<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-850
KEYCORP LOGO
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO
---------------------------
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
127 PUBLIC SQUARE, CLEVELAND, OHIO
---------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
34-6542451
----------------
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
44114-1306
----------------
(ZIP CODE)
(216) 689-6300
----------------------------------------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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<S> <C>
Securities registered pursuant Securities registered pursuant
to Section 12(b) of the Act: to Section 12(g) of the Act:
Common Shares, $1 par value
Rights to Purchase Common Shares None
- ---------------------------------------- ----------------------------------------
(TITLE OF EACH CLASS) (TITLE OF CLASS)
New York Stock Exchange
- ----------------------------------------
(NAME OF EACH EXCHANGE ON WHICH
REGISTERED)
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of voting stock held by nonaffiliates of the
Registrant was approximately $11,832,852,977 at February 28, 1997. (The
aggregate market value has been computed using the closing market price of the
stock as reported by the New York Stock Exchange on February 28, 1997.)
221,174,822
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(NUMBER OF KEYCORP COMMON SHARES OUTSTANDING AS OF FEBRUARY 28, 1997)
Certain specifically designated portions of KeyCorp's 1996 Annual Report to
Shareholders are incorporated by reference into Parts I, II and IV of this Form
10-K. Certain specifically designated portions of KeyCorp's definitive Proxy
Statement for its 1997 Annual Meeting of Shareholders are incorporated by
reference into Part III of this Form 10-K.
<PAGE> 2
KEYCORP
1996 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
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ITEM PAGE
NUMBER NUMBER
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PART I
1 Business............................................................. 1
2 Properties........................................................... 6
3 Legal Proceedings.................................................... 6
4 Submission of Matters to a Vote of Security Holders.................. 6
PART II
5 Market for Registrant's Common Stock and Related Stockholder
Matters.............................................................. 7
6 Selected Financial Data.............................................. 7
7 Management's Discussion and Analysis of Financial Condition and
Results of
Operations........................................................... 7
8 Financial Statements and Supplementary Data.......................... 8
9 Changes in and Disagreements with Accountants on Accounting and
Financial
Disclosure........................................................... 8
PART III
10 Directors and Executive Officers of the Registrant................... 8
11 Executive Compensation............................................... 8
12 Security Ownership of Certain Beneficial Owners and Management....... 8
13 Certain Relationships and Related Transactions....................... 8
PART IV
14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K..... 9
Signatures........................................................... 13
Exhibits............................................................. 14
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PART I
ITEM 1. BUSINESS
OVERVIEW
KeyCorp (also referred to herein as the "Corporation") is a legal entity
separate and distinct from its banking and other subsidiaries. Accordingly, the
right of KeyCorp, its security holders and its creditors to participate in any
distribution of the assets or earnings of its banking and other subsidiaries is
necessarily subject to the prior claims of the respective creditors of such
banking and other subsidiaries, except to the extent that claims of the
Corporation in its capacity as creditor of such banking and other subsidiaries
may be recognized.
KeyCorp, organized in 1958 under the laws of the state of Ohio and registered
under the Bank Holding Company Act of 1956, as amended, is headquartered in
Cleveland, Ohio, and is engaged primarily in the business of commercial and
retail banking. At December 31, 1996, it was one of the nation's largest bank
holding companies with consolidated total assets of approximately $67.6 billion.
Its subsidiaries provide a wide range of banking, fiduciary and other financial
services to its corporate, individual and institutional customers through three
primary lines of business: Corporate Banking, National Consumer Finance and
Community Banking. These services are provided across much of the country
through a network of banking subsidiaries operating more than 1,200 full-service
banking offices in 15 states, a 24-hour telephone banking call center services
group and nearly 1,900 ATMs as of December 31, 1996. At February 28, 1997, the
Corporation and its subsidiaries had approximately 26,963 full-time equivalent
employees.
In addition to the customary banking services of accepting deposits and making
loans, the bank and trust company subsidiaries provide specialized services,
including personal and corporate trust services, personal financial services,
customer access to mutual funds, cash management services, investment banking
services and international banking services. Through its subsidiary banks, trust
companies and registered investment adviser subsidiaries, KeyCorp provides
investment management services to institutional and individual clients,
including large corporate and public retirement plans, Taft-Hartley plans,
foundations and endowments, and high net worth individuals. In addition,
investment management subsidiaries serve as investment advisers to the
proprietary mutual funds offered by other affiliates.
KeyCorp provides other financial services both inside and outside of its primary
banking markets through its nonbank subsidiaries. These services include
accident and health insurance on loans made by subsidiary banks, venture
capital, community development financing, securities underwriting and brokerage,
automobile financing and other financial services. KeyCorp is an equity
participant in joint ventures with a number of other unaffiliated companies in
Electronic Payment Services, Inc., which operates ATMs throughout the country,
and Integrion Financial Network, L.L.C., which is building a platform for
electronic banking.
The following financial data is included in the Financial Review section of
KeyCorp's 1996 Annual Report to Shareholders and is incorporated herein by
reference as indicated below:
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DESCRIPTION OF FINANCIAL DATA PAGE
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Selected Financial Data...................................................... 6
Average Balance Sheets, Net Interest Income and Yields/Rates................. 14
Components of Net Interest Income Changes.................................... 16
Composition of Loans......................................................... 25
Maturities and Sensitivity of Certain Loans to Changes in Interest Rates..... 27
Securities Available for Sale................................................ 28
Investment Securities........................................................ 28
Allocation of the Allowance for Loan Losses.................................. 29
Summary of Loan Loss Experience.............................................. 30
Summary of Nonperforming Assets and Past Due Loans........................... 31
Maturity Distribution of Time Deposits of $100,000 or More................... 33
Impaired Loans and Other Nonperforming Assets................................ 52
Short-Term Borrowings........................................................ 54
</TABLE>
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The executive offices of KeyCorp are located at 127 Public Square, Cleveland,
Ohio 44114-1306, and its telephone number is (216) 689-6300.
MERGERS, ACQUISITIONS AND DIVESTITURES
The information presented in Note 2, "Mergers, Acquisitions and Divestitures,"
beginning on page 49 of the Financial Review section of KeyCorp's 1996 Annual
Report to Shareholders is incorporated herein by reference.
COMPETITION
The market for banking and related financial services is highly competitive.
KeyCorp and its subsidiaries ("Key") competes with other providers of financial
services, such as other bank holding companies, commercial banks, savings
associations, credit unions, mortgage banking companies, mutual funds, insurance
companies, investment management firms, investment banking firms, broker-dealers
and a growing list of other local, regional and national institutions which
offer financial services. Key competes by offering quality products and
innovative services at competitive prices.
In recent years, mergers between financial institutions have added competitive
pressure to Key's core banking services. In addition, competition is expected to
intensify as a consequence of interstate banking laws now in effect in the
majority of states which permit banking organizations to expand geographically.
Further, the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "Interstate Act") removed the restrictions on interstate acquisitions of
banks and bank holding companies as of September 29, 1995. The act also
authorizes nationwide interstate branching and bank mergers effective June 1,
1997, although states may "opt-in" and permit branching sooner, or "opt-out" and
prohibit branching into or out of that state. See "Supervision and
Regulation--Interstate Banking and Other Recent Legislation" herein.
SUPERVISION AND REGULATION
The following discussion addresses certain of the material elements of the
regulatory framework applicable to bank holding companies and their
subsidiaries, and provides certain specific information regarding Key.
Regulation of financial institutions, such as Key, is intended primarily for the
protection of depositors, the deposit insurance funds of the Federal Deposit
Insurance Corporation ("FDIC") and the banking system as a whole, and generally
is not intended for the protection of shareholders or other investors.
In the following discussion, references to statutes and regulations are brief
summaries thereof and are qualified in their entirety by reference to the full
text of such statutes and regulations. In addition, there are other statutes and
regulations not described below that apply to the operation of banking
institutions. Changes in the applicable laws, and in their application by
regulatory agencies, cannot necessarily be predicted, but they may have a
material effect on the business and results of KeyCorp.
General
As a bank holding company, KeyCorp is subject to the regulation, supervision and
examination of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") under the Bank Holding Company Act of 1956, as amended
(the "BHCA"). Under the BHCA, bank holding companies may not, in general,
directly or indirectly acquire the ownership or control of more than 5% of the
voting shares, or substantially all of the assets, of any company, including a
bank, without the prior approval of the Federal Reserve Board. In addition, bank
holding companies are generally prohibited under the BHCA from engaging in
commercial or industrial activities.
The Corporation's banking subsidiaries are also subject to extensive regulation,
supervision and examination by applicable Federal banking agencies. On January
13, 1997, KeyCorp converted all of its state-chartered bank subsidiaries, with
the exception of KeyBank of Washington, to national banks. KeyBank of
Washington's charter was converted on March 5, 1997. Key Bank USA, National
Association ("KeyBank USA"), Key Trust Company of Florida National Association
and KeyBank National Association in Ohio, New York,
2
<PAGE> 5
Washington, Alaska, Colorado, Idaho, Maine, Oregon, Utah, Vermont, Wyoming and
New Hampshire (all of which are separate banking subsidiaries) are national
banking associations with full banking powers, subject to regulation,
supervision and examination by the Office of the Comptroller of the Currency
(the "OCC"). Also on January 13, 1997, KeyCorp converted all of its
state-chartered trust company subsidiaries except Society Trust Company of New
York to national bank charters that limit their powers to trust-related
fiduciary activities. These are Key Trust Company of Ohio, National Association,
Key Trust Company of Indiana, National Association, and KeyTrust Company
National Association in New York, Alaska, Maine, Washington and Wyoming (all of
which are separate trust company subsidiaries). These entities are also subject
to the regulation, supervision and examination of the OCC, although they are not
regulated as banks for purposes of the BHCA. Society Trust Company of New York
is a state-chartered trust company subsidiary subject to regulation by the
banking authorities in the State of New York. Because the deposits in all of the
Corporation's banking subsidiaries are insured (up to applicable limits) by the
FDIC, the FDIC also has certain regulatory and supervisory authority over all
such banking subsidiaries.
The Corporation also has other financial services subsidiaries that are subject
to regulation, supervision and examination by the Federal Reserve Board, as well
as other applicable state and Federal regulatory agencies. For example, the
Corporation's brokerage and asset management subsidiaries are subject to
supervision and regulation by the Securities and Exchange Commission, the
National Association of Securities Dealers, Inc. and state securities
regulators, and the Corporation's insurance subsidiaries are subject to
regulation by the insurance regulatory authorities of the various states. Other
nonbank subsidiaries of the Corporation are subject to other laws and
regulations of both the Federal government and the various states in which they
are authorized to do business.
Dividend Restrictions
The principal source of cash flow to the Corporation, including cash flow to pay
dividends on the Corporation's common and preferred shares and debt service on
the Corporation's debt, is dividends from its banking and other subsidiaries.
Various Federal and state statutory and regulatory provisions limit the amount
of dividends that may be paid to the Corporation by its banking subsidiaries
without regulatory approval.
The approval of the OCC is required for the payment of any dividend by a
national bank if the total of all dividends declared by the board of directors
of such bank in any calendar year would exceed the total of: (i) the bank's net
profits (as defined and interpreted by regulation) for the current year plus
(ii) the retained net profits (as defined and interpreted by regulation) for the
preceding two years, less any required transfer to surplus or a fund for the
retirement of any preferred stock. In addition, a national bank can pay
dividends only to the extent that retained net profits (including the portion
transferred to surplus) exceed bad debts (as defined and interpreted by
regulation). All of the Corporation's banking subsidiaries and trust company
subsidiaries, with the exception of Society Trust Company of New York, are
national banks and are subject to these restrictions. Until the Corporation's
state-chartered banks were converted to national banks, they were subject to
similar restrictions under state law.
In addition, if, in the opinion of the applicable Federal banking agency, a
depository institution under its jurisdiction is engaged in or is about to
engage in an unsafe or unsound practice (which, depending on the financial
condition of the institution, could include the payment of dividends) the agency
may require, after notice and hearing, that such institution cease and desist
from such practice. The OCC and the FDIC have indicated that paying dividends
that would deplete a depository institution's capital base to an inadequate
level would be an unsafe and unsound practice. Moreover, under the Federal
Deposit Insurance Act (the "FDI Act"), an insured depository institution may not
pay any dividend if payment would cause it to become undercapitalized or if it
is undercapitalized. See "Regulatory Capital Standards and Related Matters --
Prompt Corrective Action." Also, the Federal Reserve Board, the OCC and the FDIC
have issued policy statements which provide that FDIC-insured depository
institutions and their holding companies should generally pay dividends only out
of the current operating earnings.
3
<PAGE> 6
Holding Company Structure
Transactions Involving Banking Subsidiaries. The Corporation's banking
subsidiaries are subject to Federal Reserve Act restrictions which limit the
amount of funds or other items of value that can be transferred from such
subsidiaries to either the Corporation and (with certain exceptions) the
Corporation's nonbanking subsidiaries. Any such loans or extensions of credit
are required to be secured in specified amounts.
Source of Strength Doctrine. Under Federal Reserve Board policy, a bank holding
company is expected to serve as a source of financial and managerial strength to
each of its subsidiary banks and, under appropriate circumstances, to commit
resources to support each such subsidiary bank. This support may be required by
the Federal Reserve Board at times when the Corporation may not have the
resources to provide it, or, for other reasons, would not otherwise be inclined
to provide it. Certain loans by a bank holding company to a subsidiary bank are
subordinate in right of payment to deposits in, and certain other indebtedness
of, the subsidiary bank. In addition, the Crime Control Act of 1990 provides
that in the event of a bank holding company's bankruptcy, any commitment by a
bank holding company to a Federal bank regulatory agency to maintain the capital
of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a
priority of payment.
Depositor Preference. The FDI Act provides that, in the event of the
"liquidation or other resolution" of an insured depository institution, the
claims of depositors of such institution (including claims by the FDIC as
subrogee of insured depositors) and certain claims for administrative expenses
of the FDIC as a receiver would be afforded a priority over other general
unsecured claims against such an institution, including Federal funds and
letters of credit. If an insured depository institution fails, insured and
uninsured depositors along with the FDIC will be placed ahead of unsecured,
nondeposit creditors, including a parent holding company, in order of priority
of payment.
Liability of Commonly Controlled Institutions. Under the FDI Act, an insured
depository institution which is under common control with another insured
depository institution is generally liable for any loss incurred, or reasonably
anticipated to be incurred, by the FDIC in connection with the default of such
commonly controlled institution, or any assistance provided by the FDIC to such
commonly controlled institution which is in danger of default. The term
"default" is defined generally to mean the appointment of a conservator or
receiver and the term "in danger of default" is defined generally as the
existence of certain conditions indicating that a "default" is likely to occur
in the absence of regulatory assistance.
Regulatory Capital Standards and Related Matters
Capital Guidelines. The Federal Reserve Board, the FDIC and the OCC have
adopted substantially similar risk-based and leverage capital guidelines for
United States banking organizations. Under these risk-based capital standards,
the minimum consolidated ratio of total capital to risk-adjusted assets
(including certain off-balance sheet items, such as standby letters of credit)
required by the Federal Reserve Board for bank holding companies, such as Key,
is currently 8%. At least one-half of the total capital must be comprised of
common equity, retained earnings, qualifying noncumulative, perpetual preferred
stock, a limited amount of qualifying cumulative, perpetual preferred stock and
minority interests in the equity accounts of consolidated subsidiaries, less
goodwill and certain other intangible assets ("Tier I capital"). The remainder
may consist of hybrid capital instruments, perpetual debt, mandatory convertible
debt securities, a limited amount of subordinated debt, other preferred stock
and a limited amount of loan and lease loss reserves ("Tier II capital"). As of
December 31, 1996, Key's Tier I and total capital to risk-adjusted assets ratios
were 7.98% and 13.01%, respectively.
In addition to the risk-based standard, Key is subject to minimum leverage ratio
guidelines. The leverage ratio is defined to be the ratio of a banking
organization's Tier I capital to its total consolidated quarterly average assets
less goodwill and certain other intangible assets. These guidelines provide for
a minimum leverage ratio of 3% for bank holding companies that have the highest
supervisory rating. All other bank holding companies must maintain a minimum
leverage ratio of at least 4% to 5%. Neither Key nor any of its banking
affiliates has
4
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been advised by its primary Federal banking regulator of any specific leverage
ratio applicable to it. As of December 31, 1996, Key's Tier I leverage ratio was
6.93%.
The Corporation's banking subsidiaries are also subject to capital requirements
adopted by their respective primary Federal regulatory agency which are
substantially similar to those imposed by the Federal Reserve Board on bank
holding companies. The Corporation's national bank subsidiaries are subject to
the capital requirements of the OCC. Prior to their conversion to national
banks, the Corporation's state-chartered bank subsidiaries were subject to FDIC
capital requirements. As of December 31, 1996, each of the Corporation's banking
subsidiaries had capital in excess of all minimum regulatory requirements.
Prompt Corrective Action. The "prompt corrective action" provisions of the FDI
Act group FDIC-insured depository institutions into five broad categories based
on their capital ratios. The five categories -- "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized" and
"critically undercapitalized" -- are based upon an institution's total, Tier I
and leverage capital ratios. Under the regulations, an institution is: (i) "well
capitalized" if it has a total risk-based capital ratio of 10% or greater, a
Tier I risk-based capital ratio of 6% or greater and a leverage ratio of 5% or
greater and is not subject to any written agreement, order or capital directive
to meet and maintain a specific capital level for any capital measure; (ii)
"adequately capitalized" if it has a total risk-based capital ratio of 8% or
greater, a Tier I risk-based capital ratio of 4% or greater and a leverage ratio
of 4% or greater (3% in certain circumstances) and is not "well capitalized";
(iii) "undercapitalized" if it has a total risk-based capital ratio of less than
8%, a Tier I risk-based capital ratio of less than 4% or a leverage ratio of
less than 4% (3% in certain circumstances); (iv) "significantly
undercapitalized" if it has a total risk-based capital ratio of less than 6%, a
Tier I risk-based capital ratio of less than 3% or a leverage ratio of less than
3%; and (v) "critically undercapitalized" if its tangible equity is equal to or
less than 2% of average quarterly tangible assets. An institution may be
downgraded to, or be deemed to be in, a capital category that is lower than is
indicated by its capital ratios if it is determined to be in an unsafe or
unsound condition or if it receives an unsatisfactory examination rating with
respect to certain matters.
Each KeyCorp banking subsidiary is considered to be "well capitalized." An
institution's capital category, as determined by applying the prompt corrective
action provisions of law, may not constitute an accurate representation of the
overall financial condition or prospects of the Corporation or its banking
subsidiaries, and should be considered in conjunction with other available
information regarding Key's financial condition and results of operations.
FDIC INSURANCE
Under the FDIC's risk-related insurance assessment system, all insured
depository institutions are required to pay annual assessments to the Bank
Insurance Fund (the "BIF") or the Savings Association Insurance Fund (the
"SAIF") of the FDIC. The assessments are based on the institution's risk
classification which, in turn, is based on an assignment of the institution by
the FDIC to one of three capital groups and to one of three supervisory
subgroups. The capital groups are "well capitalized," "adequately capitalized"
and "undercapitalized". The three supervisory subgroups are Group "A" (for
financially solid institutions with only a few minor weaknesses), Group "B" (for
those institutions with weaknesses which, if uncorrected, could cause
substantial deterioration of the institution and increase the risk to the
deposit insurance fund) and Group "C" (for those institutions with a substantial
probability of loss to the insurance fund, absent effective corrective action).
On August 8, 1995, the FDIC amended its regulations on insurance assessments to
establish a new assessment rate schedule of $.04 to $.31 per $100 of domestic
deposits in replacement of the previous schedule of $.23 to $.31 per $100 of
domestic deposits for institutions whose deposits are subject to assessment by
the BIF. The new BIF schedule became effective on June 1, 1995. Assessments
collected in accordance with the previous assessment schedule that exceed the
amount due under the new schedule have been refunded with interest, from the
effective date of June 1, 1995. For the period commencing June 1 through
December 31, 1995, insurance premiums on deposits of all of the Corporation's
banking subsidiaries were assessed at the rate of $.04 per $100 of domestic
deposits. The BIF rate was reduced further to zero as of January 1, 1996. The
FDIC maintained the SAIF assessment rate at $.23 per $100 of insured deposits
during 1995 and in 1996 through
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the date of enactment of the Deposit Insurance Funds Act of 1996 ("Funds Act")
passed by Congress on September 30 to recapitalize the SAIF. In accordance with
the Funds Act, effective January 1, 1997, the FDIC will require all insured
institutions to begin servicing the bonds issued in the late 1980s to fund
government assistance payments made necessary by a higher volume of insolvencies
in the thrift industry. The servicing will take the form of an annual assessment
equal to $.0129 per $100 of BIF-assessable deposits and $.0644 per $100 of
SAIF-assessable deposits. This will result in a 1997 expense of approximately $5
million for the Corporation's banking subsidiaries.
INTERSTATE BANKING AND OTHER RECENT LEGISLATION
On September 29, 1994, the Interstate Act was enacted into Federal law. Under
the Interstate Act, commencing on September 29, 1995, bank holding companies
were permitted to acquire banks located in any state regardless of the state law
in effect at the time. The Interstate Act also provides for the nationwide
interstate branching of banks. Under the Interstate Act, both national and
state-chartered banks will be permitted to merge across state lines (and thereby
establish interstate branches) commencing on June 1, 1997. States are permitted
to "opt-out" of the interstate branching authority by taking action prior to the
commencement date. States may also "opt-in" early (i.e., prior to June 1, 1997)
to the interstate branching provisions. All states in which the Corporation has
banking subsidiaries have "opted in" to the interstate branching provisions. As
a result, the Corporation plans to consolidate all of its bank subsidiaries
(other than KeyBank USA) into one national banking institution in mid-1997. The
Corporation continues to evaluate its business opportunities with respect to its
trust company subsidiaries, and plans for consolidating these subsidiaries are
not yet final.
In addition to the matters discussed above, there have been proposed a number of
legislative and regulatory proposals designed to strengthen the Federal deposit
insurance system and to improve the overall financial stability of the United
States banking system, and to provide for other changes in the bank regulatory
structure, including proposals to reduce regulatory burdens on banking
organizations and to expand the nature of products and services banks and bank
holding companies may offer. It is impossible to predict whether or in what form
these proposals may be adopted in the future, and, if adopted, what their effect
will be on Key.
ITEM 2. PROPERTIES
The headquarters of KeyCorp, KeyBank National Association (Ohio) and KeyBank USA
are located in Key Tower at 127 Public Square, Cleveland, Ohio 44114-1306. Key
currently leases approximately 695,000 square feet of the complex, encompassing
the first twenty-three floors, the 28th floor and the 54th through 56th floors
of the 57-story Key Tower. At December 31, 1996, the banking subsidiaries of
KeyCorp owned 711 of their branch banking offices and leased 494 offices. The
lease terms for applicable branch banking offices are not individually material,
with terms ranging from month-to-month to 99-year leases from inception.
Additional information pertaining to KeyCorp's properties is presented in Note
7, "Premises and Equipment," on page 53 of the Financial Review section of
KeyCorp's 1996 Annual Report to Shareholders and is incorporated herein by
reference.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of business, Key is subject to legal actions which
involve claims for substantial monetary relief. Based on information presently
available to management and Key's counsel, management does not believe that any
legal actions, individually or in the aggregate, will have a material adverse
effect on the financial condition of Key.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this report, no matter
was submitted to a vote of security holders of KeyCorp.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
On August 20, 1996, KeyCorp sold an aggregate of 270,263 KeyCorp Common Shares
pursuant to the exemption from registration under Rule 506 of the Securities Act
of 1933, as amended. The sale of the KeyCorp Common Shares was made in
connection with an acquisition of a privately held company by KeyCorp. The
acquisition was structured as a stock for stock exchange. KeyCorp received
shares of the privately held company and future services of certain of the
selling stockholders in exchange for KeyCorp Common Shares. In making the sale,
KeyCorp relied on the fact that the KeyCorp Common Shares were acquired by no
more than 35 persons other than accredited investors and that each
non-accredited investor, either alone or together with his purchaser
representative(s), was capable of evaluating the investment.
During the fourth quarter of 1996, the Corporation formed two wholly owned
Delaware business trusts, KeyCorp Institutional Capital A ("Capital A") and
KeyCorp Institutional Capital B ("Capital B"), which issued $350 million and
$150 million, respectively, of corporation-obligated mandatorily redeemable
capital securities of subsidiary trusts holding solely junior subordinated
deferrable interest debentures of the Corporation ("capital securities").
Goldman, Sachs & Co. acted as lead underwriter for the Capital A capital
securities sold on December 4, 1996, and Credit Suisse First Boston was the sole
underwriter for the Capital B capital securities sold on December 30, 1996. The
offering price and commission for both transactions was $1,000 per capital
security and $10 per capital security, respectively. The capital securities sold
by Capital A and Capital B were sold primarily to qualified institutional buyers
(as defined in Rule 144A under the Securities Act of 1933, as amended) and were
therefore exempt from registration. A limited amount of capital securities were
sold to institutional investors that are accredited investors within the meaning
of Rule 501 (a) under the Securities Act of 1933, as amended. Further
information pertaining to the capital securities is included in Note 11,
"Capital Securities," on page 56 of the Financial Review section of KeyCorp's
1996 Annual Report to Shareholders and is incorporated herein by reference.
The dividend restrictions discussion beginning on page 3 of this report and the
following disclosures included in the Financial Review section of KeyCorp's 1996
Annual Report to Shareholders are incorporated herein by reference:
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Discussion of Common Shares and shareholder information presented in the
Capital and Dividends section.............................................. 34
Presentation of quarterly market price and cash dividends per Common Share... 37
Discussion of dividend restrictions presented in Note 17, "Commitments,
Contingent Liabilities and Other Disclosures".............................. 62
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The Selected Financial Data presented on page 6 of the Financial Review section
of KeyCorp's 1996 Annual Report to Shareholders is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information included under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" presented on pages 1 through 38
of the Financial Review section of KeyCorp's 1996 Annual Report to Shareholders
is incorporated herein by reference.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Selected Quarterly Financial Data and the financial statements and the notes
thereto, presented on page 37 and on pages 42 through 68, respectively, of the
Financial Review section of KeyCorp's 1996 Annual Report to Shareholders are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is set forth in the sections captioned
"Issue One -- ELECTION OF DIRECTORS" and "EXECUTIVE OFFICERS" contained in
KeyCorp's definitive Proxy Statement for the 1997 Annual Meeting of Shareholders
to be held May 15, 1997, and is incorporated herein by reference. KeyCorp
expects to file its final proxy statement on or about April 7, 1997.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is set forth in the sections captioned
"THE BOARD OF DIRECTORS AND ITS COMMITTEES," "COMPENSATION OF EXECUTIVE
OFFICERS" and "EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS" contained in
KeyCorp's definitive Proxy Statement for the 1997 Annual Meeting of Shareholders
to be held May 15, 1997, and is incorporated herein by reference. The
information set forth in the sections captioned "COMPENSATION AND ORGANIZATION
COMMITTEE AND EQUITY BASED COMPENSATION COMMITTEE JOINT REPORT ON EXECUTIVE
COMPENSATION" and "KEYCORP STOCK PRICE PERFORMANCE" contained in KeyCorp's
definitive Proxy Statement for the 1997 Annual Meeting of Shareholders to be
held May 15, 1997, is not incorporated by reference in this Report on Form 10-K.
KeyCorp expects to file its final proxy statement on or about April 7, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is set forth in the section captioned
"SHARE OWNERSHIP AND PHANTOM STOCK UNITS" contained in KeyCorp's definitive
Proxy Statement for the 1997 Annual Meeting of Shareholders to be held May 15,
1997, and is incorporated herein by reference. KeyCorp expects to file its final
proxy statement on or about April 7, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth in the section captioned
"Issue One -- ELECTION OF DIRECTORS" contained in KeyCorp's definitive Proxy
Statement for the 1997 Annual Meeting of Shareholders to be held May 15, 1997,
and is incorporated herein by reference. KeyCorp expects to file its final proxy
statement on or about April 7, 1997.
8
<PAGE> 11
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) FINANCIAL STATEMENTS
The following financial statements of KeyCorp and its subsidiaries, and the
auditor's report thereon, are incorporated herein by reference to the pages
indicated in the Financial Review section of KeyCorp's 1996 Annual Report to
Shareholders:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Financial Statements:
Report of Ernst & Young LLP, Independent Auditors.......................... 41
Consolidated Balance Sheets at December 31, 1996 and 1995.................. 42
Consolidated Statements of Income for the Years Ended December 31, 1996,
1995 and 1994........................................................... 43
Consolidated Statements of Changes in Shareholders' Equity for the Years
Ended December 31, 1996, 1995 and 1994.................................. 44
Consolidated Statements of Cash Flow for the Years Ended December 31, 1996,
1995 and 1994........................................................... 45
Notes to Consolidated Financial Statements................................. 46
</TABLE>
(a) (2) FINANCIAL STATEMENT SCHEDULES
All financial statement schedules for KeyCorp and its subsidiaries have been
included in the consolidated financial statements or the related footnotes, or
they are either inapplicable or not required.
(a) (3) EXHIBITS*
<TABLE>
<S> <C>
3.1 Amended and Restated Articles of Incorporation of KeyCorp. Filed as Exhibit
7 to Form 8-A/A filed on February 25, 1994, and incorporated herein by
reference.
3.2 Regulations of KeyCorp. Filed as Exhibit 6 to Form 8-A/A filed on February
25, 1994, and incorporated herein by reference.
4.1 Rights Agreement, dated as of August 25, 1989, between Society Corporation
and First Chicago Trust Company of New York, as Rights Agent. Filed as
Exhibit 1 to Form 8-A filed on August 29, 1989, and incorporated herein by
reference.
4.2 First Amendment to Rights Agreement, dated as of February 21, 1991, between
Society Corporation and First Chicago Trust Company of New York, as Rights
Agent. Filed as Exhibit 1 to Form 8-A filed on February 28, 1991, amending
Registration Statement on Form 8-A filed August 29, 1989, and incorporated
herein by reference.
4.3 Second Amendment to Rights Agreement, dated as of September 12, 1991,
between Society Corporation and First Chicago Trust Company of New York, as
Rights Agent.
4.4 Resignation of First Chicago Trust Company of New York as Rights Agent and
appointment of Society National Bank as Rights Agent effective July 1, 1992.
Filed as Exhibit 4.4 to Form 10-K for the year ended December 31, 1992, and
incorporated herein by reference.
4.5 Third Amendment to Rights Agreement, dated as of October 1, 1993, between
Society Corporation and Society National Bank, as Rights Agent. Filed as
Exhibit 4 to Schedule 13D filed on October 12, 1993, and incorporated herein
by reference.
10.1 KeyCorp Short Term Incentive Compensation Plan (January 1, 1997
Restatement).
10.2 KeyCorp Long Term Cash Incentive Compensation Plan (January 1, 1997
Restatement).
</TABLE>
9
<PAGE> 12
<TABLE>
<S> <C>
10.3 KeyCorp Supplemental Retirement Plan (August 1, 1996 Amendment and
Restatement).
10.4 Amended and Restated Employment Agreement between KeyCorp and Roger Noall,
dated July 19, 1995. Filed as Exhibit 10.1 to Form 10-Q for the quarter
ended September 30, 1995, and incorporated herein by reference.
10.5 Employment Agreement between KeyCorp and Gary Allen, dated July 1, 1993.
Filed as Exhibit 10.14 to Form 10-K for the year ended December 31, 1994,
and incorporated herein by reference.
10.6 Employment Agreement between KeyCorp and K. Brent Somers, dated February 5,
1996. Filed as Exhibit 10 to Form 10-Q for the quarter ended March 31, 1996,
and incorporated herein by reference.
10.7 Amended and Restated Director Deferred Compensation Plan (April 15, 1996
Amendment and Restatement). Filed as Exhibit 10 to Form 10-Q for the quarter
ended June 30, 1996, and incorporated herein by reference.
10.8 KeyCorp Universal Life Insurance Plan. Filed as Exhibit 10.15 to Form 10-K
for the year ended December 31, 1993, and incorporated herein by reference.
10.9 KeyCorp Supplemental Long Term Disability Plan. Filed as Exhibit 10.16 to
Form 10-K for the year ended December 31, 1993, and incorporated herein by
reference.
10.10 Society Corporation 1984 Stock Option Plan, as amended. Filed as Exhibit
10.14 to Form 10-K for the year ended December 31, 1995, and incorporated
herein by reference.
10.11 Society Corporation 1988 Stock Option Plan, amended as of September 19,
1996.
10.12 1987 Stock Option Plan of Trustcorp, Inc. Filed as Exhibit 10.16 to Form
10-K for the year ended December 31, 1995, and incorporated herein by
reference.
10.13 KeyCorp Amended and Restated 1991 Equity Compensation Plan (Amended as of
September 19, 1996).
10.14 Restatement of the Ameritrust Long-Term Incentive Plan as the Ameritrust
Stock Option Plan. Filed as Exhibit 10.19 to Form 10-K for the year ended
December 31, 1995, and incorporated herein by reference.
10.15 Trust Agreement (Executive Benefits Rabbi Trust), dated November 3, 1988.
Filed as Exhibit 10.20 to Form 10-K for the year ended December 31, 1995,
and incorporated herein by reference.
10.16 Ameritrust Corporation Deferred Compensation Plan. Filed as Exhibit 10.21 to
Form 10-K for the year ended December 31, 1995, and incorporated herein by
reference.
10.17 Old KeyCorp Supplemental Disability Plan (Specimen Document).
10.18 Form of Amendment to Employment Agreement and Severance Agreement for old
KeyCorp executives. Filed as Exhibit 10.37 to Form 10-K for the year ended
December 31, 1993, and incorporated herein by reference.
10.19 KeyCorp Directors' Stock Option Plan (November 17, 1994 Restatement). Filed
as Exhibit 10.37 to Form 10-K for the year ended December 31, 1994, and
incorporated herein by reference.
10.20 KeyCorp 1988 Stock Option Plan (September 19, 1996 Amendment and
Restatement).
10.21 KeyCorp Excess Cash Balance Pension Plan, effective January 1, 1996. Filed
as Exhibit 10.30 to Form 10-K for the year ended December 31, 1995, and
incorporated herein by reference.
</TABLE>
10
<PAGE> 13
<TABLE>
<S> <C>
10.22 KeyCorp Excess 401(k) Savings Plan (January 1, 1997 Amendment and
Restatement).
10.23 KeyCorp Executive Deferred Compensation Plan, effective June 1, 1990.
10.24 KeyCorp Survivor Benefit Plan, effective September 1, 1990.
10.25 KeyCorp Directors' Survivor Benefit Plan, effective September 1, 1990.
10.26 KeyCorp Supplemental Retirement Benefit Plan for Key Executives, effective
July 1, 1990 and restated August 16, 1990.
10.27 KeyCorp Umbrella Trust for Executives, between KeyCorp and National Bank of
Detroit dated July 1, 1990.
10.28 KeyCorp Umbrella Trust for Directors, between KeyCorp and National Bank of
Detroit dated July 1, 1990.
10.29 KeyCorp Executive Supplemental Pension Plan, amended, restated and effective
August 1, 1996.
10.30 KeyCorp Supplemental Retirement Plan, amended, restated and effective August
1, 1996.
10.31 KeyCorp Cash Balance Pension Plan, amended, restated and effective August 1,
1996.
10.32 Form of Change of Control Agreements between KeyCorp and certain executive
officers of KeyCorp effective October 15, 1996.
10.33 Amended and Restated Employment Agreement between KeyCorp and Robert W.
Gillespie effective November 21, 1996.
10.34 Form of Stock Performance Option Grant between KeyCorp and Robert W.
Gillespie, dated January 15, 1997.
10.35 Form of Stock Performance Option Grants between KeyCorp and certain
executive officers of KeyCorp, dated January 15, 1997.
10.36 KeyCorp Deferred Compensation Plan, effective January 1, 1997.
11 Statement re: Computation of Per Share Earnings.
12 Statement re: Computation of Ratios.
13 KeyCorp 1996 Annual Report to Shareholders.
21 Subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP, Independent Auditors.
24 Powers of Attorney.
27 Financial Data Schedule.
</TABLE>
The Corporation hereby agrees to furnish the Securities and Exchange Commission
upon request, copies of instruments outstanding, including indentures, which
define the rights of long-term debt security holders.
All documents listed as Exhibits 10.1 through 10.36 constitute management
contracts or compensatory plans or arrangements.
* Copies of these Exhibits have been filed with the Securities and Exchange
Commission. Shareholders may obtain a copy of any exhibit, upon payment of
reproduction costs, by writing KeyCorp Investor Relations, at 127 Public
Square (Mailcode OH-01-27-1113), Cleveland, OH 44114-1306.
11
<PAGE> 14
(b) REPORTS ON FORM 8-K
<TABLE>
<S> <C>
October 18, 1996 -- Item 5. Other Events and Item 7. Financial Statements, Pro Forma
Financial Statements and Exhibits. Reporting that the Registrant issued
a press release on October 16, 1996, announcing its earnings results
for the three- and nine-month periods ended September 30, 1996.
November 25, 1996 -- Item 5. Other Events. Reporting that the Registrant issued a press
release on November 25, 1996, announcing strategic actions that have
been or will be undertaken in the next year to complete the
transformation to a nationwide, bank-based financial services company.
</TABLE>
No other reports on Form 8-K were filed during the fourth quarter of 1996.
12
<PAGE> 15
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON THE DATE INDICATED.
KEYCORP
/S/ THOMAS C. STEVENS
--------------------------------------
THOMAS C. STEVENS
Executive Vice President,
General Counsel and Secretary
March 13, 1997
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT
HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND
IN THE CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------- ----------------------
<S> <C>
* Robert W. Gillespie Chairman, President
and
Chief Executive
Officer (Principal
Executive Officer)
* K. Brent Somers Senior Executive Vice
President and Chief
Financial Officer
(Principal Financial
Officer)
* Lee G. Irving Executive Vice
President and Chief
Accounting Officer
(Principal Accounting
Officer)
* Cecil D. Andrus Director
* William G. Bares Director
* Albert C. Bersticker Director
<CAPTION>
SIGNATURE TITLE
- ---------------------- ----------------------
<S> <C>
* Kenneth M. Curtis Director
* John C. Dimmer Director
* Lucie J. Fjeldstad Director
* Stephen R. Hardis Director
* Henry S. Hemingway Director
* Charles R. Hogan Director
* Douglas J. McGregor Director
* Henry L. Meyer III Vice Chairman and
Director
* Steven A. Minter Director
* M. Thomas Moore Director
* Ronald B. Stafford Director
* Dennis W. Sullivan Director
* Peter G. Ten Eyck, Director
II
* Nancy B. Veeder Director
</TABLE>
/s/ Thomas C. Stevens
*By Thomas C. Stevens, attorney-in-fact
March 13, 1997
13
<PAGE> 1
Exhibit 4.3
SECOND AMENDMENT
TO
RIGHTS AGREEMENT
THIS SECOND AMENDMENT TO RIGHTS AGREEMENT (this "Amendment") is entered
into as of September 12, 1991, between Society Corporation, an Ohio corporation
(the "Company), and First Chicago Trust Company of New York, as Rights Agent
(the "Rights Agent"). This Amendment modifies and amends the Rights Agreement,
dated as of August 25, 1989, between the Company and the Rights Agent, as
modified and amended by the First Amendment to Rights Agreement, dated as of
February 21, 1991, also between the Company and the Rights Agent (the Rights
Agreement as amended being herein referred to as the "Rights Agreement") .
W I T N E S E T H:
------------------
WHEREAS, on August 17, 1989, the Board of Directors of the Company
authorized and declared a dividend consisting of one right (a "Right") for each
Common Share, with a par value of $1 each (a "Common Share"), of the Company
outstanding on September 12, 1989 (the "Record Date"), each Right initially
representing the right to purchase one Common Share of the Company, upon the
terms and subject to the conditions set forth in the Rights Agreement, and
further authorized the issuance of one Right in respect of each Common Share of
the Company that is (i) issued after the Record Date but before the earlier of
the occurrence of a Triggering Event and the Expiration Date (as such terms are
defined in the Rights Agreement), (ii) issued after the Record Date but
<PAGE> 2
before the Expiration Date in exchange for Common Stock, par value $1.00
per share, of Trustcorp, Inc., a Delaware corporation, upon consummation of the
merger of Trustcorp, Inc. into the Company, or (iii) issued upon exercise, after
the Record Date but before the Expiration Date, of any employee stock option
granted by the Company prior to the occurrence of a Triggering Event; and
WHEREAS, the Rights remain issued and outstanding as of the date hereof
and the Rights Agreement remains in effect with respect thereto; and
WHEREAS, as of the date hereof no Triggering Event or Shares Acquisition
Date has occurred; and
WHEREAS, the Company and Ameritrust Corporation, a Delaware corporation
("Ameritrust"), propose to enter into a Society Corporation Stock Option
Agreement (the "Stock Option Agreement") pursuant to which the Company will
grant to Ameritrust an option to acquire Common Shares of the Company subject to
and in accordance with the terms and conditions set forth in the Stock Option
Agreement; and
WHEREAS, the Company and Ameritrust propose to enter into an Agreement
and Plan of Merger (the "Merger Agreement") pursuant to which Ameritrust will
merge with and into the Company, which will be the surviving corporation in the
merger, subject to and in accordance with the terms and conditions set forth in
the Merger Agreement; and
WHEREAS, in connection with the anticipated
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<PAGE> 3
approval, execution, and delivery of the Stock Option Agreement and the Merger
Agreement, the Board of Directors of the Company has adopted, in accordance with
Section 26 of the Rights Agreement, a resolution approving this Amendment and
directing the appropriate officers of the Company to take all appropriate steps
to execute, deliver, and put into effect this Amendment, and an appropriate
officer of the Company has provided a certificate to the Rights Agent as
provided for in Section 26 of the Rights Agreement.
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein set forth, the parties hereby agree as follows:
1. AMENDMENT OF SECTION 1(a). Section 1(a) of the Rights Agreement is
amended to read as follows:
(a) An "Acquiring Person" means any Person (other than the
Company, any Subsidiary, any employee benefit plan or employee stock
ownership plan of the Company or of any Subsidiary, or any Person
organized, appointed, or established by the Company or any Subsidiary for
or pursuant to the terms of any such plan) that, together with all
Affiliates and Associates of the Person, is the Beneficial Owner of more
than 15% of the Common Shares of the Company then outstanding, except that
(i) a Person will not be deemed to be an Acquiring Person if the Person
becomes the Beneficial Owner of more than 15% of the Common Shares as a
result of a reduction in the number of Common Shares outstanding unless
subsequent to the reduction the Person, or any Affiliate or Associate of
the Person, becomes the Beneficial Owner of any additional Common Shares
other than as a result of a stock dividend, stock split, or similar
transaction effected by the Company in which all shareholders are treated
equally, (ii) a Person will not be deemed to be an Acquiring Person if the
Person becomes the Beneficial Owner of more than 15% of the Common Shares
inadvertently and, as soon as practicable after the Person learns
-3-
<PAGE> 4
about such beneficial ownership, divests a sufficient number of Common
Shares so that the Person ceases to be the Beneficial Owner of more than 15%
of the Common Shares, and (iii), for purposes of this Section 1(a), neither
Ameritrust nor any Affiliate or Associate of Ameritrust shall be deemed to
be the Beneficial Owner of Common Shares of the Company by reason of the
approval, execution, or delivery of the Stock Option Agreement, the Merger
Agreement, or both, or by reason of the consummation of any transaction
contemplated by the Stock Option Agreement, the Merger Agreement, or both,
so long as Ameritrust or any Subsidiary of Ameritrust is not the Beneficial
Owner of any Common Shares of the Company other than (A) Common Shares of
the Company of which Ameritrust or any Subsidiary of Ameritrust is or
becomes the Beneficial Owner by reason of the approval, execution, or
delivery of the Stock Option Agreement, the Merger Agreement, or both, or by
reason of the consummation of any transaction contemplated by the Stock
Option Agreement, the Merger Agreement, or both, (B) Common Shares of the
Company Beneficially Owned by Ameritrust or any Subsidiary of Ameritrust on
September 12, 1991, or Common Shares of the Company acquired after September
12, 1991 by any Affiliate or Associate of Ameritrust (other than a
Subsidiary of Ameritrust), (C) Common Shares of the Company of which
Ameritrust or any Subsidiary of Ameritrust inadvertently becomes the
Beneficial Owner after September 12, 1991, provided that the number of such
Common Shares does not exceed 1/2% of the Common Shares of the Company then
outstanding and that Ameritrust or any such Subsidiary, as the case may be,
divests such Common Shares as soon as practicable after it learns about such
beneficial ownership, and (D) Common Shares of the Company Beneficially
Owned or otherwise held by Ameritrust or any Subsidiary of Ameritrust in
trust accounts or otherwise acquired in the ordinary course of its banking
or trust business.
2. AMENDMENT OF SECTION 1(i). Section 1(i) of the Rights Agreement
is amended to read as follows:
(i) A "Flip-in Event" means any event described in paragraphs
(A), (B), and (C) of Section 11(a)(ii), except that no Flip-in Event shall
be deemed to have occurred under any of the circumstances set forth in
Section 34 of this Agreement.
-4-
<PAGE> 5
3. AMENDMENT OF SECTION 1(j). Section 1(j) of the Rights Agreement
is amended to read as follows:
(j) A "Flip-over Event" means any event described in clauses
(x), (y), and (z) of Section 13(a), except that no Flip-over Event shall be
deemed to have occurred under any of the circumstances set forth in Section
34 of this Agreement.
4. AMENDMENT OF SECTION 1(p). Section 1(p) of the Rights Agreement
is amended to read as follows:
(p) The "Shares Acquisition Date" means the first date of public
announcement by the Company or by an Acquiring Person (whether by press
release, filing made with the Securities and Exchange Commission, or
otherwise) that a person has become an Acquiring Person, except that no
Shares Acquisition Date shall be deemed to have occurred under any of the
circumstances set forth in Section 34 of this Agreement.
5. AMENDMENT OF SECTION 1(s). Section 1(s) of the Rights Agreement
is amended to read as follows:
(s) A "Triggering Event" is deemed to occur (i) at the close of
business on the 20th calendar day following the occurrence of a Flip-in
Event or (ii) upon the occurrence of a Flip-over Event, except that no
Triggering Event shall be deemed to have occurred under any of the
circumstances set forth in Section 34 of the Rights Agreement.
6. ADDITION OF SECTION 1(t). A new Section 1(t) is added to the
Rights Agreement, to read as follows:
(t) The "Merger Agreement" shall mean the Agreement and Plan of
Merger, dated as of September 12, 1991, by and between Ameritrust and the
Company, as the same may be from time-to-time amended.
7. ADDITION OF SECTION 1(u). A new Section 1(u) is added to the
Rights Agreement, to read as follows:
-5-
<PAGE> 6
(u) "Ameritrust" shall mean Ameritrust Corporation, a Delaware
corporation, and its successors.
8. ADDITION OF SECTION 1(v). A new Section 1(v) is added to the
Rights Agreement, to read as follows:
(v) "Stock Option Agreement" shall mean the Society Corporation
Stock Option Agreement, dated as of September 12, 1991, by and between
Ameritrust and the Company, as the same may be from time-to-time amended.
9. AMENDMENT OF SECTION 3(a). Section 3(a) of the Rights
Agreement is amended to read as follows:
(a) Except as otherwise provided in Section 34 of this
Agreement, until the earlier of (i) the close of business on the 20th
calendar day after the Shares Acquisition Date or (ii) the close of business
on the 20th calendar day after the date of the commencement by any Person
(other than the Company, any Subsidiary, any employee benefit plan or
employee stock ownership plan of the Company or of any Subsidiary, or any
Person organized, appointed, or established by the Company or any Subsidiary
for or pursuant to the terms of any such plan), of a tender offer or
exchange offer the consummation of which would result in the Person making
the tender offer or exchange offer becoming an Acquiring Person (the earlier
of these dates is referred to as the "Distribution Date"), the Rights will
be evidenced (subject to the provisions of Section 3(b)) by the certificates
for Common Shares of the Company registered in the names of the holders of
the Common Shares (which certificates for Common Shares shall also be deemed
to be certificates for Rights) and not by separate Right certificates, and
the Rights will be transferable only in connection with the transfer of the
Common Shares on the transfer books of the Company maintained by the Company
or its transfer agent. As soon as practicable after the Distribution Date,
the Rights Agent will send, by first-class, insured, postage prepaid mail,
to each record holder of Common Shares as of the close of business on the
Distribution Date at the address of the holder shown on the records of the
Company or its transfer agent, a Right certificate, in substan-
-6-
<PAGE> 7
tially the form of Exhibit A ("Right Certificate"), evidencing one Right
for each Common Share held of record as of the close of business on the
Distribution Date. From and after the close of business on the Distribution
Date, the Rights will be evidenced solely by the Right Certificates.
10. AMENDMENT OF SECTION 3(c). Section 3(c) of the Rights
Agreement is amended to read as follows:
(c) Rights shall be issued in respect of all Common Shares that
are (i) issued after the Record Date but before the earlier of the
occurrence of a Triggering Event or the Expiration Date, (ii) issued after
the Record Date but before the Expiration Date in exchange for Common
Stock, par value $1.00 per share, of Trustcorp, Inc., a Delaware
corporation, upon consummation of the merger of Trustcorp, Inc. into the
Company, (iii) issued after the Record Date but before the Expiration Date
in exchange for Common Stock, par value $l.66-2/3 per share, of Ameritrust
upon consummation of the merger of Ameritrust into the Company or issued
pursuant to the Stock Option Agreement, or (iv) issued upon exercise, after
the Record Date but before the Expiration Date, of any employee stock
option granted by the Company prior to the occurrence of a Triggering
Event. In the event that any Rights are issued in accordance with this
Section 3(c) and, at the time of issuance, a Flip-in Event or Flip-over
Event has occurred, such Rights shall be entitled to the same rights and
privileges as if issued prior to the occurrence of the Flip-in Event or
Flip-over Event. Certificates representing Common Shares issued or
surrendered for transfer or exchange after September 12, 1991, but prior to
the earlier of the Distribution Date or the Expiration Date shall bear the
following legend:
This certificate also evidences and entitles
the holder to certain Rights as set forth in a
Rights Agreement between Society Corporation
and First Chicago Trust Company of New York,
Rights Agent, dated as of August 25, 1989, as
amended from time to time (the "Rights Agree-
ment"), the terms of which are hereby incorpo-
rated in this certificate by reference and a
copy of which is on file at the principal exec-
utive offices of Society Corporation. Under
-7-
<PAGE> 8
certain circumstances, as set forth in the Rights
Agreement, the Rights will be evidenced by separate
certificates and will no longer be evidenced by this
certificate. Society Corporation will mail to the
holder of this certificate a copy of the Rights
Agreement (as in effect on the date of mailing) without
charge promptly after receipt of a written request
therefor. Under certain circumstances, Rights that
are or were beneficially owned by an Acquiring Person
or an Affiliate or Associate of an Acquiring Person
(as these terms are defined in the Rights Agreement)
and any subsequent holder may become null and void.
Until the Distribution Date, the Rights associated with the Common Shares
represented by certificates containing the foregoing legend shall be
evidenced by the certificates alone, and the surrender for transfer of any
such certificate shall also constitute the surrender for transfer of the
Rights associated with the Common Shares represented by the certificate.
11. AMENDMENT OF SECTION 7(a). Section 7(a) of the Rights
Agreement is amended to read as follows:
(a) Subject to Section 7(e) and Section 34, the registered
holder of any Right Certificate may exercise the Rights evidenced by the
Right Certificate (except as otherwise provided in this Agreement), in
whole or in part, at any time after the Distribution Date upon surrender of
the Right Certificate, with the form of election to purchase and the
certificate on the reverse side duly executed, to the Rights Agent at its
office in New York, together with payment of the aggregate Purchase Price
(or, upon the occurrence of a Triggering Event, the aggregate Exercise
Price) with respect to the number of Common Shares as to which the
surrendered Rights are being exercised, at or prior to the close of
business on the earlier of (i) September 12, 1999 (the "Final Expiration
Date") and (ii) the date on which the Rights are redeemed as provided in
Section 23 (the earlier of these dates is referred to as the "Expiration
Date").
-8-
<PAGE> 9
12. AMENDMENT OF SECTION 11(a)(ii). Section 11(a) (ii) (A)
of the Rights Agreement is amended to read as follows:
(A) any Person (other than the Company, any Subsidiary, any
employee benefit plan or employee stock ownership plan of the Company or of
any Subsidiary, or any Person organized, appointed, or established by the
Company or any Subsidiary for or pursuant to the terms of any such plan),
alone or together with any of its Affiliates or Associates, becomes the
Beneficial Owner of more than 15% of the Common Shares of the Company then
outstanding, except that this clause (A) shall not apply (x) if the Person
becomes the Beneficial Owner of more than 15% of the Common Shares pursuant
to a tender offer or exchange offer for all outstanding Common Shares of
the Company at a price and on other terms determined by the Board of
Directors of the Company (prior to the purchase of Common Shares pursuant
to the tender or exchange offer) to be fair to and in the best interests of
the Company and its shareholders, employees, customers, and other
constituencies, (y) if the Person becomes the Beneficial Owner of more than
15% of the Common Shares as a result of a reduction in the number of Common
Shares then outstanding unless subsequent to the reduction the Person, or
any Affiliate or Associate of the Person, becomes the Beneficial Owner of
any additional Common Shares other than as a result of a stock dividend,
stock split, or similar transaction effected by the Company in which all
shareholders are treated equally, or (z) if the Person becomes the
Beneficial Owner of more than 15% of the Common Shares inadvertently and,
as soon as practicable after the Person learns about such beneficial
ownership, divests a sufficient number of Common Shares so that the Person
ceases to be the Beneficial Owner of more than 15% of the Common Shares,
and except further that, for purposes of this Clause (A), neither
Ameritrust nor any Affiliate or Associate of Ameritrust shall be deemed to
be the Beneficial Owner of Common Shares of the Company by reason of the
approval, execution, or delivery of the Stock Option Agreement, the Merger
Agreement, or both, or by reason of the consummation of any transaction
contemplated by the Stock Option Agreement, the Merger Agreement, or both,
so long as Ameritrust or any Subsidiary of Ameritrust is not the Beneficial
Owner of any Common Shares of the Company other than (A) Common Shares of
the Company of which Ameritrust
-9-
<PAGE> 10
or any subsidiary of Ameritrust is or becomes the Beneficial Owner by
reason of the approval, execution, or delivery of the Stock Option
Agreement, the Merger Agreement, or both, or by reason of the consummation
of any transaction contemplated by the Stock Option Agreement, the Merger
Agreement, or both, (B) Common Shares of the Company Beneficially Owned by
Ameritrust or any Subsidiary of Ameritrust on September 12, 1991, or Common
Shares of the Company acquired after September 12, 1991 by any Affiliate or
Associate of Ameritrust (other than a Subsidiary of Ameritrust), (C) Common
Shares of the Company of which Ameritrust or any Subsidiary of Ameritrust
inadvertently becomes the Beneficial Owner after September 12, 1991,
provided that the number of such Common Shares does no exceed 1/2% of the
Common Shares of the Company then outstanding and that Ameritrust or any
such Subsidiary, as the case may be, divests such Common Shares as soon as
practicable after it learns about such beneficial ownership, and (D) Common
Shares of the Company Beneficially Owned or otherwise held by Ameritrust or
any Subsidiary of Ameritrust in trust accounts or otherwise acquired in the
ordinary course of its banking or trust business, or
13. ADDITION OF SECTION 34. A new Section 34
is added to the Rights Agreement, to read as follows:
34. CERTAIN EVENTS. Notwithstanding any provision of this
Agreement to the contrary, no Distribution Date, Shares Acquisition Date,
Flip-In Event, Flip-over Event, or Triggering Event shall be deemed to have
occurred, and no holder of Rights shall be entitled to exercise the Rights
under or be entitled to any rights pursuant to Sections 7(a), il(a), or
13(a) of this Agreement, solely by reason of the approval, execution, or
delivery of the Stock Option Agreement, the Merger Agreement, or both, or
solely by reason of the consummation of any transaction contemplated by the
Stock Option Agreement, the Merger Agreement, or both, except that in the
event Ameritrust or any Subsidiary of Ameritrust becomes the Beneficial
Owner of any Common Shares of the Company other than pursuant to clauses
(i), (ii), or (iii) of Section 1(a) above, the provisions of this Section
34 shall not be applicable.
14. EFFECTIVENESS. This Amendment shall be deemed to be in force
and effective immediately upon execution
-10-
<PAGE> 11
and delivery of the Stock Option Agreement, the Merger Agreement, or both.
Except as amended hereby, the Rights Agreement shall remain in full force and
effect and shall be otherwise unaffected hereby.
15. MISCELLANEOUS.
(a) This Amendment shall be binding upon and shall inure to the
benefit of each of the parties and their respective successors and assigns.
(b) Unless otherwise defined herein, all defined terms used herein
shall have the same meanings given to them in the Rights Agreement.
(c) This Amendment shall be deemed to be a contract made under the
substantive laws of the State of Ohio and for all purposes shall be governed by
and construed in accordance with the internal substantive laws of such State
applicable to contracts to be made and performed entirely within such State.
(d) This Amendment may be executed in any number of counterparts,
each of which shall for all purposes be deemed an original and all of which
shall together constitute but one and the same instrument.
(e) If any term, provision, covenant, or restriction of this
Amendment is held by a court of competent jurisdiction or other authority to be
invalid, illegal, or unenforceable, the remainder of the terms, provisions,
covenants, and restrictions of this Amendment
-11-
<PAGE> 12
shall remain in full force and effect and shall in no way be affected, impaired,
or invalidated.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
SOCIETY CORPORATION
By:/s/ Robert W. Gillespie
-----------------------
Name: Robert W. Gillespie
Title: Chairman of the
Board and Chief
Executive Officer
FIRST CHICAGO TRUST COMPANY OF
NEW YORK
By:/s/ John C. Bambach
-----------------------
Name: John C. Bambach
Title: Vice President
<PAGE> 1
Exhibit 10.1
KEYCORP
SHORT TERM INCENTIVE COMPENSATION PLAN
(JANUARY 1, 1997 RESTATEMENT)
KeyCorp (the "Corporation") hereby establishes this Short Term
Incentive Compensation Plan for the purpose of providing an incentive to
selected key officers of the Corporation and its subsidiaries.
ARTICLE I
DEFINITIONS
-----------
For the purposes hereof, the following words and phrases shall have the
meanings indicated:
1. A "Beneficiary" shall mean any person designated by a
Participant in accordance with the Plan to receive payment of all or a portion
of any Incentive Compensation Award for which the Participant is eligible at the
time of the Participant's death.
2. The "Committee" shall mean the Compensation and Organization
Committee of the Board of Directors of the Corporation or other Committee of the
Board of Directors hereafter succeeding to the responsibilities currently
performed by the Compensation and Organization Committee with respect to the
Plan.
3. A "Deferred Compensation Account" shall mean the bookkeeping
account to which any amount of an Incentive Compensation Award that has been
deferred pursuant to this Plan prior to January 1, 1997 shall be credited.
4. An "Incentive Compensation Award" shall mean the incentive
which may be paid to a Participant pursuant to the Plan for any calendar year.
5. "Market Point" shall mean for any Participant for any calendar
year the market point (as determined under the Corporation's salary
administration program) of such Participant's job grade at the end of the
calendar year; provided, however, that if the Corporation changes such
Participant's job grade during any such calendar year or such
1
<PAGE> 2
Participant is promoted, transferred, or otherwise moves into a different
job grade during such calendar year, then such Market Point shall be calculated
on a pro rata basis for each of the periods in which such job grades were in
effect for such Participant.
6. A "Participant" shall mean a senior officer of the Corporation
or one of its subsidiaries who is selected by the Committee to participate in
the Plan.
7. The "Plan" shall mean this Short Term Incentive Compensation
Plan, together with all amendments hereto.
8. "Plan Year" shall mean each calendar year for which the Plan
remains in existence.
9. "Subsidiary" shall mean a corporation organized and existing
under the laws of the United States or of any state or the District of Columbia
of which 80 percent or more of the issued and outstanding stock is owned by the
Corporation or by a Subsidiary of the Corporation.
10. The "Target Incentive Compensation Pool" shall mean the
aggregate amount, as determined in accordance with Article II of the Plan, of
the aggregate individual target Incentive Compensation Awards of Participants.
11. "Target Pool Percentage" shall mean the percentage determined
pursuant to Article II, Section 2 below that will be used to establish the
aggregate amount available for Incentive Compensation Awards.
ARTICLE II
INCENTIVE COMPENSATION AWARDS
-----------------------------
1. PARTICIPATION. Annually, the Committee shall select the Participants
in the Plan for the Plan Year. In general, the selection will be made prior to
the beginning of each Plan Year or as soon thereafter as is reasonably possible;
in addition, such selection may be made at any time during a Plan Year in the
case of a newly hired employee or an employee that receives a new position. Not
in limitation of the foregoing, the Committee shall have the authority to
designate at the beginning of a Plan Year, or as soon thereafter as is
reasonably
2
<PAGE> 3
possible, employees in selected job grades as Participants, including any
employee that may later be hired or promoted into any such job grade during
the Plan Year, without further action on behalf of the Committee. Participants
shall be notified of their selection in writing. In the event that employees are
determined to be Participants by job grade, the Chief Executive Officer, or his
or her designee, may select additional eligible employees for Plan participation
notwithstanding their job grade. Employees otherwise eligible for participation
because of their job grade shall be excluded if they are participants in
business unit or similar incentive compensation plans.
2. INCENTIVE COMPENSATION POOL. As soon as practical after the end
of each Plan Year, the Committee shall determine the Target Pool Percentage (not
to exceed 200%) to be applied to the Target Incentive Compensation Pool to
establish the maximum aggregate amount to be distributed as Incentive
Compensation Awards. The guidelines for determining the percentage shall be
determined by the Committee prior to the Plan Year or as soon thereafter as is
reasonably possible.
Such individual target incentives for persons selected to be in the
Plan are as follows:
<TABLE>
<CAPTION>
Incentive Job Target Incentive As a
Group Grades Percent of Market Point
----- ------ -----------------------
<S> <C> <C>
I 95-96 50%
II 94 45%
III 92-93 40%
IV 90-91 35%
V 89 30%
VI 88 25%
VII 87 20%
VIII 85-86 15%
IX 84 and below 10%
</TABLE>
Target incentives for Participants who are eligible for part of the Plan Year or
whose incentive group assignment changed during the Plan Year will be calculated
on a pro rata basis for both the period of each incentive group assignment and
the period during the Plan Year in which the Participant was an eligible
employee. In the event that an individual whose job does not
3
<PAGE> 4
have an assigned salary grade is approved for participation in the Plan,
the Chief Executive Officer, or his or her designee, is authorized to select a
target incentive percentage for such individual and base the calculation of
target incentive and other calculations under this Plan on such individual's
base salary.
3. INCENTIVE COMPENSATION AWARDS. The Committee will determine the
amount of the Incentive Compensation Award for each Participant. No Incentive
Compensation Award may exceed the Participant's target incentive for the Plan
Year multiplied by the greater of (a) two hundred percent (200%) or (b) one
hundred fifty percent (150%) of the Target Pool Percentage. The Committee may
determine that a Participant shall receive no Incentive Compensation Award for
the Plan Year. Ordinarily, Incentive Compensation Awards shall be made only to
Participants who are actively employed at the end of the Plan Year; however,
Participants who retire or become disabled during a Plan Year, or the
Beneficiary(s) or estate of a Participant whose death occurs during a plan year
shall be entitled to, on a pro rata basis (for the period of time the
Participant was in the Plan for the Plan Year) the lesser of (i) the
Participant's target incentive or (ii) the Participant's target incentive times
the Target Pool Percentage if the Committee determines a Target Pool Percentage
of less than 100%.
4. PAYMENT OF INCENTIVE COMPENSATION AWARD. Incentive Compensation
Awards shall be paid on or prior to March 15 of the year following the Plan
Year. Notwithstanding any other provision of the Plan, the Committee, in its
sole discretion, shall have the authority to authorize payment of all or a
portion of all Incentive Compensation Awards prior to the end of the Plan Year,
and if a portion, the Corporation shall pay the remaining portion of the Award
on or prior to March 15 of the year following the Plan Year.
All Deferred Compensation Accounts for Incentive Compensation Awards
deferred prior to January 1, 1997 shall be transferred for record keeping
purposes to the KeyCorp Deferred Compensation Plan on January 1, 1997 and shall
be maintained in accordance with the provisions of such Deferred Compensation
Plan.
4
<PAGE> 5
Notwithstanding any other provision of the Plan, the Committee, in its
sole discretion, shall have the authority to require deferral of payment of all
or a portion of all Incentive Compensation Awards due to any Plan Participant if
the Committee determines that, based on the Corporation's estimated financial
results, the Corporation would be denied a deduction for federal income tax
purposes for such Award or the portion thereof by reason of Section 162(m) of
the Internal Revenue Code of 1986, as amended, and the regulations issued
thereunder, if the Award or the portion thereof were not so deferred. Such
deferred Incentive Compensation Awards, or the portion thereof, shall be
deferred in accordance with the provisions of the KeyCorp Deferred Compensation
Plan.
It is the intention of the Corporation and the Participants that the
Plan be unfunded for tax purposes and for the purposes of Title I of the
Employee Retirement Income Security Act of 1974, as amended.
ARTICLE III
ADMINISTRATION
--------------
The Corporation shall be responsible for the general administration of
the Plan and for carrying out the provisions hereof. The Committee shall have
all such powers as may be necessary to carry out its duties under the Plan,
including the power to determine all questions pertaining to claims for benefits
and procedures for claim review, and the power to resolve all other questions
arising under the Plan, including any questions of construction. The Corporation
and the Committee may take such further action as the Corporation and the
Committee shall deem advisable in the administration of the Plan. The actions
taken and the decisions made by the Corporation and the Committee hereunder
shall be final and binding upon all interested parties. In accordance with the
provisions of Section 503 of the Employee Retirement Income Security Act of
1974, as amended, the Committee shall provide a procedure for handling claims of
Participants or their Beneficiaries under this Plan. Such procedure shall be in
accordance with regulations issued by the Secretary of Labor and shall
6
<PAGE> 6
provide adequate written notice within a reasonable period of time with
respect to the denial of any such claims as well as a reasonable opportunity for
a full and fair review by the Committee of any such denial. Notwithstanding
anything to the contrary contained herein, the Corporation shall be the
"administrator" for the purpose of the Employee Retirement Income Security Act
of 1974, as amended. Any action authorized under the Plan to be done by the
Committee may be done by the Board of Directors or any other Board committee
authorized by the Board of Directors.
ARTICLE IV
AMENDMENT AND TERMINATION
-------------------------
The Corporation reserves the right to amend or terminate the Plan at
any time by action of its Board of Directors or a duly authorized committee
thereof.
ARTICLE V
MISCELLANEOUS
-------------
1. NOT AN EMPLOYMENT AGREEMENT. Nothing herein contained shall be
construed as a commitment to or agreement with any person employed by the
Corporation or a Subsidiary to continue such person's employment with the
Corporation or Subsidiary, and nothing herein contained shall be construed as a
commitment or agreement on the part of the Corporation or any Subsidiary to
continue the employment or the annual rate of compensation of any such person
for any period. All Participants shall remain subject to discharge to the same
extent as if the Plan had never been put into effect.
2. CLAIMS OF OTHER PERSONS. The provisions of the Plan shall in no
event be construed as giving any person, firm, or corporation any legal or
equitable right against the Corporation or any Subsidiary, their officers,
employees, agents, or directors, except any such rights as are specifically
provided for in the Plan or are hereafter created in accordance with the terms
and provisions of the Plan.
6
<PAGE> 7
3. ABSENCE OF LIABILITY. No member of the Board of Directors of the
Corporation or a Subsidiary or any officer or employee of the Corporation
or a Subsidiary shall be liable for any act or action hereunder, whether of
commission or omission.
4. SEVERABILITY. The invalidity or unenforceability of any
particular provisions of the Plan shall not affect any other provision hereof,
and the Plan shall be construed in all respects as if such invalid or
unenforceable provision were omitted herefrom.
5. GOVERNING LAW. The provisions of the Plan shall be governed and
construed in accordance with the laws of the State of Ohio.
KEYCORP
By: ________________________________
Roger Noall, Senior Executive Vice President
and Chief Administrative Officer
<PAGE> 1
Exhibit 10.2
LONG TERM CASH INCENTIVE COMPENSATION PLAN
(JANUARY 1, 1997 RESTATEMENT)
KeyCorp (the "Corporation") hereby establishes this Long Term Cash
Incentive Compensation Plan for the purpose of providing an incentive to
selected senior officers of the Corporation and its subsidiaries.
ARTICLE I
DEFINITIONS
-----------
For the purposes hereof, the following words and phrases shall have the
meanings indicated:
1. A "Beneficiary" shall mean any person designated by a Participant in
accordance with the Plan to receive payment of all or a portion of any Incentive
Compensation Award for which the Participant is eligible at the time of the
Participant's death.
2. Change of Control. A "Change of Control" shall be deemed to have
occurred if at any time there is a Change of Control under any of clauses (a),
(b), (c), or (d) below. For these purposes, the Corporation will be deemed to
have become a subsidiary of another corporation if any other corporation (which
term shall include, in addition to a corporation, a limited liability company,
partnership, trust, or other organization) owns, directly or indirectly, 50
percent or more of the total combined outstanding voting power of all classes of
stock of the Corporation or any successor to the Corporation.
(a) A Change of Control will have occurred under this clause (a)
if the Corporation is a party to a transaction pursuant to
which the Corporation
1
<PAGE> 2
is merged with or into, or is consolidated with, or becomes
the subsidiary of another corporation and either
(i) immediately after giving effect to that transaction,
less than 65% of the then outstanding voting
securities of the surviving or resulting corporation
or (if the Corporation becomes a subsidiary in the
transaction) of the ultimate parent of the
Corporation represent or were issued in exchange for
voting securities of the Corporation outstanding
immediately prior to the transaction, or
(ii) immediately after giving effect to that transaction,
individuals who were directors of the Corporation on
the day before the first public announcement of (A)
the pendency of the transaction or (B) the intention
of any person or entity to cause the transaction to
occur, cease for any reason to constitute at least
51% of the directors of the surviving or resulting
corporation or (if the Corporation becomes a
subsidiary in the transaction) of the ultimate parent
of the Corporation.
(b) A Change of Control will have occurred under this clause (b)
if a tender or exchange offer shall be made and consummated
for 35% or more of the outstanding voting stock of the
Corporation or any person (as the term "person" is used in
Section 13(d) and Section 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "1934 Act")) is or
becomes the beneficial owner of 35% or more of the
outstanding voting stock of the Corporation or there is a
report filed on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form or report), each as adopted under
the 1934 Act, disclosing the acquisition of 35% or more of
the outstanding voting stock of the Corporation in a
transaction or series of transactions by any person (as
defined earlier in this clause (b)).
(c) A Change of Control will have occurred under this clause (c)
if either
(i) without the prior approval, solicitation, invitation,
or recommendation of the Corporation's Board of
Directors any person or entity makes a public
announcement of a bona fide intention (A) to engage
in a transaction with the Corporation that, if
consummated, would result in a Change Event (as
defined below in this clause (c)), or (B) to
"solicit" (as defined in Rule 14a-1 under the 1934
Act) proxies in connection with a proposal that is
not approved or recommended by the Corporation's
Board of Directors, or
2
<PAGE> 3
(ii) any person or entity publicly announces a bona fide
intention to engage in an election contest relating
to the election of directors of the Corporation
(pursuant to Regulation 14A, including Rule 14a-11,
under the 1934 Act),
and, at any time within the 24 month period immediately
following the date of the announcement of that intention,
individuals who, on the day before that announcement,
constituted the directors of the Corporation (the "Incumbent
Directors") cease for any reason to constitute at least a
majority thereof unless both (A) the election, or the
nomination for election by the Corporation's shareholders, of
each new director was approved by a vote of at least
two-thirds of the Incumbent Directors in office at the time of
the election or nomination for election of such new director,
and (B) prior to the time that the Incumbent Directors no
longer constitute a majority of the Board of Directors, the
Incumbent Directors then in office, by a vote of at least 75%
of their number, reasonably determine in good faith that the
change in Board membership that has occurred before the date
of that determination and that is anticipated to thereafter
occur within the balance of the 24 month period to cause the
Incumbent Directors to no longer be a majority of the Board of
Directors was not caused by or attributable to, in whole or in
any significant part, directly or indirectly, proximately or
remotely, any event under subclause (i) or (ii) of this clause
(c).
For purposes of this clause (c), the term "Change Event" shall mean any
of the events described in the following subclauses (x), (y), or (z) of
this clause (c):
(x) A tender or exchange offer shall be made for 25% or
more of the outstanding voting stock of the
Corporation or any person (as the term "person" is
used in Section 13(d) and Section 14(d)(2) of the
1934 Act) is or becomes the beneficial owner of 25%
or more of the outstanding voting stock of the
Corporation or there is a report filed on Schedule
13D or Schedule 14D-1 (or any successor schedule,
form, or report), each as adopted under the 1934 Act,
disclosing the acquisition of 25% or more of the
outstanding voting stock of the Corporation in a
transaction or series of transactions by any person
(as defined earlier in this subclause (x)).
(y) The Corporation is a party to a transaction pursuant
to which the Corporation is merged with or into, or
is consolidated with, or becomes the subsidiary of
another corporation and, after giving effect to
such transaction, less than 50% of the then
outstanding voting securities of the surviving or
resulting corporation or (if
3
<PAGE> 4
the Corporation becomes a subsidiary in the
transaction) of the ultimate parent of the
Corporation represent or were issued in exchange for
voting securities of the Corporation outstanding
immediately prior to such transaction or less than
51% of the directors of the surviving or resulting
corporation or (if the Corporation becomes a
subsidiary in the transaction) of the ultimate
parent of the Corporation were directors of the
Corporation immediately prior to such transaction.
(z) There is a sale, lease, exchange, or other transfer
(in one transaction or a series of related
transactions) of all or substantially all the assets
of the Corporation.
(d) A Change of Control will have occurred under this clause (d)
if there is a sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all or
substantially all of the assets of the Corporation.
3. The "Committee" shall mean the Compensation and Organization
Committee of the Board of Directors of the Corporation or other Committee of the
Board of Directors hereafter succeeding to the responsibilities currently
performed by the Compensation and Organization Committee with respect to the
Plan.
4. "Compensation Cycle" shall mean a period consisting of three
consecutive calendar years.
5. A "Deferred Compensation Account" shall mean the bookkeeping
account to which any amount of an Incentive Compensation Award that has been
deferred pursuant to this Plan prior to January 1, 1997 shall be credited.
6. An "Incentive Compensation Award" shall mean the incentive
which may be paid to a Participant pursuant to the Plan.
7. "Market Point" shall mean for any Participant the average market
point (as determined under the Corporation's salary administration program) of
such Participant's job grade at the end of each of the three years of the
applicable Compensation Cycle; provided, however, that if the Corporation
changes such Participant's job grade during any such year or such Participant is
promoted,
4
<PAGE> 5
transferred, or otherwise moves into a different job grade during such
year, then such Market Point shall be calculated on a pro rata basis for each of
the periods in which such job grades were in effect for such Participant.
8. A "Participant" shall mean a senior officer of the Corporation
or one of its subsidiaries who is selected by the Committee to participate in
the Plan.
9. The "Plan" shall mean this Long Term Cash Incentive
Compensation Plan, together with all amendments hereto.
10. "Subsidiary" shall mean a corporation organized and existing under
the laws of the United States or of any state or the District of Columbia of
which 80 percent or more of the issued and outstanding stock is owned by the
Corporation or by a Subsidiary of the Corporation.
ARTICLE II
INCENTIVE COMPENSATION AWARDS
-----------------------------
1. PARTICIPATION. Annually, the Committee shall select the Participants
in the Plan for the Compensation Cycle and shall determine whether such
Participant shall be in Incentive Group I, Incentive Group II, or Incentive
Group III. The selection will be made prior to the beginning of each
Compensation Cycle or as soon thereafter as is reasonably possible. Participants
shall be notified of their selection in writing.
2. INCENTIVE COMPENSATION AWARDS. The Incentive Compensation Awards are
determined by applying a percentage to each Participant's target incentive. The
formula for determining the percentage shall be based on return on common equity
of the Corporation for the Compensation Cycle (i.e., average annual return on
common equity) and such formula shall be established by the Committee prior to
the beginning of a Compensation Cycle or as soon thereafter as is reasonably
possible. The Committee, in its sole discretion, may discontinue the
participation of an individual Participant; any such discontinued Participant
shall receive a pro rata Incentive Compensation Award after completion of the
Compensation Cycle; such pro rata
5
<PAGE> 6
payment shall be based on a fraction the numerator of which is the number of
months of the Compensation Cycle that are completed prior to such discontinuance
and the denominator of which is 36.
Individual target incentives are as follows:
<TABLE>
<CAPTION>
TARGET INCENTIVE
----------------
AS A PERCENT OF
---------------
INCENTIVE GROUP MARKET POINT
--------------- ------------
<S> <C>
I 30%
II 25%
III 20%
</TABLE>
In the event that the Committee approves participation in the Plan for an
individual whose job does not have an assigned job grade, the Committee is
authorized to base the calculation of target incentive and other calculations
under this Plan on such individual's base salary. As soon as practical after the
end of each Compensation Cycle, the Corporation shall compute the amount of the
Incentive Compensation Awards payable under the Plan for such Compensation Cycle
in accordance with the percentage determined by the formula. The Committee,
after consulting with the Chief Executive Officer or in its sole discretion,
reserves the right to increase or decrease the Incentive Compensation Awards of
all Participants by revising the computation of the Corporation's return on
common equity based on extraordinary circumstances that affected the
Corporation's financial performance; provided, however, if there occurs a Change
of Control, such authority to decrease the Incentive Compensation Awards shall
not apply to any Incentive Compensation Award, or any portion of Incentive
Compensation Award, earned on or prior to such Change of Control.
3. PAYMENT UPON DEATH, DISABILITY, RETIREMENT, AND PLAN TERMINATION.
Participants who retire at age 65 or older or become disabled during a
Compensation Cycle, or the Beneficiary(s) or the estate of a Participant whose
death occurs during a
6
<PAGE> 7
Compensation Cycle, shall receive a pro rata Incentive Compensation Award
after completion of the Compensation Cycle; such pro rata payment shall be
based on a fraction the numerator of which is the number of months of
the Compensation Cycle that are completed prior to such change in status
and the denominator of which is 36. The Committee may, in its sole
discretion, award a pro rata Incentive Compensation Award to Participants who
retire between the ages of 55 and 65, which pro rata payment will be calculated
in the same manner as set forth in the immediately preceding sentence. If a
Participant terminates employment during the Compensation Cycle for any reason
other than retirement, disability, or death, no Incentive Compensation Award
shall be payable to such Employee. In the event that a Participant dies prior to
receiving an Incentive Compensation Award, the Corporation shall pay any such
Incentive Compensation Award to the Participant's estate, unless the Participant
designates in writing that payment shall be made to a Beneficiary or
Beneficiaries. Such designation shall include the proportion to be paid to each
Beneficiary and indicate the disposition of such share if a Beneficiary does not
survive the Participant.
In the event of any termination of this Plan for any reason, the
guidelines or formulas for determining the Incentive Compensation Awards shall
be based on the performance of the Corporation from the beginning of such
Compensation Cycle to the calendar month end occurring just prior to the
effective date of the termination of the Plan. In the event of any such
termination of the Plan, the Committee shall have no right to decrease the
Incentive Compensation Awards computed in accordance with this Section and
Article II, Section 2 above. If this Plan is terminated during a Compensation
Cycle for any reason, including but not limited to a termination caused by a
Change of Control, each Participant shall receive a pro rata Incentive
Compensation Award based on the number of full months of the Compensation Cycle
that are completed prior to such termination of the Plan. In the event of any
such plan
7
<PAGE> 8
termination, the Corporation shall base such pro rata Incentive Compensation
Awards on the Corporation's performance for each full year of any
current Compensation Cycle and, for the year in which the termination occurs, on
the number of full months of such year prior to the effective date of such Plan
termination; the Corporation shall retain the services of the independent public
accountants used by the Corporation (prior to the plan termination) to determine
the financial performance for such partial year. The Corporation shall then
calculate such pro rata Incentive Compensation Award using the Corporation's
performance for each such full year and such partial year as determined above
(i.e., average monthly return on equity).
4. PAYMENT OF INCENTIVE COMPENSATION AWARD. Incentive Compensation
Award shall be paid on or prior to March 15 of the calendar year following the
end of the Compensation Cycle. Notwithstanding any other provision of the Plan,
the Committee, in its sole discretion, shall have the authority based on the
Corporation's estimated financial results for the Compensation Cycle to
authorize payment of all or a portion of all Incentive Compensation Awards prior
to the end of the Compensation Cycle, and if a portion, the Corporation shall
pay the remaining portion of the Award on or prior to March 15 of the calendar
year following the end of the Compensation Cycle.
All Deferred Compensation Accounts for Incentive Compensation Awards
deferred prior to January 1, 1997 shall be transferred for record keeping
purposes to the KeyCorp Deferred Compensation Plan on January 1, 1997 and shall
be maintained in accordance with the provisions of such Deferred Compensation
Plan.
Notwithstanding any other provision of the Plan, the Committee, in its
sole discretion, shall have the authority to require deferral of payment of all
or a portion of all Incentive Compensation Awards due to any Plan Participant if
the Committee determines that, based on the Corporation's estimated financial
results, the Corporation would be denied a deduction for federal income tax
purposes for such Award or the
8
<PAGE> 9
portion thereof by reason of Section 162(m) of the Internal Revenue Code of
1986, as amended, and the regulations issued thereunder, if the Award or the
portion thereof were not so deferred. Such deferred Incentive Compensation
Awards, or the portion thereof, shall be deferred in accordance with the
provisions of the KeyCorp Deferred Compensation Plan.
All payments of Incentive Compensation Awards shall be in cash from the
general assets of the Corporation or a Subsidiary, and Participants shall have
the status of general unsecured creditors of the Corporation.
It is the intention of the Corporation and the Participants that the
Plan be unfunded for tax purposes and for the purposes of Title I of the
Employee Retirement Income Security Act of 1974, as amended.
ARTICLE III
ADMINISTRATION
--------------
The Corporation shall be responsible for the general administration of
the Plan and for carrying out the provisions hereof. The Committee shall have
all such powers as may be necessary to carry out its duties under the Plan,
including the power to determine all questions pertaining to claims for benefits
and procedures for claim review, and the power to resolve all other questions
arising under the Plan, including any questions of construction. The Corporation
and the Committee may take such further action as the Corporation and the
Committee shall deem advisable in the administration of the Plan. The actions
taken and the decisions made by the Corporation and the Committee hereunder
shall be final and binding upon all interested parties. In accordance with the
provisions of Section 503 of the Employee Retirement Income Security Act of
1974, as amended, the Committee shall provide a procedure for handling claims of
Participants or their Beneficiaries under this Plan. Such procedure shall be in
accordance with regulations issued by the Secretary of Labor and shall provide
adequate written notice within a reasonable period of time with respect to the
9
<PAGE> 10
denial of any such claims as well as a reasonable opportunity for a full and
fair review by the Committee of any such denial. Notwithstanding anything to the
contrary contained herein, the Corporation shall be the "administrator" for the
purpose of the Employee Retirement Income Security Act of 1974, as amended. Any
action authorized under this Plan to be done by the Committee may be done by the
Board of Directors or any other Board committee authorized by the Board of
Directors.
ARTICLE IV
AMENDMENT AND TERMINATION
-------------------------
The Corporation reserves the right to amend or terminate the Plan at
any time by action of its Board of Directors or a duly authorized Committee
thereof. Unless the Committee determines otherwise prior to a Change of Control,
this Plan shall be automatically terminated on the effective date of any Change
of Control.
ARTICLE V
MISCELLANEOUS
-------------
1. NOT AN EMPLOYMENT AGREEMENT. Nothing herein contained shall be
construed as a commitment to or agreement with any person employed by the
Corporation or a Subsidiary to continue such person's employment with the
Corporation or Subsidiary, and nothing herein contained shall be construed as a
commitment or agreement on the part of the Corporation or any Subsidiary to
continue the employment or the annual rate of compensation of any such person
for any period. All Participants shall remain subject to discharge to the same
extent as if the Plan had never been put into effect.
2. CLAIMS OF OTHER PERSONS. The provisions of the Plan shall in no
event be construed as giving any person, firm, or corporation any legal or
equitable right as against the Corporation or any Subsidiary, their officers,
employees, agents, or directors, except any such rights as are specifically
provided for in the Plan or are hereafter created in accordance with the terms
and provisions of the Plan.
10
<PAGE> 11
3. ABSENCE OF LIABILITY. No member of the Board of Directors of
the Corporation or a Subsidiary or any officer or employee of the Corporation or
a Subsidiary shall be liable for any act or action hereunder, whether of
commission or omission.
4. SEVERABILITY. The invalidity or unenforceability of any
particular provisions of the Plan shall not affect any other provision hereof,
and the Plan shall be construed in all respects as if such invalid or
unenforceable provision were omitted herefrom.
5. GOVERNING LAW. The provisions of the Plan shall be governed
and construed in accordance with the laws of the State of Ohio.
KEYCORP
By: ______________________________________
Roger Noall, Senior Executive Vice President
and Chief Administrative Officer
11
<PAGE> 1
Exhibit 10.3
KEYCORP
SUPPLEMENTAL RETIREMENT PLAN
ARTICLE I
---------
THE PLAN
--------
The Society Corporation Supplemental Retirement Plan as originally
established effective as of May 14, 1981, and thereafter amended and restated in
its entirety, effective April 26, 1990 and January 1, 1993, and thereafter
amended and restated in its entirety effective January 1, 1995 as the KeyCorp
Supplemental Retirement Plan (the "Plan") is hereby amended and restated in its
entirety effective August 1, 1996. The Plan, as herein amended and restated,
supplements the retirement benefits of certain key employees of KeyCorp and its
subsidiaries who are covered by the Plan in accordance with the terms hereof.
The provisions of this Plan shall be applicable generally to all Grandfathered
Employees (as defined below).
ARTICLE II
----------
DEFINITIONS
-----------
2.1 MEANINGS OF DEFINITIONS. As used herein, the following words
and phrases shall have the meanings hereinafter set forth,
unless a different meaning is plainly required by the context:
(a) "AVERAGE INTEREST CREDIT" shall mean the average of the
Interest Credits (as defined in the Retirement Plan) for the
three (3) consecutive calendar years ending with the year of
the Grandfathered Employee's termination.
(b) "AVERAGE TREASURY RATE" shall mean the average of the Treasury
Rates (as defined in the Retirement Plan) for the three (3)
consecutive calendar years ending with the year of the
Grandfathered Employee's termination.
(c) "BENEFICIARY" shall mean Grandfathered Employee's surviving
spouse in the event the Grandfathered Employee dies before his
or her Supplemental Retirement Benefit shall have been
distributed to him or her.
(d) "COMPENSATION" for any Plan Year or any partial Plan year in
which the Grandfathered Employee incurs a severance from
service date shall mean the entire amount of base compensation
paid to such Grandfathered Employee during such period by
reason of his employment as an Employee as reported for
federal income tax purposes, or which would have been paid
except for (1) the timing of an Employer's payroll processing
operations, (2) the provisions of the
1
<PAGE> 2
KeyCorp 401(k) Savings Plan, or (3) the provisions of the
KeyCorp Flexible Benefits Plan, provided, however, that
the term shall more specifically exclude:
(i) any amount attributable to the Grandfathered
Employee's exercise of stock appreciation rights and
the amount of any gain to the Grandfathered Employee
upon the exercise of stock options;
(ii) any amount attributable to the Grandfathered
Employee's receipt of non-cash remuneration whether
or not it is included in the Grandfathered Employee's
income for federal income tax purposes;
(iii) any amount attributable to the Grandfathered
Employee's receipt of moving expenses and any
relocation bonus paid to the Grandfathered Employee
during the Plan Year;
(iv) any amount attributable to a lump sum severance
payment paid by an Employer or the Corporation to the
Grandfathered Employee;
(v) any amount attributable to fringe benefits (cash and
non-cash);
(vi) any amount attributable to any bonus or payment made
as an inducement for the Grandfathered Employee to
accept employment with an Employer;
(vii) any amount paid to the Grandfathered Employee during
the Plan year which is attributable to interest
earned on compensation deferred under a plan of an
Employer or the Corporation.
(viii) any amount attributable to salary deferrals paid to
the Grandfathered Employee during the Plan year,
which have been previously included as compensation
under the Plan; and
(ix) any amount paid for any period after the
Grandfathered Employee's termination or retirement
date.
(e) "CORPORATION" shall mean KeyCorp, an Ohio corporation, its
corporate successors, and any corporation or corporations into
or with which it may be merged or consolidated.
(f) "EARLY RETIREMENT DATE" shall mean the date of the
Grandfathered Employee's retirement from his or her employment
with an Employer on or after the Grandfathered Employee's
attainment of age 55 and completion of a minimum of ten years
of Benefit Service, but prior to the Grandfathered Employee's
Normal Retirement Date.
2
<PAGE> 3
(g) "EMPLOYEE" shall mean any person who is employed by an
Employer, provided, however, that as of December 31, 1994 all
Employees who are Plan Grandfathered Employees (other than
Grandfathered Employees) shall cease any further future
benefit accrual under the Plan and such Employees'
Supplemental Retirement Plan benefit shall be valued in
accordance with the provisions of Article IX hereof and
transferred to KeyCorp Excess Cash Balance Pension Plan.
Thereafter, effective January 1, 1995, the term "Employee"
shall include only Grandfathered Employees.
(h) "EMPLOYER" shall mean the Corporation and any of its
subsidiaries unless specifically excluded as an Employer for
Plan purposes by written action of an officer of the
Corporation and approved by the Corporation. An Employer's
participation shall be subject to any conditions or
requirements made by the Corporation, and each Employer shall
be deemed to appoint the Corporation as its exclusive agent
under the Plan as long as it continues as a subsidiary.
(i) "FINAL AVERAGE COMPENSATION" shall mean with respect to any
Employee the annual average of his highest aggregate
Compensation for any period of five consecutive years within
the period of ten consecutive full years immediately prior to
his retirement or other termination of employment, or any
termination of the Plan, whichever first occurs; provided,
however, that if an Employee is employed for less than five
consecutive years prior to such date, the term shall
mean the monthly average of the aggregate amount of his
Compensation for his entire period of employment, multiplied
by 12. If an Employee receives no Compensation for any
portion of such five consecutive years because of absence from
work, there shall be treated as Compensation received during
such period of absence an amount equal to the Compensation he
would have received had he not been absent, such amount to be
determined by the Corporation on the basis of such Employee's
salary or wage rate in effect immediately prior to such
absence; provided, however, that no Compensation shall be
credited hereunder for the period during which he is
permanently and totally disabled and for which he receives
benefits under the long term disability program maintained in
effect by his Employer.
(j) "GRANDFATHERED EMPLOYEE" shall mean an Employee who is listed
on Exhibit A attached hereto.
(k) "INCENTIVE COMPENSATION PLAN" shall mean the KeyCorp
Management Incentive Compensation Plan, the KeyCorp Short-Term
Incentive Compensation Plan, and the KeyCorp Long-Term
Incentive Compensation Plan, as may be amended from time to
time.
3
<PAGE> 4
(l) "NORMAL RETIREMENT DATE" shall mean the first day of the month
coinciding with or immediately following a Grandfathered
Employee's 65th birthday, or if later, the fifth anniversary
of the Participant's employment commencement date.
(m) "RETIREMENT PLAN" shall mean the KeyCorp Cash Balance Pension
Plan with all amendments, modifications and supplements which
may be made thereto, as in effect on the date of a
Grandfathered Employee's retirement, death, or other
termination of employment.
(n) "SUPPLEMENTAL RETIREMENT BENEFIT" shall mean the benefit paid
under this Plan as determined under Section 3.2.
All other capitalized and undefined terms used herein shall have the
meanings given them in the Retirement Plan for Employees of Society Corporation
and Subsidiaries (January 1, 1993 Restatement) ("Society Retirement Plan"),
unless a different meaning is plainly required by the context.
The masculine gender includes the feminine, and singular references
include the plural, unless the context clearly requires otherwise.
ARTICLE III
-----------
SUPPLEMENTAL RETIREMENT BENEFIT
-------------------------------
3.1 ELIGIBILITY. A Grandfathered Employee shall be eligible for a
Supplemental Retirement Benefit hereunder if the Grandfathered Employee (i)
retires on or after age 65 with five or more years of Credited Service, (ii)
terminates employment with an Employer on or after age 55 with ten or more years
of Benefit
4
<PAGE> 5
Service, (iii) terminates his active employment with an Employer upon
becoming Disabled after completing five or more years of Benefit Service and
disability benefits have ceased under the KeyCorp Long-Term Disability Plan due
to the Participant's election for Early or Normal Retirement under the
Retirement Plan, or (iv) dies after completing five or more years of Benefit
Service, and has a Beneficiary who is eligible for a benefit under the
Retirement Plan.
3.2 AMOUNT AND PAYMENT. The amount of a Grandfathered Employee's
Supplemental Retirement Benefit hereunder shall be determined as follows:
Effective as of December 5, 1989, the monthly Supplemental Retirement
Benefit payable to a Grandfathered Employee shall be such amount as is
required, when added to the monthly benefit payable (before the
reduction applicable to any optional method of payment) under the
Retirement Plan, to produce an aggregate monthly benefit equal to the
monthly benefit which would have been payable (determined without
regard to the annual limitation on Plan benefits imposed pursuant to
Section 415(b) of the Code, and $150,000 (as adjusted) limitation on
annual compensation taken into account under the Plan imposed pursuant
to Section 401(a)(17) of the Code, or the reduction applicable to any
optional method of payment) under either the Society Retirement Plan
formula in effect on and after January 1, 1989, or the applicable
Society Retirement Plan formula in effect prior to January 1, 1989,
whichever results in a larger monthly benefit, if there was added to
the Grandfathered Employee's Final Average Monthly Compensation an
amount equal to the monthly average of the highest five Incentive
Compensation Awards granted to him or her under the Incentive
Compensation Plan during the ten-year period preceding the earliest of
his retirement, death, disability, or other termination of employment.
Notwithstanding the foregoing, if a Grandfathered Employee was granted
fewer than five awards, such monthly average is determined by adding
the amounts of such awards and dividing by 60. Solely for purposes of
reference, the alternative benefit formulas in effect under the Society
Retirement Plan prior to January 1, 1989, and the eligibility criteria
applicable to each are reproduced in Exhibit B attached hereto.
3.3 EARLY RETIREMENT ELECTION. In the event the Grandfathered Employee
elects to receive his or her Supplemental Retirement Benefit on or after the
Grandfathered Employee's Early Retirement Date but prior to the Grandfathered
Employee's Normal Retirement Date, the Grandfathered Employee's Supplemental
Retirement Benefit shall be calculated in accordance with Section 3.2 and the
Grandfathered Employee's monthly benefit payable under the Retirement Plan for
purposes of this Section 3.3 shall be the Grandfathered Employee's Normal
Retirement Date. In calculating this Normal Retirement Date benefit, if the
Grandfathered Employee is not eligible for, or chooses not to elect his or her
monthly benefit under the provisions of Section 6.5(b) of the Retirement Plan,
then such Grandfathered Employee's Retirement Plan benefit as of his or her
termination date shall be increased for purposes of this Plan with an imputed
Average Interest Credit to reflect the Grandfathered Employee's benefit at his
or her Normal Retirement Date and shall be converted to the form of
5
<PAGE> 6
a single life annuity option using the Average Treasury Rate and GATT
Mortality Table. The amount of the Grandfathered Employee's monthly Supplemental
Retirement Benefit otherwise determined under this Section 3.3 hereof shall then
be reduced by .3% for each month between ages 55 and 60 and .4% for each month
after age 60 in which the commencement of the Grandfathered Employee's
Supplemental Retirement Benefit precedes his or her Normal Retirement Date.
3.4 ACTUARIAL FACTORS. The Supplemental Retirement Benefit payable to
a Grandfathered Employee or Grandfathered Employee's Beneficiary in a form other
than a single life annuity shall be actuarially equivalent to such single life
annuity payment option. In making the determination provided for in this Article
III, the Corporation shall rely upon calculations made by the independent
actuaries for the Plan, who shall determine actuarially equivalent benefits
under the Plan by applying the UP-1984 Mortality Table (set back two years) and
using an interest rate of 6%.
ARTICLE IV
----------
PAYMENT OF SUPPLEMENTAL RETIREMENT BENEFIT
------------------------------------------
4.1 IMMEDIATE PAYMENT UPON TERMINATION OR RETIREMENT OF GRANDFATHERED
EMPLOYEE. Subject to the provisions of Section 4.2 hereof, a Grandfathered
Employee meeting the age and service eligibility requirements of Section 3.1
shall receive an immediate distribution of his or her Supplemental Retirement
Benefit upon the Grandfathered Employee's retirement or termination of
employment, in the form of a single life annuity, unless the Grandfathered
Employee elects in writing a minimum of thirty days prior to his or her
retirement or termination date, to receive payment of his or her Supplemental
Retirement Benefit under a different form of payment. The forms of payment from
which a Grandfathered Employee may elect shall be identical to those forms of
payment specified in the Retirement Plan, provided, however, that the lump sum
payment option available under the Retirement Plan shall not be available under
this Plan. Such method of payment, once elected by the Grandfathered Employee,
shall be irrevocable.
4.2 DEFERRED BENEFIT PAYMENT. A Grandfathered Employee who retires
or terminates his or her employment with an Employer after meeting the age and
service requirements of Section 3.1, may elect to defer receipt of his or her
Supplemental Retirement Benefit until a date specified by the Grandfathered
Employee, provided, (1) the Grandfathered Employee notifies the Corporation in
writing of his or her deferral election a minimum of one year prior to the
Grandfathered Employee's retirement or termination of employment, (2) the
Grandfathered Employee specifies the future date on which such Supplemental
Retirement Benefit shall be distributed, and (3) the Grandfathered Employee
commences distribution of his or her Supplemental Retirement Benefit no later
than the first day of the month immediately following the Grandfathered
Employee's sixty-fifth (65th) birthday. The election to defer, once made by the
Grandfathered Employee, shall be irrevocable.
6
<PAGE> 7
Notwithstanding the foregoing, in the case of an "unforeseeable
emergency", upon written application by the Grandfathered Employee to the
Corporation, the Corporation, in its sole discretion, may accelerate the
distribution of the Grandfathered Employee's deferred Supplemental Retirement
Benefit. For purposes of this Section 4.2, the term "unforeseeable emergency"
shall mean an unanticipated emergency that is caused by an event beyond the
control of the Grandfathered Employee that would result in severe financial
hardship to the Grandfathered Employee if such premature distribution were not
permitted.
4.3 PAYMENT UPON DEATH OF GRANDFATHERED EMPLOYEE.
---------------------------------------------
(a) Upon the death of a Grandfathered Employee who has met the service
requirement of Section 3.1, but who has not yet commenced distribution
of his or her Supplemental Retirement Benefit there shall be paid to
the Grandfathered Employee's Beneficiary 50% of the Supplemental
Retirement Benefit which the Grandfathered Employee would have been
entitled to receive had he or she retired on his or her Normal
Retirement Date and elected to receive his or her Supplemental
Retirement Benefit.
For purposes of this Section 4.3(a) only, the following shall apply:
(i) The Grandfathered Employee's Benefit Service shall be
calculated as of the Grandfathered Employee's date of death.
(ii) The Grandfathered Employee's Retirement Plan benefit shall be
calculated under the provisions of Article IV of the
Retirement Plan as if the Grandfathered Employee retired on
his or her Normal Retirement Date, with such Retirement Plan
benefit being increased for purposes of this Section 4.3(a)
with an imputed Average Interest Credit to reflect what the
Grandfathered Employee's Plan benefit would have been as of
the Grandfathered Employee's Normal Retirement Date; such
Retirement Plan benefit shall be converted to a single life
annuity Option using the Average Treasury Rate and the Gatt
Mortality Table.
Payment of this death benefit shall be made in the form of a
single life annuity, and will be subject to distribution any time after
the Grandfathered Employee's Early Retirement Date, which shall be
calculated in accordance with the actuarial reduction provisions
contained within Section 3.3 hereof, if paid prior to the Participant's
Normal Retirement Date."
(b) In the event of a Grandfathered Employee's death after the
Grandfathered Employee has commenced distribution of his or her
Supplemental Retirement Benefit, there shall be paid to the
Grandfathered Employee's Beneficiary only those survivor benefits
provided under the form of benefit payment elected by the Grandfathered
Employee.
7
<PAGE> 8
4.4 PAYMENT UPON GRANDFATHERED EMPLOYEE'S ATTAINMENT OF AGE 70-1/2. A
Grandfathered Employee shall be required to commence distribution of his or her
Supplemental Retirement Benefit no later than April 1 of the calendar year
following the year in which the Grandfathered Employee attains age 70-1/2.
ARTICLE V
---------
ADMINISTRATION AND CLAIMS PROCEDURE
-----------------------------------
5.1 ADMINISTRATION. The Corporation, which shall be the
"Administrator" of the Plan for purposes of ERISA and the "Plan
Administrator" for purposes of the Code, shall be responsible for the general
administration of the Plan, for carrying out the provisions hereof, and for
making payments hereunder. The Corporation shall have the sole and absolute
discretionary authority and power to carry out the provisions of the Plan,
including, but not limited to, the authority and power (a) to determine all
questions relating to the eligibility for and the amount of any benefit to be
paid under the Plan, (b) to determine all questions pertaining to claims for
benefits and procedures for claim review, (c) to resolve all other questions
arising under the Plan, including any questions of construction, and (d) to take
such further action as the Corporation shall deem necessary or advisable in the
administration of the Plan. All findings, decisions, and determinations of any
kind made by the Corporation shall not be disturbed unless the Corporation has
acted in an arbitrary and capricious manner. Subject to the requirements of law,
the Corporation shall be the sole judge of the standard of proof required in any
claim for benefits and in any determination of eligibility for a benefit. All
decisions of the Corporation shall be final and binding on all parties. The
Corporation may employ such attorneys, investment counsel, agents, and
accountants as it may deem necessary or advisable to assist it in carrying out
its duties hereunder. The actions taken and the decisions made by the
Corporation hereunder shall be final and binding upon all interested parties
subject, however, to the provisions of Section 5.2. The Plan Year, for purposes
of Plan administration, shall be the calendar year.
5.2 CLAIMS REVIEW PROCEDURE. Whenever the Corporation decides for
whatever reason to deny, whether in whole or in part, a claim for benefits under
this Plan filed by any person (herein referred to as the "Claimant"), the
Corporation shall transmit a written notice of its decision to the Claimant,
which notice shall be written in a manner calculated to be understood by the
Claimant and shall contain a statement of the specific reasons for the denial of
the claim and a statement advising the Claimant that, within 60 days of the date
on which he receives such notice, he may obtain review of the decision of the
Corporation in accordance with the procedures hereinafter set forth. Within such
60-day period, the Claimant or his authorized representative may request that
the claim denial be reviewed by filing with the Corporation a written request
therefore, which request shall contain the following information:
(a) the date on which the request was filed with the Corporation; provided,
however, that the date on which the request for review was in fact
filed with the Corporation shall
8
<PAGE> 9
control in the event that the date of the actual filing is later than
the date stated by the Claimant pursuant to this paragraph (a);
(b) the specific portions of the denial of his claim which the Claimant
requests the Corporation to review;
(c) a statement by the Claimant setting forth the basis upon which he
believes the Corporation should reverse its previous denial of his
claim and accept his claim as made; and;
(d) any written material which the Claimant desires the Corporation to
examine in its consideration of his position as stated pursuant to
paragraph (c) above.
In accordance with this Section, if the Claimant requests a review of
the Corporation's decision, such review shall be made by the Corporation, who
shall, within sixty (60) days after receipt of the request form, review and
render a written decision on the claim containing the specific reasons for the
decision including reference to Plan provisions upon which the decision is
based. All findings, decisions, and determinations of any kind made by the
Corporation shall not be modified unless the Corporation has acted in an
arbitrary and capricious manner. Subject to the requirements of a law, the
Corporation shall be the sole judge of the standard of proof required in any
claim for benefits, and any determination of eligibility for a benefit. All
decisions of the Corporation shall be binding on the Claimant and upon all other
Persons. If the Claimant shall not file written notice with the Corporation at
the times set forth above, such individual shall have waived all benefits under
the Plan other than as already provided, if any, under the Plan.
ARTICLE VI
----------
FUNDING
-------
All benefits under the Plan shall be payable solely in cash from the
general assets of the Corporation or a subsidiary, and Grandfathered Employees,
and Grandfathered Employees' Beneficiaries shall have the status of general
unsecured creditors of the Corporation. The obligations of the Corporation to
make distributions in accordance with the provisions of the Plan constitute a
mere promise to make payments in the future. The Corporation shall have no
obligation to establish a trust or fund to fund its obligation to pay benefits
under the Plan or to insure any benefits under the Plan. Notwithstanding any
provision of this Plan, the Corporation may, in its sole discretion, combine the
payment due and owing under this Plan with one or more other payments owing to a
Grandfathered Employee, or a Grandfathered Employee's Beneficiary under any
other plan, contract, or otherwise (other than any payment due under the
Retirement Plan), in one check, direct deposit, wire transfer, or other means of
payment. Finally, it is the intention of the Corporation and the Grandfathered
Employees that the Plan be unfunded for tax purposes and for the purposes of
Title I of the Employee Retirement Income Security Act of 1974, as amended.
9
<PAGE> 10
Executed at Cleveland, Ohio, as of the 1st day of August, 1996.
KEYCORP
By:
---------------------------------------
Title:
-------------------------------------
10
<PAGE> 11
<TABLE>
<CAPTION>
EXHIBIT A
LIST OF GRANDFATHERED EMPLOYEE
------------------------------
NAME OF EMPLOYEE NAME OF EMPLOYEE
- ---------------- ----------------
<S> <C>
Andrews, James McGuire, James
Auletta, Patrick McDaniel, D. A.
Bailey, Raymond McGinty, Kevin
Barger, C. Michael Melluzzo, Sebastian
Beran, John Meyer, John R.
Blake, John T. Meyer III, Henry
Brooks, Craig Moody Jr., John
Bullard, Janet Murray, Bruce
Carlini, Lawrence Neel, Thomas M.
Colao Jr., Anthony Newman, Michael
Cortelli, John Noall, Roger
Cruse Jr., Donald Nucerino, Donald
Deal, Frederick O'Donnell, F. Scott
Doland, Michael Patrick, Robert
Dorland, David Platt, Craig, T.
Edmonds, David Ponchak, Frank
Egan, Richard Purinton II, Arthur
Fishell, James Rapacz, Richard
Flowers, James Rasmussen, Eric
Gill, Michael Roark, Michael
Gillespie, Jr., Robert Rusnak, Joseph
Greer, Michael Saddler, Thomas
Gula, Allen Schaedel, Elroy
Haas, Robert Seink, Edward
Hancock, John Simon, William
Hann, Jr., William Smith, James J.
Hartman, Sheldon Swisher, Trace
Hawthorne, Douglas Tracy, Robert
Hedberg, Douglas Trigg, Michael
Heintel, Jr., Carl Uzl, Ralph R.
Heisler, Jr., Robert Walker, Martin
Herron, David Wall, Stephen
Heyworth, Anthony Wert, James W.
Hitchcock, Thomas Willet, Richard
Holloway, Ruben L.
Johannsen, Rolland D.
Jones, Robert G.
Kamerer, James
Kaplan, Stephen
Karnatz, William
Kleinhenz, Karen R.
Klimas, Daniel
Knapp, Peter O.
Koontz, Cary
Kucler, Jack
Malone, Michael
Mayer, George
</TABLE>
11
<PAGE> 12
EXHIBIT B
---------
FOR PERIODS OF TIME PRIOR TO JANUARY 1, 1989, THREE ALTERNATIVE BENEFIT
FORMULAS WERE IN EFFECT UNDER THE SOCIETY RETIREMENT PLAN. THE MONTHLY AMOUNT OF
THE NORMAL RETIREMENT BENEFIT PAYABLE TO AN ELIGIBLE GRANDFATHERED EMPLOYEE WAS
EQUAL TO:
(a) IF HE BECAME A GRANDFATHERED EMPLOYEE AND THEREFORE BEGAN TO ACCRUE
BENEFITS UNDER THE PLAN PRIOR TO JULY 1, 1981, THE GREATER OF:
(i) his final average monthly compensation multiplied by the sum
of:
(A) 3.2% multiplied by his years of benefit service not
in excess of 15, plus
(B) 1% multiplied by his years of benefit service in
excess of 15 but not in excess of 25, plus
(C) 0.5% multiplied by his years of benefit service in
excess of 25; reduced by:
(D) 3.33% of his Social Security Benefit Amount
multiplied by his years of benefit service not in
excess of 15; or
(ii) the amount determined in accordance with the formula set forth
in paragraph (b) below which is otherwise applicable to a
person who becomes an Employee on or after July 1, 1981; or
(b) IF HE BECAME AN EMPLOYEE AND THEREFORE BEGAN TO ACCRUE BENEFITS
UNDER THE PLAN ON OR AFTER JULY 1, 1981, HIS FINAL AVERAGE MONTHLY COMPENSATION
MULTIPLIED BY THE SUM OF:
(i) 2% multiplied by his years of benefit service not in excess of
30, plus
(ii) 0.5% multiplied by his years of benefit service in excess of
30; reduced by:
(iii) 1.67% of his Social Security Benefit Amount multiplied by his
years of benefit service not in excess of 30 to a maximum of
50% of such Amount; or
(c) IF HE BECAME AN EMPLOYEE AND THEREFORE BEGAN TO ACCRUE BENEFITS
UNDER THE PLAN ON JANUARY 1, 1985, AND IMMEDIATELY PRIOR TO SUCH DATE WAS A
GRANDFATHERED EMPLOYEE IN THE THIRD NATIONAL BANK AND TRUST COMPANY OF DAYTON,
OHIO RETIREMENT PLAN, THE GREATER OF:
12
<PAGE> 13
(i) the amount determined in accordance with the formula set forth
in paragraph (b) above which is otherwise applicable to a
person who becomes an Employee on or after July 1, 1981; or
(ii) the sum of:
(A) 2.2% of his final average monthly compensation,
reduced by 2% of his Social Security Benefit Amount;
the difference to be multiplied by his years of
benefit service at normal retirement date not in
excess of 25, plus
(B) 1.1% of his final average monthly compensation,
reduced by 1% of his Social Security Benefit Amount;
the difference to be multiplied by his years of benefit
service at normal retirement date in excess of 25,
adjusted as necessary to produce the actuarial
equivalent value on a straight life annuity basis of a
benefit otherwise payable on a ten-year certain and
continuous basis; provided, however, that in the case
of each Employee who was in the employment of Society
National Bank of Cleveland on December 31, 1971, and
whose continuous service is not broken after the date
and prior to the date of his retirement, the monthly
amount of his normal retirement benefit otherwise
determined under this Section shall be not less than
the monthly amount of his normal retirement benefit
determined under the normal retirement benefit formula
of the Plan as in effect on December 31, 1971, based on
the assumption that he received no increases in the
rate of his compensation after December 31, 1971, and
using the rules for computing continuous service
specified in Article II of the Plan as in effect on
June 30, 1976 (hereinafter referred to as his "minimum
benefit"); and provided, further, that the monthly
amount so determined under the provisions of this
Exhibit B shall be reduced to the extent provided in
Section 14.10 of the Society Retirement Plan as in
effect on December 31, 1988. Notwithstanding anything
to the contrary contained in the Society Retirement
Plan, in no event shall an Employee receive a benefit
commencing at his normal retirement date which is less
than the largest early retirement benefit to which he
had been entitled under the Society Retirement Plan
prior to his normal retirement date.
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<PAGE> 1
Exhibit 10.11
SOCIETY CORPORATION
1988 STOCK OPTION PLAN
1. PURPOSE. This 1988 Stock Option Plan (the "Plan") is intended to provide
to selected officers of Society Corporation (the "Corporation") and its
subsidiaries incentives for effective service and high levels of performance by
affording them the opportunity to purchase Common Shares of the Corporation to
increase their proprietary interest in the Corporation's continued progress and
success and to enable the Corporation and its subsidiaries to attract qualified
officers.
2. TYPES OF OPTIONS. Options granted under the Plan may be (a) "incentive
stock options" within the meaning of Section 422A of the Internal Revenue Code
of 1986, as amended, or (b) non-incentive stock options.
3. ADMINISTRATION. The Plan shall be administered by a Committee composed
of not less than three directors of the Corporation to be appointed by the Board
of Directors (the "Committee"). The members of the Committee shall not be
officers or employees of the Corporation or any subsidiary. The Board of
Directors may also appoint one or more directors as alternate members of the
Committee. No option may be granted to any member or alternate member of the
Committee. The Committee shall have authority, subject to the terms of the Plan
(a) to determine the officers to whom options shall be granted, the type of
option granted, the number of shares to be covered by each option, the purchase
price of the shares covered by each option, the form of consideration which may
be accepted in payment of the option price including, without limitation, cash,
securities, other property, or any combination thereof, the time or times at
which options shall be exercisable, and the terms and provisions of the
instruments by which options shall be evidenced, (b) to interpret the Plan, and
(c) to make all determinations necessary for the administration of the Plan.
Subject to Section 18, the Committee shall also have the authority to amend the
terms and conditions applicable to outstanding options provided that no
amendment shall contain terms and conditions inconsistent with the provisions of
the Plan. Notwithstanding the foregoing, the Corporation's Board of Directors
may exercise any authority granted herein to the Committee.
The construction and interpretation by the Committee of any provision of
the Plan or any stock option agreement entered into pursuant to the Plan and any
determination by the Committee pursuant to any provision of the Plan or any
stock option agreement shall be final and conclusive. No member or alternate
member of the Committee shall be liable for any such action or determination
made in good faith.
4. ELIGIBILITY. Options may be granted to officers of the Corporation or
any subsidiary (including officers who are members of the Board of Directors of
the Corporation or any subsidiary). The granting of any option to an officer
shall not entitle such officer to, nor disqualify him from, participation in any
other grant of an option. Further, the granting of any option to an officer
shall not be deemed or construed to impair or affect in any manner
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whatsoever the right of the Corporation or any subsidiary in its discretion
to terminate the services of such officer.
5. STOCK AVAILABLE FOR OPTIONS. The stock which may be issued and sold upon
the exercise of options granted under the Plan may be authorized and unissued
Common Shares of the Corporation or treasury shares as the Board of Directors
may from time to time determine. The Corporation may reacquire Common Shares at
the time options are exercised, or from time to time in advance, whenever the
Board of Directors may deem such purchase advisable.
Common Shares may be either Ordinary Shares or Book Value Shares. "Ordinary
Shares" are Common Shares of the Corporation for which there is a generally
recognized trading market and which are freely transferable. "Book Value Shares"
are Common Shares of the Corporation which have the same voting, dividend, and
liquidation rights as Ordinary Shares, except that they shall not be
transferable other than to the Corporation and except that they shall be subject
to the repurchase provisions set forth in the stock option agreements pursuant
to which they were acquired or purchased.
Subject to adjustment as provided in Section 14, the total number of Common
Shares of the Corporation which may be issued or sold upon the exercise of all
options granted under this Plan shall not exceed the following:
(a) 1,350,000 Ordinary Shares, and
(b) a number of Book Value Shares, which as of the respective
dates of grant is proportionate to the number of Ordinary Shares
described in (a) above, based on the ratio of the then fair market
value per share of Ordinary Shares to the then applicable Book Value
Per Share (as hereinafter defined in Section 6) of the Book Value
Shares; provided, however, that such number of Book Value Shares shall
not exceed 2,025,000, and the number of Book Value Shares so determined
shall be rounded to the next lowest whole number of Book Value Shares.
The exercise of an option or stock appreciation right relating to Ordinary
Shares will reduce proportionately the number of Book Value Shares, if any,
subject to the same option or stock appreciation right, and vice versa. Any Book
Value Shares or Ordinary Shares ceasing to be subject to the related option
because of such reduction shall no longer be available for the future grant of
options under the Plan.
In the event that any outstanding option under the Plan for any reason
expires or is terminated prior to the end of the period during which options may
be granted under the Plan, the Common Shares subject to the unexercised portion
of such option shall again be available for the future grant of options under
the Plan.
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<PAGE> 3
6. OPTION PRICE. The option price under an option to purchase Ordinary
Shares, whether an incentive stock option or a non-incentive stock option, shall
be not less than the fair market value of the Ordinary Shares covered by the
option, as determined by the Committee, on the date the option is granted.
The option price for any Book Value Share shall be not less than the Book
Value Per Share on the Fiscal Quarter Date coincident with or immediately
preceding the date of the grant of the option. "Book Value Per Share" as of any
date means the shareholders' equity allocable to Common Shares of the
Corporation, as set forth in the consolidated balance sheet of the Corporation
and its subsidiaries as at the Fiscal Quarter Date coincident with or
immediately preceding such date, divided by the number of Common Shares of the
Corporation outstanding as of such Fiscal Quarter Date; provided, however, that
the Book Value Per Share, for the purpose of calculating the repurchase price of
Book Value Shares, may be adjusted to such an extent as may be determined by the
Committee to preserve the benefit of the arrangement for holders of options on
Book Value Shares and the Corporation, if in the opinion of the Committee, after
consultation with the Corporation's independent public accountants, changes in
the Corporation's accounting policies' acquisitions, or other unusual or
extraordinary items have materially affected the number of the Corporation's
Common Shares outstanding or shareholders' equity allocable to the Corporation's
Common Shares.
"Fiscal Quarter Date" means March 31, June 30, September 30, or December 31
of any year or such other dates as the Corporation may from time to time fix as
ending dates of fiscal quarters of the Corporation.
7. GRANT OF STOCK OPTIONS; STOCK OPTION AGREEMENTS.
(a) Incentive Stock Options. The Committee may, from time to time,
grant incentive stock options under the Plan. Any grant of an incentive
stock option shall be to purchase a specified number of Ordinary
Shares. The day on which the Committee authorizes the grant of an
incentive stock option shall be the day on which such incentive stock
option is granted. No optionee may be granted incentive stock options
for Ordinary Shares that are exercisable for the first time by the
optionee in any calendar year (under all plans of the Corporation and
its subsidiaries) which exceed an aggregate fair market value
(determined at the time of grant) of $100,000.
(b) Non-lncentive Stock Options. The Committee may, from time to
time, grant non-incentive stock options under the Plan. Any grant of a
non-incentive stock option may be to purchase a specified number of
Ordinary Shares or Book Value Shares, or both, and may give the
optionee the election to purchase either Ordinary Shares or Book Value
Shares. The day on which the Committee authorizes the grant of a
non-incentive stock option shall be considered the day on which such
non-incentive stock option is granted, unless the Committee
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<PAGE> 4
specifies a later day. The exercise of a non-incentive stock option to
purchase Ordinary Shares will reduce proportionately the number of Book
Value Shares, if any, covered by the same non-incentive stock option,
and vice versa. Any grant in respect of Book Value Shares shall provide
for the repurchase thereof by the Corporation, and upon such repurchase
the repurchase price may be paid in cash, in Ordinary Shares, or a
combination of such methods of payment, and may either give to the
optionee or retain in the Committee the right to elect the method of
payment of the repurchase price.
(c) Stock Option Agreements. Each grant of an incentive stock
option or a non-incentive stock option under the Plan shall be
evidenced by a stock option agreement executed on behalf of the
Corporation by an officer designated by the Committee and accepted by
the optionee. Such stock option agreement shall contain such terms and
provisions, consistent with the Plan, as the Committee may approve.
(d) Election. The Committee may, at the time of the grant of a
stock option, permit the optionee to irrevocably elect at such time
whether such stock option shall be an incentive stock option subject to
the terms and conditions set forth in the Plan applicable to incentive
stock options, which terms and conditions, if such election is made,
shall be set forth in the stock option agreement.
8. EXERCISE OF OPTIONS. Options, whether incentive stock options or
non-incentive stock options, shall be exercised by delivery of written notice of
exercise to the Corporation accompanied by payment of the option price. Except
as otherwise provided in Section 9, an option may be exercised only while the
optionee is in the employ of the Corporation or of a subsidiary. An optionee to
whom an option has been granted must remain in the continuous employ of the
Corporation or of a subsidiary for one year from the date on which the option is
granted before he or she or, with respect to any non-incentive stock options,
any Transferee may exercise any part of the option; provided, however, that this
requirement of one year of continuous employment shall not apply to an optionee
who retires under any retirement plan, program, or policy of the Corporation or
of a subsidiary unless the option is covered by a stock appreciation right, in
which case, the retiring optionee must have been in the continuous employ of the
Corporation or of a subsidiary for at least six months from the date on which
the option is granted. Thereafter, each option shall become exercisable in one
or more installments at the time or times provided in the instrument evidencing
the option. Once an installment becomes exercisable, it shall remain exercisable
until expiration or termination of the option. An officer to whom an option is
granted or any Transferee may exercise the option from time to time, in whole or
in part, up to the total number of shares with respect to which the option is
then exercisable. No fraction of a Common Share may, however, be purchased upon
the exercise of an option. A "Transferee" means, with respect to non-incentive
stock options, a person or entity to which, in the Committee's discretion, any
non-incentive stock option may be assigned or transferred.
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<PAGE> 5
Notwithstanding any provision of this Section 8 to the contrary, any
option, whether an incentive stock option or a non-incentive stock option,
granted pursuant to the Plan (a) may, in the discretion of the Committee, become
fully exercisable as to all optioned shares from and after the time the optionee
ceases to be an employee of the Corporation or any of its subsidiaries as a
result of the sale or other disposition by the Corporation of assets or property
(including shares of any subsidiary) in respect of which the optionee had
theretofore been employed or as a result of which optionee's continued
employment with the Corporation or any subsidiary is no longer required, and (b)
shall, in the case of a change in control (as hereinafter defined) of the
Corporation, become fully exercisable as to all optioned shares from and after
the date of such change in control. For purposes of this paragraph, a "change in
control" shall be deemed to occur:
(i) upon the approval by the shareholders of the Corporation of
(A) any consolidation or merger of the Corporation with or into another
corporation or entity if, as a result of such consolidation or merger,
voting securities of the Corporation outstanding immediately prior to
such consolidation or merger will not represent or account for (either
directly by continuing to be outstanding as voting securities of the
resulting or surviving corporation or entity or indirectly by being
converted into or exchanged for voting securities of the resulting or
surviving corporation or entity) at least 60% of the voting securities
of the resulting or surviving corporation as of immediately after the
consolidation or merger, (B) any sale, lease, exchange, or other
transfer (in one transaction or a series of related transactions) of
all or substantially all the assets of the Corporation, or (C) adoption
of any plan or proposal for the liquidation or dissolution of the
Corporation, or
(ii) upon any "person" (as defined in Section 13(d) of the
Securities Exchange Act of 1934 as amended), corporation or other
entity, other than the Corporation or any subsidiary or employee
benefit plan or trust maintained by the Corporation or any of its
subsidiaries, becoming the "beneficial owner" (as defined in Rule 13d-3
promulgated under the Securities Exchange Act of 1934), directly or
indirectly, of more than 25% of the Common Shares of the Corporation
outstanding at the time, without the prior approval of the Board of
Directors of the Corporation, or
(iii) if, during any period of 24 consecutive calendar months,
individuals who at the beginning of such period constitute the
directors of the Corporation cease for any reason to constitute at
least a majority thereof unless the election or the nomination for
election by the shareholders of the Corporation of each new director of
the Corporation was approved by the vote of at least two-thirds of the
directors of the Corporation still then in office who were directors of
the Corporation at the beginning of any such period.
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<PAGE> 6
9. EXERCISE OF OPTIONS AFTER TERMINATION OF EMPLOYMENT OR DEATH.
(a) Incentive Stock Options. An incentive stock option may be exercised
after termination of employment, whether upon death, disability, retirement, or
otherwise only to the extent provided in this Section 9(a).
(i) Upon any termination of employment for any reason other than
the optionee's death, disability, or retirement under any retirement
plan, program, or policy of the Corporation or of a subsidiary, the
optionee shall have the right within the period of three months next
following the date of such termination of employment, to purchase all
or any part of the Common Shares which the optionee would have been
entitled to purchase if he or she had exercised his or her option on
the date of such termination of employment, except that, if the
employment of the optionee is terminated by the Corporation or a
subsidiary, the optionee may exercise his or her incentive stock option
only with the consent of the Committee.
(ii) Upon any termination of employment due to retirement under
any retirement plan, program, or policy of the Corporation or of a
subsidiary, the optionee shall have the right within the period of two
years next following the date of termination of employment, to purchase
all or any part of the Common Shares which the optionee would have been
entitled to purchase if he or she had exercised his or her incentive
stock option on the date of such termination of employment.
(iii) Upon any termination of employment due to disability, the
optionee, or his attorney in fact or guardian, shall have the right
within the period of one year next following the date of termination of
employment, to purchase all or any part of the Common Shares which the
optionee would have been entitled to purchase if he or she had
exercised his or her incentive stock option on the date of such
termination of employment.
(iv) Upon the death of the optionee while in the active service of
the Corporation or of a subsidiary, or within the period referred to in
subsection (i), (ii), or (iii) of this Section 9(a), the optionee's
executor or administrator or the person or persons to whom the
optionee's rights under his or her option are transferred by will or
the laws of descent and distribution shall have the right, within the
period of two years next following the date of the optionee's death, to
purchase all or any part of the Common Shares which the optionee would
have been entitled to purchase if he or she had exercised his or her
incentive stock option on the date of death.
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<PAGE> 7
(b) Non-incentive Stock Options. A non-incentive stock option may be
exercised after termination of employment, whether upon death, disability,
retirement, or otherwise only to the extent provided in this Section 9(b).
(i) Upon any termination of employment for any reason other than
the optionee's death, disability, or retirement under any retirement
plan, program, or policy of the Corporation or of a subsidiary, the
optionee or a Transferee shall have the right within the period of six
months next following the date of such termination of employment, to
purchase all or any part of the Common Shares which the optionee would
have been entitled to purchase if he or she had exercised his or her
option on the date of such termination of employment, except that if
the employment of the optionee is terminated by the Corporation or a
subsidiary, the optionee or Transferee may exercise his or her
incentive stock option only with the consent of the Committee.
(ii) Upon any termination of employment due to retirement under
any retirement plan, program, or policy of the Corporation or of a
subsidiary, the optionee or any Transferee shall have the right within
the period of two years next following the date of termination of
employment, to purchase all or any part of the Common Shares which the
optionee would have been entitled to purchase if he or she had
exercised his or her incentive stock option on the date of such
termination of employment.
(iii) Upon any termination of employment due to disability, the
optionee, his or her attorney in fact or guardian, or any Transferee
shall have the right within the period of two years next following the
date of termination of employment, to purchase all or any part of the
Common Shares which the optionee would have been entitled to purchase
if he or she had exercised his or her non-incentive stock option on the
date of such termination of employment.
(iv) Upon the death of the optionee while in the active service of
the Corporation or of a subsidiary, or within the period referred to in
subsection (i) (ii), or (iii) of this Section 9(b) the optionee's
executor or administrator, the person or persons to whom the optionee's
rights under his or her option are transferred by will or the laws of
descent and distribution, or any Transferee shall have the right,
within the period of two years next following the date of the
optionee's death, to purchase all or any part of the Common Shares
which the optionee would have been entitled to purchase if he or she
had exercised his or her non-incentive stock option on the date of
death.
10. TERMINATION OF OPTIONS. Notwithstanding any other provision in this
Plan, any option, whether an incentive stock option or a non-incentive stock
option, granted under the Plan shall terminate, and the right of the optionee or
other person to purchase Common Shares shall expire, at the time set forth in
the grant, which shall be not later than ten years from the
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<PAGE> 8
date such option is granted; provided, however, in the case of non-incentive
stock options, the Committee may authorize a term of ten years and one week from
the date such option is granted if the Committee determines it is desirable in
order to assure that such option is not treated as an incentive stock option for
Federal income tax purposes.
11. PAYMENT FOR SHARES. Upon exercise of an option, whether an incentive
stock option or a non-incentive stock option, the option price shall be payable
either (a) in cash, or (b) by the transfer to the Corporation by the optionee or
Transferee of Ordinary Shares or Book Value Shares having a value (current
market value in the case of Ordinary Shares and Book Value in the case of Book
Value Shares) equal to the option price, including, in the discretion of the
Committee exercised at the time the option is granted, the right to transfer
shares acquired upon the exercise of a part of an option in payment of the
option price upon immediate exercise of a further part of the option, or (c) by
a combination of the methods described in (a) and (b) of this Section 11.
12. ASSIGNABILITY. Non-incentive stock options granted under the Plan may
be assignable or transferable in the Committee's discretion and may be exercised
by the Transferee. Except as otherwise provided in Section 9, an incentive stock
option granted under the Plan may not be assigned or transferred and may be
exercised only by the optionee to whom granted.
13. OPTIONS IN SUBSTITUTION FOR STOCK OPTIONS GRANTED BY OTHER COMPANIES.
Options, whether incentive stock options or non-incentive stock options, may be
granted under the Plan in substitution for stock options held by employees of a
company who become or are about to become officers of the Corporation or a
subsidiary as a result of the merger or consolidation of the employer company
with the Corporation or a subsidiary, or the acquisition by the Corporation or a
subsidiary of the assets of the employer company, or the acquisition by the
Corporation or a subsidiary of stock of the employer company as a result of
which it becomes a subsidiary of the Corporation. The terms, provisions, and
benefits of the substitute options so granted may vary from the terms,
provisions and benefits set forth in or authorized by the Plan to such extent as
the Committee at the time of grant may deem appropriate to conform, in whole or
in part, to the terms, provisions, and benefits of the options in substitution
for which they are granted.
14. ADJUSTMENT UPON CHANGES IN SHARES. The number and option price of the
Common Shares covered by each option and the total number of shares that may be
sold under the Plan shall be proportionately adjusted to reflect, as deemed
equitable and appropriate by the Committee, any stock dividend, stock split or
share combination of the Common Shares, or reclassification or recapitalization
of the Corporation. If the Corporation shall be a party to any merger,
consolidation, or other form of business combination, or liquidation or
dissolution, and in connection therewith the holders of Common Shares shall
become entitled to receive securities, cash, or other property in conversion or
extinguishment of, exchange for, or otherwise in respect of Common Shares, the
officer to whom an option has been granted shall be entitled, upon exercise of
the option rights granted under the Plan on the terms and conditions set forth
in the instrument evidencing the option, to receive, in lieu of Common
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<PAGE> 9
Shares, the securities, cash, or other property that the officer would be
entitled to receive as a holder of Common Shares had the officer exercised the
option rights set forth in the instrument evidencing the option immediately
prior to the effective date of the merger, consolidation or other form of
business combination; provided, however, that the Committee may authorize the
disposition of the option rights granted under the Plan in such other manner as
any be necessary and equitable in its discretion to realize the intention of the
option rights granted under the Plan.
15. PURCHASE FOR INVESTMENT. Each person exercising an option, whether an
incentive stock option or a non-incentive stock option, may be required by the
Corporation to furnish a representation that he or she is acquiring the shares
purchased upon such exercise as an investment and not with a view to
distribution thereof if the Corporation shall, in its sole discretion, determine
that such representation is required to ensure that a resale or other
disposition of the shares would not involve a violation of the Securities Act of
1933, as amended, or of applicable blue sky laws. Any investment representation
so furnished shall no longer be applicable at any time such representation is no
longer necessary for such purposes.
16. LEGAL REQUIREMENTS. No option shall be granted and no shares shall be
delivered under this Plan except in compliance with all applicable Federal and
state laws and regulations, including, without limitation, the United States
Internal Revenue Code and Federal and state securities laws
17. DURATION AND TERMINATION OF THE PLAN. The Plan shall remain in effect
through February 17, 1998, and shall then terminate, unless terminated at an
earlier date by action of the Board of Directors: provided, however, that
termination of the Plan shall not affect options granted prior thereto.
18. AMENDMENTS. The Board of Directors may alter or amend the Plan from
time to time prior to its termination, except that, without shareholder
approval, no amendment shall increase the aggregate number of shares with
respect to which options may be granted (except in accordance with the
provisions of Section 14), reduce the option price at which options may be
exercised (except in accordance with the provisions of Section 14), extend the
time within which options may be granted under the Plan, or change the
requirements relating to either eligibility for participation in the Plan or
administration of the Plan. Except in accordance with the provisions of Section
14, neither the Board of Directors nor the Committee may, without the consent of
the holder of an option granted under the Plan, alter or impair such option. The
Committee may, with the agreement of the affected optionee, cancel any stock
option agreement entered into pursuant to the Plan. In the event of such
cancellation, the Committee may authorize the grant of a new incentive stock
option or nonincentive stock option for the same or a different number of Common
Shares specified in the cancelled stock option agreement, at such option price
and upon terms and provisions which would have been applicable under the Plan
had not the Corporation and the optionee entered into the cancelled stock option
agreement.
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Exhibit 10.13
AMENDMENT TO
KEYCORP AMENDED AND RESTATED
1991 EQUITY COMPENSATION PLAN
Pursuant to the direction of the Compensation and Organization
Committee of KeyCorp's Board of Directors, the KeyCorp Amended and Restated 1991
Equity Compensation Plan (the "Plan") is hereby amended as provided herein.
Terms not specifically defined herein shall have the meanings set forth in the
Plan.
1. Section 2.5 of the Plan is hereby amended to read as follows:
"2.5 Change of Control. A "Change of Control" shall be deemed
to have occurred if at any time after the date of the grant of the
relevant Award there is a Change of Control under any of clauses (a),
(b), (c), or (d) below. For these purposes, the Corporation will be
deemed to have become a subsidiary of another corporation if any other
corporation (which term shall include, in addition to a corporation, a
limited liability company, partnership, trust, or other organization)
owns, directly or indirectly, 50 percent or more of the total combined
outstanding voting power of all classes of stock of the Corporation or
any successor to the Corporation.
(a) A Change of Control will have occurred under this clause
(a) if the Corporation is a party to a transaction pursuant to which
the Corporation is merged with or into, or is consolidated with, or
becomes the subsidiary of another corporation and either
(i) immediately after giving effect to that transaction, less
than 65% of the then outstanding voting securities of the
surviving or resulting corporation or (if the Corporation
becomes a subsidiary in the transaction) of the ultimate
parent of the Corporation represent or were issued in
exchange for voting securities of the Corporation
outstanding immediately prior to the transaction, or
(ii) immediately after giving effect to that transaction,
individuals who were directors of the Corporation on the
day before the first public announcement of (A) the
pendency of the transaction or (B) the intention of any
person or entity to cause the transaction to occur, cease
for any reason to constitute at least 51% of the
directors of the surviving or resulting corporation or
(if the Corporation becomes a subsidiary in the
transaction) of the ultimate parent of the Corporation.
<PAGE> 2
(b) A Change of Control will have occurred under this clause
(b) if a tender or exchange offer shall be made and consummated for 35%
or more of the outstanding voting stock of the Corporation or any
person (as the term "person" is used in Section 13(d) and Section
14(d)(2) of the 1934 Act) is or becomes the beneficial owner of 35% or
more of the outstanding voting stock of the Corporation or there is a
report filed on Schedule 13D or Schedule 14D-1 (or any successor
schedule, form or report), each as adopted under the 1934 Act,
disclosing the acquisition of 35% or more of the outstanding voting
stock of the Corporation in a transaction or series of transactions by
any person (as defined earlier in this clause (b)).
(c) A Change of Control will have occurred under this
clause (c) if either
(i) without the prior approval, solicitation, invitation,
or recommendation of the Corporation's Board of
Directors any person or entity makes a public
announcement of a bona fide intention (A) to engage
in a transaction with the Corporation that, if
consummated, would result in a Change Event (as
defined below in this clause (c)), or (B) to
"solicit" (as defined in Rule 14a-1 under the 1934
Act) proxies in connection with a proposal that is
not approved or recommended by the Corporation's
Board of Directors, or
(ii) any person or entity publicly announces a bona fide
intention to engage in an election contest relating
to the election of directors of the Corporation
(pursuant to Regulation 14A, including Rule 14a-11,
under the 1934 Act),
and, at any time within the 24 month period immediately following the
date of the announcement of that intention, individuals who, on the day
before that announcement, constituted the directors of the Corporation
(the "Incumbent Directors") cease for any reason to constitute at least
a majority thereof unless both (A) the election, or the nomination for
election by the Corporation's shareholders, of each new director was
approved by a vote of at least two-thirds of the Incumbent Directors in
office at the time of the election or nomination for election of such
new director, and (B) prior to the time that the Incumbent Directors no
longer constitute a majority of the Board of Directors, the Incumbent
Directors then in office, by a vote of at least 75% of their number,
reasonably determine in good faith that the change in Board membership
that has occurred before the date of that determination and that is
anticipated to thereafter occur within the balance of the 24 month
period to cause the Incumbent Directors to no longer be a majority of
the Board of Directors was not caused by or attributable to,
2
<PAGE> 3
in whole or in any significant part, directly or indirectly,
proximately or remotely, any event under subclause (i) or (ii) of this
clause (c).
For purposes of this clause (c), the term "Change Event" shall mean any
of the events described in the following subclauses (x), (y), or (z) of
this clause (c):
(x) A tender or exchange offer shall be made for 25% or more
of the outstanding voting stock of the Corporation or any
person (as the term "person" is used in Section 13(d) and
Section 14(d)(2) of the 1934 Act) is or becomes the beneficial
owner of 25% or more of the outstanding voting stock of the
Corporation or there is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form, or report),
each as adopted under the 1934 Act, disclosing the acquisition
of 25% or more of the outstanding voting stock of the
Corporation in a transaction or series of transactions by any
person (as defined earlier in this subclause (x)).
(y) The Corporation is a party to a transaction pursuant to
which the Corporation is merged with or into, or is
consolidated with, or becomes the subsidiary of another
corporation and, after giving effect to such transaction, less
than 50% of the then outstanding voting securities of the
surviving or resulting corporation or (if the Corporation
becomes a subsidiary in the transaction) of the ultimate
parent of the Corporation represent or were issued in exchange
for voting securities of the Corporation outstanding
immediately prior to such transaction or less than 51% of the
directors of the surviving or resulting corporation or (if the
Corporation becomes a subsidiary in the transaction) of the
ultimate parent of the Corporation were directors of the
Corporation immediately prior to such transaction.
(z) There is a sale, lease, exchange, or other transfer (in
one transaction or a series of related transactions) of all or
substantially all the assets of the Corporation.
(d) A Change of Control will have occurred under this clause
(d) if there is a sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all or
substantially all of the assets of the Corporation."
3
<PAGE> 4
2. A new Section 27 shall be added to the Plan, which Section 27
shall read as follows:
"27. PLAN EFFECTIVE DATE. The Plan, originally named the
Society Corporation 1991 Equity Compensation Plan, was approved by the
Corporation's shareholders at the Annual Meeting of Shareholders held
on April 16, 1991 and became effective on that date. On March 17, 1994,
the Corporation's Board of Directors adopted, subject to shareholder
approval, certain amendments to the Plan, then renamed the KeyCorp
Amended and Restated 1991 Equity Compensation Plan. The shareholders
approved these amendments at the Corporation's Annual Meeting of
Shareholders held on May 19, 1994. The Plan was further amended by
action of the Committee on July 17, 1996 to amend the definition of
Change of Control as set forth in Section 2.5 of the Plan, which
amendment was effective as of January 1, 1996. If the Corporation
hereafter enters into a transaction intended to be accounted for as a
pooling of interests and the Committee determines, based on the written
advice of the Corporation's independent accountants, that the July 17,
1996 amendment or the operation thereof would conflict with or
jeopardize the pooling of interests accounting treatment for such
transaction, then the July 17, 1996 amendment shall be inoperative and
shall be treated as if it had never been effected so that the
definition of Change of Control would be as in effect prior to such
amendment."
3. If the Corporation hereafter enters into a transaction intended to
be accounted for as a pooling of interests and the Committee determines, based
on the written advice of the Corporation's independent accountants, that this
amendment or the operation hereof would conflict with or jeopardize the pooling
of interests accounting treatment for such transaction, then this amendment
shall be inoperative and shall have no force or effect and the Plan shall be as
in effect prior to this amendment.
4. Except as provided in the preceding paragraph, this amendment shall
be effective as of January 1, 1996 and shall apply to all Options granted on and
after that date unless expressly provided otherwise in the relevant Award
Instrument.
IN WITNESS WHEREOF, the undersigned has set his hand as of July 17,
1996.
-----------------------------------
Roger Noall
Senior Executive Vice President and
Chief Administrative Officer
KeyCorp
4
<PAGE> 1
EXHIBIT 10.17
INSURED John A. Doe CUSTOMAX
POLICY NUMBER LA DOOOOOO
POLICY DATE 01-01-1987
EFFECTIVE DATE 01-01-1987 SPECIMEN
POLICY
DISABILITY INCOME POLICY
A Guaranteed renewable Noncancellable contract.
NONCANCELLABLE TO AGE 65 AT GUARANTEED PREMIUM RATE THEREAFTER UNTIL AGE 75,
RENEWABLE ON EACH POLICY ANNIVERSARY ON WHICH THE INSURED IS EMPLOYED AT LEAST
30 HOURS PER WEEK AFTER AGE 65, PREMIUM RATE IS BASED ON THE INSURED'S AGE ON
EACH RENEWAL DATE
[A Guaranteed renewable Noncancellable contract]
This policy provides disability income benefits under stated conditions. Please
refer to the policy provisions where we tell you when and how we will pay
benefits. You will find an index of these provisions on Page 2.
TWENTY DAY RIGHT TO EXAMINE POLICY
Within 20 days after this policy is delivered to you or your representative, you
may cancel the policy for any reason. To cancel this policy, you or your
representative must mail or deliver the policy to our Home Office or to one of
our authorized representatives. If this is done, the policy will be canceled
from the beginning and all of the premium paid will be refunded.
[Satisfaction guaranteed or full premium refund--you have 20 days to examine
this policy before making a decision to accept it.]
RENEWAL
This policy is even renewable after age 65 if you continue to work 30 or more
hours per week. You may renew this policy on each policy anniversary until the
policy anniversary when the insured's age is 65 by paying each premium before
its Grace Period ends. Beginning with the policy anniversary when his age is 65,
you may renew this policy until the policy anniversary when his age is 75 by
paying the appropriate premium on each premium due date on which he is employed
in a regular occupation at least 30 hours a week.
[This policy is even renewable after age 65 if you continue to work 30 or more
hours per week.]
This policy become effective on the Effective Date shown on page 3.
UNUN.
2211 Congress Street
Portland, Maine 04122
(Provisions may vary in certain states)
Executive
Professional
<PAGE> 2
INDEX OF POLICY PROVISIONS
TWENTY DAY RIGHT TO EXAMINE POLICY 1
RENEWAL 1
POLICY SCHEDULE 3
PREMIUMS 4
REINSTATEMENT 4
DEFINITIONS 5
BENEFITS 7
DISABILITY BENEFIT 7
MONTHLY BENEFIT AMOUNT 7
BENEFIT FOR LOSS OF USE 8
SUCCESSIVE DISABILITIES 8
WAIVER OF PREMIUM 8
BENEFIT INDEXING PROVISION 8
INDEXED AMOUNT 9
TRANSPLANT DONOR BENEFIT 9
REHABILITATION 9
EXCLUSIONS AND LIMITATIONS 9
PREEXISTING CONDITION LIMITATION 9
MULTIPLE BENEFITS 9
CLAIM INFORMATION 10
HOW TO FILE A CLAIM 10
CONDITIONS AND TIME LIMITS 10
HOW AND WHEN WE PAY BENEFITS 10
CHANGE OF PLAN PROVISION 11
GENERAL PROVISIONS 11
THE CONTRACT 11
INCONTESTABLE 11
CONTEST 12
CONFORMITY WITH STATE STATUTES 12
LEGAL ACTIONS 12
MISSTATEMENT OF AGE 12
OWNER 12
LOSS PAYEE 12
ASSIGNMENT 12
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<PAGE> 3
POLICY SCHEDULE
Insured John A. Doe 01-01-87 Policy Date
Policy Number LA DOOOOO 01-01-87 Effective Date
SUMMARY OF PREMIUM
Premiums are payable as follows
-----
BEGINNING ANNUAL SEMIANNUAL QUARTERLY Your choice
01-01-1987 $335.90 $171.31 $87.33 premium payment
schedule
01-01-2017 Company rates then in effect -----
*Premium guaranteed to age 65
SUMMARY OF COVERAGE
Form - EP87 Annual Premium-$335.90 until 01-01-2017
Then company rates then
in effect
Maximum Disability Benefit - $1,000
Elimination period - 90 days
Maximum Benefit Period - To the later of (A) age 65 policy anniversary or
(B) 24 months after disability payments begin.
PREMIUM
RIDER BENEFIT ANNUAL CEASE
FORM DESCRIPTION AMOUNT PREMIUM DATE
---
Cost of Living Adjustment Some of the
Retirement Benefit optional benefits
------------------------------ available to
College Benefit customize your
particular program
---
Rider premiums for the premium term are included in the summary of premium
-3-
<PAGE> 4
PREMIUMS
All premiums except the first premium are due on the before the due date. They
are payable as stated on page 3.
Each premium will keep this policy in effect and continue coverage for the term
shown
[Premiums are guaranteed to age 65]
As long as all premiums are paid before the end of their Grace Period, we will
not increase the premium rate for this policy before the policy anniversary when
the Insured's age is 65. On and after the policy anniversary when his age is 65,
the premium is the rate then in effect for his age on each policy anniversary.
The Grace Period is the 31 consecutive days that begin with the day a premium is
due. We will keep this policy in effect and continue coverage during that time.
If the premium is not paid during those 31 days, this policy and all coverage
under this policy will terminate.
If we accept premium after the policy anniversary when the Insured's age is 65,
we will keep this policy in effect and continue coverage until the end of the
period for which we accept it.
If any premium is paid beyond the month in which the Insured dies or this policy
terminates for some other reason, we will refund the amount of the unearned
premium paid.
Premiums must be paid in United States dollars.
REINSTATEMENT
[Reinstatement possible for up to 6 months 6.]
If this policy terminates because a premium is not paid by the end of the Grace
Period, you may apply to reinstate this policy at any time until the first
unpaid premium is six months overdue.
In order to reinstate this policy, two requirements must be met. They are
1. a reinstatement application must be completed (to complete a
reinstatement application means you submit the reinstatement
application with evidence of the Insured's insurability and the full
amount of overdue premium); and
2. we approve the instatement application.
A reinstatement application must be prepaid, and we will issue a prepayment
agreement. The date of the prepayment agreement will be the date the
reinstatement application has been completed.
If we approve the reinstatement application, this policy will be reinstated on
the approval date. If the overdue premium is paid without submitting a
reinstatement application and we keep the premium without requesting a
reinstatement application within a reasonable time, this policy will be
reinstated the date we receive the premium. If we issue a prepayment agreement
and do not approve or disapprove the reinstatement application within 45 days
from the date of the
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<PAGE> 5
prepayment agreement, this policy will be reinstated on that 45th day.
If this policy is reinstated it will only cover:
1. injury that occurs on or after the date this policy is restated or
2. sickness which is first diagnosed or is first treated more than 10 days
after this policy is reinstated.
IT WILL NOT COVER.
1. any injury or sickness when is excluded by name or description; and
2. any preexisting condition excluded by the reinstatement application.
DEFINITIONS
POLICY means the contract of insurance between you and us. This form, all
applications, and any riders, endorsements, or amendments that are attached to
it make up the entire contract.
[Coverage flexibility --this feature allows you to purchase varying levels and
types of coverage on a single policy.
COVERAGE means a type or amount of benefit provided by this policy. Each
benefit, each modification of that benefit for which we require evidence
of insurability, and each reinstatement of that benefit is a separate coverage.
For purposes of the Incontestable provision, an increase provided by the
Benefit Indexing Provision is part of the coverage that was indexed unless
evidence of insurability is required for that increase.
YOU and YOUR refer to the owner of this policy. The owner is the Insured unless
ownership right have been assigned.
WE, OUR and US refer to UNUM Life Insurance Company of America (or First UNUM
Life Insurance Company).
INSURED means the person named on page 3. It is the person whom we are insuring.
The Insured can not be changed.
INJURY means bodily harm cause by an accident.
SICKNESS means a mental or physical illness or condition which has been
diagnosed or treated.
MAXIMUM DISABILITY BENEFIT means the amount shown on page 3.
MAXIMUM BENEFIT PERIOD means the period shown on page 3.
PREEXISTING CONDITION means an injury or sickness suffered by the Insured which
exists on the effective date of the coverage and, during the past five years,
either:
1. was diagnosed;
2. caused the Insured to receive medical advice or treatment; or
3. cause symptoms for which an ordinarily prudent person would have sought
medical advice or treatment
CPI-U means the Consumer Price Index for All Urban Consumers published by the
Bureau of Labor Statistics or its successor. We may choose another
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<PAGE> 6
nationally published index if the CPI-U is replaced or changed. If the new
or revised index is proportionate to the CPI-U, we will use the new index.
Otherwise, we will choose the index which, in our judgment, most closely
reflects the change in the cost of living in the United States. If the change
is subject to government approval, we will obtain it before we use the new or
revised index. CPI-U FACTOR means, during each year of disability, the ratio of
the Current Index to the Base Index. A year of disability is from one
anniversary of the beginning of disability to the next.
[Own occupation coverage--This definition of regular occupation recognizes the
years of education and experience the insured may have invested in
professionally recognized specialty. While he is totally disabled in his
occupation or specialty, he will receive the full monthly benefit, even it he is
working in a new occupation].
BASE INDEX means the last CPI-U index published in the calendar year before
disability begins.
CURRENT INDEX means the last CPI-U index published in each calendar year after
the disability begins.
REGULAR OCCUPATION means the Insured's occupation at the time the Elimination
Period begins. If the Insured engages primarily in a professionally recognized
specialty at that time, his occupation is that specialty.
TO WORK FULL TIME in his regular occupation means the Insured works
approximately the same number of hours in the same regular occupation as he was
working before disability began.
[During the Elimination Periods Insured need any experience]
[a loss of time or duties--loss of income is not required, whether Totally
Disabled or Residually Disabled, to satisfy the Elimination Period.]
IMPAIRMENT, IMPAIRS AND IMPAIRED mean (1) injury or sickness totally or
residually disable the Insured; and (2) the Insured is receiving medical care
from someone other than himself which is appropriate for the injury or sickness.
TOTAL DISABILITY AND TOTALLY DISABLED means injury or sickness restricts the
Insured's ability to perform the material and substantial duties of his regular
occupation to an extent that prevents him from engaging in his regular
occupation.
RESIDUAL DISABILITY AND RESIDUALLY DISABLED mean injury or sickness does not
prevent the Insured from engaging in his regular occupation, BUT does restrict
his ability to perform the material and substantial duties of his regular
occupation: (i) for as long a time as he customarily performed them before the
injury or sickness: or (ii) as effectively as he customarily performed them
before the injury or sickness.
DISABILITY AND DISABLED mean the period while he Insured is satisfying the
Elimination Period, or while the Disability Benefit or the Loss of Use Benefit
is payable.
[Elimination Period is the number of days during which an insured must _______
an impairment before benefits will be payable]
ELIMINATION PERIOD means the number days stated on page 3. preceding the date
benefits become payable (other than the Loss of Use Benefit), during which
injury or sickness impairs the Insured.
[You can customize your disability protection by varying the Elimination Period
of your various coverages.]
The Elimination Period begins on the first day that the Insured is impaired
Different Elimination Period may apply to different coverage under this policy.
The Elimination Period for each coverage is described on page 3.
-6-
<PAGE> 7
[Combines Elimination Periods for separate impairments from the same cause]
If the impairment ceases before the Insured satisfies the Elimination Period and
he become impaired again from the same cause within 6 months we will combine
those impairments to determine when benefits begin.
NET INCOME means all payment received by the Insured for duties that he performs
in his regular occupation minus his share of the usual and customary business
expenses which he or his company incurs on a regular basis and are essential to
the operation of the business.
[Flexibility--this policy allows for 3 different methods to determine "prior net
income".]
[Since inflation can be a major factor in today's economy, during disability an
Insured's "prior net income" is indexed based on the CPI-U.]
PRIOR NET INCOME means the largest of: (1) the Insured's average monthly net
income for the last 12 months before the Elimination Period began; (2) the
Insured's average monthly net income for the 12 months period immediately before
those 12 months; or (3) the highest average monthly net income for any two
consecutive years of the last 5 years before the Elimination Period began. On
each anniversary of the first day of a period of disability, we will calculate a
CPI-U Factor. We will multiply the prior net income by that Factor. Then we will
use that amount to calculate the Maximum Disability Benefit.
LOST OF NET INCOME means the Insured's indexed prior net income minus the net
income he received for the month to which a payment relates
BENEFITS
DISABILITY BENEFIT. We will pay the Monthly Benefit Amount in any month after
the Insured has satisfied the Elimination Period that:
1. the Insured is totally disabled or the insured is residually disabled
and experiences at least a 20% loss of net income in his regular
occupation as a result of a present injury or sickness;
2. the injury or sickness which causes the loss of net income is the one
which caused him to satisfy the Elimination Period;
[Medical care required only when appropriate.]
3. he is receiving medical care from someone other than himself which is
APPROPRIATE for the injury is sickness; and
4. benefits under the Disability Benefit and the Loss of Use Benefit
combined have not been paid for the Maximum Benefit Period.
After disability ceases, resumption of this Disability Benefit is subject to the
preceding requirements and those stated in the Successive Disabilities
provision.
[A___ monthly benefit will paid if the Insured is totally disabled or if his
loss of net income is 75% or more]
MONTHLY BENEFIT AMOUNT. If the Insured is totally disabled or if the Insured's
loss of net income is 75% or more, we will pay the Maximum Disability Benefit
for that month. Whenever the loss of net income is less than 75% but at least
20%, the amount payable will be determined by the following formula:
LOSS OF NET INCOME x Maximum Disability
prior net income Benefit
During the first six months that we pay the Disability Benefit, as a result of a
residual disability, we will pay one-half
-7-
<PAGE> 8
of the Maximum Disability Benefit rather than the amount due under the formula
if the Insured's loss of net income is from 20% to 50%.
[During the first 6 months of residual disability that the Insured's loss of net
income is 20% to 50%, we will pay half the Maximum Disability Benefit.]
[Loss of Use benefits are paid even if the insured is working in his regular
occupation and has no loss of net income.]
BENEFIT FOR LOSS OF USE. Limited by the Maximum Benefit
Period, we will pay the Maximum Disability Benefit monthly while an injury or
sickness causes the Insured the total loss of use of:
1. speech, hearing in both ears, or sight in both eyes; or
2. one hand and one foot; or
3. both hands or
4. both feet.
We will pay this benefit from the date of loss.
After disability ceases, resumption of this Loss of Use Benefit is subject to
the preceding requirements and those stated in the Successive Disabilities
provision.
[Disabilities recurring within 6 months will not be considered separate
disabilities unless they are the result of different causes.]
SUCCESSIVE DISABILITIES. A period of disability which follows a past period of
disability will be considered a separate period of disability only if the
subsequent period of disability is;
1. caused by a different injury or sickness than the one which caused the
past period of disability; or
2. separated from the past period of disability by at least six months
during which the Insured is able to return to work full time in his
regular occupation.
Any such separated period of disability will be considered a new disability; it
will be subject to its own Elimination Period and Maximum Benefit Period. Any
other subsequent period of disability will be considered an extension of the
past period of disability.
[Consecutive days not required.]
[During disability, premium is waived even beyond benefit periods. All premiums
paid from the date of loss will be refunded]
WAIVER OF PREMIUM. After disability has lasted for ninety days while this policy
is effect, we will waive the premium as long as the Insured is unable to return
to work full time in his regular occupation as a result of the injury or
sickness which cause the disability. We will refund premium already paid for
that period on a pro rata basis.
[To protect current income at all times, coverage must increase income
increases--this feature provides an annual increase in the benefits amount based
on changes in the CPI-U--minimum 4%, maximum 8%.]
BENEFIT INDEXING PROVISION. On each policy anniversary until the policy
anniversary when the Insured's age is 55, except during disability, you will
automatically have the opportunity to increase the Maximum Disability Benefit by
the Indexed Amount provided that:
1. on each fifth policy anniversary, we determine based on evidence
submitted that the Insured's total coverage then in effect does not
exceed our issue and participation limits for the income which he is
then earning and.
2. you have not refused the opportunity to increase the Insured's coverage
in two consecutive years.
If you cannot automatically increase the Maximum Disability Benefit because
-8-
<PAGE> 9
the Insured did not satisfy provision (1) above, you still may increase the
Maximum Disability Benefit by the Indexed Amount on any subsequent policy
anniversary until the policy anniversary when the Insured's age is 55, except
during disability, if on that date the income which he is then earning qualifies
him for the increase.
When the opportunity is made available, you may increase the Insured's Maximum
Disability Benefit by paying the premium for the increased amount. The premium
will be based on his age on that policy anniversary and the premium rate then in
effect for this plan. The Maximum Benefit Period. Elimination Period and plan
will be the same as for the coverage which is indexed.
INDEXED AMOUNT. The increase available each year will be the percent change in
the CPI-U between November 30 in the previous calendar year and November 30 of
the calendar year before that one or 8%, whichever is smaller, times the current
Maximum Disability Benefit for the policy. If the change in the CPI-U is less
then 4%, the increase available will be 4% of the current Maximum Disability
Benefit.
[Benefits are payable as a sickness]
TRANSPLANT DONOR BENEFIT. Disability which result from the transplant of a part
of the Insured's body to another person's body will be considered caused by a
sickness.
[Flexible Rehabilitation Program]
REHABILITATION. While the Insured is receiving the Disability Benefit, you may
request or we may suggest participation in a rehabilitation program designed to
help him return to work. If we determine that such a program is appropriate, we
may pay reasonable expenses for such items as tuition, books, training programs,
or additional living expenses. The actual expenses covered and the terms of the
plan will be subject to mutual agreement. Our agreement will be outlined in a
written plan of rehabilitation. Benefits will continue as provided by this
policy except if they are modified by the plan of rehabilitation.
EXCLUSIONS AND LIMITATIONS
This policy does not pay benefits which are based on injury or sickness caused
by war or an act of war, whether declared or undeclared.
PREEXISTING CONDITION LIMITATION. This policy does not pay benefits which are
based on a preexisting condition if:
1. the preexisting condition is not disclosed or is misrepresented in the
application; and
2. the preexisting condition impairs the Insured or causes a loss of use
or other loss during the first two years after the effective date of
the coverage.
Benefits will not be paid if they are based on impairment or loss of use or
other loss that began before the effective date of the coverage.
MULTIPLE BENEFITS. The Disability Benefit or Loss of Use Benefit payable in any
month shall not exceed the Maximum Disability Benefit. In any
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<PAGE> 10
month that the Loss of Use Benefit is paid, no Disability Benefit will be
paid.
CLAIM INFORMATION
HOW TO FILE A CLAIM. To make a claim under this policy, the following steps
must be taken:
1. give Notice of Claim (someone must notify us that disability has
started as defined in this policy);
[Benefit procedures.]
2. file Proof of Loss (the Insured, or someone acting in his behalf, and
his attending physician must complete and return the claim form
provided by us);
3. promptly complete and return any other forms we require; and
4. the Insured undergoes a medical examination or a personal interview as
often as we reasonably request while the claim is pending. We reserve
the right to select the examiner. We will pay for the examination.
We will evaluate the claim and either:
1. pay the benefits specified in the policy; or
2. notify the Insured and any Loss Payee that benefits are not payable and
why. If we need more information, we will tell the Insured and any Loss
Payee what we need.
CONDITIONS AND TIME LIMITS. In order for benefits to be payable, there are some
conditions and time limits which each of us must meet. They are:
1. We must be given the Notice of Claim within 30 days after the
Elimination Period begins, or as soon as reasonably possible.
2. We will furnish claim forms within 15 days after we receive written
Notice of Claim. If the forms are not received within 15 days, send us
proof of what happened and the extent of the sickness or injury.
3. The claim forms and other information requested by us (Proof of Loss)
must be furnished to us within 90 days after each month for which a
benefit is payable. However, failure to furnish such proof within 90
days will not reduce or nullify the claim if proof is furnished as soon
as reasonably possible within one year after the 90 days. If the
Insured is legally unable to notify us, the one year limit does not
apply.
4. We must be given the information which we need to determine if a
benefit is payable and how much that benefit should be. We may require
relevant portions of income tax returns for the Insured or his
business, income statements, vouchers for overhead expenses, and other
statements or reports of receipts and payments. We may also require
evidence that the Insured was liable for an overhead expense before
disability began.
HOW AND WHEN WE PAY BENEFITS. We will pay benefits due under this policy in
United States dollars. We will not
-10-
<PAGE> 11
pay any benefit until we have sufficient Proof of Loss. When we have determined
that the claim is payable, we will pay according to the Benefits provision. If
any amount is accrued and unpaid when our liability terminates, we will pay it
immediately.
We will pay all benefits to the Loss Payee if living, otherwise we will pay you.
If you die while you are entitled to receive benefits, we will pay any remaining
benefit and any unearned premium to your estate.
CHANGE OF PLAN PROVISION
[The needs of individuals change is business and employment ________ change.
This policy ____ ____ and the right to convert his coverage to ________ _____
insurance contract, while ______ original ___ or premium ___]
This policy may be exchanged for any other disability income policy issued by us
when the exchange is made, subject to underwriting guidelines then in effect,
provided:
1. the Insured is not disabled;
2. he is able to work full time in his regular occupation and is doing so;
and
3. the request is made before the policy anniversary when his age is 55.
The Insured, amount Maximum Benefit Period and Elimination Period will be the
same as for this policy. Any rider attached to this policy when you exchange it
may be continued on the new policy if it is available with that policy. The new
policy will exclude any condition excluded by this policy.
The premium for the new policy will be based on the Insured's premium class and
age on the effective dates of the coverages exchanged and his regular occupation
on the date the exchange is effective.
If your request is approved, the new policy will be effective as of the date we
receive the request to exchange policies.
GENERAL PROVISION
THE CONTRACT. This policy represents the entire contract between you and us.
Statement by agents or brokers are not part of our contract. Only an executive
officer of this Company can approve a change in this policy. The approval must
be in writing and be endorsed on or attached to this policy. No one else can
change this policy or waive any of its conditions.
Unless we tell you something else, years, months and anniversaries that we refer
to are calculated from the Policy Date shown on page 3.
[If disability occurs within the 2 year contestability period we may contest
that disability only up to one year beyond the two year period of contestability
or the length of disability, whichever is short.]
INCONTESTABLE. We will not contest a coverage provided under this policy based
on information given in the application for that coverage after that coverage
has been in effect during the Insured's lifetime for two years from the
effective date of that coverage, excluding any period during which the Insured
is impaired or suffers a loss of use or other loss. In no event, will we contest
a coverage more than three years from the effective date of that coverage.
If impairment or loss of use or other loss begins after a coverage has been in
effect during the Insured's lifetime for two years from the effective date of
that
-11-
<PAGE> 12
coverage, we will not reduce or deny a claim which is based on that
impairment or loss of use or other loss because of a preexisting condition
unless the condition is excluded from coverage by name or description
CONTEST means that we question that validity of coverage under this policy by
letter to you. This contest is effective on the date we mail that letter and
refund the premium to you.
[Your state laws prevail.]
CONFORMITY WITH STATE STATUTES. If any provision of this policy conflicts with
the statutes of the state where the Insured resides on the effective date of
that provision, it is amended to conform with the minimum requirements of those
statutes.
LEGAL ACTIONS. No one may start legal action to recover on this policy until 60
days after written Proof of Loss has been given to us. Legal action must be
started within three years after the written Proof of Loss is required to be
furnished.
MISSTATEMENT OF AGE. If the Insured's age has been misstated, any benefit
payable will be changed to the amount which the premium paid would have bought
for the correct age.
If we accept premium for a coverage which we would not have issued or which
would have ceased according to the correct age, our only liability is to refund
the premium for the period not covered.
OWNER. You own this policy. You have all of the rights and privileges
granted by this policy while it is in effect. Some of your ownership rights are.
1. the right to continue or terminate this policy;
2. the right to name someone else (a Loss Payee) to receive the benefits
of this policy;
3. the right to suspend this policy while the Insured is in military
service; and
4. the right to assign any of all rights under this policy.
You may reduce the Maximum Disability Benefit at any time. Premium will be
recomputed for the reduced amount based on the Insured's age and premium class
on the effective dates of the coverage. The reduction will be effective on the
date we receive your written request at our Home Office.
LOSS PAYEE. If you decide to have someone else receive policy benefits, you must
notify us in writing on a form satisfactory to us. The notice will be effective
when we receive it at our Home Office.
ASSIGNMENT. You may assign any or all ownership rights to someone else. The
assignment must be in writing and must specify the rights which are assigned and
for how long. The Loss Payee is not changed by an assignment unless the
assignment specifically names a new Loss Payee.
No assignment is binding on us until the original or an acceptable copy is
received at our Home Office. We are not responsible for the validity or effect
of any assignment.
-12-
<PAGE> 1
Exhibit 10.20
KEYCORP
1988 STOCK OPTION PLAN
AS AMENDED AND RESTATED
AS OF SEPTEMBER 19, 1996
1. PURPOSE OF THE PLAN
The purpose of the KeyCorp 1988 Stock Option Plan is to provide a
method by which those employees of KeyCorp and its Subsidiaries who are largely
responsible for the management, growth, and protection of the business, and who
are making and can continue to make substantial contributions to the success of
the business, may be encouraged to acquire a larger stock ownership in KeyCorp,
thus increasing their proprietary interest in the business, providing them with
greater incentive for their continued employment, and promoting the interests of
KeyCorp and all of its shareholders. Accordingly, KeyCorp will, from time to
time during the term of the Plan, grant to such key employees as may be
selected, in the manner provided in the Plan, options to purchase KeyCorp Common
Shares and stock appreciation rights to use in connection with the stock
options, subject to the conditions provided in the Plan.
2. DEFINITIONS
Unless the context clearly indicates otherwise, the following terms
have the meanings set forth below.
(a) "Board of Directors" or "Board" means the Board of Directors of
KeyCorp.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the committee appointed by the Board of Directors
of KeyCorp to administer the Plan.
(d) "Common Shares" means KeyCorp Common Shares, with a par value of $1
each.
(e) "Grant Date" as used with respect to a particular Option, means the
date as of which such Option is granted by the Committee pursuant to the Plan.
(f) "Incentive Stock Option" means an Option that qualifies as an
Incentive Stock Option as described in Section 421 of the Code.
(g) "Non-Qualified Stock Option" means any Option granted under the
Plan other than Incentive Stock Options.
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(h) "Option" means an option granted pursuant to Section 5 of the Plan
to purchase Common Shares and which shall be designated as either an Incentive
Stock Option or a Non-Qualified Stock Option.
(i) "Optionee" means an individual to whom an Incentive Stock Option or
Non-Qualified Stock Option or Right is granted pursuant to the Plan.
(j) "Plan" means the KeyCorp 1988 Stock Option Plan as set forth herein
and as may be amended from time to time.
(k) "Right" means a stock appreciation right granted under Section 7 of
the Plan.
(l) "Subsidiary" means any stock corporation of which a majority of the
voting common or capital stock is owned, directly or indirectly, by KeyCorp and
any other company designated as such by the Committee, but only during the
period of such ownership or designation.
(m) "Total and Permanent Disability," as applied to an Optionee, means
that the Optionee has (1) physical or mental impairment which entitles the
Optionee to receive disability payments under any long term disability plan of
KeyCorp or of any Subsidiary, or (2) established to the satisfaction of KeyCorp
that the Optionee is unable to perform normal duties and responsibilities with
KeyCorp by reason of a medically determinable physical or mental impairment
which can be expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than twelve months, all within the
meaning of Section 22(e)(3) of the Code, and (3) in either case, satisfied any
requirement imposed by the Committee.
(n) "Transferee" means, with respect to Non-Qualified Stock Options
only, any person or entity to which an Optionee is permitted by the Committee to
assign or transfer all or part of his or her Options.
3. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Committee, which shall be
comprised of three or more Directors who are appointed by the Board of Directors
and selected from those Directors who are not employees of KeyCorp or a
Subsidiary. The Board may from time to time remove members from or add members
to the Committee. Vacancies on the Committee, howsoever caused, shall be filled
by the Board. The Board shall select one of the Committee's members as Chairman.
The Committee shall hold meetings at such times and places as it may determine,
subject to such rules as to procedures not inconsistent with the provisions of
the Plan as are prescribed by the Board, set forth in KeyCorp's Regulations as
applicable to committees, and as prescribed by the Committee itself. A majority
of the authorized number of members of the Committee shall constitute a quorum
for the transaction of business. The affirmative vote of a majority of the
members of the Committee present at any meeting at which a quorum is present
shall be the valid act of the Committee. Acts taken without a
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<PAGE> 3
meeting and reduced to or approved in a writing or writings signed by all of
the members of the Committee then serving shall be the valid acts of the
Committee. No member of the Committee shall be eligible to be granted Options or
Rights under the Plan while a member of the Committee.
(b) The Committee shall be vested with full authority to make such
rules and regulations as it deems necessary or desirable to administer the Plan
and to interpret the provisions of the Plan. Any determination, decision, or
action of the Committee in connection with the construction, interpretation,
administration, or application of the Plan shall be final, conclusive, and
binding upon all Optionees and any person claiming under or through an Optionee
unless otherwise determined by the Board.
(c) Any determination, decision, or action of the Committee provided
for in the Plan may be made or taken by action of the Board, if it so
determines, with the same force and effect as if such determination, decision,
or action had been made or taken by the Committee. No member of the Committee or
of the Board shall be liable for any determination, decision, or action made in
good faith with respect to the Plan or any Option or Right granted under the
Plan. The fact that a member of the Board who is not then a member of the
Committee shall at the time be, or shall theretofore have been, or thereafter
may be a person who has received or is eligible to receive an Option or Right
shall not disqualify him or her from taking part in and voting at any time as a
member of the Board in favor of or against any amendment or repeal of the Plan,
provided that such vote shall be in accordance with the recommendations of the
Committee.
4. STOCK SUBJECT TO THE PLAN
(a) The Common Shares to be issued or transferred under the Plan will
be KeyCorp Common Shares which shall be made available, at the discretion of the
Board, either from authorized but unissued Common Shares or from Common Shares
reacquired by KeyCorp, including shares purchased in the open market. The
maximum number of Common Shares upon which Options may be granted in each year
under this Plan shall not exceed 2 percent of the total issued and outstanding
Common Shares as of December 31 of the next preceding year, as adjusted pursuant
to Section 15 of the Plan, provided, however, that for each year in which the
Plan is in effect, no more than 1,355,625 of the total issued and outstanding
Common Shares shall be available for the grant of Incentive Stock Options under
this Plan. In addition, the maximum number of Common Shares upon which Options
may be granted in each year under this Plan to any one individual Optionee shall
not exceed .2% of the total issued and outstanding Common Shares as of December
31 of the next preceding year, as adjusted pursuant to Section 15 of the Plan.
Unused grant capacity shall not cumulate from one year to the next.
(b) In the event that any outstanding Option or Right under the Plan
for any reason expires or is terminated, the Common Shares allocable to the
unexercised portion of such Option or Right may again be made subject to Option
or Right under the Plan.
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<PAGE> 4
5. GRANT OF OPTIONS
The Committee may from time to time, subject to the provisions of the
Plan, grant Options to key employees of KeyCorp or of a Subsidiary to purchase
Common Shares allotted in accordance with Section 4 of the Plan. The Committee
may designate any Option granted as either an Incentive Stock Option or a
Non-Qualified Stock Option, or the Committee may designate a portion of the
Option as an Incentive Stock Option and the remaining portion as a Non-Qualified
Stock Option. If an Optionee exercises an Option, then at the discretion of the
Committee or pursuant to the terms of the original Option, the Optionee may
receive a replacement Option to purchase a number of Common Shares determined by
the Committee or the terms of the original Option, with an option price
determined under Section 6 of the Plan as of the date of exercise of the
original Option and with a term extending to the expiration date of the original
Option.
6. OPTION PRICE
The purchase price per share of any Option granted under the Plan shall
be 100 percent of the fair market value of one Common Share on the date the
Option is granted, except that the purchase price per share shall be 110 percent
of the fair market value in the case of an Incentive Stock Option granted to an
individual described in subsection 8(b) of the Plan. For purposes of the Plan,
the fair market value of a Common Share shall be equal to the highest closing
price of one Common Share as reported for consolidated trading on the New York
Stock Exchange (or such other national securities exchange on which the Common
Shares may be principally traded) on the date the Option is granted, or if no
sale of Common Shares has been made on any securities exchange on that day, the
fair market value shall be determined by reference to such price for the next
preceding day on which a sale occurred. During such time as Common Shares are
not listed on a national securities exchange, fair market value per share shall
be the mean between the closing dealer "bid" and "ask" prices for Common Shares
as quoted by National Association of Securities Dealers Automated Quotation
System for the day of the grant, and if no "bid" and "ask" prices are quoted for
the day of grant, the fair market value shall be determined by reference to such
prices on the next preceding day on which such prices were quoted. In the event
that Common Shares are not traded on a national securities exchange, and no
closing dealer "bid" and "ask" prices are available, then the fair market value
of one Common Share on the day the Option is granted shall be determined by the
Committee or by the Board. The purchase price shall be subject to adjustment
only as provided in Section 15 of the Plan.
7. GRANT OF RIGHTS
The Committee may, at any time and in its discretion, grant to any
employee of KeyCorp or any of its Subsidiaries who is awarded or who holds an
outstanding Option or any other outstanding stock option granted by KeyCorp, the
right to surrender such Option (to the extent any Option or such other stock
option is otherwise exercisable) and to receive from KeyCorp an amount equal to
the excess, if any, of the fair market value of the Common Shares with respect
to which such Option is surrendered on the date of such surrender over the
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<PAGE> 5
option price of the Option or other stock option surrendered. Payment by KeyCorp
of the amount receivable upon any exercise of a Right may be made by delivery of
Common Shares, or cash, or any combination of Common Shares and cash, as
determined in the sole discretion of the Committee from time to time. No
fractional shares shall be issued. The Committee may provide for the elimination
of fractional Common Shares delivered to the Optionee without adjustment or for
the payment of the value of such fractional shares in cash. KeyCorp Common
Shares delivered to the Optionee upon the exercise of a Right, and the surrender
of the Option or stock option, shall be valued at the fair market value
(determined pursuant to Section 6) of a Common Share on the date the right is
exercised and the Option or stock option is surrendered. The Committee may limit
the period or periods during which the Rights may be exercised and may provide
such other terms and conditions (which need not be the same with respect to each
Optionee) under which a Right may be granted and/or exercised. A Right may be
exercised only as long as the related Option or stock option is exercisable. In
no event may a Right be exercised more than ten years after the date of the
grant of the related Option or stock option. A right may not be granted with
respect to an Incentive Stock Option at any time other than at the same time the
Incentive Stock Option is granted. Rights granted with respect to Incentive
Stock Options (a) shall expire no later than the expiration of the underlying
Option, (b) shall be for no more than the difference between the exercise price
of the underlying option and the market price of the stock subject to the
underlying option at the time the right is exercised, (c) shall be transferrable
only when the underlying Option is transferrable and under the same conditions,
(d) shall be exercisable only when the underlying Option is exercisable, and (e)
shall be exercisable only when the market price of the stock subject to the
underlying Option exceeds the exercise price of the Option.
8. ELIGIBILITY OF OPTIONEES
(a) Options and Rights shall be granted only to persons who are key
employees of KeyCorp or of a Subsidiary as determined by the Committee at the
time of grant. The term "employees" shall include persons who are Directors or
Officers who are also employees of KeyCorp or of any Subsidiary.
(b) Any other provision of the Plan notwithstanding, an individual who
owns more than ten percent of the total combined voting power of all classes of
outstanding KeyCorp Common Shares or any Subsidiary shall not be eligible for
the grant of an Incentive Stock Option unless the special requirements set forth
in Sections 6 and 10(a) of the Plan are satisfied. For purposes of this
subsection (b), in determining stock ownership, an individual shall be
considered as owning the stock owned, directly or indirectly, by or for his or
her brothers and sisters, spouse, ancestors, and lineal descendants. Stock
owned, directly or indirectly, by or for a corporation, partnership, estate, or
trust shall be considered as being owned proportionately by or for its
shareholders, partners, or beneficiaries. Stock with respect to which such
individual holds an Option shall not be counted. Outstanding stock shall include
all stock actually issued and outstanding immediately after the grant of the
Option. Outstanding stock shall not include shares authorized for issue under
outstanding Options held by the Optionee or by another person.
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<PAGE> 6
(c) Subject to the terms, provisions, and conditions of the Plan and
subject to review by the Board, the Committee shall have exclusive jurisdiction
to (1) select the key employees to be granted Options or Rights (it being
understood that more than one Option or Right may be granted to the same
person), (2) determine the number of shares subject to each Option or Right, (3)
determine the date or dates when the Options or Rights will be granted, (4)
determine the purchase price of the shares subject to each Option in accordance
with Section 6 of the Plan, (5) determine the date or dates when each Option or
Right may be exercised within the term of the Option specified pursuant to
Section 10 of the Plan, (6) determine whether or not an Option constitutes an
Incentive Stock Option, and (7) prescribe the form, which shall be consistent
with the Plan, of the documents evidencing any Options or Rights granted under
the Plan.
(d) Neither anything contained in the Plan or in any document under the
Plan nor the grant of any Option or Right under the Plan shall confer upon any
Optionee any right to continue in the employ of KeyCorp or of any Subsidiary or
limit in any respect the right of KeyCorp or of any Subsidiary to terminate the
Optionee's employment at any time and for any reason.
9. NON-TRANSFERABILITY
Non-Qualified Stock Options may be assignable or transferable in the
Committee's discretion, and any Transferee shall have the power to exercise such
Non-Qualified Stock Option in accordance with the terms of such Option and this
Plan. No Incentive Stock Option or Right granted under the Plan shall be
assignable or transferable by the Optionee other than by will or the laws of
descent and distribution, and during the lifetime of an Optionee, all such
Options shall be exercisable only by the Optionee.
10. TERM AND EXERCISE OF OPTIONS AND RIGHTS
(a) Each Option or Right granted under the Plan shall terminate on the
date determined by the Committee and specified in the Option Agreement, provided
that each Option shall terminate not later than ten years after the date of
grant. However, any Option designated as an Incentive Stock Option granted to a
more than ten percent shareholder shall terminate not later than five years
after the date of grant. The Committee, at its discretion, may provide further
limitations on the exercisability of Options or Rights granted under the Plan.
An Option or Right may be exercised only during the continuance of the
Optionee's employment, except as provided in Section 11 of the Plan.
(b) A person electing to exercise an Option or Right shall give written
notice to KeyCorp, in such form as the Committee shall have prescribed or
approved, of such election and of the number of shares he or she has elected to
purchase and shall at the time of exercise tender the full purchase price of any
shares he or she has elected to purchase. The purchase price upon the exercise
of an Option shall be paid in full in cash, provided, however, that in lieu of
cash, with the approval of the Committee at or prior to exercise, an Optionee
or, with respect to Non-Qualified Stock Options, any Transferee may exercise his
or her Option by
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<PAGE> 7
tendering to KeyCorp Common Shares owned by him or her and having a fair market
value equal to the cash exercise price applicable to his or her Option, with the
then fair market value of such stock to be determined in the manner provided in
Section 6 of the Plan (with respect to the determination of the fair market
value of Common Shares on the date an Option is granted). However, if an
Optionee or, with respect to Non-Qualified Stock Options, a Transferee pays the
Option exercise price of a Non-Qualified Stock Option in whole or in part in the
form of unrestricted Common Shares already owned by the Optionee or Transferee,
KeyCorp may require that the Optionee or Transferee have owned the stock for a
period of time that would not cause the exercise to create a charge to KeyCorp's
earnings. Such provision may be used by KeyCorp to prevent a pyramid exercise.
As conditions to exercising an Option or a Right, the holder must (1) arrange to
pay to KeyCorp any amount required to be withheld under any tax law on account
of the exercise, and (2) in the case of an Incentive Stock Option, agree to
notify KeyCorp of any disqualifying disposition (as defined in Section 421 of
the Code) of the Common Shares acquired upon the exercise and agree to pay to
KeyCorp any amount required to be withheld under any tax law on account of the
disposition. Any payment on account of withholding taxes shall be made in a form
acceptable to the Committee.
(c) An Optionee or a Transferee of an Option shall have no rights as a
shareholder with respect to any shares covered by his or her Option or Right
until the date the Stock Certificate is issued evidencing ownership of the
shares. No adjustments shall be made for dividends (ordinary or extraordinary),
whether in cash, securities, or other property, or distributions, or other
rights for which the record date is prior to the date such Stock Certificate is
issued, except as provided in Section 15 of the Plan.
(d) A person may, in accordance with the other provisions of the Plan,
elect to exercise Options or Rights in any order, notwithstanding the fact that
Options or Rights granted to him or her prior to the grant of the Options or
Rights selected for exercise are unexpired.
11. TERMINATION OF EMPLOYMENT
If an Optionee severs from all employment with KeyCorp and/or its
Subsidiaries, any Option or Right granted to him or her under the Plan shall
terminate as follows: (1)
(a) An Option or Right held by an Optionee who has terminated
employment due to a Total and Permanent Disability or, with respect to
Non-Qualified Stock Options, any Option or Right held by a Transferee shall
terminate twenty-four months after the termination of employment; (2)
- --------
(1) Pursuant to the resolutions adopted by the Executive Equity Compensation
Committee of the Board of Directors of the Corporation dated as of January 18,
1995, the amendments made in Section 11 of the Plan, as incorporated herein, do
not apply to Incentive Stock Options granted pursuant to the Plan. All Incentive
Stock Options granted under the Plan will be governed by the terms set forth in
the original Plan.
(2) Incentive Stock Options shall terminate upon their original expiration
date, as provided in the original Plan; provided, however, that the exercise of
an Incentive Stock Option more than one year after the termination
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<PAGE> 8
(b) An Option or Right shall be exercisable within a period of one year
from the date of Optionee's death by (i) the executor or administrator of the
Optionee's estate, (ii) by the person to whom the Optionee shall have
transferred such right by last Will and Testament or by the laws of descent or
distribution or, (iii) with respect to Non-Qualified Stock Options, by any
Transferree;
(c) An Option or Right held by an Optionee who terminates for cause, as
determined by the Committee, or, with respect to Non-Qualified Stock Options, an
Option or Right held by any Transferee of such Optionee shall expire immediately
upon the date of termination unless some other expiration date is fixed by the
Committee;
(d) An Option or Right held by an Optionee who terminates employment
under circumstances entitling the Optionee to immediate payment of normal
retirement or early retirement benefits under any retirement or supplemental
retirement plan of KeyCorp or of a Subsidiary (whether the Optionee elects to
commence or defer receipt of such payment) or, with respect to Non-Qualified
Stock Options, an Option or Right held by any Transferee of such Optionee shall
expire twenty-four months after the termination of employment unless (i)
subsection 11(c) above is applicable, in which case such subsection 11(c) shall
govern, or (ii) a later expiration date is fixed by the Committee; (3) and
(e) An Option or Right held by an Optionee who terminates for any
reason other than those specified in subsections (a), (b), (c) or (d) above or,
with respect to Non-Qualified Stock Options, an Option or Right held by any
Transferree of such Optionee shall expire six months after the date of
termination of employment unless a later expiration date is fixed by the
Committee. (4)
The foregoing notwithstanding, no Option or Right shall be exercisable
after its expiration date.
Whether an authorized leave of absence or an absence for military or
governmental service shall constitute termination of employment for purposes of
the Plan shall be determined by the Committee, which determination shall be
final, conclusive, and binding upon the affected Optionee and any person
claiming under or through such Optionee. Termination of employment with any
Subsidiary of KeyCorp in order to accept employment with another Subsidiary of
KeyCorp or while remaining an employee of KeyCorp or of any of its Subsidiaries
shall not be a termination of employment for the purposes of this Section 11.
- --------------------------------------------------------------------------------
of employment because of disability will cause the Option to fail to qualify for
Incentive Stock Option treatment under the Code.
(3) Incentive Stock Options shall expire 3 months after the date of
termination, unless a later date is fixed by the Committee, as provided in the
original Plan.
(4) Incentive Stock Options shall expire 3 months after the date of
termination, unless a later date is fixed by the Committee, as provided in the
original Plan.
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<PAGE> 9
12. MODIFICATION, EXTENSION, AND RENEWAL
Subject to the terms and conditions and within the limitations of the
Plan, the Committee may modify, extend, or renew outstanding Options or Rights
(to the extent not theretofore exercised) and authorize the granting of new
Options or Rights in substitution therefor. Without in any way limiting the
generality of the foregoing, the Committee may grant to an Optionee, if he or
she is otherwise eligible and consents thereto, a new or modified Option or
Right in lieu of an outstanding Option or Right for a number of shares at an
exercise price and for a term which are greater or less than under the earlier
Option or Right or may do so by cancellation and re-grant, amendment,
substitution, or otherwise subject only to the general limitations and
conditions of the Plan. The foregoing notwithstanding, no modification of an
Option or Right shall, without the consent of the Optionee, alter or impair any
rights or obligations under any Option or Right theretofore granted under the
Plan.
13. PERIOD IN WHICH GRANTS MAY BE MADE
Options and Rights may be granted pursuant to the Plan at any time on
or before April 26, 2000.
14. AMENDMENT OR TERMINATION OF THE PLAN
The Board may at any time terminate, amend, modify, or suspend the
Plan, provided that, without the approval of the shareholders of KeyCorp, no
amendment or modification shall be made by the Board which (a) increases the
maximum number of shares as to which Options or Rights may be granted under the
Plan; (b) alters the method by which the Option price is determined; (c) extends
any Option or Right for a period longer than ten years after the date of grant;
(d) materially modifies the requirements as to eligibility for participation in
the Plan; or (e) alters this Section 14 so as to defeat its purpose. Further, no
amendment, modification, suspension, or termination of the Plan shall in any
manner affect any Option or Right theretofore granted under the Plan without the
consent of the Optionee or any person validly claiming under or through the
Optionee.
15. CHANGES IN CAPITALIZATION
(a) In the event that the shares of KeyCorp, as presently constituted,
shall be changed into or exchanged for a different number or kind of shares of
stock or other securities of KeyCorp or of another corporation (whether by
reason of merger, consolidation, recapitalization, reclassification, split-up,
combination of shares, or otherwise), or if the number of such shares of stock
shall be increased through the payment of a stock dividend, then subject to the
provisions of subsection (c) below, there shall be substituted for or added to
each share of stock of KeyCorp which was theretofore appropriated or which
thereafter may become subject to an Option or Right under the Plan the number
and kind of shares of stock or other securities into which each outstanding
KeyCorp Common Share shall be so changed, or for which each such share shall be
exchanged, or to which each such share shall be entitled, as the case may be.
Outstanding Options and Rights shall also be appropriately amended as to
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<PAGE> 10
price and other terms as may be necessary to reflect the foregoing events. The
maximum number of Common Shares upon which Options and Incentive Stock Options
may be granted, as provided in Section 4(a) of the Plan, shall be
proportionately adjusted to reflect any of the foregoing events.
(b) If there shall be any other change in the number or kind of
outstanding shares of stock of KeyCorp, or of any stock or other securities into
which such stock shall have been changed, or for which it shall have been
exchanged, and if the Board or the Committee, as the case may be, shall, in its
sole discretion, determine that such change equitably requires an adjustment in
any Option or Right which was theretofore granted or which may thereafter be
granted under the Plan, then such adjustment shall be made in accordance with
such determination.
(c) A dissolution or liquidation of KeyCorp or a merger or
consolidation in which KeyCorp is not the surviving corporation shall cause each
outstanding Option and Right to terminate, except to the extent that another
corporation may and does in the transaction assume and continue the Option or
substitute its own options. In either event, the Board or the Committee, as the
case may be, shall have the right to accelerate the time within which the Option
or Right may be exercised.
(d) Fractional shares resulting from any adjustment in Options or
Rights pursuant to this Section 15 may be settled as the Board or the Committee,
as the case may be, shall determine.
(e) To the extent that the foregoing adjustments relate to stock or
securities of KeyCorp, such adjustments shall be made by the Committee, whose
determination in that respect shall be final, binding, and conclusive. Notice of
any adjustment shall be given by KeyCorp to each holder of an Option or Right
which shall have been so adjusted.
(f) The grant of an Option or Right pursuant to the Plan shall not
affect in any way the right or power of KeyCorp to make adjustments,
reclassifications, reorganizations, or changes of its capital or business
structure or to merge, consolidate, dissolve, liquidate, sell, or transfer all
or any part of its business or assets.
16. ACCELERATION UPON CHANGE OF CONTROL
Unless otherwise specified by the Board or the Committee and set forth
in the documents evidencing any Options or Rights granted under the Plan, upon
the occurrence of a Change of Control of KeyCorp, each Option or Right granted
on or after January 3, 1994 to any Optionee that then remains outstanding shall
become immediately exercisable in full. For purposes of the Option or Right,
whether a Change of Control has occurred will be determined as provided in this
Section 16. Unless otherwise specified by the Board or the Committee and set
forth in the documents evidencing any Options or Rights granted under the Plan,
a Change of Control will be deemed to have occurred if at any time while the
Option is outstanding there is a Change of Control under any of clauses (a),
(b), (c), or (d), below. For these purposes
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KeyCorp will be deemed to have become a subsidiary of another corporation if any
one other corporation owns, directly or indirectly, 50 percent or more of the
total combined voting power of all classes of stock of KeyCorp.
(a) A Change of Control will have occurred under this clause (a) if
KeyCorp is a party to a transaction pursuant to which KeyCorp is merged with or
into, or is consolidated with, or becomes the subsidiary of another corporation
and, at any time within 24 months after the effective date of that transaction,
individuals who were directors of KeyCorp on the day after the last annual
meeting of shareholders of KeyCorp occurring before the transaction cease for
any reason to constitute at least 40% of the directors of the surviving or
resulting corporation or (if KeyCorp becomes a subsidiary in the transaction) of
the ultimate parent of KeyCorp.
(b) A Change of Control will have occurred under this clause (b) if
KeyCorp is a party to a transaction pursuant to which KeyCorp is merged with or
into, or is consolidated with, or becomes the subsidiary of another corporation
and,
(i) after giving effect to such transaction, less than 40% of the
then outstanding voting securities of the surviving or resulting corporation or
(if KeyCorp becomes a subsidiary in the transaction) of the ultimate parent of
KeyCorp represent or were issued in exchange for voting securities of KeyCorp
outstanding immediately prior to such transaction, and
(ii) at any time within 24 months after the effective date of that
transaction, individuals who were directors of KeyCorp on the day after the last
annual meeting of shareholders of KeyCorp occurring before that effective date
cease for any reason to constitute at least 51% of the directors of the
surviving or resulting corporation or (if KeyCorp becomes a subsidiary in the
transaction) of the ultimate parent of KeyCorp.
(c) A Change of Control will have occurred under this clause (c) if any
of the events described in (i), (ii), (iii), or (iv) of this clause (c) (a
"Change Event") occurs, but only if the condition set out in (x) or the
condition set out in (y) of this clause (c) applies. The Change Events described
in (i), (ii), (iii), and (iv) of this clause (c) are as follows:
(i) There is a report filed on Schedule 13D or Schedule 14D-1 (or
any successor schedule, form, or report), each as adopted under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), disclosing the acquisition of
25% or more of the voting stock of KeyCorp in a transaction or series of
transactions by any person (as the term "person" is used in Section 13(d) and
Section 14(d)(2) of the 1934 Act (a "Person")).
(ii) KeyCorp is a party to a transaction pursuant to which KeyCorp
is merged with or into, or is consolidated with, or becomes the subsidiary of
another corporation and, after giving effect to such transaction, less than 50%
of the then outstanding voting securities of the surviving or resulting
corporation or (if KeyCorp becomes a subsidiary in the transaction) of the
ultimate parent of KeyCorp represent or were issued in exchange for voting
securities of KeyCorp outstanding immediately prior to such transaction.
11
<PAGE> 12
(iii) There is a sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all or substantially all the
assets of KeyCorp.
(iv) The shareholders of KeyCorp approve any plan or proposal for
the liquidation or dissolution of KeyCorp.
The conditions set out in (x) and (y) of this clause (c) are as
follows:
(x) A Change Event occurred in connection with a transaction that
was not approved or recommended by KeyCorp's Board of Directors.
(y) A Change Event occurred in connection with a transaction that
was approved or recommended by KeyCorp's Board of Directors but only if, within
the 24 month period ending on the date of that Change Event, KeyCorp had been
"put in play" without the prior approval, solicitation, invitation, or
recommendation of KeyCorp's Board of Directors. For purposes of this condition
(y), KeyCorp will be deemed to have been "put in play" if any Person makes a
public announcement of an intention.
(I) to engage in a transaction with KeyCorp that, if
consummated, would result in a Change Event, or
(II) to "solicit" proxies in connection with a proposal that
is not approved or recommended by KeyCorp's Board of Directors or to engage in
an "election contest" relating to the election of Directors of KeyCorp (as those
terms are defined in Regulation 14 under the Securities Exchange Act or 1934, as
amended).
(d) A Change of Control will have occurred under this clause (d) if any
Person announces an intention to engage in an "election contest" relating to the
election of Directors of KeyCorp (as that term is defined in Regulation 14 under
the Securities Exchange Act of 1934, as amended) and, at any time within the
twenty-four month period immediately following the date of the announcement of
that intention, individuals who, on the day after the last annual meeting of
shareholders of KeyCorp occurring before that announcement, constituted the
directors of KeyCorp cease for any reason to constitute at least a majority
thereof.
Nothwithstanding the foregoing, the term "change of control" shall not
include the merger of the former KeyCorp, a New York Corporation, into Society
Corporation, an Ohio corporation, on March 1, 1994.
17. LISTING AND REGISTRATION OF SHARES
(a) No Option or Right granted pursuant to the Plan shall be
exercisable in whole or in part if at any time the Board or the Committee, as
the case may be, shall determine, in its sole discretion, that the listing,
registration, or qualification of the Common Shares subject to such Option or
Right on any securities exchange or under any applicable law, or the consent or
12
<PAGE> 13
approval of any governmental regulatory body, is necessary or desirable as a
condition of or in connection with the granting of such Option or Right or the
issue of shares thereunder unless such listing, registration, qualification,
consent, or approval shall have been effected or obtained free of any conditions
not acceptable to the Board.
(b) If a registration statement under the Securities Act of 1933 with
respect to shares issuable upon exercise of any Option or Right granted under
the Plan is not in effect at the time of exercise, the person exercising such
Option or Right shall give the Committee a written statement, satisfactory in
form and substance to the Committee, that he or she is acquiring the shares for
his or her own account for investment and not with a view to their disposition.
KeyCorp may place upon any Stock Certificate for shares issuable upon exercise
of such Option or Right such legend as the Committee may prescribe to prevent
disposition of the shares in violation of the Securities Act of 1933 or any
other applicable law.
18. EFFECTIVE DATE OF PLAN
The Plan was approved by KeyCorp's shareholders at the Annual Meeting
of Shareholders held on April 23, 1992, and became effective on that date.
Unless sooner terminated by the Board, the Plan will terminate ten years from
its effective date and no Options may be granted under the Plan after such
termination date. The Plan was restated by action of the Board of Directors on
November 17, 1994, to, among other things (i) adjust the number of shares
covered by the Plan and other various share limits contained in the Plan as a
result of the 3-for-2 stock split by means of a stock dividend on April 15, 1992
and the 1.205 exchange ratio applicable in the merger (the "Merger") of the
former KeyCorp, a New York corporation, into Society Corporation, an Ohio
corporation, on March 1, 1994, (ii) conform the provisions of the Plan to Ohio
law and KeyCorp's Regulations, both of which became applicable as a result of
the Merger, and (iii) incorporate all amendments to the Plan.
13
<PAGE> 1
Exhibit 10.22
KEYCORP EXCESS 401(K) SAVINGS PLAN
The KeyCorp Excess 401(k) Savings Plan ("Plan") is hereby amended and
restated in its entirety to be effective January 1, 1997. The Plan as amended
and restated, is intended to provide certain key employees of KeyCorp with a
Plan benefit equal the benefit that the Participant would have been eligible to
receive under the KeyCorp 401(k) Savings Plan but for the contribution limits
imposed by Section 402(g) of the Internal Revenue Code of 1986, as amended
(Code) or the compensation limits imposed by Section 401(a)(17) of the Code. It
is the intention of KeyCorp, and it is the understanding of those Participants
covered under the Plan, that the Plan is unfunded for tax purposes and for
purposes of Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
ARTICLE I
---------
DEFINITIONS
-----------
1.1 MEANING OF DEFINITIONS. For the purposes hereof, the following words and
phrases shall have the meanings hereinafter set forth, unless a different
meaning is plainly required by the context:
(A) "401(k) SAVINGS PLAN" shall mean the KeyCorp 401(k)
Savings Plan, with all amendments, modifications, supplements thereto
and hereafter made.
(B) "BENEFICIARY" shall mean the Participant's surviving
spouse who is entitled to receive the benefit hereunder in the event
the Participant dies before his or her Excess 401(k) Plan benefit shall
have been distributed to him or her in full.
(C) "CHANGE OF CONTROL" shall be deemed to have occurred if
under any rabbi trust arrangement maintained by the Corporation, the
Corporation is required under the terms of such arrangement to fund
such rabbi trust to secure the payment of any Participants' Plan
benefits payable hereunder because a "Change of Control" as defined in
such rabbi trust has occurred after January 1, 1997.
(E) "CODE" shall mean the Internal Revenue Code of 1986, as
amended from time to time, together with all regulations promulgated
thereunder. Reference to a section of the Code includes such section
and any comparable section or sections of any future legislation that
amends, supplements, or supersedes such section.
<PAGE> 2
(F) "COMPENSATION" of a Participant for any Plan Year or any
partial Plan Year in which the Participant incurs a Severance From
Service Date shall mean the entire amount of compensation paid to such
Participant during such period by reason of his employment with an
Employer, as reported for federal income tax purposes, plus that
compensation which would have been paid except for (1) the timing of an
Employer's payroll processing operations, (2) the provisions of the
KeyCorp 401(k) Savings Plan, or (3) the provisions of the KeyCorp
Flexible Benefits Plan, provided, however, that the term shall not
include:
(i) any amount attributable to the Employee's receipt of
stock appreciation rights and the amount of any gain
to the Employee upon the exercise of a stock option;
(ii) any amount attributable to the Employee's receipt of
non-cash remuneration which is included in the
Employee's income for federal income tax purposes;
(iii) any amount attributable to the Employee's receipt of
moving expenses and any relocation bonus paid to the
Employee during the Plan Year;
(iv) any amount attributable to a severance paid by an
Employer or the Corporation to the Employee;
(v) any amount attributable to fringe benefits (cash and
non-cash), regardless of whether any or all such
items are includible in such Participant's gross
income for federal tax purposes;
(vi) any amount attributable to any bonus or payment made
as an inducement for the Employee to accept
employment with an Employer;
(vii) any amount attributable to compensation of any type,
including bonus or incentive compensation payments,
paid on or after the Employee's Severance From
Service Date; or
(viii) any amount attributable to compensation deferred by
the Participant.
(G) "CORPORATE CONTRIBUTIONS" shall mean (i) those Matching
Employer Contributions and Profit Sharing Contributions an Employer has
agreed to contribute to the Plan in accordance with the provisions of
Article IV. Corporate Contributions shall be subject to the vesting
requirements contained within Article VI of the Plan, and a Participant
shall have no interest in those Corporate Contributions credited to his
or her Plan Account until the Participant is fully vested in such
Corporate Contributions.
<PAGE> 3
(H) "CORPORATION" shall mean KeyCorp, an Ohio Corporation, its
corporate successors, and any corporation or corporations into or with
which it may be merged or consolidated.
(I) "DEFERRAL COMMENCEMENT DATE" shall mean the first pay
period coinciding with or immediately following the date on which the
Participant reaches his or her maximum contribution limit under Section
402(g) of the Code and/or the Participant's maximum compensation limit
under Section 401(a)(17) of the Code which effectively terminates the
Participant's further deferral of Compensation under the 401(k) Savings
Plan.
(J) "DEFERRAL ELECTION" shall mean the commitment made by the
Participant to defer up to 6% of the Participant's Compensation each
pay period to the Plan, which shall commence with the Participant's
Deferral Commencement Date; a Participant's Deferral Election shall be
made in such manner and at such time as the Corporation shall direct.
(K) "DEFERRAL PERIOD" shall mean each Plan year, provided
however that a Participants initial Deferral Period shall be from his
or her first day of participation in the Plan through the last day of
the applicable Plan year.
(L) "EMPLOYEE" shall mean any person who is employed by an
Employer who meets the definitional requirements of "Employee" as
contained within the 401(k) Savings Plan.
(M) "EMPLOYER" shall mean the Corporation and any of its
subsidiaries, unless specifically excluded as an Employer for Plan
purposes by written action of an officer of the Corporation. An
Employer's participation shall be subject to any conditions or
requirements made by the Corporation, and each Employer shall be deemed
to appoint the Plan Administrator as its exclusive agent under the Plan
as long as it continues as a subsidiary.
(N) "INVESTMENT FUND" shall mean those Investment Funds
established in accordance with and pursuant to the provisions of
Article III of the 401(k) Savings Plan, as may be amended from time to
time.
(O) "MATCHING EMPLOYER CONTRIBUTION" shall mean the amount
which an Employer has agreed to contribute to the Plan in accordance
with the provisions of Article IV of the Plan.
(P) "PARTICIPANT" shall mean an Employee who meets the
eligibility requirements set forth in Section 2.1 and becomes a Plan
Participant pursuant to Section 2.2 of the Plan.
<PAGE> 4
(Q) "PARTICIPANT DEFERRALS" shall mean the Participant's
elective deferral of Compensation under this Plan.
(R) "PLAN" shall mean the KeyCorp Excess 401(k) Savings Plan,
with all amendments, modifications, and supplements hereafter made.
(S) "PLAN ACCOUNT" shall mean those bookkeeping accounts
established by the Corporation for each Plan Participant, which shall
reflect (a) all Participant Deferrals and any earnings, gains, and
losses which would be attributable thereto, if such Participant
Deferrals had been invested pursuant to the Participant's directions in
the various Plan's Investment Funds, and (b) all Corporate
Contributions credited by the Corporation to each Participant, and any
dividends, gains, and losses which would be attributable thereto, if
such credited Corporate Contributions had been invested by the
Participant in the Corporation Stock Fund. Plan Accounts shall not
constitute separate Plan funds or Plan assets. Neither the maintenance
of, nor the crediting of amounts to such Plan Accounts shall be treated
as (i) the allocation of any Corporation assets to, or a segregation of
any Corporation assets in any such Plan Accounts, or (ii) as otherwise
creating a right in any person or Participant to receive specific
assets of the Corporation. Benefits under the Plan shall be paid from
the general assets of the Corporation.
(T) "PROFIT SHARING CONTRIBUTIONS" shall mean those
discretionary contributions which an Employer may contribute to the
Plan pursuant to Article IV of the Plan.
(U) "VALUATION DATE" shall mean each "business day" or
"business days" designated by the Plan Administrator on which
Investment Funds are valued for bookkeeping purposes.
(V) "RETIREMENT" shall mean the termination of employment of a
Participant under circumstances making him or her eligible to receive
an Early Retirement or Normal Retirement Date benefit under the KeyCorp
Cash Balance Pension Plan as the same shall be in effect on the date of
a Participant's Retirement.
1.2 PRONOUNS: The masculine pronoun wherever used herein includes the
feminine in any case so requiring, and the singular may include the plural.
1.3 ADDITIONAL REFERENCE: All other words and phrases used herein shall
have the meaning given them in the 401(k) Savings Plan, unless a different
meaning is clearly required by the context.
<PAGE> 5
ARTICLE II
----------
EMPLOYEE PARTICIPATION
----------------------
2.1 EMPLOYEE ELIGIBILITY. An Employee shall be eligible to become a Participant
in the Plan, provided, (1) the Corporation selects such Employee to participate
in the Plan, (2) the Employee is a Participant in the 401(k) Savings Plan, (3)
such Employee's elective deferrals of Compensation under the 401(k) Savings Plan
reaches the deferral limitations prescribed by Section 402(g) of the Code,
and/or the compensation limitations prescribed by Section 401(a)(17) of the
Code, and (4) the Employee elects to defer up to 6% of his or her Compensation
to the Plan.
2.2 NOTIFICATION OF NEW PARTICIPANTS. The Corporation shall notify an Employee
of his or her eligibility to participate in the Plan; the Employee's election to
defer Compensation to the Plan shall be made at such time and in such a manner
as the Corporation shall direct. An Employee shall not become a Participant in
the Plan until the Employee's Deferral Election is received by the Corporation.
2.3 EFFECT AND DURATION. Upon becoming a Participant, an Employee shall be
entitled to the benefits and shall be bound by all terms and conditions of the
Plan. Each Employee who becomes a Participant in the Plan shall remain a
Participant until his or her Termination of Participation, as provided in
Section 7.1 hereof, provided however, that such Participant continues to meet
the eligibility requirements of Section 2.1 of the Plan, and provided further
that the Corporation continues the Participant's participation in the Plan.
2.4 AUTHORIZED LEAVE OF ABSENCE. A Participate on an authorized leave of absence
who is not receiving Compensation during such leave period shall continue as a
Plan Participant during such leave, provided, however, that no Corporate
Contributions shall be credited to the Participant's Plan Account on behalf of
the Participant during such leave period. Upon the Participant's return to
active employment with an Employer, the Participant's Participant Deferrals
shall automatically resume in accordance with the Participant's Deferral
Election as in effect prior to the Participant's leave period unless otherwise
modified by the Participant.
2.5 RE-EMPLOYMENT. If an Employee's employment is terminated and such Employee
is subsequently re-hired by an Employer, such Employee shall be eligible to
participate in the Plan only if the Employee meets the eligibility criteria
contained within Section 2.1 hereof, and the Corporation selects such Employee
to participate in the Plan.
ARTICLE III
-----------
PARTICIPANT DEFERRALS
---------------------
3.1 PARTICIPANT DEFERRALS. Upon meeting the eligibility criteria contained
within Section 2.1 hereof, a Participant may defer not less than one percent,
nor more than 6 percent of his or
<PAGE> 6
her Compensation to the Plan. Such Participant Deferrals shall be effective
with the first payment of Compensation to the Participant coinciding with or
immediately following the later of (1) the date on which the Participant's
elective deferral of Compensation under the 401(k) Savings Plan reaches the
maximum deferral limitations prescribed under Section 402(g) of the Code, and/or
the maximum compensation limits prescribed under Section 401(a)(17) of the Code,
and (2) the date on which the Corporation receives the Employee's Deferral
Election. Participant Deferrals shall be credited to the Participant's Plan
Account as of each applicable pay period in which the Participant makes
Participant Deferrals to the Plan.
3.2 CHANGE IN ELIGIBILITY STATUS. If the Corporation determines that a
Participant's performance is no longer at a level that deserves to be rewarded
through participation in the Plan, but does not terminate the Participant's
employment with an Employer, the Participant's existing Deferral Election shall
terminate at the conclusion of the Deferral Period, and no new Deferral Election
may be made by such Participant.
ARTICLE IV
----------
CORPORATE CONTRIBUTIONS
-----------------------
4.1 MATCHING EMPLOYER CONTRIBUTIONS. Matching Employer Contributions shall be
credited to the Participant's Plan Account as of each pay period in proportion
to the respective amount of each Participant's Participant Deferrals made to the
Plan during such pay period, so that the credited Matching Employer Contribution
shall be equal to 100% of the Participant's Participant Deferrals made to the
Plan for such pay period.
4.2 PROFIT SHARING CONTRIBUTIONS. Profit Sharing Contributions, if any, shall
be credited to Participant's Plan Accounts at such time and in such manner as
the Corporation directs.
ARTICLE V
---------
INVESTMENTS
-----------
5.1 PLAN ACCOUNT. All Participant Deferrals and Corporate Contributions shall be
credited to a Plan Account established in the Participant's name. Separate
sub-accounts may be established to reflect Participant's investment elections,
and any earnings, gains, or losses attributable to such elections.
5.2 INVESTMENT OF PARTICIPANT DEFERRALS. Each Participant shall direct the
manner in which his or her Participant Deferrals are to be invested for
bookkeeping purposes under the Plan. All Participant Deferrals may be invested
for bookkeeping purposes in any one or more of the Plan Investment Funds, in
such amount as the Participant shall elect, provided that such election amounts
are expressed in five percent increments. Participants may modify their
investment elections at such times and in such manner as the Corporation shall
direct. All Participant Deferrals invested in the Corporate Stock Fund shall be
credited to the
<PAGE> 7
Participant's Plan Account as of each applicable pay period based on the
New York Stock Exchange's closing price for such common shares as of the date of
payment of compensation for such applicable pay period.
5.3 INVESTMENT OF CORPORATE CONTRIBUTIONS. All Corporate Contributions credited
to a Participant's Plan Account shall be invested for bookkeeping purposes in
the Corporation Stock Fund based on the New York Stock Exchange's closing price
for such common shares as of the date of payment of compensation for such
applicable pay period. Corporate Contributions are not subject to Participants'
investment directions.
5.4 VALUATION OF PLAN ACCOUNTS. As of each Valuation Date, the Plan
Administrator shall determine the value of each Participant's Plan Account
balance, which shall reflect the net gain or loss of each Investment Fund
invested in (on a bookkeeping basis) by the Participant. The reasonable and
equitable decision of the Plan Administrator as to the value of each Investment
Fund shall be conclusive and binding upon all Participants and the Beneficiary
of each deceased Participant having any interest, direct or indirect in the
Participant's Plan Account. The value of an Investment Fund on any day not a
Valuation Date, shall be the value on the last preceding Valuation Date.
5.5 CORPORATE ASSETS. All Participant Deferrals, Corporate Contributions,
dividends, and any other earnings and losses credited to a Participant's Plan
Account remain the assets and property of the Corporation, which shall be
subject to distribution to the Participant only in accordance with Articles VII
and VIII of the Plan. All payments hereunder shall be in the form of cash and
shall be made from the general assets of the Corporation, and Participants and
Beneficiaries shall have the status of general unsecured creditors of the
Corporation. Nothing contained in the Plan shall create, or be construed as
creating a trust of any kind or any other fiduciary relationship between the
Participant, the Corporation, or any other person. It is the intention of the
Corporation and the Participant that the Plan be unfunded for tax purposes and
for purposes of Title I of the Employee Retirement Income Security Act of 1974,
as amended.
5.6 NO PRESENT INTEREST. Subject to any federal statute to the contrary, no
right or benefit under the Plan and no right or interest in each Participant's
Plan Account shall be subject to anticipation, alienation, sale, assignment,
pledge, encumbrance, or charge, and any attempt to anticipate, alienate, sell,
assign, pledge, encumber, or charge any right or benefit under the Plan, or
Participant's Plan Account shall be void. No right, interest, or benefit under
the Plan or Participant's Plan Account shall be liable for or subject to the
debts, contracts, liabilities, or torts of the Participant or Beneficiary. If
the Participant or Beneficiary becomes bankrupt or attempts to alienate, sell,
assign, pledge, encumber, or charge any right under the Plan or Participant's
Plan Account, such attempt shall be void and unenforceable.
5.7 DETERMINATION OF AMOUNT. The Plan Administrator shall verify the amount of
Participant Deferrals, Corporate Contributions, dividends, and earnings, if any,
to be credited to each Participant's Plan Account in accordance with the
provisions of the Plan. This
<PAGE> 8
determination shall be final and conclusive upon all Participants and
Beneficiaries hereunder. As soon as reasonably practicable after the close of
the Plan Year, the Corporation shall send to each Participant an itemized
accounting statement which shall reflect the Participant's Plan Account balance.
5.8 EFFECT OF PLAN TERMINATION. Notwithstanding anything to the contrary
contained in the Plan, the termination of the Plan or the termination of the
401(k) Savings Plan shall terminate the liability of the Corporation to make
further Corporate Contributions to the Plan.
ARTICLE VI
----------
VESTING
-------
6.1 PLAN VESTING. For purposes of determining a Participant's vested interest in
those Corporate Contributions credited to Participants' Plan Accounts, a
Participant shall become vested in those Corporate Contributions credited to his
or her Plan Account upon the following:
1. The Participant's completion of three years of vested service;
2. The Participant's termination of his active employment with an
Employer upon becoming Disabled; or
3. The Participant's death.
For purposes of this Section 6.1 hereof, vested service shall be
determined based on the Participant's Employment Commencement Date with an
Employer through the Participant's Severance From Service Date and shall be
calculated based on consecutive twelve-month periods during which time the
Participant is employed by an Employer.
ARTICLE VII
-----------
TERMINATION OF PARTICIPATION AND DISTRIBUTION
---------------------------------------------
7.1 TERMINATION OF PARTICIPATION. Each Participant shall cease to be a
Participant hereunder and shall be entitled to distribution of their vested Plan
benefits under the Plan, on the first to occur:
(a) On the date of the Participant's Retirement from the
employ of his or her Employer;
(b) On the date such Participant's employment with his or
her Employer is terminated for any other reason
(whether because of death, disability, voluntary
resignation, or otherwise),
<PAGE> 9
provided, however, that if any such date shall be a pay period, the Participant
shall for all purposes hereof cease to be a Participant upon the next succeeding
day
7.2 DISTRIBUTION. As of a Participant's Termination of Participation, the funds
attributable to Participant Deferrals and Corporate Contributions, if vested,
shall be distributed to the Participant or to his or her Beneficiary in a lump
sum payment. A Participant retiring from the employ of his or her Employer,
whose Plan Account balance equals or exceeds $50,000 as of such Retirement date,
may, request, subject to approval by the Corporation, that his or her
distribution be made in a series of installments over a fixed period of time
which shall not exceed 180 months. A Participant must request that his or her
distribution be made in the form of installments a minimum of twelve months
prior to the Participant's Retirement date.
Distribution under either method shall be made or commenced as soon as
reasonably practicable, but in no event later than 60 days after the close of
the Plan Year in which the Participant's termination of Participation has
occurred.
If a Participant or former Participant dies after the distribution of
his or her interest under the Plan has commenced, the remaining portion of the
Participant's entire interest under the Plan, if any, shall be distributed to
the Participant's Beneficiary under the method of distribution being used as of
the Participant's or former Participant's date of death. If a Participant or
former Participant dies before the distribution of his or her entire interest
has commenced, the Participant's or former Participant's entire interest under
the Plan shall be distributed to his or her Beneficiary in a lump-sum payment.
7.3 FORM OF DISTRIBUTION. The distribution of a Participant's or former
Participant's interest under the Plan shall be made in the form of cash.
7.4 FACILITY OF PAYMENT. If it is found that any individual to whom an amount is
payable hereunder is incapable of attending to his or her financial affairs
because of any mental or physical condition, including the infirmities of
advanced age, such amount (unless prior claim therefor shall have been made by a
duly qualified guardian or other legal representative) may, in the discretion of
the Corporation, be paid to another person for the use or benefit of the
individual found incapable of attending to his or her financial affairs or in
satisfaction of legal obligations incurred by or on behalf of such individual.
Any such payment shall be charged to the Participant's Plan Account from which
any such payment would otherwise have been paid to the individual found
incapable of attending to his financial affairs, and shall be a complete
discharge of any liability therefor under the Plan.
<PAGE> 10
ARTICLE VIII
------------
WITHDRAWALS
-----------
8.1 WITHDRAWAL OF CORPORATE CONTRIBUTIONS. Prior to the Participant's
Termination of Participation, the Participant may not withdraw from the Plan
those Participant Deferrals or Corporate Contributions credited to the
Participant's Plan Account, or any earnings or gains attributable thereto.
ARTICLE IX
----------
DEATH OF THE PARTICIPANT
------------------------
9.1 DEATH OF THE PARTICIPANT. In the event of the death of a Participant, the
amount, attributable to Participant Deferrals and vested Corporate Contributions
credited to the Participant's Plan Account shall be paid to the Participant's
Beneficiary If the Beneficiary (including all contingent Beneficiary(ies)),
fails to survive the Participant, the amount of the Participant's Account shall
be paid to the Participant's estate in a lump sum ninety days after the
appointment of an executor or administrator. In the event of the death of the
Beneficiary after the death of a Participant, the remaining amount of the
Account payable to such Beneficiary shall be paid in a lump sum to the estate of
such Beneficiary ninety days after the appointment of an executor or
administrator for such estate.
ARTICLE X
---------
ADMINISTRATION
--------------
ADMINISTRATION AND CLAIMS PROCEDURE
-----------------------------------
10.1 ADMINISTRATION. The Corporation, which shall be the "Administrator" of the
Plan for purposes of ERISA and the "Plan Administrator" for purposes of the
Code, shall be responsible for the general administration of the Plan, for
carrying out the provisions hereof, and for making payments hereunder. The
Corporation shall have the sole and absolute discretionary authority and power
to carry out the provisions of the Plan, including, but not limited to, the
authority and power (a) to determine all questions relating to the eligibility
for and the amount of any benefit to be paid under the Plan, (b) to determine
all questions pertaining to claims for benefits and procedures for claim review,
(c) to resolve all other questions arising under the Plan, including any
questions of construction or interpretation, and (d) to take such further action
as the Corporation shall deem necessary or advisable in the administration of
the Plan. All findings, decisions, and determinations of any kind made by the
Plan Administrator shall not be disturbed unless the Plan Administrator has
acted in an arbitrary and capricious manner. Subject to the requirements of law,
the Plan Administrator shall be the sole judge of the standard of proof required
in any claim for benefits and in any determination of eligibility for a benefit.
All decisions of the Plan Administrator shall be final
<PAGE> 11
and binding on all parties. The Corporation may employ such attorneys,
investment counsel, agents, and accountants as it may deem necessary or
advisable to assist it in carrying out its duties hereunder. The actions taken
and the decisions made by the Corporation hereunder shall be final and binding
upon all interested parties subject, however, to the provisions of Section 10.2.
The Plan year, for purposes of Plan administration, shall be the calendar year.
10.2 CLAIMS REVIEW PROCEDURE. Whenever the Plan Administrator decides for
whatever reason to deny, whether in whole or in part, a claim for benefits under
this Plan filed by any person (herein referred to as the "Claimant"), the Plan
Administrator shall transmit a written notice of its decision to the Claimant,
which notice shall be written in a manner calculated to be understood by the
Claimant and shall contain a statement of the specific reasons for the denial of
the claim and a statement advising the Claimant that, within 60 days of the date
on which he or she receives such notice, he or she may obtain review of the
decision of the Plan Administrator in accordance with the procedures hereinafter
set forth. Within such 60-day period, the Claimant or his or her authorized
representative may request that the claim denial be reviewed by filing with the
Plan Administrator a written request therefore, which request shall contain the
following information:
(i) the date on which the request was filed with the Plan
Administrator; provided, however, that the date on which the
request for review was in fact filed with the Plan
Administrator shall control in the event that the date of the
actual filing is later than the date stated by the Claimant
pursuant to this paragraph (i);
(ii) the specific portions of the denial of the claim on which the
Claimant requests the Plan Administrator to review;
(iii) a statement by the Claimant setting forth the basis upon which
the Plan Administrator should reverse its previous denial of
the claim and accept the claim as made; and
(iv) any written material which the Claimant desires the Plan
Administrator to examine in its consideration of his position
as stated pursuant to paragraph (ii) above.
In accordance with this Section, if the claimant requests a review of
the Plan Administrator's decision, such review shall be made by the Plan
Administrator, who shall, within ninety (90) days after receipt of the request
form, review and render a written decision on the claim containing the specific
reasons for the decision including reference to Plan provisions upon which the
decision is based. All findings, decisions, and determinations of any kind made
by the Plan Administrator shall not be modified unless the Plan Administrator
has acted in an arbitrary and capricious manner. Subject to the requirements of
a law, the Plan Administrator shall be the sole judge of the standard of proof
required in any claim for benefits, and any determination of eligibility for a
benefit. All decisions of the Plan Administrator shall be binding on the
claimant and upon all other Persons. If the Participant,
<PAGE> 12
or Beneficiary shall not file written notice with the Plan Administrator at
the times set forth above, such individual shall have waived all benefits under
the Plan other than as already provided, if any, under the Plan.
ARTICLE XI
----------
AMENDMENT AND TERMINATION
-------------------------
11.1 RESERVATION OF RIGHTS. The Corporation reserves the right to terminate the
Plan at any time by action of the Board of Directors of the Corporation, or any
duly authorized committee thereof, and to modify or amend the Plan, in whole or
in part, at any time and for any reason; provided, however, that no such action
shall reduce any Participant or Beneficiary's Participant Deferrals and
Corporate Contributions credited to the Participants' Plan Account as of the
effective date of such amendment.
11.2 EFFECT OF PLAN TERMINATION. If the Corporation terminates the Plan,
Participants shall receive distribution of their interests under the Plan within
60 days of the Plan's termination date, in a lump-sum payment.
ARTICLE XII
-----------
CHANGE OF CONTROL
12.1 CHANGE OF CONTROL. Notwithstanding the provisions of Section 11.1 and
Section 11.2 of Article XI, in the event of a Change of Control as defined in
Section 1.1(c) of the Plan, no amendment of modification of this Plan may be
made at any time on or after such Change of Control (1) to reduce or modify a
Participant's Pre-Change of Control Account Balance, or (2) to reduce or modify
the Investment Funds' method of crediting all earnings, gains and losses on a
Participant's Pre-Change of Control Account Balance. For purposes of this
Section 12.1 hereof, the term "Pre-Change of Control Account Balance" shall mean
with regard to any Plan Participant, the aggregate amount of such Participant's
Participant Deferrals and Corporate Contributions with all earnings, gains, and
losses thereon which are credited to the Participant's Plan Account through the
close of the calendar year in which such Change of Control occurs. All
Participant Deferrals and Corporate Contributions which are invested for
bookkeeping purposes in the Plan's Investment Funds shall be treated and shall
be valued in the same manner as the KeyCorp 401(k) Savings Plan Investment Funds
are treated and valued.
12.2 AMENDMENT IN THE EVENT OF A CHANGE OF CONTROL. On or after a Change of
Control, the provisions of Article IV, Article V, Article VI, Article VII, and
Article XII may not be amended or modified as such Sections and Articles apply
with regard to Participants' Pre-Change of Control Account Balances.
<PAGE> 13
ARTICLE XIII
------------
SECURITIES LAWS COMPLIANCE
13.1 RESTRICTIONS IMPOSED ON TRANSACTIONS INVOLVING THE CORPORATION STOCK FUND.
Notwithstanding any contrary provision in this Plan, the Corporation may, in its
discretion, but in a uniform, non-discriminatory manner, delay, suspend or
otherwise limit any investment in or withdrawal from the Corporation Stock Fund
for such time and to the extent the Corporation, on advice of legal counsel,
determines is necessary or desirable to avoid violating any applicable state or
federal securities laws, rules or regulations.
ARTICLE XIV
-----------
MISCELLANEOUS
-------------
14.1 TRUST FUND. At its discretion, the Corporation may establish one or more
trusts, with such trustees as the Corporation may approve, for the purpose of
providing for the payment of benefits owed under the Plan. Although such a trust
shall be irrevocable, in the event of insolvency or bankruptcy of the
Corporation, such assets will be subject to the claims of the Corporation's
general creditors. To the extent any benefits provided under the Plan are paid
from any such trust, Employer shall have no further obligation to pay them. If
not paid from the trust, such benefits shall remain the obligation of Employer.
14.2 PROTECTIVE PROVISIONS. A Participant will cooperate with Employer by
furnishing any and all information requested by Employer in order to facilitate
the payment of benefits hereunder.
14.3 VALIDITY. In case any provision of this Plan shall be held illegal or
invalid for any reason, said illegality or invalidity shall not affect the
remaining parts hereof, but this Plan shall be construed and enforced as if such
illegal and invalid provision had never been inserted herein.
14.4 NOTICE. Any notice required or permitted under the Plan shall be sufficient
if in writing and hand delivered or sent by registered or certified mail. Such
notice shall be deemed as given as of the date of delivery or, if delivery is
made by mail, as of the date shown on the postmark on the receipt for
registration or certification. Mailed notice to the Corporation shall be
directed to the Corporation address. Mailed notice to a Participant or
Beneficiary shall be directed to the individual's last known address in
Employer's records.
14.5 SUCCESSORS. The provisions of this Plan shall bind and inure to the benefit
of Employer and its successors and assigns. The term successors as used herein
shall include any corporate or other business entity which shall, whether by
merger, consolidation, purchase or otherwise acquire all or substantially all of
the business and assets of Employer, and successors of any such corporation or
other business entity.
<PAGE> 14
ARTICLE XV
----------
MISCELLANEOUS PROVISIONS
------------------------
15.1 NO COMMITMENT AS TO EMPLOYMENT. Nothing herein contained shall be construed
as a commitment or agreement upon the part of any Employee hereunder to continue
his or her employment with an Employer, and nothing herein contained shall be
construed as a commitment on the part of any Employer to continue the employment
or rate of compensation of any Employee hereunder for any period. All
Participants shall remain subject to discharge to the same extent as if the Plan
had never been put into effect.
15.2 BENEFITS. Nothing in the Plan shall be construed to confer any right or
claim upon any person, firm, or corporation other than the Participants, former
Participants, and Beneficiaries.
15.3 ABSENCE OF LIABILITY. No member of the Board of Directors of the
Corporation or a subsidiary or committee authorized by the Board of Directors,
or any officer of the Corporation or a subsidiary or officer of a subsidiary
shall be liable for any act or action hereunder, whether of commission or
omission, taken by any other member, or by any officer, agent, or Employee,
except in circumstances involving bad faith or willful misconduct, for anything
done or omitted to be done.
15.4 EXPENSES. The expenses of administration of the Plan shall be paid by the
Corporation.
15.5 PRECEDENT. Except as otherwise specifically provided, no action taken in
accordance with the Plan by the Corporation shall be construed or relied upon as
a precedent for similar action under similar circumstances.
15.6 WITHHOLDING. The Corporation shall withhold any tax which the Corporation
in discretion deems necessary to be withheld from any payment to any
Participant, former Participant, or Beneficiary hereunder, by reason of any
present or future law.
15.7 VALIDITY OF PLAN. The validity of the Plan shall be determined and the Plan
shall be construed and interpreted in accordance with the provisions of the Act,
the Code, and, to the extent applicable, the laws of the State of Ohio. The
invalidity or illegality of any provision of the Plan shall not affect the
validity or legality of any other part thereof.
15.8 PARTIES BOUND. The Plan shall be binding upon the Employers, Participants,
former Participants, and Beneficiaries hereunder, and, as the case may be, the
heirs, executors, administrators, successors, and assigns of each of them.
15.9 HEADINGS. All headings used in the Plan are for convenience of reference
only and are not part of the substance of the Plan.
<PAGE> 15
15.10 DUTY TO FURNISH INFORMATION. The Corporation shall furnish to each
Participant, former Participant, or Beneficiary any documents, reports, returns,
statements, or other information that it reasonably deems necessary to perform
its duties imposed hereunder or otherwise imposed by law.
Executed at Cleveland, Ohio, to be effective as of the 1st day of
January, 1997.
KEYCORP
By:
---------------------------
Title:
-------------------------
<PAGE> 1
Exhibit 10.23
KEYCORP
EXECUTIVE DEFERRED COMPENSATION PLAN
Effective June 1, 1990
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C> <C>
ARTICLE I PURPOSE; EFFECTIVE DATE 1
1.1 Purpose 1
1.2 Effective Date 1
ARTICLE II DEFINITIONS 1
2.1 Account 1
2.2 Actuarial Equivalent 1
2.3 Beneficiary 2
2.4 Board 2
2.5 Change in Control 2
2.6 Committee 3
2.7 Company 4
2.8 Compensation 4
2.9 Deferral Commitment 4
2.10 Deferral Period 4
2.11 Determination Date 4
2.12 Discretionary Contribution 4
2.13 Earnings 4
2.14 Employer 5
2.15 Financial Hardship 5
2.16 Incentive Compensation 5
2.17 Make-Up Contribution 5
2.18 Participant 5
2.19 Participation Agreement 5
2.20 Plan 5
2.21 Prior Plan 6
2.22 Qualified Profit Sharing Plan 6
ARTICLE III PARTICIPATION AND DEFERRAL COMMITMENTS 6
3.1 Eligibility and Participation 6
3.2 Form of Deferral 7
3.3 Limitations on Deferral Committee 7
3.4 Commitment Limited by Termination 8
3.5 Modification of Deferral Commitment 8
3.6 Change in Employment Status 8
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
TABLE OF CONTENTS
(Continued)
PAGE
----
<S> <C> <C>
ARTICLE IV DEFERRED COMPENSATION ACCOUNT 9
4.1 Account 9
4.2 Timing of Credits; Withholding 9
4.3 Make-Up Contributions 9
4.4 Discretionary Contributions 10
4.5 Determination of Account 10
4.6 Vesting of Account 11
4.7 Statement of Account 11
ARTICLE V PLAN BENEFITS 12
5.1 Distributions Prior to Termination
of Employment 12
5.2 Distributions Following Termination
of Employment 13
5.3 Form of Benefit Payment Following
Termination of Employment 14
5.4 Accelerated Distribution 14
5.5 Withholding for Taxes 14
5.6 Valuation and Settlement 15
5.7 Payment to Guardian 15
ARTICLE VI BENEFICIARY DESIGNATION 16
6.1 Beneficiary Designation 16
6.2 Changing Beneficiary 16
6.3 Community Property 16
6.4 No Beneficiary Designation 18
ARTICLE VII ADMINISTRATION 18
7.1 Committee; Duties 18
7.2 Agents 19
7.3 Binding Effect of Decisions 19
7.4 Indemnity of Committee 19
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
TABLE OF CONTENTS
(Continued)
PAGE
----
<S> <C> <C>
ARTICLE VIII CLAIMS PROCEDURE 19
8.1 Claim 19
8.2 Review of Claim 20
8.3 Notice of Denial of Claim 20
8.4 Reconsideration of Denied Claim 21
8.5 Employer to Supply Information 22
ARTICLE IX AMENDMENT AND TERMINATION OF PLAN 23
9.1 Amendment 23
9.2 Employer's Right to Terminate 23
ARTICLE X MISCELLANEOUS 24
10.1 Unfunded Plan 24
10.2 Company and Employer Obligations 25
10.3 Unsecured General Creditor 25
10.4 Trust Fund 25
10.5 Nonassignability 25
10.6 Not a Contract of Employment 26
10.7 Protective Provisions 26
10.8 Governing Law 26
10.9 Validity 26
10.10 Notice 27
10.11 Successors 27
(iii)
</TABLE>
<PAGE> 5
KEYCORP
EXECUTIVE DEFERRED COMPENSATION PLAN
ARTICLE I
PURPOSE; EFFECTIVE DATE
-----------------------
1.1 PURPOSE. The purpose of this Executive Deferred Compensation Plan
is to provide current tax planning opportunities as well as supplemental funds
for retirement or death for selected employees of the Employer. It is intended
that the Plan wil aid in attracting and retaining employees of exceptional
ability by providing them with these benefits.
1.2 EFFECTIVE DATE. The Plan is effective as of June 1, 1990.
ARTICLE II
DEFINITIONS
-----------
For the purposes of this Plan, the following terms shall have the
meanings indicated, unless the context clearly indicates otherwise:
2.1 ACCOUNT. "Account" means the device used by the Employer to measure
and determine the amount to be paid to a Participant under the Plan.
2.2 ACTUARIAL EQUIVALENT. "Actuarial Equivalent" means equivalence in
value between two or more forms and/or times of payment based on a
determination by an actuary chosen by the
PAGE 1 -- EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 6
committee, using sound acturial assumptions at the time of such determination
2.3 BENEFICIARY. "Beneficiary" means the person, persons or entity
entitled under Article VI to receive any Plan benefits payable after a
Participant's death.
2.4 BOARD. "Board" means the Board of Directors of the Company.
2.5 CHANGE IN CONTROL. A "Change in Control" means a Change in Control
of a nature that would be required to be reported (assuming such event has not
been "previously reported") in response to Item 1(a) of the current report on
Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") or any
successor thereto; provided that, without limitation, such a change in Control
shall be deemed to have occurred at such time as:
(a) Any person is or becomes the "beneficial owner (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of twenty five percent (25%) or more of the combined
voting power of the Company's Voting Securities;
(b) Individuals who constitute the Board of the Company on
the date hereof (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of the Company or the
Board of any corporation with which the Company merges, provided
that any person becoming a director subsequent to the date hereof
whose election, or nomination
PAGE 2 -- EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 7
for election by the Company's shareholders, was approved by a vote of at least
three quarters (3/4) of the directors comprising the Incumbent Board (either by
a specific vote or by approval of the proxy statement of the Company in which
such person is named as a nominee for director, without objection to such
nomination) shall be, for purposes of this clause (b), considered as though such
person were a member of the Incumbent Board;
(c) If any person or entity acquires an interest which is
determined by the Federal Reserve Board to constitute a controlling interest
in the Company;
(d) The sale by the Company of more than fifty percent (50%) of
the book value of its assets to a single purchaser or to a group of affiliated
purchasers; or
(e) The merger or consolidation of the Company in a transaction
in which the shareholders of the Company receive less than fifty percent (50%)
of the outstanding voting shares of the continuing corporation. Notwithstanding
anything in the foregoing to the contrary, no Change in Control shall be deemed
to have occurred by virtue of any transaction which results in which a
Participant, or group of Participants, acquiring, directly or indirectly, twenty
five percent (25%) or more of the combined voting power of the Company's Voting
Securities.
2.6 COMMITTEE. "Committee" means the Compensations
Committee of the Board.
PAGE 3 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 8
2.7 COMPANY. "Company" means KeyCorp, a New York
corporation.
2.8 COMPENSATION. "Compensation" means salary and incentive
Compensation payable to a Participant during the calendar year, before reduction
for amounts deferred under this Plan or any other salary reduction program.
Compensation does not include expense reimbursements, any form of non-cash
compensation, or benefits.
2.9 DEFERRAL COMMITMENT. "Deferral Commitment" means a
commitment made by a Participant to defer Compensation pursuant
to Article III.
2.10 DEFERRAL PERIOD. "Deferral Period" means each calendar
year. The initial Deferral Period, however, shall be from July 1, 1990,
through December 31, 1990.
2.11 DETERMINATION DATE. "Determination Date" means the
last day of each calendar month.
2.12 DISCRETIONARY CONTRIBUTION. "Discretionary Contribution"
means the Employer contribution credited to a Participant's Account under
Section 4.4.
2.13 EARNINGS. "Earnings" means the rate of growth credited
to an account on each Determination Date in a calendar year and shall be equal
to .5 percentage points higher than the effective annual yield of the average
of the Moody's Average Corporate Bond Yield Index for the previous calendar
month as published by Moody's Investor Service, Inc. (or any successor
PAGE 4 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 9
publisher thereto), or, if such index is no longer published, a substantially
similar index selected by the Board.
2.14 EMPLOYER. "Employer" means the Company and any
subsidiary or affiliate of the Company designated by the Board.
2.15 FINANCIAL HARDSHIP. "Financial Hardship" means a financial
hardship to the Participant resulting from a sudden and unexpected illness or
accident of the Participant or of a dependent of the Participant, loss of the
Participant's property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Participant.
2.16 INCENTIVE COMPENSATION. "Incentive Compensation" means
amounts payable to a participant as incentive awards under the KeyCorp
Executive Incentive Compensation Plan.
2.17 MAKE-UP CONTRIBUTION. "Make-Up Contribution" means the
Employer contribution credited to a Participant's Account under 4.3.
2.18 PARTICIPANT. "Participant" means any eligible individual
who has elected to defer Compensation under this Plan.
2.19 PARTICIPATION AGREEMENT. "Participation Agreement" means
the agreement submitted by a Participant to the Committee prior to the
beginning of a Deferral Period, with respect to a Deferral Commitment made for
such Deferral Period.
2.20 PLAN. "Plan" means this Executive Deferred Compensation
Plan as amended from time to time.
PAGE 5 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 10
2.21 PRIOR PLAN. "Prior Plan" means the individual
deferral arrangements and plans in effect on May 31, 1990.
2.22 QUALIFIED PROFIT SHARING PLAN. "Qualified Profit Sharing
Plan" means the KeyCorp Profit Sharing Plus Plan, or any successor defined
contribution retirement income plan maintained by Employer that qualifies under
Section 401(a) of the Internal Revenue Code.
ARTICLE III
PARTICIPATION AND DEFERRAL COMMITMENTS
--------------------------------------
3.1 ELIGIBILITY AND PARTICIPATION.
(a) ELIGIBILITY. Eligibility to participate in the
Plan shall be limited to key employees of Employer who are
designated, from time to time, by the Board.
(b) PARTICIPATION. An eligible individual may elect to
participate in the Plan with respect to any Deferral Period by
submitting a Participation Agreement to the Committee by the 15th
day of the month immediately preceding the beginning of the
Deferral Period.
(c) PART-YEAR PARTICIPATION. When an individual
first becomes eligible to participate during a Deferral
Period, a Participation Agreement may be submitted to the
Committee within thirty (30) days after the Committee
notifies the individual of eligibility to participate.
Such Participation Agreement will be effective only with
regard
PAGE 6 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 11
to Compensation earned following submission to the
Committee.
3.2 FORM OF DEFERRAL. A Participant may elect Deferral
Commitments in the Participation Agreement as follows:
(a) SALARY DEFERRAL COMMITMENT. A salary Deferral
Commitment shall be related to the salary payable by
Employer to a Participant during the Deferral Period. The
amount to be deferred shall be stated either as a
percentage or a dollar amount.
(b) INCENTIVE DEFERRAL COMMITMENT. An incentive
Deferral Commitment shall be related to the Incentive
Compensation earned by the Participant for the Deferral
Period. The amount to be deferred shall be stated either
as a percentage or a dollar amount.
3.3 LIMITATIONS ON DEFERRAL COMMITMENTS. The following
limitations shall apply to Deferral Commitments:
(a) MINIMUM. The minimum deferral amount shall be two
hundred dollars ($200) for each month in the Deferral Period,
except there shall be no minimum deferral amount on an incentive
Deferral Commitment if the Participant has also made a salary
Deferral Commitment for the same Deferral Period. The minimum
Deferral Commitment for a Participant who enters participation
after the beginning of a Deferral Period shall be based on the
number of months remaining in the Deferral Period.
PAGE 7 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 12
(b) MAXIMUM. The maximum deferral amount shall be fifty
percent (50%) of salary in a salary Deferral Commitment and one
hundred percent (100%) of Incentive Compensation in an incentive
Deferral Commitment.
(c) CHANGES IN MINIMUM OR MAXIMUM. The Committee
may change the minimum or maximum deferral amounts from
time to time by giving written notice to all Participants.
No such change may affect a Deferral Commitment made prior
to the Committee's action.
3.4 COMMITMENT LIMITED BY TERMINATION. If a Participant
terminates employment with Employer prior to the end of the Deferral Period, the
Deferral Period shall end at the date of termination. The minimum deferral for
the Deferral Period shall be based on the number of months to the date of
termination.
3.5 MODIFICATION OF DEFERRAL COMMITMENT. Except as
provided in Section 5.1(b) below, Deferral Commitments shall be
irrevocable.
3.6 CHANGE IN EMPLOYMENT STATUS. If the Board determines
that a Participant's performance is no longer at a level that deserves reward
through participation in the Plan, but does not terminate the Participant's
employment with Employer, the Participant's existing Deferral Commitment shall
terminate at the end of the Deferral Period, and no new Deferral Commitment
may be made by such Participant after notice of such determination is given
by the Board.
PAGE 8 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 13
ARTICLE IV
DEFERRED COMPENSATION ACCOUNT
-----------------------------
4.1 ACCOUNT. The amounts deferred by a Participant under the
Plan, any Employer contributions and Earnings shall be credited to the
Participant's Account. Separate subaccounts may be maintained to reflect
different forms of distribution and levels of vesting and forms of payment. The
Account shall be a bookkeeping device utilized for the sole purpose of
determining the benefits payable under the Plan and shall not constitute a
separate fund of assets. On July 1, 1990, each Participant shall have an Account
balance equal to the amount held for the Participant pursuant to the Prior
Plan, if any.
4.2 TIMING OF CREDITS; WITHHOLDING. A Participant's deferred
Compensation shall be credited to the Participant's Account at the time it would
have been payable to the Participant. Any withholding of taxes or other amounts
with respect to deferred Compensation that is required by state, federal or
local law shall reduce the amount credited to the Participant's Account.
4.3 MAKE-UP CONTRIBUTIONS. Employer may credit a Make-
Up Contribution to the Participant's Account in this Plan equal to the
reduction in the Participant's allocation of a Qualified Profit Sharing Plan
contribution because of deferrals under this Plan. The Make-Up Contribution
shall be credited to the Account
PAGE 9 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 14
as of the date the contribution would have been credited to the Participant's
account in the Qualified Profit Sharing Plan in the absence of deferral.
4.4 DISCRETIONARY CONTRIBUTIONS. Employer may make
Discretionary Contributions to a Participant's Account. Discretionary
Contributions shall be credited at such times and in such amounts as the Board
in its sole discretion shall determine.
4.5 DETERMINATION OF ACCOUNT. Each Participant's Account as of
each Determination Date shall consist of the balance of the Account as of the
immediately preceding Determination Date, adjusted as follows:
(a) NEW DEFERRALS. The Account shall be increased
by any deferred Compensation credited since such Determination
Date.
(b) EMPLOYER CONTRIBUTIONS. The Account shall be
increased by any Employer contributions credited since such
Determination Date.
(c ) DISTRIBUTIONS. The Account shall be reduced by
any benefits distributed from the Account to the Participant since
such Determination Date.
(d) EARNINGS. The Account shall be increase by the
Earnings on the average daily balance in the Account since such
Determination Date.
PAGE 10 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 15
4.6 VESTING OF ACCOUNT. Each Participant shall be vested in
the amounts credited to such Participant's Account and Earnings thereon as
follows:
(a) AMOUNTS ROLLED OVER. A Participant shall be
one hundred percent (100%) vested at all times in any
amounts rolled into this Plan from the Prior Plan and any
Earnings thereon.
(b) AMOUNTS DEFERRED. A Participant shall be one
hundred percent (100%) vested at all times in the amount
of Compensation elected to be deferred under this Plan and
Earnings thereon.
(c) MAKE-UP CONTRIBUTIONS. A Participant's
Make-Up Contribution and Earnings thereon shall become vested
at the same time and in the same amount as they would have
become vested if made to the Qualified Profit Sharing
Plan.
(d) DISCRETIONARY CONTRIBUTIONS. A Participant's
Discretionary Contributions and Earnings thereon shall become
vested as determined by the Board.
4.7 STATEMENT OF ACCOUNT. The Committee shall give to
each Participant a statement showing the balance in the Participant's Account on
an annual basis and at such times as may be determined by the Committee.
PAGE 11 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 16
ARTICLE V
PLAN BENEFITS
5.1 DISTRIBUTION PRIOR TO TERMINATION OF EMPLOYMENT. A
Participant's Account may be distributed to the Participant prior
to termination of employment as follows:
(a) EARLY WITHDRAWALS. A Participant may elect in a
Participation Agreement to withdraw all or any portion of the
amount deferred by that Participation Agreement as of a date
specified in the election. Such date shall not be sooner than seven
years after the date the Deferral Period commences. The amount
withdrawn shall not exceed the amount of Compensation deferred,
without Earnings. Such election shall be made at the time the
Deferral Commitment is made and shall be irrevocable.
(b) HARDSHIP WITHDRAWAL. Upon finding that a
Participant has suffered a Financial Hardship, the Committee may,
in its sole discretion, make distributions from the Participant's
Account. The amount of such a withdrawal shall be limited to the
amount reasonably necessary to meet the Participant's needs
resulting from the Financial Hardship. If payment is made due to
Financial Hardship under this Plan or the Qualified Profit Sharing
Plan, the Participant's deferrals under this Plan shall cease for a
12-month period. Any resumption of the Participant's deferrals
under the Plan after such 12-month period shall be made only at
PAGE 12 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 17
the election of the Participant in accordance with Article
III herein.
(c) FORM OF PAYMENT AND TIME. Any distribution
pursuant to Section 5.1(a) or 5.1(b) shall be payable in a lump
sum. The distribution shall be paid in the case of a partial
withdrawal, as provided in the Participation Agreement, and in
case of a Financial Hardship, within thirty (30) days after the
determination of a Financial Hardship.
5.2 DISTRIBUTIONS FOLLOWING TERMINATION OF EMPLOYMENT.
Upon a Participant's termination of employment with Employer for any reason, the
Employer shall pay the Participant or in the case of death the Participant's
Beneficiary, benefits equal to the balance in the Participant's Account. Plan
benefits attributed to Deferrals made on or after July 1, 1990, shall be payable
in the manner provided in Section 5.3 and at the time provided in Section 5.6.
Plan benefits with respect to a Prior Plan shall be payable in the same manner
and at the same time as selected by the Participant under the Prior Plan.
5.3 FORM OF BENEFIT PAYMENT FOLLOWING TERMINATION OF
EMPLOYMENT.
(a) Subject to Section 5.3(c ), benefits shall be
paid in the form selected by the Participant at the time of the
Deferral Commitment. Options include:
(i) A lump sum payment.
PAGE 13 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 18
(ii) Equal monthly installments of the
Account and Interest amortized over a period of sixty
(60), one hundred twenty (120), or one hundred eighty
(180) months.
(b) The Interest on the unpaid balance of an Account
under (a) shall be equal to the average Earnings over the thirty
six (36) months immediately preceding the commencement of benefit
payments.
(c) SMALL ACCOUNT(S). Notwithstanding Section
5.3(a), if a Participant's Account is under fifty thousand
dollars ($50,000) on the valuation date, the benefit shall
be paid in a lump sum.
5.4 ACCELERATED DISTRIBUTION. Notwithstanding any other
provision of the Plan, at any time after a Change of Control or at any time
following termination of Employment, a Participant shall be entitled to receive,
upon written request to the Committee, a lump sum distribution equal to ninety
percent (90%) of the vested Account balance as of the Determination Date
immediately preceding the date on which the Committee receives the written
request. The remaining balance shall be forfeited by the Participant. The amount
payable under this section shall be paid in a lump sum within sixty five (65)
days following the receipt of the notice by the Committee from the Participant.
5.5 WITHHOLDING FOR TAXES. To the extent required by the law
in effect at the time payments are made, the Employer shall withhold from the
payments made hereunder any Taxes required to
PAGE 14 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 19
be withheld by the federal or any state or local government, including any
amounts which the Employer determines is reasonably necessary to pay any
generation-skipping transfer tax which is or may become due. A beneficiary,
however, may elect not to have withholding of federal income tax pursuant to
Section 3405(a)(2) of the Internal Revenue Code, or any successor provision
thereto.
5.6 VALUATION AND SETTLEMENT. The amount of a lump sum payment
and the initial amount of installments shall be based on the value of the
Participant's Account on the valuation date. The last day of the month preceding
the Participant's Termination of Employment shall be the valuation date. The
date on which a lump sum is paid or the date on such installments commence shall
be the settlement date. Subject to Section 5.7, the settlement date shall be no
more than sixty five (65) days after the valuation date. All payments shall be
made as of the first day of the month.
5.7 PAYMENT TO GUARDIAN. The Committee may direct payment to
the duly appointed guardian, conservator, or other similar legal representative
of a Participant or Beneficiary to whom payment is due. In the absence of such a
legal representative, the Committee may, in its sole and absolute discretion,
make payment to a person having the care and custody of a minor, incompetent or
person incapable of handling the disposition of property upon proof satisfactory
to the Committee of
PAGE 15 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 20
incompetency, minority, or incapacity. Such distribution shall completely
discharge the Committee from all liability with respect to such benefit.
ARTICLE VI
BENEFICIARY DESIGNATION
-----------------------
6.1 BENEFICIARY DESIGNATION. Subject to Section 6.3, each
Participant shall have the right, at any time, to designate one or more persons
or an entity as Beneficiary (both primary as well as secondary) to whom benefits
under this Plan shall be paid in the event of Participant's death prior to
complete distribution of the Participant's Account. Each Beneficiary designation
shall be in a written form prescribed by the Committee and shall be effective
only when field with the Committee during the Participant's lifetime.
6.2 CHANGING BENEFICIARY. Subject to Section 6.3, any
Beneficiary designation may be changed by a Participant without the consent of
the previously named Beneficiary by the filing of a new designation with the
Committee. The filing of a new designation shall cancel all designations
previously filed.
6.3 COMMUNITY PROPERTY. If the Participant resides in a
community property state, the following rules shall apply:
(a) Designation by a married Participant of a
Beneficiary other than the Participant's spouse shall not be
effective unless the spouse executes a written consent that
acknowledges the effect of the designation, or it is
PAGE 16 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 21
established the consent cannot be obtained because the
spouse cannot be located.
(b) A married Participant's Beneficiary designation
may be changed by a Participant with the consent of the
Participant's spouse as provided for in section 6.3(a) by the
filing of a new designation with the Committee.
(c) If the Participant's marital status changes after
the Participant has designated a Beneficiary, the following shall
apply:
(i) If the Participant is married at the
time of death but was unmarried when the
designation was made, the designation shall be void
unless the spouse has consented to it in the manner
prescribed in Section 6.3(a).
(ii) If the Participant is unmarried at
the time of death but was married when the designation
was made:
a) The designation shall be void if
the spouse was named as Beneficiary;
b) The designation shall remain valid
if a nonspouse Beneficiary was named.
(iii) If the Participant was married when
the designation was made and is married to a different
spouse at death, the designation shall be void unless
the new spouse has consented to it in the manner
prescribed above.
PAGE 17 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 22
6.4 NO BENEFICIARY DESIGNATION. If any Participant fails to
designation is void, or if the Beneficiary designated by a deceased Participant
dies before the Participant or before complete distribution of the Participant's
benefits, the Participant's Beneficiary shall be the person in the first of the
following classes in which there is a survivor:
(a) The Participant's spouse;
(b) The Participant's children in equal shares,
except that if any of the children predeceases the Participant but
leaves issue surviving, then such issue shall take by right of
representation the share the parent would have taken if living;
(c ) The Participant's estate.
ARTICLE VII
ADMINISTRATION
--------------
7.1 COMMITTEE; DUTIES. This Plan shall be administered by the
Compensation Committee of the Board. The Committee shall have the authority to
make, amend, interpret and enforce all appropriate rules and regulations for the
administration of the Plan and decide or resolve any and all questions,
including interpretations of the Plan, as may arise in such administration. A
majority vote of the Committee members shall control any decision. Members of
the Committee may be Participants under this Plan.
PAGE 18 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 23
7.2 AGENTS. The Committee may, from time to time, employ
agents and delegate to them such administrative duties as it sees fit, and may
from time to time consult with counsel who may be counsel to the Company.
7.3 BINDING EFFECT OF DECISIONS. The decision or action of
the Committee with respect to any question arising out of or in connection with
the administration, interpretation and application of the Plan and the rules
and regulations promulgated hereunder shall be final, conclusive and binding
upon all persons having any interest in the Plan.
7.4 INDEMNITY OF COMMITTEE. The Company shall indemnify an
hold harmless the members of the Committee against any and all claims, loss,
damage, expense or liability arising from any action or failure to act with
respect to this Plan on account of such person's service on the Committee,
except in the case of gross negligence or willful misconduct.
ARTICLE VIII
CLAIMS PROCEDURE
----------------
8.1 CLAIM. The Committee shall establish rules and procedures
to be followed by Participants and Beneficiaries in (a) filing claims for
benefits, and (b) for furnishing and verifying proofs necessary to establish
the right to benefits in accordance with the Plan, consistent with the remainder
of this Article. Such rules and procedures shall require that claims and proofs
be made in writing and directed to the Committee.
PAGE 19 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 24
8.2 REVIEW OF CLAIM. The Committee shall review all claims
for benefits. Upon receipt by the Committee of such a claim, it shall determine
all facts which are necessary to establish the right of the claimant to
benefits under the provisions of the Plan and the amount thereof as herein
provided within ninety (90) days of receipt of such claim. If prior to the
expiration of the initial ninety (90) day period, the Committee determines
additional time is needed to come to a determination on the claim, the
Committee shall provide written notice to the Participant, Beneficiary or other
claimant of the need for the extension, not to exceed a total of one hundred
eighty (180) days from the date the application was received.
8.3 NOTICE OF DENIAL OF CLAIM. In the event that any
Participant, Beneficiary or other claimant claims to be entitled to a benefit
under the Plan, and the Committee determines that such claim should be denied in
whole or in part, the Committee shall, in writing, notify such claimant that the
claim has been denied, in whole or in part, setting forth the specific reasons
for such denial. Such notification shall be written in a manner reasonable
expected to be understood by such claimant and shall refer to the specific
sections of the Plan relied on, shall describe any additional material or
information necessary for the claimant to perfect the claim and an explanation
of why such material or information is necessary, and where appropriate, shall
include an explanation of how the claimant can obtain reconsideration of such
denial.
PAGE 20 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 25
8.4 RECONSIDERATION OF DENIED CLAIM.
(a) Within sixty (60) days after receipt of the notice
of the denial of a claim, such claimant or duly authorized
representative may request, by mailing or delivery of such written
notice to the Committee, a reconsideration by the Committee of the
decision denying the claim. If the claimant or duly authorized
representative fails to request such a reconsideration within such
sixty (60) day period, it shall be conclusively determined for all
purposes of this Plan that the denial of such claim by the
Committee is correct. If such claimant or duly authorized
representative requests a reconsideration within such sixty (60)
day period, the claimant of duly authorized representative shall
have thirty (30) days after filing a request for reconsideration to
submit additional written material in support of the claim, review
pertinent documents, and submit issues and comments in writing.
(b) After such reconsideration request, the Committee
shall determine within sixty (60) days of receipt of the claimant's
request for reconsideration whether such denial of the claim was
correct and shall notify such claimant in writing of its
determination. The written notice of decision shall be in writing
and shall include specific reasons for the decision, written in a
manner calculated to be understood by the claimant, as well as
specific references to the pertinent Plan provisions on
PAGE 21 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 26
which the decision is based. In the event of special circumstances
determined by the Committee, the time for the Committee to make a
decision may be extended by an additional sixty (60) days upon
written notice to the claimant prior to the commencement of the
extension. If such determination is favorable to the claimant, it
shall be binding and conclusive. If such determination is adverse
to such claimant, it shall be binding and conclusive unless the
claimant or his duly authorized representative notifies the
Committee within ninety (90) days after the mailing or delivery to
the claimant by the Committee of its determination that claimant
intends to institute legal proceedings challenging the
determination of the Committee and actually institutes such legal
proceedings within one hundred eighty (180) days after such mailing
or delivery.
8.5 EMPLOYER TO SUPPLY INFORMATION. To enable the
Committee to perform its functions, the Employer shall supply full and timely
information to the Committee of all matters relating to the retirement, death or
other cause for termination of employment of all Participants, and such other
pertinent facts as the Committee may require.
PAGE 22 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 27
ARTICLE IX
AMENDMENT OF TERMINATION OF PLAN
--------------------------------
9.1 AMENDMENT. The Board may at any time amend the Plan by
written instrument, notice of which is given to all Participants and to
Beneficiaries receiving installment payments, subject to the following:
(a) PRESERVATION OF ACCOUNT BALANCE. No amendment
shall reduce the amount accrued in any Account to the date such
notice of the amendment is given.
(b) CHANGES IN EARNINGS RATE. No amendment shall
reduce the rate of earnings to be credited after the date of the
amendment to the amount already accrued in any Account and any
Deferred Compensation credited to the Account under Deferral
Commitments already in effect on that date.
9.2 EMPLOYER'S RIGHT TO TERMINATE. The Board may at any
time partially of completely terminate the Plan if, in its judgment, the tax,
accounting or other effects of the continuance of the Plan, or potential
payments thereunder would not be in the best interests of Employer.
(a) PARTIAL TERMINATION. The Board may partially
terminate the Plan by instructing the Committee not to accept
any additional Deferral Commitments. If such a partial
termination occurs, the Plan shall continue to operate and be
effective with regard to Deferral Commitments entered into prior
to the effective date of such partial termination.
PAGE 23 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 28
(b) COMPLETE TERMINATION. The Board may completely
terminate the Plan by instructing the Committee no to accept any
additional Deferral Commitments, and by terminating all ongoing
Deferral Commitments. If such a complete termination occurs, the
Plan shall cease to operate and in equal monthly installments over
the following period, based on the Account balance:
<TABLE>
<CAPTION>
Account Balance Payout Period
--------------- -------------
<S> <C>
Less than $50,000 Lump Sum
$50,000 but less than $100,000 3 Years
More than $100,000 5 Years
</TABLE>
Payments shall commence within sixty five (65) days after
the Board Terminates the Plan and earnings shall continue to be
credited on the unpaid Account balance at the rate specified in
Section 5.3(b).
ARTICLE X
MISCELLANEOUS
-------------
10.1 UNFUNDED PLAN. This plan is an unfunded plan maintained
primarily to provide deferred compensation benefits for a select group of
"management or highly-compensated employees" within the meaning of Sections 201,
301 and 401 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and therefore is exempt from the provisions of Parts 2, 3 and 4 of
Title I of ERISA.
PAGE 24 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 29
10.2 COMPANY AND EMPLOYER OBLIGATIONS. The obligation to make
benefit payments to any Participant under the Plan shall be a joint and several
liability of the Company and the Employer that employed the Participant.
10.3 UNSECURED GENERAL CREDITOR. Participants and
Beneficiaries shall be unsecured general creditors, with no secured or
preferential right to any assets of Employer or any other property for payment
of benefits under this Plan. Any life insurance policies, annuity contracts or
other property purchased by Employer in connection with this Plan shall remain
its general, unpledged and unrestricted assets. Employer's obligation under the
Plan shall be an unfunded and unsecured promise to pay money in the future.
10.4 TRUST FUND. At its discretion, the Company may establish
one or more trusts, with such trustees as the Board may approve, for the purpose
of providing for the payment of benefits owed under the Plan. Although such a
trust shall be irrevocable, its assets shall be held for payment of all the
Company's general creditors in the event of insolvency or bankruptcy. To the
extent any benefits provided under the Plan are paid from any such trust,
Employer shall have no further obligation to pay them. If not paid from the
trust, such benefits shall remain the obligation of Employer.
10.5 NONASSIGNABILITY. Neither a Participant nor any other
person shall have any right to commute, sell, assign, transfer, pledge, a
nticipate, mortgage or otherwise encumber,
PAGE 25 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 30
transfer, hypothecate or convey in advance of actual receipt the amounts, if
any, payable hereunder, or any part thereof, which are, and all rights to which
are, expressly declared to be unassignable and non-transferrable. No part of the
amounts payable shall, prior to actual payment, be subject to seizure or
sequestration for the payment of any debts, judgments, alimony or separate
maintenance owed by a Participant or any other person, nor be transferable by
operation of law in the event of a Participant's or any other person's
bankruptcy or insolvency.
10.6 NOT A CONTRACT OF EMPLOYMENT. This Plan shall not
constitute a contract of employment between Employer and the Participant.
Nothing in this Plan shall give a Participant the right to be retained in the
service of Employer or to interfere with the right of Employer to discipline or
discharge a Participant at any time.
10.7 PROTECTIVE PROVISIONS. A Participant will cooperate with
Employer by furnishing any and all information requested by Employer in order to
facilitate the payment of benefits hereunder, and by taking such physical
examinations as Employer may deem necessary and taking such other action as may
be requested by Employer.
10.8 GOVERNING LAW. The provisions of this Plan shall be
construed and interpreted according to the laws of the State of New York,
except as preempted by federal law.
10.9 VALIDITY. In case any provision of this Plan shall
be held illegal or invalid for any reason, said illegality or
PAGE 26 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 31
invalidity shall not affect the remaining parts hereof, but this Plan shall be
construed and enforced as if such illegal and invalid provision had never been
inserted herein.
10.10 NOTICE. Any notice required or permitted under the Plan
shall be sufficient if in writing and hand delivered or sent by registered or
certified mail. Such notice shall be deemed as given as of the date of delivery
or, if delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification. Mailed notice to the Committee shall
be directed to the Company's address. Mailed notice to a Participant or
Beneficiary shall be directed to the individual's last known address in
Employer's records.
10.11 SUCCESSORS. The provisions of this Plan shall bind and
inure to the benefit of Employer and its successors and assigns. The term
successors as used herein shall include any corporate or other business entity
which shall, whether by merger, consolidation, purchase or otherwise acquire all
or substantially all of the business and assets of Employer, and successors of
any such corporation or other business entity.
KEYCORP/ Victor J. Riley, Jr.
By: ______________________________
Its Chairman, President & Chief
Executive Officer
Dated: ______________________________
PAGE 27 - EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 1
Exhibit 10.24
KEYCORP
SURVIVOR BENEFIT PLAN
Effective July 1, 1990
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I PURPOSE..........................................................1
1.1 Purpose.............................................................1
1.2 Effective Date......................................................1
ARTICLE II DEFINITIONS.....................................................1
2.1 Board...............................................................1
2.2 Cash Value..........................................................1
2.3 Committee...........................................................1
2.4 Compensation........................................................2
2.5 Date of Participation...............................................2
2.6 Disability..........................................................2
2.7 Employer............................................................2
2.8 Employer's Cost.....................................................2
2.9 Employer's Share of Premium.........................................2
2.10. Insurer...........................................................2
2.11 Participant........................................................3
2.12 Participant's Share of Premium.....................................3
2.13 PLAN...............................................................3
2.14 Plan Benefit......................................................3
2.15 Policy.............................................................3
2.16 Retirement.........................................................3
2.17 Terminated for Cause...............................................4
2.18 Years of Credited Service..........................................5
ARTICLE III PARTICIPATION.................................................5
3.1 Eligibility.........................................................5
3.2 Participation.......................................................5
ARTICLE IV POLICY OWNERSHIP................................................5
4.1 Policy Ownership....................................................5
4.2 Employer's Security Interest........................................6
ARTICLE V PREMIUM PAYMENT..................................................6
5.1 Premium Payment.....................................................6
5.2 Payment of Participant's Share......................................6
ARTICLE VI EMPLOYER'S INTEREST IN THE POLICY...............................6
6.1 Collateral Assignment...............................................7
6.2 Limitations.........................................................7
ARTICLE VII PARTICIPANT'S INTEREST IN THE POLICY...........................8
7.1 Cash Surrender Value................................................8
7.2 Plan Benefit........................................................8
7.3 Insurance Proceeds..................................................8
ARTICLE VIII TERMINATION, RETIREMENT, DISABILITY..........................8
8.1 Termination of Employment Prior to Retirement.......................9
8.2 Termination of Employment Due to Retirement.........................9
8.3 Disability.........................................................10
ARTICLE IX AMENDMENT AND TERMINATION OF PLAN.............................11
9.1 Amendment..........................................................11
9.2. Termination.......................................................11
ARTICLE X INSURER NOT A PARTY TO PLAN.....................................12
ARTICLE XI NAMED FIDUCIARY................................................12
11.1 Named Fiduciary...................................................12
11.2 Indemnification...................................................12
-ii-
<PAGE> 3
ARTICLE XII CLAIMS PROCEDURE.............................................13
12.1 Claim.............................................................13
12.2 Review of Claim...................................................13
12.3 Notice of Denial of Claim.........................................13
12.4 Reconsideration of Denied Claim...................................14
12.5 Employer to Supply Information....................................15
ARTICLE XIII MISCELLANEOUS...............................................15
13.1 Not a Contract of Employment......................................15
13.2 Protective Provisions.............................................15
13.3. Transfer of Participant's Interest in the Policy.................16
13.4 Terms.............................................................16
13.5 Governing Law.....................................................16
13.6 Validity..........................................................16
13.7 Notice............................................................16
13.8 Successors........................................................16
-iii-
<PAGE> 4
KEYCORP
SURVIVOR BENEFIT PLAN
ARTICLE I
PURPOSE
1.1 PURPOSE. This Plan has been established to provide
certain key employees of KeyCorp and its subsidiaries with life insurance
protection. The Plan will provide life insurance benefits to the beneficiaries
of the participating employees under a split dollar life insurance arrangement.
1.2 EFFECTIVE DATE. The Plan will be effective as of
July 1, 1990.
ARTICLE II
DEFINITIONS
-----------
Whenever used in this document, the following terms shall have the
meanings set forth in this Article unless a contrary or different meaning is
expressly provided;
2.1 BOARD. "Board" shall mean the Board of Directors of KeyCorp.
2.2 CASH VALUE. "Cash Value" shall mean the Policy's cash value as that
term is defined in the Policy.
2.3 COMMITTEE. "Committee" shall mean the Committee appointed to
administer the Plan pursuant to Article XI.
2.4 COMPENSATION. "Compensation" shall mean the base salary payable to
the Participant and considered to be "wages" for purposes of federal income tax
withholding before reduction for amounts deferred under the KeyCorp Executive
Deferred
-1-
<PAGE> 5
Compensation Plan or any other elective salary reduction program. Compensation
does not include incentive compensation, bonuses, expenses reimbursement, any
form of non-cash compensation, or benefits.
2.5 DATE OF PARTICIPATION. "Date of Participation" shall be the later
of the date on which the Policy is issued or July 1, 1990.
2.6 DISABILITY. "Disability" shall mean a physical or mental condition
that prevents the Participant from satisfactorily performing the Participant's
usual duties for Employer. The Committee shall determine the existence of
Disability and may rely on advice from a medical examiner satisfactory to the
Committee in making the determination.
2.7 EMPLOYER. "Employer" shall mean KeyCorp, a New York corporation, or
a subsidiary of KeyCorp participating in this Plan.
2.8 EMPLOYER'S COST. "Employer's Cost" shall mean the Employer's Share
of Premium plus interest at the annual effective rate of eight and one-half
percent (8.5%) from the date each premium was paid.
2.9 EMPLOYER'S SHARE OF PREMIUM. "Employer's Share of Premium" shall
mean the aggregate amount of insurance premium paid by the Employer less the
Participant's Share of Premium.
2.10 INSURER. "Insurer" shall mean any insurance company issuing a life
insurance policy under this Plan.
2.11 PARTICIPANT. "Participant" shall mean an employee of the Employer
who has been designated as a Participant by the Board.
-2-
<PAGE> 6
2.12 PARTICIPANT'S SHARE OF PREMIUM. "Participant's Share of Premium"
shall mean the aggregate portion of premiums required to be contribution by the
Participant. This shall be an amount equal to the annual term cost of the
current life insurance proceeds payable as a Plan Benefit under Section 2.14
measured by the lower of the PS 58 rate or the Insurer's current published
premium rate for annually renewable term insurance for standard risks.
2.13 PLAN. "Plan" shall mean the KeyCorp Survivor Benefit Plan.
2.14 PLAN BENEFIT. "Plan Benefit" shall mean insurance proceeds equal
to the lesser of three (3) times the Participant's annual Compensation rate or
one million dollar ($1 million). The Plan Benefit shall be adjusted annually on
the anniversary of Plan participation based on Participant's annual Compensation
rate on January 1 of the current calendar year.
2.15 POLICY. "Policy" shall mean, with respect to each Participant, all
life insurance policies which are issued by an Insurer under this Plan on the
life of such Participant.
2.16 RETIREMENT . "Retirement" shall mean termination of employment
with the Employer, on or after age sixty-two (62) with fifteen (15) Years of
Credited Service, after age sixty-five (65), or pursuant to an employment
agreement between KeyCorp and the Participant.
2.17 TERMINATED FOR CAUSE. "Terminated for Cause" shall mean
termination of a Participant's employment by KeyCorp upon:
(a) The willful and continued failure by the Participant to
perform substantially the Participant's duties with KeyCorp (other than
any such failure
-3-
<PAGE> 7
resulting from the Participant's incapacity due to physical or mental
illness) after a demand for substantial performance is delivered to the
Participant by the President of KeyCorp with specifically identifies
the manner in which such executive believes that the Participant has
not substantially performed the Participant's duties, or has failed to
comply in material respects with the terms and obligations of
employment by KeyCorp as such terms and obligations are applied to
similarly situated employees, or
(b) The willful engaging by the Participant in illegal conduct
which is materially and demonstrably injurious to KeyCorp.
For purposes of this paragraph, no act, or failure to act, on the
Participant's part shall be considered "willful" unless done, or omitted to be
done, by the Participant in bad faith and without reasonable belief that the
Participant's action or omission was in, or not opposed to, the best interests
of KeyCorp. Any act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or based upon the advice of counsel for
KeyCorp shall be conclusively presumed to be done, or omitted to be done, by the
Participant in good faith and in the best interests of the Company. It is also
expressly understood that the Participant's attention to matters not directly
related to the business of KeyCorp shall not provide a basic for termination for
Cause so long as the Board has approved the Participant's engagement in such
activities. Notwithstanding the foregoing, the Participant shall not be deemed
to have been Terminated for Cause unless and until there shall have been
delivered to the Participant a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters (3/4) of the entire membership
of the Board at a meeting of the Board called and held for the purpose (after
reasonable notice to the Participant and an opportunity for the Participant,
together with the Participant's counsel, to be heard before the Board), finding
that in good faith opinion
-4-
<PAGE> 8
of the Board the Participant was guilty of the conduct set forth above in (a) or
(b) of this paragraph and specifying the particulars thereof in detail.
2.18 YEARS OF CREDITED SERVICE. "Years of Credited Service" means the
number of years of credited vesting service determined under the provisions of
the KeyCorp Pension Plan.
ARTICLE III
PARTICIPATION
-------------
3.1 ELIGIBILITY. Eligibility shall be limited to those employees of the
Employer who are designated by the Board to participate in the Plan.
3.2 PARTICIPATION. A Participant, upon being designated as such, shall
complete such documents as are prescribed by the Committee in order to
participate in the Plan.
ARTICLE IV
POLICY OWNERSHIP
----------------
4.1 POLICY OWNERSHIP. The Participant, or his transferee, shall be the
owner of the Policy and may exercise all ownership rights granted to the owner
by the terms of the Policy, subject to the rights of the Employer as herein
provided. The Participant's rights shall include, but are not limited to, the
right to assign has interest in the Policy, the right to change the beneficiary
of that portion of the proceeds to which he is entitled under Article VII, and
the right to exercise settlement options with respect to that portion. The
Participant shall not borrow against, surrender or cancel the Policy, nor
terminate the Policy dividend election without the express written consent of
the Employer.
-5-
<PAGE> 9
4.2 EMPLOYER'S SECURITY INTEREST. The Employer shall have a security
interest in the Cash Value of the Policy equal to the Employer's Share of
Premium and a portion of the death benefit, as defined in the collateral
assignment attached as Exhibit A, and as hereinafter provided under Article VI.
ARTICLE V
PREMIUM PAYMENT
---------------
5.1 PREMIUM PAYMENT. Each premium on the Policy shall be paid by the
Employer as it becomes due.
5.2 PAYMENT OF PARTICIPANT'S SHARE. Within thirty (30) days after
payment of the first Policy premium and thereafter, prior to the Policy
anniversary, the Employer shall notify the Participant of the Participant's
Share of Premium. The Employer shall deduct such amount from the Participant's
compensation ratably over the following twelve (12) months. Prior to Retirement,
the Participant shall be required to contribute the annual cost of insurance
protection, as determined above, in each year until the Participant retires.
After the Participant retires, the Employer shall be responsible for any
premiums due before the release of the collateral assignment under paragraph
8.2.
ARTICLE VI
EMPLOYER'S INTEREST IN THE POLICY
---------------------------------
6.1 COLLATERAL ASSIGNMENT. Each Participant shall assign the Policy to
the Employer as collateral, under the form of collateral assignment attached as
Exhibit A. Such assignment shall give the Employer the limited power to enforce
its right to recover the Employer's Share of Premium on the Policy from the Cash
Value or from the death benefit thereof. The collateral assignment of the Policy
to the Employer shall not be terminated, altered or amended by the Participant
without the express written consent of
-6-
<PAGE> 10
the Employer. The Employer and Participants will take all action necessary to
cause the collateral assignment to conform to the provisions of this Plan.
6.2 LIMITATIONS. The interest of the Employer in and to the Policy
shall be specifically limited to the following right in and to the Cash Value
and a portion of the death benefit:
(a) The right to recover the entire Cash Value in the event
the Policy is surrendered or canceled prior to the Participant's
Retirement;
(b) The right to recover, upon the death of the Participant
prior to Retirement, all of the Policy proceeds in excess of that
portion of the Policy proceeds payable to the Participant's beneficiary
or beneficiaries as provided in paragraph 7.3;
(c) Exempt as provided in paragraph 8.1, the right to receive
full ownership of the Policy, in the event of termination of employment
by the Participant prior to Retirement for reasons other than death or
disability;
(d) Except as provided in paragraph 9.2, the right to receive
full ownership of the Policy, in the event of termination of the Plan.
ARTICLE VII
PARTICIPANT'S INTEREST IN THE POLICY
------------------------------------
7.1 CASH SURRENDER VALUE. Notwithstanding any other provision in the
Plan to the contrary, the Participant shall at all times own that portion of the
Cash Value equal to the Participant's Share of Premium to the extent said Cash
Value exceeds the Employer's Share of Premium. Such ownership interest shall be
assigned to the Employer pursuant
-7-
<PAGE> 11
to the terms of the collateral assignment required under paragraph 6.1. Except
as provided in paragraph 8.1 and 9.2, in the event of the Participant's
termination of employment prior to Retirement or the Employer's termination of
the Plan, the Participant will be required to assign his interest in the Cash
Value to the Employer.
7.2 PLAN BENEFIT. Upon the death of the Participant, the beneficiary or
beneficiaries designated by the Participant shall be entitled to receive the
Plan Benefit.
7.3 INSURANCE PROCEEDS. The Employer shall promptly take all action
necessary to obtain the data benefit provided under the Policy (including any
benefit under this Plan owed to the beneficiary or beneficiaries designated by
the Participant). Such death benefit shall be paid to the beneficiary or
beneficiaries designated by the Participant after the full amount due the
Employer under paragraph 6.2(b) has been paid.
ARTICLE VIII
TERMINATION, RETIREMENT, DISABILITY
-----------------------------------
8.1 TERMINATION OF EMPLOYMENT PRIOR TO RETIREMENT. In the event of
termination of employment prior to Retirement for reasons other than death or
disability, the Participant shall have a ninety (90) day option to purchase the
Employer's interest in the Policy at price equal to the Employer's Cost.
Notwithstanding the above, if the Participant is Terminated for Cause, or fails
to exercise the purchase option, the Employer shall become the sole owner of the
Policy and the Participant shall execute any and all instruments the may be
required to vest ownership of said Policy in the Employer. Thereafter, neither
the Participant nor his beneficiaries shall have any further interest in the
Policy or this Plan.
8.2 TERMINATION OF EMPLOYMENT DUE TO RETIREMENT. In the event of
termination of employment with the Employer due to Retirement, the Employer
shall do the following:
-8-
<PAGE> 12
(a) If the Participant's termination date occurs prior to the
seventh (7th) anniversary of the Participant's Date of Participation,
the Employer shall continue to pay any premiums throughout the seventh
(7th anniversary of the Participant's Date of Participation. After the
seventh (7th) anniversary, the Employer shall immediately release its
interest in the Policy and in the collateral assignment. Upon release
of the collateral assignment, the Employer shall have no further
obligation to pay future Policy premiums and shall have no further
interest in the Policy.
(b) If the Participant's termination date occurs after the
seventh (7th) anniversary of the Participant's Date of Participation,
then the Employer shall immediately release its interest in the Policy
and in the collateral assignment. Upon release of the collateral
assignment, the Employer shall have no further interest in the Policy
and shall have no further obligation to pay future Policy premiums.
8.3 DISABILITY. In the event the Participant becomes disable prior to
Retirement, the Employer will continue the Plan with regard to the Participant.
During the period of the Disability, the Participant shall be required to
contribute the Participant's Share of Premium. Upon the Participant's attainment
of age sixty-five (65), the Participant shall be deemed to have retired.
-9-
<PAGE> 13
ARTICLE IX
AMENDMENT AND TERMINATION OF PLAN
---------------------------------
9.1 AMENDMENT. The Employer may amend the Plan from time to time as may
be necessary for administrative purposes and legal compliance. The power to
amend the Plan pursuant to this section shall include, but not be limited to,
the power to increase or decrease the Plan Benefit as defined under the Plan. If
such amendment adversely impacts the interest of the Participant, the Employer
shall grant the Participant a ninety (90) day option to purchase the Employer's
interest in the Policy at a price equal to the Employer's Cost. However, no such
amendment shall reduce the amount of benefit payable with respect to a
Participant who has retired.
9.2 TERMINATION. The Employer may, at any time, in its sole discretion,
terminate the Plan in whole or in part. Upon termination in whole or in part,
the Employer shall grant to the Participant a ninety (90) day option to purchase
the Employer's interest in the policy at a price equal to the Employer's Cost.
If the Participant fails to exercise this purchase option, the Employer, in its
discretion, may elect to become the sole owner of the Policy. If the Employer
elects to become the sole owner of the Policy, the Participant shall execute any
and all instruments that may be required to vest ownership of said Policy in the
Employer. Thereafter, neither the Participant nor this beneficiaries shall have
any further interest in the Policy. However, such termination shall not apply to
a Participant who has retired before the effective date of the termination.
Premiums on policies on such Participants shall continue to be paid and said
policy shall be transferred to such Participant as provided in paragraph 8.2.
-10-
<PAGE> 14
ARTICLE X
INSURER NOT A PARTY TO PLAN
---------------------------
The Insurer shall be bound only by the provisions of the Policy, any
endorsements on the Policy and the collateral assignment. Any payments made or
action taken by an Insurer in accordance therewith shall fully discharge it from
all claims, suits and demands of all person whosoever. Except as specifically
provided by endorsement on the Policy, it shall in no way be bound by the
provisions of this Plan.
ARTICLE XI
NAMED FIDUCIARY
---------------
11.1 NAMED FIDUCIARY. The Committee is hereby designated as the "Named
Fiduciary." The Committee shall be the Compensation Committee of the Board. As
the Named Fiduciary, the Committee shall have the authority to make, amend,
interpret and enforce all appropriate rules and regulations for the
Administration of the Plan and decide interpretations of the Plan, as may arise
in such administration. The Committee may allocate to others certain aspects of
the management and operation responsibilities of the Plan, including the
employment of advisors and the delegation of any ministerial duties to qualified
individuals.
11.2 INDEMNIFICATION. The Employer shall indemnify and hold harmless
the Committee and individual members against any and all claims, loss, damage,
expenses or liability arising from any action or failure to act with respect to
this Plan, except in the case of gross negligence or willful misconduct.
-11-
<PAGE> 15
ARTICLE XII
CLAIMS PROCEDURE
----------------
12.1 CLAIM. The Committee shall establish rules and procedures to be
followed by Participants and beneficiaries in (a) filing claims for benefits,
and (b) for furnishing and verifying proofs necessary to establish the right to
benefits in accordance with the Plan, consistent with the remainder of this
article. Such rules and procedures shall require that claims and proofs be made
in writing and directed to the Committee.
12.2 REVIEW OF CLAIM. The Committee shall review all claims for
benefits. Upon receipt by the Committee of such a claim, it shall determine all
fact which are necessary to establish the right of the claimant to benefits
under the provisions of the Plan and the amount thereof as herein provided
within ninety (90) days of receipt of such claim. If prior to the expiration of
the initial ninety (90) days period, the Committee determines additional time is
needed to come to a determination on the claim, the Committee shall provide
written notice to the Participant, beneficiary or other claimant of the need for
the extension, not to exceed a total of one hundred eighty (180) days from the
date the application was received.
12.3 NOTICE OF DENIAL OF CLAIM. In the event that any Participant,
beneficiary or other claimant claims to be entitled to a benefit under the Plan,
and the Committee determines that such claim should be denied in whole or in
part, the Committee shall, in writing, notify such claimant that his or her
claim has been denied, in whole or in part, setting forth the specific reasons
for such denial. Such notification shall be written in a manner reasonably
expected to be understood by such claimant and shall refer to the specific
sections of the Plan relied on, shall describe any additional material or
information necessary for the claimant to perfect the claim and an explanation
of why such material or information is necessary, and where appropriate, shall
include an explanation of how the claimant can obtain reconsideration of such
denial.
-12-
<PAGE> 16
12.4 RECONSIDERATION OF DENIED CLAIM
(a) Within sixty (60) days after receipt of the notice of the
denial of a claim, such claimant or has duly authorized representative
may request, by mailing or delivery of such written notice to the
Committee, a reconsideration by the Committee of the decision denying
the claim. If the claimant or his duly authorized representative fails
to request such a reconsideration within such sixty (60) day period, it
shall be conclusively determined for all purposes of this Plan that the
denial of such claim by the Committee is correct. If such claimant or
his duly authorized representative request a reconsideration within
such sixty (60) day period, the claimant or his duly authorized
representative shall have thirty (30) days after filing a request for
reconsideration to submit additional written material in support of the
claim, review pertinent documents, and submit issues and comments in
writing.
(b) After such reconsideration request, the Committee shall
determine within sixty (60) days of receipt of the claimant's request
for reconsideration whether such denial of the claim was correct and
shall notify such claimant in writing of its determination. The written
notice of decision shall be in writing and shall include specific
reasons for the decision, written in a manner calculated to be
understood by the claimant, as well as specific references to the
pertinent Plan provisions on which the decision is based. In the event
of special circumstances determined by the Committee, the time for the
Committee to make a decision may be extended by an additional sixty
(60) days upon written notice to the claimant prior to the commencement
of the extension. If such determination is favorable to the claimant,
it shall be binding and conclusive. If such determination is adverse to
such claimant, it shall be binding and conclusive unless the claimant
or his duly authorized representative notifies the Committee within
ninety (90) days after the mailing or delivery to the claimant by the
Committee of its determination that claimant intends to institute legal
proceedings challenging the determination
-13-
<PAGE> 17
of the Committee and actually institutes such legal proceedings within
one hundred eighty (180) days after such mailing or delivery.
12.5 EMPLOYER TO SUPPLY INFORMATION. To enable the Committee to perform
its functions, the Employer shall supply full and timely information to the
Committee of all matters relating to the retirement, death or other cause for
termination of employment of all Participants, and such other pertinent facts as
the Committee may require.
ARTICLE XIII
MISCELLANEOUS
-------------
13.1 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of the Plan
shall not be deemed to constitute a contract of employment between the Employer
and a Participant, and neither a Participant nor a Participant's beneficiary
shall have any rights against the Employer except as may otherwise be
specifically provided herein. Moreover, nothing in this Plan shall be deemed to
give a Participant the right to be retained in the service of the Employer or to
interfere with the right of the Employer to discipline or discharge him at any
time.
13.2 PROTECTIVE PROVISIONS. A Participant will cooperate with the
Employer by furnishing any and all information requested by the Employer, in
order to facilitate the payment of benefits hereunder, and by taking such
physical examinations as the Employer may deem necessary and taking such other
reasonable action as may be requested by the Employer.
13.3 TRANSFER OF PARTICIPANT'S INTEREST IN THE POLICY. In the event a
Participant shall transfer all of his interest in the Policy, then all of a
Participant's interest in the Policy shall be vested in his transferee, who
shall be substituted as a party hereunder, and a Participant shall have no
further interest in the Policy.
-14-
<PAGE> 18
13.4 TERMS. In this Plan document, unless the context clearly indicates
the contrary, the reference to the masculine gender will be deemed to include
the feminine gender, and the singular shall include the plural.
13.5 GOVERNING LAW. The provisions of the Plan shall be construed and
interpreted according to the laws of the State of New York, except as preempted
by federal law.
13.6 VALIDITY. In case any provision of this Plan shall be held illegal
or invalid for any reason, such illegality or invalidity shall not affect the
remaining parts hereof, but this Plan shall be construed and enforced as if such
illegal and invalid provision had never been inserted herein.
13.7 NOTICE. Any notice or filing required or permitted to be given to
the Employer under the Plan shall be sufficient if in writing and hand
delivered, or sent by registered or certified mail to the Committee. Such
notice, if mailed, shall be addressed to the principal offices of the Employer.
Notice mailed to the Participant shall be at such address as is given in the
records of the Employer. Notices shall be deemed given as of the date of
delivery or, if delivery is made by mail, as of the date shown on the postmark
on the receipt for registration or certification.
13.8 SUCCESSORS. The provisions of the Plan shall bind and inure to the
benefit of the Employer and its successor and assigns. The term successors as
used herein shall include any corporate or other business entity which shall,
whether by merger, consolidation, purchases of otherwise, acquire all or
substantially all of the business and assets of the Employer, and successors of
any such corporation or other business entity.
-15-
<PAGE> 19
IN WITNESS WHEREOF, the Employer has caused this instrument to be
executed by its officers thereunto duly authorized, as of the 3rd day of August,
1990.
KEYCORP
By: /s/
------------------------------------------------
Victor J. Riley, Jr.
Title: Chairman, President & Chief Executive Officer
----------------------------------------------
-16-
<PAGE> 20
[KEYCORP LOGO] SURVIVOR BENEFIT PLAN
COLLATERAL ASSIGNMENT
================================================================================
THIS ASSIGNMENT, made and entered into this ___________________________ day of
19__ , by the undersigned as owner (the "Owner") of that certain Life Insurance
Policy No. ________________ issued by Pacific Mutual Life Insurance Company,
Newport Beach, California ("Insurer") and any supplementary contracts issued in
connection therewith (said policy and contract being herein called the
"Policy"), upon the life of ______________________ ("Insured"), to the trustee
of the KeyCorp Umbrella Trust for Executives dated July 1, 1990 ("Assignee")
established by KeyCorp, a New York corporation or any participating subsidiary
of KeyCorp (the "Company").
WITNESSETH:
WHEREAS, the Insured is an employee of the Company; and
WHEREAS, said Assignee desires to assist the Insured by paying a portion of the
annual premium due on the Policy, as more specifically provided for in that
certain Survivor Benefit Plan dated July 1, 1990, adopted by the Company (the
"Plan"); and
WHEREAS, in consideration of the Assignee agreeing to pay such premiums, the
Owner agrees to grant the Assignee a security interest in said Policy as a
collateral security for the repayment of that portion of the premiums paid by
the Assignee.
NOW, THEREFORE, for value received, the undersigned hereby assigns, transfers
and sets over to the Assignee, its successors and assigns, the following
specific rights in the Policy and subject to the following terms and conditions:
1) This Assignment is made, and the Policy is to be held, as
collateral security for all liabilities of the Owner to the
Assignee, either now existing or that may hereafter arise
pursuant to the terms of the Plan.
2) The Assignee's interest in the Policy shall further be limited
to:
(a) The right to recover the entire Cash Value of the
Policy in the event the Policy is surrendered or
canceled, prior to the Insured's Retirement, as
provided in the Plan;
-17-
<PAGE> 21
[KEYCORP LOGO] SURVIVOR BENEFIT PLAN
COLLATERAL ASSIGNMENT
================================================================================
(b) The right to recover, upon the death of the Insured
prior to Retirement, all of the Policy proceeds in
excess of those payable to the Participant's
beneficiary or beneficiaries, as provided under the
Plan, reduced by any indebtedness against the Policy;
and
(c) The right to receive full ownership of the Policy in
the event of termination of the Insured's employment
prior to Retirement for reasons other than death or
disability, as provided in Paragraph 8.1 of the Plan;
and
(d) The right to receive full ownership of the Policy in
the event the Plan is terminated by the Board prior
to the Insured's Retirement as provided in Paragraph
9.2 of the Plan.
3) Except as specifically herein granted to the Assignee, the
Owner shall retain all incidents of ownership in the Policy,
including the right to assign his interest in the Policy, the
right to change the beneficiary of that portion of the
proceeds to which he is entitled under Article VII of the
Plan, and the right to exercise all settlement options
permitted by the terms of the Policy; provided, however, that
all rights retained by Owner shall be subject to the terms and
conditions of the Plan.
4) The Assigned shall, upon request, forward the Policy to the
Insurer, without reasonable delay, for endorsement of any
designation or change of beneficiary, any election of optional
mode of settlement, or the exercise of any other right
reserved by the Owner hereunder.
5) The Insurer is hereby authorized to recognize the Assignee's
claims to rights hereunder without investigating the reason
for any action taken by the Assignee, the validity or amount
of liabilities of the Owner to the Assignee under the
Agreement, the existence of any default therein, the giving of
any notice required herein, or the application to be made by
the Assignee of any amounts to be paid to the Assignee. The
signature of the Assignee shall be sufficient for the exercise
of any rights under the Policy assigned hereby to the Assignee
and the receipt of the Assignee for any sums received by its
shall be a full discharge and release therefor to the Insurer.
-18-
<PAGE> 22
[KEYCORP LOGO] SURVIVOR BENEFIT PLAN
COLLATERAL ASSIGNMENT
================================================================================
6) Upon termination of employment at Retirement, the Assignee
shall, as provided for under Paragraph 8.2 of the Plan,
reassign to the Owner the Policy and all specific right
included in this Collateral Assignment.
IN WITNESS WHEREOF, the undersigned Owner has executed this Assignment.
Witness Owner
-19-
<PAGE> 1
Exhibit 10.25
KEYCORP
DIRECTORS' SURVIVOR BENEFIT PLAN
Effective as of September 1, 1990
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I PURPOSE EFFECTIVE DATE 1
ARTICLE II DEFINITIONS 1
2.1 Beneficiary 1
2.2 Board 1
2.3 Committee 1
2.4 Company 1
2.5 Participant 2
2.6 Participation Agreement 2
2.7 Year of Service 2
ARTICLE III PARTICIPATION 2
3.1 Eligibility and Participation 2
3.2 Suicide 2
ARTICLE IV BENEFITS 3
4.1 Death During Active Service
on the Board 3
4.2 Death After Termination of
Board Service 3
4.3 Payment of Benefits 4
ARTICLE V BENEFICIARY DESIGNATION 4
5.1 Beneficiary Designation 4
5.2 Changing Beneficiary 4
5.3 Community Property 4
5.4 No Beneficiary Designation 6
ARTICLE VI ADMINISTRATION 6
6.1 Committee Duties 6
6.2 Agents 7
6.3 Binding Effect of Decisions 7
6.4 Indemnity of the Committee 7
</TABLE>
(i)
<PAGE> 3
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE VII CLAIMS PROCEDURE 7
7.1 Claim 7
7.2 Review of Claim 8
7.3 Notice of Denial of Claim 8
7.4 Reconsideration of Denied Claim 9
7.5 Company to Supply Information 10
ARTICLE VIII TERMINATION AMENDMENT 11
8.1 Amendment 11
8.2 Termination 11
ARTICLE IX MISCELLANEOUS 11
9.1 Unsecured General Creditor 11
9.2 Trust Fund 12
9.3 Nonassignability 12
9.4 Not A Contract of Employment 13
9.5 Protective Provisions 13
9.6 Governing Law 13
9.7 Validity 13
9.8 Notice 13
9.9 Successors 14
</TABLE>
(ii)
<PAGE> 4
KEYCORP
DIRECTORS' SURVIVOR BENEFIT PLAN
ARTICLE I
PURPOSE: EFFECTIVE DATE
-----------------------
The purpose of this Directors' Survivor Benefit Plan (hereinafter
referred to as the "Plan"), is to provide death benefits to the Beneficiaries of
eligible Directors of KeyCorp. It is intended that the Plan will aid in
retaining and attracting Directors of exceptional ability by providing them with
these benefits. This Plan shall be effective as of September 1, 1990.
ARTICLE II
DEFINITIONS
-----------
For purposes of this plan, the following terms shall have the meanings
indicated, unless the context clearly indicates otherwise:
2.1 BENEFICIARY. "Beneficiary" means the person, persons or entity
entitles under Article V to receive Plan benefits payable upon a Participant's
death.
2.2 BOARD. "Board" means the Board of Directors of KeyCorp.
2.3 COMMITTEE. "Committee" means the Compensation Committee of the
Board.
2.4 COMPANY. "Company means KeyCorp, a New York Corporation, or any
successor to the business thereof.
PAGE 1 - Directors' Survivor Benefit Plan
<PAGE> 5
2.5 PARTICIPANT. "Participant" means any individual who meets the
conditions for participation described in Article III.
2.6 PARTICIPATION AGREEMENT. "Participation Agreement" means the
agreement filed by a Participant on a form prescribed by the Committee which
acknowledges assent to the terms of the Plan.
2.7 YEAR OF SERVICE. "Year of Service" means twelve (12) months of
service on the Board.
ARTICLE III
PARTICIPATION
-------------
3.1 ELIGIBILITY AND PARTICIPATION.
(a) ELIGIBILITY. Eligibility to participate in the Plan shall
be limited to Directors of the Company.
(b) PARTICIPATION. A Director's participation in the Plan
shall be effective upon notification of the Director of eligibility to
participate, completion of a Participation Agreement by the Director
and acceptance of the Participation Agreement by the Committee.
3.2 SUICIDE. No benefits shall be paid under this Plan upon the death
of a Participant by reason of suicide within twenty-four (24) months after
signing a Participation Agreement.
PAGE 2 - DIRECTORS' SURVIVOR BENEFIT PLAN
<PAGE> 6
ARTICLE IV
BENEFITS
--------
4.1 DEATH DURING ACTIVE SERVICE ON THE BOARD. Upon the death of a
Participant who is a member of the Board of Directors, the Company shall pay the
Participant's Beneficiary one hundred thousand dollars ($100,000) plus the
amount needed to pay all federal and state income taxes on the benefit herein
provided, based upon the highest combined federal and state marginal tax rate
applicable to the Beneficiary in the year of the Participant's death.
4.2 DEATH AFTER TERMINATION OF BOARD SERVICE.
(a) If a Participant terminates service on the Board after
five (5) or more Years of Service, upon the death of the Participant,
the Company shall pay the Participant's Beneficiary one hundred
thousand dollars ($100,000) plus the amount needed to pay all federal
and state income taxes on the benefit provided, based upon the highest
combined federal and state marginal tax rate applicable to the
Beneficiary in the year of the Participant's death.
(b) If a Participant terminates service on the Board with less
than five (5) Years of Service, no benefits shall be payable under this
Plan to either the Participant or the Participant's Beneficiary.
PAGE 3 - DIRECTORS' SURVIVOR BENEFIT PLAN
<PAGE> 7
4.3 PAYMENT OF BENEFITS. Any benefits due to a Beneficiary under this
plan shall be payable within one hundred twenty (120) days after all documents
prescribed by the Committee have been forwarded to the Company.
ARTICLE V
BENEFICIARY DESIGNATION
-----------------------
5.1 BENEFICIARY DESIGNATION. Subject to Section 5.3, each Participant
shall have the right, at any time, to designate one or more persons or an entity
as Beneficiary (both primary as well as secondary) to whom benefits under this
Plan shall be paid in the event of the Participant's death. Each Beneficiary
designation shall be in written form prescribed by the Committee and shall be
effective only when filed with the Committee during the Participant's lifetime.
5.2 CHANGING BENEFICIARY. Subject to Section 5.3, any Beneficiary
designation may be changed by a Participant without the consent of the
previously named Beneficiary by the filing of a new designation with the
Committee. The filing of a new designation shall cancel all designations
previously filed.
5.3 COMMUNITY PROPERTY. If the Participant resides in a community
property state, the following rules shall apply:
(a) Designation by a married Participant of a Beneficiary
other than the Participant's spouse shall not be effective unless the spouse
executes a written consent that acknowledges the effect of the designation, or
it is
PAGE 4 - DIRECTORS' SURVIVOR BENEFIT PLAN
<PAGE> 8
established the consent cannot be obtained because the spouse cannot be located.
(b) A married Participant's Beneficiary designation may be
changed by a Participant with the consent of the Participant's spouse as
provided for in Section 5.3(a) by the filing of a new designation with the
Committee.
(c) If the Participant's marital status changes after the
Participant has designated a Beneficiary, the following shall apply:
(i) If the Participant is married at the time of
death but was unmarried when the designation was made, the
designation shall be void unless the spouse has consented to
it in the manner prescribed in Section 5.3(a).
(ii) If the Participant is unmarried at the time of
death but was married when the designation was made:
a) The designation shall be void if the
spouse was named as Beneficiary.
b) The designation shall remain valid if a
nonspouse Beneficiary was named.
(iii) If the Participant was married when the
designation was made and is married to a different spouse at
death, the designation shall be void unless
PAGE 5 - DIRECTORS' SURVIVOR BENEFIT PLAN
<PAGE> 9
the new spouse has consented to it in the manner prescribed above.
5.4 NO BENEFICIARY DESIGNATION. If any Participant fails to designate a
Beneficiary in the manner provided above, if the designation is void, or if the
Beneficiary designated by a deceased Participant dies before the Participant or
before complete distribution of the Participant's benefits, the Participant's
Beneficiary shall be the person in the first of the following classes in which
there is a survivor:
(a) The Participant's spouse;
(b) The Participant's children in equal shares, except that if
any of the children predeceases the Participant but leaves issue
surviving, then such issue shall take by right of representation the
share the parent would have taken if living;
(c) The Participant's estate.
ARTICLE VI
ADMINISTRATION
--------------
6.1 COMMITTEE DUTIES. This Plan shall be administered by the
Compensation Committee of the Board. The Committee shall have the authority to
make, amend, interpret and enforce all appropriate rules and regulations for the
administration of the Plan and decide or resolve any and all questions,
including interpretations of the Plan, as may arise in such administration.
PAGE 6 - DIRECTORS' SURVIVOR BENEFIT PLAN
<PAGE> 10
A majority vote of the Committee members shall control any decision. Members of
the Committee may be Participants under this Plan.
6.2 AGENTS. The Committee may, from time to time, employ other agents
and delegate to them such administrative duties as it sees fit, and may from
time to time consult with counsel who may be counsel to Company.
6.3 BINDING EFFECT OF DECISIONS. The decision or action of the
Committee in respect of any questions arising out of or in connection with the
administration, interpretation and application of the Plan in the rules and
regulations promulgated hereunder shall be final and conclusive and binding upon
all persons having any interest in Plan.
6.4 INDEMNITY OF THE COMMITTEE. Company shall indemnify and hold
harmless the Committee against any and all claims, loss, damage, expense or
liability arising from any action or failure to act with respect to this Plan,
except in the case of gross negligence or willful misconduct.
ARTICLE VII
CLAIMS PROCEDURE
----------------
7.1 CLAIM. The Committee shall establish rules and procedures to be
followed by Participants and Beneficiaries in (a) filing claims for benefits,
and (b) for furnishing and verifying proofs necessary to establish the right to
benefits in accordance with the Plan, consistent with the remainder of this
PAGE 7 - DIRECTORS' SURVIVOR BENEFIT PLAN
<PAGE> 11
Article. Such rules and procedures shall require that claims and proofs be made
in writing and directed to the Committee.
7.2 REVIEW OF CLAIM. The Committee shall review all claims for
benefits. Upon receipt by the Committee of such a claim, it shall determine all
facts which are necessary to establish the right of the claimant to benefits
under the provisions of the Plan and the amount thereof as herein provided
within ninety (90) days of receipt of such claim. If prior to the expiration of
the initial ninety (90) day period, the Committee determines additional time is
needed to come to a determination on the claim, the Committee shall provide
written notice to the Participant, Beneficiary or other claimant of the need for
the extension, not to exceed a total of one hundred eighty (180) days from the
date the application was received.
7.3 NOTICE OF DENIAL OF CLAIM. In the event that any Participant,
Beneficiary or other claimant claims to be entitled to a benefit under the Plan,
and the Committee determines that such claim should be denied in whole or in
part, the Committee shall, in writing, notify such claimant that the claim has
been denied, in whole or in part, setting forth the specific reasons for such
denial. Such notification shall be written in a manner reasonably expected to be
understood by such claimant and shall refer to the specific sections of the Plan
relied on, shall describe any additional material or information necessary for
the claimant to perfect the claim and an explanation of why such material or
information is necessary, and where appropriate,
PAGE 8 - DIRECTORS' SURVIVOR BENEFIT PLAN
<PAGE> 12
shall include an explanation of how the claimant can obtain reconsideration of
such denial.
7.4 RECONSIDERATION OF DENIED CLAIM.
(a) Within sixty (60) days after receipt of the notice of the
denial of a claim, such claimant or duly authorized representative may
request, by mailing or delivery of such written notice to the
Committee, a reconsideration by the Committee of the decision denying
the claim. If the claimant or duly authorized representative fails to
request such a reconsideration within such sixty (60) day period, it
shall be conclusively determined for all purposes of this Plan that the
denial of such claim by the Committee is correct. If such claimant or
duly authorized representative requests a reconsideration within such
sixty (60) day period, the claimant or duly authorized representative
shall have thirty (30) days after filing a request for reconsideration
to submit additional written material in support of this claim, review
pertinent documents, and submit issues and comments in writing.
(b) After such reconsideration request, the Committee shall
determine within sixty (60) days of receipt of the claimant's request
for reconsideration whether such denial of the claim was correct and
shall notify such claimant in writing of its determination. The written
notice of decision shall be in writing and shall include specific
reasons for the decision, written in a manner calculated to
PAGE 9 - DIRECTORS' SURVIVOR BENEFIT PLAN
<PAGE> 13
be understood by the claimant, as well as specific references to the
pertinent Plan provisions on which the decision is based. In the event
of special circumstances determined by the Committee, the time for the
Committee to make a decision may be extended by an additional sixty
(60) days upon written notice to the claimant prior to the commencement
of the extension. If such determination is favorable to the claimant,
it shall be binding and conclusive. If such determination is adverse to
such claimant, it shall be binding and conclusive unless the claimant
or his duly authorized representative notifies the Committee within
ninety (90) days after mailing or delivery to the claimant by the
Committee of its determination that claimant intends to institute legal
proceedings challenging the determination of the Committee and actually
institutes such legal proceeding within one hundred eighty (180) days
after such mailing or delivery.
7.5 COMPANY TO SUPPLY INFORMATION. To enable the Committee to perform
its functions, the Company shall supply full and timely information to the
Committee of all matters relating to the retirement, death or other cause for
termination of employment of all Participants, and such other pertinent facts as
the Committee may require.
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<PAGE> 14
ARTICLE VIII
TERMINATION AMENDMENT
---------------------
8.1 AMENDMENT. The Board may, in its sole discretion, amend this Plan
at any time or from time to time. Any amendment may provide different benefits
or amounts of benefits from those herein set forth. However, no such amendment
shall reduce the amount of benefit payable with respect to a Participant who has
terminated service on the Board before the effective date of the amendment.
8.2 TERMINATION. The Board may, in its sole discretion, terminate this
Plan at any time. The Participants shall have no right to continuation of the
death benefit protection provided by this Plan. However, no such termination
shall prevent the payment of benefits with respect to Participants who have
terminated service on the Board before the effective date of termination.
ARTICLE IX
MISCELLANEOUS
-------------
9.1 UNSECURED GENERAL CREDITOR. Participants and their Beneficiaries,
heirs, successors and assigns shall have no legal or equitable rights, interest
or claims in any property or assets of Company, nor shall they be Beneficiaries
of, or have any rights, claims or interests in any life insurance policies or
the proceeds therefrom owned or which may be acquired by the Company. Any and
all other Company assets and policies shall be, and
PAGE 11 - DIRECTORS' SURVIVOR BENEFIT PLAN
<PAGE> 15
remain, the general, unpledged, and unrestricted assets of the Company.
Company's obligation under the Plan shall be that of an unfunded and unsecured
promise of Company to pay money.
9.2 TRUST FUND. At its discretion, Company may establish one or more
trusts, with such trustees as the Board may approve, for the purpose of
providing for the payment of benefits owed under the Plan. Although such a trust
shall be irrevocable, its assets shall be held for payment of all Company's
general creditors in the event of insolvency or bankruptcy. To the extent any
benefits provided under the Plan are paid from any such trust, Company shall
have no further obligation to pay them. If not paid from the trust, such
benefits shall remain the obligation of Company.
9.3 NONASSIGNABILITY. A Participant, Beneficiary nor any other person
shall have no right to commute, sell, assign, transfer, pledge, anticipate,
mortgage or otherwise encumber, transfer, hypothecate or convey in advance of
actual receipt the amounts, if any, payable hereunder, or any part thereof. Such
amounts and all rights under this Plan are expressly declared to be unassignable
and nontransferable. No part of the amounts payable shall, prior to actual
payment, be subject to seizure or sequestration for the payment of any debts,
judgments, alimony or separate maintenance owed by Participant or any other
person, nor be transferable by operation of law in the event of a Participant's
or any other person's bankruptcy or insolvency.
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<PAGE> 16
9.4 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of this Plan
shall not be deemed to constitute a contract of employment between Company and
the Participant, and the Participant or Beneficiary shall have no rights against
Company except as may otherwise be specifically provided herein. Moreover,
nothing in this Plan shall be deemed to give a Participant the right to be
retained in the service of Company or to interfere with the right of Company to
discipline or discharge the Participant at any time.
9.5 PROTECTIVE PROVISIONS. A Participant or Beneficiary will cooperate
with Company by furnishing any and all information requested by Company, in
order to facilitate the payment of benefits hereunder, and by taking such
physical examinations as Company may deem necessary and taking such other action
as may be requested by Company.
9.6 GOVERNING LAW. The provision of this Plan shall be construed and
interpreted according to the laws of the State of New York.
9.7 VALIDITY. In case any provision of this Plan shall be held illegal
or invalid for any reasons, said illegality or invalidity shall not affect the
remaining parts hereof, but this Plan shall be construed and enforced as if such
illegal and invalid provision had never been inserted herein.
9.8 NOTICE. Any notice or firing required or permitted to be given to
the Committee under the Plan shall be sufficient if in writing and hand
delivered, or sent by registered or
PAGE 13 - DIRECTORS' SURVIVOR BENEFIT PLAN
<PAGE> 17
certified mail to the Committee. Such notice shall be deemed given as of the
date of delivery or, if delivery is made by mail, as of the date shown on the
postmark on the receipt for registration or certification.
9.9 SUCCESSORS. Provisions of this Plan shall bind and inure to the
benefit of KeyCorp and its successors and assigns. The term successors as used
herein shall include any corporate or other business entity which shall, whether
by merger, consolidation, purchase or otherwise acquire all or substantially all
of the business and assets of KeyCorp, and successors of any such corporation or
other business entity. IN WITNESS WHEREOF, and pursuant to resolution of the
Board of KeyCorp, such corporation has caused this instrument to be executed by
its duly authorized officers effective as of September 1, 1990.
KEYCORP
By: ______________________
Chairman
By: ______________________
Dated: ______________________
PAGE 14 - DIRECTORS' SURVIVOR BENEFIT PLAN
<PAGE> 1
Exhibit 10.26
KEYCORP
SUPPLEMENTAL RETIREMENT BENEFIT PLAN
FOR KEY EXECUTIVES
EFFECTIVE JULY 1, 1990
RESTATED AUGUST 16, 1990
<PAGE> 2
TABLE OF CONTENTS
PAGE
----
PREAMBLE................................................................... 1
ARTICLE I DEFINITIONS.................................................. 1
1.1 Board............................................... 1
1.2 Credited Service.................................... 1
1.3 Effective Date...................................... 2
1.4 Employee............................................ 2
1.5 Employer............................................ 2
1.6 Final Average Salary................................ 2
1.7 Incentive Compensation.............................. 2
1.8 Participant......................................... 3
1.9 Pension Plan........................................ 3
1.10 Plan................................................ 3
1.11 Plan Year........................................... 3
1.12 Salary.............................................. 3
1.13 Service............................................. 3
ARTICLE II PARTICIPATION................................................ 4
2.1 General Rule........................................ 4
2.2 Reemployment of Participant......................... 4
2.3 Prospective Changes in
Participation Requirements.......................... 4
2.4 Vesting............................................. 4
ARTICLE III RETIREMENT CONDITIONS........................................ 5
3.1 Normal Retirement................................... 5
3.2 Delayed Retirement Date............................. 5
3.3 Early Retirement Date............................... 5
<PAGE> 3
PAGE
----
ARTICLE IV RETIREMENT ALLOWANCES........................................ 6
4.1 Normal Retirement Allowance......................... 6
4.2 Delayed Retirement Allowance........................ 7
4.3 Early Retirement Allowance.......................... 7
4.4 Vested Termination Allowance........................ 8
4.5 Optional Methods of Retirement
Payments............................................ 9
4.6 Special Rules With Regard to
Calculation of Retirement
Allowances........................................... 10
ARTICLE V DEATH BENEFITS................................................ 12
5.1 Death Prior to Retirement............................ 12
5.2 Death After Commencement
of Retirement Allowance.............................. 13
ARTICLE VI DISABILITY BENEFITS........................................... 14
6.1 Total and Permanent Disability
Defined.............................................. 14
6.2 Termination Prior to Ten Years
of Credited Service.................................. 14
6.3 Termination After Ten Years
of Credited Service.................................. 14
6.4 Recovery From Disability Prior
to Normal Retirement Date............................ 15
ARTICLE VII ADMINISTRATION................................................ 16
7.1 Contributions by Participants........................ 16
7.2 Contributions by Employer............................ 16
7.3 Designation and Duties of
Administrator........................................ 17
7.4 Amendment............................................ 17
7.5 Plan Termination..................................... 17
<PAGE> 4
PAGE
----
ARTICLE VIII CLAIMS PROCEDURE.............................................. 18
8.1 Claim................................................ 18
8.2 Review of Claim...................................... 18
8.3 Notice of Denial of Claim............................ 18
8.4 Reconsideration of Denied Claim...................... 19
8.5 Employer to Supply Information....................... 20
ARTICLE IX MISCELLANEOUS................................................. 21
9.1 Headings and Subheadings............................. 21
9.2 Gender and Number.................................... 21
9.3 Construction of Plan................................. 21
9.4 Employee's Rights.................................... 21
9.5 Vested Interest...................................... 21
9.6 Receipt or Release................................... 22
9.7 Spendthrift Clause................................... 22
9.8 Facility of Payments................................. 22
9.9 Delegation of Authority by
the Employer......................................... 22
APPENDIX A
APPENDIX B
APPENDIX C
<PAGE> 5
KEYCORP
SUPPLEMENTAL RETIREMENT BENEFIT PLAN
FOR KEY EXECUTIVES
RESTATED AUGUST 16, 1990
PREAMBLE
The purpose of this Supplemental Retirement Benefit Plan for Key
Executives is to provide certain employees with supplemental retirement
benefits. It is intended that this Plan will aid in attracting and retaining
employees of exceptional ability by providing them with this benefit. This Plan
is effective on July 1, 1990.
ARTICLE I
DEFINITIONS
-----------
For the purposes herein, the following terms shall have the meaning
indicated:
1.1 BOARD. "Board" shall mean the Board of Directors of KeyCorp as from
time to time constituted.
1.2 CREDITED SERVICE. "Credited Service" shall mean the same period of
time as constitutes Credited Service for that Participant under the Pension Plan
except that:
(a) It shall not be subject to a thirty-five (35) year
maximum, and
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<PAGE> 6
(b) It shall continue to accrue during periods of total and
permanent disability to the extent provided by Article VI hereof.
1.3 EFFECTIVE DATE. "Effective Date" shall mean July 1, 1990.
1.4 EMPLOYEE. "Employee" shall mean any person regularly employed by
the Employer, including officers, but not including directors unless a director
is also an officer or employee of the Employer, nor attorneys or other persons
doing independent professional work who are retained by the Employer.
1.5 EMPLOYER. "Employer" shall mean KeyCorp and all of its wholly-owned
subsidiaries, each with respect to its own Employees.
1.6 FINAL AVERAGE SALARY. "Final Average Salary" shall mean the average
of the annual Salary of a Participant for the highest three (3) calendar years
out of the last five (5) calendar years preceding the Participant's termination
of employment; if the Participant has less than three (3) years of employment,
the average shall be for all of the Participant's years of employment. If the
Participant is not compensated for all or a part of a year in such period
because of an absence, the number of complete months in which the Participant
received no compensation during such year shall be disregarded in determining
Final Average Salary.
1.7 INCENTIVE COMPENSATION. "Incentive Compensation" shall mean amounts
payable to a participant under the KeyCorp Executive Incentive Compensation
Plan.
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<PAGE> 7
1.8 PARTICIPANT. "Participant" shall mean an employee entitled to
participate in this Plan in accordance with Article II hereof.
1.9 PENSION PLAN. "Pension Plan" shall mean the KeyCorp Pension Plan as
amended from time to time.
1.10 PLAN. "Plan" shall mean the KeyCorp Supplemental Retirement
Benefit Plan for Key Executives as contained herein or as amended from time to
time.
1.11 PLAN YEAR. "Plan Year" shall mean the calendar year.
1.12 SALARY. "Salary" shall mean the base salary and Incentive
Compensation of an Employee exclusive of bonuses, overtime pay and other extra
compensation. For this purpose, the basic salary of an Employee shall include:
(a) Amounts that are the subject of a deferred compensation
agreement between the Employee and the Employer;
(b) Amounts that are the subject of a Salary Reduction
Agreement within the meaning of the KeyCorp Profit Sharing Plus Plan;
and
(c) Amounts that are the subject of a salary reduction
arrangement between the Employee and the Employer in accordance with
the Internal Revenue Code Section 125.
1.13 SERVICE. "Service" shall mean the same period of time as
constitutes Service for that Participant under the Pension Plan.
Page 3 - SUPPLEMENTAL RETIREMENT BENEFIT PLAN FOR KEY EXECUTIVES
<PAGE> 8
ARTICLE II
PARTICIPATION
-------------
2.1 GENERAL RULES. Participation shall be limited to Participants of
the KeyCorp Supplemental Retirement Benefit Plan for Key Executives who are
designated as Participants of this Plan by the Board. A Participant in this Plan
shall not also be a Participant in the KeyCorp Supplemental Retirement Benefit
Plan.
2.2 REEMPLOYMENT OF PARTICIPANT. A Participant who has terminated his
employment and subsequently is reemployed shall become a Participant immediately
upon his reemployment provided that the Board again designates him for
participation in the Plan.
2.3 PROSPECTIVE CHANGES IN PARTICIPATION REQUIREMENTS. The Employer, in
its sole discretion, reserves the right to alter the requirements for
participation in Section 2.1 at any time and from time to time; provided,
however, that any such change shall not cause any Employee who became a Plan
Participant hereunder prior to the effective date of such change to become
ineligible hereunder by virtue of such change.
2.4 VESTING. A Participant shall be one-hundred percent (100%) vested
in benefits under this Plan upon completion of five (5) years of Credited
Service.
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<PAGE> 9
ARTICLE III
RETIREMENT CONDITIONS
---------------------
3.1 NORMAL RETIREMENT. Except as may be provided in an applicable
Appendix to the Plan, the Normal Retirement Date of a Participant shall be the
earliest of:
(a) The first day of the month coinciding with or next
following the date he attains the age of sixty-five (65); or
(b) The first day of the month coinciding with or next
following the date that the Participant both attains the age of
sixty-two (62) and completes fifteen (15) years of Credited Service.
3.2 DELAYED RETIREMENT DATE. A Participant may continue in the
employment of the Employer beyond his Normal Retirement Date, but, to the extent
permitted by applicable law, he may continue in the employment of the Employer
beyond his seventieth (70th) birthday only if agreed to by the Employer. To the
extent permitted by applicable law, a Participant continuing in employment
beyond his seventieth (70th) birthday shall retire from the employment of the
Employer on the first day of the month coinciding with or next following the end
of the last approved period of employment.
3.3 EARLY RETIREMENT DATE. A Participant may retire from employment of
the Employer prior to his Normal Retirement Date, on the first day of any month
coinciding with or following the date on which he has either attained the age of
Page 5 - SUPPLEMENTAL RETIREMENT BENEFIT PLAN FOR KEY EXECUTIVES
<PAGE> 10
sixty (60), or both attained the age of fifty (50) and completed at least
fifteen (15) years of Credited Service.
ARTICLE IV
RETIREMENT ALLOWANCES
---------------------
4.1 NORMAL RETIREMENT ALLOWANCE. A Participant shall, upon retirement
at his Normal Retirement Date, receive a monthly retirement allowance which
shall commence on such retirement date and shall be payable in the form and over
such duration as elected by the Participant. The amount of each such retirement
allowance shall be equal to (a) plus (b) minus (c) as follows:
(a) One-twelfth (1/12th) of seventy-five percent (75%) of his
Final Average Salary reduced by two (2) percentage points for the
number of years by which the Participant's total years of Credited
Service at his Normal Retirement Date is less than twenty-five (25)
years (rounded down to the nearest whole year), multiplied by a
fraction, the numerator of which is the Participant's years of Credited
Service earned prior to January 1, 1988, and the denominator of which
is the Participant's total years of Credited Service at his Normal
Retirement Date.
(b) One-twelfth (1/12th) of sixty-five percent (65%) of his
Final Average Salary reduced by 2.6 percentage points for the number of
years by which the Participant's total years of Credited Service at his
Normal Retirement Date is less than twenty-five (25) years (rounded
down to nearest whole year), multiplied by a fraction, the numerator of
which is the
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<PAGE> 11
Participant's years of Credited Service earned after December 31, 1987,and
the denominator of which is the Participant's total Years of Credited Service
at his Normal Retirement Date.
(c) The sum of:
(i) His monthly retirement benefit under the Pension
Plan determined at his Normal Retirement Date; and
(ii) His monthly Primary Social Security Benefit as
defined in the Pension Plan.
4.2 DELAYED RETIREMENT ALLOWANCE. Upon retirement after his Normal
Retirement Date, a Participant shall receive a monthly allowance which shall
commence on the first day of the month coincident with or next following the
date of such retirement and shall be payable in the form and over such duration
as elected by the Participant pursuant to Section 4.5. The amount of each such
monthly retirement allowance shall be computed in the same manner as the Normal
Retirement Allowance except that Final Average Salary and Credited Service will
be determined as of the Delayed Retirement date.
4.3 EARLY RETIREMENT ALLOWANCE. Upon retirement at his Early Retirement
Date, a Participant shall receive a monthly retirement allowance, which shall
commence on the first day of any month coinciding with or preceding his Normal
Retirement Date and shall be payable in the form and over such duration as
elected by the Participant pursuant to Section 4.5. The amount of each such
Page 7 - SUPPLEMENTAL RETIREMENT BENEFIT PLAN FOR KEY EXECUTIVES
<PAGE> 12
monthly retirement allowance shall be equal to the product of items (a), (b) and
(c) below:
(a) A monthly retirement allowance determined in the same
manner as for retirement at his Normal Retirement Date except that:
(i) Credited Service shall be determined as if the
Participant had in fact continued in active employment until
his Normal Retirement Date; and
(ii) Final Average Salary shall be determined as of
the date of his actual retirement.
(b) The ratio that the Participant's Credited Service to the
date of his actual retirement bears to the Credited Service that he
would have had if he had continued in employment until his Normal
Retirement Date. For this purpose, the Normal Retirement Date of a
Participant shall be the earliest date on which the Participant could
have retired under Section 3.1.
(c) Actuarial reduction factors which take into account the
commencement of benefits prior to a Participant's Normal Retirement
Date. Such actuarial reduction factors shall be the same factors as are
then applicable under the Pension Plan with respect to the commencement
of benefits before a Participant's Normal Retirement Date under the
Pension Plan.
4.4 VESTED TERMINATION ALLOWANCE. A vested Participant, who terminates
before his Early Retirement Date, shall receive a monthly retirement allowance,
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<PAGE> 13
which shall commence on the first day of the month coinciding with or next
following his sixty-fifth (65th) birthday and shall be payable in the form and
over such duration as elected by the Participant pursuant to Section 4.5. The
amount of each such monthly retirement allowance shall be equal to the product
of items (a) and (b) below:
(a) A monthly retirement allowance determined in the same
manner as for retirement at his Normal Retirement Date except that:
(i) Credited Service shall be determined as if the
Participant had in fact continued in active employment until
his sixty-fifth (65th) birthday; and
(ii) Final Average Salary shall be determined as of
the date of his actual retirement.
(b) The ratio that the Participant's Credited Service to the
date of his actual retirement bears to the Credited Service that he
would have had if he had continued in employment until his sixty-fifth
(65th) birthday.
4.5 OPTIONAL METHODS OF RETIREMENT PAYMENTS. The benefits hereunder
shall be paid in accordance with the optional method of retirement payment that
has been elected by the Participant at the time of initial Plan participation.
The Participant may elect one of the following payment forms:
(a) Joint and fifty percent (50%) survivor benefit.
(b) Joint and one hundred percent (100%) survivor
benefit.
(c) Ten (10) year certain and life.
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<PAGE> 14
(d) Fifteen (15) year certain and life.
(e) Single life annuity.
The same actuarial reduction factors and method of calculating actuarial
equivalence under the Pension Plan shall be applicable under this Plan. Any such
optional method of retirement payment shall be the actuarial equivalent of the
actual dollar amount of lifetime retirement allowance otherwise payable from
this Plan after adjustment for the benefit payable from the Pension Plan and the
Primary Social Security Benefit.
4.6 SPECIAL RULES WITH REGARD TO CALCULATION OF RETIREMENT ALLOWANCES.
The following special rules shall be applicable with regard to the calculation
of retirement allowances under the Plan:
(a) A Participant's monthly retirement benefit under the
Pension Plan shall mean the benefit to which the Participant is or,
upon proper application, would be, entitled under the Pension Plan. For
this purpose, the benefit to which the Participant would be entitled
under the Pension Plan is the benefit which he could receive if he
elected to commence payments at the earliest time available under the
Pension Plan, notwithstanding when he actually elects to have benefits
commence.
(b) The Participant's Primary Social Security Benefit shall
mean the Primary Social Security Benefit payable, if proper application
were made, when the Participant retires under this Plan.
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<PAGE> 15
If a Participant is not eligible for such Primary Social
Security Benefit upon his retirement under this Plan, and upon proper
application would not be so entitled, then no Primary Social Security
Benefit shall be taken into account under Section 4.1 until the
earliest date at which he is eligible to receive such benefits if
proper application were made. In such an event, the Primary Social
Security Benefit to which such Participant is or, upon proper
application, would be entitled at such earliest date shall be taken
into account under Section 4.1 in calculating his benefits under this
Plan from and after such date. Once such Primary Social Security
Benefits are taken into account under Section 4.1, any subsequent
change in the Participant's Primary Social Security Benefits (whether
such change is the result of applying a cost-of-living increase, or
recomputing the benefit based upon more recent compensation or
otherwise) shall be disregarded.
(c) If a Participant is not a participant in the Pension Plan,
his benefit will be determined without reference to the amount of his
benefit under the Pension Plan specified in Section 4.1; provided,
however, that if such Participant is a participant in a defined benefit
pension plan qualified under Internal Revenue Code Section 401(a),
maintained by the Employer or any subsidiary thereof, other than the
Pension Plan, then the benefit payable to such Participant under such
other plan, determined in accordance with subsection (a) above, shall
be applied in lieu of the amount of his benefit under the Pension Plan
specified in Section 4.1.
Page 11 - SUPPLEMENTAL RETIREMENT BENEFIT PLAN FOR KEY EXECUTIVES
<PAGE> 16
(d) If a Participant is entitled to receive a benefit from the
Pension Plan and also from another defined benefit pension plan
qualified under Internal Revenue Code Section 401(a), maintained by the
Employer or any subsidiary thereof, then the amount payable from such
other plan, determined in accordance with subsection (a) above, shall
be added to the amount of his benefit under the Pension Plan taken into
account in accordance with Section 4.1.
(e) Specific exceptions to the provisions of the Plan related
to the calculation of Retirement Allowances shall be governed by the
Appendices which are incorporated as part of this Plan.
ARTICLE V
DEATH BENEFITS
--------------
5.1 DEATH PRIOR TO RETIREMENT.
(a) If a Participant dies in active employment and prior to
becoming eligible for either an Early Retirement Allowance or a Normal
Retirement Allowance hereunder, no death benefit shall be payable from
this Plan.
(b) If a Participant dies in active employment but after
becoming eligible for either an Early Retirement Allowance or a Normal
Retirement Allowance, and is survived by his spouse, a monthly
retirement allowance shall be paid to his surviving spouse commencing
on the first day of the month coincident with or next following his
date of death and continuing on the first day of each month thereafter
during his spouse's lifetime. Each
Page 12 - SUPPLEMENTAL RETIREMENT BENEFIT PLAN FOR KEY EXECUTIVES
<PAGE> 17
such monthly retirement allowance shall equal seventy-five percent
(75%) of the monthly retirement allowance to which the Participant
would have been entitled had he retired on this date of death.
For the purpose of calculating this death benefit only, the
following special rules apply with respect to the calculation of the
Primary Social Security Benefit which the Participant would have been
entitled to receive:
(i) If both the Participant had attained his
sixty-second (62nd) birthday and his spouse had attained her
sixtieth (60th) birthday on the Participant's date of death,
then the Primary Social Security Benefit to which the
Participant would have been entitled had he retired on his
date of death instead of dying and then commenced receiving
Social Security benefits will be applied.
(ii) In all other cases, the Primary Social Security
Benefit shall be deemed to be zero.
5.2 DEATH AFTER COMMENCEMENT OF RETIREMENT ALLOWANCE. Except as
provided in Section 4.5, all rights to any benefits under the Plan will cease
upon the death of any Participant for whom retirement allowances have commenced.
Page 13 - SUPPLEMENTAL RETIREMENT BENEFIT PLAN FOR KEY EXECUTIVES
<PAGE> 18
ARTICLE VI
DISABILITY BENEFITS
-------------------
6.1 TOTAL AND PERMANENT DISABILITY DEFINED. Total and permanent
disability shall mean such disability as, after the expiration of the waiting
period provided by law, will entitle the Participant to receive disability
benefit payments in accordance with Title II of the United States Social
Security Act.
6.2 TERMINATION PRIOR TO TEN YEARS OF CREDITED SERVICE. A Participant
who terminates his employment with the Employer because of total and permanent
disability and who has completed less than ten (10) years of Credited Service at
such time shall not thereby be entitled to any benefits from the Plan.
6.3 TERMINATION AFTER TEN YEARS OF CREDITED SERVICE. A Participant who
terminates his employment with the Employer because of total and permanent
disability and who has completed ten (10) or more years of Credited Service
shall be subject to whichever of the following subsections shall be applicable:
(a) If he shall (after the applicable statutory waiting
period) be continuously disabled and entitled to Social Security
disability benefits until his attainment of age sixty-five (65), then
he shall receive a monthly retirement allowance from this Plan
commencing upon the first day of the month coincident with or next
following the attainment of his sixty-fifth (65th) birthday and payable
on the first day of each month thereafter for his remaining lifetime.
Such monthly retirement allowance shall be determined
Page 14 - SUPPLEMENTAL RETIREMENT BENEFIT PLAN FOR KEY EXECUTIVES
<PAGE> 19
in the same manner as for retirement at his Normal Retirement Date, except that:
(i) Credited Service shall be determined as if the
Participant had in fact continued in active employment until
his sixty-fifth (65th) birthday, and
(ii) Final Average Salary shall be determined as of
the date of his actual termination of employment due to
disability.
(b) If he shall (after the applicable statutory waiting
period) not be continually disabled and entitled to Social Security
disability benefits until his attainment of age sixty-five (65), he
shall not be entitled to a disability benefit from this Plan, but shall
be subject to the provisions of Section 6.4 hereof.
6.4 RECOVERY FROM DISABILITY PRIOR TO NORMAL RETIREMENT DATE. If a
Participant who became totally and permanently disabled thereafter recovers from
such disability prior to attaining age sixty-five (65) (as evidenced solely by
the fact that he is no longer eligible for Social Security disability benefits),
then his benefits from this Plan shall be determined as follows:
(a) If he returns to employment with the Employer upon such
recovery, then he shall not be entitled to any disability benefits in
accordance with this Article VI. For the purpose of determining his
entitlement to, and amount of, benefits under any other provision of
this
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<PAGE> 20
Plan, however, his period of Credited Service and Service shall
include the period during which he was totally and permanently
disabled.
(b) If he fails to return to employment with the Employer upon
such recovery, then he shall not be entitled to any disability benefits
in accordance with this Article VI. This shall not, however, deprive
him of the benefits if any, to which he is otherwise entitled under
this Plan based upon his age, Credited Service, Service and Final
Average Salary, as of his termination of employment due to disability.
ARTICLE VII
ADMINISTRATION
--------------
7.1 CONTRIBUTIONS BY PARTICIPANTS. No contributions by Participants
shall be required or permitted under this Plan.
7.2 CONTRIBUTIONS BY EMPLOYER.
(a) This Plan is intended to be an unfunded plan maintained
primarily to provide deferred compensation
(b) The Employer shall be responsible for the payment of all
benefits provided under the Plan. At its discretion, the Employer may
establish one or more trusts, with such trusts as the Employer may
approve for the purpose of providing for the payment of such benefits.
Such trust or trusts may be irrevocable, but the assets thereof shall
be subject to the claims of the Employer's creditors. To the extent any
benefits provided under the Plan are actually paid from any such trust,
the Employer shall
Page 16 - SUPPLEMENTAL RETIREMENT BENEFIT PLAN FOR KEY EXECUTIVES
<PAGE> 21
have no further obligation with respect thereto, but to the extent not
so paid, such benefits shall remain the obligations of, and shall be
paid by, the Employer. Employer's obligation under the Plan shall be
that of an unfunded and unsecured promise of Employer to pay money in
the future.
7.3 DESIGNATION AND DUTIES OF ADMINISTRATOR. The Board shall designate
the administrator of this Plan who shall administer this Plan and who shall
serve until the Board designates another administrator. All decisions of such
administrator with respect to the administration of this Plan shall be final and
binding upon the Employer, the Participants and all other parties hereto.
7.4 AMENDMENT. The Board shall have the right at any time, and from
time to time, to amend, in whole or in part, any or all of the provisions of
this Plan. However, no such amendment shall reduce or eliminate any benefit to
which the Participant would then be entitled to receive (based upon his age,
Credited Service, Service and Final Average Salary as of the date of such
amendment) as of the date of such amendment.
7.5 PLAN TERMINATION. The Board shall have the right at any time to
terminate this Plan. However, no such termination shall reduce or eliminate any
benefit to which the Participant would then be entitled to receive (based upon
his age, Credited Service, Service and Final Average Salary as of the date of
such termination) as of the date of such termination.
Page 17 - SUPPLEMENTAL RETIREMENT BENEFIT PLAN FOR KEY EXECUTIVES
<PAGE> 22
ARTICLE VIII
CLAIMS PROCEDURES
-----------------
8.1 CLAIM. The Committee shall establish rules and procedures to be
followed by Participants and Beneficiaries in (a) filing claims for benefits,
and (b) for furnishing and verifying proofs necessary to establish the right to
benefits in accordance with the Plan, consistent with the remainder of this
Article. Such rules and procedures shall require that claims and proofs be made
in writing and directed to the Committee.
8.2 REVIEW OF CLAIM. The Committee shall review all claims for
benefits. Upon receipt by the Committee of such a claim, it shall determine all
facts which are necessary to establish the right of the claimant to benefits
under the provisions of the Plan and the amount thereof as herein provided
within ninety (90) days of receipt of such claim. If prior to the expiration of
the initial ninety (90) day period, the Committee determines additional time is
needed to come to a determination on the claim, the Committee shall provide
written notices to the Participant, Beneficiary or other claimant of the need
for the extension, not to exceed a total of one hundred eighty (180) days from
the date the application was received.
8.3 NOTICE OF DENIAL OF CLAIM. In the event that any Participant,
Beneficiary or other claimant claims to be entitled to a benefit under the Plan,
and the Committee determines that such claim should be denied in whole or in
part, the Committee shall, in writing, notify such claimant that the claim has
been denied, in whole or in part, setting forth the specific reasons for such
denial. Such
Page 18 - SUPPLEMENTAL RETIREMENT BENEFIT PLAN FOR KEY EXECUTIVES
<PAGE> 23
notification shall be written in a manner reasonably expected to be
understood by such claimant and shall refer to the specific sections of the Plan
relied on, shall describe any additional material or information necessary for
the claimant to perfect the claim and an explanation of why such material or
information is necessary, and where appropriate, shall include an explanation of
how the claimant can obtain reconsideration of such denial.
8.4 RECONSIDERATION OF DENIED CLAIM.
(a) Within sixty (60) days after receipt of the notice of the
denial of a claim, such claimant or duly authorized representative may
request, by mailing or delivery of such written notice to the
Committee, a reconsideration by the Committee of the decision denying
the claim. If the claimant or duly authorized representative fails to
request such a reconsideration within such sixty (60) days period, it
shall be conclusively determined for all purposes of this Plan that the
denial of such claim by the Committee is correct. If such claimant or
duly authorized representative requests a reconsideration within such
sixty (60) day period, the claimant or duly authorized representative
shall have thirty (30) days after filing a request for reconsideration
to submit additional written material in support of the claim, review
pertinent documents, and submit issues and comments in writing.
(b) After such reconsideration request, the Committee shall
determine within sixty (60) days of receipt of the claimant's request
for
Page 19 - SUPPLEMENTAL RETIREMENT BENEFIT PLAN FOR KEY EXECUTIVES
<PAGE> 24
reconsideration whether such denial of the claim was correct and
shall notify such claimant in writing of its determination. The written
notice of decision shall be in writing and shall include specific
reasons for the decision, written in a manner calculated to be
understood by the claimant, as well as specific references to the
pertinent Plan provisions on which the decision is based. In the event
of special circumstances determined by the Committee, the time for the
Committee to make a decision may be extended by additional sixty (60)
days upon written notice to the claimant prior to the commencement of
the extension. If such determination is favorable to the claimant, it
shall be binding and conclusive. If such determination is adverse to
such claimant, it shall be binding and conclusive unless the claimant
or duly authorized representative notifies the Committee within ninety
(90) days after the mailing or delivery to the claimant by the
Committee of its determination that claimant intends to institute legal
proceedings challenging the determination of the Committee and actually
institutes such legal proceedings within one hundred eighty (180) days
after such mailing or delivery.
8.5 EMPLOYER TO SUPPLY INFORMATION. To enable the Committee to perform
its functions, the Employer shall supply full and timely information to the
Committee of all matters relating to the retirement, death or other cause for
termination of service of all Participants, and such other pertinent facts as
the Committee may require.
Page 20 - SUPPLEMENTAL RETIREMENT BENEFIT PLAN FOR KEY EXECUTIVES
<PAGE> 25
ARTICLE IX
MISCELLANEOUS
-------------
9.1 HEADINGS AND SUBHEADINGS. The headings and subheadings in the Plan
have been inserted for convenience of reference only and are to be ignored in
any construction of the provisions hereof.
9.2 GENDER AND NUMBER. Whenever any words are used herein in the
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and whenever any words
are used herein in the singular form they shall be construed as though they were
also used in plural form in all cases where they would so apply.
9.3 CONSTRUCTION OF PLAN. This Plan shall be construed according to the
laws of the State of New York and all provisions hereof shall be administered
according to the laws of such State.
9.4 EMPLOYEE'S RIGHTS. Neither the establishment of this Plan, nor any
modification thereof, nor the payment of any benefits, shall be construed as
giving to an Employee or other person, any legal or equitable right against the
Employer, or any officer or Employee thereof, except as herein provided. Under
no circumstances shall the terms of employment of an Employee be modified or in
any way affected hereby.
9.5 VESTED INTEREST. No Plan Participant or other Employee shall have a
vested interest with respect to this Plan except as specifically provided
herein.
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<PAGE> 26
9.6 RECEIPT OR RELEASE. Any payment to an Employee, contingent
annuitant, beneficiary, or to their legal representatives, in accordance with
the provisions of the Plan, shall to the extent thereof be in full satisfaction
of all claims hereunder against the Employer, who may require such Employee,
contingent annuitant, beneficiary or legal representative, as a condition
precedent to such payment, to execute a receipt and release therefor in such
form as shall be determined by the Employer.
9.7 SPENDTHRIFT CLAUSE. Except insofar as may be contrary to any
applicable law, no payment of any benefit under the Plan shall be assignable and
no such payment or contribution shall be subject to the claims of any creditor.
9.8 FACILITY OF PAYMENTS. If any Employee, contingent annuitant or
beneficiary is a minor or is, in the judgment of the administrator, otherwise
legally incapable of personally receiving and giving a valid receipt for any
payment due him under the Plan, the administrator may, unless and until claim
shall have been made by a duly appointed guardian or legal representative of
such person, make such payment or any part thereof to such person's spouse,
child, parent, brother or sister, or other person deemed by the administrator to
have incurred expense for or assumed responsibility for the expense of such
person. Any payment so made shall be in complete discharge of any liability
under the Plan for such payment.
9.9 DELEGATION OF AUTHORITY BY THE EMPLOYER. Whenever the Employer,
under the terms of this Agreement, is permitted or required to do or perform any
Page 22 - SUPPLEMENTAL RETIREMENT BENEFIT PLAN FOR KEY EXECUTIVES
<PAGE> 27
act or matter or thing, it shall be done and performed by any officer thereunto
duly authorized by its Board of Directors.
IN WITNESS WHEREOF, KEYCORP has caused its corporate seal to be affixed
hereto and these presents to be executed by its duly authorized corporate
officers, this ____ day of _____________, 199_, to be effective as of July 1,
1990.
(Seal) KEYCORP
ATTEST
By:
- -------------------------------- ------------------------------
Secretary
IN WITNESS WHEREOF, KEYCORP has caused its corporate seal to be affixed
hereto and these presents to be executed by its duly authorized corporate
officers, this ____ day of ___________, 1990, to be effective as of July 1,
1990.
(Seal) KEYCORP
ATTEST
By:
- -------------------------------- ------------------------------
Secretary President
Page 23 - SUPPLEMENTAL RETIREMENT BENEFIT PLAN FOR KEY EXECUTIVES
<PAGE> 28
APPENDIX A
Special Provisions Applicable to Employees of Key Pacific Bancorporation and
its Subsidiaries.
1. Service and Credited Service (Plan Reference: Section I).
---------------------------------------------------------
For the purpose of determining the benefit payable to any Participant
listed below, the Service and Credit Service of such a Participant
shall be determined as if the Employer of each such Participant had
been an Employer under the Pension Plan throughout the period that the
Participant was in the employ of such Employer.
Thaddeus R. Winnowski
William H. Stevens
<PAGE> 29
APPENDIX B
Special Provisions Applicable to Employees of National Commercial Bank and Trust
Company.
1. Normal Retirement (Plan Reference: Section 3.01).
-------------------------------------------------
The Normal Retirement Date of Participants who were members of the
Retirement System of the national Commercial Bank and Trust Company on
January 1, 1951, shall be the first day of the month coinciding with or
next following the date that the Participant attains the age of sixty
(60).
<PAGE> 30
APPENDIX C
Special Provisions Applicable to Hans F. Horjo.
1. Credited Service (Plan Reference: Section 1.02).
------------------------------------------------
For purposes of determining Mr. Horjo's Credited Service under the
Plan, Mr. Horjo will be deemed to have commenced employment on July 1,
1976.
<PAGE> 1
Exhibit 10.27
KEYCORP
UMBRELLA TRUST(TM) FOR EXECUTIVES
JULY 1, 1990
KeyCorp
One KeyCorp Plaza
P.O. Box 88
Albany, New York 12201-0088 Company
NBD Bank, N.A.
611 Woodward Avenue
Detroit, Michigan 48226 Trustee
<PAGE> 2
TABLE OF CONTENTS
PAGE
----
PAGE 2 - UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 3
INDEX OF TERMS
TERMS SECTION PAGE
PAGE 3 - UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 4
KEYCORP
UMBRELLA TRUST(TM) FOR EXECUTIVES
This Trust Agreement is made and entered into by and between KeyCorp, a
New York corporation (the "Company"), and NBD Bank, N.A., a Michigan banking
corporation (the "Trustee").
The Company hereby establishes with the Trustee a trust to hold all
monies and other assets, together with the income thereon, as shall be paid or
transferred to it hereunder in accordance with the terms and conditions of this
Trust Agreement. The Trustee hereby accepts the trust established under this
Trust Agreement and agrees to hold, IN TRUST, all monies and other assets
transferred to it hereunder for the uses and purposes and upon the terms and
conditions set forth herein, and the Trustee further agrees to discharge and
perform fully and faithfully all of the duties and obligations imposed upon it
under this Trust Agreement.
PREAMBLE
--------
The Company has adopted the following plans (the "Plan") which shall be
subject to this trust:
Employment Contracts
Severance Plans
Supplemental Retirement Benefits Plan
Supplemental Survivor Benefit Plan
Executive Deferred Compensation Plan
If only one Plan is subject to this trust at any time, references in this Trust
Agreement to the Plans shall refer to such Plan.
The Plans are administered by an administrative committee (the
"Committee") appointed by the Company. If the Plans are administered by more
than one Committee at any time, reference in this Trust Agreement to the
Committee which relate to a particular Plan shall refer to the Committee which
administers that Plan and, if the reference does not relate to a particular
Plan, shall refer to all of such Committees. All references in this Trust
Agreement to the Committee shall refer to the administrative committee(s) which
administers the Plan(s), unless
PAGE 1 - UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 5
the Company appoints a separate administrative committee to administer this
Trust Agreement. If the Company appoints a separate administrative committee to
administer this Trust Agreement, references in this Trust Agreement to the
Committee shall refer to such administrative committee which is appointed to
administer this Trust Agreement, unless the context clearly indicates otherwise.
The Plan participants who are covered by this Trust Agreement
("Participants") shall be all persons who are Plan participants prior to a
Special Circumstance, unless the Company specifically designates only specified
individuals or groups of Plan participants as Participants covered by this Trust
Agreement. After a person becomes a Participant covered by this Trust Agreement,
such person will continue to be a Participant at all times thereafter (including
after retirement or other termination of service) until all Plan benefits
payable to such Participant have been paid, the Participant ceases to be
entitled to any Plan benefits, or the Participant's death, whichever occurs
first. The term "Participants" shall not include any beneficiaries of
Participants.
At any time prior to a Special Circumstances, the Company may, by
written notice to the Trustee, cause additional plans to become Plans subject to
this Trust Agreement or cause additional Plan participants to become
Participants covered by this Trust Agreement. Upon and after a Special
Circumstance, the Company shall not add any additional plans or Plan
participants to this Trust Agreement.
The Company shall provide the Trustee with certified copies of the
following items: (i) the Plan documents; (ii) all Plan amendments promptly upon
their adoption; and (iii) lists and specimen signatures of the members of the
Committee(s) which administer the Plan(s) and this Trust Agreement and any other
Company representatives authorized to take action in regard to the
administration of the Plan(s) and this trust, including any changes in the
members of such Committee(s) and of such other representatives promptly
following any such change. The Company shall also provide the Trustee at least
annually with a list of all Participants in each Plan who are covered by this
Trust Agreement.
The purpose of this trust is to give Participants greater security by
placing assets in trust for use only to pay Plan benefits to Participants or, if
the Company becomes insolvent, to pay creditors. The Company shall continue to
be liable to Participants to make all payments required
PAGE 2 - UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 6
under the terms of the Plans to the extent such payments are not made from this
trust. Distributions made from this trust to Participants or their beneficiaries
shall, to the extent of such distributions, satisfy the Company's obligations to
pay benefits to Participants and their beneficiaries under the Plans.
The Company and the Trustee agree that the trust hereby created has
been established to pay obligations of the Company pursuant to the Plans and is
subject to the rights of general creditors of the Company, and accordingly is a
grantor trust under the provisions of Sections 671 through 677 of the Internal
Revenue Code of 1986, as amended (the "Code"). The Company hereby agrees to
report all items of income, deductions and credits of the trust on its own
income tax returns; and the Company shall have no right to any distributions
from the trust or any claim against the trust for funds necessary to pay any
income taxes which the Company is required to pay on account of reporting the
income of the trust on its income tax returns. No contribution to or income of
the trust is intended to be taxable to Participants until benefits are
distributed to them.
The Plans are intended to be "unfunded" and maintained "primarily for
the purpose of providing deferred compensation for a select group of management
or highly compensated employees" for purposes of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and as such are intended not to be
covered by Parts 2 through 4 of Subtitle B of Title I of ERISA (relating to
participation and vesting, funding and fiduciary responsibility). The existence
of this trust is not intended to alter this characterization of the Plans.
ARTICLE I
EFFECTIVE DATE; DURATION
------------------------
1.01 Effective Date and Trust Year
-----------------------------
This trust shall become effective when the Trust Agreement has
been executed by the Company and the Trustee and the Company has made a
contribution to the trust. For tax purposes the trust year shall be the calendar
year. For financial reporting purposes the trust year shall coincide with the
Company's fiscal year. The Company shall report any change in its fiscal year
to the Trustee.
1.02 Duration
--------
PAGE 3 - UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 7
1.02-1 This trust shall continue in effect until all assets of
the trust fund are exhausted through distribution of benefits to Participants,
payment to creditors in the event of insolvency, payment of fees and expenses of
the Trustee, and return of remaining funds to the Company pursuant to 1.02-2.
Notwithstanding the foregoing, this trust shall terminate on the day before
twenty-one years after the death of the last survivor of all present or future
Participants who are now living and those persons now living who are designated
as beneficiaries of any such Participants in accordance with the terms of any of
the Plans.
1.02-2 Except as otherwise provided in 1.02 and 1.03, the
trust shall be irrevocable until all benefits payable under the Plans to
Participants who are covered by this Trust Agreement are paid. The Trustee
shall then return to the Company any assets remaining in the trust.
1.02-3 If the existence of this trust or any Subtrust is held
to be ERISA Funding or Tax Funding by a federal court and appeals from that
holding are no longer timely or have been exhausted, this trust or such Subtrust
shall terminate. The Board of Directors of the Company (the "Board") may also
terminate this trust or any Subtrust if it determines, that either (i) judicial
authority or the opinion of the U.S. Department of Labor, Treasury Department or
Internal Revenue Services (as expressed in proposed or final regulations,
advisory opinions or rulings, or similar administrative announcements) creates a
significant risk that the trust or any Subtrust will be held to be ERISA Funding
or Tax funding or (ii) ERISA or the Code requires the trust or any Subtrust to
be amended in a way that creates a significant risk that the trust or such
Subtrust will be held to be ERISA Funding or Tax Funding, and failure to so
amend the trust or such Subtrust could subject the Company to material
penalties. Upon any such termination, the assets of each terminated Subtrust
remaining after payment of the Trustee's fees and expenses shall be distributed
as follows:
(a) Such assets shall be transferred to a new trust
established by the Company which is not deemed to be ERISA
Funding or Tax Funding, but which is similar in all other
respects to this trust, if the Company determines that it is
possible to establish such a trust.
(b) If the Company determines that it is not possible
to establish the trust in (a) above, then the assets shall be
distributed to the Company if the
PAGE 4 - UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 8
Written Consent of Participants, as defined in 1.02-5, is
obtained for such distribution.
(c) If the Company determines that it is not possible
to establish the trust in (a) above and the Written Consent of
Participants is not obtained to distribute the assets to the
Company, then the assets of the terminated Subtrust shall be
allocated in proportion to (i) the vested accrued benefits and
(ii) then, if any assets remain, the unvested (if any) accrued
benefits of Participants under the applicable Plan and shall
be distributed to such Participants in lump sums. Any assets
remaining shall be distributed to other Subtrusts or the
Company in accordance with 2.04.
Notwithstanding the foregoing, the Trustee shall distribute
Plan benefits to a Participant to the extent that a federal court or IRS has
held that the interest of the Participant in this trust causes such Plan
benefits to be includible for federal income tax purposes in the gross income of
the Participant prior to actual payment of such Plan benefits to the Participant
and appeals from that holding are no longer timely or have been exhausted. The
Trustee may also distribute Plan benefits to a Participant, upon direction of
the Committee, if the Trustee reasonably believes that there is a significant
risk that the Participant's interest in the trust fund will be held to be ERISA
Funding or Tax Funding with respect to such Participant or that such Participant
will be determined not to be a "management or highly compensated employee" for
purposes of ERISA. The provisions of this paragraph shall also apply to any
beneficiary of a Participant.
1.02-4 This trust is "Tax Funding" if it causes the interest
of a Participant in this trust to be includible for federal income tax purposes
in the gross income of the Participant prior to actual payment of Plan benefits
to the Participant.
This trust is "ERISA Funding" if it prevents any of the Plans
from meeting the "unfunded" criterion of the exceptions to application of the
provisions of Parts 2 through 4 of Subtitle B of Title I of ERISA for plans that
are unfunded and maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees.
PAGE 5 - UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 9
1.02-5 "Written Consent of Participants" means, for the
purposes of this Trust Agreement, consent in writing by Participants who (i) are
a majority in number and (ii) have more than fifty percent (50%) in value of the
accrued benefits, of the Participants in each Subtrust under this Trust
Agreement on the date of such consent.
1.03 Irrevocability
--------------
1.03-1 Subject to 1.02, this trust shall become irrevocable
upon the issuance by the Internal Revenue Service of a private letter ruling
establishing that its existence and ownership of assets do not cause the trust
to be deemed to be Tax Funding. If such a ruling is denied or the Company is
informed that a ruling will not be forthcoming, the Company may revoke the trust
and take possession of all assets held by the Trustee for the trust. This trust
shall also become irrevocable if such a ruling is not requested by the Company
within ninety (90) days after the date of establishing this trust.
1.03-2 Notwithstanding the provisions of 1.03-1, if a Special
Circumstance occurs, the Company may declare the trust to be irrevocable.
1.04 Special Circumstance
--------------------
1.04-1 Upon the occurrence of a Special Circumstance described
in 1.04-2, the trust assets shall be held for Participants who had accrued
benefits under the Plans before the Special Circumstance occurred, including
benefits accrued for such Participants after the Special Circumstance.
1.04-2 A "Special Circumstance" shall mean a Change in Control
(as defined in 1.04-3) or a Default (as defined in 1.04-6).
1.04-3 A "Change in Control" shall mean a Change in Control of
a nature that would be required to be reported (assuming such event has not been
"previously reported") in response to Item 1(a) of the current report on Form
8-X, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or any
successor thereto; provided that, without limitation, such a Change in Control
shall be deemed to have occurred at such time as:
(a) Any person is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of twenty five percent
PAGE 6 - UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 10
(25%) or more of the combined voting power of the Company's
Voting Securities;
(b) Individuals who constitute the Board of the
Company on the date hereof (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board of
the Company or the Board of any corporation with which the
Company merges, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination
for election by the Company's shareholders, was approved by a
vote of at least three quarters (3/4) of the directors
comprising the Incumbent Board (either by a specific vote or
by approval of the proxy statement of the Company in which
such person is named as a nominee for director, without
objection to such nomination) shall be, for purposes of this
clause (b), considered as though such person were a member of
the Incumbent Board;
(c) If any person or entity acquires an interest
which is determined by the Federal Reserve Board to constitute
a controlling interest in the Company;
(d) The sale by the Company of more than fifty
percent (50%) of the book value of its assets to a single
purchaser or to a group of affiliated purchasers; or
(e) The merger or consolidation of the Company in a
transaction in which the shareholders of the Company receive
less than fifty percent (50%) of the outstanding voting shares
of the continuing corporation. Notwithstanding anything in the
foregoing to the contrary, no Change in Control shall be
deemed to have occurred by virtue of any transaction which
results in a Participant, or group of Participants, acquiring,
directly or indirectly, twenty five percent (25%) or more of
the combined voting power of the Company's Voting Securities.
1.04-4 For purposes of this Trust Agreement, a Change in
Control shall be deemed to have occurred when the Trustee makes a determination
to that effect on its own initiative or upon receipt by the Trustee of written
notice to that effect from the Company. The Chief Executive Officer of the
Company or the Board shall furnish written notice to the Trustee when a Change
in Control occurs under 1.04-3.
PAGE 7 - UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 11
1.04-5 "Voting Securities" shall mean any securities of the
Company which vote generally in the election of directors.
1.04-6 A "Default" shall mean a failure by the Company to
contribute, within thirty (30) days of receipt of written notice from the
Trustee, any of the following amounts:
(a) The full amount of any insufficiency in assets of
any Subtrust that is required to pay any premiums or loan
interest payments on insurance contracts which are held in the
Subtrust;
(b) The full amount of any insufficiency in assets of
any Subtrust that is required to pay any Plan benefit that is
payable upon a direction from the Committee pursuant to 3.02-3
or upon resolution of a disputed claim pursuant to 3.03-2; or
(c) Any contribution which is then required under
2.01. If, after the occurrence of a Default, the Company at any time cures such
Default by contributing to the trust all amounts which are then required under
subparagraphs (a), (b) and (c) above, it shall then cease to be deemed that a
Default has occurred or that a Special Circumstance has occurred by reason of
such Default.
ARTICLE II
TRUST FUND AND FUNDING POLICY
-----------------------------
2.01 Contributions
-------------
2.01-1 The Company shall contribute to the trust such amounts
as are required to purchase or hold insurance contracts in the trust and to pay
premiums and loan interest payments thereon, all as described in 2.02-1. The
Company shall also contribute to the trust such amounts as are necessary to
enable the Trustee to make all Plan benefit payments to Participants when due,
unless the Company makes such payments directly, whenever the Trustee advises
the Company that the assets of the trust or Subtrust, other than insurance
contracts or amounts needed to pay future premiums or loan interest payments on
insurance contracts, are insufficient to make such payments. In its discretion,
the Company may contribute to the trust such additional amounts or assets as the
Committee may reasonably decide are necessary to provide security for all Plan
benefits payable to Participants covered by this trust.
PAGE 8- UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 12
2.01-2 Whenever the Company makes a contribution to the trust,
the Company shall designate the Plan(s) and Subtrust(s) to which such
contribution (or designated portions thereof) shall be allocated. The Company
may also make contributions to a special reserve for payment of future fees and
expenses of the Trustee and future trust fees and expenses for legal and
administrative proceedings. The Company shall designate a separate Subtrust to
receive such contributions, which shall be distinct from the other Subtrust(s)
established for the Plan(s).
A trust funding deposit for payment of future insurance
premiums ("Trust Funding Deposit") shall be established in each Subtrust which
holds insurance contracts. The Company shall designate the portion of each
contribution which shall be allocated to the Trust Funding Deposit for a
particular Subtrust. The Trust Funding Deposit for a Subtrust shall normally be
used only to pay premiums on insurance contracts which are held in that
Subtrust. However, if necessary, the Trust Funding Deposit may be used to pay
Plan benefits which are payable to Participants from the Subtrust in the sole
discretion of the Trustee.
2.01-3 The Company shall, immediately upon the occurrence of a
Special Circumstance (as defined in 1.04-2) or a Potential Change in Control (as
defined in 2.01-7), and at least annually following a Special Circumstance,
contribute to the trust the sum of the following:
(a) The present value of the remaining premiums and
the interest on any policy loans on insurance contracts held
in the trust to the extent the Trust Funding Deposit is
determined to be inadequate to pay such remaining premiums and
policy loan interest.
(b) The amount by which the present value of all
benefits (vested and unvested) payable under the Plans on a
pre-tax basis to Participants covered by this trust exceeds
the value of all trust assets. Each Participant's benefit
under any Plan for purposes of calculating present value shall
be the highest benefit the Participant would have accrued
under the Plan within the twenty four (24) months following
such event, assuming that the Participant's service continues
for twenty four (24) months at the same rate of compensation,
that the Participant continues to make future deferrals under
deferred compensation plans in accordance with his prior
elections, and that the Participant is terminated at a time
when he is entitled
PAGE 9- UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 13
to receive any benefit enhancement provided by the Plan upon a
Change in Control. Any benefit enhancement or right with
respect to the Plans which is provided under employment or
severance agreements of Participants shall be taken into
account in making the foregoing calculation.
(c) The present value of a reasonable estimate
provided by the Trustee of its fees and expenses due over the
remaining duration of the trust. Unless the Trustee estimates
a greater amount, such amount shall be presumed to be equal to
two percent (2%) of the present value of all accrued benefits
(vested and unvested) payable under the Plans on a pre-tax
basis to Participants covered by this trust.
(d) The present value of a reasonable estimate
provided by the Trustee of the anticipated fees and expenses
for the purpose of commencing or defending lawsuits or legal
or administrative proceedings over the remaining duration of
the trust. Unless the Trustee estimates a greater amount, such
amount shall be presumed to be equal to two percent (2%) of
the present value of all accrued benefits (vested and
unvested) payable under the Plans on a pre-tax basis to
Participants covered by this trust.
2.01-4 The calculations required under 2.01-3 shall be based
on the terms of the Plans and the actuarial assumptions and methodology set
forth in Appendix A attached hereto. Before a Special Circumstance, Appendix A
may be revised by the Committee from time to time. After a Special Circumstance,
Appendix A may be revised only with the Written Consent of Participants.
2.01-5 Whenever the Company makes a contribution to the trust
pursuant to 2.01-3, it shall furnish the Trustee with a written statement
setting forth the computation of all required amounts contributed under
subparagraphs (a), (b), (c) and (d) of 2.01-3.
Whenever a Special Circumstance occurs or the Company makes a
contribution pursuant to 2.01-3, the Company shall deliver to the Trustee,
contemporaneously with or immediately prior to such event, a schedule (the
"Payment Schedule") indicating the amounts payable under each Plan in respect of
each Participant, or providing a formula or instructions acceptable to the
Trustee for determining the amounts so payable, the form in which such
PAGE 10 UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 14
amounts are to be paid (as provided for or available under the Plans) and the
time of commencement for payment of such amounts. The Payment Schedule shall
include any other necessary instructions with respect to Plan benefits
(including legal expenses) payable under the Plans and any conditions with
respect to any Participant's entitlement to, and the Company's obligation to
provide, such benefits, and such instructions may be revised from time to time
to the extent so provided under the Plans or this Trust Agreement.
A modified Payment Schedule shall be delivered by the Company
to the Trustee at each time that (i) additional amounts are required to be paid
by the Company to the Trustee pursuant to 2.01-3, (ii) Excess Assets are
returned to the Company pursuant to 2.04, and (iii) upon the occurrence of any
event requiring a modification of the Payment Schedule. The Company shall also
furnish a Payment Schedule or modified Payment Schedule for any or all Plan(s)
upon request by the Trustee at any other time. Whenever the Company is required
to deliver to the Trustee a Payment Schedule or a modified Payment Schedule, the
Company shall also deliver at the same time to each Participant the respective
portion of the Payment Schedule or modified Payment Schedule that sets forth the
amount payable to that Participant.
2.01-6 Any contribution to the trust which is made by the
Company under 2.01-3 on account of a Potential Change in Control shall be
returned to the Company following one year after delivery of such contribution
to the Trustee unless a Change in Control shall have occurred during such
one-year period, if the Company requests such return within sixty (60) days
after such one-year period. If no such request is made within this 60-day
period, the contribution shall become a permanent part of the trust fund. The
one-year period shall recommence in the event of and upon the date of any
subsequent Potential Change in Control.
2.01-7 A "Potential Change in Control" shall be deemed to
occur if:
(a) Any person, as defined in Section 13(d)(3) of the
Act, other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company
delivers to the Company a statement containing the information
required by Schedule 13-D under the Act, or any amendment to
any such statement, that shows that such person has acquired,
directly or indirectly, the beneficial ownership of (i) more
than twenty four and nine tenths percent (24.9%) of any class
of equity security of the Company entitled to vote as single
class in
PAGE 11 - UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 15
the election or removal from office of directors, or
(ii) more than twenty four and nine tenths percent (24.9%) of
the voting power of any group of classes of equity securities
of the Company entitled to vote as a single class in the
election or removal from office of directors;
(b) The Company becomes aware that preliminary or
definitive copies of a proxy statement and information
statement or other information have been filed with the
Securities and Exchange Commission pursuant to Rule 14a-6,
Rule 14a-11, Rule 14c-5, or Rule 14f-1 under the Act relating
to a Potential Change in Control of the Company;
(c) Any person delivers to the Company pursuant to
Rule 14d-3 under the Act a Tender Offer Statement relating to
Voting Securities of the Company;
(d) Any person (other than the Company) publicly
announces an intention to take actions which if consummated
would constitute a Change in Control;
(e) The Company enters into an agreement or
arrangement, the consummation of which would result in the
occurrence of a Change in Control;
(f) The Board approves a proposal, or the Company
enters into an agreement, which if consummated would
constitute a Change in Control; or
(g) The Board adopts a resolution to the effect that,
for purposes of this Trust Agreement, a Potential Change in
Control has occurred.
Notwithstanding the foregoing, a Potential Change in Control shall not be deemed
to occur as a result of any event described in (a) through (f) above, if
directors who were a majority of the members of the Board prior to such event
determine that the event shall not constitute a Potential Change in Control and
furnish written notice to the Trustee of such determination.
2.01-8 For purposes of this trust, a Potential Change in
Control shall be deemed to have occurred when the Trustee makes a determination
to that effect on its own initiative or upon receipt by the Trustee of written
notice to that effect from the Company. The Chief Executive Officer of the
Company or the Board shall furnish written notice to the Trustee when a
Potential Change in Control occurs under 2.01-7.
PAGE 12 - UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 16
2.01-9 The Trustee shall accept the contributions made by the
Company and hold them as a trust fund for the payment of benefits under the
Plans. The Trustee shall not be responsible for determining the required amount
of contributions or for collecting any contribution not voluntarily paid, nor
shall the Trustee be responsible for the adequacy of the trust fund to meet and
discharge all liabilities under the Plans. Contributions may be in cash or in
other assets specified in 2.02.
2.02 Investments and Valuation
-------------------------
2.02-1 The trust fund shall be invested primarily in insurance
contracts ("Contracts"). Such Contracts may be purchased by the Company and
transferred to the Trustee as in-kind contributions or may be purchased by the
Trustee with the proceeds of cash contributions (or may be purchased upon
direction by the Committee pursuant to 2.02-2 or an Investment Manager pursuant
to 2.02-4). The Company's contributions to the trust shall include sufficient
cash to make projected premium payments on such Contracts and payments of
interest due on loans secured by the cash value of such Contracts, unless the
Company makes these payments directly. The Trustee shall have the power to
exercise all rights, privileges, options and elections granted by or permitted
under any Contract or under the rules of the insurance company issuing the
Contract ("Insurer"), including the right to obtain policy loans against the
cash value of the Contract. Prior to a Special Circumstance, the exercise by the
Trustee of any incidents of ownership under any Contract shall be subject to the
direction of the Committee. The Committee may from time to time direct the
Trustee in writing as to the designation of the beneficiary of a Participant
under a Contract for any part of the death benefits payable to such beneficiary
thereunder, and the Trustee shall file such designation with the Insurer.
Notwithstanding anything contained herein to the contrary,
neither the Company nor the Trustee shall be liable for the refusal of any
Insurer to issue or change any Contract or Contracts or to take any other action
requested by the Trustee; nor for the form, genuineness, validity, sufficiency
or effect of any Contract or Contracts held in the trust; nor for the act of any
person or persons that may render any such Contract or Contracts null and void;
nor for failure of any Insurer to pay the proceeds of any such Contract or
Contracts as and when the same shall become due and payable; nor for any delay
in payment resulting from any provision contained in any such Contract or
Contracts; nor for the fact that for any reason whatsoever (other than its
PAGE 13 UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 17
own negligence or willful misconduct) any Contracts shall lapse or otherwise
become uncollectible.
2.02-2 Prior to a Special Circumstance, the Trustee shall
invest the trust fund in accordance with written directions by the Committee,
including directions for exercising rights, privileges, options and elections
pertaining to Contracts and for borrowing from Contracts or other borrowing by
the Trustee. The Trustee shall act only as an administrative agent in carrying
out directed investment transactions and shall not be responsible for the
investment decision. If a directed investment transaction violates any duty to
diversify, to maintain liquidity or to meet any other investment standard under
this trust or applicable law, the entire responsibility shall rest upon the
Company. The Trustee shall be fully protected in acting upon or complying with
any investment objectives, guidelines, restrictions or directions provided in
accordance with this paragraph.
After a Special Circumstance the Committee shall no longer be
entitled to direct the Trustee with respect to the investment of the trust fund,
unless the Written Consent of Participants is obtained for the Committee to
continue to have this right pursuant to 2.02-2. If such Written Consent of
Participants is not obtained, the trust fund shall be invested by the Trustee
pursuant to 2.02-3 or by an Investment Manager pursuant to 2.02-4. The Trustee
or Investment Manager shall have the right to invest the Trust Fund primarily in
insurance contracts pursuant to 2.02-1.
Notwithstanding the foregoing, no investments shall be made at
any time in any securities, instruments, accounts or real property of the
Company, and the Trustee may not loan trust fund assets to the Company, or
permit the Company to pledge trust fund assets as collateral for loans to the
Company.
The Committee may not direct the Trustee to make any
investments, and the Company may not make any contributions to the trust fund,
which are not permissible investments under 2.02-2 and 2.02-3.
2.02-3 If the Trustee does not receive instructions from the
Committee for the investment of part or all of the trust fund for a period of at
least sixty (60) days, the Trustee shall invest and reinvest the assets of the
trust fund as the Trustee, in its sole discretion, may deem
PAGE 14 UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 18
appropriate, in accordance with applicable law. Permissible investments shall be
limited to the following:
(a) Insurance or annuity contracts;
(b) Preferred or common stocks, bonds, notes,
debentures, commercial paper, certificates of deposit, money
market funds, obligations of governmental bodies, or other
securities;
(c) Interest-bearing savings or deposit accounts with
any federally-insured bank or savings and loan association
(including the Trustee or an affiliate of the Trustee); or
(d) Shares or certificates of participation issued by
investment companies, investment trusts, mutual funds, or
common or pooled investment funds (including any common or
pooled investment fund now or hereafter maintained by the
Trustee or an affiliate of the Trustee).
2.02-4 The Company may appoint one or more investment managers
("Investment Manager") subject to the following provisions:
(a) The Company may appoint one or more Investment
Managers to manage (including the power to acquire and dispose
of) a specified portion of the assets of the trust
(hereinafter referred to as that Investment Manager's
"Segregated Fund"). Any Investment Manager so appointed must
be either (A) an investment adviser registered as such under
the Investment Advisers Act of 1940, (B) a bank, as defined in
that Act, or (C) an insurance company qualified to perform
services in the management, acquisition or disposition of the
assets of trusts under the laws of more than one state; and
any Investment Manager so appointed must acknowledge in
writing to the Company and to the Trustee that it is a
fiduciary with respect to the Plans. The Trustee, until
notified in writing to the contrary, shall be fully protected
in relying upon any written notice of the appointment of an
Investment Manager furnished to it by the Company. In the
event of any vacancy in the office of Investment Manager, the
Trustee shall be deemed to be the Investment Manager of that
Investment Manager's Segregated Fund until an Investment
Manager thereof shall have been duly appointed; and in
PAGE 15 - UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 19
such event, until an Investment Manager shall have been so
appointed and qualified, references herein to the Trustee's
acting in respect of that Segregated Fund pursuant to
direction from the Investment Manager shall be deemed to
authorize the Trustee to act in its own discretion in managing
and controlling the assets of that Segregated Fund, and
subparagraphs (b) and (c) below shall have no effect with
respect thereto and shall be disregarded.
(b) Each Investment Manager appointed pursuant to
subparagraph (a) above shall have exclusive authority and
discretion to manage and control the assets of its Segregated
Fund and may invest and reinvest the assets of the Segregated
Fund in any investments in which the Trustee is authorized to
invest under 2.02-3, subject to the terms and limitations of
any written instruments pertaining to its appointment as
Investment Manager. Copies of any such written instruments
shall be furnished to the Trustee. In addition, each
Investment Manager from time to time and at any time may
delegate to the Trustee (or in the event of any vacancy in the
office of Investment Manager, the Trustee may exercise in
respect of that Investment Manager's Segregated Fund)
discretionary authority to invest and reinvest otherwise
uninvested cash held in its Segregated Fund temporarily in
bonds, notes or other evidences of indebtedness issued or
fully guaranteed by the United States of America or any agency
or instrumentality thereof, or in other obligations of a
short-term nature, including prime commercial paper
obligations or part interests therein.
(c) Unless the Trustee knowingly participates in, or
knowingly undertakes to conceal, an act or omission of an
Investment Manager, knowing such act or omission to be a
breach of the fiduciary responsibility of the Investment
Manager with respect to the Plans, the Trustee shall not be
liable for any act or omission of any Investment Manager and
shall not be under any obligation to invest or otherwise
manage the assets of the Plans that are subject to the
management of any Investment Manager. Without limiting the
generality of the foregoing, the Trustee shall not be liable
by reason of its taking or refraining from taking at the
direction of an Investment Manager any action in respect of
that
PAGE 16 - UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 20
Investment Manager's Segregated Fund. The Trustee shall
be under no duty to question or to make inquiries as to any
direction or order or failure to give direction or order by
any Investment Manager; and the Trustee shall be under no duty
to make any review of investments acquired for the trust at
the direction or order of any Investment Manager and shall be
under no duty at any time to make any recommendation with
respect to disposing of or continuing to retain any such
investment.
2.02-5 The values of all assets in the trust fund shall be
reasonably determined by the Trustee and may be based on the determination of
qualified independent parties or Experts (as described in 2.06-2). At any time
before or after a Special Circumstance, the Trustee shall have the right to
secure confirmation of value by a qualified independent party or Expert for all
property of the trust fund, as well as any property to be substituted for other
property of the trust fund pursuant to 2.05. Before a Special Circumstance the
Company may designate one or more independent parties, who are acceptable to the
Trustee, to determine the fair market value of any notes, securities, real
property or other assets.
Any insurance or annuity contracts held in the trust fund
shall be valued at their cash surrender value, except for purposes of
substituting other property for such Contracts pursuant to 2.05-2. All
securities shall be valued net of costs to sell, or register for sale, such
securities. All real property shall be valued net of costs to sell such real
property. All other assets of the trust fund shall be valued at their fair
market value.
The Company shall pay all costs incurred in valuing the assets
of the trust fund, including any assets to be substituted for other assets of
the trust fund pursuant to 2.05. If not so paid, these costs shall be paid from
the trust fund. The Company shall reimburse the trust fund within thirty (30)
days after receipt of a bill from the Trustee for any such costs paid out of the
trust fund.
2.03 Subtrusts
---------
2.03-1 The Trustee shall establish a separate subtrust
("Subtrust") for each Plan to which it shall credit contributions it receives
which are earmarked for that Plan and Subtrust. The Trustee shall also establish
a separate Subtrust to which it shall credit contributions it receives which are
earmarked to the special reserve for payment of future fees and expenses of
PAGE 17 UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 21
the Trustee and future trust fees and expenses for legal and administrative
proceeding. Each Subtrust shall reflect an undivided interest in assets of the
trust fund and shall not require any segregation of particular assets. except
that an insurance contract covering benefits of a particular Plan shall be held
in the Subtrust for the Plan. All contributions shall be designated by the
Company for a particular Subtrust. However, any contribution received by the
Trustee which is not earmarked for a particular Subtrust shall be allocated
among the Subtrusts as the Trustee may determine in its sole discretion.
The Committee may direct the Trustee to maintain a separate
sub-account within each Subtrust for a Plan for each Participant who discovered
by the Subtrust. Each sub-account in a Subtrust shall reflect an individual
interest in assets of the Subtrust and, as much as possible, shall operate in
the same manner as if it were a separate Subtrust.
2.03-2 The Trustee shall allocate investment earnings and
losses and expenses of the trust fund among the Subtrusts in proportion to their
balances, except that changes in the value of an insurance contract (including
premiums and interest on loans on an insurance contract) shall be allocated to
the Subtrust for which it is held. Payments to creditors during Insolvency
Administration under 5.02 shall be charged against the Subtrusts in proportion
to their balances, except that payment of Plan benefits to a Participant as a
general creditor shall be charged against the Subtrust for that Plan.
2.03-3 Assets allocated to a Subtrust for one plan may not be
utilized to provide benefits under any other Plans until all benefits under such
Plan have been paid in full, except that Excess Assets of a Subtrust may be
transferred to other Subtrusts pursuant to 2.04-5.
2.04 Recapture of Excess Assets
--------------------------
2.04-1 In the event the trust shall hold Excess Assets, the
Committee, at its option, may direct the Trustee to return part or all of such
Excess Assets to the Company.
2.04-2 "Excess Assets" are assets of the trust exceeding one
hundred twenty five percent (125%) of the amounts described in subparagraphs
(a), (b), (c) and (d) of 2.01-3.
2.04-3 The calculation required by 2.04-2 shall be based on
the terms of the plans and the actuarial assumptions and methodology set forth
in Appendix A. Before a Special Circumstance, the calculation shall be made by
the Company or a qualified actuary or consultant selected by the Committee.
After a Special Circumstances, the calculation shall be made by a
PAGE 18 - UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 22
qualified actuary or consultant selected by the Trustee, provided the Committee
may select a qualified actuary or consultant with the Written Consent of
Participants.
2.04-4 Excess Assets shall be returned to the Company in the
following order of priority, unless the Trustee determines otherwise to protect
the participants:
(a) Cash and cash equivalents;
(b) All taxable investments of the trust (other than
cash and cash equivalents and Contracts with Insurers), in
such order as the Committee may request;
(c) All non-taxable investments of the trust (other
than cash and cash equivalents and Contracts with Insurers),
in such order as the Committee may request; and
(d) Contracts with Insurers, proceeding in order of
Contracts on insureds from the youngest to the oldest ages
based on the insured's attained age on the date of return of
Excess Assets.
Notwithstanding the foregoing, Excess Assets may be returned
in any other order of priority directed by the Committee with the Written
Consent of Participants.
2.04-5 If any Subtrust holds Excess Assets, the Committee may
direct the Trustee to transfer such Excess Assets to other Subtrusts, either
ratably in proportion to the unfunded liabilities to Participants for Plan
benefits of all other Subtrusts or first to the other Subtrust(s) with the
largest percentage of such unfunded liabilities. After a Special Circumstance
the Trustee may also transfer Excess Assets of a Subtrust to other Subtrusts
upon its own initiative in such amounts as it may determine in its sole
discretion.
Excess Assets of a Subtrust for a Plan shall be determined in
the same manner as Excess Assets of the trust are determined pursuant to 2.04-2
and 2.04-3. In making this determination each Subtrust for a Plan shall bear its
allocable share of the amounts described in subparagraphs (a) and (b) of 2.01-3
which relate to that Plan. The Trustee, in its sole discretion, shall determine
whether there are Excess Assets in the separate Subtrust which constitutes the
reserve for payment of future fees and expenses of the Trustee and future trust
fees and expenses for legal and administrative proceedings. Excess Assets for
this Subtrust shall be any amounts
PAGE 19 - UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 23
which the Trustee reasonably determines will not be needed in the future for
payment of such fees and expenses.
2.05 Substitution of Other Property
------------------------------
2.05-1 The Company shall have the power to reacquire part or
all of the assets or collateral held in the trust found at any time, by
simultaneously substitution for it other readily marketable property of
equivalent value, net of any costs of disposition; provided that, if the trust
holds Excess Assets, the property which is substituted shall not be required to
be of equivalent value, but only of sufficient value so that the trust will
retain Excess Assets of not less than $10,000 after such substitution. The
property which is substituted must be among the types of investments authorized
under 2.02 and may not be less liquid or marketable or less well secured than
the property for which it is substituted, as determined by the Trustee. such
power is exercisable in a nonfiduciary capacity and may be exercised without the
approval or consent of Participants or any other person.
2.05-2 Except for insurance contracts, the value of any assets
reacquired under 2.05-1 shall be determined as provided in 2.02-5. The value of
any insurance contract reacquired under 2.05-1 shall be the present value of
future projected cash flow or benefits payable under the Contract, but not less
than the cash surrender value. The projection shall include death benefits based
on reasonable mortality assumptions, including know facts specifically relating
to the health of the insured and the terms of the Contract to be reacquired.
Values shall be reasonably determined by the Trustee and may be based on the
determination of qualified independent parties and Experts, as described in
2.02-5 and 2.06-2. The Trustee shall have the right to secure confirmation of
value by a qualified independent party or Expert for all property to be
substituted for other property.
2.05-3 The Company shall pay all costs incurred in valuing the
assets of the trust fund, including any assets to be substituted for other
assets of the trust fund pursuant to 2..05. If not so paid, these costs shall be
paid from the trust fund. The Company shall reimburse the trust fund within
thirty (30) days after receipt of a bill from the Trustee for any such costs
paid out of the trust fund.
2.06 Administrative Powers of Trustee
--------------------------------
PAGE 20 UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 24
2.06-1 Subject in all respects to applicable provisions of
this Trust Agreement and the Plans, including limitations on investment of the
trust fund, the Trustee shall have the rights, powers and privileges of an
absolute owner when dealing with property of the trust, including (without
limiting the generality of the foregoing) the powers listed below:
(a) To sell, convey, transfer, exchange, partition,
lease, and otherwise dispose of any of the assets of the trust
at any time held by the Trustee under this Trust Agreement;
(b) To exercise any option, conversion privilege or
subscription right given the Trustee as the owner of any
security held in the trust; to vote any corporate stock either
in person or by proxy, with or without power of substitution;
to consent to or oppose any reorganization, consolidation,
readjustment of financial structure, sale, lease or other
disposition of the assets of any corporation or other
organization, the securities of which may be an asset of the
trust; and to take any action in connection therewith and
receive and retain any securities resulting therefrom;
(c) To deposit any security with any protective or
reorganization committee, and to delegate to such committee
such power and authority with respect thereto as the Trustee
may deem proper, and to agree to pay out of the trust such
portion of the expenses and compensation of such committee as
the Trustee, in its discretion, shall deem appropriate;
(d) To cause any property of the trust to be issued,
held or registered in the name of the Trustee as trustee, or
in the name of one or more of its nominees, or one or more
nominees of any system for the central handling of securities,
or in such form that title will pass by delivery, provided
that the records of the Trustee shall in all events indicate
the true ownership of such property, or to deposit any
securities held in the trust with a securities depository;
(e) To renew or extend the time of payment of any
obligation due or to become due;
(f) To commence or defend lawsuits or legal or
administrative proceedings; to compromise, arbitrate or settle
claims, debts or damages in favor
PAGE 21 UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 25
of or against the trust; to deliver or accept, in either total
or partial satisfaction of any indebtedness or other
obligation, any property; to continue to hold for such period
of time as the Trustee may deem appropriate any property so
received; and to pay all costs and reasonable attorneys' fees
in connection therewith out of the assets of the trust;
(g) To foreclose any obligation by judicial
proceeding or otherwise;
(h) Subject to 2.02, to borrower money from any
person in such amounts, upon such terms and for such purposes
as the Trustee, in its discretion, may deem appropriate; and
in connection therewith, to execute promissory notes,
mortgages or other obligations and to pledge or mortgage any
trust assets as security; and to lend money on a secured or
unsecured basis to any person other than a party in interest;
(i) To manage any real property in the trust in the
same manner as if the Trustee were the absolute owner thereof,
including the power to lease the same for such terms or terms
within or beyond the existence of the trust and upon such
conditions as the Trustee may deem proper; and to grant
options to purchase or acquire options to purchase any real
property;
(j) To appoint one or more persons or entities as
ancillary trustee or sub-trustee for the purpose of investing
in and holding title to real or personal property or any
interest therein located outside the State of Michigan;
provided than any such ancillary trustee or sub-trustee shall
act with such power, authority, discretion, duties, and
functions of the Trustee as shall be specified in the
instrument establishing such ancillary trust or sub-trust,
including (without limitation) the power to receive, hold and
manage property, real or personal, or undivided interest
therein; and the Trustee may pay the reasonable expenses and
compensation of such ancillary trustees or sub-trustees out of
the trust;
(k) To hold such part of the assets of the trust
uninvested for such limited periods of time as may be
necessary for purposes of orderly trust administration or
pending required directions, without liability for payment of
interest;
PAGE 22 - UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 26
(l) To determine how all receipts and disbursements
shall be credited, charged or apportioned as between income
and principal, and the decision of the Trustee shall be final
and not subject to question by any Participant or beneficiary
of the trust;
(m) Generally to do all acts, whether or not
expressly authorized, which the Trustee may deem necessary or
desirable for the orderly administration or protection of the
trust fund.
2.06-2 The Trustee may engage one or more qualified
independent attorneys, accountants, actuaries, appraisers, consultants or other
experts (an "Expert") for any purpose, including the determination of Excess
Assets pursuant to 2.04 or disputed claims pursuant to 3.03. The determination
of an Expert shall be final and binding on the Company, the Trustee, and all of
the participants unless, within thirty (30) days after receiving a determination
deemed by an Participant to be adverse, any Participant initiates suit in a
court of competent jurisdiction seeking appropriate relief. The Trustee shall
have no duty to oversee or independently evaluate the determination of the
Expert. The Trustee shall be authorized to pay the fees and expenses of any
Expert out of the assets of the trust fund.
2.06-3 The Company shall from time to time pay taxes
(references in this Trust Agreement to the payment of taxes shall include
interest and applicable penalties ) of any and all kinds whatsoever which at any
time are lawfully levied or assessed upon or become payable in respect of the
trust fund, the income or any property forming a part thereof, or any security
transaction pertaining thereto. To the extent that any taxes levied or assessed
upon the trust fund are not paid by the Company or contested by the Company
pursuant to the last sentence of this paragraph, the Trustee shall pay such
taxes out of the trust fund, and the Company shall upon demand by the Trustee
deposit into the trust fund an amount equal to the amount paid from the trust
fund to satisfy such tax liability. If requested by the Company, the Trustee
shall, at the Company's expense, contest the validity of such taxes in any
manner deemed appropriate by the Company or its counsel, but only if it has
received an indemnity bond or other security satisfactory to it to pay any
expenses of such contest. Alternatively, the Company may itself contest the
validity of such taxes, but any such contest shall not affect the Company's
obligation to reimburse the trust fund for taxes paid from the trust fund.
PAGE 23 - UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 27
2.06-4 Notwithstanding any provisions in the Plans or this
Trust Agreement to the contrary, the Company and Trustee may withhold any
benefits payable to a beneficiary as a result of the death of the Participant or
any other beneficiary until such time as (a) the Company or Trustee is able to
determine whether a generation-skipping transfer tax, as defined in Chapter 13
of the Code, or any substitute provision therefor, is or may become payable by
the Company or Trustee as a result of benefit payments to the beneficiary; and
(b) the Company or Trustee has determined the amount of generation-skipping
transfer tax that is or may become due, including interest thereon. If any such
tax is or may become payable, the Company or Trustee feels are reasonably
necessary to pay any generation-skipping transfer tax and interest thereon which
is or may become due.
Any excess amounts so withheld from a beneficiary, which are
not used to pay generation-skipping transfer tax and interest thereon, shall be
payable to the beneficiary as soon as there is a final determination of the
applicable generation-skipping transfer tax and interest thereon. Whenever any
amounts which were withheld are paid to any beneficiary, interest shall be
payable by the Company or Trustee to such beneficiary for the period of time
between the date when such amounts would otherwise have been paid to the
beneficiary and the date when such amounts are actually paid to the beneficiary
after the aforementioned generation-skipping transfer tax determinations are
made and the amount of benefits payable to the beneficiary is finally
determined. Interest shall be payable at the same rate as provided under 5.03-2.
ARTICLE III
ADMINISTRATION
--------------
3.01 Committee; Company Representatives
----------------------------------
3.01-1 The Committee is the plan administrator for the Plans
and has general responsibility to interpret the Plans and determine the rights
of Participants and beneficiaries.
3.01-2 The Trustee shall be given the names and specimen
signatures of the members of the Committee and any other Company representatives
authorized to take action in regard to the administration of the Plans and this
trust. The Trustee shall accept and rely upon the names and signatures until
notified of any change. Instructions to the Trustee shall be signed for the
Committee by the Chairman or such other person as the Committee may designate
and for the Company by any officer or such other representative as the Company
may designate.
PAGE 24 - UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 28
3.02 Payment of Benefits
-------------------
3.02-1 Benefit payments shall normally be made directly by the
Company. If such payments are not made when due, after sixty (60) days written
notice to the Company to permit the Company to cure any such Default, unless
such notice is waived by the Company, the Trustee shall pay benefits to
Participants and beneficiaries on behalf of the Company in satisfaction of its
obligations under the Plans. Benefit payments from a Subtrust shall be made in
full until the assets of the Subtrust are exhausted. Payments due on the date
the Subtrust is exhausted shall be covered pro rata. The Company's obligation
shall not be limited to the trust fund, and a Participant or beneficiary shall
have a claim against the Company for any payment not made by the Trustee.
3.02-2 A Participant's entitlement to benefits under the Plans
shall be determined by the Committee. Any benefit enhancement or right with
respect to the Plans which is provided under employment or severance agreements
of Participants shall be taken into account in making the foregoing
determination. Any claim for such benefits shall be considered and reviewed
under the claims procedures established for the Plans.
3.02-3 The Trustee shall make payments in accordance with
written directions from the Committee or consultant designated by the Committee,
except as provided in 3.03. The Trustee may request such directions from the
Committee or consultant designated by the Committee. If the Committee or
consultant designated by the Committee fails to furnish written directions to
the Trustee, within sixty (60) days after receiving a written request for
directions from the Trustee, the Trustee may make payments in accordance with
written directions from Participants or may determine the amounts due under the
terms of the Plans in reliance upon the most recent Payment Schedule furnished
to it by the Company.
The Trustee shall make any required income tax withholding and
shall pay amounts withhold to taxing authorities on the Company's behalf or
determine that such amounts have been paid by the Company.
3.02-4 The Trustee shall use the assets of the trust or any
Subtrust to make benefit payments or other payments in the following order of
priority, unless the Trustee determines otherwise to protect the Participants:
PAGE 25 - UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 29
(a) Cash contributions from the Company which are
specifically designated to enable the Trustee to make such
benefit payments or other payments when due;
(b) Cash and cash equivalents of the trust or
Subtrust;
(c) All taxable investments of the trust or Subtrust
(other than cash and cash equivalents and Contracts with
Insurers), in such order as the Trustee may determine;
(d) All non-taxable investments of the trust or
Subtrust (other than cash and cash equivalents and Contracts
with Insurers), in such order as the Trustee may determine;
and
(e) Contracts with Insurers held in the trust or
Subtrust, in such order and manner (for example, making
tax-free withdrawals prior to any taxable withdrawals from
Contracts) as the Trustee may determine. Unless the Trustee
determines otherwise to protect the Participants, the Trustee
shall make tax-free withdrawals prior to any taxable
withdrawals from Contracts; shall make withdrawals from
Contracts to the premium vanish point before surrendering any
Contracts; and shall surrender Contracts, only if necessary,
proceeding in order of Contracts o insureds from the youngest
to the oldest ages based on the insured's age on the date of
surrender of the Contract.
Notwithstanding the foregoing, the Trustee may use the assets
of the trust or any Subtrust in any other order of priority directed by the
Committee with the Written Consent of Participants affected thereby.
3.03 Disputed Claims
---------------
3.03-1 A Participant covered by this Trust whose claim has
been denied by the Committee, or who has received no response to the claim
within sixty (60) days after submission, may submit the claim to the Trustee.
The Trustee shall give written notice of the claim to the Committee. If the
Trustee receives no written response from the Committee within thirty (30) days
after the date the Committee is given written notice of the claim, the Trustee
shall pay the Participant the amount claimed, unless it determines that a lessor
amount is due under the terms of the Plans. If a written response is received
within such thirty (30) days, the Trustee shall
PAGE 26- UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 30
consider the claim, including the Committee's response. If a written response is
received within such thirty (30) days, the Trustee shall consider the claim,
including the Committee's response. If the merits of the claim depend on
compensation, service or other data in the possession of the Company and it is
not provided, the Trustee may rely upon information provided by the Participant.
Any benefit enhancement or right with respect to the Plans which is provided
under employment or severance agreements of Participants shall be taken into
account in making the foregoing determination.
3.03-2 The Trustee shall give written notice to the
Participant and the Committee of its decision on the claim. If the decision is
to grant the claim, the Trustee shall make payment to the Participant. The
Trustee may decline to decide a claim and may file suit to have the matter
resolved by a court of competent jurisdiction. All of the Trustee's expenses in
the court proceeding, including attorneys fees, shall be allowed as
administrative expenses of the trust.
Either the Participant or the Company may challenge the
Trustee's decision by filing suit in a court of competent jurisdiction. If no
such suit is filed within sixty (60) days after delivery of written notice of
the Trustee's decision, the decision shall become final and binding on all
parties.
Notwithstanding the two preceding paragraphs, after the
Trustee decides a claim or declines to decide a claim, any dispute between a
Participant and the Company or the Trustee as to the interpretation or
application of the provisions of this Trust Agreement and amounts payable
hereunder may, at the election of any party to such dispute (or, if more than
one Participant is such a party, at the election of two-thirds of such
Participants) be determined by binding arbitration in New York in accordance
with the rules of the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator's award in any court of competent jurisdiction.
All fees and expenses of such arbitration shall be paid by the Trustee and
considered an expense of the trust under 3.06.
If the Participant is not satisfied with the decision of the
Arbitrator, the Participant may appeal the Arbitrator's decision by filing suit
in a court of competent jurisdiction. If no such suit is filed within sixty (60)
days after delivery of written notice of the Arbitrator's decision, the decision
shall become final and binding on all. If the Participant appeals the
PAGE 27- UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 31
Arbitrator's decision and the decision is ultimately upheld, the Participant
shall reimburse the Trustee for all expenses incurred in defending the
Arbitrator's decision.
3.03-3 If the Committee opposes a claim presented under 3.03-1
and the Trustee ultimately pays the claim from trust assets, the Trustee shall
reimburse the Participant's expenses in pursuing the claim, including attorneys
fees at the trial and appellate level. The Company shall reimburse the trust
fund within thirty (30) days after receipt of a bill from the Trustee for any
such Participant's expenses which are reimbursed by the Trustee.
3.04 Records
-------
3.04-1 The Trustee shall keep complete records on the trust
fund open to inspection by the Company, Committee and Participants at all
reasonable times. In addition to accountings required below, the Trustee shall
furnish to the Company, Committee and Participants any information reasonably
requested about the trust fund.
3.05 Accountings
-----------
3.05-1 The Trustee shall furnish the Company with a complete
statement of accounts annually within sixty (60) days after the end of the trust
year showing assets and liabilities and income and expense for the year of the
trust and each Subtrust. The Trustee shall also furnish the Company with
accounting statements at such other times as the Company may reasonably request.
The form and content of the statement of accounts shall be sufficient for the
Company to include in computing its taxable income and credits the income,
deductions and credits against tax that are attributable to the trust fund. The
Trustee shall also allow, upon the Company's request, access to the statements
of accounts by the Company's independent public accountant.
3.05-2 The Company may object to an accounting within one
hundred eighty (180) days after it is furnished and require that it be settled
by audit by a qualified, independent certified public accountant. The auditor
shall be chosen by the Trustee from a list of at least five such accountants
furnished by the Company at the time the audit is requested. Either the Company
or the Trustee may require that the account be settled by a court of competent
jurisdiction, in lieu of or in conjunction with the audit. All expenses of any
audit or court proceedings, including reasonable attorneys' fees, shall be
allowed as administrative expenses of the trust.
PAGE 28- UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 32
3.05-3 If the Company does not object to an accounting within
the time provided, the account shall be settled for the period covered by it.
3.05-4 When an account is settled, it shall be final and
binding on all parties, including all Participants and persons claiming through
them.
3.06 Expenses and Fees
-----------------
3.06-1 The Trustee shall be reimbursed for all reasonable
expenses and shall be paid a reasonable fee fixed by agreement with the Company
from time to time. No increase in the fee shall be effective before sixty (60)
days after the Trustee gives Written notice to the Company of the increase. The
Trustee shall notify the Company periodically of expenses and fees.
3.06-2 The Company shall pay trustee and other administrative
and valuation fees and expenses. If not so paid, these fees and expenses shall
be paid from the trust fund. The Company shall reimburse the trust fund within
thirty (30) days after receipt of a bill from the Trustee for any fees and
expenses paid out of the trust fund.
ARTICLE IV
LIABILITY
---------
4.01 Indemnity
---------
4.01-1 Subject to such limitations as may be imposed by
applicable law, the Company shall indemnify and hold harmless the Trustee from
any claim, loss, liability or expense arising from any action or inaction in
administration of this trust based on direction or information from either the
Company, Committee, any Investment Manager or any Expert, or any action taken
with respect to Written Consent of Participants as defined in 1.02-5, except in
the case of willful misconduct or bad faith.
4.02 Bonding
-------
4.02-1 The Trustee need not give any bond or other security
for performance of its duties under this trust.
ARTICLE V
INSOLVENCY
----------
5.01 Determination of Insolvency
---------------------------
5.01-1 The Company is Insolvent for purposes of this trust
if:
PAGE 29 - UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 33
(a) The Company is unable to pay its debts as they
come due; or
(b) The Company is the subject of a pending
proceeding as a debtor under the federal Bankruptcy Code
(or any successor federal statute).
5.01-2 The Company shall promptly give written notice to the
Trustee upon becoming Insolvent. The Chief Executive Officer of the Company and
the Board shall be obligated to give such notice. If the Trustee receives such
notice or receives from any other person claiming to be a creditor of the
Company a written allegation that the Company is Insolvent, the Trustee shall
independently determine whether such insolvency exists. The expenses of such
determination shall be allowed as administrative expenses of the trust.
5.01-3 Upon receipt of the notice or allegation described in
5.01-2, the Trustee shall discontinue making payments from the trust fund to
Participants and beneficiaries under the Plans and shall commence Insolvency
Administration under 5.02.
5.01-4 The Trustee shall have no obligation to investigate the
financial condition of the Company prior to receiving a notice or allegation of
insolvency under 5.01-2.
5.02 Insolvency Administration
-------------------------
5.02-1 During Insolvency Administration, the Trustee shall
hold the trust fund for the benefit of the creditors of the Company and make
payments only in accordance with 5.02-2. The Participants and beneficiaries
shall have no greater rights than general creditors of the Company. The Trustee
shall continue the investment of the trust fund in accordance with 2.02.
5.02-2 The Trustee shall make payments out of the trust fund
in one or more of the following ways:
(a) To creditors in accordance with instructions from
a court, or a person appointed by a court, having jurisdiction
over the Company's condition of insolvency;
(b) To Participants and beneficiaries in accordance
with such instructions; or
(c) In payment of its own fees or expenses.
5.02-3 The Trustee shall have a priority claim against the
trust fund with respect to its own fees and expenses.
5.03 Termination of Insolvency Administration
----------------------------------------
PAGE 30 UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 34
5.03-1 Insolvency Administration shall terminate when the
Trustee determines that the Company:
(a) Is not Insolvent, in response to a notice or
allegation of insolvency under 5.01-2;
(b) Has ceased to be Insolvent; or
(c) Has been determined by a court of competent
jurisdiction not to be Insolvent or to have ceased to be
Insolvent.
5.03-2 Upon termination of Insolvency Administration under
5.03-1, the trust fund shall continue to be held for the benefit of the
Participants and beneficiaries under the Plans. Benefit payments due during the
period of Insolvency Administration shall be made as soon as practicable,
together with interest from the due dates at the following rates:
(a) For the Executive Deferred Compensation Plan, the
rate credited on the Participant's account under the Plan.
(b) For the Supplemental Executive Benefit Plan, a
rate equal to the interest rate fixed by the Pension Benefit
Guaranty Corporation for valuing immediate annuities in the
preceding month.
(c) For the Severance Plans, a rate equal to the
interest rate fixed by the Pension Benefit Guaranty
Corporation for valuing immediate annuities in the preceding
month.
5.04 Creditors' Claims During Solvency
---------------------------------
5.04-1 During periods of Solvency the Trustee shall hold the
trust fund exclusively to pay Plan benefits and fees and expenses of the trust
until all Plan benefits have been paid. Creditors of the Company shall not be
paid during Solvency from the trust fund, which may not be seized by or
subjected to the claims of such creditors in any way.
5.04-2 A period of Solvency is any period not covered by 5.02.
ARTICLE VI
SUCCESSOR TRUSTEES
------------------
6.01 Resignation and Removal
-----------------------
6.01-1 The Trustee may resign at any time by notice to the
Company, which shall be effective in sixty (60) days unless the Company and the
Trustee agree otherwise.
PAGE 31 - UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 35
6.01-2 The Trustee may be removed by the Company on sixty (60)
days' written notice or shorter notice accepted by the Trustee. After a Special
Circumstance the Trustee may be removed only with the Written Consent of
Participants.
6.01-3 When resignation or removal is effective, the Trustee
shall begin transfer of assets to the successor Trustee immediately. The
transfer shall be completed within sixty (60) days, unless the Company extends
the time limit.
6.01-4 If the Trustee resigns or is removed, the Company shall
appoint a successor by the effective date of resignation or removal under 6.01-1
or 6.01-2. After a Special Circumstance a successor Trustee may be appointed
only with the Written Consent of Participants. If no such appointment has been
made, the Trustee may apply to a court of competent jurisdiction for appointment
of a successor or for instructions. All expenses of the Trustee in connection
with the proceeding shall be allowed as administrative expenses of the trust.
6.02 Appointment of Successor
------------------------
6.02-1 The Company may appoint any national or state bank or
trust company that is unrelated to the Company as a successor to replace the
Trustee upon resignation or removal. The appointment shall be effective when
accepted in writing by the new Trustee, which shall have all of the rights and
powers of the former Trustee, including ownership rights in the trust assets.
The former Trustee shall execute any instruments necessary or reasonably
requested by the Company or the successor Trustee to evidence the transfer.
After a Special Circumstance a successor Trustee may be appointed only with the
Written Consent of Participants.
6.02-2 The successor Trustee need not examine the records and
acts of any prior Trustee and may retain or dispose of existing trust assets,
subject to Article II. The successor Trustee shall not be responsible for, and
the Company shall indemnify and hold harmless the successor Trustee from any
claim or liability because of, any action or inaction of any prior Trustee or
any other past event, any existing condition or any existing assets.
6.03 Accountings; Continuity
-----------------------
6.03-1 A Trustee who resigns or is removed shall submit a
final accounting to the Company as soon as practicable. The accounting shall be
received and settled as provided in 3.05 for regular accountings.
PAGE 32 - UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 36
6.03-2 No resignation or removal of the Trustee or change in
identity of the Trustee for any reason shall cause a termination of the Plans or
this trust.
ARTICLE VII
GENERAL PROVISIONS
------------------
7.01 Interests Not Assignable
------------------------
7.01-1 The interest of a Participant in the trust fund may not
be assigned, pledged or otherwise encumbered, seized by legal process,
transferred or subjected to the claims of the Participant's creditors in any
way.
7.01-2 The Company may not create a security interest in the
trust fund in favor of any of its creditors. The Trustee shall not make payments
from the trust fund of any amounts to creditors of the Company other than
Participants, except as provided in 5.02.
7.01-3 The Participants shall have no interest in the assets
of the trust fund beyond the right to receive payment of Plan benefits and
reimbursement of expenses from such assets subject to the instructions during
Insolvency referred to in 5.02. During Insolvency Administration the
Participants' rights to trust assets shall not be superior to those of any other
general creditors of the Company.
7.02 Amendment
---------
7.02-1 The Company and the Trustee may amend this Trust
Agreement at any time by a written instrument executed by both parties. Except
as provided below, any such amendment after a Special Circumstance or more than
two years after the date hereof may be made only with the Written Consent of
Participants. Notwithstanding the foregoing, any such amendment may be made by
written agreement of the Company and the Trustee without the Written Consent of
Participants if such amendment will not have a material adverse effect on the
rights of any Participant hereunder or, prior to a Special Circumstance, is
necessary to comply with any laws, regulations or other legal requirements.
7.03 Applicable Law
--------------
7.03-1 This trust shall be governed, construed and
administered according to the laws of Michigan, except as preempted by ERISA.
7.04 Agreement Binding on All Parties
--------------------------------
PAGE 33 - UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 37
7.04-1 This Trust Agreement shall be binding upon the heirs,
personal representatives, successors and assigns of any and all present and
future parties.
7.05 Notices and Directions
----------------------
7.05-1 Any notice or direction under this Trust Agreement
shall be in writing and shall be effective when actually delivered or, if
mailed, when deposited postpaid as first-class mail. Mail to a party shall be
directed to the address stated below or to such other address as either party
may specify by notice to the other party. Notices to the Committee shall be sent
to the address of the Company. Notices to Participants who have submitted claims
under 3.03 shall be mailed to the address shown in the claim submission. Until
notice is given to the contrary, notices to the Company and the Trustee shall be
addressed as follows:
Company: KeyCorp
One KeyCorp Plaza
P.O. Box 88
Albany, New York 12201-0088
Attention: Lee Irving
Trustee: NBD Bank, N.A.
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Ken Oswald
7.06 No Implied Duties
-----------------
7.06-1 The duties of the Trustee shall be those stated in this
trust, and no other duties shall be implied.
7.07 Gender, Singular and Plural
---------------------------
7.07-1 All pronouns and any variations thereof shall be deemed
to refer to the masculine or feminine, as the identity of the person or persons
may require. As the context may require, the singular may be read as the plural
and the plural as the singular.
ARTICLE VIII
INSURER
-------
8.01 Insurer Not a Party
-------------------
PAGE 34 UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 38
8.01-1 The Insurer shall not be deemed to be a party to this
Trust Agreement, and its obligations shall be measured and determined solely by
the terms of its Contracts and other agreements executed by it.
8.02 Authority of Trustee
--------------------
8.02-1 The Insurer shall accept the signature of the Trustee
on any documents or papers executed in connection with such Contracts. The
signature of the Trustee shall be conclusive proof to the Insurer that the
person on whose life an application is being made is eligible to have such
Contract issued on his life and is eligible for a Contract of the type and
amount requested.
8.03 Contract Ownership
------------------
8.03-1 The Insurer shall deal with the Trustee as the sole and
absolute owner of the trust's interests in such Contracts and shall have no
obligation to inquire whether any action or failure to act on the part of the
Trustee is in accordance with or authorized by the terms of the Plans or this
Trust Agreement.
8.04 Limitation of Liability
-----------------------
8.04-1 The Insurer shall be fully discharged from any and all
liability for any action taken or any amount paid in accordance with the
direction of the Trustee and shall have no obligation to see to the proper
application of the amounts so paid. The Insurer shall have no liability for the
operation of this Trust Agreement or the Plans, whether or not in accordance
with their terms and provisions.
8.05 Change of Trustee
-----------------
8.05-1 The Insurer shall be fully discharged from any and all
liability for dealing with a party or parties indicated on its records to be the
Trustee until such time as it shall receive at its home office written notice of
the appointment and qualification of a successor Trustee.
IN WITNESS WHEREOF, the Company and the Trustee have caused
this Trust Agreement to be executed by their respective duly authorized officers
on the dates set forth below.
COMPANY: By
-----------------------------------
Its
-----------------------------------
Executed: ___________________, 199_
PAGE 35 UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 39
TRUSTEE: By
-----------------------------------
Its
-----------------------------------
Executed: ___________________, 199_
PAGE 36 UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 40
APPENDIX A
Assumptions and Methodology for
Calculations Required Under 2.01 and 2.04
1. The liability for benefits under each Plan will be calculated using two
different assumptions as to when Participants terminate service:
(a) As of the applicable date under 2.01-3 or 2.04.
(b) Twenty four (24) months after the applicable date, assuming
future compensation continues at current levels, and future
deferrals under deferred compensation plans continue pursuant
to prior elections.
The liability for accrued benefits under each Plan will be the greater
of the liabilities calculated in accordance with (a) and (b) above.
2. Calculations will be based upon the most valuable optional form of
payment available to the Participant.
3. The liability for benefits under deferred compensation or other defined
contribution Plans shall be equal to the deferral or other account
balances (vested and unvested) of Participants as of the applicable
date, plus projected deferrals expected to be made within twenty four
(24) months after the applicable date pursuant to prior elections.
Account balances of Participants under a Plan shall be calculated based
on crediting the highest rate of interest which may become payable to
Participants under the Plan.
4. The liability for benefits under other Plans shall be equal to the
present value of accrued benefits (vested and unvested) of Participants
as of the relevant dates under 1(a) and (b) above.
5. No mortality is assumed prior to the commencement of benefits, except
for purposes of calculating any additional accrued liability under 5
above. Future mortality is assumed to occur in accordance with the 1983
Group Annuity Table Male Rates after the commencement of benefits.
6. The present value of amounts shall be determined using a discount rate
equal to the then current Pension Benefit Guaranty Corporation
immediate annuity rate for a nonmultiemployer plan.
7. Where left undefined above, calculations will be performed in
accordance with generally accepted actuarial principles.
PAGE 37 UMBRELLA TRUST(TM) FOR EXECUTIVES
<PAGE> 1
Exhibit 10.28
KEYCORP
UMBRELLA TRUST(TM) FOR DIRECTORS
JULY 1, 1990
KeyCorp Company
One KeyCorp Plaza
Post Office Box 88
Albany, New York 12201-0088
NBD Bank, N.A. Trustee
611 Woodward Avenue
Detroit, Michigan 48226
<PAGE> 2
TABLE OF CONTENTS
PREAMBLE 1
- --------------------------------------------------------------------------------
ARTICLE I EFFECTIVE DATE; DURATION 3
- --------------------------------------------------------------------------------
1.01 EFFECTIVE DATE AND TRUST YEAR 3
-----------------------------
1.02 DURATION 4
--------
1.02-1 4
1.02-2 4
1.02-3 4
1.02-4 5
1.02-5 5
1.03 IRREVOCABILITY 6
--------------
1.03-1 6
1.03-2 6
1.04 SPECIAL CIRCUMSTANCE 6
--------------------
1.04-1 6
1.04-2 6
1.04-3 6
1.04-4 7
1.04-5 7
1.04.6 7
ARTICLE II TRUST FUND AND FUNDING POLICY 8
- -----------------------------------------------------------------------------
2.01 CONTRIBUTIONS 8
-------------
2.01-1 8
2.01-2 8
2.01-3 9
2.01-4 10
2.01-5 10
2.01-6 11
2.01-7 12
2.01-8 13
2.01-9 13
2.02 INVESTMENTS AND VALUATION 13
-------------------------
2.02-1 13
2.02-2 14
2.02-3 15
2.02-4 15
2.02-5 17
2.03 SUBTRUSTS 18
---------
2.03-1 18
2.03-2 19
Page 2
<PAGE> 3
2.03-3 19
2.04 RECAPTURE OF EXCESS ASSETS 19
--------------------------
2.04-1 19
2.04-2 19
2.04-3 19
2.04-4 20
2.04-5 20
2.05 SUBSTITUTION OF OTHER PROPERTY 21
------------------------------
2.05-1 21
2.05-2 21
2.05-3 21
2.06 ADMINISTRATIVE POWERS OF TRUSTEE 21
--------------------------------
2.06-1 21
2.06-2 24
2.06-3 24
2.06-4 25
ARTICLE III ADMINISTRATION 26
- --------------------------------------------------------------------------------
3.01 COMMITTEE, COMPANY REPRESENTATIVES 26
----------------------------------
3.01-1 26
3.01-2 26
3.02 PAYMENT OF BENEFITS 26
-------------------
3.02-1 26
3.02-2 26
3.02-3 27
3.02-4 27
3.03 DISPUTED CLAIMS 28
---------------
3.03-1 28
3.03-2 28
3.03-3 29
3.04 RECORDS 30
3.04-1 30
3.05 ACCOUNTINGS 30
-----------
3.05-1 30
3.05-2 30
3.05-3 30
3.05-4 30
3.06 EXPENSES AND FEES 30
-----------------
3.06-1 30
3.06-2 31
ARTICLE IV LIABILITY 31
- --------------------------------------------------------------------------------
4.01 INDEMNITY 31
4.01-1 31
4.02 BONDING 31
Page 3
<PAGE> 4
4.02-1 31
ARTICLE V INSOLVENCY 31
- --------------------------------------------------------------------------------
5.01 DETERMINATION OF INSOLVENCY 31
---------------------------
5.01-1 31
5.01-2 32
5.01-3 32
5.01-4 32
5.02 INSOLVENCY ADMINISTRATION 32
-------------------------
5.02-1 32
5.02-2 32
5.02-3 32
5.03 TERMINATION OF INSOLVENCY ADMINISTRATION 33
----------------------------------------
5.03-1 33
5.03-2 33
5.04 CREDITORS' CLAIMS DURING SOLVENCY 33
---------------------------------
5.04-1 33
5.04-2 33
ARTICLE VI SUCCESSOR TRUSTEES 34
- -------------------------------------------------------------------------------
6.01 RESIGNATION AND REMOVAL 34
-----------------------
6.01-1 34
6.01-2 34
6.01-3 34
6.01-4 34
6.02 APPOINTMENT OF SUCCESSOR 34
------------------------
6.02-1 34
6.02-2 34
6.03 ACCOUNTINGS; CONTINUITY 35
-----------------------
6.03-1 35
6.03-2 35
ARTICLE VII GENERAL PROVISIONS 35
- -------------------------------------------------------------------------------
7.01 INTERESTS NOT ASSIGNABLE 35
------------------------
7.01-1 35
7.01-2 35
7.01-3 35
7.02 AMENDMENT 35
---------
7.02-1 35
7.03 APPLICABLE LAW 36
--------------
7.03-1 36
7.04 AGREEMENT BINDING ON ALL PARTIES 36
--------------------------------
7.04-1 36
Page 4
<PAGE> 5
7.05 NOTICES AND DIRECTIONS 36
----------------------
7.05-1 36
7.06 NO IMPLIED DUTIES 37
-----------------
7.06-1 37
7.07 GENDER, SINGULAR AND PLURAL 37
---------------------------
7.07-1 37
ARTICLE VIII INSURER 37
- -------------------------------------------------------------------------------
8.01 INSURER NOT A PARTY 37
-------------------
8.01-1 37
8.02 AUTHORITY OF TRUSTEE 37
--------------------
8.02-1 37
8.03 CONTRACT OWNERSHIP 37
------------------
8.03-1 37
8.04 LIMITATION OF LIABILITY 37
-----------------------
8.04-1 37
8.05 CHANGE OF TRUSTEE 38
-----------------
8.05-1 38
APPENDIX A ASSUMPTIONS AND METHODOLOGY FOR CALCULATIONS
- --------------------------------------------------------
REQUIRED UNDER 2.01 AND 2.04 40
- --------------------------------------------------------------------------------
Page 5
<PAGE> 6
KEYCORP
UMBRELLA TRUST(TM) FOR DIRECTORS
JULY 1, 1990
This Trust Agreement is made and entered into by and between KeyCorp, a
New York corporation (the "Company"), and NBD Bank, N.A., a Michigan banking
corporation (the "Trustee").
The Company hereby establishes with the Trustee a trust to hold all
monies and other assets, together with the income thereon, as shall be paid or
transferred to it hereunder in accordance with the terms and conditions of this
Trust Agreement. The Trustee hereby accepts the trust established under this
Trust Agreement and agrees to hold, IN TRUST, all monies and other assets
transferred to it hereunder for the uses and purposes and upon the terms and
conditions set forth herein, and the Trustee further agrees to discharge and
perform fully and faithfully all of the duties and obligations imposed upon it
under this Trust Agreement.
PREAMBLE
--------
The Company has adopted the following plans (the "Plans") which shall
be subject to this trust:
Deferred Compensation Plan for Directors
Directors' Retirement Plan
Directors' Survivor Benefit Plan
If only one Plan is subject to this trust at any time, references in this Trust
Agreement to the Plans shall refer to such Plan.
The Plans are administered by an administrative committee (the
"Committee") appointed by the Company. If the Plans are administered by more
than one Committee at any time, references in this Trust Agreement to the
Committee which relate to a particular Plan shall refer to the Committee which
administers that Plan and, if the reference does not relate to a particular
Plan, shall refer to all of such Committees. All references in this
Page 1 Umbrella Trust(TM) For Directors
<PAGE> 7
Trust Agreement to the Committee shall refer to the administrative committee(s)
which administers the Plan(s), unless the Company appoints a separate
administrative committee to administer this Trust Agreement. If the Company
appoints a separate administrative committee to administer this Trust
Agreement, references in this Trust Agreement to the Committee shall refer
to such administrative committee which is appointed to administer this Trust
Agreement, unless the context clearly indicates otherwise.
The Plan participants who are covered by this Trust Agreement
("Participants") shall be all persons who are Plan participants prior to a
Special Circumstance, unless the Company specifically designates only specified
individuals or groups of Plan participants as Participants covered by this Trust
Agreement. After a person becomes a Participant covered by this Trust Agreement,
such person will continue to be a Participant at all times thereafter (including
after retirement or other termination of service) until all Plan benefits
payable to such Participant have been paid, the Participant ceases to be
entitled to any Plan benefits, or the Participant's death, whichever occurs
first. The term "Participant" shall not include any beneficiaries of
Participants.
At any time prior to a Special Circumstance, the Company may, by
written notice to the Trustee, cause additional plans to become Plans subject to
this Trust Agreement or cause additional Plan participants to become
Participants covered by this Trust Agreement. Upon and after a Special
Circumstance, the Company shall not add any additional plans or Plan
participants to this Trust Agreement.
The Company shall provide the Trustee with certified copies of the
following items: (i) the Plan documents; (ii) all Plan amendments promptly upon
their adoption; and (iii) lists and specimen signatures of the members of the
Committee(s) which administer the Plan(s) and this Trust Agreement and any other
Company representatives authorized to take action in regard to the
administration of the Plan(s) an this trust, including any changes in the
members of such Committee(s) and of such other representatives promptly
following any such change. The Company shall also provide the Trustee at least
annually with a list of all Participants in each Plan who are covered by this
Trust Agreement.
The purpose of this trust is to give Participants greater security by
placing assets in trust for use only to pay Plan benefits to Participants or, if
the Company becomes
Page 2 Umbrella Trust(TM) For Directors
<PAGE> 8
insolvent, to pay creditors. The Company shall continue to be liable to
Participants to make all payments required under the terms of the Plans to the
extent such payments are not made from this trust. Distributions made from this
trust to Participants or their beneficiaries shall, to the extent of such
distributions, satisfy the Company's obligations to pay benefits to Participants
and their beneficiaries under the Plans.
The Company and the Trustee agree that the trust hereby created has
been established to pay obligations of the Company pursuant to the Plans and is
subject to the rights of general creditors of the Company, and accordingly is a
grantor trust under the provisions of Sections 671 through 677 of the Internal
Revenue Code of 1986, as amended (the "Code"). The Company hereby agrees to
report all items of income, deductions and credits of the trust on its own
income tax returns; and the Company shall have no right to any distributions
from the trust or any claim against the trust for funds necessary to pay any
income taxes which the Company is required to pay on account of reporting the
income of the trust on its income tax returns. No contribution to or income of
the trust is intended to be taxable to Participants until benefits are
distributed to them.
The Plans are solely for directors and are not employee benefit plans
within the meaning of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") and as such are intended not to be covered by ERISA.
ARTICLE I
EFFECTIVE DATE; DURATION
------------------------
1.01 Effective Date and Trust Year
-----------------------------
This trust shall become effective when the Trust Agreement has
been executed by the Company and the Trustee and the Company has made a
contribution to the trust. For tax purposes the trust year shall be the calendar
year. For financial reporting purposes the trust year shall coincide with the
Company's fiscal year. The Company shall report any change in its fiscal year
to the Trustee.
Page 3 Umbrella Trust(TM) For Directors
<PAGE> 9
1.02 Duration
--------
1.02-1 This trust shall continue in effect until all
assets of the trust fund are exhausted through distribution of benefits to
Participants, payment to creditors in the event of insolvency, payment of fees
and expenses of the Trustee, and return of remaining funds to the Company
pursuant to 1.02-2. Notwithstanding the foregoing, this trust shall terminate on
the day before twenty-one (21) years after the death of the last survivor of all
present or future Participants who are now living and those persons now living
who are designated as beneficiaries of any such Participants in accordance with
the terms of any of the Plans.
1.02-2 Except as otherwise provided in 1.02 and 1.03, the
trust shall be irrevocable until all benefits payable under the Plans to
Participants who are covered by this Trust Agreement are paid. The Trustee
shall then return to the Company any assets remaining in the trust.
1.02-3 If the existence of this trust or any Subtrust is
held to be Tax Funding by a federal court and appeals from that holding are no
longer timely or have been exhausted, this trust or such Subtrust shall
terminate. The Board of Directors of the Company (the "Board") may also
terminate this trust or any Subtrust if it determines that either (i) judicial
authority or the opinion of the Treasury Department or Internal Revenue Service
(as expressed in proposed or final regulations, rulings, or similar
administrative announcements) creates a significant risk that the trust or any
Subtrust will be held to be Tax Funding or (ii) the Code requires the trust or
any Subtrust to be amended in a way that creates a significant risk that the
trust or such Subtrust will be held to be Tax Funding, and failure to so amend
the trust or such Subtrust could subject the Company to material penalties. Upon
any such termination, the assets of each terminated Subtrust remaining after
payment of the Trustee's fees and expenses shall be distributed as follows:
(a) Such assets shall be transferred to a
new trust established by the Company which is not deemed to be
Tax Funding, but which is similar in all other respects to
this trust, if the Company determines that it is possible to
establish such a trust.
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<PAGE> 10
(b) If the Company determines that it is not
possible to establish the trust in (a) above, then the assets
shall be distributed to the Company if the Written Consent of
Participants, as defined in 1.02-5, is obtained for such
distribution.
(c) If the Company determines that it is not
possible to establish the trust in (a) above and the Written
Consent of Participants is not obtained to distribute the
assets to the Company, then the assets of the terminated
Subtrust shall be allocated in proportion of (i) the vested
accrued benefits and (ii) then, if any assets remain, the
unvested (if any) accrued benefits of Participants under the
applicable Plan and shall be distributed to such Participants
in lump sums. Any assets remaining shall be distributed to
other Subtrusts or the Company in accordance with 2.04.
Notwithstanding the foregoing, the Trustee shall distribute
Plan benefits to a Participant to the extent that a federal court has held that
the interest of the Participant in this trust causes such Plan benefits to be
includible for federal income tax purposes in the gross income of the
Participant prior to actual payment of such Plan benefits to the Participant and
appeals from that holding are no longer timely or have been exhausted. The
Trustee may also distribute Plan benefits to a Participant, upon direction of
the Committee, if the Trustee reasonably believes that there is a significant
risk that the Participant's interest in the trust fund will be held to be Tax
Funding with respect to such Participant. The provisions of this paragraph shall
also apply to any beneficiary of a Participant.
1.02-4 This trust is "Tax Funding" if it causes the
interest of a Participant in this trust to be includible for federal income tax
purposes in the gross income of the Participant prior to actual payment of Plan
benefits to the Participant.
1.02-5 "Written Consent of Participants" means, for the
purposes of this Trust Agreement, consent in writing by Participants who (i) are
a majority in number and (ii) have more than fifty percent (50%) in value of the
accrued benefits, of the Participants in each Subtrust under this Trust
Agreement on the date of such consent.
Page 5 Umbrella Trust(TM) For Directors
<PAGE> 11
1.03 Irrevocability
--------------
1.03-1 Subject to 1.02, this trust shall become
irrevocable upon the issuance by the Internal Revenue Service of a private
letter ruling establishing that its existence and ownership of assets do not
cause the trust to be deemed to be Tax Funding. If such a ruling is denied or
the Company is informed that a ruling will not be forthcoming, the Company may
revoke the trust and take possession of all assets held by the Trustee for the
trust. This trust shall also become irrevocable if such a ruling is not
requested by the Company within ninety (90) days after the date of establishing
this trust.
1.03-2 Notwithstanding the provisions of 1.03-1, if a
Special Circumstance occurs, the Company may declare the trust to be
irrevocable.
1.04 Special Circumstance
--------------------
1.04-1 Upon the occurrence of a Special Circumstance
described in 1.04-2, the trust assets shall be held for Participants who had
accrued benefits under the Plans before the Special Circumstance occurred,
including benefits accrued for such Participants after the Special Circumstance.
1.04-2 A "Special Circumstance" shall mean a Change in
Control (as defined in 1.04-3) or a Default (as defined in 1.04-6).
1.04-3 A "Change in Control" shall mean a Change in
Control of a nature that would be required to be reported (assuming such event
has not been "previously reported") in response to Item 1(a) of the current
report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") or
any successor thereto; provided that, without limitation, such a Change in
Control shall be deemed to have occurred at such time as:
(a) Any person is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of twenty-five percent (25%) or more
of the combined voting power of the Company's Voting
Securities;
(b) Individuals who constitute the Board of
the Company on the date hereof (the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board
of the Company or the Board
Page 6 Umbrella Trust(TM) For Directors
<PAGE> 12
of any corporation with which the Company mergers, provided
that any person becoming a director subsequent to the date
hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least
three quarters (3/4) of the directors comprising the Incumbent
Board (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a
nominee for director, without objection to such nomination)
shall be, for purposes of this clause (b), considered as
though such person were a member of the Incumbent Board;
(c) If any person or entity acquires an
interest which is determined by the Federal Reserve Board to
constitute a controlling interest in the Company;
(d) The sale by the Company of more than
fifty percent (50%) of the book value of its assets to a
single purchaser or to a group of affiliated purchasers; or
(e) The merger or consolidation of the
Company in a transaction in which the shareholders of the
Company receive less than fifty percent (50%) of the
outstanding voting shares of the continuing corporation.
1.04-4 For purposes of this Trust Agreement, a Change in
Control shall be deemed to have occurred when the Trustee makes a determination
to that effect on its own initiative or upon receipt by the Trustee of written
notice to that effect from the Company. The Chief Executive Officer of the
Company or the Board shall furnish written notice to the Trustee when a Change
in Control occurs under 1.04-3.
1.04-5 "Voting Securities" shall mean any securities of
the Company which vote generally in the election of directors.
1.04.6 A "Default" shall mean a failure by the Company
to contribute, within thirty (30) days of receipt of written notice from the
Trustee, any of the following amounts:
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<PAGE> 13
(a) The full amount of any insufficiency in
assets of any Subtrust that is required to pay any premiums or
loan interest payments on insurance contracts which are held
in the Subtrust;
(b) The full amount of any insufficiency in
assets of any Subtrust that is required to pay any Plan
benefit that is payable upon a direction from the Committee
pursuant to 3.02-3 or upon resolution of a disputed claim
pursuant to 3.03-2; or
(c) Any contribution which is then required
under 2.01.
If, after the occurrence of a Default, the Company at any time
cures such Default by contributing to the trust all amounts which are then
required under subparagraphs (a), (b) and (c) above, it shall then cease to be
deemed that a Default has occurred or that a Special Circumstance has occurred
by reason of such Default.
ARTICLE II
TRUST FUND AND FUNDING POLICY
-----------------------------
2.01 Contributions
-------------
2.01-1 The Company shall contribute to the trust such
amounts as are required to purchase or hold insurance contracts in the trust and
to pay premiums and loan interest payments thereon, all as described in 2.02-1.
The Company shall also contribute to the trust such amounts as are necessary to
enable the Trustee to make all Plan benefit payments to Participants when due,
unless the Company makes such payments directly, whenever the Trustee advises
the Company that the assets of the trust or Subtrust, other than insurance
contracts or amounts needed to pay future premiums or loan interest payments on
insurance contracts, are insufficient to make such payments. In its discretion,
the Company may contribute to the trust such additional amounts or assets as the
Committee may reasonably decide are necessary to provide security for all Plan
benefits payable to Participants covered by this trust.
2.01-2 Whenever the Company makes a contribution to the
trust, the Company shall designate the Plan(s) and Subtrust(s) to which such
contribution (or
Page 8 Umbrella Trust(TM) For Directors
<PAGE> 14
designated portions thereof) shall be allocated. The Company may also make
contributions to a special reserve for payment of future fees and expenses of
the Trustee and future trust fees and expenses for legal and administrative
proceedings. The Company shall designate a separate Subtrust to receive such
contributions, which shall be distinct from the other Subtrust(s) established
for the Plan(s).
A trust funding deposit for payment of future insurance
premiums ("Trust Funding Deposit") shall be established in each Subtrust which
holds insurance contracts. The Company shall designate the portion of each
contribution which shall be allocated to the Trust Funding Deposit for a
particular Subtrust. The Trust Funding Deposit for a Subtrust shall normally be
used only to pay premiums on insurance contracts which are held in that
Subtrust. However, if necessary, the Trust Funding Deposit may be used to pay
Plan benefits which are payable to Participants from the Subtrust in the sole
discretion of the Trustee.
2.01-3 The Company shall, immediately upon the occurrence of a
Special Circumstance (as defined in 1.04-2) or a Potential Change in Control (as
defined in 2.01-7), and at least annually following a Special Circumstance,
contribute to the trust the sum of the following:
(a) The present value of the remaining
premiums and the interest on any policy loans on insurance
contracts held in the trust to the extent the Trust Funding
Deposit is determined to be inadequate to pay such remaining
premiums and policy loan interest.
(b) The amount by which the present value of
all benefits (vested and unvested) payable under the Plans on
a pretax basis to Participants covered by this trust exceeds
the value of all trust assets. Each Participant's benefit
under any Plan for purposes of calculating present value shall
be the highest benefit the Participant would have accrued
under the Plan within the twenty-four (24) months following
such event, assuming that the Participant's service continues
for twenty-four (24) months at the same rate of compensation,
that the Participant continues to make future deferrals under
deferred compensation plans in accordance
Page 9 Umbrella Trust(TM) For Directors
<PAGE> 15
with his prior elections, and that the Participant is
terminated at a time when he is entitled to receive any
benefit enhancement provided by the Plan upon a Change in
Control. Any benefit enhancement or right with respect to the
Plans which is provided under employment or severance
agreements of Participants shall be taken into account in
making the foregoing calculation.
(c) The present value of a reasonable
estimate provided by the Trustee of its fees and expenses due
over the remaining duration of the trust. Unless the Trustee
estimates a greater amount, such amount shall be presumed to
be equal to two percent (2%) of the present value of all
accrued benefits (vested and unvested) payable under the Plans
on a pretax basis to Participants covered by this trust.
(d) The present value of a reasonable
estimate provided by the Trustee of the anticipated fees and
expenses for the purpose of commencing or defending lawsuits
or legal or administrative proceedings over the remaining
duration of the trust. Unless the Trustee estimates a greater
amount, such amount shall be presumed to be equal to two
percent (2%) of the present value of all accrued benefits
(vested and unvested) payable under the Plans on a pretax
basis to Participants covered by this trust.
2.01-4 The calculations required under 2.01-3 shall be based
on the terms of the Plans and the actuarial assumptions and methodology set
forth in Appendix A attached hereto. Before a Special Circumstance, Appendix A
may be revised by the Committee from time to time. After a Special Circumstance,
Appendix A may be revised only with the Written Consent of Participants.
2.01-5 Whenever the Company makes a contribution to the
trust pursuant to 2.01-3, it shall furnish the Trustee with a written statement
setting forth the computation of all required amounts contributed under
subparagraphs (a), (b), (c) and (d) of 2.01-3.
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<PAGE> 16
Whenever a Special Circumstance occurs or the Company makes a
contribution pursuant to 2.01-3, the Company shall deliver to the Trustee,
contemporaneously with or immediately prior to such event, a schedule (the
"Payment Schedule") indicating the amounts payable under each Plan in respect of
each Participant, or providing a formula or instructions acceptable to the
Trustee for determining the amounts so payable, the form in which such amounts
are to be paid (as provided for or available under the Plans) and the time of
commencement for payment of such amounts. The Payment Schedule shall include any
other necessary instructions with respect to Plan benefits (including legal
expenses) payable under the Plans and any conditions with respect to any
Participant's entitlement to, and the Company's obligation to provide, such
benefits, and such instructions may be revised from time to time to the extent
so provided under the Plans or this Trust Agreement.
A modified Payment Schedule shall be delivered by the Company
to the Trustee at each time that (i) additional amounts are required to be paid
by the Company to the Trustee pursuant to 2.01-3, (ii) Excess Assets are
returned to the Company pursuant to 2.04, and (iii) upon the occurrence of any
event requiring a modification of the Payment Schedule. The Company shall also
furnish a Payment Schedule or modified Payment Schedule for any or all Plan(s)
upon request by the Trustee at any other time. Whenever the Company is required
to deliver to the Trustee a Payment Schedule or a modified Payment Schedule, the
Company shall also deliver at the same time to each Participant the respective
portion of the Payment Schedule or modified Payment Schedule that sets forth the
amount payable to that Participant.
2.01-6 Any contribution to the trust which is made by
the Company under 2.01-3 on account of a Potential Change in Control shall be
returned to the Company following one (1) year after delivery of such
contribution to the Trustee unless a Change in Control shall have occurred
during such one (1) year period, if the Company requests such return within
sixty (60) days after such one (1) year period. If no such request is made
within this sixty (60) day period, the contribution shall become a permanent
part of the trust fund. The one (1) year period shall recommence in the event of
and upon the date of any subsequent Potential Change in Control.
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<PAGE> 17
2.01-72. A "Potential Change in Control" shall be deemed to
occur if:
(a) Any person, as defined in Section
13(d)(3) of the Act, other than a trustee or other fiduciary
holding securities under an employee benefit plan of the
Company delivers to the Company a statement containing the
information required by Schedule 13-D under the Act, or any
amendment to any such statement, that shows that such person
has acquired, directly or indirectly, the beneficial ownership
of (i) more than twenty-four and nine-tenths percent (24.9%)
of any class of equity security of the Company entitled to
vote as single class in the election or removal from office of
directors, or (ii) more than twenty-four and nine-tenths
percent (24.9%) of the voting power of any group of classes of
equity securities of the Company entitled to vote as a single
class in the election or removal from office of directors;
(b) The Company becomes aware that
preliminary or definitive copies of a proxy statement and
information statement or other information have been filed
with the Securities and Exchange Commission pursuant to Rule
14a-6, Rule 14a-11, Rule 14c-5, or Rule 14f-1 under the Act
relating to a Potential Change in Control of the Company;
(c) Any person delivers to the Company
pursuant to Rule 14d-3 under the Act a Tender Offer Statement
relating to Voting Securities of the Company;
(d) Any person (other than the Company)
publicly announces an intention to take actions which if
consummated would constitute a Change in Control;
(e) The Company enters into an agreement or
arrangement, the consummation of which would result in the
occurrence of a Change in Control;
(f) The Board approves a proposal, or the
Company enters into an agreement, which if consummated would
constitute a Change in Control; or
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<PAGE> 18
(g) The Board adopts a resolution to the
effect that, for purposes of this Trust Agreement, a Potential
Change in Control has occurred.
Notwithstanding the foregoing, a Potential Change in Control
shall not be deemed to occur as a result of any event described in (a) through
(f) above, if directors who were a majority of the members of the Board prior to
such event determine that the event shall not constitute a Potential Change in
Control and furnish written notice to the Trustee of such determination.
2.01-8 For purposes of this trust, a Potential Change in
Control shall be deemed to have occurred when the Trustee makes a determination
to that effect on its own initiative or upon receipt by the Trustee of written
notice to that effect from the Company. The Chief Executive Officer of the
Company or the Board shall furnish written notice to the Trustee when a
Potential Change in Control occurs under 2.01-7.
2.01-9 The Trustee shall accept the contributions made by the
Company and hold them as a trust fund for the payment of benefits under the
Plans. The Trustee shall not be responsible for determining the required amount
of contributions or for collecting any contribution not voluntarily paid, nor
shall the Trustee be responsible for the adequacy of the trust fund to meet and
discharge all liabilities under the Plans. Contributions may be in cash or in
other assets specified in 2.02.
2.02 Investments and Valuation
-------------------------
2.02-1 The trust fund shall be invested primarily in
insurance contracts ("Contracts"). Such Contracts may be purchased by the
Company and transferred to the Trustee as in-kind contributions or may be
purchased by the Trustee with the proceeds of cash contributions (or may be
purchased upon direction by the Committee pursuant to 2.02-2 or an Investment
Manager pursuant to 2.02-4). The Company's contributions to the trust shall
include sufficient cash to make projected premium payments on such Contracts and
payments of interest due on loans secured by the cash value of such Contracts,
unless the Company makes these payments directly. The Trustee shall have the
power to exercise all rights, privileges, options and elections granted by or
permitted under any Contract or under the rules of the insurance company issuing
the Contract
Page 13 Umbrella Trust(TM) For Directors
<PAGE> 19
("Insurer"), including the right to obtain policy loans against the cash value
of the Contract. Prior to a Special Circumstance, the exercise by the Trustee of
any incidents of ownership under any Contract shall be subject to the direction
of the Committee. The Committee may from time to time direct the Trustee in
writing as to the designation of the beneficiary of a Participant under a
Contract for any part of the death benefits payable to such beneficiary
thereunder, and the Trustee shall file such designation with the Insurer.
Notwithstanding anything contained herein to the contrary,
neither the Company nor the Trustee shall be liable for the refusal of any
Insurer to issue or change any Contract or Contracts or to take any other action
requested by the Trustee; nor for the form, genuineness, validity, sufficiency
or effect of any Contract or Contracts held in the trust; nor for the act of any
person or persons that may render any such Contract or Contracts null and void;
nor for failure of any Insurer to pay the proceeds of any such Contract or
Contracts as and when the same shall become due and payable; nor for any delay
in payment resulting from any provision contained in any such Contract or
Contracts; nor for the fact that for any reason whatsoever (other than its own
negligence or willful misconduct) any Contracts shall lapse or otherwise become
uncollectible.
2.02-2 Prior to a Special Circumstance, the Trustee shall
invest the trust fund in accordance with written directions by the Committee,
including directions for exercising rights, privileges, options and elections
pertaining to Contracts and for borrowing from Contracts or other borrowing by
the Trustee. The Trustee shall act only as an administrative agent in carrying
out directed investment transactions and shall not be responsible for the
investment decision. If a directed investment transaction violates any duty to
diversify, to maintain liquidity or to meet any other investment standard under
this trust or applicable law, the entire responsibility shall rest upon the
Company. The Trustee shall be fully protected in acting upon or complying with
any investment objectives, guidelines, restrictions or directions provided in
accordance with this paragraph.
After a Special Circumstance the Committee shall no longer be
entitled to direct the Trustee with respect to the investment of the trust fund,
unless the Written Consent of Participants is obtained for the Committee to
continue to have this right pursuant to 2.02-2. If such Written Consent of
Participants is not obtained, the trust fund
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shall be invested by the Trustee pursuant to 2.02-3 or by an Investment
Manager pursuant to 2.02-4. The Trustee or Investment Manager shall have the
right to invest the Trust Fund primarily in insurance contracts pursuant to
2.02-1.
Notwithstanding the foregoing, no investments shall be made at
any time in any securities, instruments, accounts or real property of the
Company, and the Trustee may not loan trust fund assets to the Company, or
permit the Company to pledge trust fund assets as collateral for loans to the
Company.
The Committee may not direct the Trustee to make any
investments, and the Company may not make any contributions to the trust fund,
which are not permissible investments under 2.02-2 and 2.02-3.
2.02-3 If the Trustee does not receive instructions from
the Committee for the investment of part or all of the trust fund for a period
of at least sixty (60) days, the Trustee shall invest and reinvest the assets of
the trust fund as the Trustee, in its sole discretion, may deem appropriate, in
accordance with applicable law. Permissible investments shall be limited to the
following:
(a) Insurance or annuity contracts;
(b) Preferred or common stocks, bonds,
notes, debentures, commercial paper, certificates of deposit,
money market funds, obligations of governmental bodies, or
other securities;
(c) Interest-bearing savings or deposit
accounts with any federally-insured bank or savings and loan
association (including the Trustee or an affiliate of the
Trustee); or
(d) Shares or certificates of participation
issued by investment companies, investment trusts, mutual
funds, or common or pooled investment funds (including any
common or pooled investment fund now or hereafter maintained
by the Trustee or an affiliate of the Trustee).
2.02-4 The Company may appoint one or more investment
managers ("Investment Manager") subject to the following provisions:
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(a) The Company may appoint one or more
Investment Managers to manage (including the power to acquire
and dispose of) a specified portion of the assets of the trust
(hereinafter referred to as that Investment Manager's
"Segregated Fund"). Any Investment Manager so appointed must
be either (A) an investment adviser registered as such under
the Investment Advisers Act of 1940, (B) a bank, as defined in
that Act, or (C) an insurance company qualified to perform
services in the management, acquisition or disposition of the
assets of trusts under the laws of more than one state; and
any Investment Manager so appointed must acknowledge in
writing to the Company and to the Trustee that it is a
fiduciary with respect to the Plans. The Trustee, until
notified in writing to the contrary, shall be fully protected
in relying upon any written notice of the appointment of an
Investment Manager furnished to it by the Company. In the
event of any vacancy in the office of Investment Manager, the
Trustee shall be deemed to be the Investment Manager of that
Investment Manager's Segregated Fund until an Investment
Manager thereof shall have been duly appointed; and in such
event, until an Investment Manager shall have been so
appointed and qualified, references herein to the Trustee's
acting in respect of that Segregated Fund pursuant to
direction from the Investment Manager shall be deemed to
authorize the Trustee to act in its own discretion in managing
and controlling the assets of that Segregated Fund, and
subparagraphs (b) and (c) below shall have no effect with
respect thereto and shall be disregarded.
(b) Each Investment Manager appointed
pursuant to subparagraph (a) above shall have exclusive
authority and discretion to manage and control the assets of
its Segregated Fund and may invest and reinvest the assets of
the Segregated Fund in any investments in which the Trustee is
authorized to invest under 2.02-3, subject to the terms and
limitations of any written instruments pertaining to its
appointment as Investment Manager. Copies of any such written
instruments shall be
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furnished to the Trustee. In addition, each Investment Manager
from time to time and at any time may delegate to the Trustee
(or in the event of any vacancy in the office of Investment
Manager, the Trustee may exercise in respect of that
Investment Manager's Segregated Fund) discretionary authority
to invest and reinvest otherwise uninvested cash held in its
Segregated Fund temporarily in bonds, notes or other evidences
of indebtedness issued or fully guaranteed by the United
States of America or any agency or instrumentality thereof, or
in other obligations of a short-term nature, including prime
commercial paper obligations or part interests therein.
(c) Unless the Trustee knowingly
participates in, or knowingly undertakes to conceal, an act or
omission of an Investment Manager, knowing such act or
omission to be a breach of the fiduciary responsibility of the
Investment Manager with respect to the Plans, the Trustee
shall not be liable for any act or omission of any Investment
Manager and shall not be under any obligation to invest or
otherwise manage the assets of the Plans that are subject to
the management of any Investment Manager. Without limiting the
generality of the foregoing, the Trustee shall not be liable
by reason of taking or refraining from taking at the direction
of an Investment Manager any action in respect of that
Investment Manager's Segregated Fund. The Trustee shall be
under no duty to question or to make inquiries as to any
direction or order or failure to give direction or order by
any Investment Manager; and the Trustee shall be under no duty
to make any review of investments acquired for the trust at
the direction or order of any Investment Manager and shall be
under no duty at any time to make any recommendation with
respect to disposing of or continuing to retain any such
investment.
2.02-5 The values of all assets in the trust fund shall
be reasonably determined by the Trustee and may be based on the determination of
qualified independent
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parties or Experts (as described in 2.06-2). At any time before or after a
Special Circumstance, the Trustee shall have the right to secure confirmation of
value by a qualified independent party or Expert for all property of the trust
fund, as well as any property to be substituted for other property of the trust
fund pursuant to 2.05. Before a Special Circumstance the Company may designate
one or more independent parties, who are acceptable to the Trustee, to determine
the fair market value of any notes, securities, real property or other assets.
Any insurance or annuity contracts held in the trust fund
shall be valued at their cash surrender value, except for purposes of
substituting other property for such Contracts pursuant to 2.05-2. All
securities shall be valued net of costs to sell, or register for sale, such
securities. All real property shall be valued net of costs to sell such real
property. All other assets of the trust fund shall be valued at their fair
market value.
The Company shall pay all costs incurred in valuing the assets
of the trust fund, including any assets to be substituted for other assets of
the trust fund pursuant to 2.05. If not so paid, these costs shall be paid from
the trust fund. The Company shall reimburse the trust fund within thirty (30)
days after receipt of a bill from the Trustee for any such costs paid out of the
trust fund.
2.03 Subtrusts
---------
2.03-1 The Trustee shall establish a separate subtrust
("Subtrust") for each Plan to which it shall credit contributions it receives
which are earmarked for that Plan and Subtrust. The Trustee shall also establish
a separate Subtrust to which it shall credit contributions it receives which are
earmarked to the special reserve for payment of future fees and expenses of the
Trustee and future trust fees and expenses for legal and administrative
proceedings. Each Subtrust shall reflect an undivided interest in assets of the
trust fund and shall not require any segregation of particular assets, except
that an insurance contract covering benefits of a particular Plan shall be held
in the Subtrust for the Plan. All contributions shall be designated by the
Company for a particular Subtrust. However, any contribution received by the
Trustee which is not earmarked for a particular Subtrust shall be allocated
among the Subtrusts as the Trustee may determine in its sole discretion.
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The Committee may direct the Trustee to maintain a separate
sub-account within each Subtrust for a Plan for each Participant who is covered
by the Subtrust. Each sub-account in a Subtrust shall reflect an individual
interest in assets of the Subtrust and, as much as possible, shall operate in
the same manner as if it were a separate Subtrust.
2.03-2 The Trustee shall allocate investment earnings
and losses and expenses of the trust fund among the Subtrusts in proportion to
their balances, except that changes in the value of an insurance contract
(including premiums and interest on loans on an insurance contract) shall be
allocated to the Subtrust for which it is held. Payments to creditors during
Insolvency Administration under 5.02 shall be charged against the Subtrusts in
proportion to their balances, except that payment of Plan benefits to a
Participant as a general creditor shall be charged against the Subtrust for that
Plan.
2.03-3 Assets allocated to a Subtrust for one Plan may
not be utilized to provide benefits under any other Plans until all benefits
under such Plan have been paid in full, except that Excess Assets of a Subtrust
may be transferred to other Subtrusts pursuant to 2.04-5.
2.04 Recapture of Excess Assets
--------------------------
2.04-1 In the event the trust shall hold Excess Assets,
the Committee, at its option, may direct the Trustee to return part or all of
such Excess Assets to the Company.
2.04-2 "Excess Assets" are assets of the trust exceeding
one hundred twenty-five percent (125%) of the amounts described in subparagraphs
(a), (b), (c) and (d) of 2.01-3.
2.04-3 The calculation required by 2.04-2 shall be based
on the terms of the Plans and the actuarial assumptions and methodology set
forth in Appendix A. Before a Special Circumstance, the calculation shall be
made by the Company or a qualified actuary or consultant selected by the
Committee. After a Special Circumstance, the calculation shall be made by a
qualified actuary or consultant selected by the Trustee, provided the Committee
may select a qualified actuary or consultant with the Written Consent of
Participants.
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2.04-4 Excess Assets shall be returned to the Company in
the following order of priority, unless the Trustee determines otherwise to
protect the participants:
(a) Cash and cash equivalents;
(b) All taxable investments of the trust
(other than cash and cash equivalents and Contracts with
Insurers), in such order as the Committee may request;
(c) All non-taxable investments of the trust
(other than cash and cash equivalents and Contracts with
Insurers), in such order as the Committee may request; and
(d) Contracts with Insurers, proceeding in
order of Contracts on insureds from the youngest to the oldest
ages based on the insured's attained age on the date of return
of Excess Assets.
2.04-5 If any Subtrust holds Excess Assets, the Committee may
direct the Trustee to transfer such Excess Assets to other Subtrusts, either
ratably in proportion to the unfunded liabilities to Participants for Plan
benefits of all other Subtrusts or first to the other Subtrust(s) with the
largest percentage of such unfunded liabilities. After a Special Circumstance
the Trustee may also transfer Excess Assets of a Subtrust to other Subtrusts
upon its own initiative in such amounts as it may determine in its sole
discretion.
Excess Assets of a Subtrust for a Plan shall be determined in
the same manner as Excess Assets of the trust are determined pursuant to 2.04-2
and 2.04-3. In making this determination each Subtrust for a Plan shall bear its
allocable share of the amounts described in subparagraphs (a) and (b) of 2.01-3
which relate to that Plan. The Trustee, in its sole discretion, shall determine
whether there are Excess Assets in the separate Subtrust which constitutes the
reserve for payment of future fees and expenses of the Trustee and future trust
fees and expenses for legal and administrative proceedings. Excess Assets for
this Subtrust shall be any amounts which the Trustee reasonably determines will
not be needed in the future for payment of such fees and expenses.
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2.05 Substitution of Other Property
------------------------------
2.05-1 The Company shall have the power to reacquire
part or all of the assets or collateral held in the trust fund at any time, by
simultaneously substituting for it other readily marketable property of
equivalent value, net of any costs or disposition; provided that, if the trust
holds Excess Assets, the property which is substituted shall not be required to
be of equivalent value, but only of sufficient value so that the trust will
retain Excess Assets of not less than $10,000 after such substitution. The
property which is substituted must be among the types of investments authorized
under 2.02 and may not be less liquid or marketable or less well secured than
the property for which it is substituted, as determined by the Trustee. Such
power is exercisable in a nonfiduciary capacity and may be exercised without the
approval or consent of Participants or any other person.
2.05-2 Except for insurance contracts, the value of any assets
reacquired under 2.05-1 shall be determined as provided in 2.02-5. The value of
any insurance contract reacquired under 2.05-1 shall be the present value of
future projected cash flow or benefits payable under the Contract, but not less
than the cash surrender value. The projection shall include death benefits based
on reasonable mortality assumptions, including known facts specifically relating
to the health of the insured and the terms of the Contract to be reacquired.
Values shall be reasonably determined by the Trustee and may be based on the
determination of qualified independent parties and Experts, as described in
2.02-5 and 2.06-2. The Trustee shall have the right to secure confirmation of
value by a qualified independent party or Expert for all property to be
substituted for other property.
2.05-3 The Company shall pay all costs incurred in valuing the
assets of the trust fund, including any assets to be substituted for other
assets of the trust fund pursuant to 2.05. If not so paid, these costs shall be
paid from the trust fund. The Company shall reimburse the trust fund within
thirty (30) days after receipt of a bill from the Trustee for any such costs
paid out of the trust fund.
2.06 Administrative Powers of Trustee
--------------------------------
2.06-1 Subject in all respects to applicable provisions of
this Trust Agreement and the Plans, including limitations on investment of the
trust fund, the Trustee
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shall have the rights, powers and privileges of an absolute owner when dealing
with property of the trust, including (without limiting the generality of the
foregoing) the powers listed below:
(a) To sell, convey, transfer, exchange,
partition, lease, and otherwise dispose of any of the assets
of the trust at any time held by the Trustee under this Trust
Agreement;
(b) To exercise any option, conversion
privilege or subscription right given the Trustee as the owner
of any security held in the trust; to vote any corporate stock
either in person or by proxy, with or without power of
substitution; to consent to or oppose any reorganization,
consolidation, merger, readjustment of financial structure,
sale, lease or other disposition of the assets of any
corporation or other organization, the securities of which may
be an asset of the trust; and to take any action in connection
therewith and receive and retain any securities resulting
therefrom;
(c) To deposit any security with any
protective or reorganization committee, and to delegate to
such committee such power and authority with respect thereto
as the Trustee may deem proper, and to agree to pay out of the
trust such portion of the expenses and compensation of such
committee as the Trustee, in its discretion, shall deem
appropriate;
(d) To cause any property of the trust to be
issued, held or registered in the name of the Trustee as
trustee, or in the name of one or more of its nominees, or one
or more nominees of any system for the central handling of
securities, or in such form that title will pass by delivery,
provided that the records of the Trustee shall in all events
indicate the true ownership of such property, or to deposit
any securities held in the trust with a securities depository;
(e) To renew or extend the time of payment
of any obligation due to or become due;
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(f) To commence or defend lawsuits or legal
or administrative proceedings; to compromise, arbitrate or
settle claims, debts or damages in favor of or against the
trust; to deliver or accept, in either total or partial
satisfaction of any indebtedness or other obligation, any
property; to continue to hold for such period of time as the
Trustee may deem appropriate any property so received; and to
pay all costs and reasonable attorneys' fees in connection
therewith out of the assets of the trust;
(g) To foreclose any obligation by judicial
proceeding or otherwise;
(h) Subject to 2.02, to borrow money from
any person in such amounts, upon such terms and for such
purposes as the Trustee, in its discretion, may deem
appropriate; and in connection therewith, to execute
promissory notes, mortgages or other obligations and to
pledge or mortgage any trust assets as security; and to lend
money on a secured or unsecured basis to any person other
than a party in interest;
(i) To manage any real property in the trust
in the same manner as if the Trustee were the absolute owner
thereof, including the power to lease the same for such term
or terms within or beyond the existence of the trust and upon
such conditions as the Trustee may deem proper; and to grant
options to purchase or acquire options to purchase any real
property;
(j) To appoint one or more persons or
entities as ancillary trustee or sub-trustee for the purpose
of investing in and holding title to real or personal property
or any interest therein located outside the State of Michigan;
provided that any such ancillary trustee or sub-trustee shall
act with such power, authority, discretion, duties, and
functions of the Trustee as shall be specified in the
instrument establishing such ancillary trust or sub-trust,
including (without limitation) the power to receive, hold and
manage property, real or personal, or undivided interests
therein; and
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the Trustee may pay the reasonable expenses and compensation
of such ancillary trustees or sub-trustees out of the trust;
(k) To hold such part of the assets of the
trust uninvested for such limited periods of time as may be
necessary for purposes of orderly trust administration or
pending required directions, without liability for payment of
interest;
(l) To determine how all receipts and
disbursements shall be credited, charged or apportioned as
between income and principal, and the decision of the Trustee
shall be final and not subject to question by any Participant
or beneficiary of the trust; and
(m) Generally to do all acts, whether or not
expressly authorized, which the Trustee may deem necessary or
desirable for the orderly administration or protection of the
trust fund.
2.06-2 The Trustee may engage one or more qualified
independent attorneys, accountants, actuaries, appraisers, consultants or other
experts (an "Expert") for any purpose, including the determination of Excess
Assets pursuant to 2.04 or disputed claims pursuant to 3.03. The determination
of an Expert shall be final and binding on the Company, the Trustee, and all of
the Participants unless, within thirty (30) days after receiving a determination
deemed by any Participant to be adverse, any Participant initiates suit in a
court of competent jurisdiction seeking appropriate relief. The Trustee shall
have no duty to oversee or independently evaluate the determination of the
Expert. The Trustee shall be authorized to pay the fees and expenses of any
Expert out of the assets of the trust fund.
2.06-3 The Company shall from time to time pay taxes
(references in this Trust Agreement to the payment of taxes shall include
interest and applicable penalties) of any and all kinds whatsoever which at any
time are lawfully levied or assessed upon or become payable in respect of the
trust fund, the income or any property forming a part thereof, or any security
transaction pertaining thereto. To the extent that any taxes levied or assessed
upon the trust fund are not paid by the Company or contested by the Company
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pursuant to the last sentence of this paragraph, the Trustee shall pay such
taxes out of the trust fund, and the Company shall upon demand by the Trustee
deposit into the trust fund an amount equal to the amount paid from the trust
fund to satisfy such tax liability. If requested by the Company, the Trustee
shall, at the Company's expense, contest the validity of such taxes in any
manner deemed appropriate by the Company or its counsel, but only if it has
received an indemnity bond or other security satisfactory to it to pay any
expenses of such contest. Alternatively, the Company may itself contest the
validity of any such taxes, but any such contest shall not affect the Company's
obligation to reimburse the trust fund for taxes paid from the trust fund.
2.06-4 Notwithstanding any provisions in the Plans or this
Trust Agreement to the contrary, the Company and Trustee may withhold any
benefits payable to a beneficiary as a result of the death of the Participant or
any other beneficiary until such time as (a) the Company or Trustee is able to
determine whether a generation-skipping transfer tax, as defined in Chapter 13
of the Code, or any substitute provision therefore, is or may become payable by
the Company or Trustee as a result of benefit payments to the beneficiary; and
(b) the Company or Trustee has determined the amount of generation-skipping
transfer tax that is or may become due, including interest thereon. If any such
tax is or may become payable, the Company or Trustee shall reduce the benefits
otherwise payable hereunder to such beneficiary by such amounts as the Company
or Trustee feels are reasonably necessary to pay any generation-skipping
transfer tax and interest thereon which is or may become due.
Any excess amounts so withheld from a beneficiary, which are
not used to pay generation-skipping transfer tax and interest thereon, shall be
payable to the beneficiary as soon as there is a final determination of the
applicable generation-skipping transfer tax and interest thereon. Whenever any
amounts which were withheld are paid to any beneficiary, interest shall be
payable by the Company or Trustee to such beneficiary for the period of time
between the date when such amounts would otherwise have been paid to the
beneficiary and the date when such amounts are actually paid to the beneficiary
after the aforementioned generation-skipping transfer tax determinations are
made and the
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amount of benefits payable to the beneficiary is finally determined.
Interest shall be payable at the same rate as provided under 5.03-2.
ARTICLE III
ADMINISTRATION
--------------
3.01 Committee, Company Representatives
----------------------------------
3.01-1 The Committee is the plan administrator for the Plans
and has general responsibility to interpret the Plans and determine the rights
of Participants and beneficiaries.
3.01-2 The Trustee shall be given the names and specimen
signatures of the members of the Committee and any other Company representatives
authorized to take action in regard to the administration of the Plans and this
trust. The Trustee shall accept and rely upon the names and signatures until
notified of any change. Instructions to the Trustee shall be signed for the
Committee by the Chairman or such other person as the Committee may designate
and for the Company by any officer or such other representative as the Company
may designate.
3.02 Payment of Benefits
-------------------
3.02-1 Benefit payments shall normally be made directly by the
Company. If such payments are not made when due, after sixty (60) days written
notice to the Company to permit the Company to cure any such Default, unless
such notice is waived by the Company, the Trustee shall pay benefits to
Participants and beneficiaries on behalf of the Company in satisfaction of its
obligations under the Plans. Benefit payments from a Subtrust shall be made in
full until the assets of the Subtrust are exhausted. Payments due on the date
the Subtrust is exhausted shall be covered pro rate. The Company's obligation
shall not be limited to the trust fund, and a Participant or beneficiary shall
have a claim against the Company for any payment not made by the Trustee.
3.02-2 A Participant's entitlement to benefits under the Plans
shall be determined by the Committee. Any benefit enhancement or right with
respect to the Plans which is provided under employment or severance agreements
of Participants shall be
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<PAGE> 32
taken into account in making the foregoing determination. Any claim for such
benefits shall be considered and reviewed under the claims procedures
established for the Plans.
3.02-3 The Trustee shall make payments in accordance with
written directions from the Committee or consultant designated by the Committee,
except as provided in 3.03. The Trustee may request such directions from the
Committee or consultant designated by the Committee. If the Committee or
consultant designated by the Committee fails to furnish written directions to
the Trustee, within sixty (60) days after receiving a written request for
directions from the Trustee, the Trustee may make payments in accordance with
written directions from Participants or may determine the amounts due under the
terms of the Plans in reliance upon the most recent Payment Schedule furnished
to it by the Company.
The Trustee shall make any required income tax withholding and
shall pay amounts withheld to taxing authorities on the Company's behalf or
determine that such amounts have been paid by the Company.
3.02-4 The Trustee shall use the assets of the trust or any
Subtrust to make benefit payments or other payments in the following order of
priority, unless the Trustee determines otherwise to protect the Participants:
(a) Cash contributions from the Company
which are specifically designated to enable the Trustee to
make such benefit payments or other payments when due;
(b) Cash and cash equivalents of the trust
or Subtrust;
(c) All taxable investments of the trust or
Subtrust (other than cash and cash equivalents and Contracts
with Insurers), in such order as the Trustee may determine;
(d) All non-taxable investments of the trust
or Subtrust (other than cash and cash equivalents and
Contracts with Insurers), in such order as the Trustee may
determine; and
(e) Contracts with Insurers held in the
trust or Subtrust, in such order and manner (for example,
making tax-free withdrawals prior to any taxable withdrawals
from Contracts) as the Trustee may determine.
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Unless the Trustee determines otherwise to protect the
Participants, the Trustee shall make tax-free withdrawals
prior to any taxable withdrawals from Contracts; shall make
withdrawals from Contracts to the premium vanish point before
surrendering any Contracts; and shall surrender Contracts,
only if necessary, proceeding in order of Contracts on
insureds from the youngest to the oldest ages based on the
insured's age on the date of surrender of the Contract.
Notwithstanding the foregoing, the Trustee may use the assets
of the trust or any Subtrust in any other order of priority directed by the
Committee with the Written Consent of Participants affected thereby.
3.03 Disputed Claims
---------------
3.03-1 A Participant covered by this Trust whose claim has
been denied by the Committee, or who has received no response to the claim
within sixty (60) days after submission, may submit the claim to the Trustee.
The Trustee shall give written notice of the claim to the Committee. If the
Trustee receives no written response from the Committee within thirty (30) days
after the date the Committee is given written notice of the claim, the Trustee
shall pay the Participant the amount claimed, unless it determines that a lesser
amount is due under the terms of the Plans. If a written response is received
within such thirty (30) days, the Trustee shall consider the claim, including
the Committee's response. If the merits of the claim depend on compensation,
service or other data in the possession of the Company and it is not provided,
the Trustee may rely upon information provided by the Participant. Any benefit
enhancement or right with respect to the Plans which is provided under
employment or severance agreements of Participants shall be taken into account
in making the foregoing determination.
3.03-2 The Trustee shall give written notice to the
Participant and the Committee of its decision on the claim. If the decision is
to grant the claim, the Trustee shall make payment to the Participant. The
Trustee may decline to decide a claim and may file suit to have the matter
resolved by a court of competent jurisdiction. All of the
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<PAGE> 34
Trustee's expenses in the court proceeding, including attorneys' fees, shall
be allowed as administrative expenses of the trust.
Either the Participant or the Company may challenge the
Trustee's decision by filing suit in a court of competent jurisdiction. If no
such suit is filed within sixty (60) days after delivery of written notice of
the Trustee's decision, the decision shall become final and binding on all
parties.
Notwithstanding the two preceding paragraphs, after the
Trustee decides a claim or declines to decide a claim, any dispute between a
Participant and the Company or the Trustee as to the interpretation or
application of the provisions of this Trust Agreement and amounts payable
hereunder may, at the election of any party to such dispute (or, if more than
one Participant is such a party, at the election of two-thirds (2/3) of such
Participants) be determined by binding arbitration in New York in accordance
with the rules of the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator's award in any court of competent jurisdiction.
All fees and expenses of such arbitration shall be paid by the Trustee and
considered an expense of the trust under 3.06.
If the Participant is not satisfied with the decision of the
Arbitrator, the Participant may appeal the Arbitrator's decision by filing suit
in a court of competent jurisdiction. If no such suit is filed within sixty (60)
days after delivery of written notice of the Arbitrator's decision, the decision
shall become final and binding on all. If the Participant appeals the
Arbitrator's decision, and the decision is ultimately upheld, the Participant
shall reimburse the Trustee for all expenses incurred in defending the
Arbitrator's decision.
3.03-3 If the Committee opposes a claim presented under 3.03-1
and the Trustee ultimately pays the claim from trust assets, the Trustee shall
reimburse the Participant's expenses in pursuing the claim, including attorneys'
fees at the trial and appellate level. The Company shall reimburse the trust
fund within thirty (30) days after receipt of a bill from the Trustee for any
such Participant's expenses which are reimbursed by the Trustee.
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<PAGE> 35
3.04 Records
-------
3.04-1 The Trustee shall keep complete records on the trust
fund open to inspection by the Company, Committee and Participants at all
reasonable times. In addition to accountings required below, the Trustee shall
furnish to the Company, Committee and Participants any information reasonably
requested about the trust fund.
3.05 Accountings
-----------
3.05-1 The Trustee shall furnish the Company with a complete
statement of accounts annually within sixty (60) days after the end of the trust
year showing assets and liabilities and income and expense for the year of the
trust and each Subtrust. The Trustee shall also furnish the Company with
accounting statements at such other times as the Company may reasonably request.
The form and content of the statement of accounts shall be sufficient for the
Company to include in computing its taxable income and credits the income,
deductions and credits against tax that are attributable to the trust fund. The
Trustee shall also allow, upon the Company's request, access to the statements
of account by the Company's independent public accountant.
3.05-2 The Company may object to an accounting within one
hundred eighty (180) days after it is furnished and require that it be settled
by audit by a qualified, independent certified public accountant. The auditor
shall be chosen by the Trustee from a list of at least five such accountants
furnished by the Company at the time the audit is requested. Either the Company
or the Trustee may require that the account be settled by a court of competent
jurisdiction, in lieu of or in conjunction with the audit. All expenses of any
audit or court proceedings, including reasonable attorneys' fees, shall be
allowed as administrative expenses of the trust.
3.05-3 If the Company does not object to an accounting within
the time provided, the account shall be settled for the period covered by it.
3.05-4 When an account is settled, it shall be final and
binding on all parties, including all Participants and persons claiming through
them.
3.06 Expenses and Fees
-----------------
3.06-1 The Trustee shall be reimbursed for all reasonable
expenses and shall be paid a reasonable fee fixed by agreement with the Company
from time to time.
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<PAGE> 36
No increase in the fee shall be effective before sixty (60) days after the
Trustee gives written notice to the Company of the increase. The Trustee shall
notify the Company periodically of expenses and fees.
3.06-2 The Company shall pay Trustee and other administrative
and valuation fees and expenses. If not so paid, these fees and expenses shall
be paid from the trust fund. The Company shall reimburse the trust fund within
thirty (30) days after receipt of a bill from the Trustee for any fees and
expenses paid out of the trust fund.
ARTICLE IV
LIABILITY
---------
4.01 Indemnity
---------
4.01-1 Subject to such limitations as may be imposed by
applicable law, the Company shall indemnify and hold harmless the Trustee from
any claim, loss, liability or expense arising from any action or inaction in
administration of this trust based on direction or information from either the
Company, Committee, any Investment Manager or any Expert, or any action taken
with respect to Written Consent of Participant as defined in 1.02-5, except in
the case of willful misconduct or bad faith.
4.02 Bonding
-------
4.02-1 The Trustee need not give any bond or other security
for performance of its duties under this trust.
ARTICLE V
INSOLVENCY
----------
5.01 Determination of Insolvency
---------------------------
5.01-1 The Company is Insolvent for purposes of this trust if:
(a) The Company is unable to pay its debts
as they come due; or
(b) The Company is the subject of a pending
proceeding as a debtor under the federal Bankruptcy Code (or
any successor federal statute).
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5.01-2 The Company shall promptly give written notice to the
Trustee upon becoming Insolvent. The Chief Executive Officer of the Company and
the Board shall be obligated to give such notice. If the Trustee receives such
notice or receives from any other person claiming to be a creditor of the
Company a written allegation that the Company is Insolvent, the Trustee shall
independently determine whether such insolvency exists. The expenses of such
determination shall be allowed as administrative expenses of the trust.
5.01-3 Upon receipt of the notice or allegation described in
5.01-2, the Trustee shall discontinue making payments from the trust fund to
Participants and beneficiaries under the Plans and shall commence Insolvency
Administration under 5.02.
5.01-4 The Trustee shall have no obligation to investigate the
financial condition of the Company prior to receiving a notice or allegation of
insolvency under 5.01-2.
5.02 Insolvency Administration
-------------------------
5.02-1 During Insolvency Administration, the Trustee shall
hold the trust fund for the benefit of the creditors of the Company and make
payments only in accordance with 5.02-2. The Participants and beneficiaries
shall have no greater rights than general creditors of the Company. The Trustee
shall continue the investment of the trust fund in accordance with 2.02.
5.02-2 The Trustee shall make payments out of the trust
fund in one or more of the following ways:
(a) To creditors in accordance with
instructions from a court, or a person appointed by a court,
having jurisdiction over the Company's condition of
insolvency;
(b) To Participants and beneficiaries in
accordance with such instructions; or
(c) In payment of its own fees or expenses.
5.02-3 The Trustee shall have a priority claim against
the trust fund with respect to its own fees and expenses.
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<PAGE> 38
5.03 Termination of Insolvency Administration
----------------------------------------
5.03-1 Insolvency Administration shall terminate when the
Trustee determines that the Company:
(a) Is not Insolvent, in response to a
notice or allegation of insolvency under 5.01-2;
(b) Has ceased to be Insolvent; or
(c) Has been determined by a court of
competent jurisdiction not to be Insolvent or to have ceased
to be Insolvent.
5.03-2 Upon termination of Insolvency Administration
under 5.03-1, the trust fund shall continue to be held for the benefit of the
Participants and beneficiaries under the Plans. Benefit payments due during the
period of Insolvency Administration shall be made as soon as practicable,
together with interest from the due dates at the following rates:
(a) For the Deferred Compensation Plan for
Directors, the rate credited on the Participant's account
under the Plan.
(b) For the Directors' Retirement Plan, a
rate equal to the interest rate fixed by the Pension Benefit
Guaranty Corporation for valuing immediate annuities in the
preceding month.
5.04 Creditors' Claims During Solvency
---------------------------------
5.04-1 During periods of Solvency the Trustee shall hold the
trust fund exclusively to pay Plan benefits and fees and expenses of the trust
until all Plan benefits have been paid. Creditors of the Company shall not be
paid during Solvency from the trust fund, which may not be seized by or
subjected to the claims of such creditors in any way.
5.04-2 A period of Solvency is any period not covered by 5.02.
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<PAGE> 39
ARTICLE VI
SUCCESSOR TRUSTEES
------------------
6.01 Resignation and Removal
-----------------------
6.01-1 The Trustee may resign at any time by notice to the
Company, which shall be effective in sixty (60) days unless the Company and the
Trustee agree otherwise.
6.01-2 The Trustee may be removed by the Company on sixty (60)
days' written notice or shorter notice accepted by the Trustee. After a Special
Circumstance the Trustee may be removed only with the Written Consent of
Participants.
6.01-3 When resignation or removal is effective, the Trustee
shall begin transfer of assets to the successor Trustee immediately. The
transfer shall be completed within sixty (60) days, unless the Company extends
the time limit.
6.01-4 If the Trustee resigns or is removed, the Company shall
appoint a successor by the effective date of resignation or removal under 6.01-1
or 6.01-2. After a Special Circumstance a successor Trustee may be appointed
only with the Written Consent of Participants. If no such appointment has been
made, the Trustee may apply to a court of competent jurisdiction for appointment
of a successor or for instructions. All expenses of the Trustee in connection
with the proceeding shall be allowed as administrative expenses of the trust.
6.02 Appointment of Successor
------------------------
6.02-1 The Company may appoint any national or state bank or
trust company that is unrelated to the Company as a successor to replace the
Trustee upon resignation or removal. The appointment shall be effective when
accepted in writing by the new Trustee, which shall have all of the rights and
powers of the former Trustee, including ownership rights in the trust assets.
The former Trustee shall execute any instruments necessary or reasonably
requested by the Company or the successor Trustee to evidence the transfer.
After a Special Circumstance a successor Trustee may be appointed only with the
Written Consent of Participants.
6.02-2 The successor Trustee need not examine the records and
acts of any prior Trustee and may retain or dispose of existing trust assets,
subject to Article II.
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<PAGE> 40
The successor Trustee shall not be responsible for, and the Company shall
indemnify and hold harmless the successor Trustee from any claim or liability
because of, any action or inaction of any prior Trustee or any other past event,
any existing condition or any existing assets.
6.03 Accountings; Continuity
-----------------------
6.03-1 A Trustee who resigns or is removed shall submit
a final accounting to the Company as soon as practicable. The accounting shall
be received and settled as provided in 3.05 for regular accountings.
6.03-2 No resignation or removal of the Trustee or
change in identity of the Trustee for any reason shall cause a termination of
the Plan or this trust.
ARTICLE VII
GENERAL PROVISIONS
------------------
7.01 Interests Not Assignable
------------------------
7.01-1 The interest of a Participant in the trust fund may not
be assigned, pledged or otherwise encumbered, seized by legal process,
transferred or subjected to the claims of the Participant's creditors in any
way.
7.01-2 The Company may not create a security interest in the
trust fund in favor of any of its creditors. The Trustee shall not make payments
from the trust fund of any amounts to creditors of the Company other than
Participants, except as provided in 5.02.
7.01-3 The Participants shall have no interest in the assets
of the trust fund beyond the right to receive payment of Plan benefits and
reimbursement of expenses from such assets subject to the instructions during
Insolvency referred to in 5.02. During Insolvency Administration the
Participants' rights to trust assets shall not be superior to those of any other
general creditors of the Company.
7.02 Amendment
---------
7.02-1 The Company and the Trustee may amend this Trust
Agreement at any time by a written instrument executed by both parties. Except
as provided below, any such amendment after a Special Circumstance ore more than
two (2) years after the date
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<PAGE> 41
hereof may be made only with the Written Consent of Participants.
Notwithstanding the foregoing, any such amendment may be made by written
agreement of the Company and the Trustee without the Written Consent of
Participants if such amendment will not have a material adverse effect on the
rights of any Participant hereunder or, prior to a Special Circumstance, is
necessary to comply with any laws, regulations or other legal requirements.
7.03 Applicable Law
--------------
7.03-1 This trust shall be governed, construed and
administered according to the laws of Michigan, except as preempted by ERISA.
7.04 Agreement Binding on All Parties
--------------------------------
7.04-1 This Trust Agreement shall be binding upon the heirs,
personal representatives, successors and assigns of any and all present and
future parties.
7.05 Notices and Directions
------------------------------------------------
7.05-1 Any notice or direction under this Trust Agreement
shall be in writing and shall be effective when actually delivered or, if
mailed, when deposited postpaid as first-class mail. Mail to a party shall be
directed to the address stated below or to such other address as either party
may specify by notice to the other party. Notices to the Committee shall be sent
to the address of the Company. Notices to Participants who have submitted claims
under 3.03 shall be mailed to the address shown in the claim submission. Until
notice is given to the contrary, notices to the Company and the Trustee shall be
addressed as follows:
Company: KeyCorp
One KeyCorp Plaza
Post Office Box 88
Albany, New York 12201-0088
Attention: Lee Irving
Trustee: NBD Bank, N.A.
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Ken Oswald
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7.06 No Implied Duties
-----------------
7.06-1 The duties of the Trustee shall be those stated
in this trust, and no other duties shall be implied.
7.07 Gender, Singular and Plural
---------------------------
7.07-1 All pronouns and any variations thereof shall be deemed
to refer to the masculine or feminine, as the identity of the person or persons
may require. As the context may require, the singular may be read as the plural
and the plural as the singular.
ARTICLE VIII
INSURER
-------
8.01 Insurer Not a Party
-------------------
8.01-1 The Insurer shall not be deemed to be a party to this
Trust Agreement, and its obligations shall be measured and determined solely by
the terms of its Contracts and other agreements executed by it.
8.02 Authority of Trustee
--------------------
8.02-1 The Insurer shall accept the signature of the Trustee
on any documents or papers executed in connection with such Contracts. The
signature of the Trustee shall be conclusive proof to the Insurer that the
person on whose life an application is being made is eligible to have such
Contract issued on his life and is eligible for a Contract of the type and
amount requested.
8.03 Contract Ownership
------------------
8.03-1 The Insurer shall deal with the Trustee as the sole and
absolute owner of the trust's interests in such Contracts and shall have no
obligation to inquire whether any action or failure to act on the part of the
Trustee is in accordance with or authorized by the terms of the Plans or this
Trust Agreement.
8.04 Limitation of Liability
-----------------------
8.04-1 The Insurer shall be fully discharged from any and all
liability for any action taken or any amount paid in accordance with the
direction of the Trustee and shall have no obligation to see to the proper
application of the amounts so paid. The
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<PAGE> 43
Insurer shall have no liability for the operation of this Trust Agreement or the
Plans, whether or not in accordance with their terms and provisions.
8.05 Change of Trustee
-----------------
8.05-1 The Insurer shall be fully discharged from any and all
liability for dealing with a party or parties indicated on its records to be
the Trustee until such time as it shall receive at its home office written
notice of the appointment and qualification of a successor Trustee.
IN WITNESS WHEREOF, the Company and the Trustee have caused this Trust
Agreement to be executed by their respective duly authorized officers on the
dates set forth below.
Company:
By:
------------------------------------
Its:
------------------------------------
Executed: _____________________, 199_
Trustee:
By:
------------------------------------
Its:
------------------------------------
Executed: _____________________, 199_
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<PAGE> 44
APPENDIX A
ASSUMPTIONS AND METHODOLOGY FOR
CALCULATIONS REQUIRED UNDER 2.01 AND 2.04
1. The liability for benefits under each Plan will be calculated using two
different assumptions as to when Participants terminate service:
(a) As of the applicable date under 2.01-3 or 2.04.
(b) Twenty-four (24) months after the applicable date, assuming
future compensation continues at current levels, and future
deferrals under deferred compensation plans continue pursuant
to prior elections.
The liability for accrued benefits under each Plan will be the greater
of the liabilities calculated in accordance with (a) and (b) above.
2. Calculations will be based upon the most valuable optional form of
payment available to the Participant.
3. The liability for benefits under deferred compensation or other defined
contribution Plans shall be equal to the deferral or other account
balances (vested and unvested) of Participants as of the applicable
date, plus projected deferrals expected to be made within twenty-four
(24) months after the applicable date pursuant to prior elections.
Account balances of Participants under a Plan shall be calculated based
on crediting the highest rate of interest which may become payable to
Participants under the Plan.
4. The liability for benefits under other Plans shall be equal to the
present value of accrued benefits (vested and unvested) of Participants
as of the relevant dates under 1(a) or (b) above.
5. No mortality is assumed prior to the commencement of benefits. Future
mortality is assumed to occur in accordance with the 1983 Group Annuity
Table Male Rates after the commencement of benefits.
6. The present value of accounts shall be determined using a discount rate
equal to the then current Pension Benefit Guaranty Corporation
immediate annuity rate for nonmulti-employer plan.
7. Where left undefined above, calculations will be performed in
accordance with generally accepted actuarial principles.
EXHIBIT A.1
Page 40
<PAGE> 1
Exhibit 10.29
KEYCORP
-------
EXECUTIVE SUPPLEMENTAL PENSION PLAN
-----------------------------------
ARTICLE I
---------
THE PLAN
--------
The KeyCorp Executive Supplemental Pension Plan ("Plan") originally
established effective January 1, 1995, is hereby amended and restated in its
entirety effective August 1, 1996. The Plan as amended and restated supplements
the pension benefits of certain key employees of KeyCorp and its subsidiaries
who are covered by the Plan. It is the intention of KeyCorp, and of the
Participants covered under the Plan, that the Plan be unfunded for tax purposes
and for purposes of Title I of the Employee Retirement Income Security Act of
1974, as amended.
ARTICLE II
----------
DEFINITIONS
-----------
2.1 MEANINGS OF DEFINITIONS. As used herein, the following words and phrases
shall have the meanings hereinafter set forth, unless a different meaning is
plainly required by the context:
(a) "AVERAGE INTEREST CREDIT" shall mean the average of the Interest
Credits (as defined in the Pension Plan) for the three (3) consecutive calendar
years ending with the year of the Participant's termination.
(b) "AVERAGE TREASURY RATE" shall mean the average of the Treasury
Rates (as defined in the Pension Plan) for the three (3) consecutive calendar
years ending with the year of the Participant's termination.
(c) "BENEFICIARY" shall mean the Participant's surviving spouse who is
entitled to receive the benefits hereunder in the event the Participant dies
before his or her Supplemental Pension Benefit shall have been distributed to
him or her.
(d) "CREDITED SERVICE" shall be calculated with respect to a
Participant by measuring the period of service commencing on the Participant's
Employment Commencement Date and Re-Employment Commencement Date, if applicable,
and ending on the Participant's Severance from Service Date, and shall be
computed based on each full month during which time the Employee is employed by
an Employer.
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<PAGE> 2
(e) "COMPENSATION" for any Plan Year or any partial Plan Year in which
the Participant incurs a Severance From Service Date shall mean the entire
amount of base compensation paid to such Participant during such period by
reason of his employment as an Employee as reported for federal income tax
purposes, or which would have been paid except for (1) the timing of an
Employer's payroll processing operations, (2) the provisions of the KeyCorp
401(k) Savings Plan, or (3) the provisions of the KeyCorp Flexible Benefits
Plan, provided, however, that the term shall more specifically exclude:
(i) any amount attributable to the Participant's exercise of stock
appreciation rights and the amount of any gain to the
Participant upon the exercise of stock options;
(ii) any amount attributable to the Participant's receipt of non-cash
remuneration whether or not it is included in the Participant's
income for federal income tax purposes;
(iii) any amount attributable to the Participant's receipt of moving
expenses and any relocation bonus paid to the Participant during
the Plan Year;
(iv) any amount attributable to a lump sum severance payment paid by
an Employer or the Corporation to the Participant;
(v) any amount attributable to fringe benefits (cash and non-cash);
(vi) any amount attributable to any bonus or payment made as an
inducement for the Participant to accept employment with an
Employer;
(vii) any amount paid to the Participant during the Plan Year which is
attributable to interest earned on compensation which had been
deferred under a plan of an Employer or the Corporation.
(viii) any amount paid to the Participant during the Plan Year which
previously has been included as Compensation under the Plan; and
(ix) any amount paid for any period after the Participant's
termination or retirement date.
In the case of a Disabled Participant, such Participant's Compensation
for each year while Disabled shall equal an amount which shall reflect the
Participant's Compensation for the calendar year preceding the date of the
Participant's Disability.
2
<PAGE> 3
(g) "CORPORATION" shall mean KeyCorp, an Ohio Corporation, its
corporate successors, and any corporation or corporations into or with which it
may be merged or consolidated.
(h) "EARLY RETIREMENT DATE" shall mean the date of Participant's
retirement from his or her employment with Employer on or after the
Participant's attainment of age 55 and completion of a minimum of ten years of
Credited Service, but prior to the Participant's Normal Retirement Date.
(i) "EMPLOYEE" shall mean a person regularly employed by an Employer
provided, however, that the term Employee shall specifically exclude those
individuals who are participating in a KeyCorp sponsored Supplemental Retirement
Plan.
(j) "EMPLOYER" shall mean the Corporation and its subsidiaries unless
specifically excluded as an Employer for Plan purposes by written action by an
officer of the Corporation and approved by the Corporation. An Employer's
participation shall be subject to any conditions or requirements made by the
Corporation, and each Employer shall be deemed to appoint the Corporation as its
exclusive agent under the Plan as long as it continues as a subsidiary of the
Corporation.
(k) "FINAL AVERAGE COMPENSATION" shall mean with respect to any
Participant the annual average of his or her highest aggregate Compensation for
any period of five consecutive years within the period of ten consecutive years
immediately prior to his or her retirement, death, or other termination of
employment, or any termination of the Plan, whichever first occurs. If the
Participant receives no Compensation for any portion of such five years because
of an absence from work, there shall be treated as Compensation received during
such period of absence an amount equal to the Compensation the Participant would
have received had he or she not been absent, such amount to be determined by the
Corporation on the basis of such Participant's Compensation in effect
immediately prior to such absence. In computing a Participant's Final Average
Compensation, there shall be included the Participant's highest five Incentive
Compensation Awards granted under an Incentive Compensation Plan during the ten
year period immediately preceding the earliest of his or her retirement, death,
disability, or other termination of employment.
(l) "EMPLOYMENT COMMENCEMENT DATE" of a Participant shall mean the date
on which he or she first performs an Hour of Service For an Employer.
(m) "HOUR OF SERVICE" shall mean any hour for which an Employee is paid
or entitled to payment by an Employer for the performance of duties.
(n) "INCENTIVE COMPENSATION AWARD" shall mean an incentive compensation
award (whether paid in cash, deferred, or a combination of both) granted to a
Participant under an Incentive Compensation Plan, provided, however, that an
incentive compensation award granted under the KeyCorp Management Incentive
Compensation Plan, and/or the KeyCorp Short-Term Incentive Compensation Plan
shall constitute an incentive compensation
3
<PAGE> 4
award for the year in which the award is earned (without regard to the actual
time of payment), and an incentive compensation award granted under the KeyCorp
Long Term Incentive Compensation Plan ("LTIC Plan") with respect to any
multi-year period shall be deemed to be "for" the last year of the multi-year
period without regard to the actual time of payment of the award. Thus, for
example, an incentive compensation award granted under the LTIC Plan with
respect to the three-year period comprised of 1993, 1994, and 1995 will be
deemed to be "for" 1995 (without regard to the actual time of payment), and the
entire award under the LTIC Plan for that period will be a LTIC Plan award for
1995.
(o) "INCENTIVE COMPENSATION PLAN" shall mean the KeyCorp Management
Incentive Compensation Plan, the KeyCorp Short-Term Incentive Compensation Plan,
and the KeyCorp Long-Term Incentive Compensation Plan, as may be amended from
time to time.
(p) "NORMAL RETIREMENT DATE" shall mean the first day of the month
coinciding with or immediately following a Participant's 65th birthday or, if
later, the fifth anniversary of the Participant's Employment Commencement Date.
(q) "PARTICIPANT" shall mean an Employee employed by an Employer in a
position classified as a job grade 89 or above, who is selected by the
Corporation to become a Participant in the Plan, and whose participation in the
Plan has not been terminated by the Corporation. The Corporation retains the
right at all times, in its sole and absolute discretion to determine who shall
become and remain a Participant in the Plan.
(r) "PENSION PLAN" shall mean the KeyCorp Cash Balance Pension Plan
with all amendments, modifications and supplements which may be made thereto.
(s) "SEVERANCE FROM SERVICE DATE" shall occur on the earlier of the
date on which a Participant quits, retires, is discharged or dies.
(t) "SOCIAL SECURITY PRIMARY INSURANCE AMOUNT" shall mean the amount
estimated by the Corporation that is expected to be paid to a Participant under
the Federal Insurance Contributions Act, as amended, and in effect upon the date
of termination of employment. Such amount shall be calculated assuming the
Participant will begin to receive payment at age 65 or the Participant's Normal
Retirement Date, whichever is later, and that he receives no earnings for the
purpose of calculating this amount after the date of the Participant's
termination of employment. All compensation prior to the Participant's date of
termination of employment with an Employer shall be based upon a salary scale,
projected backwards, which is the actual change in the average compensation from
year to year, as indexed, as determined by the Social Security Administration.
(u) "SUPPLEMENTAL PENSION BENEFIT" shall mean the pension benefit
payable pursuant to the terms of the Plan to a Participant meeting the
eligibility requirements of Section 3.1 of the Plan.
4
<PAGE> 5
(v) "SUPPLEMENTAL RETIREMENT PLAN" shall mean the KeyCorp Supplemental
Retirement Plan (formerly known as the Society Corporation Supplemental
Retirement Plan), the KeyCorp Supplemental Retirement Benefit Plan, and the
KeyCorp Supplemental Retirement Benefit Plan for Key Executives, with all
amendments, modifications, and supplements which may be made thereto.
2.2 CONSTRUCTION. Unless the context otherwise indicates, the masculine wherever
used shall include the feminine and neuter, the singular shall include the
plural, words such as "herein", "hereof", "hereby", "hereunder" and words of
similar import shall refer to the Plan as a whole and not any particular part
thereof.
All other capitalized but undefined terms used herein, shall have the
meaning given to them in the Pension Plan.
ARTICLE III
-----------
SUPPLEMENTAL PENSION BENEFIT
----------------------------
3.1 ELIGIBILITY. Subject to the provisions of Article V hereof, a Participant
shall be eligible for a Supplemental Pension Benefit hereunder if the
Participant (i) retires on or after age 65 with five or more years of Credited
Service, (ii) terminates employment with an Employer on or after age 55 with ten
or more years of Credited Service, (iii) terminates active employment with an
Employer upon becoming Disabled after completing five or more years of Credited
Service and disability benefits have ceased under the KeyCorp Long-Term
Disability Plan due to the Participant's election for Early or Normal Retirement
under the Pension Plan, or (iv) dies after completing five years of Credited
Service, and has a Beneficiary who is eligible for a benefit under the Pension
Plan.
3.2 SUPPLEMENTAL PENSION BENEFIT CALCULATION. The amount of Supplemental Pension
Benefit to be paid to a Participant under the terms of the Plan on or after the
Participant's Normal Retirement Date shall be calculated as follows:
A Participant's Supplemental Pension Benefit shall equal the
difference between "(a)" and"(b)" where:
1. "(a)" is equal to 2% times the Participant's years of Credited
Service (up to a Plan maximum of 25 years) times the
Participant's Final Average Compensation, and
2. "(b)" is equal to the sum of:
(i) the Participant's annual pension benefit under the
Pension Plan calculated as of the participant's
Normal Retirement
5
<PAGE> 6
Date, payable in the form of a single life annuity option, and
(ii) the Participant's annual estimated Social Security
Primary Insurance Amount payable at the Participant's
Normal Retirement Date.
For purposes of calculating a Participant's Supplemental Pension
Benefit under this Section 3.2 hereof, the Participant's "annual pension
benefit" under the Pension Plan shall be the Participant's Accrued Benefit as of
the Participant's termination date calculated in accordance with the provisions
of Article IV of the Pension Plan, as if such benefit were to be paid in the
form of a single life annuity; if the Participant is eligible for, and elects to
receive, his or her Pension Plan benefit under a Predecessor Plan grandfathered
formula, such "annual pension benefit" for purposes of this Section 3.2 hereof,
shall be the benefit payable to the Participant under the terms of the Pension
Plan's Predecessor Plan grandfathered formula as of the Participant's
termination date, as if such benefit were to be paid in the form of a single
life annuity.
3.3 EARLY RETIREMENT ELECTION. In the event the Participant elects to receive
his or her Supplemental Pension Benefit on or after the Participant's Early
Retirement Date but prior to the Participant's Normal Retirement Date, the
Participant's Supplemental Pension Benefit shall be calculated as provided in
accordance with Section 3.2 hereof, provided, however, that in determining the
Participant's annual Pension Plan benefit as of the Participant's Normal
Retirement Date, the Participant's Accrued Benefit under the Pension Plan as of
his or her termination date shall be increased for purposes of this Plan with an
imputed Average Interest Credit to reflect the Participant's Pension Plan
benefit at his or her Normal Retirement Date and shall be converted to the form
of a single life annuity option using the Average Treasury Rate and the GATT
Mortality Table. The amount of the Participant's annual Supplemental Pension
Benefit otherwise determined under Section 3.2 and Section 3.3 hereof, shall
then be reduced by 3.6% for each year the Participant is between the ages of 55
and 60 and 4.8% for each year after the Participant's attainment of age 60 in
which the commencement of the Participant's Supplemental Pension Benefit
precedes his or her Normal Retirement Date.
3.4 ACTUARIAL FACTORS. The Supplemental Pension Benefit payable to a Participant
or Participant's Beneficiary in a form other than a single life annuity shall be
actuarially equivalent to such single life annuity payment option. In making the
determination provided for in this Article III, the Corporation shall rely upon
calculations made by the independent actuaries for the Plan, who shall determine
actuarially equivalent benefits under the Plan by applying the UP-1984 Mortality
Table (set back two years) and using an interest rate of 6%.
6
<PAGE> 7
ARTICLE IV
----------
PAYMENT OF SUPPLEMENTAL PENSION BENEFIT
---------------------------------------
4.1 IMMEDIATE PAYMENT UPON TERMINATION OR RETIREMENT OF PARTICIPANT. Subject to
the provisions of Section 4.2 hereof, a Participant meeting the age and service
eligibility requirements of Section 3.1, shall receive an immediate distribution
of his or her Supplemental Pension Benefit upon the Participant's retirement or
termination of employment in the form of a single life annuity, unless the
Participant elects in writing a minimum of thirty days prior to his or her
retirement or termination date to receive payment of his or her Supplemental
Pension Benefit under a different form of payment. The forms of payment from
which a Participant may elect shall be identical to those forms of payment
specified in the Pension Plan, provided, however, that the lump sum payment
option available under the Pension Plan shall not be available under this Plan.
Such method of payment, once elected by the Participant, shall be irrevocable.
4.2 DEFERRED BENEFIT PAYMENT. A Participant who retires or terminates his or her
employment with an Employer after meeting the age and service requirements of
Section 3.1, may elect to defer receipt of his or her Supplemental Pension
Benefit until a date specified by the Participant, provided, (1) the Participant
notifies the Corporation in writing of his or her deferral election a minimum of
one year prior to the Participant's retirement or termination of employment, (2)
the Participant specifies the future date on which such Supplemental Pension
Benefit is to be distributed, and (3) the Participant commences distribution of
his or her Supplemental Pension Benefit no later than the first day of the month
immediately following the Participant's sixty-fifth (65th) birthday. The
election to defer, once made by the Participant, shall be irrevocable.
Notwithstanding the foregoing, in the case of an "unforeseeable
emergency", upon written application by the Participant to the Corporation, the
Corporation, in its sole discretion, may accelerate the distribution of the
Participant's deferred Supplemental Pension Benefit. For purposes of this
Section 4.2, the term "unforeseeable emergency" shall mean an unanticipated
emergency that is caused by an event beyond the control of the Participant that
would result in severe financial hardship to the Participant if such premature
distribution were not permitted.
4.3 PAYMENT UPON DEATH OF PARTICIPANT.
(a) Upon the death of a Participant who has met the service
requirements of Section 3.1, but who has not yet commenced distribution of his
or her Supplemental Pension Benefit, there shall be paid to the Participant's
Beneficiary 50% of the Supplemental Pension Benefit which the Participant would
have been entitled to receive had he or she retired on his or her Normal
Retirement Date and elected to receive his or her Supplemental Pension Benefit.
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<PAGE> 8
For purposes of this Section 4.3(a) only, the following shall apply:
(i) The Participant's Credited Service shall be calculated as of
the Participant's date of death.
(ii) The Participant's Pension Plan benefit shall be calculated
under the provisions of Article IV of the Pension Plan as if
the Participant had died on his or her Normal Retirement
Date, with such Pension Plan benefit being increased for
purposes of this Section 4.3(a) with an imputed Average
Interest Credit to reflect what the Participant's Pension
Plan benefit would have been as of the Participant's Normal
Retirement Date; such Pension Plan benefit shall be converted
to a single life annuity option using the Average Treasury
Rate and Gatt Mortality Table.
(iii) The Participant's Social Security Primary Amount shall be
calculated as if the Participant had retired as of his or her
Normal Retirement Date.
Payment of this death benefit shall be made in the form of a single
life annuity and will be subject to distribution any time after the
Participant's Early Retirement Date, which shall be calculated in accordance
with the actuarial reduction provisions contained within Section 3.3 hereof, if
paid prior to the Participant's Normal Retirement Date.
(b) In the event of a Participant's death after the Participant has
commenced distribution of his or her Supplemental Pension Benefit, there shall
be paid to the Participant's Beneficiary only those survivor benefits provided
under the form of benefit payment elected by the Participant.
4.4 PAYMENT UPON PARTICIPANT'S ATTAINMENT OF AGE 70-1/2. A Participant shall be
required to commence distribution of his or her Supplemental Pension Benefit no
later than April 1 of the calendar year following the year in which the
Participant attains age 70-1/2.
ARTICLE V
---------
ELECTION BETWEEN PLAN BENEFITS
------------------------------
5.1 PARTICIPANT ELECTION BETWEEN PLAN BENEFITS. A Participant meeting the
eligibility requirements for a Supplemental Pension Benefit, who is also a
participant in, and meets the eligibility requirements for a plan benefit under
the KeyCorp Excess Cash Balance Pension Plan shall be required prior to the
Participant's retirement or termination date, to elect a benefit from either
this Plan, or from the KeyCorp Excess Cash Balance Pension Plan. A
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<PAGE> 9
Participant's failure to elect between Plan benefits prior to the Participant's
retirement or termination date shall result in an automatic default election by
the Participant of an Excess Pension Benefit under the KeyCorp Excess Cash
Balance Pension Plan, to be paid to the Participant as of his or her retirement
or termination date in the form of a lump sum cash payment. Such payment will
relinquish the Participant's right to a Supplemental Pension Benefit.
5.2 BENEFICIARY ELECTION BETWEEN PLAN BENEFITS. If a Participant dies after
having met the eligibility requirements for a Supplemental Pension Benefit, and
the Participant at the time of his or her death also is a Participant in the
KeyCorp Excess Cash Balance Pension Plan and eligible for a benefit under the
KeyCorp Excess Cash Balance Pension Plan, the Participant's Beneficiary shall be
required to elect a death benefit from either this Plan or from the KeyCorp
Excess Cash Balance Pension Plan, but in no event may the Participant's
Beneficiary elect a benefit under both this Plan and the KeyCorp Excess Cash
Balance Pension Plan. The terms of each respective Plan shall control the form
of payment which may be elected by the Participant's Beneficiary. A
Beneficiary's failure to elect between Plan benefits within 120 days from the
date of the Participant's death shall result in an automatic default election by
the Beneficiary of an Excess Cash Balance Pension Plan benefit to be paid to the
Beneficiary in a cash lump sum payment.
ARTICLE VI
----------
ADMINISTRATION AND CLAIMS PROCEDURE
-----------------------------------
6.1 ADMINISTRATION. The Corporation, which shall be the "Administrator" of the
Plan for purposes of ERISA and the "Plan Administrator" for purposes of the
Code, shall be responsible for the general administration of the Plan, for
carrying out the provisions hereof, and for making payments hereunder. The
Corporation shall have the sole and absolute discretionary authority and power
to carry out the provisions of the Plan, including, but not limited to, the
authority and power (a) to determine all questions relating to the eligibility
for and the amount of any benefit to be paid under the Plan, (b) to determine
all questions pertaining to claims for benefits and procedures for claim review,
(c) to resolve all other questions arising under the Plan, including any
questions of construction and interpretation, and (d) to take such further
action as the Corporation shall deem necessary or advisable in the
administration of the Plan. All findings, decisions, and determinations of any
kind made by the Corporation shall not be disturbed unless the Corporation has
acted in an arbitrary and capricious manner. Subject to the requirements of law,
the Corporation shall be the sole judge of the standard of proof required in any
claim for benefits and in any determination of eligibility for a benefit. All
decisions of the Corporation shall be final and binding on all parties. The
Corporation may employ such attorneys, investment counsel, agents, and
accountants as it may deem necessary or advisable to assist it in carrying out
its duties hereunder. The actions taken and the decisions made by the
Corporation hereunder shall be
9
<PAGE> 10
final and binding upon all interested parties subject, however, to the
provisions of Section 6.2. The Plan Year, for purposes of Plan administration,
shall be the calendar year.
6.2 CLAIMS REVIEW PROCEDURE. Whenever the Corporation decides for whatever
reason to deny, whether in whole or in part, a claim for benefits under
this Plan filed by any person (herein referred to as the "Claimant"), the
Corporation shall transmit a written notice of its decision to the Claimant,
which notice shall be written in a manner calculated to be understood by the
Claimant and shall contain a statement of the specific reasons for the denial
of the claim and a statement advising the Claimant that, within 60 days of the
date on which he or she receives such notice, he or she may obtain review of
the decision of the Corporation in accordance with the procedures hereinafter
set forth. Within such 60-day period, the Claimant or his or her authorized
representative may request that the claim denial be reviewed by filing with the
Corporation a written request therefore, which request shall contain the
following information:
(a) the date on which the request was filed with the Corporation;
provided, however, that the date on which the request for
review was in fact filed with the Corporation shall control in
the event that the date of the actual filing is later than the
date stated by the Claimant pursuant to this paragraph (a);
(b) the specific portions of the denial of his claim which the
Claimant requests the Corporation to review;
(c) a statement by the Claimant setting forth the basis upon which
he believes the Corporation should reverse its previous denial
of his claim and accept his claim as made; and
(d) any written material which the Claimant desires the
Corporation to examine in its consideration of his position as
stated pursuant to paragraph (c) above.
In accordance with this Section, if the Claimant requests a review of
the Corporation's decision, such review shall be made by the Corporation, who
shall, within sixty (60) days after receipt of the request form, review and
render a written decision on the claim containing the specific reasons for the
decision including reference to Plan provisions upon which the decision is
based. All findings, decisions, and determinations of any kind made by the
Corporation shall not be modified unless the Corporation has acted in an
arbitrary and capricious manner. Subject to the requirements of a law, the
Corporation shall be the sole judge of the standard of proof required in any
claim for benefits, and any determination of eligibility for a benefit. All
decisions of the Corporation shall be binding on the Claimant and upon all other
Persons. If the Participant, or Beneficiary shall not file written notice with
the Corporation at the times set forth above, such individual shall have waived
all benefits under the Plan other than as already provided, if any, under the
Plan.
10
<PAGE> 11
ARTICLE VII
-----------
FUNDING
-------
All benefits under the Plan shall be payable solely in cash from the
general assets of the Corporation or a subsidiary, and Participants and
Beneficiaries shall have the status of general unsecured creditors of the
Corporation. The obligations of the Corporation to make distributions in
accordance with Article III and Article IV of the Plan constitute a mere promise
to make payments in the future. The Corporation shall have no obligation to
establish a trust or fund to fund its obligation to pay benefits under the Plan
or to insure any benefits under the Plan. Notwithstanding any provision of this
Plan, the Corporation may, in its sole discretion, combine the payment due and
owing under this Plan with one or more other payments owing to a Participant or
a Participant's Beneficiary under any other plan, contract, or otherwise (other
than any payment due under the Pension Plan), in one check, direct deposit, wire
transfer, or other means of payment. Finally, it is the intention of the
Corporation and the Participants that the Plan be unfunded for tax purposes and
for the purposes of Title I of the Employee Retirement Income Security Act of
1974, as amended.
ARTICLE VIII
------------
AMENDMENT AND TERMINATION
-------------------------
The Corporation reserves the right to amend or terminate the Plan at
any time by action of its Board of Directors or a duly authorized committee of
such Board of Directors; provided, however, that no such action shall adversely
affect the benefit accrued up to the date of the Plan amendment or termination
for any Participant who has met the age and service requirements of Section 3.1
of the Plan, or any Participant or Participant's Beneficiary who is receiving,
or who is eligible to receive a Supplemental Pension Benefit hereunder, unless
an equivalent benefit is provided under another plan maintained by the
Corporation.
ARTICLE IX
----------
MISCELLANEOUS
-------------
9.1 INTEREST OF PARTICIPANT. The obligation of the Corporation under the Plan to
provide the Participant or the Participant's Beneficiary with a Supplemental
Pension Benefit merely constitutes the unsecured promise of the Corporation to
make payments as provided herein, and no person shall have any interest in, or a
lien, or prior claim on any property of the Corporation.
9.2 NO COMMITMENT AS TO EMPLOYMENT. Nothing herein contained shall be construed
as a commitment or agreement upon the part of any Participant hereunder to
continue his or her
11
<PAGE> 12
employment with an Employer, and nothing herein contained shall be construed as
a commitment on the part of any Employer to continue the employment or rate of
compensation of any Participant hereunder for any period. All Participants shall
remain subject to discharge to the same extent as if the Plan had never been put
into effect.
9.3 BENEFITS. Nothing in the Plan shall be construed to confer any right or
claim upon any person, firm, or corporation other than Participants and
Participants' Beneficiaries who become entitled to a benefit under the Plan.
9.4 RESTRICTIONS ON ALIENATION. Except to the extent permitted by law, no
benefit under the Plan shall be subject to anticipation, alienation, assignment
(either at law or in equity), encumbrance, garnishment, levy, execution, or
other legal or equitable process. No person shall have power in any manner to
anticipate, transfer, assign, (either at law or in equity), alienate or subject
to attachment, garnishment, levy, execution, or other legal or equitable
process, or in any way encumber his or her benefits under the Plan, or any part
thereof, and any attempt to do so shall be void.
9.5 ABSENCE OF LIABILITY. No member of the Board of Directors of the Corporation
or a subsidiary, or any officer of the Corporation or a subsidiary shall be
liable for any act or action hereunder, whether of commission or omission, taken
by any other member, or by any officer, agent, or Employee except in
circumstances involving his or her bad faith or willful misconduct.
9.6 EXPENSES. The expenses of administration of the Plan shall be paid by the
Corporation.
9.7 PRECEDENT. Except as otherwise specifically provided, no action taken in
accordance with the Plan by the Corporation shall be construed or relied upon as
a precedent for similar action under similar circumstances.
9.8 DUTY TO FURNISH INFORMATION. The Corporation shall furnish to each
Participant or Participant's Beneficiary any documents, reports, returns
statements, or other information that it reasonably deems necessary to perform
its duties imposed hereunder or otherwise imposed by law.
9.9 WITHHOLDING. The Corporation shall withhold any tax required by any present
or future law to be withheld from any payment hereunder to any Participant or
Participant's Beneficiary.
9.10 VALIDITY OF PLAN. The validity of the Plan shall be determined and the Plan
shall be construed and interpreted in accordance with the provisions of the Act,
the Code, and, to the extent applicable, the laws of the State of Ohio. The
invalidity or illegality of any provision of the Plan shall not affect the
validity or legality of any other part thereof.
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<PAGE> 13
9.11 PARTIES BOUND. The Plan shall be binding upon the Corporation, all
Participants, all Participants' Beneficiaries, and the executors,
administrators, successors, and assigns of each of them.
9.12 HEADINGS. All headings used in the Plan are for convenience of reference
only and are not part of the substance of the Plan.
Executed at Cleveland, Ohio, to be effective as the 1st day of August,
1996.
KEYCORP
By:
----------------------------------
Title:
---------------------------------
<PAGE> 1
Exhibit 10.30
KEYCORP
-------
SUPPLEMENTAL RETIREMENT PLAN
----------------------------
ARTICLE I
---------
THE PLAN
--------
The Society Corporation Supplemental Retirement Plan as originally
established effective as of May 14, 1981, and thereafter amended and restated in
its entirety, effective April 26, 1990 and January 1, 1993, and thereafter
amended and restated in its entirety effective January 1, 1995 as the KeyCorp
Supplemental Retirement Plan (the "Plan") is hereby amended and restated in its
entirety effective August 1, 1996. The Plan, as herein amended and restated,
supplements the retirement benefits of certain key employees of KeyCorp and its
subsidiaries who are covered by the Plan in accordance with the terms hereof.
The provisions of this Plan shall be applicable generally to all Grandfathered
Employees (as defined below).
ARTICLE II
----------
DEFINITIONS
-----------
2.1 MEANINGS OF DEFINITIONS. As used herein, the following words
and phrases shall have the meanings hereinafter set forth,
unless a different meaning is plainly required by the context:
(a) "AVERAGE INTEREST CREDIT" shall mean the average of the
Interest Credits (as defined in the Retirement Plan) for the
three (3) consecutive calendar years ending with the year of
the Grandfathered Employee's termination.
(b) "AVERAGE TREASURY RATE" shall mean the average of the Treasury
Rates (as defined in the Retirement Plan) for the three (3)
consecutive calendar years ending with the year of the
Grandfathered Employee's termination.
(c) "BENEFICIARY" shall mean Grandfathered Employee's surviving
spouse in the event the Grandfathered Employee dies before his
or her Supplemental Retirement Benefit shall have been
distributed to him or her.
(d) "COMPENSATION" for any Plan Year or any partial Plan year in
which the Grandfathered Employee incurs a severance from
service date shall mean the entire amount of base compensation
paid to such Grandfathered Employee during such period by
reason of his employment as an Employee as reported for
federal income tax purposes, or which would have been paid
except for (1) the timing of an Employer's payroll processing
operations, (2) the provisions of the
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<PAGE> 2
KeyCorp 401(k) Savings Plan, or (3) the provisions of the KeyCorp
Flexible Benefits Plan, provided, however, that the term shall
more specifically exclude:
(i) any amount attributable to the Grandfathered Employee's
exercise of stock appreciation rights and the amount of
any gain to the Grandfathered Employee upon the
exercise of stock options;
(ii) any amount attributable to the Grandfathered Employee's
receipt of non-cash remuneration whether or not it is
included in the Grandfathered Employee's income for
federal income tax purposes;
(iii) any amount attributable to the Grandfathered Employee's
receipt of moving expenses and any relocation bonus
paid to the Grandfathered Employee during the Plan
Year;
(iv) any amount attributable to a lump sum severance payment
paid by an Employer or the Corporation to the
Grandfathered Employee;
(v) any amount attributable to fringe benefits (cash and
non-cash);
(vi) any amount attributable to any bonus or payment made as
an inducement for the Grandfathered Employee to accept
employment with an Employer;
(vii) any amount paid to the Grandfathered Employee during
the Plan year which is attributable to interest earned
on compensation deferred under a plan of an Employer or
the Corporation.
(viii) any amount attributable to salary deferrals paid to the
Grandfathered Employee during the Plan year, which have
been previously included as compensation under the
Plan; and
(ix) any amount paid for any period after the Grandfathered
Employee's termination or retirement date.
(e) "CORPORATION" shall mean KeyCorp, an Ohio corporation, its
corporate successors, and any corporation or corporations into or
with which it may be merged or consolidated.
(f) "EARLY RETIREMENT DATE" shall mean the date of the Grandfathered
Employee's retirement from his or her employment with an Employer
on or after the Grandfathered Employee's attainment of age 55 and
completion of a minimum of ten years of Benefit Service, but
prior to the Grandfathered Employee's Normal Retirement Date.
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<PAGE> 3
(g) "EMPLOYEE" shall mean any person who is employed by an Employer,
provided, however, that as of December 31, 1994 all Employees who
are Plan Grandfathered Employees (other than Grandfathered
Employees) shall cease any further future benefit accrual under
the Plan and such Employees' Supplemental Retirement Plan benefit
shall be valued in accordance with the provisions of Article IX
hereof and transferred to KeyCorp Excess Cash Balance Pension
Plan. Thereafter, effective January 1, 1995, the term "Employee"
shall include only Grandfathered Employees.
(h) "EMPLOYER" shall mean the Corporation and any of its subsidiaries
unless specifically excluded as an Employer for Plan purposes by
written action of an officer of the Corporation and approved by
the Corporation. An Employer's participation shall be subject to
any conditions or requirements made by the Corporation, and each
Employer shall be deemed to appoint the Corporation as its
exclusive agent under the Plan as long as it continues as a
subsidiary.
(i) "FINAL AVERAGE COMPENSATION" shall mean with respect to any
Employee the annual average of his highest aggregate Compensation
for any period of five consecutive years within the period of ten
consecutive full years immediately prior to his retirement or
other termination of employment, or any termination of the Plan,
whichever first occurs; provided, however, that if an Employee is
employed for less than five consecutive years prior to such date,
the term shall mean the monthly average of the aggregate amount
of his Compensation for his entire period of employment,
multiplied by 12. If an Employee receives no Compensation for any
portion of such five consecutive years because of absence from
work, there shall be treated as Compensation received during such
period of absence an amount equal to the Compensation he would
have received had he not been absent, such amount to be
determined by the Corporation on the basis of such Employee's
salary or wage rate in effect immediately prior to such absence;
provided, however, that no Compensation shall be credited
hereunder for the period during which he is permanently and
totally disabled and for which he receives benefits under the
long term disability program maintained in effect by his
Employer.
(j) "GRANDFATHERED EMPLOYEE" shall mean an Employee who is listed on
Exhibit A attached hereto.
(k) "INCENTIVE COMPENSATION AWARD" shall mean an incentive
compensation award (whether paid in cash, deferred, or a
combination of both) granted to a Grandfathered Employee under an
Incentive Compensation Plan, provided, however, that an incentive
compensation award granted under the KeyCorp Management Incentive
Compensation Plan, and/or the KeyCorp Short-Term Incentive
Compensation Plan shall constitute an incentive compensation
award for the year in which the award is earned (without regard
to the actual time of
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<PAGE> 4
payment), and an incentive compensation award granted under the
KeyCorp Long Term Incentive Compensation Plan ("LTIC Plan") with
respect to any multi-year period shall be deemed to be "for" the
last year of the multi-year period without regard to the actual
time of payment of the award. Thus, for example, an incentive
compensation award granted under the LTIC Plan with respect to
the three-year period comprised of 1993, 1994, and 1995 will be
deemed to be "for" 1995 (without regard to the actual time of
payment), and the entire award under the LTIC Plan for that
period will be a LTIC Plan award for 1995.
(l) "INCENTIVE COMPENSATION PLAN" shall mean the KeyCorp Management
Incentive Compensation Plan, the KeyCorp Short-Term Incentive
Compensation Plan, and the KeyCorp Long-Term Incentive
Compensation Plan, as may be amended from time to time.
(m) "NORMAL RETIREMENT DATE" shall mean the first day of the month
coinciding with or immediately following a Grandfathered
Employee's 65th birthday, or if later, the fifth anniversary of
the Participant's employment commencement date.
(n) "RETIREMENT PLAN" shall mean the KeyCorp Cash Balance Pension
Plan with all amendments, modifications and supplements which may
be made thereto, as in effect on the date of a Grandfathered
Employee's retirement, death, or other termination of employment.
(o) "SUPPLEMENTAL RETIREMENT BENEFIT" shall mean the benefit paid
under this Plan as determined under Section 3.2.
All other capitalized and undefined terms used herein shall have the
meanings given them in the Retirement Plan for Employees of Society Corporation
and Subsidiaries (January 1, 1993 Restatement) ("Society Retirement Plan"),
unless a different meaning is plainly required by the context.
The masculine gender includes the feminine, and singular references
include the plural, unless the context clearly requires otherwise.
ARTICLE III
-----------
SUPPLEMENTAL RETIREMENT BENEFIT
-------------------------------
3.1 ELIGIBILITY. A Grandfathered Employee shall be eligible for a
Supplemental Retirement Benefit hereunder if the Grandfathered Employee (i)
retires on or after age 65 with five or more years of Credited Service, (ii)
terminates employment with an Employer on or after age 55 with ten or more years
of Benefit
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<PAGE> 5
Service, (iii) terminates his active employment with an Employer upon becoming
Disabled after completing five or more years of Benefit Service and disability
benefits have ceased under the KeyCorp Long-Term Disability Plan due to the
Participant's election for Early or Normal Retirement under the Retirement
Plan, or (iv) dies after completing five or more years of Benefit Service, and
has a Beneficiary who is eligible for a benefit under the Retirement Plan.
3.2 AMOUNT AND PAYMENT. The amount of a Grandfathered Employee's
Supplemental Retirement Benefit hereunder shall be determined as follows:
Effective as of December 5, 1989, the monthly Supplemental Retirement
Benefit payable to a Grandfathered Employee shall be such amount as is
required, when added to the monthly benefit payable (before the
reduction applicable to any optional method of payment) under the
Retirement Plan, to produce an aggregate monthly benefit equal to the
monthly benefit which would have been payable (determined without
regard to the annual limitation on Plan benefits imposed pursuant to
Section 415(b) of the Code, and $150,000 (as adjusted) limitation on
annual compensation taken into account under the Plan imposed pursuant
to Section 401(a)(17) of the Code, or the reduction applicable to any
optional method of payment) under either the Society Retirement Plan
formula in effect on and after January 1, 1989, or the applicable
Society Retirement Plan formula in effect prior to January 1, 1989,
whichever results in a larger monthly benefit, if there was added to
the Grandfathered Employee's Final Average Monthly Compensation an
amount equal to the monthly average of the highest five Incentive
Compensation Awards granted to him or her under the Incentive
Compensation Plan during the ten-year period preceding the earliest of
his retirement, death, disability, or other termination of employment.
Notwithstanding the foregoing, if a Grandfathered Employee was granted
fewer than five awards, such monthly average is determined by adding
the amounts of such awards and dividing by 60. Solely for purposes of
reference, the alternative benefit formulas in effect under the Society
Retirement Plan prior to January 1, 1989, and the eligibility criteria
applicable to each are reproduced in Exhibit B attached hereto.
3.3 EARLY RETIREMENT ELECTION. In the event the Grandfathered Employee
elects to receive his or her Supplemental Retirement Benefit on or after the
Grandfathered Employee's Early Retirement Date but prior to the Grandfathered
Employee's Normal Retirement Date, the Grandfathered Employee's Supplemental
Retirement Benefit shall be calculated in accordance with Section 3.2 and the
Grandfathered Employee's monthly benefit payable under the Retirement Plan for
purposes of this Section 3.3 shall be the Grandfathered Employee's Normal
Retirement Date. In calculating this Normal Retirement Date benefit, if the
Grandfathered Employee is not eligible for, or chooses not to elect his or her
monthly benefit under the provisions of Section 6.5(b) of the Retirement Plan,
then such Grandfathered Employee's Retirement Plan benefit as of his or her
termination date shall be increased for purposes of this Plan with an imputed
Average Interest Credit to reflect the Grandfathered Employee's benefit at his
or her Normal Retirement Date and shall be converted to the form of
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<PAGE> 6
a single life annuity option using the Average Treasury Rate and GATT Mortality
Table. The amount of the Grandfathered Employee's monthly Supplemental
Retirement Benefit otherwise determined under this Section 3.3 hereof shall then
be reduced by .3% for each month between ages 55 and 60 and .4% for each month
after age 60 in which the commencement of the Grandfathered Employee's
Supplemental Retirement Benefit precedes his or her Normal Retirement Date.
3.4 ACTUARIAL FACTORS. The Supplemental Retirement Benefit payable to a
Grandfathered Employee or Grandfathered Employee's Beneficiary in a form other
than a single life annuity shall be actuarially equivalent to such single life
annuity payment option. In making the determination provided for in this Article
III, the Corporation shall rely upon calculations made by the independent
actuaries for the Plan, who shall determine actuarially equivalent benefits
under the Plan by applying the UP-1984 Mortality Table (set back two years) and
using an interest rate of 6%.
ARTICLE IV
----------
PAYMENT OF SUPPLEMENTAL RETIREMENT BENEFIT
------------------------------------------
4.1 IMMEDIATE PAYMENT UPON TERMINATION OR RETIREMENT OF GRANDFATHERED
EMPLOYEE. Subject to the provisions of Section 4.2 hereof, a Grandfathered
Employee meeting the age and service eligibility requirements of Section 3.1
shall receive an immediate distribution of his or her Supplemental Retirement
Benefit upon the Grandfathered Employee's retirement or termination of
employment, in the form of a single life annuity, unless the Grandfathered
Employee elects in writing a minimum of thirty days prior to his or her
retirement or termination date, to receive payment of his or her Supplemental
Retirement Benefit under a different form of payment. The forms of payment from
which a Grandfathered Employee may elect shall be identical to those forms of
payment specified in the Retirement Plan, provided, however, that the lump sum
payment option available under the Retirement Plan shall not be available under
this Plan. Such method of payment, once elected by the Grandfathered Employee,
shall be irrevocable.
4.2 DEFERRED BENEFIT PAYMENT. A Grandfathered Employee who retires or
terminates his or her employment with an Employer after meeting the age and
service requirements of Section 3.1, may elect to defer receipt of his or her
Supplemental Retirement Benefit until a date specified by the Grandfathered
Employee, provided, (1) the Grandfathered Employee notifies the Corporation in
writing of his or her deferral election a minimum of one year prior to the
Grandfathered Employee's retirement or termination of employment, (2) the
Grandfathered Employee specifies the future date on which such Supplemental
Retirement Benefit shall be distributed, and (3) the Grandfathered Employee
commences distribution of his or her Supplemental Retirement Benefit no later
than the first day of the month immediately following the Grandfathered
Employee's sixty-fifth (65th) birthday. The election to defer, once made by the
Grandfathered Employee, shall be irrevocable.
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<PAGE> 7
Notwithstanding the foregoing, in the case of an "unforeseeable
emergency", upon written application by the Grandfathered Employee to the
Corporation, the Corporation, in its sole discretion, may accelerate the
distribution of the Grandfathered Employee's deferred Supplemental Retirement
Benefit. For purposes of this Section 4.2, the term "unforeseeable emergency"
shall mean an unanticipated emergency that is caused by an event beyond the
control of the Grandfathered Employee that would result in severe financial
hardship to the Grandfathered Employee if such premature distribution were not
permitted.
4.3 PAYMENT UPON DEATH OF GRANDFATHERED EMPLOYEE.
(a) Upon the death of a Grandfathered Employee who has met the service
requirement of Section 3.1, but who has not yet commenced distribution
of his or her Supplemental Retirement Benefit there shall be paid to
the Grandfathered Employee's Beneficiary 50% of the Supplemental
Retirement Benefit which the Grandfathered Employee would have been
entitled to receive had he or she retired on his or her Normal
Retirement Date and elected to receive his or her Supplemental
Retirement Benefit.
For purposes of this Section 4.3(a) only, the following shall apply:
(i) The Grandfathered Employee's Benefit Service shall be calculated
as of the Grandfathered Employee's date of death.
(ii) The Grandfathered Employee's Retirement Plan benefit shall be
calculated under the provisions of Article IV of the
Retirement Plan as if the Grandfathered Employee retired on
his or her Normal Retirement Date, with such Retirement Plan
benefit being increased for purposes of this Section 4.3(a)
with an imputed Average Interest Credit to reflect what the
Grandfathered Employee's Plan benefit would have been as of
the Grandfathered Employee's Normal Retirement Date; such
Retirement Plan benefit shall be converted to a single life
annuity Option using the Average Treasury Rate and the Gatt
Mortality Table.
Payment of this death benefit shall be made in the form of a
single life annuity, and will be subject to distribution any time after
the Grandfathered Employee's Early Retirement Date, which shall be
calculated in accordance with the actuarial reduction provisions
contained within Section 3.3 hereof, if paid prior to the Participant's
Normal Retirement Date."
(b) In the event of a Grandfathered Employee's death after the
Grandfathered Employee has commenced distribution of his or her
Supplemental Retirement Benefit, there shall be paid to the
Grandfathered Employee's Beneficiary only those survivor benefits
provided under the form of benefit payment elected by the Grandfathered
Employee.
-7-
<PAGE> 8
4.4 PAYMENT UPON GRANDFATHERED EMPLOYEE'S ATTAINMENT OF AGE 70-1/2. A
Grandfathered Employee shall be required to commence distribution of his or her
Supplemental Retirement Benefit no later than April 1 of the calendar year
following the year in which the Grandfathered Employee attains age 70-1/2.
ARTICLE V
---------
ADMINISTRATION AND CLAIMS PROCEDURE
-----------------------------------
5.1 ADMINISTRATION. The Corporation, which shall be the "Administrator"
of the Plan for purposes of ERISA and the "Plan Administrator" for purposes of
the Code, shall be responsible for the general administration of the Plan, for
carrying out the provisions hereof, and for making payments hereunder. The
Corporation shall have the sole and absolute discretionary authority and power
to carry out the provisions of the Plan, including, but not limited to, the
authority and power (a) to determine all questions relating to the eligibility
for and the amount of any benefit to be paid under the Plan, (b) to determine
all questions pertaining to claims for benefits and procedures for claim review,
(c) to resolve all other questions arising under the Plan, including any
questions of construction, and (d) to take such further action as the
Corporation shall deem necessary or advisable in the administration of the Plan.
All findings, decisions, and determinations of any kind made by the Corporation
shall not be disturbed unless the Corporation has acted in an arbitrary and
capricious manner. Subject to the requirements of law, the Corporation shall be
the sole judge of the standard of proof required in any claim for benefits and
in any determination of eligibility for a benefit. All decisions of the
Corporation shall be final and binding on all parties. The Corporation may
employ such attorneys, investment counsel, agents, and accountants as it may
deem necessary or advisable to assist it in carrying out its duties hereunder.
The actions taken and the decisions made by the Corporation hereunder shall be
final and binding upon all interested parties subject, however, to the
provisions of Section 5.2. The Plan Year, for purposes of Plan administration,
shall be the calendar year.
5.2 CLAIMS REVIEW PROCEDURE. Whenever the Corporation decides for
whatever reason to deny, whether in whole or in part, a claim for benefits under
this Plan filed by any person (herein referred to as the "Claimant"), the
Corporation shall transmit a written notice of its decision to the Claimant,
which notice shall be written in a manner calculated to be understood by the
Claimant and shall contain a statement of the specific reasons for the denial of
the claim and a statement advising the Claimant that, within 60 days of the date
on which he receives such notice, he may obtain review of the decision of the
Corporation in accordance with the procedures hereinafter set forth. Within such
60-day period, the Claimant or his authorized representative may request that
the claim denial be reviewed by filing with the Corporation a written request
therefore, which request shall contain the following information:
(a) the date on which the request was filed with the Corporation; provided,
however, that the date on which the request for review was in fact
filed with the Corporation shall control in the event that the date of
the actual filing is later than the date stated by the Claimant
pursuant to this paragraph (a);
-8-
<PAGE> 9
(b) the specific portions of the denial of his claim which the Claimant
requests the Corporation to review;
(c) a statement by the Claimant setting forth the basis upon which he
believes the Corporation should reverse its previous denial of his
claim and accept his claim as made; and;
(d) any written material which the Claimant desires the Corporation to
examine in its consideration of his position as stated pursuant to
paragraph (c) above.
In accordance with this Section, if the Claimant requests a review of
the Corporation's decision, such review shall be made by the Corporation, who
shall, within sixty (60) days after receipt of the request form, review and
render a written decision on the claim containing the specific reasons for the
decision including reference to Plan provisions upon which the decision is
based. All findings, decisions, and determinations of any kind made by the
Corporation shall not be modified unless the Corporation has acted in an
arbitrary and capricious manner. Subject to the requirements of a law, the
Corporation shall be the sole judge of the standard of proof required in any
claim for benefits, and any determination of eligibility for a benefit. All
decisions of the Corporation shall be binding on the Claimant and upon all other
Persons. If the Claimant shall not file written notice with the Corporation at
the times set forth above, such individual shall have waived all benefits under
the Plan other than as already provided, if any, under the Plan.
ARTICLE VI
----------
FUNDING
-------
All benefits under the Plan shall be payable solely in cash from the
general assets of the Corporation or a subsidiary, and Grandfathered Employees,
and Grandfathered Employees' Beneficiaries shall have the status of general
unsecured creditors of the Corporation. The obligations of the Corporation to
make distributions in accordance with the provisions of the Plan constitute a
mere promise to make payments in the future. The Corporation shall have no
obligation to establish a trust or fund to fund its obligation to pay benefits
under the Plan or to insure any benefits under the Plan. Notwithstanding any
provision of this Plan, the Corporation may, in its sole discretion, combine the
payment due and owing under this Plan with one or more other payments owing to a
Grandfathered Employee, or a Grandfathered Employee's Beneficiary under any
other plan, contract, or otherwise (other than any payment due under the
Retirement Plan), in one check, direct deposit, wire transfer, or other means of
payment. Finally, it is the intention of the Corporation and the Grandfathered
Employees that the Plan be unfunded for tax purposes and for the purposes of
Title I of the Employee Retirement Income Security Act of 1974, as amended.
-9-
<PAGE> 10
Executed at Cleveland, Ohio, as of the 1st day of August, 1996.
KEYCORP
By:
----------------------------------
Title:
----------------------------------
-10-
<PAGE> 11
EXHIBIT A
---------
LIST OF GRANDFATHERED EMPLOYEE
------------------------------
NAME OF EMPLOYEE NAME OF EMPLOYEE
- ---------------- ----------------
Andrews, James McGuire, James
Auletta, Patrick McDaniel, D. A.
Bailey, Raymond McGinty, Kevin
Barger, C. Michael Melluzzo, Sebastian
Beran, John Meyer, John R.
Blake, John T. Meyer III, Henry
Brooks, Craig Moody Jr., John
Bullard, Janet Murray, Bruce
Carlini, Lawrence Neel, Thomas M.
Colao Jr., Anthony Newman, Michael
Cortelli, John Noall, Roger
Cruse Jr., Donald Nucerino, Donald
Deal, Frederick O'Donnell, F. Scott
Doland, Michael Patrick, Robert
Dorland, David Platt, Craig, T.
Edmonds, David Ponchak, Frank
Egan, Richard Purinton II, Arthur
Fishell, James Rapacz, Richard
Flowers, James Rasmussen, Eric
Gill, Michael Roark, Michael
Gillespie, Jr., Robert Rusnak, Joseph
Greer, Michael Saddler, Thomas
Gula, Allen Schaedel, Elroy
Haas, Robert Seink, Edward
Hancock, John Simon, William
Hann, Jr., William Smith, James J.
Hartman, Sheldon Swisher, Trace
Hawthorne, Douglas Tracy, Robert
Hedberg, Douglas Trigg, Michael
Heintel, Jr., Carl Uzl, Ralph R.
Heisler, Jr., Robert Walker, Martin
Herron, David Wall, Stephen
Heyworth, Anthony Wert, James W.
Hitchcock, Thomas Willet, Richard
Holloway, Ruben L.
Johannsen, Rolland D.
Jones, Robert G.
Kamerer, James
Kaplan, Stephen
Karnatz, William
Kleinhenz, Karen R.
Klimas, Daniel
Knapp, Peter O.
Koontz, Cary
Kucler, Jack
Malone, Michael
Mayer, George
-11-
<PAGE> 12
EXHIBIT B
---------
FOR PERIODS OF TIME PRIOR TO JANUARY 1, 1989, THREE ALTERNATIVE BENEFIT
FORMULAS WERE IN EFFECT UNDER THE SOCIETY RETIREMENT PLAN. THE MONTHLY AMOUNT OF
THE NORMAL RETIREMENT BENEFIT PAYABLE TO AN ELIGIBLE GRANDFATHERED EMPLOYEE WAS
EQUAL TO:
(a) IF HE BECAME A GRANDFATHERED EMPLOYEE AND THEREFORE BEGAN
TO ACCRUE BENEFITS UNDER THE PLAN PRIOR TO JULY 1, 1981, THE GREATER OF:
(i) his final average monthly compensation multiplied by the sum of:
(A) 3.2% multiplied by his years of benefit service not in excess
of 15, plus
(B) 1% multiplied by his years of benefit service in excess of 15
but not in excess of 25, plus
(C) 0.5% multiplied by his years of benefit service in excess
of 25; reduced by:
(D) 3.33% of his Social Security Benefit Amount multiplied by
his years of benefit service not in excess of 15; or
(ii) the amount determined in accordance with the formula set forth
in paragraph (b) below which is otherwise applicable to a
person who becomes an Employee on or after July 1, 1981; or
(b) IF HE BECAME AN EMPLOYEE AND THEREFORE BEGAN TO ACCRUE BENEFITS
UNDER THE PLAN ON OR AFTER JULY 1, 1981, HIS FINAL AVERAGE MONTHLY COMPENSATION
MULTIPLIED BY THE SUM OF:
(i) 2% multiplied by his years of benefit service not in excess of
30, plus
(ii) 0.5% multiplied by his years of benefit service in excess of
30; reduced by:
(iii) 1.67% of his Social Security Benefit Amount multiplied by his
years of benefit service not in excess of 30 to a maximum of
50% of such Amount; or
(c) IF HE BECAME AN EMPLOYEE AND THEREFORE BEGAN TO ACCRUE BENEFITS
UNDER THE PLAN ON JANUARY 1, 1985, AND IMMEDIATELY PRIOR TO SUCH DATE WAS A
GRANDFATHERED EMPLOYEE IN THE THIRD NATIONAL BANK AND TRUST COMPANY OF DAYTON,
OHIO RETIREMENT PLAN, THE GREATER OF:
-12-
<PAGE> 13
(i) the amount determined in accordance with the formula set forth
in paragraph (b) above which is otherwise applicable to a
person who becomes an Employee on or after July 1, 1981; or
(ii) the sum of:
(A) 2.2% of his final average monthly compensation, reduced by
2% of his Social Security Benefit Amount; the difference to
be multiplied by his years of benefit service at normal
retirement date not in excess of 25, plus
(B) 1.1% of his final average monthly compensation, reduced by
1% of his Social Security Benefit Amount; the difference to
be multiplied by his years of benefit service at normal
retirement date in excess of 25, adjusted as necessary to
produce the actuarial equivalent value on a straight life
annuity basis of a benefit otherwise payable on a ten-year
certain and continuous basis; provided, however, that in the
case of each Employee who was in the employment of Society
National Bank of Cleveland on December 31, 1971, and whose
continuous service is not broken after the date and prior to
the date of his retirement, the monthly amount of his normal
retirement benefit otherwise determined under this Section
shall be not less than the monthly amount of his normal
retirement benefit determined under the normal retirement
benefit formula of the Plan as in effect on December 31,
1971, based on the assumption that he received no increases
in the rate of his compensation after December 31, 1971, and
using the rules for computing continuous service specified
in Article II of the Plan as in effect on June 30, 1976
(hereinafter referred to as his "minimum benefit"); and
provided, further, that the monthly amount so determined
under the provisions of this Exhibit B shall be reduced to
the extent provided in Section 14.10 of the Society
Retirement Plan as in effect on December 31, 1988.
Notwithstanding anything to the contrary contained in the
Society Retirement Plan, in no event shall an Employee
receive a benefit commencing at his normal retirement date
which is less than the largest early retirement benefit to
which he had been entitled under the Society Retirement Plan
prior to his normal retirement date.
-13-
<PAGE> 1
Exhibit 10.31
KEYCORP
EXCESS CASH BALANCE PENSION PLAN
ARTICLE I
---------
THE PLAN
--------
The KeyCorp Excess Cash Balance Pension Plan ("Plan") originally
established effective January 1, 1995, is hereby amended and restated in its
entirety effective August 1, 1996. The Plan as herein amended and restated
supplements the pension benefits of certain selected key employees of KeyCorp
and its subsidiaries who are covered by the Plan in accordance with the terms
hereof. It is the intention of KeyCorp and of the Participants covered under the
Plan, that the Plan be unfunded for tax purposes and for purposes of Title I of
the Employee Retirement Income Security Act of 1974, as amended.
ARTICLE II
----------
DEFINITIONS
-----------
2.1 MEANINGS OF DEFINITIONS. As used herein, the following words and phrases
shall have the meanings hereinafter set forth, unless a different meaning is
plainly required by the context:
(a) "BENEFICIARY" shall mean the Participant's surviving spouse who is
entitled to receive the benefit hereunder in the event the Participant dies
before his or her Excess Pension Benefit shall have been distributed to him or
her.
(b) "CREDITED SERVICE" shall be calculated by measuring the period of
service commencing on the Participant's Employment Commencement Date and
Re-Employment Commencement Date, if applicable, and ending on the Participant's
Severance from Service Date, and shall be computed based on each full month
during which time the Employee is employed by an Employer.
(c) "COMPENSATION" of a Participant for any Plan Year or any partial Plan
Year in which the Participant incurs a Severance From Service Date shall mean
the entire amount of compensation paid to such Participant during such period by
reason of his employment as an Employee, as reported for federal income tax
purposes, or which would have been paid except for (1) the timing of an
Employer's payroll processing operations, (2) the Participant's written election
to defer receipt of compensation during the Plan Year, (3) the provisions of the
KeyCorp 401(k) Savings Plan, or (4) the provisions of the KeyCorp Flexible
Benefits Plan provided, however, that the term shall not include:
1
<PAGE> 2
(i) any amount attributable to the Participant's exercise of
stock appreciation rights and the amount of any gain to
the Participant upon the exercise of stock options;
(ii) any amount attributable to the Participant's receipt of
non-cash remuneration whether or not it is included in
the Participant's income for federal income tax purposes;
(iii) any amount attributable to the Participant's receipt of
moving expenses and any relocation bonus paid to the
Participant during the Plan Year;
(iv) any amount attributable to a lump sum severance payment
paid by an Employer or the Corporation to the
Participant;
(v) any amount attributable to fringe benefits (cash and
non-cash),
(vi) any amount attributable to any bonus or payment made as
an inducement for the Participant to accept employment
with an Employer,
(vii) any amount attributable to salary deferrals paid to the
Participant during the Plan Year, which have been
previously included as Compensation under the Plan during
the Plan Year or any prior Plan Year,
(viii) any amount paid to the Participant during the Plan Year
which is attributable to interest earned on Compensation
deferred under a plan of an Employer or the Corporation;
and
(ix) any amount paid for any period after the Participant's
termination or retirement date.
In the case of a Disabled Participant, such Participant's Compensation
for each year while Disabled shall equal an amount which shall reflect the
Participant's Compensation for the calendar year preceding the date of the
Participant's Disability.
(b) "CORPORATION" shall mean KeyCorp, an Ohio corporation, its
corporate successors, and any corporation or corporations into or with which it
may be merged or consolidated.
(c) "EMPLOYEE" shall mean a person who is regularly employed by an
Employer provided, however, that the term Employee shall specifically exclude
those individuals who are participants in a KeyCorp-sponsored Supplemental
Retirement Plan.
2
<PAGE> 3
(d) "EMPLOYER" shall mean KeyCorp and all of its subsidiaries or
affiliates unless specifically excluded as an Employer for Plan purposes by
written action by an officer of the Corporation. An Employer's participation
shall be subject to any conditions or requirements made by the Corporation as
the Plan Administrator, and each Employer shall be deemed to appoint the Plan
Administrator as its exclusive agent under the Plan.
(e) "EXCESS PENSION BENEFIT" shall mean the pension benefit payable
pursuant to the terms of this Plan to a Participant meeting the eligibility
requirements of Section 3.1 of the Plan.
(f) "INTEREST CREDIT" shall mean the rate at which a Participant's
Opening Account Balance as provided for under Section 3.3 of the Plan, is
periodically increased with interest. The Interest Credit allocated to a
Participant's Opening Account Balance shall be determined based on one-quarter
of the effective annual calendar-year interest rate equal to the average
(rounded to the nearest one-hundredth of one percent) 5-year United States
Treasury Bill rate in effect each month during the twelve (12) month period
ending on October 31 or the last business day in October of the preceding
calendar year. The procedures to determine such Interest Credit shall be
determined by the Pension Trust Oversight Committee, and the Pension Trust
Oversight Committee in its sole and exclusive discretion may modify the Interest
Credit to be allocated under this Plan. Interest Credits shall cease accruing as
of the Participant's retirement or termination date.
(g) "PARTICIPANT" shall mean an Employee who is a participant in the
Pension Plan and who is selected by the Corporation to become a Participant in
the Plan, and whose participation in the Plan has not been terminated by the
Corporation.
(h) "PENSION PLAN" shall mean the KeyCorp Cash Balance Pension Plan as
the same shall be in effect on the date of a Participant's retirement, death,
Disability or other termination of employment.
(i) "SUPPLEMENTAL RETIREMENT PLAN" shall mean the KeyCorp Supplemental
Retirement Plan (formerly known as the Society Corporation Supplemental
Retirement Plan), the KeyCorp Supplemental Retirement Benefit Plan, and the
KeyCorp Supplemental Retirement Benefit Plan for Key Executives, with all
amendments, modifications, and supplements which may be made thereto.
All other capitalized and undefined terms used herein shall have the
meanings given them in the Pension Plan, unless a different meaning is plainly
required by the context.
The masculine gender includes the feminine, and singular references
include the plural, unless the context clearly requires otherwise.
3
<PAGE> 4
ARTICLE III
-----------
EXCESS PENSION BENEFIT
----------------------
3.1 ELIGIBILITY. Subject to the provisions of Article V hereof, a Participant
shall be eligible for an Excess Pension Benefit hereunder if the Participant (i)
retires on or after age 65 with five or more years of Credited Service, (ii)
terminates employment with an Employer on or after age 55 with ten or more years
of Credited Service, (iii) terminates his active employment with an Employer
upon becoming Disabled after completing five or more years of Credited Service
and disability benefits have ceased under the KeyCorp Long-Term Disability Plan
due to the Participant's election for an Early or Normal Retirement under the
Pension Plan, or (iv) dies after completing five years of Credited Service, and
has a Beneficiary who is eligible for a benefit under the Pension Plan.
3.2 AMOUNT OF EXCESS PENSION BENEFIT. The Excess Pension Benefit payable to a
Participant shall be in such amount as is required, when added to the Accrued
Benefit payable in lump sum form to the Participant under the Pension Plan as of
the Participant's retirement or termination date, to produce a lump sum cash
aggregate benefit equal to the benefit which would have been payable under the
Pension Plan formula in lump sum form to the Participant if the limitations of
Section 415 of the Code and Section 401(a)(17) of the Code had not been in
effect with regard to the Participant's Compensation, as defined herein. For
purposes of this Section 3.2 hereof, the term "Pension Plan formula" means the
method of calculating a Participant's pension benefit as reflected in Article IV
of the Pension Plan, and shall not include any Predecessor Plan grandfathered
benefit formulas.
3.3 OPENING ACCOUNT BALANCE.
(1) Effective January 1, 1995, all "Employees" (other than "Grandfathered
Employees") as defined in the Society Corporation Supplemental Retirement
Plan, as amended and restated as the KeyCorp Supplemental Retirement Plan
("Supplemental Retirement Plan") whose Supplemental Retirement Plan benefit
was valued as of January 1, 1995 in the form of a lump sum cash benefit and
thereafter the value of which was transferred to this Plan pursuant to the
provisions of Article IX of the Supplemental Retirement Plan, shall have the
value of such lump sum cash benefit reflected in a bookkeeping opening
account balance ("Opening Account Balance") established for such
Participant. Such Opening Account Balance shall be credited with Interest
Credit as of the last day of each calendar quarter, based on the value of
the Participant's Opening Account Balance as of the first day of the
applicable quarter, provided, however, that no Interest Credit shall be
allocated to the Participant's Opening Account Balance on or after the
Participant's benefit distribution date. A Participant's entitlement to such
Opening Account Balance shall be governed by the eligibility provisions of
Section 3.1 of this Plan, and the value of the opening account balance shall
be added to and become a part of such Participant's Excess Pension Benefit,
which shall be payable in accordance with the terms of this Plan.
4
<PAGE> 5
(2) Effective January 1, 1995, all participants in the Ameritrust
Corporation Excess Benefit Plan and all participants in the Ameritrust
Corporation Deferred Compensation Plan (hereinafter collectively referred
to as "Ameritrust Plan"), whose Ameritrust Plan benefit was valued as of
January 1, 1995, in the form of a lump sum cash benefit and thereafter the
value of which was transferred to this Plan shall have the value of such
lump sum cash benefit reflected in a bookkeeping opening account balance
("Opening Account Balance") established for such Participant. Such Opening
Account Balance shall be credited with Interest Credit as of the last day
of each calendar quarter, based on the value of the Participant's Opening
Account Balance as of the first day of the applicable quarter, provided,
however, that no Interest Credit shall be allocated to the Participant's
Opening Account Balance on or after the Participant's benefit distribution
date. A Participant shall be fully vested in such Opening Account Balance,
and the value of the Opening Account Balance shall be added to and become
a part of such Participant's Excess Pension Benefit, which shall be payable
in accordance with the terms of this Plan. If the Participant fails to meet
eligibility requirements of Section 3.1 entitling Participant to an Excess
Pension Benefit accruing under this Plan on and after January 1, 1995, the
Participant shall nonetheless receive, at his or her termination date, the
Participant's vested Opening Account Balance valued as of the Participant's
termination date, which shall be paid pursuant to the benefit distribution
(payment) options contained in Article IV of this Plan.
ARTICLE IV
----------
PAYMENT OF EXCESS PENSION BENEFIT
---------------------------------
4.1 IMMEDIATE PAYMENT UPON TERMINATION OR RETIREMENT OF PARTICIPANT. Subject to
the provisions of Section 4.2 hereof, a Participant meeting the age and service
eligibility requirements of Section 3.1 shall receive an immediate distribution
of his or her Excess Pension Benefit upon the Participant's retirement or
termination of employment, in the form of a lump sum cash payment, unless the
Participant elects in writing, a minimum of one year prior to his or her
retirement or termination date to receive payment of his or her Excess Pension
Benefit under a different form of payment. The forms of payment from which a
Participant may elect shall be identical to those forms of payment specified in
the Pension Plan.
The Excess Pension Benefit payable to a Participant in a form other than a
lump sum payment shall be the actuarial equivalent to such lump sum cash
payment. In making the determination provided for in this Article IV, the
Corporation shall rely upon calculations made by the independent actuaries for
the Pension Plan, who shall apply the actuarial assumptions and interest rate
then in use under the Pension Plan for converting the form of payment elected by
the Participant.
4.2 DEFERRED BENEFIT PAYMENT. A Participant who retires or terminates his or
her employment with an Employer after meeting the age and service requirements
of Section 3.1,
5
<PAGE> 6
may elect to defer receipt of his or her Excess Pension Benefit until a date
specified by the Participant, provided (1) the Participant notifies the
Corporation in writing of his or her deferral election a minimum of one year
prior to the Participant's retirement or termination of employment, (2) the
Participant specifies the future date on which such Excess Pension Benefit is to
be distributed, and (3) the Participant commences his or her Excess Pension
Benefit no later than the first day of the month immediately following the
Participant's sixty-fifth (65th) birthday. The election to defer, once made by
the Participant, shall be irrevocable.
Notwithstanding the foregoing, in the case of a Participant's "unforeseeable
emergency", upon written application by the Participant to the Corporation, the
Corporation, in its sole discretion, may accelerate the distribution of the
Participant's deferred Excess Pension Benefit. For purposes of this Section 4.2,
the term "unforseeable emergency" shall mean an unanticipated emergency that is
caused by an event beyond the control of the Participant that would result in
severe financial hardship to the Participant if such premature distribution were
not permitted.
4.3 PAYMENT UPON DEATH OF PARTICIPANT.
(a) Upon the death of a Participant who has met the service requirement of
Section 3.1, but who has not yet commenced distribution of his or her Excess
Pension Benefit, there shall be paid to the Participant's Beneficiary the Excess
Pension Benefit which the Participant would have been entitled to receive had he
or she retired on his or her date of death and elected to receive his or her
Excess Pension Benefit. Such Excess Pension Benefit shall be paid in the form of
a lump sum cash payment.
(b) In the event of a Participant's death after the Participant has
commenced distribution of his or her Excess Pension Benefit, there shall be paid
to the Participant's Beneficiary only those survivor benefits provided under the
form of benefit payment elected by the Participant.
The amendment set forth in paragraphs 1 and 2 shall be effective as of
January 1, 1996. Except as herein specifically amended, the Plan shall remain in
full force and effect.
4.4 PAYMENT UPON PARTICIPANT'S ATTAINMENT OF AGE 70-1/2. A Participant shall be
required to commence distribution of his or her vested Excess Pension Benefit in
conjunction with the distribution of the Participant's Pension Plan benefit, no
later than April 1 of the calendar year following the year in which the
Participant attains age 70-1/2.
6
<PAGE> 7
ARTICLE V
---------
ELECTION BETWEEN PLAN BENEFITS
------------------------------
5.1 PARTICIPANT ELECTION BETWEEN PLAN BENEFITS. A Participant meeting the
eligibility requirements for an Excess Pension Benefit, who is also a
participant in, and meets the eligibility requirements for a plan benefit under
the KeyCorp Executive Supplemental Pension Plan, shall be required, prior to the
Participant's retirement or termination date, to elect a benefit from either
this Plan, or from the KeyCorp Executive Supplemental Pension Plan. A
Participant's failure to elect between Plan benefits prior to the Participant's
retirement or termination date shall result in an automatic default election by
the Participant of an Excess Pension Benefit under the Plan, to be paid to the
Participant as of his or her retirement or termination date in the form of a
lump sum cash payment.
5.2 BENEFICIARY ELECTION BETWEEN PLAN BENEFITS. If a Participant dies after
having met the eligibility requirements for an Excess Pension Benefit, and the
Participant at the time of his or her death also is a Participant in the KeyCorp
Executive Supplemental Pension Plan and eligible for a benefit under the KeyCorp
Executive Supplemental Pension Plan, the Participant's Beneficiary shall be
required to elect a death benefit from either this Plan or from the KeyCorp
Executive Supplemental Pension Plan, but in no event may the Participant's
Beneficiary elect a benefit under both this Plan and the KeyCorp Executive
Supplemental Pension Plan. The terms of each respective Plan shall control the
form of payment which may be elected by the Participant's Beneficiary.
A beneficiary's failure to elect between Plan benefits within 120 days from
the date of the Participant's death shall result in an automatic default
election by the Beneficiary of an Excess Pension Benefit under this Plan, to be
paid to the Beneficiary in a cash lump sum payment.
ARTICLE VI
----------
ADMINISTRATION
--------------
6.1 ADMINISTRATION. The Corporation, which shall be the "Administrator" of the
Plan for purposes of ERISA and the "Plan Administrator" for purposes of the
Code, shall be responsible for the general administration of the Plan, for
carrying out the provisions hereof, and for making payments hereunder. The
Corporation shall have the sole and absolute discretionary authority and power
to carry out the provisions of the Plan, including, but not limited to, the
authority and power (a) to determine all questions relating to the eligibility
for and the amount of any benefit to be paid under the Plan, (b) to determine
all questions pertaining to claims for benefits and procedures for claim review,
(c) to resolve all other questions arising under the Plan, including any
questions of construction, and (d) to take such further action as the
Corporation shall deem advisable in the administration of the Plan. All
7
<PAGE> 8
findings, decisions and determinations of any kind made by the Corporation shall
not be disturbed unless the Corporation has acted in an arbitrary and capricious
manner. Subject to the requirements of law, the Corporation shall be the sole
judge of the standard of proof required in any claim for benefits and in any
determination of eligibility for a benefit. All decisions of the Corporation
shall be final and binding on all parties. The Corporation may employ such
attorneys, investment counsel, agents, and accountants as it may deem necessary
or advisable to assist it in carrying out its duties hereunder. The actions
taken and the decisions made by the Corporation hereunder shall be final and
binding upon all interested parties subject, however, to the provisions of
Section 6.2. The Plan Year, for purposes of Plan administration, shall be the
calendar year.
6.2 CLAIMS REVIEW PROCEDURE. Whenever the Corporation decides for whatever
reason to deny, whether in whole or in part, a claim for benefits under the Plan
filed by any person (herein referred to as the "Claimant"), the Corporation
shall transmit a written notice of its decision to the Claimant, which notice
shall be written in a manner calculated to be understood by the Claimant and
shall contain a statement of the specific reasons for the denial of the claim
and a statement advising the Claimant that, within 60 days of the date on which
the Claimant receives such notice, Claimant may obtain review of the decision of
the Corporation in accordance with the procedures hereinafter set forth. Within
such 60-day period, the Claimant or Claimant's authorized representative may
request that the claim denial be reviewed by filing with the Corporation a
written request therefore, which request shall contain the following
information:
(i) the date on which the request was filed with the Corporation;
provided, however, that the date on which the request for
review was in fact filed with the Corporation shall control in
the event that the date of the actual filing is later than the
date stated by the Claimant pursuant to this paragraph (i);
(ii) the specific portions of the denial of the Claimant's claim which
the Claimant requests the Corporation to review;
(iii) a statement by the Claimant setting forth the basis upon which
Claimant believes the Corporation should reverse its previous
denial of the Claimant's claim and accept the Claimant's claim
as made;
(iv) any written material which the Claimant desires the
Corporation to examine in its consideration of the Claimant's
position as stated pursuant to paragraph (iii) above.
In accordance with this Section, if the Claimant requests a review of the
Corporation's decision, such review shall be made by the Corporation, which
shall, within sixty (60) days after receipt of the request form, review and
render a written decision on the claim containing the specific reasons for the
decision including reference to Plan provisions upon which the decision is
based. All findings, decisions, and determinations of any kind made by the
8
<PAGE> 9
Corporation shall not be modified unless the Corporation has acted in an
arbitrary and capricious manner. Subject to the requirements of law, the
Corporation shall be the sole judge of the standard of proof required in any
claim for benefits, and any determination of eligibility for a benefit. All
decisions of the Corporation shall be binding on the Claimant and upon all other
Persons. If the Participant or Beneficiary shall not file written notice with
the Corporation at the times set forth above, such individual shall have waived
all benefits under the Plan other than as already provided, if any, under the
Plan.
ARTICLE VII
-----------
FUNDING
-------
All benefits paid under the Plan shall be payable solely out of the general
assets of the Corporation. The Corporation shall have no obligation to establish
a trust or fund to fund its obligation to pay benefits under the Plan or to
insure any benefits under the Plan. Notwithstanding any provision of this Plan,
the Corporation may, in its sole discretion, combine the payment due and owing
under this Plan with one or more other payments owing to a Participant or the
Participant's Beneficiary under any other plan, contract, or otherwise (other
than any payment due under the Pension Plan), in one check, direct deposit, wire
transfer, or other means of payment.
ARTICLE VIII
------------
AMENDMENT AND TERMINATION
-------------------------
The Corporation reserves the right to amend or terminate the Plan at any
time by action of its Board of Directors, or any duly authorized Committee of
such Board of Directors; provided, however, that no such action shall adversely
affect any Participant who has met the age and service requirements of Section
3.1, or any Participant or Participant's Beneficiary who is receiving, or who is
eligible to receive an Excess Pension Benefit hereunder, unless an equivalent
benefit is provided under the Pension Plan or another plan maintained by an
Employer.
ARTICLE IX
----------
MISCELLANEOUS
-------------
9.1 INTEREST OF PARTICIPANT. The obligation of an Employer under the Plan to
provide a Participant or the Participant's Beneficiary with an Excess Pension
Benefit merely constitutes the unsecured promise of his Employer to make
payments as provided herein, and no person shall have any interest in, or a lien
or prior claim on, any property of an Employer.
9
<PAGE> 10
9.2 BENEFITS. Nothing in the Plan shall be construed to confer any right or
claim upon any person, firm, or corporation other than Participants and
Participants' Beneficiaries who become entitled to a benefit under the Plan.
9.3 RESTRICTIONS ON ALIENATION. Except to the extent permitted by law, no
benefit under the Plan at any time shall be subject in any manner to
anticipation, alienation, assignment (either at law or in equity), encumbrance,
garnishment, levy, execution, or other legal or equitable process. No person
shall have power in any manner to anticipate, transfer, assign, (either at law
or in equity), alienate or subject to attachment, garnishment, levy, execution,
or other legal or equitable process, or in any way encumber his benefits under
the Plan, or any part thereof, and any attempt to do so shall be void.
9.4 ABSENCE OF LIABILITY. No member of the Board of Directors of the Corporation
or a subsidiary, or any officer of the Corporation or a subsidiary shall be
liable for any act or action hereunder, whether of commission or omission, taken
by any other member, or by any officer, agent, or Employee, except in
circumstances involving his or her bad faith or willful misconduct.
9.5 EXPENSES. The expenses of administration of the Plan shall be paid by
the Corporation.
9.6 PRECEDENT. Except as otherwise specifically provided, no action taken in
accordance with the Plan by the Corporation shall be construed or relied upon as
a precedent for similar action under similar circumstances.
9.7 DUTY TO FURNISH INFORMATION. The Corporation shall furnish to each
Participant or Participant's Beneficiary any documents, reports, returns
statements, or other information that it reasonably deems necessary to perform
its duties imposed hereunder or otherwise imposed by law.
9.8 WITHHOLDING. The Corporation shall withhold any tax required by any
present or future law to be withheld from any payment hereunder to any
Participant or Participant's Beneficiary.
9.9 VALIDITY OF PLAN. The validity of the Plan shall be determined and the Plan
shall be construed and interpreted in accordance with the provisions of the Act,
the Code, and to the extent applicable, the laws of the State of Ohio. The
invalidity or illegality of any provision of the Plan shall not affect the
validity or legality of any other part thereof.
9.10 PARTIES BOUND. The Plan shall be binding upon the Employer, all
Participants, or Participants' Beneficiaries, and the executors, administrators,
successors, and assigns of each of them.
10
<PAGE> 11
9.11 HEADINGS. All headings used in the Plan are for convenience of reference
only and are not part of the substance of the Plan.
Executed at Cleveland, Ohio, to be effective as of the first day of
August, 1996.
KEYCORP
By:
----------------------------------
Title:
----------------------------------
11
<PAGE> 1
Exhibit 10.32
EXECUTIVES WITH NEW CHANGE OF CONTROL AGREEMENTS
Gary R. Allen
Patrick V. Auletta
James S. Bingay
Kevin M. Blakely
Michael J. Burns
Michael A. Butler
Stephen A. Cone
George H. Cress
Federick A. Deal
Michael L. Evans
Peter H. Fass, M.D.
James A. Fishell
Allen J. Gula, Jr.
Michael J. Hammes
Carl C. Heintel, Jr.
Robert B. Heisler
Thomas E. Helfrich
Anthony Heyworth
Leroy G. Irving
John H. Mancuso
Robert C. Meltzer
Henry L. Meyer III
A. Jay Meyerson
Richard A. Molyneux
John Simonson
K. Brent Somers
Thomas C. Stevens
Bruce E. Tofte
Andrew R. Tyson
Stephen E. Wall
Ted R. Winnowski
<PAGE> 2
AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the 15th day
of October, 1996, between KEYCORP, an Ohio corporation ("Key"), and
__________________ (the "Executive").
Key is entering into this Agreement in recognition of
the importance of the Executive's services to the continuity of management of
Key and based upon its determination that it will be in the best interests of
Key and its Subsidiaries to encourage the Executive's continued attention and
dedication to the Executive's duties in the potentially disruptive circumstances
of a possible Change of Control of Key. (As used in this Agreement, the terms
"Subsidiaries" and "Change of Control" and certain other capitalized terms have
the meanings ascribed to them in Section 7, at the end of this Agreement.)
Key and the Executive agree, effective as of the date
first set forth above, as follows:
1. Basic Severance Benefits. The benefits described in
Sections 1.1, 1.2, and 1.3 below are subject to the limitations set forth in
Sections 4.1 (which requires an election among applicable agreements providing
severance benefits if more than one such agreement would apply in the particular
circumstances of the termination of the Executive's employment and stipulates
that any payments received under this Agreement are in lieu of other claims or
rights), 4.2 (regarding withholding), 4.3 (regarding excess parachute payments),
and 4.4 (requiring the execution of a waiver and release by the Executive).
1.1 Lump Sum Severance Benefit if Employment is
Terminated in Certain Circumstances Within Two Years of a Change of
Control. If, within two years following the occurrence of a Change of
Control, the Executive's employment with Key and its Subsidiaries is
terminated by Key or its Subsidiary for any reason other than Cause,
Disability, or death or by the Executive after a Reduction of Base
Salary or a Mandatory Relocation has occurred, Key shall pay to the
Executive, within 30 business days after the Termination Date, a lump
sum severance benefit equal to 2 1/2 times the sum of (a) one year's
Base Salary (at the highest rate in effect at any time during the one
year period ending on the date of the Change of Control) plus (b)
Average Annual Incentive Compensation.
1.2 Lump Sum Severance Benefit if Employment is
Terminated by Executive for Good Reason During a Window Period. Except
as provided in the last sentence of this Section 1.2, if the Executive's
employment with Key and its Subsidiaries is terminated by the Executive
for Good Reason during a Window Period, Key shall pay to the Executive,
within 30 business days after the Termination Date, a lump sum severance
benefit equal to one and one half times the sum of (a) one year's Base
Salary (at the highest rate in effect at any time
<PAGE> 3
during the one year period ending on the date of the Change of
Control) plus (b) Average Annual Incentive Compensation. This Section
1.2 shall not apply if, at the Termination Date, (x) there has been
either any Reduction of Base Salary or any Mandatory Relocation (in
which event Section 1.1 would apply to the termination) or (y) Key or
any Subsidiary has Cause to terminate the Executive's employment (in
which case no lump sum severance benefit would be payable under either
of Sections 1.1 or 1.2).
1.3 Payment of Cost of COBRA Health Benefits. If the
Executive becomes entitled to payment of a lump sum severance benefit
under either of Sections 1.1 or 1.2 of this Agreement and the Executive
elects to continue to receive health benefits pursuant to an election
that Key or any Subsidiary is required to provide to the Executive in
order to comply with Section 4980B(f) of the Internal Revenue Code
(commonly referred to as "COBRA continuation coverage") during the
period specified in Section 4980B(f) (the "COBRA continuation period"),
Key will pay the cost of continuing those benefits from the Termination
Date through the first to occur of (a) the end of the COBRA continuation
period or (b) the date on which the Executive becomes employed (other
than on a part-time or temporary basis) by any other person or entity.
2. Other Benefits.
2.1 Reimbursement of Certain Expenses After a Change
of Control.
(a) From and after a Change of Control, Key shall pay,
as incurred, all expenses of the Executive, including the
reasonable fees of counsel engaged by the Executive, of
defending any action brought to have this Agreement declared
invalid or unenforceable.
(b) From and after a Change of Control, Key shall pay,
as incurred, all expenses of the Executive, including the
reasonable fees of counsel engaged by the Executive, of
prosecuting any action to compel Key to comply with the terms of
this Agreement upon receipt from Executive of an undertaking to
repay Key for such expenses if, and only if, it is ultimately
determined by a court of competent jurisdiction that the
Executive had no reasonable grounds for bringing that action
(which determination need not be made simply because the
Executive fails to succeed in the action).
(c) From and after a Change of Control, expenses
(including attorney's fees) incurred by the Executive in
defending any action, suit, or proceeding commenced or
threatened (whether before or after the Change of Control)
against the Executive for any action or failure to
act as an employee, officer, or director of Key or any
Subsidiary shall be paid by Key, as they are incurred, in
advance of final disposition of the action, suit,
<PAGE> 4
or proceeding upon receipt of an undertaking by or on behalf of
the Executive in which the Executive agrees to reasonably
cooperate with Key or the Subsidiary, as the case may be,
concerning the action, suit, or proceeding, and (i) if the
action, suit, or proceeding is commenced or threatened against
the Executive for any action or failure to act as a director, to
repay the amount if it is proved by clear and convincing
evidence in a court of competent jurisdiction that the
Executive's action or failure to act involved an act or omission
undertaken with deliberate intent to cause injury to Key or a
Subsidiary or undertaken with reckless disregard for the best
interests of Key or a Subsidiary, or (ii) if the action, suit,
or proceeding is commenced or threatened against the Executive
for any action or failure to act as an officer or employee, to
repay the amount if it is ultimately determined that the
Executive is not entitled to be indemnified.
2.2 Indemnification. From and after a Change of Control,
Key shall indemnify the Executive, to the full extent permitted or
authorized by the Ohio General Corporation Law as it may from time to
time be amended, if the Executive is (whether before or after the Change
of Control) made or threatened to be made a party to any threatened,
pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative, by reason of the fact that
the Executive is or was a director, officer, or employee of Key or any
Subsidiary, or is or was serving at the request of Key or any Subsidiary
as a director, trustee, officer, or employee of a bank, corporation,
partnership, joint venture, trust, or other enterprise. The
indemnification provided by this Section 2.2 shall not be deemed
exclusive of any other rights to which the Executive may be entitled
under the articles of incorporation or the regulations of Key or of any
Subsidiary, or any agreement, vote of shareholders or disinterested
directors, or otherwise, both as to action in the Executive's official
capacity and as to action in another capacity while holding such office,
and shall continue as to the Executive after the Executive has ceased to
be a director, trustee, officer, or employee and shall inure to the
benefit of the heirs, executors, and administrators of the Executive.
2.3 Disability. If, after a Change of Control and prior
to the Termination Date, the Executive is unable to perform services for
Key or any Subsidiary for any period by reason of disability of the
Executive, Key will pay and provide to the Executive all compensation
and benefits to which the Executive would have been entitled had the
Executive continued to be actively employed by Key or any Subsidiary
through the earliest of the following dates: (a) the first date on which
the Executive is no longer so disabled to such an extent that the
Executive is unable to perform services for Key or any Subsidiary, (b)
the date on which the Executive becomes eligible for payment of long
term disability benefits under a long term disability plan generally
applicable to executives of Key or a Subsidiary, (c) the date on which
Key has paid and provided 24 months of
<PAGE> 5
compensation and benefits to the Executive during the Executive's
disability, or (d) the date of the Executive's death.
3. No Set-Off; No Obligation to Seek Other Employment or
to Otherwise Mitigate Damages; No Effect Upon Other Plans. Key's obligation to
make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense, or other claim whatsoever that Key or any of its
Subsidiaries may have against the Executive. The Executive shall not be required
to mitigate damages or the amount of any payment provided for under this
Agreement by seeking other employment or otherwise. The amount of any payment
provided for under this Agreement shall not be reduced by any compensation or
benefits earned by the Executive as the result of employment by another employer
or otherwise after the termination of the Executive's employment. Neither the
provisions of this Agreement, nor the execution of the waiver and release
referred to in Section 4.4 below, nor the making of any payment provided for
hereunder shall reduce any amounts otherwise payable, or in any way diminish the
Executive's rights, under any incentive compensation plan, stock option or stock
appreciation rights plan, retirement or supplemental retirement plan, stock
purchase and savings plan, disability or insurance plan, or other similar
contract, plan, or arrangement of Key or any Subsidiary.
<PAGE> 6
4. Certain Limitations on Benefits.
4.1 Election of Benefits Required; Payments in Lieu of
Other Claims or Rights. If (a) the Executive is a party to either or both of an
employment agreement (which includes any letter agreement regarding Executive's
employment with Key) or severance agreement with Key that is not superseded
pursuant to Section 6.9 of this Agreement (singularly or collectively, the
"Prior Agreement"), and (b) the Executive's employment with Key is terminated
under circumstances giving rise to a right on the part of the Executive to
receive continuing compensation, separation pay, or other severance benefits
under the Prior Agreement and under this Agreement, the Executive shall have the
right to elect to have either the Prior Agreement (if and only to the extent the
Prior Agreement is applicable) or this Agreement, but not both, apply to the
termination. If this Section 4.1 applies: (x) Key shall not make any payments
arising out of the termination of the Executive's employment, either under the
Prior Agreement or under this Agreement, until after the Executive has delivered
to Key a signed notice of election to receive payments under the Prior Agreement
or under this Agreement, and (y) if the Executive elects to receive payments
under the Prior Agreement, the provisions of Sections 2.1 and 2.2 of this
Agreement shall nevertheless continue to be applicable, but without duplication
of payments. If the Executive receives any payments under this Agreement as a
result of the termination of the Executive's employment following a Change of
Control, those payments shall be in lieu of any and all other claims or rights
that the Executive may have for severance, separation, and/or salary
continuation pay upon that termination of the Executive's employment.
4.2 Taxes; Withholding of Taxes. Without limiting the
right of Key or its Subsidiary to withhold taxes pursuant to this Section 4.2,
the Executive shall be responsible for all income, excise, and other taxes
(federal, state, city, or other) imposed on or incurred by the Executive as a
result of receiving the payments provided in this Agreement, including, without
limitation, the payments provided under Section 1 of this Agreement. Key or its
Subsidiary may withhold from any amounts payable under this Agreement all
federal, state, city, or other taxes as Key shall determine to be required
pursuant to any law or government regulation or ruling. Without limiting the
generality of the foregoing, Key or its Subsidiary may withhold from any amount
payable under either of Sections 1.1 or 1.2 of this Agreement amounts sufficient
to satisfy any withholding requirements that may arise out of any payment made
to the Executive by Key or any Subsidiary under Section 1.3 of this Agreement.
4.3 Excess Parachute Payment Reduction. If it is
determined that any payment or distribution by Key or any of its Subsidiaries to
or for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise) (a
"Payment") would be nondeductible by Key or a Subsidiary for Federal income tax
purposes because of
<PAGE> 7
Section 280G of the Internal Revenue Code and applicable regulations promulgated
thereunder, then the aggregate present value of amounts payable or distributable
to or for the benefit of the Executive pursuant to this Agreement (such payments
or distributions pursuant to this Agreement are hereinafter referred to as
"Agreement Payments") shall be reduced (but not below zero) to the Reduced
Amount. The "Reduced Amount" shall be an amount expressed in present value that
maximizes the aggregate present value of Agreement Payments without causing any
Payment to be nondeductible by Key or a Subsidiary because of Section 280G of
the Internal Revenue Code and applicable regulations promulgated thereunder. For
purposes of this Section 4.3, present value shall be determined in accordance
with Section 280G(d)(4) of the Internal Revenue Code and applicable regulations
promulgated thereunder. All determinations required to be made under this
Section 4.3 shall be made by the Accounting Firm which shall provide detailed
supporting calculations both to Key and the Executive within 20 days after the
Termination Date or such earlier time as is requested by Key. Key and the
Executive shall cooperate with each other and the Accounting Firm and shall
provide necessary information so that the Accounting Firm may make all such
determinations. All such determinations by the Accounting Firm shall be final
and binding upon Key and the Executive. The Executive shall determine which of
the Agreement Payments (or, at the election of the Executive, other payments)
shall be eliminated or reduced consistent with the requirements of this Section
4.3, provided that, if the Executive does not make such determination within 10
days of the receipt of the calculations made by the Accounting Firm, Key shall
elect which of the Agreement Payments shall be eliminated or reduced consistent
with the requirements of this Section 4.3 and shall notify the Executive
promptly of such election. As a result of the uncertainty in the application of
Section 280G of the Internal Revenue Code and applicable regulations promulgated
thereunder that may exist at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Agreement Payments will be made
by Key that should not have been made ("Overpayment") or that additional
Agreement Payments will not be made by Key which could have been made
("Underpayment"), in each case, consistent with the calculations required to be
made hereunder. If the Accounting Firm or a court of competent jurisdiction (in
a final judgment as to which the time for appeal has lapsed or no appeal is
available) determines at any time that an Overpayment has been made, any such
Overpayment shall be treated for all purposes as a loan to the Executive which
the Executive shall repay to Key together with interest at the applicable
short-term Federal rate provided for in Section 1274(d)(1) of the Internal
Revenue Code, compounded semi-annually; provided, however, that no amount shall
be payable by the Executive to Key (or if paid by the Executive to Key, such
payment shall be returned to the Executive) if and to the extent such payment
would not reduce the amount which is subject to taxation under Section 4999 of
the Internal Revenue Code. If the Accounting Firm or a court of competent
jurisdiction (in a final judgment as to which the time for appeal has lapsed or
no appeal is available) determines at any time that an Underpayment has
occurred, any such
<PAGE> 8
Underpayment shall be promptly paid by Key to or for the benefit of the
Executive together with interest at the applicable short-term Federal
rate provided for in Section 1274(d)(1) of the Internal Revenue Code,
compounded semi-annually.
4.4 Waiver and Release. Key may condition the payment of
any amounts otherwise due under Section 1 of this Agreement upon (a) the
execution by the Executive of a waiver and release in the form attached
to this Agreement as Exhibit A, with blanks appropriately filled and, in
the case of clause (e) contained therein, completed with the number of
days that Key determines is required under applicable law, but in no
event more than 45 days, and (b) the observation of such waiting
periods, if any, before and after execution of the waiver and release by
the Executive as are required by law, such as, for example, the waiting
periods required for a waiver and release to be effective with respect
to claims under the Age Discrimination in Employment Act, provided that
Key delivers to the Executive such a waiver and release, appropriately
completed, within seven days of the date on which the Executive's
employment is terminated.
5. Term of this Agreement. This Agreement shall be
effective upon the date first above written and shall thereafter apply to any
Change of Control occurring on or before December 31, 1997. Unless this
Agreement is terminated earlier pursuant to Section 5.1, on December 31, 1997
and on December 31 of each succeeding year thereafter (a "Renewal Date"), the
term of this Agreement shall be automatically extended for an additional year
unless either party has given notice to the other, at least one year in advance
of that Renewal Date, that the Agreement shall not apply to any Change of
Control occurring after that Renewal Date.
5.1 Termination of Agreement Upon Termination of
Employment Before a Change of Control. This Agreement shall
automatically terminate and cease to be of any further effect on the
first date occurring before a Change of Control on which the Executive
is no longer employed by Key or any Subsidiary, except that, for
purposes of this Agreement, any termination of employment of the
Executive that is effected before and in contemplation of a Change of
Control that occurs after the date of the termination shall be deemed to
be a termination of the Executive's employment as of immediately after
that Change of Control and this Agreement shall be deemed to be in
effect immediately after that Change of Control.
5.2 No Termination of Agreement During Two Year Period
Beginning on Date of a Change of Control. After a Change of Control,
this Agreement may not be terminated. However, if the Executive's
employment with Key and its Subsidiaries continues for more than two
years following the occurrence of a Change of Control, then, for all
purposes of this Agreement other than Sections 2.1 and 2.2, that
particular Change of Control shall thereafter be treated as if it never
occurred.
<PAGE> 9
6. Miscellaneous.
6.1 Successor to Key. Key shall not consolidate with or
merge into any other corporation, or transfer all or substantially all
of its assets to another corporation or bank, unless such other
corporation or bank shall assume this Agreement in a signed writing and
deliver a copy thereof to the Executive. Upon such assumption the
successor corporation or bank shall become obligated to perform the
obligations of Key under this Agreement and the term "Key" as used in
this Agreement shall be deemed to refer to such successor corporation or
bank.
6.2 Notices. For purposes of this Agreement, notices and
all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
mailed by United States registered mail, return receipt requested,
postage prepaid, and addressed, in the case of notices to Key or a
Subsidiary, as follows:
KeyCorp
127 Public Square
Cleveland, Ohio 44114
Attention: Secretary
and, in the case of notices to the Executive, properly addressed to the
Executive at the Executive's most recent home address as shown on the
records of Key or its Subsidiary, or such other address as either party
may have furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective only upon
receipt.
6.3 Employment Rights. Nothing expressed or implied in
this Agreement shall create any right or duty on the part of Key or the
Executive to have the Executive continue as an officer of Key or a
Subsidiary or to remain in the employment of Key or a Subsidiary.
6.4 Administration. Key shall be responsible for the
general administration of this Agreement and for making payments under
this Agreement. All fees and expenses billed by the Accounting Firm for
services contemplated under this Agreement shall be the responsibility
of Key.
6.5 Source of Payments. Any payment specified in this
Agreement to be made by Key may be made, at the election of Key,
directly by Key or through any Subsidiary of Key. All payments under
this Agreement shall be made solely from the general assets of Key or
one of its Subsidiaries (or from a grantor trust, if any, established by
Key for purposes of making payments under this Agreement and other
similar agreements), and the Executive shall have the rights of an
unsecured general creditor of Key with respect thereto.
<PAGE> 10
6.6 Claims Review Procedure. Whenever Key decides for
whatever reason to deny, whether in whole or in part, a claim for
benefits under this Agreement by the Executive, Key shall transmit a
written notice of its decision to the Executive, which notice shall be
written in a manner calculated to be understood by the Executive and
shall contain a statement of the specific reasons for the denial of the
claim and a statement advising the Executive that, within 60 days of the
date on which the Executive receives such notice, the Executive may
obtain review of the decision of Key in accordance with the procedures
hereinafter set forth. Within such 60-day period, the Executive or the
Executive's authorized representative may request that the claim denial
be reviewed by filing with Key a written request therefor, which request
shall contain the following information:
(a) the date on which the request was filed with Key,
(b) the specific portions of the denial of the
Executive's claim that the Executive requests Key to review, and
(c) any written material that the Executive desires Key
to examine.
Within 30 days of the date specified in clause (a) of this Section 6.6,
Key shall conduct a full and fair review of its decision to deny the
Executive's claim for benefits and deliver to the Executive its written
decision on review, written in a manner calculated to be understood by
the Executive, specifying the reasons and the Agreement provisions upon
which its decision is based. Nothing in this Section 6.6 shall be
construed as limiting or restricting the Executive's right to institute
legal proceedings in a court of competent jurisdiction to enforce this
Agreement after complying with the procedures set forth in this Section
6.6 or as limiting or restricting the scope of the court's review (which
review shall be de novo); provided, further, that the failure of the
Executive to comply with the procedures set forth in this Section 6.6
shall not bar or prohibit the subsequent compliance by the Executive
with those procedures and thereafter the Executive shall have the right
to institute legal proceedings to enforce this Agreement.
6.7 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement which shall
remain in full force and effect.
6.8 Modification, Waiver, Etc. No provision of this
Agreement may be modified, waived, or discharged unless such waiver,
modification, or discharge is agreed to in a writing signed by the
Executive and Key. No waiver by either party hereto at any time of any
breach by the other party of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the
same time or at any prior or subsequent time. No agreement or
<PAGE> 11
representation, oral or otherwise, express or implied, with respect to
the subject matter hereof has been made by either party that is not set
forth expressly in this Agreement. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal
representatives, executors, administrators, successors, heirs, and
designees. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
6.9 Agreement Supersedes Certain Prior Change of Control
Agreement. This Agreement supersedes that certain agreement dated
________ __, 199_ (the "Existing Agreement") entered into between Key
(under its former name of Society Corporation) and the Executive. The
Existing Agreement shall be of no further force or effect, and no
payments or benefits of any kind shall be made under, on account of, or
by reference to the Existing Agreement in any circumstances whatsoever.
6.10 Savings Clause. If any payments otherwise payable
to the Executive under this Agreement are prohibited or limited by any
statute or regulation in effect at the time the payments would otherwise
be payable, including, without limitation, any regulation issued by the
Federal Deposit Insurance Corporation (the "FDIC") that limits executive
change of control payments that can be made by an FDIC insured
institution or its holding company if the institution is financially
troubled (any such limiting statute or regulation a "Limiting Rule"):
(a) Key will use its best efforts to obtain the consent
of the appropriate governmental agency (whether the FDIC or any
other agency) to the payment by Key to the Executive of the
maximum amount that is permitted (up to the amounts that would
be due to the Executive absent the Limiting Rule); and
(b) the Executive will be entitled to elect to have
apply, and therefore to receive benefits directly under, either
(i) this Agreement (as limited by the Limiting Rule) or (ii) any
generally applicable Key severance, separation pay, and/or
salary continuation plan that may be in effect at the time of
the Executive's termination.
Following any such election, the Executive will be entitled to receive
benefits under the agreement or plan elected only if and to the extent
the agreement or plan is applicable and subject to its specific terms.
7. Definitions.
<PAGE> 12
7.1 Accounting Firm. The term "Accounting Firm" means
the independent auditors of Key for the fiscal year preceding the year
in which the Change of Control occurred and such firm's successor or
successors; provided, however, if such firm is unable or unwilling to
serve and perform in the capacity contemplated by this Agreement, Key
shall select another national accounting firm of recognized standing to
serve and perform in that capacity under this Agreement, except that
such other accounting firm shall not be the then independent auditors
for Key or any of its affiliates (as defined in Rule 12b-2 promulgated
under the Securities Exchange Act of 1934, as amended (the "1934 Act")).
7.2 Average Annual Incentive Compensation. The term
"Average Annual Incentive Compensation" means the sum of Average Short
Term Incentive Compensation, as defined in clause (a) below, and Average
Long Term Incentive Compensation, as defined in clause (b) below.
(a) The term "Average Short Term Incentive Compensation"
means the higher of:
(i) the average of the short term incentive compensation
payable to the Executive for each of the last two years
immediately preceding the year in which the Change of
Control occurred (the "Change Year") or, if, for any
reason, short term incentive compensation was payable to
the Executive for only one of those two years, the
amount of short term incentive compensation payable to
the Executive for that year, and
(ii) the Executive's targeted short term incentive
compensation for the year prior to the Change Year,
except that if the Executive first became a participant in Key's
short term incentive compensation program during the Change
Year, Average Short Term Incentive Compensation means the
Executive's targeted short term incentive compensation for the
Change Year.
(b) The term "Average Long Term Incentive Compensation"
means the higher of:
(i) the average of the long term incentive compensation
payable to the Executive for each of the last two years
immediately preceding the Change Year or, if, for any
reason, long term incentive compensation was payable to
the Executive for only one of those two years, the
amount of long term incentive compensation payable to
the Executive for that year, and
<PAGE> 13
(ii) the Executive's targeted long term incentive
compensation for the multi-year cycle beginning with the
year immediately preceding the Change Year,
except that if the Executive first became a participant in Key's
long term incentive compensation program during the Change Year,
Average Long Term Incentive Compensation means the Executive's
targeted long term incentive compensation for the multi-year
cycle beginning with the Change Year. For these purposes, an
incentive compensation award payable to the Executive under any
incentive compensation plan with respect to a period of more
than one year will be deemed to be "for" the last year of that
multi-year period.
As used in this Section 7.2, incentive compensation means any cash based
incentive compensation, including bonuses (but excluding signing bonuses
paid to a newly hired executive) and is calculated before any reduction
on account of deferrals; short term incentive compensation means
incentive compensation for periods of time of one year or less and long
term incentive compensation means incentive compensation for periods of
time of more than one year; targeted long term or short term incentive
compensation, as the case may be, means: (i) if the incentive
compensation plan, program, or arrangement in question designates a
targeted amount or a targeted level of achievement for the Executive, it
means that targeted amount or level, (ii) if the incentive compensation
plan, program, or arrangement in question has only one level of payout
for the Executive (other than zero), it means that level (i.e. the level
other than zero), (iii) if the incentive compensation plan, program, or
arrangement in question does not designate a targeted amount or level of
achievement for the Executive but does have multiple anticipated levels
of possible payout or achievement for the Executive, it means (in each
case excluding from consideration any level that results in zero payout)
the middle level of payout or achievement for the Executive (or if there
are an even number of levels, the average of the two levels if there are
only two levels or the average of the middle two levels if there are
four or more levels), and (iv) in all other cases, the amount
anticipated or projected to be paid under the plan, program, or
arrangement in question at the time the performance period in question
commenced. For purposes of calculating Average Annual Incentive
Compensation under this Section 7.2, in determining the amount of
incentive compensation (short or long term) payable to or targeted for
the Executive for any past or current incentive compensation period or
cycle, if the incentive compensation was for a partial period or cycle
(such as where an executive becomes a participant in an incentive plan
after the incentive compensation period or cycle has commenced so that
the award payable to or targeted for the executive is prorated), such
incentive compensation payable to or targeted for the Executive shall be
determined as if the Executive had participated throughout the complete
incentive compensation period or cycle in question.
<PAGE> 14
7.3 Base Salary. The term "Base Salary" means the salary
payable to the Executive from time to time before any reduction for
voluntary contributions to the KeyCorp 401(k) Plan or any other
deferral. Base Salary does not include imputed income from payment by
Key of country club membership fees or other noncash benefits.
7.4 Cause. The employment of the Executive by Key or any
of its Subsidiaries shall have been terminated for "Cause" if, after a
Change of Control and prior to the termination of employment, any of the
following has occurred:
(a) the Executive shall have been convicted of a felony,
(b) the Executive commits an act or series of acts of
dishonesty in the course of the Executive's employment which are
materially inimical to the best interests of Key or a Subsidiary
and which constitutes the commission of a felony, all as
determined by the vote of three fourths of all of the members of
the Board of Directors of Key (other than the Executive, if the
Executive is a Director of Key) which determination is confirmed
by a panel of three arbitrators appointed and acting in
accordance with the rules of the American Arbitration
Association for the purpose of reviewing that determination,
(c) Key or any Subsidiary has been ordered or directed
by any federal or state regulatory agency with jurisdiction to
terminate or suspend the Executive's employment and such order
or directive has not been vacated or reversed upon appeal, or
(d) after being notified in writing by the Board of
Directors of Key to cease any particular Competitive Activity,
the Executive shall intentionally continue to engage in such
Competitive Activity while the Executive remains in the employ
of Key or a Subsidiary.
If (x) Key or any Subsidiary terminates the employment of the Executive
during the two year period beginning on the date of a Change of Control
and at a time when it has "Cause" therefor under clause (c), above, (y)
the order or directive is subsequently vacated or reversed on appeal and
the vacation or reversal becomes final and no longer subject to further
appeal, and (z) Key or the Subsidiary fails to offer to reinstate the
Executive to employment within ten days of the date on which the
vacation or reversal becomes final and no longer subject to further
appeal, Key or the Subsidiary will be deemed to have terminated the
Executive without Cause during the two year period beginning on the date
of the Change of Control.
7.5 Change of Control. A "Change of Control" shall be
deemed to have occurred if, at any time while this Agreement is in
effect pursuant to
<PAGE> 15
Section 5 hereof, there is a Change of Control under any of clauses (a),
(b), (c), or (d) below. For these purposes, Key will be deemed to have
become a subsidiary of another corporation if any other corporation
(which term shall, for all purposes of this Section 7.5, include, in
addition to a corporation, a limited liability company, partnership,
trust, or other organization) owns, directly or indirectly, 50 percent
or more of the total combined outstanding voting power of all classes of
stock of Key or any successor to Key.
(a) A Change of Control will have occurred under this
clause (a) if Key is a party to a transaction pursuant to which
Key is merged with or into, or is consolidated with, or becomes
the subsidiary of another corporation and either
(i) immediately after giving effect to that transaction,
less than 65% of the then outstanding voting securities
of the surviving or resulting corporation or (if Key
becomes a subsidiary in the transaction) of the ultimate
parent of Key represent or were issued in exchange for
voting securities of Key outstanding immediately prior
to the transaction, or
(ii) immediately after giving effect to that
transaction, individuals who were directors of Key on
the day before the first public announcement of (x) the
pendency of the transaction or (y) the intention of any
person or entity to cause the transaction to occur,
cease for any reason to constitute at least 51% of the
directors of the surviving or resulting corporation or
(if Key becomes a subsidiary in the transaction) of the
ultimate parent of Key.
(b) A Change of Control will have occurred under this
clause (b) if a tender or exchange offer shall be made and
consummated for 35% or more of the outstanding voting stock of
Key or any person (as the term "person" is used in Section 13(d)
and Section 14(d)(2) of the 1934 Act) is or becomes the
beneficial owner of 35% or more of the outstanding voting stock
of Key or there is a report filed on Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report), each as
adopted under the 1934 Act, disclosing the acquisition of 35% or
more of the outstanding voting stock of Key in a transaction or
series of transactions by any person (as defined earlier in this
clause (b));
(c) A Change of Control will have occurred under this
clause (c) if either
<PAGE> 16
(i) without the prior approval, solicitation,
invitation, or recommendation of the Key Board of
Directors any person or entity makes a public
announcement of a bona fide intention (A) to engage in a
transaction with Key that, if consummated, would result
in a Change Event (as defined below in this clause (c)),
or (B) to "solicit" (as defined in Rule 14a-1 under the
1934 Act) proxies in connection with a proposal that is
not approved or recommended by the Key Board of
Directors, or
(ii) any person or entity publicly announces a bona fide
intention to engage in an election contest relating to
the election of directors of Key (pursuant to Regulation
14A, including Rule 14a-11, under the 1934 Act),
and, at any time within the 24 month period immediately
following the date of the announcement of that intention,
individuals who, on the day before that announcement,
constituted the directors of Key (the "Incumbent Directors")
cease for any reason to constitute at least a majority thereof
unless both (A) the election, or the nomination for election by
Key's shareholders, of each new director was approved by a vote
of at least two-thirds of the Incumbent Directors in office at
the time of the election or nomination for election of such new
director, and (B) prior to the time that the Incumbent Directors
no longer constitute a majority of the Board of Directors, the
Incumbent Directors then in office, by a vote of at least 75% of
their number, reasonably determine in good faith that the change
in Board membership that has occurred before the date of that
determination and that is anticipated to thereafter occur within
the balance of the 24 month period to cause the Incumbent
Directors to no longer be a majority of the Board of Directors
was not caused by or attributable to, in whole or in any
significant part, directly or indirectly, proximately or
remotely, any event under subclause (i) or (ii) of this clause
(c).
For purposes of this clause (c), the term "Change Event" shall
mean any of the events described in the following subclauses
(x), (y), or (z) of this clause (c):
(x) A tender or exchange offer shall be made for 25% or
more of the outstanding voting stock of Key or any
person (as the term "person" is used in Section 13(d)
and Section 14(d)(2) of the 1934 Act) is or becomes the
beneficial owner of 25% or more of the outstanding
voting stock of Key or there is a report filed on
Schedule 13D or Schedule 14D-1 (or any successor
schedule, form, or report), each as adopted under the
1934 Act, disclosing the acquisition of 25% or more of
the outstanding voting stock of Key in
<PAGE> 17
a transaction or series of transactions by any person
(as defined earlier in this subclause (x)).
(y) Key is a party to a transaction pursuant to which
Key is merged with or into, or is consolidated with, or
becomes the subsidiary of another corporation and, after
giving effect to such transaction, less than 50% of the
then outstanding voting securities of the surviving or
resulting corporation or (if Key becomes a subsidiary in
the transaction) of the ultimate parent of Key represent
or were issued in exchange for voting securities of Key
outstanding immediately prior to such transaction or
less than 51% of the directors or the surviving or
resulting corporation or (if Key becomes a subsidiary in
the transaction) of the ultimate parent of Key were
directors of Key immediately prior to such transaction.
(z) There is a sale, lease, exchange, or other transfer
(in one transaction or a series of related transactions)
of all or substantially all the assets of Key.
(d) A Change of Control will have occurred under this
clause (d) if there is a sale, lease, exchange, or other
transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of Key.
7.6 Competitive Activity. The Executive shall be deemed
to have engaged in "Competitive Activity" if the Executive:
(a) engages in any business or business activity in
which Key or any of its Subsidiaries engages, including, without
limitation, engaging in any business activity in the banking or
financial services industry (other than as a director, officer,
or employee of Key or any of its Subsidiaries), or
(b) serves as a director, officer, or employee of any
bank, bank holding company, savings and loan association,
building and loan association, savings and loan holding company,
insurance company, investment banking or securities company,
mutual fund company, or other financial services company other
than Key or any of its Subsidiaries (each of the foregoing being
hereinafter referred to as a "Financial Services Company"), or
renders services of a consultative or advisory nature or
otherwise to any such Financial Services Company; provided,
however, this clause (b) shall not prohibit or restrict the
Executive from serving in any such capacity with the consent of
Key.
7.7 Disability. For purposes of this Agreement, the
Executive's employment will have been terminated by Key or its
Subsidiary by reason of "Disability" of the Executive only if (a) as a
result of bodily injury or sickness, the
<PAGE> 18
Executive has been unable to perform the Executive's normal duties for
Key or its Subsidiary for a period of 180 consecutive days, and (b) the
Executive begins to receive payments under the Key Long Term Disability
Plan not later than 30 days after the Termination Date.
7.8 Good Reason. The Executive shall be deemed to have
"Good Reason" to terminate the Executive's employment under this
Agreement during a Window Period if, at any time after the occurrence of
a Change of Control and before the end of the Window Period, one or more
of the events listed in clauses (a) through (c) of this Section 7.8
occurs without the written consent of the Executive:
(a) following notice by the Executive to Key and an
opportunity by Key to cure, the Executive determines in good
faith that the Executive's position, responsibilities, duties,
or status with Key are at any time materially less than or
reduced from those in effect before the Change of Control or
that the Executive's reporting relationships with superior
executive officers have been materially changed from those in
effect before the Change of Control;
(b) following notice by the Executive to Key and an
opportunity by Key to cure, the Executive is excluded from full
participation in any incentive compensation plan or stock
option, stock appreciation, or similar equity based plan in
which similarly situated executives of Key and its Subsidiaries
generally participate; or
(c) the headquarters that was the Executive's principal
place of employment before the Change of Control (whether Key's
headquarters or a regional headquarters) is relocated to a site
outside of the greater metropolitan area in which that
headquarters was located before the Change of Control. (If the
Executive's principal place of employment before the Change of
Control was neither at Key's headquarters nor at any regional
headquarters, then this clause (c) shall not be applicable.)
For purposes of clauses (a) and (b), Key will be deemed to have had an
opportunity to cure and to have failed to effect a cure if the
circumstance otherwise constituting Good Reason persists (as determined
in good faith by the Executive) for more than seven calendar days after
the Executive has given notice to Key of the existence of that
circumstance.
7.9 Mandatory Relocation. A "Mandatory Relocation" shall
have occurred if, at any time after a Change of Control, the Executive
is required to relocate the Executive's principal place of employment
for Key or its Subsidiary without the Executive's written consent more
than 35 miles from where the Executive was located prior to the Change
of Control.
<PAGE> 19
7.10 Reduction of Base Salary. A "Reduction of Base
Salary" shall have occurred if the Base Salary of the Executive is
reduced at any time after a Change of Control.
7.11 Subsidiary. A "Subsidiary" means any corporation,
bank, partnership, or other entity a majority of the voting control of
which is directly or indirectly owned or controlled at the time in
question by Key.
7.12 Termination Date. The term "Termination Date" means
the date on which the Executive's employment with Key and its
Subsidiaries terminates.
7.13 Window Period. The term "Window Period," with
respect to any particular Change of Control, means the three-month
period beginning on the date that falls on the same day of the month as
the date of the Change of Control in the fifteenth month after the month
in which the Change of Control occurs. If at any time there has been
more than one Change of Control, there shall be a separate Window Period
with respect to each such Change of Control.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
KEYCORP
By
-----------------------------------
Robert W. Gillespie
Chairman of the Board, President,
and Chief Executive Officer
THE "EXECUTIVE"
------------------
<PAGE> 20
EXHIBIT A
WAIVER AND RELEASE
DO NOT SIGN WITHOUT READING AND UNDERSTANDING
In consideration of the payments to be made to me following termination of my
employment with KeyCorp pursuant to the agreement between KeyCorp and me dated
October 15, 1996 (the "Change of Control Agreement"), which payments I
acknowledge I am not entitled to receive without execution of this Waiver and
Release, and which payments will not commence earlier than eight days after the
execution of this Waiver and Release, I, for myself, my heirs, administrators,
executors, and assigns, release and discharge Keycorp, its affiliates,
subsidiaries, divisions, successors, and assigns and the employees, officers,
directors, and agents thereof (collectively referred to throughout this Waiver
and Release as "Key") from any and all causes of action, charges of
discrimination, proceedings, or claims of every kind, nature, and character,
arising out of or relating to my employment with Key and the termination of my
employment with Key based upon or related to any contention (i) that my
employment terminated because of any tortious, wrongful, unlawful, or improper
conduct or act or in violation or breach of any express or implied contract or
agreement, or (ii) that Key engaged in any discriminatory act, event, pattern,
or practice involving age, religion, creed, sex, national origin, ancestry,
handicap, disability, veteran status, marital status, race, or color, or the
continuing or future effects thereof (including, without limitation, the federal
Age Discrimination in Employment Act, 29 U.S.C. section 621 ET SEQ., or any
similar state law).
I warrant that no promise or inducement has been offered to me other than as set
forth in the Change of Control Agreement, that I am relying on no other
statement or representation by Key, and that I have not assigned any of my
rights. I have read this Waiver and Release; I have had a full opportunity to
consider it (including the opportunity to consult with an attorney of my
choice); and I understand that by signing it I am giving up important rights,
including any right to sue under federal, state, or local law. I also verify
that my entering into this Waiver and Release is wholly voluntary.
I further warrant that:
(a) I understand that I am specifically waiving rights or claims under
the federal Age Discrimination in Employment Act, 29 U.S.C. section
621 ET SEQ.;
(b) I understand that I am not hereby waiving any rights or claims that
may arise after this Waiver and Release is executed by me;
(c) I understand that this Waiver and Release is being given by me in
exchange for consideration that is more valuable to me than what I am
entitled to without the Change of Control Agreement and the execution
of this Waiver and Release;
(d) I have been advised in writing by Key that I should have, at my
expense, an attorney of my choice review this Waiver and Release;
<PAGE> 21
EXHIBIT A
(CONT'D)
(e) I have been advised by Key that I may take up to ________ days from
receipt of this Waiver and Release to determine whether to execute the
same; and
(f) I have been advised by Key that this Waiver and Release may be
revoked by me within seven (7) days following execution of this Waiver
and Release whereupon this Waiver and Release shall be null and void.
IN WITNESS WHEREOF, I have hereby set my hand this ______________ day of
_________________________, _____.
Witness:
- ------------------------------ --------------------------
<PAGE> 22
EXHIBIT A
(CONT'D)
ACKNOWLEDGMENT OF RECEIPT OF WAIVER AND RELEASE
I do hereby acknowledge that on ________________________, ____, I
received a copy of the Waiver and Release which is attached hereto, and I
understand that I have ______* days from the date of receipt of the Waiver and
Release to determine whether to execute it.
Witness:__________________________ ________________________________
*to be completed the same as clause (e) of the Waiver and Release
<PAGE> 23
EXHIBIT A
(CONT'D)
Director of Human Resources
KeyCorp
127 Public Square
Cleveland, Ohio 44114
Re: Waiver and Release
------------------
Dear Sir or Madam:
On ____________, _____, I executed a Waiver and Release in favor of
KeyCorp. More than seven (7) days have elapsed since I executed the Waiver and
Release. I have at no time revoked my acceptance or execution of the Waiver and
Release and, accordingly, I hereby request that KeyCorp commence making the
payments due to me under my Change of Control Agreement.
Very truly yours,
Witness:
- -------------------------- ---------------------------------------
<PAGE> 1
Exhibit 10.33
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
BETWEEN KEYCORP
AND ROBERT W. GILLESPIE
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this
"Agreement") is made at Cleveland, Ohio, as of November 21, 1996, between
KEYCORP, an Ohio corporation ("Key"), and ROBERT W. GILLESPIE, 1800 Berkshire
Road, Gates Mills, Ohio 44040 ("Gillespie").
W I T N E S S E T H:
--------------------
WHEREAS, Key and Gillespie are parties to an employment
agreement, originally made December 5, 1990, amended and restated in its
entirety as of October 1, 1993 and again as of December 20, 1993, and
subsequently further amended as of May 18, 1995, pursuant to which Gillespie is
now serving as Key's Chairman of the Board, President, and Chief Executive
Officer; and
WHEREAS, Key and Gillespie now desire to amend and restate
the employment agreement in its entirety;
NOW, THEREFORE, Key and Gillespie, in consideration of the
promises and mutual covenants herein contained, amend and restate the employment
agreement originally entered into between them as of December 5, 1990 and
previously amended and restated in its entirety as of October 1, 1993 and again
as of December 20, 1993, and subsequently further amended as of May 18, 1995,
and agree as follows:
1. Definitions.
1.1 Accounting Firm. The term "Accounting Firm" means the
independent auditors of Key for the fiscal year preceding the year in which
the earlier of (i) the Termination Date, or (ii) the year, if any, in which
occurred the first Change of Control occurring after the Effective Time,
and such firm's successor or successors; provided, however, if such firm is
unable or unwilling to serve and perform in the capacity contemplated by
this Agreement, Key shall select another national accounting firm of
recognized standing to serve and perform in that capacity under this
Agreement, except that such other accounting firm shall not be the then
independent auditors for Key or any of its affiliates (as defined in Rule
12b-2 promulgated under the Securities Exchange Act of 1934, as amended
(the "1934 Act")).
Final
<PAGE> 2
1.2 Aggregate Incentive Compensation Award. The term
"Aggregate Incentive Compensation Award" with respect to Gillespie for any
year shall mean the aggregate annual incentive compensation awards (whether
paid in cash, deferred, or a combination of both) payable to Gillespie
under both the Short Term Incentive Compensation Plan and the Long Term
Incentive Compensation Plan for that year. For these purposes, an incentive
compensation award payable to Gillespie under the Long Term Incentive
Compensation Plan with respect to any multi-year period will be deemed to
be "for" the last year of that multi-year period. Thus, for example, any
incentive compensation award payable to Gillespie under the Long Term
Incentive Compensation Plan with respect to the three year period comprised
of 1996, 1997, and 1998 will be deemed to be "for" 1998 (without regard to
the time of payment), the entire award under that plan for that period will
be part of the Aggregate Incentive Compensation Award for 1998, and no part
of the award under that plan for that period will be part of the Aggregate
Incentive Compensation Award for any year other than 1998.
1.3 Average Annual Incentive Compensation. The term "Average
Annual Incentive Compensation" shall mean the greater of:
(a) The average of the two highest Aggregate Incentive
Compensation Awards payable to Gillespie for any of the years during
the five-year period ended on the December 31 immediately preceding
the Termination Date; or
(b) The average of the two highest Aggregate Incentive
Compensation Awards payable to Gillespie for any of the years during
the five-year period ended on the December 31 immediately preceding
the first Change of Control, if any, occurring after the Effective
Time.
1.4 Cause (After a Change of Control). Key will have "Cause"
to terminate Gillespie after a Change of Control has occurred only if:
(a) Gillespie is convicted of a felony;
(b) Gillespie commits an act or series of acts of dishonesty
in the course of his employment which are materially inimical to the
best interests of Key or a Subsidiary and which constitutes the
commission of a felony, all as determined in good faith by the vote of
three quarters of the entire authorized number of members of the Board
of Directors of Key, which determination is confirmed by a panel of
three arbitrators appointed and acting in accordance with the rules of
the American Arbitration Association for the purpose of reviewing that
determination; or
(c) Gillespie continues to violate his obligation under
Section 14.1 not to engage in Competitive Activities after the Board
of Directors has advised him in writing to cease those activities and
that violation is material.
Final
2
<PAGE> 3
1.5 Cause (Before a Change of Control). Key will have "Cause"
to terminate Gillespie before a Change of Control if:
(a) Gillespie commits a felony;
(b) Gillespie commits an act or series of acts of dishonesty
in the course of his employment which are materially inimical to the
best interests of Key or a Subsidiary as determined by the vote of
three quarters of the entire authorized number of members of the Board
of Directors of Key and, if the act or acts are capable of being
cured, Gillespie fails to cure or take all reasonable steps to cure
within 30 days of notice from the Board of Directors to Gillespie;
(c) Gillespie continues to violate his obligation under
Section 14.1 not to engage in Competitive Activities after the Board
of Directors has advised him in writing to cease those activities; or
(d) Other than for disability, Gillespie totally abandons and
completely fails to attempt to perform his duties and responsibilities
as specified from time to time by the Board of Directors of Key for 90
consecutive days after written notice from the Board of Directors.
1.6 Change of Control. A "Change of Control" shall be deemed
to have occurred if, at any time during the Scheduled Term, there is a
Change of Control under any of clauses (a), (b), (c), or (d) below. For
these purposes, Key will be deemed to have become a subsidiary of another
corporation if any other corporation (which term shall, for all purposes of
this Section 1.6, include, in addition to a corporation, a limited
liability company, partnership, trust, or other organization) owns,
directly or indirectly, 50 percent or more of the total combined
outstanding voting power of all classes of stock of Key or any successor to
Key.
(a) A Change of Control will have occurred under this clause
(a) if Key is a party to a transaction pursuant to which Key is merged
with or into, or is consolidated with, or becomes the subsidiary of
another corporation and either
(i) immediately after giving effect to that transaction, less
than 65% of the then outstanding voting securities of the
surviving or resulting corporation or (if Key becomes a subsidiary
in the transaction) of the ultimate parent of Key represent or
were issued in exchange for voting securities of Key outstanding
immediately prior to the transaction, or
(ii) immediately after giving effect to that transaction,
individuals who were directors of Key on the day before the first
public announcement of (x) the pendency of the transaction or (y)
the intention of any person or entity to cause the transaction to
occur, cease for any reason to constitute at least 51% of the
directors of the
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surviving or resulting corporation or (if Key becomes a subsidiary
in the transaction) of the ultimate parent of Key.
(b) A Change of Control will have occurred under this clause
(b) if a tender or exchange offer shall be made and consummated for
35% or more of the outstanding voting stock of Key or any person (as
the term "person" is used in Section 13(d) and Section 14(d)(2) of the
1934 Act) is or becomes the beneficial owner of 35% or more of the
outstanding voting stock of Key or there is a report filed on Schedule
13D or Schedule 14D-1 (or any successor schedule, form or report),
each as adopted under the 1934 Act, disclosing the acquisition of 35%
or more of the outstanding voting stock of Key in a transaction or
series of transactions by any person (as defined earlier in this
clause (b));
(c) A Change of Control will have occurred under this clause
(c) if either
(i) without the prior approval, solicitation, invitation, or
recommendation of the Key Board of Directors any person or entity
makes a public announcement of a bona fide intention (A) to engage
in a transaction with Key that, if consummated, would result in a
Change Event (as defined below in this clause (c)), or (B) to
"solicit" (as defined in Rule 14a-1 under the 1934 Act) proxies in
connection with a proposal that is not approved or recommended by
the Key Board of Directors, or
(ii) any person or entity publicly announces a bona fide
intention to engage in an election contest relating to the
election of directors of Key (pursuant to Regulation 14A,
including Rule 14a-11, under the 1934 Act),
and, at any time within the 24 month period immediately following the date
of the announcement of that intention, individuals who, on the day before
that announcement, constituted the directors of Key (the "Incumbent
Directors") cease for any reason to constitute at least a majority thereof
unless both (A) the election, or the nomination for election by Key's
shareholders, of each new director was approved by a vote of at least
two-thirds of the Incumbent Directors in office at the time of the election
or nomination for election of such new director, and (B) prior to the time
that the Incumbent Directors no longer constitute a majority of the Board
of Directors, the Incumbent Directors then in office, by a vote of at least
75% of their number, reasonably determine in good faith that the change in
Board membership that has occurred before the date of that determination
and that is anticipated to thereafter occur within the balance of the 24
month period to cause the Incumbent Directors to no longer be a majority of
the Board of Directors was not caused by or attributable to, in whole or in
any significant part, directly or indirectly, proximately or remotely, any
event under subclause (i) or (ii) of this clause (c).
For purposes of this clause (c), the term "Change Event" shall mean any of
the events described in the following subclauses (x), (y), or (z) of this
clause (c):
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(x) A tender or exchange offer shall be made for 25% or more
of the outstanding voting stock of Key or any person (as the term
"person" is used in Section 13(d) and Section 14(d)(2) of the 1934
Act) is or becomes the beneficial owner of 25% or more of the
outstanding voting stock of Key or there is a report filed on
Schedule 13D or Schedule 14D-1 (or any successor schedule, form,
or report), each as adopted under the 1934 Act, disclosing the
acquisition of 25% or more of the outstanding voting stock of Key
in a transaction or series of transactions by any person (as
defined earlier in this subclause (x)).
(y) Key is a party to a transaction pursuant to which Key is
merged with or into, or is consolidated with, or becomes the
subsidiary of another corporation and, after giving effect to such
transaction, less than 50% of the then outstanding voting
securities of the surviving or resulting corporation or (if Key
becomes a subsidiary in the transaction) of the ultimate parent of
Key represent or were issued in exchange for voting securities of
Key outstanding immediately prior to such transaction or less than
51% of the directors of the surviving or resulting corporation or
(if Key becomes a subsidiary in the transaction) of the ultimate
parent of Key were directors of Key immediately prior to such
transaction.
(z) There is a sale, lease, exchange, or other transfer (in
one transaction or a series of related transactions) of all or
substantially all the assets of Key.
(d) A Change of Control will have occurred under this clause
(d) if there is a sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all or
substantially all of the assets of Key.
1.7 Competitive Activity (After Termination Date). Gillespie
shall be deemed to have engaged in "Competitive Activity" after the
Termination Date if, after the Termination Date and without the consent of
Key, he serves as a director, officer, or employee of any Financial
Services Company located in a Restricted State or renders services of a
consultative or advisory nature or otherwise to any Financial Services
Company located in a Restricted State.
1.8 Competitive Activity (Before Termination Date). Gillespie
shall be deemed to have engaged in "Competitive Activity" before the
Termination Date if, before the Termination Date, he engages, without the
consent of Key, in any business or business activity in which Key or any of
its Subsidiaries engages, including, without limitation, engaging in any
business activity in the banking or financial services industry (other than
as a director, officer, or employee of Key or any of its Subsidiaries).
1.9 Day. A "day" as used in this Agreement means a calendar
day unless business day is specifically referred to.
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1.10 Demotion or Removal. Gillespie shall be deemed to have
been subjected to "Demotion or Removal" if, other than by Voluntary
Resignation, during the period of Gillespie's employment under this
Agreement (i) Gillespie ceases to be a director of Key, (ii) Gillespie
ceases to be Chairman of the Board of Directors of Key, or (iii) Gillespie
ceases to be Chief Executive Officer of Key.
1.11 Effective Time. The term "Effective Time" means the
close of business on the date of this Agreement.
1.12 Financial Services Company. "Financial Services Company"
means a bank, bank holding company, savings and loan association, building
and loan association, savings and loan holding company, insurance company,
investment banking, or securities company, or other financial services
company, other than Key or any of its Subsidiaries.
1.13 Full-time Employment with an Unaffiliated Employer.
"Full-time Employment with an Unaffiliated Employer" means full-time (more
than 30 hours per week) employment at either a base salary, hourly rate,
partnership interest, or other form of participation, which will result in
annual compensation to Gillespie of at least 75% of the annual base salary
of Gillespie with Key and its Subsidiaries at the highest rate in effect at
any time under this Agreement, but does not include employment by (a) a
corporation or other firm organized or formed by Gillespie as a new
business (including, without limitation, a consulting business) after the
Termination Date, or (b) a corporation or other firm the majority of the
equity interests of which were acquired by Gillespie and/or his immediate
family members after the Termination Date.
1.14 Good Reason (Throughout the Term). Gillespie shall have
"Good Reason" to terminate his employment under this Agreement if, at any
time during the term of his employment hereunder, one or more of the events
listed in (a) through (e) of this Section 1.14 occurs and, based on that
event, Gillespie gives notice of his intention to terminate his employment
effective on a date that is within one year of the occurrence of that
event:
(a) Gillespie is subjected to Demotion or Removal;
(b) Gillespie's base salary is reduced from the level of his
base salary as in effect from time to time (other than in conjunction
with an across the board and equal percentage reduction in the base
salaries of all Key senior executives);
(c) Gillespie is excluded from full participation in any
benefit plan or arrangement maintained for senior executives of Key
generally without his consent or concurrence and such exclusion has
not been cured within 90 days after Gillespie gives notice to the
Board of Directors of Key of his election to terminate his employment
for Good Reason based upon that exclusion;
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(d) Gillespie determines in good faith that his
responsibilities, duties, or authority with Key are at any time
materially reduced without his consent or concurrence and such
reduction has not been cured within 90 days after Gillespie gives
notice to the Board of Directors of Key of his election to terminate
his employment for Good Reason based upon that reduction; or
(e) Gillespie's principal place of employment for Key is
relocated outside of the Cleveland metropolitan area or Gillespie is
otherwise required by Key to relocate outside the Cleveland
metropolitan area.
1.15 Good Reason (After a Change of Control). After a Change
of Control, in addition to those events that constitute Good Reason at any
time during the term of his employment under this Agreement and are listed
in Section 1.14, Gillespie shall have "Good Reason" to terminate his
employment under this Agreement if, during the two year period commencing
on the date of that Change of Control, any of the events listed in (a)
through (c) of this Section 1.15 occurs and, based on that event, Gillespie
gives notice of his intention to terminate his employment effective on a
date that is both (i) within one year of the occurrence of that event and
(ii) not later than the second anniversary of that Change of Control:
(a) The aggregate dollar amount of the incentive compensation
awards to Gillespie under both the Short Term Incentive Compensation
Plan and the Long Term Incentive Compensation Plan for any year ending
after the date on which the Change of Control occurs is less than the
Average Annual Incentive Compensation;
(b) Gillespie determines in good faith that his
responsibilities, duties or authority with Key are materially reduced
from those in effect before the Change of Control and the reduction
has not been cured within 30 days after Gillespie gives notice to the
Board of Directors of Key of his election to terminate his employment
for Good Reason based upon that reduction; or
(c) Gillespie determines in good faith that as a result of
the Change of Control he is unable to carry out the authorities,
powers, functions, responsibilities, or duties as Chairman of the
Board of Directors and Chief Executive Officer as those authorities,
powers, functions, responsibilities, or duties attached to those
positions were in effect before the Change of Control.
1.16 Impermissible. The term "Impermissible" when used in the
context of Gillespie's continued coverage by and participation in any of
the Retirement Plans or Savings Plans shall mean that such a continuation
would violate the provisions of any such Plan, would cause any such Plan to
fail to be qualified under Section 401(a) of the Internal Revenue Code, or
would be unlawful.
1.17 Long Term Disability Plan. The term "Long Term
Disability Plan" means and includes the KeyCorp Long Term Disability Plan
and the KeyCorp Supplemental Long
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Term Disability Program, in both cases as from time to time amended,
restated, or otherwise modified, including any long term disability plan or
program that, after the Effective Time, succeeds, replaces, or is
substituted for either such plan or program and includes long term
disability benefits or rights provided pursuant to or under insurance
contracts maintained by Key applicable to senior executives of Key.
1.18 Long Term Incentive Compensation Plan. The term "Long
Term Incentive Compensation Plan" means and includes the KeyCorp Long Term
Cash Incentive Compensation Plan, formerly known as the Society Corporation
Long Term Incentive Compensation Plan, as heretofore in effect from time to
time and as may be hereafter from time to time amended, restated, or
otherwise modified, including any incentive compensation plan that, after
the Effective Time, succeeds, replaces, or is substituted for such plan and
is applicable to senior executives of Key.
1.19 Restricted State. A "Restricted State" means Ohio, New
York, and any other state (including the District of Columbia) in which Key
and its Subsidiaries (taken as a whole) have at the time business
operations or activities which account for or constitute more than 5% of
the total assets or total deposits of Key and its Subsidiaries on a
consolidated basis or more than 5% of the total income of Key and its
Subsidiaries on a consolidated basis for the then preceding three months. A
Financial Services Company shall be deemed to be located in a Restricted
State if its headquarters are then located in the Restricted State or if it
and its affiliates (taken as a whole) have at the time business operations
or activities in the Restricted State with total assets or total deposits
exceeding 5% of the total assets or total deposits of Key and its
Subsidiaries on a consolidated basis or which generate gross income during
the then preceding three months of more than 5% of the total income of Key
and its Subsidiaries on a consolidated basis for that three month period.
The determination of whether a state is a Restricted State shall be made at
the time Gillespie first serves as a director, officer, or employee of the
Financial Services Company in question or first renders services of a
consultative or advisory nature or otherwise to such Financial Services
Company.
1.20 Retirement Plans. The term "Retirement Plans" means and
includes the KeyCorp Cash Balance Pension Plan, which succeeded by merger
the Retirement Plan for Employees of Society Corporation and Subsidiaries,
and the KeyCorp Supplemental Retirement Plan, which succeeded by merger the
Amended and Restated Society Corporation Supplemental Retirement Plan, in
all cases, as from time to time amended, restated, or otherwise modified,
including any plan that, after the Effective Time, succeeds, replaces, or
is substituted for any such plan, and all retirement plans of any nature
maintained by Key or any of its Subsidiaries in which Gillespie was
participating prior to the Termination Date. Reference to a "Retirement
Plan," in the singular, shall mean any of the Retirement Plans.
1.21 Savings Plans. The term "Savings Plans" means and
by merger the Society Corporation Employee Stock Purchase and Savings Plan,
and the KeyCorp Excess 401(k) Savings Plan, which succeeded includes the
KeyCorp 401(k) Savings Plan, which succeeded
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by merger the Amended and Restated Society Corporation Supplemental Stock
Purchase and Savings Plan, in both cases, as from time to time amended,
restated, or otherwise modified, including any plan that, after the
Effective Time, succeeds, replaces, or is substituted for either such
plan, and all salary reduction, savings, profit-sharing, or stock bonus
plans (including, without limitation, all plans involving employer
matching contributions, whether or not constituting a qualified cash or
deferred arrangement under Section 401(k) of the Internal Revenue Code),
maintained by Key or any of its Subsidiaries in which Gillespie was
participating prior to the Termination Date. Reference to a "Savings
Plan," in the singular, shall mean any of the Savings Plans.
1.22 Scheduled Term. The term "Scheduled Term" shall mean the
period commencing at the Effective Time and ending May 31, 2000, except
that, if and when proxy materials are mailed to the shareholders of Key
announcing a date in May of 2000 as the date of the annual meeting of
shareholders of Key to be held in the year 2000, the date so announced
shall be substituted for May 31, 2000 as the end of the Scheduled Term.
1.23 Short Term Incentive Compensation Plan. The term "Short
Term Incentive Compensation Plan" means and includes the KeyCorp Short Term
Incentive Compensation Plan, formerly known as the Society Corporation
Management Incentive Compensation Plan, as heretofore in effect from time
to time and as may be hereafter from time to time amended, restated, or
otherwise modified, including any incentive compensation plan that, after
the Effective Time, succeeds, replaces, or is substituted for such plan and
is applicable to senior executives of Key.
1.24 Subsidiary. A "Subsidiary," as of any time, means any
corporation, bank, partnership, or other entity a majority of the voting
control of which is directly or indirectly owned or controlled at that time
by Key.
1.25 Supplemental Term. The term "Supplemental Term" shall
mean the two-year period commencing on the day after the last day of the
Scheduled Term and ending on the second anniversary of the last day of the
Scheduled Term.
1.26 Termination Date. The term "Termination Date" means the
date on which Gillespie's employment with Key and its Subsidiaries
terminates.
1.27 Voluntary Resignation. A "Voluntary Resignation" shall
have occurred if Gillespie terminates his employment with Key and all its
Subsidiaries by voluntarily resigning at his own instance without having
been requested to so resign by Key, except that any resignation by
Gillespie will not be deemed to be a Voluntary Resignation if, at the time
of that resignation, Gillespie had Good Reason to resign.
2. Term of Employment. Key engages and employs Gillespie to
render such services in the administration and operation of its affairs as, from
time to time, may be specified by its Board of Directors in a manner consistent
at all times and from time to time with his status as
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Chairman of the Board of Directors and Chief Executive Officer, all in
accordance with the terms and conditions of this Agreement, for a period
commencing at the Effective Time and ending on the last day of the Scheduled
Term, unless such period is extended by the mutual agreement of Key and
Gillespie or is sooner terminated pursuant to this Agreement.
3. Full-Time Services. Gillespie will devote all his time and
efforts to the service of Key, except (a) for usual vacation periods and
reasonable periods of illness, (b) for services as an officer and director of
any Subsidiary of Key, and (c) for service as a director or trustee of other
corporations or organizations which are not in competition with Key or any
Subsidiary.
4. Director and Executive Officer. Throughout the period of
his employment under this Agreement, (a) Gillespie will be elected and serve as
a director of Key, (b) Gillespie shall hold the offices of Chairman of the Board
of Directors and Chief Executive Officer of Key, and (c) Gillespie shall be the
most senior (in duties, responsibilities, and authority) officer of Key.
5. Compensation. For all services to be rendered by Gillespie
to Key under this Agreement, including services as an officer, director, or
member of any committee of Key or of any Subsidiary, or any other services
specified by the Board of Directors of Key, Key shall pay to Gillespie, in equal
monthly or more frequent installments, base salary at a annual rate not lower
than $840,000 per annum. In addition to such base salary, Gillespie shall
participate in any incentive compensation, retirement, savings, stock option,
disability, and other employee benefit and welfare plan or arrangement allowed
or provided by Key in which he would otherwise be eligible for participation as
an executive officer and employee of Key, and, to the extent not provided, Key
shall pay or provide for the payment of benefits commensurate with Gillespie's
annual compensation.
6. Effect of Failure to Renew. If, at the expiration of the
Scheduled Term, Gillespie's employment under this Agreement has not otherwise
been terminated and Gillespie's employment with Key is not extended upon terms
acceptable to Gillespie (either under this Agreement or under a new agreement),
then each of Key and Gillespie shall have the option (exercisable at any time
within 30 days after the expiration of the Scheduled Term) of terminating his
employment with Key as of the last day of the Scheduled Term and, upon exercise
of that option, Key shall pay and provide the following amounts and benefits to
Gillespie:
6.1 Key shall pay to Gillespie semimonthly compensation
continuation payments (one such payment to be made on each of the fifteenth
and the last day of each calendar month) throughout the Supplemental Term.
The first such semimonthly payment shall be made for the period commencing
on the day after the Termination Date and ending on the first day after the
Termination Date that is either the fifteenth or last day of the calendar
month. The last such semimonthly payment shall be made for the period
commencing with the last date immediately preceding the end of the
Supplemental Term that is either the first or sixteenth day of the calendar
month in which the Supplemental Term ends and ending on the last day of the
Supplemental Term. The amount of each such semimonthly payment (other than
the first and the last such payment) shall be equal to the sum of (a) one
half of one
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month's base salary of Gillespie (at the highest rate in effect at any
time during the two year period ending on the Termination Date), plus (b)
one-twenty-fourth (1/24) of Gillespie's Average Annual Incentive
Compensation. The amount of each of the first and last such semimonthly
payments shall be equal to the amount specified in the immediately
preceding sentence multiplied by a fraction, the numerator of which is the
number of days in the period for which that payment is payable and the
denominator of which is the number of days in the semimonthly period at
the end of which that payment is payable. If Gillespie dies after becoming
entitled to payments under this Section 6.1 but before the end of the
Supplemental Term, any payments due after his death shall be made to his
estate or, if Gillespie shall so direct to Key in writing, to his wife or
to a trust created by Gillespie. Gillespie's right to direct payment of
such payments following his death may be exercised by him at any time and
from time to time during his life, and any such direction made subsequent
to an earlier one shall revoke and supersede such earlier direction. The
amounts payable to Gillespie, his wife, or any trust created by Gillespie
for any month under this Section 6.1 shall be reduced, but not below zero,
by the full amount of the payments, if any, received by any person
(including, without limitation, Gillespie, his wife, and any trust created
by Gillespie) for that month from all Retirement Plans on account of
Gillespie.
6.2 Key shall arrange to provide Gillespie, throughout the
period beginning on the first day of the Supplemental Term and ending on
the earlier of (a) the last day of the Supplemental Term, or (b) the first
date on which Gillespie accepts Full-time Employment with an Unaffiliated
Employer, with medical benefits (including, if applicable, dental), long
term disability benefits, and group term life insurance benefits, in all
cases at substantially the same level of coverage, and subject to the same
(by dollar amount) employee contribution requirement (if any), as those
which Gillespie was receiving or entitled to receive as an officer of Key
on the Termination Date.
6.3 For the period beginning on the first day of the
Supplemental Term and ending on the earlier of (a) the last day of the
Supplemental Term, or (b) the date of Gillespie's death (the "Section 6.3
Benefit Period"), Key shall cause Gillespie to continue to be covered by
and to participate in all Retirement Plans and Savings Plans that he was
entitled to be covered by and participating in as an officer of Key on the
Termination Date, except where such coverage or participation is
Impermissible. For these purposes: (i) the entire Section 6.3 Benefit
Period shall be included in determining Gillespie's years of service, and
(ii) Gillespie's base salary during the Section 6.3 Benefit Period shall be
deemed to be the amount he receives under clause (a) of Section 6.1 and
that portion of the amount payable under clause (b) of Section 6.1 that is
attributable to incentive compensation taken into account for purposes of
determining retirement benefits under any of the Retirement Plans and
Savings Plans shall be taken into account as if it were such incentive
compensation. If, at any time during the Section 6.3 Benefit Period, Key
determines in good faith that continuing Gillespie's coverage by and
participation in any of the Retirement Plans or any of the Savings Plans
during the Supplemental Term is Impermissible, Key shall not be required to
cause Gillespie to continue to be covered by and to participate in such
affected Plan or Plans, but in lieu thereof, Key shall, within 45 days
after the end of the Section 6.3 Benefit Period, pay to
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Gillespie a lump-sum amount, with respect to each such Plan in which
Gillespie's coverage or participation ceased for any time during that
period, equal to (x) in the case of a Savings Plan, the aggregate maximum
amount of the employer matching contributions which would have been, but
were not, credited to Gillespie's account if he had, at all times during
the Section 6.3 Benefit Period, continued to be covered by and participate
in such Savings Plan to the maximum extent permitted, and (y) in the case
of a Retirement Plan, the difference between the actuarial equivalent of
the benefit under the Retirement Plan which Gillespie would have received
(after the end of the Section 6.3 Benefit Period) if he had, at all times
during the Section 6.3 Benefit Period, continued to be covered by and
participate in such Retirement Plan and had thereafter elected to receive a
straight life annuity at age 65 under that Retirement Plan and the
actuarial equivalent of the actual benefit paid or payable to Gillespie
(after the end of the Section 6.3 Benefit Period) under the Retirement Plan
determined as if Gillespie had elected to receive a straight life annuity
at age 65 under that Retirement Plan. For purposes of determining these
actuarial equivalents, the discount rate used shall be the lowest
"immediate annuity rate" published by the Pension Benefit Guaranty
Corporation under PBGC Regulation Section 2619 for plans with valuation
dates during the 90-day period ending on the Termination Date and the
accrual formulas and actuarial assumptions utilized shall be the most
favorable to Gillespie of those in effect with respect to such Retirement
Plan during the 90-day period ending on the Termination Date. All
determinations and calculations required to be made under sub-clauses (x)
and (y) of this Section 6.3 shall be made by the Accounting Firm, which
shall provide detailed supporting calculations both to Key and to Gillespie
within 30 days after the end of the Section 6.3 Benefit Period. All such
determinations and calculations by the Accounting Firm shall be final and
binding upon Key and Gillespie.
7. Effect of Good Reason (In General). If, at any time before
the expiration of the Scheduled Term, Gillespie has Good Reason to terminate his
employment, Gillespie shall have the right, exercisable at any time during the
period beginning on the date the event constituting any particular instance of
Good Reason first occurs and ending on the earlier of (a) the first anniversary
of that date, or (b) the end of the Scheduled Term, to terminate his employment
with Key by giving written notice of such election to Key. Any such termination
by Gillespie during that period shall be treated for all purposes of this
Agreement as a termination of Gillespie's employment by Key without Cause
effective as of the date on which Gillespie delivers notice of his election
under this Section 7 to Key.
8. Effect of Termination Without Cause before a Change of
Control. If, at any time before the expiration of the Scheduled Term and before
a Change of Control has occurred, Gillespie terminates his employment for Good
Reason or Key terminates Gillespie's employment without Cause, Key shall pay and
provide the following amounts and benefits to Gillespie:
8.1 Key shall pay to Gillespie semimonthly compensation
continuation payments (one such payment to be made on each of the fifteenth
and the last day of each calendar month) throughout the remainder of the
Scheduled Term and thereafter throughout the Supplemental Term. The first
such semimonthly payment shall be made for the period
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commencing on the day after the Termination Date and ending on the first
day after the Termination Date that is either the fifteenth or last day of
the calendar month. The last such semimonthly payment shall be made for the
period commencing with the last date immediately preceding the end of the
Supplemental Term that is either the first or sixteenth day of the calendar
month in which the Supplemental Term ends and ending on the last day of the
Supplemental Term. The amount of each such semimonthly payment (other than
the first and the last such payment) shall be equal to the sum of (a) one
half of one month's base salary of Gillespie (at the highest rate in effect
at any time during the two year period ending on the Termination Date),
plus (b) one-twenty-fourth (1/24) of Gillespie's Average Annual Incentive
Compensation. The amount of each of the first and last such semimonthly
payments shall be equal to the amount specified in the immediately
preceding sentence multiplied by a fraction, the numerator of which is the
number of days in the period for which that payment is payable and the
denominator of which is the number of days in the semimonthly period at the
end of which that payment is payable. If Gillespie dies after becoming
entitled to payments under this Section 8.1 but before the end of the
Supplemental Term, any payments due after his death shall be made to his
estate or, if Gillespie shall so direct to Key in writing, to his wife or
to a trust created by Gillespie. Gillespie's right to direct payment of
such payments following his death may be exercised by him at any time and
from time to time during his life, and any such direction made subsequent
to an earlier one shall revoke and supersede such earlier direction. The
amounts payable to Gillespie, his wife, or any trust created by Gillespie
for any month under this Section 8.1 shall be reduced, but not below zero,
by the full amount of the payments, if any, received by any person
(including, without limitation, Gillespie, his wife, and any trust created
by Gillespie) for that month from all Retirement Plans on account of
Gillespie.
8.2 Key shall arrange to provide Gillespie, throughout the
period beginning on the Termination Date and ending on the earlier of (a)
the last day of the Supplemental Term, or (b) the first date on which
Gillespie accepts Full-time Employment with an Unaffiliated Employer, with
medical benefits (including, if applicable, dental), long term disability
benefits, and group term life insurance benefits, in all cases at
substantially the same level of coverage, and subject to the same (by
dollar amount) employee contribution requirement (if any), as those which
Gillespie was receiving or entitled to receive as an officer of Key on the
Termination Date.
8.3 For the period beginning on the Termination Date and
ending on the earlier of (a) the last day of the Supplemental Term, or (b)
the date of Gillespie's death (the "Section 8.3 Benefit Period"), Key shall
cause Gillespie to continue to be covered by and to participate in all
Retirement Plans and Savings Plans that he was entitled to be covered by
and participating in as an officer of Key on the Termination Date, except
where such coverage or participation is Impermissible. For these purposes:
(i) the Section 8.3 Benefit Period shall be included in determining
Gillespie's years of service, and (ii) Gillespie's base salary during the
Section 8.3 Benefit Period shall be deemed to be the amount he receives
under clause (a) of Section 8.1 and that portion of the amount payable
under clause (b) of Section 8.1 that is attributable to incentive
compensation taken into account for purposes of determining retirement
benefits
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under any of the Retirement Plans and Savings Plans shall be taken into
account as if it were such incentive compensation. If, at any time during
the Section 8.3 Benefit Period, Key determines in good faith that
continuing Gillespie's coverage by and participation in any of the
Retirement Plans or any of the Savings Plans during the Section 8.3 Benefit
Period is Impermissible, Key shall not be required to cause Gillespie to
continue to be covered by and to participate in such affected Plan or
Plans, but in lieu thereof, Key shall, within 45 days after the end of the
Section 8.3 Benefit Period, pay to Gillespie a lump-sum amount, with
respect to each such Plan in which Gillespie's coverage or participation
ceased for any time during the Section 8.3 Benefit Period, equal to (x) in
the case of a Savings Plan, the aggregate maximum amount of the employer
matching contributions which would have been, but were not, credited to
Gillespie's account if he had, at all times during the Section 8.3 Benefit
Period, continued to be covered by and participate in such Savings Plan to
the maximum extent permitted, and (y) in the case of a Retirement Plan, the
difference between the actuarial equivalent of the benefit under the
Retirement Plan which Gillespie would have received (after the end of the
Section 8.3 Benefit Period) if he had, at all times during the Section 8.3
Benefit Period, continued to be covered by and participate in such
Retirement Plan and had thereafter elected to receive a straight life
annuity at age 65 under that Retirement Plan and the actuarial equivalent
of the actual benefit paid or payable to Gillespie (after the end of the
Section 8.3 Benefit Period) under the Retirement Plan determined as if
Gillespie had elected to receive a straight life annuity at age 65 under
that Retirement Plan. For purposes of determining these actuarial
equivalents, the discount rate used shall be the lowest "immediate annuity
rate" published by the Pension Benefit Guaranty Corporation under PBGC
Regulation Section 2619 for plans with valuation dates during the 90-day
period ending on the Termination Date and the accrual formulas and
actuarial assumptions utilized shall be the most favorable to Gillespie of
those in effect with respect to such Retirement Plan during the 90-day
period ending on the Termination Date. All determinations and calculations
required to be made under sub-clauses (x) and (y) of this Section 8.3 shall
be made by the Accounting Firm, which shall provide detailed supporting
calculations both to Key and to Gillespie within 30 days after the end of
the Section 8.3 Benefit Period. All such determinations and calculations by
the Accounting Firm shall be final and binding upon Key and Gillespie.
9. Effect of Termination after a Change of Control by
Gillespie for Good Reason or by Key Without Cause. If, at any time before the
expiration of the Scheduled Term and after a Change of Control has occurred,
Gillespie terminates his employment for Good Reason or Key terminates
Gillespie's employment without Cause, Key shall pay and provide the following
amounts and benefits to Gillespie:
9.1 Key shall pay to Gillespie semimonthly compensation
continuation payments (one such payment to be made on each of the fifteenth
and the last day of each calendar month) throughout the remainder of the
Scheduled Term and thereafter throughout the Supplemental Term. The first
such semimonthly payment shall be made for the period commencing on the day
after the Termination Date and ending on the first day after the
Termination Date that is either the fifteenth or last day of the calendar
month. The last such semimonthly payment shall be made for the period
commencing with the last date immediately
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preceding the end of the Supplemental Term that is either the first or
sixteenth day of the calendar month in which the Supplemental Term ends and
ending on the last day of the Supplemental Term. The amount of each such
semimonthly payment (other than the first and the last such payment) shall
be equal to the sum of (a) one half of one month's base salary of Gillespie
(at the highest rate in effect at any time during the two year period
ending on the Termination Date), plus (b) one-twenty-fourth (1/24) of
Gillespie's Average Annual Incentive Compensation. The amount of each of
the first and last such semimonthly payments shall be equal to the amount
specified in the immediately preceding sentence multiplied by a fraction,
the numerator of which is the number of days in the period for which that
payment is payable and the denominator of which is the number of days in
the semimonthly period at the end of which that payment is payable. If
Gillespie dies after becoming entitled to payments under this Section 9.1
but before the end of the Supplemental Term, any payments due after his
death shall be made to his estate or, if Gillespie shall so direct to Key
in writing, to his wife or to a trust created by Gillespie. Gillespie's
right to direct payment of such payments following his death may be
exercised by him at any time and from time to time during his life, and any
such direction made subsequent to an earlier one shall revoke and supersede
such earlier direction. The amounts payable to Gillespie, his wife, or any
trust created by Gillespie for any month under this Section 9.1 shall be
reduced, but not below zero, by the full amount of the payments, if any,
received by any person (including, without limitation, Gillespie, his wife,
and any trust created by Gillespie) for that month from all Retirement
Plans on account of Gillespie.
9.2 Key shall arrange to provide Gillespie, throughout the
period beginning on the Termination Date and ending on the earlier of (a)
the last day of the Supplemental Term, or (b) the first date on which
Gillespie accepts Full-time Employment with an Unaffiliated Employer, with
medical benefits (including, if applicable, dental), long term disability
benefits, and group term life insurance benefits, in all cases at
substantially the same level of coverage, and subject to the same (by
dollar amount) employee contribution requirement (if any), as those which
Gillespie was receiving or entitled to receive as an officer of Key on the
Termination Date.
9.3 For the period beginning on the Termination Date and
ending on the earlier of (a) the last day of the Supplemental Term, or (b)
the date of Gillespie's death (the "Section 9.3 Benefit Period"), Key shall
cause Gillespie to continue to be covered by and to participate in all
Retirement Plans and Savings Plans that he was entitled to be covered by
and participating in as an officer of Key on the Termination Date, except
where such coverage or participation is Impermissible. For these purposes:
(i) the Section 9.3 Benefit Period shall be included in determining
Gillespie's years of service, and (ii) Gillespie's base salary during the
Section 9.3 Benefit Period shall be deemed to be the amount he is deemed to
receive under clause (a) Section 9.1 and that portion of the amount payable
under clause (b) of Section 9.1 that is attributable to incentive
compensation taken into account for purposes of determining retirement
benefits under any of the Retirement Plans and Savings Plans shall be taken
into account as if it were such incentive compensation. If, at any time
during the Section 9.3 Benefit Period, Key determines in good faith that
continuing Gillespie's coverage by and
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participation in any of the Retirement Plans or any of the Savings Plans
during the Section 9.3 Benefit Period is Impermissible, Key shall not be
required to cause Gillespie to continue to be covered by and to participate
in such affected Plan or Plans, but in lieu thereof, Key shall, within 45
days after the end of the Section 9.3 Benefit Period, pay to Gillespie a
lump-sum amount, with respect to each such Plan in which Gillespie's
coverage or participation ceased for any time during the Section 9.3
Benefit Period equal to (x) in the case of a Savings Plan, the aggregate
maximum amount of the employer matching contributions which would have
been, but were not, credited to Gillespie's account if he had, at all times
during the Section 9.3 Benefit Period, continued to be covered by and
participate in such Savings Plan to the maximum extent permitted, and (y)
in the case of a Retirement Plan, the difference between the actuarial
equivalent of the benefit under the Retirement Plan which Gillespie would
have received (after the end of the Section 9.3 Benefit Period) if he had,
at all times during the Section 9.3 Benefit Period, continued to be covered
by and participate in such Retirement Plan and had thereafter elected to
receive a straight life annuity at age 65 under that Retirement Plan and
the actuarial equivalent of the actual benefit paid or payable to Gillespie
(after the end of the Section 9.3 Benefit Period) under the Retirement Plan
determined as if Gillespie had elected to receive a straight life annuity
at age 65 under that Retirement Plan. For purposes of determining these
actuarial equivalents, the discount rate used shall be the lowest
"immediate annuity rate" published by the Pension Benefit Guaranty
Corporation under PBGC Regulation Section 2619 for plans with valuation
dates during the 90-day period ending on the Termination Date and the
accrual formulas and actuarial assumptions utilized shall be the most
favorable to Gillespie of those in effect with respect to such Retirement
Plan during the 90-day period ending on the Termination Date. All
determinations and calculations required to be made under sub-clauses (x)
and (y) of this Section 9.3 shall be made by the Accounting Firm, which
shall provide detailed supporting calculations both to Key and to Gillespie
within 30 days after the end of the Section 9.3 Benefit Period. All such
determinations and calculations by the Accounting Firm shall be final and
binding upon Key and Gillespie.
10. Effect of Death While in Employ of Key. If Gillespie dies
while employed by Key, (a) Key shall pay to Gillespie's estate any unpaid base
salary due or to become due to Gillespie with respect to any period ending
before his death, (b) if Gillespie is survived by his wife, Key shall pay the
monthly survivor pension benefit provided for in Section 15, (c) Key shall have
no further obligations to Gillespie for base salary for any period after
Gillespie's death, and (d) Key shall pay such incentive compensation as is
provided for under the Short Term Incentive Compensation Plan and the Long Term
Incentive Compensation Plan to Gillespie's estate or as otherwise provided for
under such plans.
11. Effect of Disability While in Employ of Key. If, while
Gillespie is employed by Key, he becomes disabled, by reason of physical or
mental impairment, to such an extent that he is unable to perform his duties
under this Agreement:
11.1 Key may relieve Gillespie of his duties under this
Agreement for as long as Gillespie is so disabled.
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11.2 Key shall pay to Gillespie all base salary and incentive
compensation to which he would have been entitled under this Agreement and
under the Short Term Incentive Compensation Plan and the Long Term
Incentive Compensation Plan had he continued to be actively employed by Key
to the earliest of (a) the first date on which he is no longer so disabled
to such an extent that he is unable to perform his duties under this
Agreement (whereupon, if this clause (a) is the earliest to occur, he shall
again be restored to his duties under this Agreement, entitled to the
benefits of and subject to this Agreement as if no period of disability had
occurred), (b) the date on which he becomes eligible for payment of long
term disability benefits under the Long Term Disability Benefit Plan, (c)
the date of his death, or (d) the last day of the Scheduled Term
(whereupon, if this clause (d) is the earliest to occur, Gillespie shall be
entitled to the benefits provided under Section 6 of this Agreement for the
Supplemental Term).
11.3 If and when Gillespie becomes eligible for payment of
long term disability benefits under the Long Term Disability Benefit Plan,
Key shall pay to Gillespie semimonthly compensation continuation payments
(one such payment to be made on each of the fifteenth and the last day of
each calendar month) throughout the period (the "Section 11.3 Benefit
Period") beginning with the date on which Gillespie becomes so eligible and
ending on the earliest of (a) the first date on which he is no longer so
disabled to such an extent that he is unable to perform his duties under
this Agreement (whereupon, if this clause (a) occurs during the Scheduled
Term, he shall again be restored to his duties under this Agreement,
entitled to the benefits of and subject to this Agreement as if no period
of disability had occurred), (b) the date of his death, or (c) the last day
of the Supplemental Term. The first such semimonthly payment shall be made
for the period commencing on the first day of the Section 11.3 Benefit
Period and ending on the first day after that date that is either the
fifteenth or last day of the calendar month. The last such semimonthly
payment shall be made for the period commencing with the last date within
the Section 11.3 Benefit Period that is either the first or sixteenth day
of the calendar month in which the Section 11.3 Benefit Period ends and
ending on the last day of the Section 11.3 Benefit Period. The amount of
each such semimonthly payment (other than the first and the last such
payment) shall be equal to the sum of (i) one half of one month's base
salary of Gillespie (at the highest rate in effect at any time during the
two year period ending on the last day before the date of the payment on
which Gillespie performed services for Key), plus (ii) one-twenty-fourth
(1/24) of Gillespie's Average Annual Incentive Compensation (determined as
though the last day before the date of the payment on which Gillespie
performed services for Key was the Termination Date). The amount of each of
the first and last such semimonthly payments shall be equal to the amount
specified in the immediately preceding sentence multiplied by a fraction,
the numerator of which is the number of days in the period for which that
payment is payable and the denominator of which is the number of days in
the semimonthly period at the end of which that payment is payable.
11.4 The amounts payable to Gillespie for any month under
this Section 11 shall be reduced, but not below zero, by the full amount of
the payments, if any, received by
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Gillespie for that month (a) from all Retirement Plans, (b) from the Long
Term Disability Plan, and (c) from any other disability plan the entire
cost of which is borne by Key.
11.5 For purposes of entitlement to a death benefit under
Section 10 or Section 15 of this Agreement, (a) Gillespie will be treated
as being employed by Key throughout any portion of the Scheduled Term
during which he is entitled to receive payments from Key under either of
Sections 11.2 or 11.3 and (b) Gillespie will not be treated as being
employed by Key at any time during the Supplemental Term.
11.6 For purposes of all retirement, savings, stock option,
disability, and other employee benefit and welfare plans or arrangements
allowed or provided by Key to officers, Gillespie shall be treated in the
same manner that Key treats other officers who become disabled.
11.7 Except as provided in this Section 11, Key shall have no
further obligations to Gillespie for base salary or incentive compensation
for any period during which Gillespie is so disabled to such an extent that
he is unable to perform his duties under this Agreement.
12. No Set-off or Mitigation. The compensation and benefits
to be paid and provided by Key to Gillespie under this Agreement are not to be
subject to any set-off against any claim by Key against Gillespie. Gillespie
will not be required to mitigate any amounts payable by Key to Gillespie under
any of the terms of this Agreement and, except to the limited extent provided
herein with respect to welfare benefit plans, no payment or benefit to Gillespie
from any other source will reduce the obligation of Key to make payment to and
provide benefits to Gillespie after termination of his employment as provided in
this Agreement.
13. Payments Are in Lieu of Severance Payments. If Gillespie
becomes entitled to receive payments under this Agreement as a result of
termination of his employment, those payments shall be in lieu of any and all
other claims or rights that Gillespie may have for severance, separation, and/or
salary continuation pay upon that termination of his employment.
14. Limitations on Competition.
14.1 Gillespie shall not engage in any Competitive Activity
during the period of his employment with Key.
14.2 Gillespie shall not engage in any Competitive Activity
during any period after the Termination Date during which he is receiving
semimonthly compensation continuation payments under any of Sections 6.1,
8.1, or 9.1. If Gillespie continues to violate the restriction set forth in
this Section 14.2 after the Board of Directors has advised him in writing
to cease those activities and that violation is material, Key shall
thereupon be relieved of all further obligations to make payments and
provide benefits to Gillespie under any of the provisions contained in any
of Sections 6 through 9. Gillespie shall not be required to repay to Key
any payment received by him before he began to engage in any such
Competitive
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Activity. If a Financial Services Company has business operations or
activities in multiple states some of which are Restricted States and some
of which are not Restricted States, Key will not unreasonably withhold its
consent after the Termination Date to Gillespie serving as an officer,
employee, or consultant of such Financial Services Company if (a)
Gillespie's duties and responsibilities for such Financial Services Company
are restricted to a specific geographic region which does not include a
Restricted State, and (b) none of Gillespie's services or activities is
performed in or related to a Restricted State.
15. Death Benefit for Surviving Wife. If Gillespie dies while
employed by Key leaving his wife surviving him, Key shall pay to Gillespie's
wife or, if Gillespie shall so direct to Key in writing, to a trust in which his
wife is one of the beneficiaries or to his estate, a monthly survivor pension
equal to the excess, if any, of (a) one-third of the monthly amount Gillespie or
his wife or his estate would receive under Section 8.1 if Gillespie had been
terminated without Cause by Key on the day before the date of his death (i.e.,
an amount equal to one-third of the sum of two semimonthly payments calculated
as provided in the fourth sentence of Section 8.1), over (b) the aggregate
monthly survivor benefits, if any, under all Retirement Plans received by
Gillespie's wife. In the event Gillespie and his wife die in a common accident
or in the event Gillespie and his wife die within six months of each other's
death as a result of injuries sustained in a common accident, Gillespie's wife,
for purposes of the preceding sentence and for purposes of Section 10, shall be
deemed to have survived him, regardless of the actual order of their respective
deaths. The monthly survivor payments shall be paid at the rate of one per month
commencing with the month following the month in which Gillespie's death occurs
and continuing through the later of (i) the month in which Gillespie's wife
dies, or (ii) the 180th month following the month in which Gillespie's death
occurs. If Gillespie's wife dies before 180 monthly payments have been made, Key
shall pay the remaining payments to the estate of Gillespie's wife or in
accordance with Gillespie's written direction, if any, as above provided.
Gillespie's right to direct payment of such monthly survivor pension following
his death may be exercised by him at any time and from time to time during his
life, and any such direction made subsequent to an earlier one shall revoke and
supersede such earlier direction.
16. Stock Options. If a Change of Control occurs during the
period of Gillespie's employment under this Agreement and an election by
Gillespie under this Section 16 would not conflict with the treatment for
accounting purposes of any transaction entered into by Key as a pooling of
interests, Gillespie thereafter may from time to time elect to surrender to Key
his rights in any or all outstanding stock options (whether or not then
exercisable) to purchase Common Shares of Key then held by him. Upon any such
surrender, Key shall pay to Gillespie an amount equal to the excess of (a) the
aggregate fair market value of all of the Common Shares subject to the stock
options so surrendered over (b) the aggregate option price of all such Common
Shares under those stock options. For purposes of this Section 16, "fair market
value" shall mean the higher of (i) the highest price paid per share for Common
Shares of Key in connection with the Change of Control, or (ii) the mean between
the high and low sales prices for Common Shares of Key (as reported in The Wall
Street Journal) on the date of Gillespie's election to surrender his rights in
all outstanding stock options.
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17. Additional Retirement Benefits.
17.1 If Gillespie's employment with Key terminates before
March 26, 2009 (his 65th birthday) for any reason other than (a) a
Voluntary Resignation that is effective before the end of the Scheduled
Term, or (b) Cause and Gillespie (or any person claiming through Gillespie)
receives retirement benefits under one or more of the Retirement Plans at
any time after March 26, 1999 (Gillespie's 55th birthday), Key shall pay to
Gillespie, to his contingent annuitant, to his term-certain beneficiary,
and/or to his other beneficiary under each such plan, on each date after
March 26, 1999 on which a payment is payable under any such plan, a
supplemental retirement benefit equal to the excess, if any, of (x) the
amount that would be payable on that date under that plan if, at his
Termination Date, Gillespie had attained age 65 (so that there would be no
reduction in the amount of the benefit due to commencement of payment
before age 65) and had completed 40 and 3/4 years of service with Key (so
that he would be treated as having the same number of years of service as
if he had continued in the employ of Key through his 65th birthday), over
(y) the amount actually payable on that date under that plan. Any amount
paid pursuant to this Section 17.1 shall be treated, for purposes of this
Agreement, as paid from a Retirement Plan.
17.2 If Gillespie's employment with Key is terminated by a
Voluntary Resignation that is effective before the end of the Scheduled
Term and Gillespie elects to begin receiving retirement benefits under one
or more of the Retirement Plans after his 60th birthday but before his 65th
birthday, Key shall pay to Gillespie, to his contingent annuitant, to his
term-certain beneficiary, and/ or to his other beneficiary under each such
plan, on the date any payment is payable under such plan, a supplemental
retirement benefit equal to the amount by which that payment is reduced
because Gillespie began to receive benefits under that plan before his 65
birthday. Any amount paid pursuant to this Section 17.2 shall be treated,
for purposes of this Agreement, as paid from a Retirement Plan.
17.3 Upon termination of his employment with Key for any
reason whatsoever at any time after the Effective Time, Gillespie will be
treated as having satisfied all of the requirements for eligibility for a
supplemental retirement benefit under the KeyCorp Supplemental Retirement
Plan, which succeeded by merger the Amended and Restated Society
Corporation Supplemental Retirement Plan, as from time to time amended,
restated, or otherwise modified, including any plan hereafter succeeding,
replacing, or being substituted for such plan.
18. Long Term and Short Term Incentive Compensation. If
Gillespie's employment with Key terminates for any reason other than (a) a
Voluntary Resignation that is effective before the end of the Scheduled Term,
(b) Cause, or (c) death or disability, for purposes of determining Gillespie's
rights to awards under the Long Term Incentive Compensation Plan and the Short
Term Incentive Compensation Plan, Gillespie shall be treated as though, on the
Termination Date, he (a) had retired and (b) was more than 65 years of age.
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19. Office and Secretarial Support. If Gillespie's employment
with Key terminates for any reason other than (a) a Voluntary Resignation that
is effective before the end of the Scheduled Term, (b) Cause, or (c) death or
disability, Key shall provide to Gillespie, during the period commencing
immediately after the Termination Date and continuing through May 31, 2007,
furnished office space and amenities (such as telephone, word processing and fax
machine) and secretarial support appropriate to Gillespie's status as a former
Chairman of the Board and Chief Executive Officer of Key either in Cleveland,
Ohio or in such other city, village or town located in the continental United
States, as requested by Gillespie, at which Key or one of its Subsidiaries has
offices.
20. Indemnification. Key shall indemnify Gillespie, to the
full extent permitted or authorized by the Ohio General Corporation Law as it
may from time to time be amended, if Gillespie is made or threatened to be made
a party to any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative, by reason of the fact
that Gillespie is or was a director, officer, or employee of Key or any
Subsidiary, or is or was serving at the request of Key or any Subsidiary as a
director, trustee, officer, or employee of a bank, corporation, partnership,
joint venture, trust, or other enterprise. The indemnification provided by this
Section 20 shall not be deemed exclusive of any other rights to which Gillespie
may be entitled under the articles of incorporation or the regulations of Key or
of any Subsidiary, or any agreement, vote of shareholders or disinterested
directors, or otherwise, both as to action in Gillespie's official capacity and
as to action in another capacity while holding such office, and shall continue
as to Gillespie after Gillespie has ceased to be a director, trustee, officer,
or employee and shall inure to the benefit of the heirs, executors, and
administrators of Gillespie.
21. Reimbursement of Certain Expenses.
21.1 Key shall pay, as incurred, all expenses, including the
reasonable fees of counsel engaged by Gillespie, of defending any action
brought to have this Agreement declared invalid or unenforceable.
21.2 Key shall pay, as incurred, all expenses, including the
reasonable fees of counsel engaged by Gillespie, of prosecuting any action
to compel Key to comply with the terms of this Agreement upon receipt from
Gillespie of an undertaking to repay Key for such expenses if, and only if,
it is ultimately determined by a court of competent jurisdiction that
Gillespie had no reasonable grounds for bringing that action (which
determination need not be made simply because Gillespie fails to succeed in
the action).
21.3 Expenses (including attorney's fees) incurred by
Gillespie in defending any action, suit, or proceeding commenced or
threatened against Gillespie for any action or failure to act as an
employee, officer, or director of Key or any Subsidiary shall be paid by
Key, as they are incurred, in advance of final disposition of the action,
suit, or proceeding upon receipt of an undertaking by or on behalf of
Gillespie in which he agrees to reasonably cooperate with Key or the
Subsidiary, as the case may be, concerning the action, suit, or proceeding,
and (a) if the action, suit, or proceeding is commenced or threatened
against
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Gillespie for any action or failure to act as a director, to repay the
amount if it is proved by clear and convincing evidence in a court of
competent jurisdiction that his action or failure to act involved an act
or omission undertaken with deliberate intent to cause injury to Key or a
Subsidiary or (b) if the action, suit, or proceeding is commenced or
threatened against Gillespie for any action or failure to act as an
officer or employee, to repay the amount if it is ultimately determined
that he is not entitled to be indemnified. The obligation of Key to
advance expenses provided for in this Section 21.3 shall not be deemed
exclusive of any other rights to which Gillespie may be entitled under the
articles of incorporation or the regulations of Key or of any Subsidiary,
or any agreement, vote of shareholders or disinterested directors, or
otherwise.
22. Termination for Cause. In the event Gillespie's
employment is terminated for Cause, Key may, by giving written notice to
Gillespie, terminate this Agreement and all its obligations remaining to be
performed or observed by it under this
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Agreement(other than those under Section 24), except no termination of this
Agreement shall affect Gillespie's rights under any plan or benefit of Key, all
of which shall be governed by their respective terms.
23. Gross-Up of Payments Deemed to be Excess Parachute
Payments.
23.1 Key and Gillespie acknowledge that, following a Change
of Control, one or more payments or distributions to be made by Key to or
for the benefit of Gillespie (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement, under some other
plan, agreement, or arrangement, or otherwise) (a "Payment") may be
determined to be an "excess parachute payment" that is not deductible by
Key for Federal income tax purposes and with respect to which Gillespie
will be subject to an excise tax because of Sections 280G and 4999,
respectively, of the Internal Revenue Code (hereinafter referred to
respectively as "Section 280G" and "Section 4999"). If Gillespie's
employment is terminated after a Change of Control occurs, the Accounting
Firm, which, subject to any inconsistent position asserted by the Internal
Revenue Service, shall make all determinations required to be made under
this Section 23, shall determine whether any Payment would be an excess
parachute payment and shall communicate its determination, together with
detailed supporting calculations, to Key and to Gillespie within 30 days
after the Termination Date or such earlier time as is requested by Key. Key
and Gillespie shall cooperate with each other and the Accounting Firm and
shall provide necessary information so that the Accounting Firm may make
all such determinations. Key shall pay all of the fees of the Accounting
Firm for services performed by the Accounting Firm as contemplated in this
Section 23.
23.2 If the Accounting Firm determines that any Payment gives
rise, directly or indirectly, to liability on the part of Gillespie for
excise tax under Section 4999 (and/or any penalties and/or interest with
respect to any such excise tax), Key shall make additional cash payments to
Gillespie, from time to time and at the same time as any Payment
constituting an excess parachute payment is paid or provided to Gillespie,
in such amounts as are necessary to put Gillespie in the same position,
after payment of all federal, state, and local taxes (whether income taxes,
excise taxes under Section 4999 or otherwise, or other taxes) and any and
all penalties and interest with respect to any such excise tax, as
Gillespie would have been in after payment of all federal, state, and local
income taxes if the Payments had not given rise to an excise tax under
Section 4999 and no such penalties or interest had been imposed.
23.3 If the Internal Revenue Service determines that any
Payment gives rise, directly or indirectly, to liability on the part of
Gillespie for excise tax under Section 4999 (and/or any penalties and/or
interest with respect to any such excise tax) in excess of the amount, if
any, previously determined by the Accounting Firm, Key shall make further
additional cash payments to Gillespie not later than the due date of any
payment indicated by the Internal Revenue Service with respect to these
matters, in such amounts as are necessary to put Gillespie in the same
position, after payment of all federal, state, and local taxes (whether
income taxes, excise taxes under Section 4999 or otherwise, or other taxes)
and any and all penalties and interest with respect to any such excise tax,
as Gillespie would have been
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<PAGE> 24
in after payment of all federal, state, and local income taxes if the
Payments had not given rise to an excise tax under Section 4999 and no such
penalties or interest had been imposed.
23.4 If Key desires to contest any determination by the
Internal Revenue Service with respect to the amount of excise tax under
Section 4999, Gillespie shall, upon receipt from Key of an unconditional
written undertaking to indemnify and hold Gillespie harmless (on an after
tax basis) from any and all adverse consequences that might arise from the
contesting of that determination, cooperate with Key in that contest at
Key's sole expense. Nothing in this Section 23.4 shall require Gillespie to
incur any expense other than expenses with respect to which Key has paid to
Gillespie sufficient sums so that after the payment of the expense by
Gillespie and taking into account the payment by Key with respect to that
expense and any and all taxes that may be imposed upon Gillespie as a
result of his receipt of that payment, the net effect is no cost to
Gillespie. Nothing in this Section 23.4 shall require Gillespie to extend
the statute of limitations with respect to any item or issue in his tax
returns other than, exclusively, the excise tax under Section 4999. If, as
the result of the contest of any assertion by the Internal Revenue Service
with respect to excise tax under
Section 4999, Gillespie receives a refund of a Section 4999 excise tax
previously paid and/or any interest with respect thereto, Gillespie shall
promptly pay to Key such amount as will leave Gillespie, net of the
repayment and all tax effects, in the same position, after all taxes and
interest, that he would have been in if the refunded excise tax had never
been paid.
24. Deferral of Payment of Compensation under Certain
Circumstances.
24.1 Section 162(m). For purposes of this Section 24, the
term "Section 162(m)" shall mean Section 162(m) of the Internal Revenue
Code (which, as amended by the Revenue Reconciliation Act of 1993,
prescribes rules disallowing deductions for certain "applicable employee
remuneration" to any of five specified "covered employees" of a publicly
held corporation in excess of $1,000,000 per year), as from time to time
amended, and the corresponding provisions of any similar law subsequently
enacted, and to all regulations issued under that section and any such
provisions.
24.2 Deferral. Except as otherwise provided in either of
Section 24.3 or Section 24.4, below, if Key determines that, after giving
effect to all applicable elective deferrals of compensation, any amount of
compensation (including any base salary and any incentive compensation
payable under any incentive compensation plan in which Gillespie is a
participant) otherwise payable to Gillespie under this Agreement at any
particular time (the "Scheduled Time"),
(a) would not be deductible by Key if paid at the Scheduled
Time by reason of the disallowance rules of Section 162(m), and
(b) would be deductible by Key if deferred until and paid
during a later year,
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<PAGE> 25
that amount of compensation shall be deferred until, and paid during, the
year that is determined by Key to be the first year following the year of
deferral during which the compensation can be paid without disallowance of
the deduction for payment of the compensation by reason of Section 162(m).
If Key determines that in any year following the year of deferral a portion
of, but not all of, the amounts deferred (together with interest thereon as
provided in Section 24.5, below) can be paid without disallowance of the
deduction, that portion that can be so paid shall be paid by Key during
that year and the remainder, except as otherwise provided in Section 24.3
or Section 24.4, below, shall continue to be deferred until a later year.
24.3 Early Payout of Deferred Amount if Deferral is
Determined to be Ineffective. If any amount of compensation is deferred
under Section 24.2 with the expectation that it will be deductible by Key
if paid in a later year and Key later determines that the compensation will
not be deductible by Key even if payment thereof is deferred until a later
year, then, within three months of the date on which that determination is
made, the deferral with respect to that compensation shall terminate and
Key shall pay that compensation to Gillespie.
24.4 Payout Following Termination of Employment in All
Events. On April 15 of the year immediately following the year in which
Gillespie ceases to be employed by Key, Key shall pay to Gillespie, in a
single lump sum, all amounts of compensation that have been deferred
pursuant to this Section 24 and have not previously been paid so that, as
of the close of business on that date, no amount of compensation will
remain deferred under this Section 24 whether or not Key is entitled to a
deduction with respect to the payment of that compensation.
24.5 Interest on Deferred Amounts. Upon payment of any
amounts of compensation deferred for any period of time pursuant to this
Section 24, Key shall pay to Gillespie an additional amount equivalent to
the interest that would have accrued on such deferred compensation if
interest accrued thereon on a daily basis from the date on which that
compensation would have been paid but for this Section 24 through the date
on which that compensation is paid at a rate varying from month to month
and equal to 50 basis points higher than the effective annual yield of the
average of the Moody's Average Corporate Bond Yield Index for the previous
month, as published by Moody's Investor Services, Inc. (or any successor
published thereto), or, if such index is no longer published, a
substantially similar index selected by the Accounting Firm, with interest
compounded as of the end of each month.
24.6 Miscellaneous. Gillespie's rights with respect to
payment during his lifetime of any compensation deferred under this Section
24 shall not be subject to assignment. If Gillespie dies before all
compensation deferred under this Section 24 has been paid to him, any such
unpaid compensation shall be paid, at the same time it would have been paid
if Gillespie had not died but had merely ceased to be an employee of Key on
the date of his death (or, if earlier, on the last date he actually was an
employee of Key), to his estate or, if
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<PAGE> 26
Gillespie shall so direct to Key in writing, to his wife or to a trust
created by Gillespie. The obligation of Key to make payments of
compensation deferred pursuant to this Section 24 constitutes the unsecured
promise of Key to make payments from its general assets as and when due and
neither Gillespie nor any person claiming through him shall have, as a
result of this Section 24, any lien or claim on any assets of Key that is
superior to the claims of the general creditors of Key.
25. Vesting of, and Extension of Exercise Period for, Stock
Options. All stock options (other than so-called "performance options," which
are options that vest or become exercisable only if certain stock price and/or
financial performance tests are achieved) granted to Gillespie by Key after the
Effective Time which remain outstanding on the Termination Date shall be deemed
to have vested (to the extent not already vested) as of immediately prior to the
termination of his employment in all cases except when his employment is
terminated for Cause, by Voluntary Resignation before the end of the Scheduled
Term, or as a result of death or disability. All stock options (other than
performance options) granted to Gillespie by Key after the Effective Time and
which remain outstanding and are vested on the Termination Date (whether
pursuant to the immediately preceding sentence or otherwise) shall be
exercisable after the Termination Date until their respective option expiration
date (which is the last date that the option would be exercisable in accordance
with its terms if Gillespie had continued in Key's employment indefinitely)
unless Gillespie's employment is terminated for Cause or by Voluntary
Resignation before the end of the Scheduled Term. In the case of incentive stock
options granted to Gillespie by Key after the Effective Time, this Section 25
shall apply, recognizing however that failure to exercise the incentive stock
option within the time periods after the Termination Date prescribed by the
Internal Revenue Code may cause the option to fail to qualify for incentive
stock option treatment under the Internal Revenue Code. In the event that an
option in accordance with its terms without regard to this Section 25 would vest
earlier than as provided in this Section 25 or would be exercisable for a longer
period than as provided in this Section 25, the terms of the option providing
for earlier vesting and/or a longer period of exercisability, as the case may
be, shall govern. Each stock option (other than performance options) granted to
Gillespie by Key after the Effective Time shall be deemed to contain the
provisions of this Section 25 as a part of the award instrument evidencing such
option.
26. Savings Clause. If any payments otherwise payable to
Gillespie under this Agreement are prohibited by any applicable statute or
regulation in effect at the time the payments would otherwise be payable,
including, without limitation, any regulation issued by the Federal Deposit
Insurance Corporation (the "FDIC") that limits so called "golden parachute
payments" that can be made by an FDIC insured institution or its holding company
if the institution is financially troubled and certain so-called
"indemnification payments" (any such statute or regulation being a "Limiting
Rule"):
(a) Key will use its best efforts to obtain the consent of
the appropriate governmental agency (whether the FDIC or any other
agency) to the payment by Key to Gillespie of the maximum amount that
is permitted (up to the amounts that would be due to Gillespie under
this Agreement or otherwise absent the Limiting Rule); and
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<PAGE> 27
(b) Gillespie will be entitled to elect to have apply, and
therefore to receive benefits directly under, either (i) this
Agreement (as limited by the Limiting Rule) or (ii) any generally
applicable Key plan or policy (including any severance, separation
pay, and/or salary continuation plan that may be in effect at the time
of Gillespie's termination), up to the amounts that would be due to
Gillespie under this Agreement or otherwise absent the Limiting Rule.
27. Merger or Transfer of Assets of Key. Key will not
consolidate with or merge into any other corporation, or transfer all or
substantially all of its assets to another corporation, unless such other
corporation shall assume this Agreement in a signed writing and deliver a copy
thereof to Gillespie. Upon such assumption the successor corporation shall
become obligated to perform the obligations of Key under this Agreement, and the
term "Key" as used in this Agreement shall be deemed to refer to such successor
corporation.
28. Notices. Notices and all other communications provided
for in this Agreement shall be in writing and shall be deemed to have been duly
given when delivered in person (to the Secretary of Key in the case of notices
to Key and to Gillespie in the case of notices to Gillespie) or mailed by United
States registered mail, return receipt requested, postage prepaid, as follows:
If to Key:
KeyCorp
127 Public Square
Cleveland, Ohio 44114-1306
Attention: Secretary
If to Gillespie:
Mr. Robert W. Gillespie
1800 Berkshire Road
Gates Mills, Ohio 44040
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
29. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement which shall remain in full force and
effect.
30. Miscellaneous. No provision of this Agreement may be
modified, waived, or discharged unless such waiver, modification, or discharge
is agreed to in a writing signed by Gillespie and Key. No waiver by either party
hereto at any time of any breach by the other party
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<PAGE> 28
of, or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same time or at any prior or subsequent time. No
agreement or representation, oral or otherwise, express or implied, with respect
to the subject matter hereof has been made by either party which is not set
forth expressly in this Agreement. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio.
31. Prior Agreement. This Agreement amends, restates, and
extends the employment agreement originally entered into between Gillespie and
Key (under its former name, Society Corporation), made December 5, 1990, and
amended and restated in its entirety as of October 1, 1993 and again as of
December 20, 1993 and subsequently further amended as of May 18, 1995, and is
effective as of the Effective Time. As of that time, the provisions of this
Agreement supersede the provisions of the December 5, 1990 agreement as amended
and restated in its entirety as of October 1, 1993 and again as of December 20,
1993 and subsequently further amended as of May 18, 1995, and that agreement and
all prior agreements on the same subject matter shall be of no further force or
effect.
KEYCORP
By
---------------------------------------
Roger Noall, Senior Executive Vice President
and Chief Administrative Officer
-----------------------------------------
ROBERT W. GILLESPIE
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<PAGE> 1
EXHIBIT 10.34
KEYCORP
NON-QUALIFIED GRANT AGREEMENT
PERFORMANCE OPTION
Robert W. Gillespie
By action of the Equity Based Compensation Committee ("Committee") of
the Board of Directors of KeyCorp, taken pursuant to the KeyCorp Amended and
Restated 1991 Equity Compensation Plan ("Plan") on January 15, 1997, you have
been granted a Non-Qualified Stock Option (the "Option") effective on such date
(the "Option Grant Date") to purchase _______ Common Shares at a price of
$______ per share (the "Exercise Price"), which may be exercised, subject to the
provisions of the Plan, from time to time, in part or with respect to the full
number of Common Shares then remaining subject to the Option, during the period
commencing on the Vesting Date (as hereinafter defined) and ending January 15,
2007. (Unless otherwise indicated, the capitalized terms used herein shall have
the same meaning as set forth in the Plan).
The Vesting Date shall be the earlier of:
1. The first date on which the conditions in (a) and (b) below
have been satisfied:
(a) The Fair Market Value of a Common Share exceeds
$74.00 for seven consecutive trading days during the
period beginning on the Option Grant Date and ending
December 31, 2000, $82.00 for seven consecutive
trading days during the period beginning on the sixth
trading day before January 1, 2001 and ending on
December 31, 2001, or $90.00 for seven consecutive
trading days during the period beginning on the sixth
trading day before January 1, 2002 and ending on
December 31, 2002, and
(b) KeyCorp's earnings per Common Share equal or exceed
$5.20 per Common Share for the year 1999 or any
calendar year prior thereto or $5.84 per Common Share
for the year 2000, or
<PAGE> 2
2. The first day on which a Change of Control occurs after the
Option Grant Date and on or before December 31, 2002;
provided, however, if no Change of Control has occurred on or
before December 31, 2000 and the earnings per Common Share
condition in 1(b) above has not been satisfied for a year
ending on or before December 31, 2000, the Option shall
terminate on December 31, 2000.
The Option shall terminate on December 31, 2002 unless the Vesting Date
occurs on or before that date or unless the Option has been earlier terminated
in accordance with the proviso contained in 2 above. For purposes of 1(b) above,
earnings per Common Share shall be determined on the same basis as KeyCorp
reports earnings per Common Share in its annual report on Form 10-K (or any
successor form) filed with the Securities and Exchange Commission, adjusted for
the effects of unusual events (such as gains or losses from the sale of
subsidiaries or deposits in excess of 3% of average deposits or other
significant extraordinary items), all as determined by the Committee in its sole
discretion. In the event your employment with KeyCorp terminates as a result of
retirement, disability or death prior to the end of the term of your Employment
Agreement with KeyCorp dated _____, 1996 and prior to the Vesting Date, the
Committee, in its sole discretion, may extend the time in which the Option may
vest and be exercisable as fully as if your employment continued to, and
terminated as a result of retirement, disability, or death, as the case may be,
immediately after the Vesting Date as provided above.
The Option shall be governed by the terms, conditions, and provisions
of the Plan.
January __, 1997 ------------------------------
Thomas E. Helfrich
Executive Vice President
ACCEPTANCE
----------
The undersigned hereby acknowledges receipt of the Plan, agrees to be
bound by the foregoing Agreement and agrees and consents to the terms,
conditions, and provisions of the Agreement, Plan and the Award evidenced by
this Agreement.
----------------------------
Robert W. Gillespie
<PAGE> 1
EXHIBIT 10.35
KEYCORP
NON-QUALIFIED GRANT AGREEMENT
PERFORMANCE OPTION
Name of Optionee
By action of the Equity Based Compensation Committee ("Committee") of
the Board of Directors of KeyCorp, taken pursuant to the KeyCorp Amended and
Restated 1991 Equity Compensation Plan ("Plan") on January 15, 1997, you have
been granted a Non-Qualified Stock Option (the "Option") effective on such date
(the "Option Grant Date") to purchase ____ Common Shares at a price of $52.312
per share (the "Exercise Price"), which may be exercised, subject to the
provisions of the Plan, from time to time, in part or with respect to the full
number of Common Shares then remaining subject to the Option, during the period
commencing on the Vesting Date (as hereinafter defined) and ending January 15,
2007. (Unless otherwise indicated, the capitalized terms used herein shall have
the same meaning as set forth in the Plan).
The Vesting Date shall be the earlier of:
1. The first date on which the conditions in (a) and (b) below
have been satisfied:
(a) The Fair Market Value of a Common Share exceeds
$74.00 for seven consecutive trading days during the
period beginning on the Option Grant Date and ending
December 31, 2000, $82.00 for seven consecutive
trading days during the period beginning on the sixth
trading day before January 1, 2001 and ending on
December 31, 2001, or $90.00 for seven consecutive
trading days during the period beginning on the sixth
trading day before January 1, 2002 and ending on
December 31, 2002, and
(b) KeyCorp's earnings per Common Share equal or exceed
$5.20 per Common Share for the year 1999 or any
calendar year prior thereto or $5.84 per Common Share
for the year 2000, or
2. The first day on which a Change of Control occurs after the
Option Grant Date and on or before December 31, 2002;
provided, however, if no Change of Control has occurred on or
before December 31, 2000 and the earnings per Common Share
condition in 1(b) above has not been satisfied for a year
ending on or before December 31, 2000, the Option shall
terminate on December 31, 2000.
<PAGE> 2
The Option shall terminate on December 31, 2002 unless the Vesting Date
occurs on or before that date or unless the Option has been earlier terminated
in accordance with the proviso contained in 2 above. For purposes of 1(b) above,
earnings per Common Share shall be determined on the same basis as KeyCorp
reports earnings per Common Share in its annual report on Form 10-K (or any
successor form) filed with the Securities and Exchange Commission, adjusted for
the effects of unusual events (such as gains or losses from the sale of
subsidiaries or deposits in excess of 3% of average deposits or other
significant extraordinary items), all as determined by the Committee in its sole
discretion. In the event your employment with KeyCorp and its subsidiaries
terminates under any circumstances, including as a result of retirement,
disability or death, prior to the Vesting Date, the Option shall terminate.
The Option shall be governed by the terms, conditions, and provisions
of the Plan.
January 15, 1997
-------------------------
Robert W. Gillespie
Chairman of the Board and
Chief Executive Officer
ACCEPTANCE
----------
The undersigned hereby acknowledges receipt of the Plan, agrees to be
bound by the foregoing Agreement and agrees and consents to the terms,
conditions, and provisions of the Agreement, Plan and the Award evidenced by
this Agreement.
-------------------------
<PAGE> 1
Exhibit 10.36
KEYCORP
DEFERRED COMPENSATION PLAN
ARTICLE I
The KeyCorp Deferred Compensation Plan ("Plan") is hereby established
effective January 1, 1997. The Plan, as established, is intended to provide
certain key Employees of KeyCorp with the opportunity to defer their receipt of
compensation to the Plan as a means of providing current tax planning
opportunities for such Employees. It is the intention of KeyCorp, and it is the
understanding of those Participants covered under the Plan, that the Plan is
unfunded for tax purposes and for purposes of Title I of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA").
ARTICLE II
DEFINITIONS
-----------
For the purposes of this Plan, the following words and phrases shall
have the meanings hereinafter set forth, unless a different meaning is clearly
required by the context:
2.1 "BENEFICIARY" shall mean the person, persons or entity entitled
under Article VI to receive any Plan benefits payable after a Participant's
death.
2.2 "BOARD" shall mean the Board of Directors of KeyCorp, the Board's
Compensation and Organization Committee, or any other committee designated by
the Board.
2.3 "CHANGE OF CONTROL" shall be deemed to have occurred if under any
rabbi trust arrangement maintained by the Corporation, the Corporation is
required under the terms of such arrangement to fund such rabbi trust to secure
the payment of any Participants' Plan benefits payable hereunder because a
"Change of Control" as defined in such rabbi trust has occurred after January 1,
1997.
2.4 "CODE" shall mean the Internal Revenue Code of 1986, as amended
from time to time, together with all regulations promulgated thereunder.
Reference to a section of the Code shall include such section and any comparable
section or sections of any future legislation that amends, supplements, or
supersedes such section.
2.5 "COMMON STOCK ACCOUNT" shall mean the investment account
established under the Plan for bookkeeping purposes in which a Participant may
elect to have his or her Participant Deferrals credited. Participant Deferrals
to the Common Stock Account shall be credited based on a bookkeeping allocation
of KeyCorp Common Shares (both whole and fractional rounded to the nearest
one-hundredth of a share) which shall be equal to the amount of Participant
Deferrals
<PAGE> 2
invested by the Participant in the Common Stock Account. The Common Stock
Account shall also reflect on a bookkeeping basis all dividends, gains, and
losses attributable to such Common Shares. In accordance with the provisions of
Section 4.3 hereof, all Participant Deferrals credited to the Common Stock
Account, shall be based on the New York Stock Exchange's closing price for such
Common Shares as of the day such Participant Deferrals are credited to the
Participants' Plan Accounts.
2.6 "COMPENSATION" of a Participant for any Plan Year or any partial
Plan Year shall mean the entire amount of base salary paid to such Participant
during such period by reason of his or her employment with an Employer,
including any base salary which would have been paid except for (1) the
Participant's written deferral of such Compensation to this Plan during the Plan
Year, (2) the Participant's deferral of such Compensation to the KeyCorp 401(k)
Savings Plan and the KeyCorp Excess 401(k) Savings Plan, or (3) the
Participant's participation in the KeyCorp Flexible Benefits Plan.
2.7 "CORPORATION" shall mean KeyCorp, an Ohio Corporation, its
corporate successors, and any corporation or corporations into or with which it
may be merged or consolidated.
2.8 "DEFERRAL PERIOD" shall mean each Plan Year, provided however,
that a Participant's initial Deferral Period shall be from his or her first
day of participation in the Plan through the last day of the applicable Plan
Year.
2.9 "DETERMINATION DATE" shall mean the last day of each calendar
month.
2.10 "DISABILITY" shall mean (1) the physical or mental disability of
a permanent nature which prevents a Participant from performing the duties such
Participant was employed to perform for his or her Employer when such disability
commenced, (2) qualifies for disability benefits under the federal Social
Security Act within 30 months following the Participant's disability, and (3)
qualifies the Participant for disability coverage under the KeyCorp Long Term
Disability Plan.
2.11 "EMPLOYEE" shall mean a common law employee who is employed by
an Employer.
2.12 "EMPLOYER" shall mean the Corporation and any of its
subsidiaries, unless specifically excluded as an Employer for Plan purposes
by written action of an officer of the Corporation. An Employer's participation
shall be subject to any conditions or requirements made by the Corporation, and
each Employer shall be deemed to appoint the Plan Administrator as its exclusive
agent under the Plan as long as it continues as an Employer.
2.13 "FINANCIAL HARDSHIP" shall mean a financial hardship to the
Participant resulting from a sudden and unexpected illness or accident of the
Participant or of a dependent of the Participant, the loss of the Participant's
property due to casualty, or other similar extraordinary
<PAGE> 3
and unforeseeable circumstances arising as a result of events beyond the
control of the Participant.
2.14 "HARDSHIP WITHDRAWAL COMMITTEE" shall mean the Committee
established by the Corporation to review Hardship Withdrawal requests of Plan
Participants to determine whether a Financial Hardship entitles the Participant
to a distribution of Participant Deferrals in accordance with the provisions of
Section 5.1(b) of Article V of the Plan.
2.15 "INCENTIVE COMPENSATION" shall mean the incentive compensation
awarded to a Participant under the KeyCorp Management Incentive Compensation
Plan, the KeyCorp Short Term Incentive Compensation Plan and/or the KeyCorp Long
Term Cash Incentive Compensation Plan.
2.16 "INCENTIVE COMPENSATION DEFERRALS" shall mean a percentage or
whole dollar amount of any Incentive Compensation payable to a Participant
during the applicable Plan Year, which the Participant has elected in accordance
with his or her Participation Agreement to defer under this Plan.
2.17 "INTEREST BEARING ACCOUNT" shall mean the investment account
established under the Plan for bookkeeping purposes in which a Participant may
elect to have his or her Participant Deferrals credited. Participant Deferrals
invested for bookkeeping purposes in the Interest Bearing Account shall be
credited with earnings as of each Determination Date which shall be based on the
effective annual yield of the average of Moody's Average Corporate Bond Yield
Index for the previous calendar month increased by 50 basis points. In the event
that Moody's Investor Services Inc. ceases to publish such Index (or any
successor publisher thereto) the Board, in its sole and absolute discretion,
shall select a substantially similar index to be used in crediting earnings
under the Interest Bearing Account.
2.18 "PARTICIPANT" shall mean an Employee who meets the eligibility
requirements set forth in Section 3.1(a) and becomes a Plan Participant pursuant
to Section 3.1(b) or Section 3.1(c) of the Plan.
2.19 "PARTICIPATION AGREEMENT" shall mean the executed agreement
submitted by the Participant to the Corporation prior to the beginning of a
Deferral Period, which contains, in pertinent part, the Participant's deferral
commitment for such Deferral Period, the Participant's investment instructions,
payment date, and if deferred until Termination, the payment option for such
Participant Deferrals.
2.20 "PARTICIPANT DEFERRALS" shall mean those Incentive Compensation
Deferrals and Salary Deferrals the Participant has elected to defer under this
Plan for each applicable Deferral Period.
2.21 "PLAN" shall mean the KeyCorp Deferred Compensation Plan with all
amendments hereafter made.
<PAGE> 4
2.22 "PLAN ACCOUNT" shall mean those bookkeeping accounts established
by the Corporation for each Plan Participant, which shall reflect (a) all Prior
Plan Awards and Participant Deferrals invested for bookkeeping purposes in the
Common Stock Account with all dividends, gains, and losses thereon, and (b) all
Prior Plan Awards and Participant Deferrals invested for bookkeeping purposes in
the Interest Bearing Account with all earnings thereon. Plan Accounts shall not
constitute separate Plan funds or separate Plan assets. Neither the maintenance
of, nor the crediting of amounts to such Plan Accounts shall be treated (i) as
the allocation of any Corporation assets to, or a segregation of any Corporation
assets in any such Plan Accounts, or (ii) as otherwise creating a right in any
person or Participant to receive specific assets of the Corporation. Benefits
under the Plan shall be paid from the general assets of the Corporation.
2.23 "PLAN YEAR" shall mean the calendar year.
2.24 "PRIOR PLAN AWARDS" shall mean those incentive compensation
awards and any salary deferred under the KeyCorp Executive Deferred Compensation
Plan, and those incentive compensation awards deferred under the KeyCorp Long
Term Cash Incentive Compensation Plan, the KeyCorp Management Incentive
Compensation Plan, and/or the KeyCorp Short Term Incentive Compensation Plan
prior to January 1, 1997 which have been transferred to the Plan effective
January 1, 1997.
2.25 "RETIREMENT" shall mean the termination of a Participant's
employment under circumstances in which the Participant begins to receive an
Early Retirement or Normal Retirement Date benefit under any KeyCorp Pension
Plan.
2.26 "SALARY DEFERRALS" shall mean the percentage or whole dollar
amount of a Participant's annual Compensation which the Participant has elected
pursuant to his or her Participation Agreement to defer to this Plan.
2.27 "TERMINATION" shall mean the voluntary or involuntary and
permanent termination of a Participant's employment from his or her Employer and
any other Employer, whether by Retirement, Disability, resignation, death, or
otherwise.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
-----------------------------
3.1 ELIGIBILITY AND PARTICIPATION.
-----------------------------
(a) ELIGIBILITY. An Employee shall be eligible to participate in
the Plan if (1) the Employee is a Participant in the KeyCorp
Management Incentive Compensation Plan, the KeyCorp Short Term
Incentive Compensation Plan, and/or the KeyCorp Long Term
Incentive Compensation Plan, and (2) the Corporation selects
such Employee to participate in the Plan.
<PAGE> 5
(b) PARTICIPATION. An Employee meeting the eligibility criteria of
Section 3.1(a) may elect to participate in the Plan with
respect to any Deferral Period by submitting a Participation
Agreement to the Corporation prior to the beginning of the
applicable Deferral Period or such other deadline as
established by the Corporation.
(c) MID-YEAR PARTICIPATION. When an Employee first becomes
eligible to participate in the Plan during a Deferral Period,
a Participation Agreement shall be submitted to the
Corporation within thirty (30) days after the Corporation
notifies the Employee of his or her Plan eligibility. Such
Participation Agreement will be effective when received by the
Corporation.
3.2 DEFERRAL LIMITATIONS. The following Participant Deferral
limitations shall apply for each Deferral Period:
(a) SALARY DEFERRALS. A Participant may defer no less than one
hundred twenty-five dollars ($125) on a per-pay basis and no
more than 50% of the Participant's Compensation on a per-pay
basis during the applicable Deferral Period.
(b) INCENTIVE COMPENSATION DEFERRALS. A Participant may defer no
less than three thousand dollars ($3,000) and no more than
100% of any Incentive Compensation which becomes payable to
the Participant during the applicable Deferral Period.
3.3 COMMITMENT LIMITED BY TERMINATION. If a Participant
terminates employment with an Employer prior to the end of the Deferral Period,
the Deferral Period shall end as of the Participant's Termination date, and all
Participant Deferrals shall conclude as of that date.
3.4 MODIFICATION OF DEFERRAL COMMITMENT. Except as provided in
Section 5.1(b) below, a Participant's deferral commitment evidenced by his or
her Participation Agreement for the applicable Deferral Period, shall be
irrevocable.
3.5 CHANGE IN EMPLOYMENT STATUS. If the Corporation determines
that a Participant's performance is no longer at a level that deserves to be
rewarded through participation in the Plan, but does not terminate the
Participant's employment with Employer, the Participant's existing Participation
Agreement shall terminate at the end of the Deferral Period, and no new
Participation Agreement may be made by such Participant.
3.6 PRIOR PLAN AWARDS. Effective January 1, 1997, all Employees'
incentive compensation deferred under the KeyCorp Long Term Cash Incentive
Compensation Plan, the KeyCorp Short Term Incentive Compensation Plan and/or the
KeyCorp Management Incentive Compensation Plan and all salary deferrals and
incentive compensation deferred under the KeyCorp Executive Deferred
Compensation Plan shall be transferred for bookkeeping purposes to this Plan and
shall be reflected in Plan Accounts established in the Employees' name. Such
Employees shall be given the opportunity to elect to invest all or a portion of
such Prior Plan Awards in the Plan's Interest Bearing Account and/or the Plan's
Common Stock Account, and
<PAGE> 6
such election once made shall thereafter be irrevocable. Employees with
Prior Plan Awards which for bookkeeping purposes are maintained under this Plan
shall not participate in the Plan unless such Employee has met the eligibility
requirements set forth in Section 3.1(a) and has become a Plan Participant
pursuant to Section 3.1(b) or Section 3.1(c) of the Plan.
ARTICLE IV
PARTICIPANT DEFERRALS
---------------------
4.1 PLAN ACCOUNT. All Prior Plan Awards and Participant Deferrals
shall be credited to a Plan Account established in the Participant's name.
4.2 INVESTMENT OF PARTICIPANT DEFERRALS. A Participant shall
designate in his or her Participation Agreement whether, for bookkeeping
purposes, such Participant's Participant Deferrals and any Prior Plan Awards
shall be credited to the Common Stock Account or the Interest Bearing Account.
A Participant's investment instructions, once made, shall be irrevocable.
4.3 CREDITING OF PARTICIPANT DEFERRALS; WITHHOLDING. Participant
Salary Deferrals shall be credited to the Participant's Plan Account as of
each pay period during the applicable Deferral Period. Participant Incentive
Compensation Deferrals shall be credited to the Participant's Plan Account as of
the date the Incentive Compensation would have been payable to the Participant
but for the Participant's election to defer such Incentive Compensation to this
Plan. The withholding of taxes with respect to Participant Deferrals required by
state, federal or local law shall be withheld from the Participant's
Compensation to the maximum extent possible; any taxes remaining due shall
reduce the amount of Participant Deferrals credited to the Participant's Plan
Account.
4.4 VALUATION OF PLAN ACCOUNT. As of each Determination Date, the
Plan Administrator shall determine the value of each Participant's Plan Account,
which shall reflect all Prior Plan Awards and Participant Deferrals with all
earnings, gains, and losses thereon, reduced by any distributions made to the
Participant since the last Determination Date. The reasonable and equitable
decision of the Plan Administrator as to the value of each Plan Account shall be
conclusive and binding upon all Participants and Beneficiary(ies) of each
deceased Participant.
4.5 DETERMINATION OF AMOUNT. The Plan Administrator shall verify the
amount of Prior Plan Awards and Participant Deferrals, with all earnings, gains,
and losses to be credited to each Participant's Plan Account in accordance with
the provisions of the Plan, less any Plan distributions received by the
Participant. As soon as reasonably practicable after the close of each Plan
Year, the Plan Administrator shall send to each Participant an itemized
statement which shall reflect the Participant's Plan Account balance as of the
year-end Determination Date.
<PAGE> 7
ARTICLE V
DISTRIBUTION OF PLAN BENEFITS
-----------------------------
5.1 DISTRIBUTIONS PRIOR TO TERMINATION OR RETIREMENT. A
Participant's Plan Account may be distributed to the Participant prior to the
Participant's termination or Retirement under the following circumstances:
(a) EARLY DISTRIBUTION. A Participant may elect in his or her
Participation Agreement to have those Participant Deferrals
applicable to the Deferral Period distributed as of a date
specified in the Participation Agreement. Such date shall not
be sooner than seven years after the date that the applicable
Deferral Period commences. The amount distributed shall only
include the actual amount of Participant Deferrals made during
the Deferral Period without any earnings or gains thereon.
Such election for an early distribution, once made, shall be
irrevocable.
Notwithstanding the forgoing provisions of this
Section 5.1(a), if a Participant makes Participant Deferrals
in conjunction with the provisions of Section 162(m) of the
Code, such Participant Deferrals shall be distributed to the
Participant on the date specified in the Participant's
Participation Agreement, which may provide (subject to the
distribution limitations contained in Section 5.5 hereof) for
a distribution date sooner than seven years after the
applicable Deferral Period has commenced. Such distribution
shall include the applicable Participant Deferrals deferred in
accordance with the provisions of Section 162(m) of the Code,
with all earnings and gains thereon.
(b) HARDSHIP WITHDRAWAL. Upon a finding that a Participant has
suffered a Financial Hardship, the Corporation by and through
the Hardship Withdrawal Committee may, in its sole and
absolute discretion, permit the Participant to obtain a
Hardship Withdrawal from his or her Plan Account. The amount
of such a Hardship Withdrawal shall be limited to the amount
reasonably necessary to meet the Participant's immediate needs
resulting from the Financial Hardship. If a Hardship
Withdrawal is permitted in accordance with the requirements of
this Section 5.1(b) hereof, or if a Hardship Withdrawal is
permitted under the KeyCorp 401(k) Savings Plan, Participant
Deferrals under this Plan shall cease for a 12-month period.
(c) FORM OF PAYMENT AND TIME. Distributions made to a Participant
pursuant to Section 5.1(a) or 5.1(b) hereof, shall be paid in
a cash lump sum amount as soon as reasonably practicable
following (i) the distribution date specified in a
Participant's Participation Agreement, or (ii) the date on
which the Hardship Withdrawal Committee approves the
Participant's Hardship Withdrawal request.
<PAGE> 8
5.2 DISTRIBUTIONS FOLLOWING TERMINATION OF EMPLOYMENT(OTHER THAN BY
DEATH). Upon a Participant's Termination (other than by death) benefits equal to
the Participant's Plan Account balance shall be distributed to the Participant
in accordance with the distribution elections contained within the Participant's
Participation Agreement for each applicable Deferral Period. Prior Plan Awards
shall be payable in such manner and at such time as contained in the Prior Plan
Award's deferral agreement.
5.3 DISTRIBUTION OPTIONS. A Participant shall elect, as reflected
in the Participant's Participation Agreement, from the following payment
options:
(a) a cash lump sum payment, or
(b) a series of monthly installment payments over a period of 60,
120, or 180 months.
The Participant's Plan Account shall be valued as of the Determination Date
immediately preceding his or her Termination (the "valuation date"). If a
Participant has elected to receive a lump sum payment of all or any portion of
his or her Plan Account, such lump sum distribution shall be made as soon as
reasonably practicable following the Participant's Termination date. If a
Participant has elected to receive installment payments of all or any portion of
his or her Plan Account, such installment payments shall commence as soon as
reasonably practicable following the Participant's Termination date. The
Participant's unpaid Plan Account balance for bookkeeping purposes shall be
reflected in a distribution sub-account, which shall be credited with interest
based on a 36 month average (as of the valuation date) of the monthly earnings
credited under the Interest Bearing Account for the Participant's installment
payment period.
5.4 DISTRIBUTION OF SMALL ACCOUNTS. Notwithstanding the provisions
of Section 5.2 and 5.3 hereof, if a Participant's Account balance as of the
Determination Date immediately preceding the Participant's Termination date is
under $50,000, such balance shall be paid to the Participant as a single lump
sum cash payment as soon as reasonably practicable following the Participant's
Termination date.
5.5 DISTRIBUTION LIMITATION. If the Corporation determines that
any amount of a Participant's Prior Plan Awards and/or Participant Deferrals
with all interest and earnings thereon:
(1) would not be deductible by the Corporation if paid in
accordance with the distribution instructions specified by the
Participant in his or her Participation Agreement by reason of
the disallowance rules of Section 162(m) of the Code, but
(2) would be deductible by the Corporation if deferred and paid in
a later Plan Year,
the Corporation reserves the right to defer the distribution of all or any
portion of such Participant's Prior Plan Awards and/or Participant Deferrals
with all interest and earnings thereon until such time as the Corporation
determines that the distribution of all or any portion of such Participant's
Prior Plan Awards and/or Participant Deferrals will be payable without the
disallowance of the deduction prescribed by Code Section 162(m) ("Deferrals").
Such Deferrals
<PAGE> 9
shall continue to be held in the Participant's Plan Account and shall continue
to be credited, on a bookkeeping basis, with all earnings, gains, and losses
thereon. If it is thereafter determined by the Corporation that such Deferrals
will not be deductible even if paid in a later year, then such Deferrals with
all interest and earnings thereon shall become immediately payable to the
Participant.
Notwithstanding any other provision of this Section 5.5 to the
contrary, in the event of the Participant's Termination, all Deferrals shall be
paid to the Participant on or immediately following April 15th of the year
immediately following the Participant's Termination, regardless of the
deductibility of such payment.
5.6 ACCELERATION. Notwithstanding the foregoing provisions of this
Article V, the Corporation may, in its sole discretion, accelerate the
distribution of all or any portion of the Participant's Plan Account upon
written request by such Participant, provided that the Corporation determines
that such distribution would not be adverse to the best interests of the
Corporation, and further provided that the Participant shall forfeit an amount
equal to 10 percent of the amounts requested and that the Participant shall be
disqualified from making Participant Deferrals to the Plan for a period of
twenty-four (24) months from the date of such accelerated distribution.
5.7 FACILITY OF PAYMENT. If it is found that any individual to whom
an amount is payable hereunder is incapable of attending to his or her financial
affairs because of any mental or physical condition, including the infirmities
of advanced age, such amount (unless prior claim therefor shall have been made
by a duly qualified guardian or other legal representative) may, in the
discretion of the Corporation, be paid to another person for the use or benefit
of the individual found incapable of attending to his or her financial affairs
or in satisfaction of legal obligations incurred by or on behalf of such
individual. Any such payment shall be charged to the Participant's Plan Account
from which any such payment would otherwise have been paid to the individual
found incapable of attending to his or her financial affairs, and shall be a
complete discharge of any liability therefor under the Plan.
ARTICLE VI
BENEFICIARY DESIGNATION
-----------------------
6.1 BENEFICIARY DESIGNATION. Subject to Section 6.3 hereof, each
Participant shall have the right, at any time, to designate one or more persons
or an entity as Beneficiary (both primary as well as secondary) to whom benefits
under this Plan shall be paid in the event of Participant's death prior to
complete distribution of the Participant's Plan Account. Each Beneficiary
designation shall be in a written form prescribed by the Corporation and shall
be effective only when filed with the Corporation during the Participant's
lifetime.
6.2 CHANGING BENEFICIARY. Subject to Section 6.3, any Beneficiary
designation may be changed by a Participant without the consent of the
previously named Beneficiary by the
<PAGE> 10
filing of a new designation with the Corporation. The filing of a new
designation shall cancel all designations previously filed.
6.3 NO BENEFICIARY DESIGNATION. If any Participant fails to
designate a Beneficiary in the manner provided above, if the designation is
void, or if the Beneficiary (including all contingent Beneficiaries) designated
by a deceased Participant dies before the Participant or before complete
distribution of the Participant's benefits, the Participant's Beneficiary shall
be the person in the first of the following classes in which there is a
survivor:
(a) The Participant's spouse;
(b) The Participant's children in equal shares, except that if any
of the children predeceases the Participant but leaves issue
surviving, then such issue shall take, by right of
representation the share the parent would have taken if
living:
(c) The Participant's estate.
6.4 DISTRIBUTION UPON DEATH. If a Participant dies after the
distribution of his or her interest under the Plan has commenced, the remaining
portion of the Participant's entire interest under the Plan, if any, shall be
distributed to the Participant's Beneficiary under the method of distribution
being used as of the Participant's date of death. If the Participant dies before
the distribution of the Participant's Plan Account has commenced, the
Participant's entire interest under the Plan shall be valued as of the
Determination Date immediately preceding the Participant's date of death, and
shall be distributed to his or her Beneficiary in a lump sum payment as soon as
reasonably practicable following the Participant's date of death.
ARTICLE VII
ADMINISTRATION
--------------
7.1 ADMINISTRATION. The Corporation, which shall be the
"Administrator" of the Plan for purposes of ERISA and the "Plan
Administrator" for purposes of the Code, shall be responsible for the general
administration of the Plan, for carrying out the provisions hereof, and for
making payments hereunder. The Corporation shall have the sole and absolute
discretionary authority and power to carry out the provisions of the Plan,
including, but not limited to, the authority and power (a) to determine all
questions relating to the eligibility for and the amount of any benefit to be
paid under the Plan, (b) to determine all questions pertaining to claims for
benefits and procedures for claim review, (c) to resolve all other questions
arising under the Plan, including any questions of construction and/or
interpretation, and (d) to take such further action as the Corporation shall
deem necessary or advisable in the administration of the Plan. All findings,
decisions, and determinations of any kind made by the Plan Administrator shall
not be disturbed unless the Plan Administrator has acted in an arbitrary and
capricious manner. Subject to the requirements of law, the Plan Administrator
shall be the sole judge of the standard of proof required in any claim for
benefits and in any determination of eligibility for a benefit. All
<PAGE> 11
decisions of the Plan Administrator shall be final and binding on all
parties. The Corporation may employ such attorneys, investment counsel, agents,
and accountants as it may deem necessary or advisable to assist it in carrying
out its duties hereunder. The actions taken and the decisions made by the
Corporation hereunder shall be final and binding upon all interested parties
subject, however, to the provisions of Section 7.2. The Plan Year, for purposes
of Plan administration, shall be the calendar year.
7.2 CLAIMS REVIEW PROCEDURE. Whenever the Plan Administrator
decides for whatever reason to deny, whether in whole or in part, a claim for
benefits under this Plan filed by any person (herein referred to as the
"Claimant"), the Plan Administrator shall transmit a written notice of its
decision to the Claimant, which notice shall be written in a manner calculated
to be understood by the Claimant and shall contain a statement of the specific
reasons for the denial of the claim and a statement advising the Claimant that,
within 60 days of the date on which he or she receives such notice, he or she
may obtain review of the decision of the Plan Administrator in accordance with
the procedures hereinafter set forth. Within such 60-day period, the Claimant or
his or her authorized representative may request that the claim denial be
reviewed by filing with the Plan Administrator a written request therefor, which
request shall contain the following information:
(a) the date on which the request was filed with the Plan
Administrator; provided, however, that the date on which the
request for review was in fact filed with the Plan
Administrator shall control in the event that the date of the
actual filing is later than the date stated by the Claimant
pursuant to this paragraph (a);
(b) the specific portions of the denial of his or her claim which
the Claimant requests the Plan Administrator to review;
(c) a statement by the Claimant setting forth the basis upon which
he or she believes the Plan Administrator should reverse its
previous denial of the claim and accept the claim as made; and
(d) any written material which the Claimant desires the Plan
Administrator to examine in its consideration of his or her
position as stated pursuant to paragraph (b) above.
In accordance with this Section, if the claimant requests a review of
the Plan Administrator's decision, such review shall be made by the Plan
Administrator, who shall, within ninety (90) days after receipt of the request
form, review and render a written decision on the claim containing the specific
reasons for the decision including reference to Plan provisions upon which the
decision is based. All findings, decisions, and determinations of any kind made
by the Plan Administrator shall not be modified unless the Plan Administrator
has acted in an arbitrary and capricious manner. Subject to the requirements of
law, the Plan Administrator shall be the sole judge of the standard of proof
required in any claim for benefits, and any determination of eligibility for a
benefit. All decisions of the Plan Administrator shall be binding on the
claimant and upon all other Persons. If the Participant or Beneficiary shall not
file written notice with the
<PAGE> 12
Plan Administrator at the times set forth above, such individual shall have
waived all benefits under the Plan other than as already provided, if any, under
the Plan.
ARTICLE VIII
AMENDMENT AND TERMINATION OF PLAN
---------------------------------
8.1 RESERVATION OF RIGHTS. The Corporation reserves the right to
terminate the Plan at any time by action of the Board of Directors of the
Corporation, or any duly authorized committee thereof, and to modify or amend
the Plan, in whole or in part, at any time and for any reason, subject to the
following:
(a) PRESERVATION OF ACCOUNT BALANCE. No termination, amendment, or
modification of the Plan shall reduce (i) the amount of Prior
Plan Awards and/or Participant Deferrals, or (ii) all earnings
and gains on such Prior Plan Awards and/or Participant
Deferrals that have accrued up to the effective date of the
termination, amendment, or modification.
(b) CHANGES IN EARNINGS RATE. No amendment or modification of the
Plan shall reduce the rate of earnings to be credited on all
Prior Plan Awards, Participant Deferrals, and all earnings
accrued thereon under the Interest Bearing Account until the
close of the applicable Deferral Period in which such
amendment or modification is made.
8.2 EFFECT OF PLAN TERMINATION. If the Corporation terminates the
Plan either in whole or in part, the following will apply:
(a) PARTIAL TERMINATION. The Corporation may partially terminate
the Plan by instructing the Plan Administrator not to accept
any additional Participation Agreements. If such a partial
termination occurs, the Plan shall continue to operate and be
effective with regard to Participation Agreements entered into
prior to the effective date of such partial termination.
(b) COMPLETE TERMINATION. The Corporation may completely terminate
the Plan by instructing the Plan Administrator not to accept
any additional Participation Agreements and by terminating all
ongoing Participation Agreements. If such a complete
termination occurs, the Plan shall cease to operate and the
Employer shall pay out each Participant's Plan Account
balance. Payment shall be made in equal monthly installments
over the following period, based on the value of each
Participant's Plan Account balance:
<PAGE> 13
<TABLE>
<CAPTION>
Account Balance Payout Period
--------------- -------------
<S> <C>
Equal to or less than $50,000 Lump Sum
More than $50,000 but less than $100,000 3 Years
More than $100,000 5 Years
</TABLE>
Plan payments shall commence within sixty-five (65) days after the Corporation
terminates the Plan. The Participant's unpaid Plan Account balance for
bookkeeping purposes shall be reflected in a distribution sub-account, which
shall be credited with interest for the Participant's installment payment period
based on a 36 month average (as of the Plan termination date) of the monthly
earnings credited under the Interest Bearing Account.
ARTICLE IX
CHANGE OF CONTROL
-----------------
9.1 CHANGE OF CONTROL. Notwithstanding any other provision of the
Plan to the contrary, in the event of a Change of Control as defined in
accordance with Section 2.2 of the Plan, no amendment or modification of
this Plan may be made at any time on or after such Change of Control (1) to
reduce or modify a Participant's Pre-Change of Control Account Balance, (2) to
reduce or modify the Interest Bearing Account's rate of earnings on or method of
crediting such earnings to a Participant's Pre-Change of Control Account
Balances, or (3) to reduce or modify the Common Stock Accounts' method of
calculating all earnings, gains, and/or losses on a Participant's Pre-Change of
Control Account Balance. For purposes of this Section 9.1, the term "Pre-Change
of Control Account Balance" shall mean, with regard to any Plan Participant, the
aggregate amount of such Participant's Prior Plan Awards and Participant
Deferrals with all earnings, gains, and losses thereon which are credited to the
Participant's Plan Account through the close of the calendar year in which such
Change of Control occurs.
9.2 INTEREST BEARING ACCOUNT. In accordance with the provisions of
clause (2) of Section 9.1 hereof, in the event that Moody's Average Corporate
Bond Yield Index ceases to be published on or after a Change of Control, the
Corporation shall reasonably select a substantially similar index to be used in
crediting earnings on Participants' Pre-Change of Control Account Balances held
in the Plan's Interest Bearing Account.
9.3 INVESTMENT TRANSFER. On and after a Change of Control, a
Participant may at any time upon providing written notice to the Corporation,
transfer all or any portion of his or her Pre-Change of Control Account Balance
invested in the Common Stock Account to the Plan's Interest Bearing Account.
9.4 COMMON STOCK CONVERSION. In the event of a Change of Control
in which the common shares of the Corporation are converted into or
exchanged for securities, cash and/or other property as a result of any capital
reorganization or reclassification of the capital stock of
<PAGE> 14
the Corporation, or consolidation or merger of the Corporation with or into
another corporation or entity, or the sale of all or substantially all of its
assets to another corporation or entity, the Corporation shall cause the Common
Stock Account to reflect on a bookkeeping basis the securities, cash and other
property that would have been received in such reorganization, reclassification,
consolidation, merger or sale on an equivalent amount of common shares equal to
the balance in the Common Stock Account and, from and after such reorganization,
reclassification, consolidation, merger or sale, the Common Stock Account shall
reflect on a bookkeeping basis all dividends, interest, earnings and losses
attributable to such securities, cash, and other property (with any cash earning
interest at the rate applicable to the Interest Bearing Account); provided,
however, from and after any such reorganization, reclassification,
consolidation, merger or sale, a Participant may give written notice at any time
to the Corporation to transfer all or any portion of such Participant's Common
Stock Account balance to the Interest Bearing Account.
9.5 AMENDMENT IN THE EVENT OF A CHANGE OF CONTROL. On or after a
Change of Control, the provisions of Section 2.4, Section 2.16, Article IV,
Article V, Article VI, Article VIII, and Article IX may not be amended or
modified as such Sections and Articles apply with regard to Participants'
Pre-Change of Control Account Balances.
ARTICLE X
MISCELLANEOUS PROVISIONS
------------------------
10.1 UNFUNDED PLAN. This Plan is an unfunded plan maintained
primarily to provide deferred compensation benefits for a select group of
"management or highly-compensated employees" within the meaning of Sections 201,
301, and 401 of ERISA, and therefore is exempt from the provisions of Parts 2,
3, and 4 of Title I of ERISA.
10.2 NO COMMITMENT AS TO EMPLOYMENT. Nothing herein contained
shall be construed as a commitment or agreement upon the part of any
Employee hereunder to continue his or her employment with an Employer, and
nothing herein contained shall be construed as a commitment on the part of any
Employer to continue the employment or rate of compensation of any Employee
hereunder for any period. All Participants shall remain subject to discharge to
the same extent as if the Plan had never been put into effect.
10.3 BENEFITS. Nothing in the Plan shall be construed to confer any
right or claim upon any person, firm, or corporation other than the
Participants, former Participants, and Beneficiaries.
10.4 ABSENCE OF LIABILITY. No member of the Board of Directors of
the Corporation or a subsidiary or committee authorized by the Board of
Directors, or any officer of the Corporation or a subsidiary or officer of a
subsidiary shall be liable for any act or action hereunder, whether of
commission or omission, taken by any other member, or by any officer,
<PAGE> 15
agent, or Employee, except in circumstances involving bad faith or willful
misconduct, for anything done or omitted to be done.
10.5 EXPENSES. The expenses of administration of the Plan shall be
paid by the Corporation.
10.6 PRECEDENT. Except as otherwise specifically agreed to by the
Corporation in writing, no action taken in accordance with the Plan by the
Corporation shall be construed or relied upon as a precedent for similar action
under similar circumstances.
10.7 WITHHOLDING. The Corporation shall withhold any tax which the
Corporation in its discretion deems necessary to be withheld from any payment to
any Participant, former Participant, or Beneficiary hereunder, by reason of any
present or future law.
10.8 VALIDITY OF PLAN. The validity of the Plan shall be determined
and the Plan shall be construed and interpreted in accordance with the
provisions of ERISA, the Code, and, to the extent applicable, the laws of the
State of Ohio. The invalidity or illegality of any provision of the Plan shall
not affect the validity or legality of any other part thereof.
10.9 PARTIES BOUND. The Plan shall be binding upon the Employers,
Participants, former Participants, and Beneficiaries hereunder, and, as the case
may be, the heirs, executors, administrators, successors, and assigns of each
of them.
10.10 HEADINGS. All headings used in the Plan are for convenience
of reference only and are not part of the substance of the Plan.
10.11 DUTY TO FURNISH INFORMATION. The Corporation shall furnish to
each Participant, former Participant, or Beneficiary any documents, reports,
returns, statements, or other information that it reasonably deems necessary to
perform its duties imposed hereunder or otherwise imposed by law.
10.12 TRUST FUND. At its discretion, the Corporation may establish
one or more trusts, with such trustees as the Corporation may approve, for the
purpose of providing for the payment of benefits owed under the Plan. Although
such a trust may be irrevocable, in the event of insolvency or bankruptcy of the
Corporation, such assets will be subject to the claims of the Corporation's
general creditors. To the extent any benefits provided under the Plan are paid
from any such trust, the Employer shall have no further obligation to pay them.
If not paid from the trust, such benefits shall remain the obligation of the
Employer.
10.13 VALIDITY. In case any provision of this Plan shall be held
illegal or invalid for any reason, said illegality or invalidity shall not
affect the remaining parts hereof, but this Plan shall be construed and enforced
as if such illegal and invalid provision had never been inserted herein.
10.14 NOTICE. Any notice required or permitted under the Plan shall
be deemed sufficiently provided if such notice is in writing and hand
delivered or sent by registered or
<PAGE> 16
certified mail. Such notice shall be deemed given as of the date of
delivery or, if delivery is made by mail, as of the date shown on the postmark
or on the receipt for registration or certification. Mailed notice to the
Corporation shall be directed to the Corporation's address, attention: KeyCorp
Compensation and Benefits Department. Mailed notice to a Participant or
Beneficiary shall be directed to the individual's last known address in the
Employer's records
10.15 SUCCESSORS. The provisions of this Plan shall bind and inure
to the benefit of each Employer and its successors and assigns. The term
successors as used herein shall include any corporate or other business entity
which shall, whether by merger, consolidation, purchase or otherwise, acquire
all or substantially all of the business and assets of an Employer.
KEYCORP
By:
-----------------------------
Dated:
-----------------------------
<PAGE> 1
EXHIBIT 11
KEYCORP
COMPUTATION OF NET INCOME PER COMMON SHARE
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
NET INCOME APPLICABLE TO COMMON SHARES
Net income.................................................... $ 783 $ 825 $ 853
Less: Preferred dividend requirements......................... 8 16 16
-------- -------- --------
--- --- ---
Net income applicable to Common Shares...................... $ 775 $ 809 $ 837
=========== =========== ===========
NET INCOME PER COMMON SHARE
Weighted average Common Shares outstanding.................... 229,905 234,787 243,067
=========== =========== ===========
Net income applicable to Common Shares........................ $ 775 $ 809 $ 837
=========== =========== ===========
Net income per Common Share................................... $ 3.37 $ 3.45 $ 3.45
=========== =========== ===========
NET INCOME PER COMMON SHARE -- PRIMARY
Weighted average Common Shares outstanding.................... 229,905 234,787 243,067
Dilutive common stock options(1).............................. 3,538 2,247 2,399
-------- -------- --------
--- --- ---
Weighted average Common Shares and Common Share equivalents
outstanding.............................................. 233,443 237,034 245,466
=========== =========== ===========
Net income applicable to Common Shares........................ $ 775 $ 809 $ 837
=========== =========== ===========
Net income per Common Share................................... $ 3.32 $ 3.41 $ 3.41
=========== =========== ===========
NET INCOME PER COMMON SHARE -- FULLY DILUTED
Weighted average Common Shares outstanding.................... 229,905 234,787 243,067
Dilutive common stock options(1).............................. 5,003 3,520 2,401
-------- -------- --------
--- --- ---
Weighted average Common Shares and Common Share equivalents
outstanding.............................................. 234,908 238,307 245,468
=========== =========== ===========
Net income applicable to Common Shares........................ $ 775 $ 809 $ 837
=========== =========== ===========
Net income per Common Share................................... $ 3.30 $ 3.39 $ 3.41
=========== =========== ===========
</TABLE>
- ---------------
(1) Dilutive common stock options are based on the treasury stock method using
average market price in computing net income per Common Share -- primary,
and the higher of year end market price or average market price in computing
net income per Common Share -- fully diluted.
14
<PAGE> 1
EXHIBIT 12
KEYCORP
COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
COMPUTATION OF EARNINGS
Net income............................................ $ 783 $ 825 $ 853 $ 710 $ 592
Add: Provision for income taxes....................... 360 368 430 374 280
Less: Cumulative effect of accounting change.......... -- -- -- -- 7
Extraordinary net gain........................... -- 36 -- -- --
------ ------ ------ ------ ------
Income before income taxes and extraordinary
net gain.................................... 1,143 1,157 1,283 1,084 865
Fixed charges, excluding interest on deposits......... 810 819 513 345 324
------ ------ ------ ------ ------
Total earnings for computation, excluding
interest on deposits........................ 1,953 1,976 1,796 1,429 1,189
Interest on deposits.................................. 1,469 1,705 1,325 1,233 1,469
------ ------ ------ ------ ------
Total earnings for computation, including
interest on deposits........................ $3,422 $3,681 $3,121 $2,662 $2,658
====== ====== ====== ====== ======
COMPUTATION OF FIXED CHARGES
Net rental expense.................................... $ 126 $ 117 $ 124 $ 130 $ 131
====== ====== ====== ====== ======
Portion of net rental expense deemed representative of
interest............................................ $ 42 $ 39 $ 41 $ 43 $ 43
Distributions on capital securities................... 3 -- -- -- --
Interest on short-term borrowed funds................. 492 519 334 175 174
Interest on long-term debt............................ 273 261 138 127 107
------ ------ ------ ------ ------
Total fixed charges, excluding interest on
deposits.................................... 810 819 513 345 324
Interest on deposits.................................. 1,469 1,705 1,325 1,233 1,469
------ ------ ------ ------ ------
Total fixed charges, including interest on
deposits.................................... $2,279 $2,524 $1,838 $1,578 $1,793
====== ====== ====== ====== ======
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Preferred stock dividend requirement on a pre-tax
basis............................................... $ 12 $ 23 $ 24 $ 28 $ 36
Total fixed charges, excluding interest on deposits... 810 819 513 345 324
------ ------ ------ ------ ------
Combined fixed charges and preferred stock
dividends, excluding interest on deposits... 822 842 537 373 360
Interest on deposits.................................. 1,469 1,705 1,325 1,233 1,469
------ ------ ------ ------ ------
Combined fixed charges and preferred stock
dividends, including interest on deposits... $2,291 $2,547 $1,862 $1,606 $1,829
====== ====== ====== ====== ======
RATIO OF EARNINGS TO FIXED CHARGES
Excluding deposit interest............................ 2.41X 2.42x 3.50x 4.15x 3.67x
Including deposit interest............................ 1.50X 1.46x 1.70x 1.69x 1.48x
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
Excluding deposit interest............................ 2.38X 2.35x 3.34x 3.84x 3.31x
Including deposit interest............................ 1.49X 1.45x 1.68x 1.66x 1.45x
</TABLE>
15
<PAGE> 1
Exhibit 13
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
dollars in millions,
except per share amounts 1996 1995
- --------------------------------------------------------------------------
<S> <C> <C>
PER COMMON SHARE
Net income--as reported $ 3.37 $ 3.45
Net income--as adjusted(1) 3.71 3.45
Cash dividends 1.52 1.44
Book value at year end 21.84 21.36
Market price at year end 50.50 36.25
Weighted average Common Shares (000) 229,905 234,787
- --------------------------------------------------------------------------
AT DECEMBER 31,
Loans $49,235 $48,332
Earning assets 59,260 58,762
Total assets 67,621 66,339
Deposits 45,317 47,282
Total shareholders' equity 4,881 5,153
Common Shares outstanding (000) 223,454 233,703
- --------------------------------------------------------------------------
PERFORMANCE RATIOS
Return on average total assets--as reported 1.21% 1.24%
Return on average total assets--as adjusted(1) 1.33 1.24
Return on average total equity--as reported 15.64 17.10
Return on average total equity--as adjusted(1) 17.18 17.10
Efficiency 60.84 63.03
- --------------------------------------------------------------------------
<FN>
(1) Excludes the impact of the 1996 restructuring charge and Key's share of a
1996 government mandated assessment to recapitalize the Savings Association
Insurance Fund.
</TABLE>
Return on Average Total Equity
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Excluding restructuring charge 15.91% 16.95% 18.56% 17.10% 17.07%
Including restructuring charge 15.64%
</TABLE>
<TABLE>
<CAPTION>
Efficiency Ratio
<S> <C>
1992 60.96%
1993 60.50%
1994 59.39%
1995 63.03%
1996 60.84%
</TABLE>
Return on Average Total Assets
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
---- ---- ---- ---- ---
<S> <C> <C> <C> <C> <C>
Excluding restructuring charge 1.13% 1.24% 1.36% 1.24% 1.31%
Including restructuring charge 1.21%
</TABLE>
FINANCIAL REVIEW
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Glossary of Terms ............................2
Introduction..................................3
Performance Overview..........................4
Line of Business Results......................5
Results of Operations........................12
Net Interest Income........................12
Asset and Liability Management.............17
Noninterest Income.........................21
Noninterest Expense........................23
Income Taxes...............................24
Financial Condition..........................25
Loans......................................25
Securities.................................27
Asset Quality..............................29
Deposits and Other Sources
of Funds.................................33
Liquidity..................................33
Capital and Dividends......................34
Fourth Quarter Results.......................36
Banking Services Data by Region..............38
Six-Year Consolidated Balance Sheets...........39
Six-Year Consolidated Statements
of Income....................................40
Report of Management...........................41
Report of Ernst & Young LLP,
Independent Auditors.........................41
Consolidated Financial Statements..............42
Subsidiaries...................................69
Corporate Information..........................71
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 1
<PAGE> 2
Management's Discussion and Analysis of Financial Condition
and Results of Operations
GLOSSARY OF TERMS
CAPITAL COMPONENTS AND RATIOS:
LEVERAGE RATIO: Tier I capital as a percentage of quarterly average total
assets, less goodwill and other non-qualifying intangible assets. The Federal
regulatory minimum standard for the leverage ratio is 3.00%.
NET RISK-ADJUSTED ASSETS: The sum of risk-weighted assets and the
risk-weighted credit equivalent amounts of off-balance sheet items; less
goodwill, other non-qualifying intangible assets, and the non-qualifying
portion of the allowance for loan losses.
TIER I CAPITAL: The sum of common shareholders' equity (including Common
Shares; related surplus; and retained earnings, net of treasury stock, loans
to employee stock ownership plan ("ESOP") trustee and net unrealized losses
on marketable equity securities), perpetual preferred stock and capital
securities; less goodwill and other non-qualifying intangible assets.
TIER II CAPITAL: The sum of the qualifying portion of the allowance for loan
losses, subordinated debt instruments and certain hybrid capital instruments.
TIER I RISK-ADJUSTED CAPITAL RATIO: The ratio of Tier I capital to net
risk-adjusted assets. The Federal regulatory minimum standard for the Tier I
risk-adjusted capital ratio is 4.00%.
TOTAL CAPITAL: The sum of Tier I capital and Tier II capital.
TOTAL RISK-ADJUSTED CAPITAL RATIO: The ratio of total capital to net
risk-adjusted assets. The Federal regulatory minimum standard for the total
risk-adjusted capital ratio is 8.00%.
CAPITAL SECURITIES: Corporation-obligated mandatorily redeemable capital
securities of subsidiary trusts holding solely junior subordinated deferrable
interest debentures of the Corporation.
DERIVATIVES: Interest rate swaps, futures, forwards, caps, floors, and other
off-balance sheet financial instruments used for asset and liability management
or trading purposes which derive their values or contractually required cash
flows from the values or cash flows of underlying financial instruments or
market indices.
EARNING ASSETS: The sum of loans (including loans held for sale), investment
securities, securities available for sale and short-term investments
(interest-bearing deposits with banks, Federal funds sold, securities purchased
under agreements to resell, and trading account assets).
EFFICIENCY RATIO: Noninterest expense (excluding certain nonrecurring charges
and distributions on capital securities) divided by taxable-equivalent net
interest income plus noninterest income (excluding net securities transactions
and gains on certain asset sales).
FAIR VALUE: Defined in Statement of Financial Accounting Standards ("SFAS") No.
107 as the amount at which an instrument could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale.
In the absence of quoted market prices for an asset or liability, fair value may
be determined through consideration of appraisals or prices for similar assets
and liabilities; estimation using financial models; calculation of the present
value of the estimated expected cash flows using a discount rate commensurate
with the associated risks; or a combination of methods based on management's
judgment and experience.
IMPAIRED LOANS: All nonaccrual loans, except for smaller-balance, homogeneous
nonaccrual loans.
INTEREST-BEARING LIABILITIES: The sum of interest-bearing deposits, Federal
funds purchased, securities sold under agreements to repurchase, other
short-term borrowings, and long-term debt.
INTEREST RATE SPREAD: The difference between the taxable-equivalent yield on
average earning assets and the rate paid on average interest-bearing
liabilities.
INTEREST RATE SWAP: A contract wherein one party pays a fixed or variable rate
of interest based on a notional amount to a second party, which pays to the
first party a fixed or variable rate of interest based on the same notional
amount.
MERGER AND INTEGRATION CHARGES: Expenses directly related to mergers and
consisting of investment banking and other professional fees; severance payments
and other employee costs; systems and facilities costs; and other merger-related
costs.
NET INTEREST MARGIN: Fully taxable-equivalent net interest income as a
percentage of average earning assets.
NONACCRUAL LOANS: Generally, loans for which the receipt of payment is 90 days
or more past due (unless the loan is well secured and in the process of
collection) and the accrual of interest income has been discontinued.
NONPERFORMING ASSETS: The sum of nonperforming loans, other real estate owned
and other nonperforming assets (primarily venture capital investments).
NONPERFORMING LOANS: The sum of nonaccrual loans and loans whose repayment
criteria have been renegotiated to less-than-market terms due to the inability
of the borrowers to repay the loans in accordance with their original terms.
OTHER REAL ESTATE OWNED ("OREO"): Real estate acquired in formal foreclosure
proceedings under which the creditor has taken possession of the collateral.
OVERHEAD RATIO: Noninterest expense (excluding certain nonrecurring charges and
distributions on capital securities) less noninterest income (excluding net
securities transactions and gains on certain asset sales) divided by
taxable-equivalent net interest income.
Financial Page 2 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 3
RESTRUCTURING CHARGE: Expenses incurred in connection with the transformation to
a nationwide, bank-based financial services company and consisting of severance
payments, consolidation costs related to banking offices identified for closure
and costs related to the write-off of certain obsolete software previously
developed for internal use.
RETURN ON AVERAGE TOTAL ASSETS: Net income as a percentage of average total
assets.
RETURN ON AVERAGE TOTAL EQUITY: Net income as a percentage of average total
shareholders' equity.
SECURITIZATION: A transaction involving the transfer of a pool of loans to a
trust, wherein securities (representing beneficial interests in the loans) are
issued by the trust and sold to investors.
TAXABLE-EQUIVALENT INCOME: Tax-exempt income which has been adjusted to an
amount that would yield the same after-tax income had the income been subject to
taxation at the statutory Federal income tax rate.
INTRODUCTION
This section of the report, including the highlights summarized below, provides
a discussion and analysis of the financial condition and results of operations
of KeyCorp and its subsidiaries ("Key") for the periods presented. It should be
read in conjunction with the consolidated financial statements and notes
thereto, presented on pages 42 through 68.
This report contains forward-looking statements which are subject to numerous
assumptions, risks and uncertainties. Statements pertaining to future periods
are subject to uncertainty because of the possibility of changes in underlying
factors and assumptions. Actual results could differ materially from those
contained in or implied by such forward-looking statements for a variety of
factors including: sharp and/or rapid changes in interest rates; significant
changes in the economic scenario from the current anticipated scenario which
could materially change anticipated credit quality trends and the ability to
generate loans; significant delay in or inability to execute strategic
initiatives designed to grow revenues and/or control expenses, including plans
to form a nationwide bank, to reduce expenses to achieve a 55% efficiency ratio
by around the end of 1997, and to both consolidate and divest branches; and
significant changes in accounting, tax, or regulatory practices or requirements.
During 1996, a number of actions were taken in connection with the execution of
Key's strategic plan. In January, the merger of Key's Indiana and Michigan
affiliate banks was completed as the first step in plans to combine the
affiliate banks in the Great Lakes Region. The final stage of the Great Lakes
reorganization was completed in June as the Indiana/Michigan bank was merged
with and into Society National Bank, Key's principal bank subsidiary located in
Ohio, with the resulting bank being named KeyBank National Association ("KeyBank
N.A."). Key plans to consolidate twelve of its bank subsidiaries into one
national banking institution by mid-1997. Key Bank USA National Association
("KeyBank USA") will not take part in this consolidation. All of Key's bank
subsidiaries now have "Key" as part of their names, facilitating the
effectiveness of a national brand marketing campaign.
Several actions taken during 1996 reflect continuing efforts to reallocate
resources to businesses with higher earnings potential and to focus on certain
client segments, while emphasizing technology to enhance service capability.
Specifically, during the first quarter, Key launched its first small-business
specialty center in Columbus, Ohio. The opening of the specialty center is part
of an overall plan to transform the branch network into customized "KeyCenters"
which target the needs of specific client segments. Other first quarter actions
included the formation of two new subsidiaries which provide specialized
services, primarily to corporate and institutional clients. Key Global Finance,
Ltd. ("KGFL") provides sophisticated, asset-specific structured financings and
advisory work for larger corporations, while Key Capital Markets, Inc. ("KCMI"),
a broker-dealer registered with the National Association of Securities Dealers,
Inc., provides foreign exchange, financial risk management and financial
advisory services to its institutional clients in the public and private sector.
KCMI also engages in certain underwriting and dealing activities authorized by
the Board of Governors of the Federal Reserve System ("Federal Reserve System").
In the second quarter, Key acquired Knight Insurance Agency, Inc. ("Knight"), a
Boston-based company (doing business under the name "Knight College Resource
Group") which specializes in providing education financing programs, and now
operates as a wholly owned subsidiary of KeyBank USA. Also in the second
quarter, Key completed the sale of Society First Federal Savings Bank ("SFF"),
its Florida savings association subsidiary, but continues to provide private
banking services in Florida through a banking affiliate located in Naples.
In the third quarter, Key acquired Carleton, McCreary, Holmes & Co.
("Carleton"), a Cleveland-based investment-banking firm specializing in mergers
and acquisitions and other financial advisory services for mid-sized
and larger corporate clients, and merged it into KCMI. Key also announced an
alliance with fourteen other North American banks and IBM to form Integrion
Financial Network, L.L.C. with the purpose of developing a secure, wide-ranging
home banking and electronic commerce network.
During the fourth quarter, Key announced strategic actions to be taken over the
next year to complete its transformation to a nationwide, bank-based financial
services company. These actions include the consolidation of Key's bank
subsidiaries (other than KeyBank USA) into one nationwide banking institution by
mid-1997, the consolidation of nearly 140 branch offices, and a reduction of
approximately 10% of Key's employment base. The actions are to be taken
throughout 1997, with the objective of achieving management's previously
announced target of a 55% efficiency ratio by around the end of 1997, with
further improvement thereafter. In
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 3
<PAGE> 4
connection with these actions, Key recorded a $100 million restructuring charge
in December. Key also announced its intention to divest another 140 branch
offices, a strategic action for which expected costs are not included in the
restructuring charge. In connection with this strategy, on February 18, 1997,
Key entered into a definitive agreement for the sale of KeyBank National
Association (Wyoming), its 28 branch Wyoming bank subsidiary. The transaction is
expected to close in the third quarter of 1997, pending necessary regulatory
approvals and various other conditions. In addition, during December Key moved
the media and telecommunications, healthcare, structured finance and leasing
businesses to a newly-formed commercial finance subsidiary, Key Corporate
Capital Inc. ("KCCI").
In addition to the above actions, during 1996 management continued to take
certain steps to manage Key's balance sheet in accordance with strategies
developed in mid-1995 to improve returns to shareholders, improve liquidity,
enhance capital flexibility and manage credit risk. These steps included the
sale of $500 million of residential mortgage loans, $101 million of
out-of-franchise credit cards and $1.0 billion of student loans (of which $711
million was associated with securitizations). Other steps included the
securitization and sale of $212 million of sub-prime auto loans and the
continued, planned runoff of lower-yielding securities and residential mortgage
loans.
Key continued to manage its capital base proactively to enhance returns to
shareholders. On June 30, 1996, Key redeemed its 10% Cumulative Preferred Stock.
Moreover, throughout 1996, 14,620,000 Key Common Shares were repurchased in
accordance with two programs authorized by Key's Board of Directors. In January
1996, the Board approved a 12,000,000 Common Shares repurchase program and, when
that program was completed, a new program was approved in November which
authorized the repurchase of up to an additional 12,000,000 shares by the end of
1997. The repurchase of these shares reflected the additional capital
flexibility achieved through the loan sales and securitizations completed during
1996 and 1995. Key also augmented its flexibility to continue its management of
capital through the fourth quarter issuance of $500 million of tax-advantaged
capital securities which receive Tier I capital treatment.
The above items are discussed in greater detail in the remainder of this
discussion and in the notes to the consolidated financial statements.
PERFORMANCE OVERVIEW
In 1996, Key recorded net income of $783 million, or $3.37 per Common Share.
This compared with $825 million, or $3.45 per Common Share, in 1995 and $853
million, or $3.45 per Common Share, in 1994. The return on average total equity
for 1996 was 15.64%, compared with 17.10% and 18.56% in 1995 and 1994,
respectively. The return on average total assets was 1.21% in 1996, 1.24% in
1995 and 1.36% in 1994. Having notable impact on 1996 earnings was the
previously discussed restructuring charge of $100 million ($66 million after
tax, $.29 per Common Share) recorded late in the fourth quarter to accelerate
the creation of a nationally chartered nationwide bank covering 28 geographic
market areas by mid-1997, from a structure centered around four geographic
regions. Excluding the restructuring charge and Key's share of a government
mandated assessment of $17 million ($11 million after tax, $.05 per Common
Share) to recapitalize the Savings Association Insurance Fund ("SAIF") recorded
in the third quarter, earnings for 1996 were $860 million, or $3.71 per Common
Share. On the same basis, Key's 1996 return on average total assets was 1.33%
and its return on average total equity was 17.18%. The impact of these
nonrecurring items on Key's 1996 operating results is summarized in Figure 1.
Figure 1 Significant Nonrecurring Items
<TABLE>
<CAPTION>
Year ended December 31, 1996
Earnings Per Return on Return on
Net Common Average Total Average Total
dollars in millions, except per share amounts Income Share Assets Equity
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
As reported $783 $3.37 1.21% 15.64%
Effect of:
Restructuring charge 66 .29 .10 1.32
SAIF Assessment 11 .05 .02 .22
- ------------------------------------------------------------------------------------------------------------------------
As adjusted $860 $3.71 1.33% 17.18%
==== ===== ==== =====
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Financial Page 4 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 5
Figure 2 presents the primary income and expense components for each of the
three years in the period ended December 31, 1996, expressed on a per Common
Share basis. The selected financial data set forth in Figure 3 presents certain
information highlighting Key's financial performance for each of the last six
years.
Figure 2 Components of Earnings Per Common Share
<TABLE>
<CAPTION>
Year ended December 31,
Change
1996 vs. 1995
--------------
1996 1995 1994 Amount Percent
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income $21.54 $21.81 $18.47 $(.27) (1.2)%
Interest expense 9.72 10.58 7.39 (.86) (8.1)
- --------------------------------------------------------------------------------
Net interest income 11.82 11.23 11.08 .59 5.3
Provision for
loan losses .86 .43 .51 .43 100.0
- --------------------------------------------------------------------------------
Net interest income
after provision
for loan losses 10.96 10.80 10.57 .16 1.5
Noninterest income 4.73 3.97 3.63 .76 19.1
Noninterest expense 10.72 9.84 8.92 .88 8.9
- --------------------------------------------------------------------------------
Income before
income taxes 4.97 4.93 5.28 .04 .8
Income taxes 1.57 1.56 1.77 .01 .6
Extraordinary net gain -- .15 -- (.15) (100.0)
Preferred dividends .03 .07 .06 (.04) (57.1)
- --------------------------------------------------------------------------------
Earnings per
Common Share $ 3.37 $ 3.45 $ 3.45 $(.08) (2.3)%
====== ====== ====== =====
- --------------------------------------------------------------------------------
</TABLE>
In comparison with the prior year, Key's 1996 earnings reflected a $154 million,
or 17%, increase in noninterest income, a $74 million, or 3%, advance in
taxable-equivalent net interest income and an $8 million, or 2%, decrease in
income tax expense. These positive factors were partially offset by a $35
million, or 2%, increase in noninterest expense (excluding the $100 million
restructuring charge and the $17 million SAIF assessment) and a $97 million, or
97%, increase in the provision for loan losses. The efficiency ratio, which
provides a measure of the extent to which recurring revenues are used to pay
operating expenses, was 60.84% in 1996, compared with 63.03% in 1995 and 59.39%
in 1994. In addition to the impact of the 1996 restructuring charge and SAIF
assessment, comparative results were affected by the special items discussed
below.
In 1995, results included an extraordinary net gain of $61 million ($36 million
after tax, $.15 per Common Share) recorded in connection with the sales of
certain subsidiaries. This net gain included a gain of $72 million ($42 million
after tax, $.17 per Common Share) from the sale of the residential mortgage loan
servicing business and a loss of $11 million ($6 million after tax, $.02 per
Common Share) incurred in connection with the sale of Schaenen Wood &
Associates, Inc. ("Schaenen Wood"), an asset management subsidiary. In addition,
continued efforts to reconfigure the balance sheet in order to reduce exposure
to changes in interest rates resulted in net losses of $49 million ($31 million
after tax, $.13 per Common Share) from the sales of securities. Other items
included a one-time tax benefit of $16 million, or $.07 per Common Share, which
related to acquisitions completed in prior years; $25 million ($15 million after
tax, $.06 per Common Share) of write-offs of certain obsolete software
previously developed for internal use, and a $12 million ($8 million after tax,
$.03 per Common Share) positive adjustment resulting from better-than-expected
performance of student loan securitizations completed in prior periods. In the
aggregate, these items increased 1995 earnings by $14 million, or $.06 per
Common Share.
Earnings in 1994 were also affected by a special item. Steps taken in the fourth
quarter of 1994 to reconfigure the balance sheet in order to reduce Key's
exposure to further increases in interest rates included the sales of certain
securities during the fourth quarter of 1994. These sales resulted in losses of
$24 million ($14 million after tax, $.06 per Common Share).
LINE OF BUSINESS RESULTS
Key's three primary lines of business are Corporate Banking, National Consumer
Finance and Community Banking. A summary of 1996 and 1995 financial results and
significant performance measures for each primary line of business is presented
in Figure 4.
The financial information discussed in the remainder of this section was derived
from the internal profitability reporting system used by management to monitor
and manage the financial performance of Key. The financial results and
performance measures reported are based on internal management accounting
policies which have been developed to ensure that results are compiled on a
consistent basis and reflect the underlying economics of the businesses. These
policies address the methodologies applied in connection with funds transfer
pricing as well as the allocation of certain costs and capital. Funds transfer
pricing was used in the determination of net interest income by assigning a
standard cost for funds used (or a standard credit for funds provided) to assets
and liabilities based on their maturity and/or repricing characteristics. The
net effect of transfer pricing is included in the Community Banking line of
business where the securities portfolios are also maintained. Indirect expenses
were allocated based on actual volume measurements and other criteria, as
appropriate. The provision for loan losses was allocated in an amount equal to
the actual net charge-offs of each respective line of business. The level of the
consolidated provision for loan losses reflects management's intention to
continue to maintain the provision at a level equal to or above net charge-offs
and the application of methodologies designed by management to assess the
adequacy of the consolidated allowance by focusing on a number of specific
factors. These factors are more fully discussed in the Asset Quality section
beginning on page 29.
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 5
<PAGE> 6
Figure 3 Selected Financial Data
<TABLE>
<CAPTION>
Compound
Annual Rate
dollars in millions, of Change
except per share amounts 1996 1995 1994 1993 1992 1991 (1991-1996)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
Interest income $4,951 $5,121 $4,490 $4,214 $4,199 $4,652 1.3%
Interest expense 2,234 2,485 1,797 1,535 1,750 2,519 (2.4)
Net interest income 2,717 2,636 2,693 2,679 2,449 2,133 5.0
Provision for loan losses 197 100 125 212 339 466 (15.8)
Noninterest income 1,087 933 883 1,002 925 849 5.1
Noninterest expense 2,464 2,312 2,168 2,385 2,170 2,066 3.6
Income before income taxes
and extraordinary item 1,143 1,157 1,283 1,084 865 450 20.5
Income before extraordinary item 783 789 853 710 592 314 20.1
Net income 783 825 853 710 592 314 20.1
Net income applicable to Common Shares 775 809 837 692 568 298 21.1
- -----------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE
Income before extraordinary item $ 3.37 $ 3.30 $ 3.45 $ 2.89 $ 2.42 $ 1.31 20.8%
Net income 3.37 3.45 3.45 2.89 2.42 1.31 20.8
Cash dividends 1.52 1.44 1.28 1.12 .98 .92 10.6
Book value at year end 21.84 21.36 18.88 17.53 15.64 14.10 9.1
Market price at year end 50.50 36.25 25.00 29.75 32.13 24.75 15.3
Dividend payout ratio 45.10% 41.74% 37.10% 38.75% 40.50% 70.23% (8.5)
Weighted average Common Shares (000) 229,905 234,787 243,067 239,775 235,005 227,116 .2
- -----------------------------------------------------------------------------------------------------------------------------
AT DECEMBER 31,
Loans $49,235 $48,332 $46,580 $41,397 $36,960 $36,226 6.3%
Earning assets 59,260 58,762 60,047 54,353 49,381 48,208 4.2
Total assets 67,621 66,339 66,801 59,634 55,068 53,601 4.8
Deposits 45,317 47,282 48,564 46,499 43,433 42,835 1.1
Long-term debt 4,213 4,003 3,570 1,764 1,790 1,225 28.0
Common shareholders' equity 4,881 4,993 4,530 4,225 3,683 3,272 8.3
Total shareholders' equity 4,881 5,153 4,690 4,385 3,927 3,516 6.8
Full-time equivalent employees 27,689 29,563 29,211 29,983 29,117 29,509 --
- -----------------------------------------------------------------------------------------------------------------------------
PERFORMANCE RATIOS
Return on average total assets 1.21% 1.24% 1.36% 1.24% 1.13% .60% N/A
Return on average common equity 15.73 17.35 18.87 17.27 16.33 9.29 N/A
Return on average total equity 15.64 17.10 18.56 16.95 15.91 9.31 N/A
Efficiency 60.84 63.03 59.39 60.50 60.96 65.27 N/A
Overhead 45.46 49.66 46.14 46.85 47.21 52.63 N/A
Net interest margin (TE) 4.78 4.47 4.83 5.31 5.31 4.71 N/A
- -----------------------------------------------------------------------------------------------------------------------------
CAPITAL RATIOS AT DECEMBER 31,
Equity to assets(1) 7.22% 7.77% 7.03% 7.37% 7.13% 6.56% N/A
Tangible equity to tangible assets(1) 5.88 6.25 6.19 6.51 6.11 5.45 N/A
Tier I risk-adjusted capital 7.98 7.53 8.48 8.73 8.56 7.67 N/A
Total risk-adjusted capital 13.01 10.85 11.62 12.22 11.73 9.80 N/A
Leverage 6.93 6.20 6.63 6.72 6.56 5.97 N/A
- -----------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Including capital securities, these ratios at December 31, 1996, are 7.96%
and 6.63%, respectively.
The comparability of the information presented above is affected by certain
acquisitions and divestitures completed by Key in the time periods presented.
For further information concerning these transactions, refer to Note 2,
Mergers, Acquisitions and Divestitures beginning on page 49.
N/A = Not Applicable
TE = Taxable Equivalent
</TABLE>
Financial Page 6 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 7
Figure 4 Line of Business Results
<TABLE>
<CAPTION>
Year ended December 31, 1996
National
Corporate Consumer Community KeyCorp
dollars in millions Banking Finance Banking Other Consolidated
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net interest income (TE) $484 $473 $1,827 $(17) $2,767
Provision for loan losses 20 129 46 2 197
Noninterest income 228 178 502 179 1,087
Noninterest expense 337 268 1,655 204 2,464
- ------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 355 254 628 (44) 1,193
Allocated income taxes and
TE adjustment 124 89 220 (23) 410
- ------------------------------------------------------------------------------------------------------------------------------
Net income $231 $165 $ 408 $(21) $ 783
==== ==== ====== ===== ======
Percent of consolidated net income 30% 21% 52% (3)% 100%
- ------------------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCES
Loans $11,115 $11,832 $25,255 $ 14 $48,216
Earning assets 11,304 11,847 34,666 28 57,845
Deposits 2,602 830 41,291 -- 44,723
Allocated common equity(1) 912 1,012 2,259 823 5,006
- ------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE RATIOS
Return on average allocated common equity(1) 25.33% 16.30% 18.06% N/M 15.64%
Efficiency 47.33 41.17 71.06 N/M 60.84
- ------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1995
National
Corporate Consumer Community KeyCorp
dollars in millions Banking Finance Banking Other Consolidated
- ------------------------------------------------------------------------------------------------------------------------------
SUMMARY OF OPERATIONS
Net interest income (TE) $436 $371 $1,887 $ (1) $2,693
Provision for loan losses 1 70 28 1 100
Noninterest income 201 184 466 82 933
Noninterest expense 314 233 1,665 100 2,312
- ------------------------------------------------------------------------------------------------------------------------------
Income before income taxes
and extraordinary item (TE) 322 252 660 (20) 1,214
Allocated income taxes and
TE adjustment 112 88 231 (6) 425
Extraordinary net gain -- -- -- 36 36
- ------------------------------------------------------------------------------------------------------------------------------
Net income $210 $164 $ 429 $ 22 $ 825
==== ==== ====== ==== ======
Percent of consolidated net income 25% 20% 52% 3% 100%
- ------------------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCES
Loans $10,403 $10,073 $27,516 $ 20 $48,012
Earning assets 10,481 10,366 39,322 34 60,203
Deposits 2,519 741 44,305 -- 47,565
Allocated common equity(1) 832 740 2,386 866 4,824
- ------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE RATIOS
Return on average allocated common equity(1) 25.23% 22.16% 17.98% N/M 17.10%
Efficiency 49.29 41.98 70.76 N/M 63.03
- -------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Preferred equity is included in Other.
TE = Taxable Equivalent
N/M = Not Meaningful
</TABLE>
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 7
<PAGE> 8
Income taxes were allocated based on the statutory Federal income tax rate of
35% for the periods presented and capital was assigned to each line of business
based on regulatory requirements and management's assessment of economic factors
which are based on broad risk categories (primarily credit, operating, interest
rate and market risk).
The development and application of these methodologies is a dynamic process.
Accordingly, financial results may be revised periodically to reflect management
accounting enhancements, changes in risk profile or changes in the
organization's structure. Further, unlike financial accounting, there is no
authoritative guidance for management accounting similar to generally accepted
accounting principles. Consequently, reported results are not necessarily
comparable with those presented by other companies. Figure 4 reflects a number
of revisions which have been made to the previously disclosed 1995 financial
results to conform with the current year presentation. Primary among these
revisions are the inclusion of Key PrivateBank (previously a separate line of
business) as part of Community Banking and the reclassification of middle market
and public sector business from Corporate Banking to Community Banking. The
revisions also include the reclassification of the securities and residential
mortgage loan portfolios and the net effect of transfer pricing from Other to
Community Banking, and the reclassification of nonearning assets (including
intangibles) from Other to the three primary lines of business. In addition, the
allocation methodology applied to the provision for loan losses as described on
page 5 was revised from one which was previously based on experience over a full
business cycle (approximately five years), and costs related to certain support
functions previously included in Other have been allocated to the respective
lines of business.
A description of each of Key's primary lines of business is presented below.
Corporate Banking
As one of the largest providers of corporate financial services in the nation,
Key offers a complete range of financing, transaction processing and advisory
services to corporations through its Corporate Bank. It also operates the fourth
largest bank-affiliated equipment leasing company in the United States. The
Corporate Bank's business units are organized around client segments. In serving
these segments, Key's Corporate Bank provides a number of specialized services
including international banking, venture capital, corporate finance advisory and
merchant banking, capital markets products, institutional asset services and
corporate wealth transfer products. Key is also one of the leading cash
management providers in the country.
Key volume statistics of the Corporate Banking line of business for 1996 are as
follows:
- - A total average loan portfolio of approximately $11.1 billion outstanding, up
$712 million, or 7%, from the prior year.
- - An average commercial real estate portfolio of approximately $5.0 billion
outstanding, with new loan commitments exceeding $2.8 billion in 1996.
- - Equipment lease outstandings of almost $2.7 billion at December 31, reflecting
a 19% increase over 1995 and $890 million in new lease volume, and
- - Fee income which rose 13% from the prior year, while noninterest expense was
limited to an increase of 7%.
In 1996, Corporate Banking contributed approximately 30% of Key's consolidated
earnings with net income of $231 million, resulting in a return on average
allocated common equity of 25.33%. In 1995, net income was $210 million, or
approximately 25% of Key's consolidated earnings, and the return on average
allocated common equity was 25.23%. The increase in earnings relative to the
prior year was due, in large part, to continued growth in average earning
assets, combined with an increase in noninterest income. The growth in
noninterest income reflected an increase in venture capital gains, higher income
from various capital markets activities and the growth in service charges on
deposit accounts. These positive factors were partially offset by a higher level
of noninterest expense and an increase in the provision for loan losses.
For the Corporate Bank, 1996 was an active year, involving the formation of four
new businesses and a reorganization designed to increase accountability and
speed decision making, while increasing growth through both broader market
coverage and targeted acquisitions. Those client segments which are enhanced by
a franchise presence in a geographic market in order to maximize relationship
management effectiveness moved to the Community Banking line of business. These
include the middle market and public sector segments. Those businesses whose
clients are best served by a national marketing focus and are not franchise
dependent formed the Corporate Bank.
The four new businesses formed in 1996 consist of KGFL, KCMI, Key Real Estate
Capital Markets, Inc. ("Key Real Estate") and KCCI. KGFL provides sophisticated,
asset-specific structured financings and advisory work for larger corporations
through a variety of highly engineered and tailored solutions which include
tax-advantaged, cross-border and domestic leasing and project financing. KCMI, a
broker-dealer registered with the National Association of Securities Dealers,
Inc., provides foreign exchange, financial risk management and financial
advisory services to its institutional clients in the public and private sector.
As a Federal Reserve Board approved, Section 20 subsidiary, KCMI may engage in
certain securities underwriting activities. In addition, Key's real estate
business was repositioned during 1996 to provide a nationwide focus on targeted
developers, both within the existing franchise as well as in six regional
locations outside the franchise. In conjunction with this change, Key Real
Estate was formed to offer an integrated financing product line from
construction lending to long-term mortgage investor placement and loan conduit
securitizations
Financial Page 8 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 9
in the public markets. In December, the media and telecommunications,
healthcare, structured finance and leasing businesses were moved to a newly
formed commercial finance subsidiary, KCCI.
A highlight of 1996 was the receipt of the Ford Motor Credit Quality Excellence
Award for being the top provider of cash management services to Ford's retail
and lease financing clients during 1995. This award was based upon the accuracy
and timeliness of the services provided, as well as client service
responsiveness. Another development included the signing of a definitive
agreement with Harris Trust & Savings Bank of Chicago to transfer Key's
shareholder services business to Harris.
Corporate Banking's efforts in 1997 will focus on implementing the following
primary initiatives:
- - The redesign of the relationship management sales process and supporting
systems, begun late in 1995, was implemented in 1996 and will be relied upon
to maximize revenue growth potential.
- - Within KCCI, the healthcare business, which has traditionally targeted
hospitals and long-term care, will broaden its marketing to include the
assisted living sector throughout the country. The structured finance business
will open new offices outside of Key's franchise to increase its marketing
reach.
- - New out-of-franchise offices will be opened in 1997 in connection with Key's
commercial real estate business. Real estate capital markets capabilities will
continue to be expanded in order to provide developers with access to
long-term private and public debt placement in addition to current on-balance
sheet construction financing.
- - PRISM, Key's 401K daily valuation product line, is a strategically important
element of Key's asset management business. To increase the volume of Key's
Victory Mutual Fund assets, six out-of-franchise sales offices will be opened
in 1997. Victory funds are an important product offering for 401K plans.
- - In January 1997, Key entered into an alliance with Standard Chartered Bank out
of the United Kingdom, under which Standard Chartered will provide Key's
client base with access to Asian markets for trade financing and international
cash management services, and
- - Key's Corporate Bank will continue to expand capabilities to provide
integrated financing solutions to corporate clients, combining investment
banking and commercial banking capabilities. The acquisition of the Carleton
investment banking firm will enhance the scope and the scale of Corporate
Banking capabilities through merger and acquisition advisory services,
recapitalizations and private placements of equity and debt, and assistance
with strategic partnerships.
National Consumer Finance
National Consumer Finance is responsible for Key's indirect, non branch-based
consumer loan and deposit products and is distinct from the direct branch-based
consumer business conducted by the Community Banking group. National Consumer
Finance specializes in credit cards, auto loans and leases, marine and
recreational vehicle loans, educational loans and branchless deposit generating
activities. These businesses have been grouped together so as to market and
operate Key's indirect consumer loan and credit card businesses under a single
management and operating structure. As of December 31, 1996, based on the volume
of loans generated, National Consumer Finance was the third largest education
lender in the nation, ranked number one in financing consumer purchases of
marine and recreational vehicles and ranked in the top ten in retail auto
financing.
The National Consumer Finance line of business was characterized by the
following key volume statistics as of December 31, 1996:
- - Indirect auto loans and leases of almost $5.4 billion outstanding, with 1996
originations of $3.7 billion generated through a network of approximately
6,000 auto loan dealers.
- - Student loans of approximately $2.2 billion outstanding, with 1996
originations of more than $1.1 billion.
- - A $1.8 billion credit card portfolio and more than 1.9 million client
accounts, and
- - A $2.1 billion indirect marine and recreational vehicle portfolio, with 1996
originations exceeding $750 million.
In 1996, National Consumer Finance generated net income of $165 million, or
approximately 21% of Key's consolidated earnings, and a return on average
allocated common equity of 16.30%. In the prior year, net income was $164
million, or approximately 20% of Key's consolidated earnings, and the return on
average allocated common equity was 22.16%. The increase in earnings relative to
the prior year reflected the improvement in net interest income due primarily to
the growth in new loan originations as well as the impact of wider interest rate
spreads resulting from a new national pricing program instituted in 1996. Growth
in net interest income was largely offset by a decline in loan securitization
income, reflecting both a lower volume of securitizations in 1996 and a $12
million positive adjustment recorded in 1995 for better-than-expected
performance of student loan securitizations completed in prior years, as well as
increases in both noninterest expense and the provision for loan losses.
Noninterest expense was up due primarily to the impact of a full year of
goodwill amortization associated with the September 1995 acquisition of AFG and
additional costs associated with various business initiatives, including market
expansion. The increase in the provision for loan losses reflected a higher
level of net charge-offs, primarily in
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 9
<PAGE> 10
the indirect auto and credit card portfolios. Net charge-offs were up due in
part to the impact of a strategy adopted to expand Key's consumer customer base
to include various credit risk profiles, while implementing risk-adjusted
pricing to address the relative difference in credit risk. Also contributing to
the higher level of net charge-offs was the widespread nationwide deterioration
in consumer credit quality, as reflected in the record number of bankruptcies
during 1996. Excluding the impact of the 1995 securitization adjustment and
other nonrecurring items in both years, net income for 1996 was up 12% from the
prior year.
During 1996, new offices were opened in Charlotte, North Carolina, and Kansas
City, Missouri, and the national prime and sub-prime auto finance program was
rolled out to approximately 90% of the dealerships with which Key conducts
business. National Consumer Finance also expanded its education lending business
through the June acquisition of Knight, a Boston-based company (conducting
business under the name "Knight College Resource Group") which specializes in
originating and servicing student loans. In addition, during the first half of
1996 a new innovative product known as KeySmart was launched to provide credit
card holders with added payment flexibility. Under this new program cardholders
are given the choice of three payment options under which the level of the
interest rate charged is lower based on a larger payment made for the respective
billing cycle, thereby providing the client with the incentive for responsible
debt management. Clients may also pay their entire balance within the grace
period each month and, in turn, incur no interest charges on purchases. As of
December 31, more than 30,000 KeySmart accounts had been opened, helping to
boost the credit card portfolio to $1.8 billion by December 31, 1996, up 20%
from the 1995 year end level. In response to a rapidly changing mortgage lending
environment, National Consumer Finance also initiated a transformation of its
first mortgage business from the traditional originator approach to the
utilization of a telephone mortgage call center. Utilizing the "telemortgage
center," origination costs were reduced by more than 200%, while maintaining
high client service standards.
In 1997, National Consumer Finance will focus on continuing its efforts to build
a national brand name, enhancing delivery and servicing capabilities, utilizing
technology for product and process differentiation, and diversifying by market
and risk segment and product. This will be accomplished by implementing the
following primary initiatives:
- - An 8 region marketing structure covering the 48 contiguous states for all auto
dealer financing products will be completed.
- - Cross-selling will be emphasized, particularly with respect to clients who may
be interested in financing the purchase of marine or recreational vehicles and
the education of their children.
- - Efforts will be made to grow the education lending business by building and
expanding upon the products offered by Knight and introducing them to new Key
markets, and
- - A new national home equity strategy will be introduced to leverage existing
branch franchise referrals as well as establish new offices in selected
out-of-franchise markets.
Community Banking
The Community Banking line of business is responsible for delivering a complete
line of branch-based retail financial products and services to small businesses
and consumers, addressing the more complex, diverse needs of the affluent client
segment and maximizing relationship management effectiveness in the middle
market and public sector businesses. The delivery of these products and services
is accomplished through Key's banking affiliates operating more than 1,200
full-service banking offices in 15 states, a 24-hour telephone banking call
center services group, nearly 1,900 ATMs that access 13 different networks and
comprise the twelfth largest ATM network in the United States and relationship
management teams of approximately 700 middle market and public sector
professionals.
Community Banking currently serves approximately 3 million consumer households,
400,000 small businesses and 40,000 middle market businesses, resulting in a
loan portfolio which averaged approximately $25.3 billion and average deposits
of more than $41 billion during 1996. It is one of the largest small business
lenders in the nation with more than $2.2 billion in small business loans at
December 31, 1996. Community Banking is organized around three secondary lines
of business, Retail Community Bank, Corporate Community Bank and Key
PrivateBank.
Retail Community Bank has identified four primary client segments each of which
has unique behavioral and demographic characteristics:
Mass Market--Served by branch-based relationship specialists, this is the
largest of the four segments and is comprised of individuals typically under 50
years of age who have an annual household income of less than $100,000.
Mature Market--This segment is comprised of individuals who are typically over
50 years of age, and are generally associated with the occurrence of major life
events such as retirement, the start of a second career, the transition to new
housing, the death of a spouse or entering the Social Security and Medicare
System.
Emerging Affluent--Through the retail private banking program, these clients pay
a membership fee which entitles them to a broad array of specialized credit,
deposit and investment products. In particular, a combination of proprietary and
non-proprietary investment opportunities are emphasized. This group is comprised
of households with annual income levels of at least $100,000.
Financial Page 10 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 11
Small Business--Served by small business relationship managers, this segment is
comprised of clients with annual sales and credit needs of less than $3 million
and $300,000, respectively.
Corporate Community Bank serves three primary client segments which were moved
from Corporate Banking to Community Banking in 1996:
Community Middle Market--This segment is comprised of businesses with annual
sales volumes ranging from $3 million to $10 million.
Community Upper Middle Market--This segment is comprised of businesses with
annual sales volumes ranging from more than $10 million to $100 million.
Public Sector--Within this segment, the various financial service needs of
public and governmental entities, institutions of higher education and nonprofit
organizations are addressed.
Key PrivateBank addresses the more complex, diverse needs of the affluent client
by offering a full, integrated range of transaction, credit, investment
management, estate planning, financial planning, and trust products and
services. The delivery system is segmented into three different programs which
address clients' needs as they increase in complexity. Each of these programs
serves a specific group of affluent clients with focus on relationship
management, client segmentation, technological support, product innovation and
service quality.
Private Banking--This entry-level program emphasizes a combination of
traditional bank products and other investment options as a basis for helping
clients to build their net worth. Individuals are required to maintain at least
$50,000 in aggregate account relationships and view Key as their primary
provider of financial services. Personalized service is provided by an assigned
relationship manager who functions as a single point of contact to other Key
financial professionals.
Private Banking and Investing--This program focuses on the more complex
investment and estate planning needs of individuals having annual income of at
least $100,000 or net worth of at least $250,000. Participants in this program
are served by a team of financial experts including a credit representative, a
trust professional, a broker, and often, a certified financial planner.
Wealth Management--Wealth Management provides sophisticated financial solutions
and an exceptionally high level of service tailored to wealthy individuals and
families with investable assets of at least $5 million. Primary services
provided include asset management, estate planning, business succession
planning, tax and financial planning and extensive fiduciary services. Other
nontraditional investment capabilities which were more fully developed in 1996
include venture capital investment and private placement services, hedge funds,
customized derivatives and real estate limited partnerships.
Within Wealth Management, the Nonprofit Asset Services Group focuses on the
specialized asset management needs of nonprofit entities with a dedicated team
of specialists experienced in the administration and investment management of
endowments, foundations and planned giving arrangements. Clients include
private, corporate and community foundations: religious, educational, cultural
and health care institutions, as well as individuals and families.
In 1996, net income for Community Banking totaled $408 million, or approximately
52% of Key's consolidated earnings, as compared with $429 million, or 52%,
respectively, for 1995. Its return on average allocated common equity was 18.06%
in 1996 and 17.98% in 1995. Positive factors affecting Community Banking's
financial performance in comparison with the prior year were continued growth in
noninterest income and a decrease in noninterest expense. The growth in
noninterest income reflected an increase in investment management fee income as
a result of both the strong financial markets and an increase in the number of
Key PrivateBank funded brokerage accounts. The improvement in noninterest
expense in 1996, was moderated by additional costs incurred in conjunction with
strategic actions taken to improve client servicing capabilities and the 1996
SAIF assessment of $17 million ($11 million after tax). Reduced net interest
income and a higher provision for loan losses more than offset the improvements
in noninterest income and noninterest expense, however.
During 1996, significant progress was made on a number of initiatives geared
toward enhancing service. In the latter half of 1995 and early in 1996,
specialized training was developed for relationship managers to assist them in
addressing the various needs of specific client segments and continues to be
implemented throughout the Key franchise. Early in the year, Key also launched
its first small business specialty center in Columbus, Ohio and opened
investment specialty centers in Seattle, Washington, and Portland, Oregon in
mid-November. These are the first of a number of specialty centers which will be
opened as part of Key's strategy to develop specialized offices which focus on
the needs of specific client segments. In the first quarter, Key launched a
fully integrated telephone bill payment service, KeyPay. This service is
provided free of charge and is integral to Key's convenience banking strategy.
At year end there were approximately 25,000 clients remitting to 10,000
merchants in all Key markets. Key entered into an alliance with fourteen other
banks and IBM to form Integrion Financial Network, L.L.C. with the purpose of
developing a secure, wide-ranging home banking and electronic commerce network.
In addition, the re-engineered middle market relationship management process was
successfully implemented in three of Key's four regions with the fourth and
final implementation scheduled for early 1997.
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 11
<PAGE> 12
Several new products and services were also introduced. Key MasterMoney debit
card products were introduced across all geographic and client segments. At year
end, there were approximately 1,250,000 accounts, making Key the largest issuer
of MasterCard's debit cards in the United States. Sales volumes during the 1996
holiday shopping season tripled over those of 1995. Also new in 1996 was the
offering of a KeyMoney Access account which pays clients $.25 per ATM deposit up
to a maximum payment of $1.00 per month. KeyLease Plus is a new service which
provides small business owners with a simpler origination process and a range of
flexible options for equipment leasing. In addition, non-traditional banking
products such as mutual funds and annuities have been incorporated into the
Community Banking line of business to provide a choice from a full complement of
financial products and services. Its telebanking centers, which were receiving
approximately 56,000 calls per month at year end, generated new loan volume
during 1996 nearly three times that produced last year by the telebanking
centers.
In Key PrivateBank, targeted marketing efforts, in conjunction with the success
of the Key Money Management Account, have significantly increased the deposit
base. At the end of 1996, Key PrivateBank served approximately 71,000 households
with $20 billion of assets under management and $1.3 billion in Key Money
Management Account balances. In addition, new relationship products and
services, such as the Key Managed Asset Program (KEYMAP), the Key Trust Index
500 Fund and specialized mortgage products with simplified documentation
requirements were introduced in 1996 to address emerging needs of Key's affluent
clients. Also introduced was an enhanced relationship statement which combines
all account activity and balances of an individual client in one convenient
document.
In 1997, the following primary initiatives will be undertaken by Community
Banking:
- - Key Counselor, a new, integrated branch platform sales system, will be
implemented to allow Key to capture critical information and more fully
understand the extent of the client relationship.
- - Key Resource, an interactive kiosk, will be established in certain of Key's
banking offices to allow clients to inquire about products, open new accounts
and apply for loans. Combined with telephone banking, Key Resource will
complement Key's efforts to satisfy increased demand for convenience.
- - A next generation payment card, based on integrated circuit chip technology,
will be piloted in selected venues and with employees to test acceptance for
use in small dollar purchases.
- - Home banking via personal computers will be piloted. Clients will be able to
access information on their current accounts and services, obtain value-added
financial information, pay bills, transfer funds, reconcile accounts and
initiate service requests, and
- - Key PrivateBank will continue to develop and enhance its investment products,
as well as broaden the relationship manager's full financial planning
capabilities in order to better serve its affluent clients. In 1997, a rollout
of the first stages of a re-engineered delivery and support process for
personal fiduciary products will begin and continued investments will be made
to build the relationship manager base in growth markets.
Other
The "Other" category includes activities that are not directly attributable to
one of the three major lines of business. Included in this category are certain
nonbanking affiliates, eliminations of intercompany transactions, restructuring
charges and extraordinary items. Also included in the "Other" category are the
portions of certain assets, capital and support functions which were not
specifically allocated to the three primary lines of business.
Restructuring charges of approximately $100 million were recorded in the fourth
quarter of 1996 in connection with previously announced strategic actions to be
taken over the next year to complete Key's transformation to a nationwide,
bank-based financial services company. The strategic actions as well as the
nature of the charges incurred are more fully disclosed in Note 14,
Restructuring Charge, on page 60.
In 1995, the items classified as extraordinary included a gain of $72 million
($42 million after tax, $.17 per Common Share) from the sale of the residential
mortgage loan servicing business, partially offset by a loss of $11 million ($6
million after tax, $.02 per Common Share) incurred in connection with the sale
of Schaenen Wood & Associates, Inc., an asset management subsidiary.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income, which is comprised of interest and loan-related fee income
less interest expense, is the principal source of earnings for Key. Net interest
income is affected by a number of factors including the level, pricing, mix and
maturity of earning assets and interest-bearing liabilities (both on- and
off-balance sheet), interest rate fluctuations and asset quality. To facilitate
comparisons in the following discussion, net interest income is presented on a
taxable-equivalent basis.
Various components of the balance sheet and their respective yields and rates
which affect interest income and expense are illustrated in Figure 6. The
information presented in Figure 9 provides a summary of the effect on net
interest income of changes in yields/rates and average balances in 1996 and
1995. A more in-depth discussion of changes in earning assets and funding
sources is presented in the Financial Condition section beginning on page 25.
Financial Page 12 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 13
In 1996, net interest income reached a record high of $2.8 billion, up $74
million, or 3%, from the prior year. This followed a decrease of $59 million in
1995 relative to the comparable 1994 period. The 1996 increase resulted from a
net interest margin which rose 31 basis points to 4.78% and more than offset the
effect of a managed decrease of $2.4 billion, or 4%, in average earning assets.
In 1995, the decrease in net interest income was attributable to a 36 basis
point decline in the net interest margin to 4.47%, which more than offset the
impact of a $3.3 billion, or 6%, increase in average earning assets.
As shown in Figures 5 and 6, the net interest margin was 4.78% for 1996,
compared with 4.47% in 1995 and 4.83% in 1994. The increase in the net interest
margin in 1996 resulted from a number of factors. Primary among these factors
were the origination of new loans with wider interest rate spreads and the
impact of actions taken in both 1996 and 1995 to reduce lower spread assets by
means of their maturity, run-off, securitization and sale. These actions are
more fully described in the following Asset and Liability Management section.
Another factor which contributed to the improved margin was the completion
during the first quarter of 1996 of the amortization of deferred swap losses
resulting from interest rate swap terminations taken late in 1994 and early in
1995 to reduce Key's exposure to changes in interest rates. Swap terminations
are discussed in greater detail in Note 19, Financial Instruments with
Off-Balance Sheet Risk, beginning on page 64. In 1996, the net interest margin
also benefited from the June 1996 sale of SFF. Although this transaction
reduced net interest income during the last half of 1996, it had a positive
impact on the net interest margin since SFF's net interest margin was lower
than Key's. The positive impact of the above factors was moderated somewhat by
the effect of the funding costs associated with the Common Share repurchase
programs. In 1995, the 36 basis point reduction in the net interest margin was
attributable to the growth in earning assets (principally new loan
originations) at reduced spreads, increased reliance on market-priced funding
alternatives with relatively higher interest rates, and actions taken
(primarily the sales of certain securities and the execution of pay fixed
swaps) by management during the 1994 fourth quarter and the 1995 first quarter
to reduce Key's exposure to changes in interest rates.
Average earning assets in 1996 totaled $57.8 billion, which was $2.4 billion, or
4%, lower than the prior year. This decrease was due primarily to a $2.3
billion, or 20%, decline in securities (including both investment securities and
securities available for sale) and a $264 million, or 33%, decline in short-term
investments. The planned reduction in securities is part of Key's overall
asset/liability management strategy, which is discussed under Management Actions
in the following Asset and Liability Management section. The level of short-term
investments was reduced in 1996 as a result of programs instituted to better
manage securities used to meet the collateral requirements of the affiliate
banks. In 1995, the growth in average earning assets resulted principally from a
higher level of loans which rose $4.6 billion, or 10%, reflecting the impact of
acquisitions as well as internal loan growth. As illustrated in Figure 6, the
largest increases in 1995 loans relative to the prior year occurred in the
commercial, financial and agricultural; commercial mortgage and residential real
estate portfolios. Average earning assets comprised 89% of average total assets
during 1996 and 90% during 1995.
Although the level of average loans outstanding during 1996 increased only
slightly from the prior year, the composition of the total loan portfolio
changed dramatically. Specifically, increases in loans targeted for growth (such
as commercial, home equity, credit card and consumer installment loans) were
offset by a reduction in residential mortgage loans. The decrease in the
mortgage loan portfolio reflects Key's continued strategy of securitizing and/or
selling selected loans which do not meet certain return on equity, credit and
other internal standards. As a result of the employment of this strategy and the
decrease in the securities portfolio discussed above, during the first three
quarters of 1996 Key experienced a gradual reduction in average total earning
assets. This trend was reversed, however, during the fourth quarter of 1996 as
the growth in targeted loans exceeded the decline in lower spread assets. The
pace of reductions in both residential mortgage loans and securities has begun
to slow. Factors impacting the composition of Key's loan portfolio are more
fully described in the Loan section beginning on page 25.
Figure 5 Net Interest Margin (TE)
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net interest margin (TE) 5.31% 5.31% 4.83% 4.47% 4.78%
Yield on earning assets (TE) 9.00% 8.29% 7.99% 8.60% 8.65%
Cost of funds 3.69% 2.98% 3.16% 4.13% 3.87%
<FN>
TE = Taxable Equivalent
</TABLE>
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 13
<PAGE> 14
Figure 6 Average Balance Sheets, Net Interest Income and Yield/Rates
<TABLE>
<CAPTION>
Year ended December 31,
1996 1995 1994
- ------------------------------------------------------------------ ----------------------------- --------------------------
Average Yield/ Average Yield/ Average Yield/
dollars in millions Balance Interest Rate Balance Interest Rate Balance Interest Rate
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Loans(3,4)
Commercial, financial and agricultural $11,970 $1,070 8.94% $11,252 $1,027 9.13% $ 9,762 $ 856 8.77%
Real estate--commercial mortgage 7,039 648 9.21 7,115 678 9.53 6,396 553 8.65
Real estate--construction 1,631 166 10.18 1,416 148 10.45 1,207 107 8.86
Commercial lease financing 2,372 148 6.24 1,876 125 6.66 1,384 94 6.79
- -------------------------------------------------------------------------------------------------------------------------------
Total commercial loans 23,012 2,032 8.83 21,659 1,978 9.13 18,749 1,610 8.59
Real estate--residential 7,224 593 8.21 9,554 762 7.98 8,699 653 7.51
Credit card 1,665 243 14.59 1,386 210 15.15 1,361 194 14.25
Other consumer 13,887 1,284 9.25 13,042 1,197 9.18 12,383 1,054 8.51
- -------------------------------------------------------------------------------------------------------------------------------
Total consumer loans 22,776 2,120 9.31 23,982 2,169 9.04 22,443 1,901 8.47
Loans held for sale 2,428 198 8.15 2,371 201 8.48 2,271 160 7.05
- -------------------------------------------------------------------------------------------------------------------------------
Total loans 48,216 4,350 9.02 48,012 4,348 9.06 43,463 3,671 8.45
Taxable investment securities 246 14 5.69 7,807 521 6.67 7,664 507 6.61
Tax-exempt investment securities(3) 1,425 114 8.00 1,482 126 8.47 1,579 136 8.63
- -------------------------------------------------------------------------------------------------------------------------------
Total investment securities 1,671 128 7.66 9,289 647 6.96 9,243 643 6.96
Securities available for sale(3,5) 7,423 495 6.69 2,103 136 6.40 4,066 228 5.50
Interest-bearing deposits with banks 24 1 4.17 138 8 5.86 34 2 4.47
Federal funds sold and securities
purchased under resale agreements 463 25 5.40 533 32 5.91 71 3 4.18
Trading account assets 48 2 4.17 128 7 6.00 39 2 5.23
- -------------------------------------------------------------------------------------------------------------------------------
Total short-term investments 535 28 5.23 799 47 5.91 144 7 4.53
- -------------------------------------------------------------------------------------------------------------------------------
Total earning assets 57,845 5,001 8.65 60,203 5,178 8.60 56,916 4,549 7.99
Allowance for loan losses (872) (868) (821)
Other assets 7,846 7,307 6,466
- -------------------------------------------------------------------------------------------------------------------------------
$64,819 $66,642 $62,561
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Money market deposit accounts $10,211 311 3.05 $ 7,161 261 3.64 $ 7,197 197 2.74
Savings deposits 5,604 138 2.46 6,506 174 2.68 7,697 205 2.66
NOW accounts 2,438 48 1.97 5,444 110 2.02 5,559 106 1.91
Certificates ($100,000 or more) 3,377 199 5.89 3,677 222 6.03 2,992 146 4.88
Other time deposits 13,723 720 5.25 14,466 783 5.41 12,338 544 4.41
Deposits in foreign offices 996 53 5.32 2,182 155 7.12 3,015 127 4.21
- -------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 36,349 1,469 4.04 39,436 1,705 4.32 38,798 1,325 3.41
Federal funds purchased and securities
sold under repurchase agreements 5,843 295 5.05 5,623 315 5.60 5,850 243 4.16
Other short-term borrowings 3,279 197 6.01 3,362 204 6.05 1,930 91 4.71
Long-term debt(6) 4,296 273 6.43 3,895 261 6.84 2,234 138 6.35
- -------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 49,767 2,234 4.49 52,316 2,485 4.75 48,812 1,797 3.69
Noninterest-bearing deposits 8,374 8,129 8,046
Other liabilities 1,644 1,373 1,104
Capital securities 28 -- --
Preferred stock 79 160 160
Common shareholders' equity 4,927 4,664 4,439
- -------------------------------------------------------------------------------------------------------------------------------
$64,819 $66,642 $62,561
======= ======= =======
Interest rate spread (TE) 4.16 3.85 4.30
- -------------------------------------------------------------------------------------------------------------------------------
Net interest income (TE) and net
interest margin (TE) $2,767 4.78% $2,693 4.47% $2,752 4.83%
====== ==== ====== ==== ====== ====
Taxable-equivalent adjustment(3) $50 $57 $59
- -------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) For years prior to 1994, all real estate loans are included in real
estate--residential loans.
(2) For years prior to 1994, credit card receivables are included in consumer
loans.
(3) Interest income on tax-exempt securities and loans has been adjusted to a
taxable-equivalent basis using the statutory Federal income tax rate of 35%
for years subsequent to 1992 and 34% for years prior to 1993.
(4) For purposes of these computations, nonaccrual loans are included in
average loan balances.
(5) Yield is calculated on the basis of amortized cost.
(6) Rate calculation excludes ESOP debt.
N/M = Not Meaningful
TE = Taxable Equivalent
</TABLE>
Financial Page 14 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 15
<TABLE>
<CAPTION>
Year ended December 31,
1993 1992
- ------------------------------------------------------------------------------- ---------------------------------------
Average Yield/ Average Yield/
dollars in millions Balance Interest Rate Balance Interest Rate
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans(3,4)
Commercial, financial and agricultural $ 9,120 $ 735 8.06% $10,926 $ 921 8.43%
Real estate--commercial mortgage See note(1) See note(1) See note(1) See note(1) See note(1) See note(1)
Real estate--construction See note(1) See note(1) See note(1) See note(1) See note(1) See note(1)
Commercial lease financing 1,387 109 7.86 1,006 84 8.35
- -------------------------------------------------------------------------------------------------------------------------
Total commercial loans 10,507 844 8.03 11,932 1,005 8.42
Real estate--residential 17,612 1,478 8.39 13,315 1,165 8.75
Credit card See note(2) See note(2) See note(2) See note(2) See note(2) See note(2)
Other consumer 8,993 926 10.30 10,061 1,100 10.93
- -------------------------------------------------------------------------------------------------------------------------
Total consumer loans 26,605 2,404 9.04 23,376 2,265 9.69
Loans held for sale 2,251 151 6.71 717 59 8.23
- -------------------------------------------------------------------------------------------------------------------------
Total loans 39,363 3,399 8.68 36,025 3,329 9.26
Taxable investment securities 7,769 556 7.16 7,985 677 8.48
Tax-exempt investment securities(3) 1,787 159 8.87 1,881 176 9.36
- -------------------------------------------------------------------------------------------------------------------------
Total investment securities 9,556 715 7.48 9,866 853 8.65
Securities available for sale(3,5) 2,070 141 6.84 801 57 7.14
Interest-bearing deposits with banks 427 15 3.49 477 20 4.21
Federal funds sold and securities
purchased under resale agreements 166 6 3.61 269 11 3.83
Trading account assets 17 1 3.37 23 1 4.46
- -------------------------------------------------------------------------------------------------------------------------
Total short-term investments 610 22 3.52 769 32 4.08
- -------------------------------------------------------------------------------------------------------------------------
Total earning assets 51,599 4,277 8.29 47,461 4,271 9.00
Allowance for loan losses (804) (806)
Other assets 6,256 5,698
- -------------------------------------------------------------------------------------------------------------------------
$57,051 $52,353
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Money market deposit accounts $ 7,307 189 2.59 $ 7,648 248 3.25
Savings deposits 7,383 214 2.90 5,321 181 3.41
NOW accounts 5,314 109 2.06 4,429 121 2.73
Certificates ($100,000 or more) 3,089 138 4.47 3,573 188 5.25
Other time deposits 12,443 551 4.42 13,382 717 5.36
Deposits in foreign offices 1,019 32 3.09 368 14 3.72
- -------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 36,555 1,233 3.37 34,721 1,469 4.23
Federal funds purchased and securities
sold under repurchase agreements 4,378 130 2.97 4,062 143 3.52
Other short-term borrowings 1,196 45 3.72 722 31 4.31
Long-term debt(6) 1,896 127 6.96 1,463 107 7.70
- -------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 44,025 1,535 3.49 40,968 1,750 4.28
Noninterest-bearing deposits 7,786 6,661
Other liabilities 1,051 1,001
Capital securities -- --
Preferred stock 184 244
Common shareholders' equity 4,005 3,479
- -------------------------------------------------------------------------------------------------------------------------
$57,051 $52,353
======= =======
Interest rate spread (TE) 4.80 4.72
- -------------------------------------------------------------------------------------------------------------------------
Net interest income (TE) and net
interest margin (TE) $2,742 5.31% $2,521 5.31%
====== ==== ====== ====
Taxable-equivalent adjustment(3) $63 $72
- -------------------------------------------------------------------------------------------------------------------------
<FN>
(1) For years prior to 1994, all real estate loans are included in real
estate--residential loans.
(2) For years prior to 1994, credit card receivables are included in consumer
loans.
(3) Interest income on tax-exempt securities and loans has been adjusted to a
taxable-equivalent basis using the statutory Federal income tax rate of 35%
for years subsequent to 1992 and 34% for years prior to 1993.
(4) For purposes of these computations, nonaccrual loans are included in
average loan balances.
(5) Yield is calculated on the basis of amortized cost.
(6) Rate calculation excludes ESOP debt.
N/M = Not Meaningful
TE = Taxable Equivalent
</TABLE>
<TABLE>
<CAPTION>
Compound Annual
Year ended December 31, Rate of Change
1991 (1991-1996)
- -------------------------------------------------------------------------------- -------------------------
Average Yield/ Average
dollars in millions Balance Interest Rate Balance Interest
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Loans(3,4)
Commercial, financial and agricultural $11,838 $1,156 9.77% .2% (1.5)%
Real estate--commercial mortgage See note(1) See note(1) See note(1) See note(1) See note(1)
Real estate--construction See note(1) See note(1) See note(1) See note(1) See note(1)
Commercial lease financing 823 77 9.36 23.6 14.0
- ------------------------------------------------------------------------------------------------------------
Total commercial loans 12,661 1,233 9.74 12.7 10.5
Real estate--residential 12,970 1,302 10.04 (11.0) (14.6)
Credit card See note(2) See note(2) See note(2) See note(2) See note(2)
Other consumer 9,519 1,144 12.02 7.8 2.3
- ------------------------------------------------------------------------------------------------------------
Total consumer loans 22,489 2,446 10.88 .3 (2.8)
Loans held for sale 499 47 9.42 37.2 33.3
- ------------------------------------------------------------------------------------------------------------
Total loans 35,649 3,726 10.47 6.2 3.1
Taxable investment securities 7,441 678 9.11 (49.4) (54.0)
Tax-exempt investment securities(3) 1,856 185 9.97 (5.1) (9.2)
- ------------------------------------------------------------------------------------------------------------
Total investment securities 9,297 863 9.28 (29.1) (31.7)
Securities available for sale(3,5) 750 60 7.94 58.2 52.5
Interest-bearing deposits with banks 592 41 6.96 (47.3) (52.4)
Federal funds sold and securities
purchased under resale agreements 726 41 5.59 (8.6) (9.4)
Trading account assets 52 3 6.91 (1.6) (7.8)
- ------------------------------------------------------------------------------------------------------------
Total short-term investments 1,370 85 6.23 (17.1) (19.9)
- ------------------------------------------------------------------------------------------------------------
Total earning assets 47,066 4,734 10.06 4.2 1.1
Allowance for loan losses (704) 4.4
Other assets 5,634 6.8
- ------------------------------------------------------------------------------------------------------------
$51,996 4.5
=======
LIABILITIES AND SHAREHOLDERS' EQUITY
Money market deposit accounts $ 6,733 342 5.08 8.7 (1.9)
Savings deposits 3,989 185 4.62 7.0 (5.7)
NOW accounts 3,760 163 4.34 (8.3) (21.7)
Certificates ($100,000 or more) 4,912 337 6.86 (7.2) (10.0)
Other time deposits 15,479 1,085 7.01 (2.4) (7.9)
Deposits in foreign offices 367 24 6.48 22.1 17.2
- ------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 35,240 2,136 6.06 .6 (7.2)
Federal funds purchased and securities
sold under repurchase agreements 3,808 214 5.61 8.9 6.6
Other short-term borrowings 1,188 74 6.27 22.5 21.6
Long-term debt(6) 1,220 95 8.32 28.6 23.5
- ------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 41,456 2,519 6.09 3.7 (2.4)
Noninterest-bearing deposits 6,228 6.1
Other liabilities 943 11.8
Capital securities -- N/M
Preferred stock 166 (13.8)
Common shareholders' equity 3,203 9.0
- ------------------------------------------------------------------------------------------------------------
$51,996 4.5
=======
Interest rate spread (TE) 3.97
- ------------------------------------------------------------------------------------------------------------
Net interest income (TE) and net
interest margin (TE) $2,215 4.71% 4.6%
====== ====
Taxable-equivalent adjustment(3) $82 (9.4)%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 15
<PAGE> 16
Key uses portfolio interest rate swaps (as defined in Note 19, Financial
Instruments with Off-Balance Sheet Risk, beginning on page 64) in the management
of its interest rate sensitivity position. The notional amount of such swaps
increased to $12.3 billion at December 31, 1996, from $11.1 billion at year end
1995. The increase was due primarily to the execution of pay fixed swaps in
connection with efforts to manage Key's exposure to rising interest rates. For
1996, interest rate swaps contributed $66 million and 11 basis points to net
interest income and the net interest margin, respectively, including the impact
of both the spread on the swap portfolio and the amortization of deferred gains
and losses resulting from terminated swaps. In 1995, interest rate swaps reduced
net interest income by $29 million and the net interest margin by 5 basis points
compared with contributions of $99 million and 17 basis points, respectively, in
1994. These changes should not be viewed in isolation, however, because the swap
portfolio is used in Key's overall program of asset and liability management as
described in the following Asset and Liability Management section, and changes
in the interest cash flows of the swap portfolio are substantially offset by
changes in the interest cash flows of the assets or liabilities whose
characteristics the swaps are intended to alter.
Figure 7 1996 Average Earning Assets Mix
<TABLE>
<S> <C>
Securities 15.7%
Short-term investments .9%
Total loans 83.4%
</TABLE>
Figure 8 1996 Mix of Funding for Average Earning Assets
<TABLE>
<S> <C>
Noninterest-bearing deposits 14.4%
Interest-bearing deposits 62.5%
Short-term borrowings 15.7%
Long-term debt 7.4%
</TABLE>
Figure 9 Components of Net Interest Income Changes
<TABLE>
<CAPTION>
1996 vs 1995 1995 vs 1994
- ----------------------------------------------------------------------------------------------------------------------
Average Yield/ Net Average Yield/ Net
in millions Volume Rate Change Volume Rate Change
- ----------------------------------------------------------------------------------------------------------------------
INTEREST INCOME
<S> <C> <C> <C> <C> <C> <C>
Loans $ 18 $ (16) $ 2 $ 413 $ 264 $677
Taxable investment securities (440) (67) (507) 10 4 14
Tax-exempt investment securities (5) (7) (12) (8) (2) (10)
Securities available for sale 355 4 359 (123) 31 (92)
Short-term investments (14) (5) (19) 38 2 40
- ----------------------------------------------------------------------------------------------------------------------
Total interest income (TE) (86) (91) (177) 330 299 629
INTEREST EXPENSE
Money market deposit accounts 98 (48) 50 (1) 65 64
Savings deposits (23) (13) (36) (32) 1 (31)
NOW accounts (59) (3) (62) (3) 7 4
Certificates of deposit ($100,000 or more) (18) (5) (23) 38 38 76
Other time deposits (39) (24) (63) 103 136 239
Deposits in foreign offices (70) (32) (102) (42) 70 28
- ----------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits (111) (125) (236) 63 317 380
Federal funds purchased and securities
sold under repurchase agreements 12 (32) (20) (9) 81 72
Other short-term borrowings (5) (2) (7) 82 31 113
Long-term debt 26 (14) 12 110 13 123
- ----------------------------------------------------------------------------------------------------------------------
Total interest expense (78) (173) (251) 246 442 688
- ----------------------------------------------------------------------------------------------------------------------
Net interest income (TE) $ (8) $ 82 $ 74 $ 84 $(143) $(59)
==== ===== ===== ===== ===== =====
- ----------------------------------------------------------------------------------------------------------------------
<FN>
The change in interest not due solely to volume or rate has been allocated in
proportion to the absolute dollar amounts of the change in each.
TE = Taxable Equivalent
</TABLE>
Financial Page 16 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 17
ASSET AND LIABILITY MANAGEMENT
Asset/Liability Management Committees
Key manages its exposure to economic loss from fluctuations in interest rates
through an active program of asset and liability management pursuant to
guidelines established by its Asset/Liability Management Policy Committee, and
strategies formulated and implemented by the Asset/Liability Strategy Committee
(collectively, "ALCO"). The ALCO has the responsibility for approving the
asset/liability management policies of Key, formulating and implementing
strategies to improve balance sheet positioning and/or earnings, and reviewing
the interest rate sensitivity positions of Key and each of its affiliate banks.
Both asset/liability management committees meet at least monthly.
Short-term Interest Rate Exposure
The primary tool utilized by management to measure and manage interest rate
exposure is a simulation model. Use of the model to perform simulations of
changes in interest rates over one- and two-year time horizons has enabled
management to develop strategies for managing exposure to interest rate risk. In
its simulations, management estimates the impact on net interest income of
various pro forma changes in the overall level of interest rates. These
estimates are based on a large number of assumptions related to loan and deposit
growth, prepayments, interest rates, and other factors. Management believes that
both individually and in the aggregate these assumptions are reasonable, but the
complexity of the simulation modeling process results in a sophisticated
estimate, not an absolutely precise calculation of exposure. For example,
estimates of future cash flows must be made for instruments without contractual
payment schedules. The ALCO guidelines provide that a gradual 200 basis point
increase or decrease in short-term rates over the next 12-month period should
not result in more than a 2% impact on net interest income from what net
interest income would have been if interest rates did not change. As shown in
Figure 10, Key has been operating well within these guidelines.
Short-term interest rate exposure analysis is supplemented with an interest rate
sensitivity gap ("gap") model. This model measures the difference between assets
and liabilities repricing or maturing within specified time periods. An
asset-sensitive position indicates that there are more rate-sensitive assets
than rate-sensitive liabilities repricing or maturing during specified time
horizons, which would generally imply a favorable impact on net interest income
in periods of rising interest rates. Conversely, a liability-sensitive position,
where rate-sensitive liabilities exceed the amount of rate-sensitive assets
repricing or maturing within applicable time frames, would generally imply a
favorable impact on net interest income in periods of declining interest rates.
The interest rate gap analysis table shown in Figure 11 presents the gap
position (including the impact of portfolio interest rate swap contracts) of Key
at December 31, 1996. Gap analysis has several limitations. For example, it does
not take into consideration ongoing loan and deposit
Figure 10 Net Interest Income at Risk to Changes in Interest Rates
<TABLE>
<CAPTION>
Estimated Change in Net Interest Income
Mar95 Jun95 Sep 95 Dec 95 Mar96 Jun96 Sep96 Dec96
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gradual 200 Basis Point
Decrease in Rates Over
Next 12 Months .27% .27% .23% .30% .89% .92% .60% .71%
Gradual 200 Basis Point
Increase in Rates Over -1.27% -1.10% -1.20% -1.24% -1.34% -1.13% -1.23% -1.28%
Next 12 Months
</TABLE>
Figure 11 Interest Rate Gap Analysis
<TABLE>
<CAPTION>
December 31, 1996
1 to 90 91 to 180 181 to 365 1 to 5 Over 5
dollars in millions Days Days Days Years Years Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans $24,605 $ 3,186 $ 5,665 $12,866 $ 2,913 $49,235
Investment securities 86 259 241 730 285 1,601
Securities available for sale 799 336 1,108 3,037 2,448 7,728
Short-term investments 696 -- -- -- -- 696
Other assets 1,641 1,089 927 1,604 3,100 8,361
- -----------------------------------------------------------------------------------------------------------------------------
Total assets 27,827 4,870 7,941 18,237 8,746 67,621
- -----------------------------------------------------------------------------------------------------------------------------
Noninterest-bearing deposits 1,673 457 834 3,991 2,569 9,524
Interest-bearing deposits 11,518 3,853 5,380 11,600 3,442 35,793
Borrowed funds 11,188 419 574 810 2,116 15,107
Other liabilities 300 408 409 506 193 1,816
Capital securities -- -- -- -- 500 500
Shareholders' equity -- -- -- -- 4,881 4,881
- -----------------------------------------------------------------------------------------------------------------------------
Total liabilities, capital securities
and shareholders' equity 24,679 5,137 7,197 16,907 13,701 67,621
- -----------------------------------------------------------------------------------------------------------------------------
Interest rate swap contracts (3,591) (1,438) 21 1,648 3,360 --
- -----------------------------------------------------------------------------------------------------------------------------
Rate sensitivity gap $ (443) $(1,705) $ 765 $ 2,978 $ (1,595) --
Cumulative gap $ (443) $(2,148) $(1,383) $ 1,595 -- --
- -----------------------------------------------------------------------------------------------------------------------------
Cumulative gap as a % of earning assets (.75)% (3.63)% (2.33)% 2.69% -- --
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 17
<PAGE> 18
activity of Key's core businesses, the varying degrees of interest rate
sensitivity pertaining to the assets and liabilities that reprice within very
short time frames or the various spreads on different assets and liabilities
maturing within a given time frame. Such characteristics are considered in the
simulation model. The cumulative interest rate sensitivity gap within the
one-year time frame shown in Figure 11 indicated that Key was slightly liability
sensitive.
Long-term Interest Rate Exposure
Short-term interest rate exposure analysis is complemented by an economic value
of equity model. This model provides the added benefit of measuring the exposure
to interest rate changes outside the one- to two-year time frame not measured by
the simulation model. The economic value of Key's equity is determined by
modeling the net present value of future cash flows for asset, liability, and
off-balance sheet positions based on the implied forward yield curve. Economic
value analysis has several limitations including: the economic values of asset,
liability, and off-balance sheet positions do not represent the true fair values
of the positions, since they do not consider factors such as credit risk and
liquidity; indeterminate maturity assets and liabilities require that estimated
cash flows be developed; the future structure of the balance sheet derived from
ongoing loan and deposit activity by Key's core businesses is not factored into
present value calculations; and the analysis requires assumptions about events
that span an even longer time frame than that used in the simulation model. The
economic value analysis as of December 31, 1996, shown in Figure 12,
demonstrates the sensitivity of Key's economic value of equity as a percent of
the base economic value of assets to an immediate 200 basis point increase or
decrease in interest rates. Key is currently in the process of defining policy
guidelines for managing long-term interest rate risk.
Figure 12 Long-term Interest Rate Exposure
<TABLE>
<CAPTION>
December 31, 1996
Changes In Interest Rates
--------------------------------------
+200 Basis Points -200 Basis Points
- ---------------------------------------------------------------------------
<S> <C> <C>
Change in economic value
of equity as a percent of the
base economic value of assets(1) -1.3% +0.6%
==== ====
- ---------------------------------------------------------------------------
<FN>
(1) The base economic value of assets represents the net present value of
future cash flows (discounted at current interest rates) for total assets,
adjusted for Key's off-balance sheet asset and liability management
portfolios.
</TABLE>
Management Actions
During the first quarter of 1995, management completed the reconfiguration of
Key's balance sheet in accordance with plans initially announced the previous
December. The objective of this reconfiguration was to reduce Key's exposure to
changes in interest rates. At the time the plans were announced, Key's
liability-sensitive position was moderately in excess of the ALCO guidelines.
Implementation of the balance sheet reconfiguration plans began during the
fourth quarter of 1994 with the sale of $878 million of securities with an
aggregate weighted average yield of 5.67%. This was followed by the first
quarter 1995 sale of $ 1.2 billion of securities with an aggregate weighted
average yield of 6.24%. In addition, over these two quarters Key executed $2.1
billion of portfolio interest rate swaps that received a variable rate and paid
a fixed rate, and terminated $1.6 billion of portfolio interest rate swaps that
received a fixed rate and paid a variable rate. During the fourth quarter of
1994 and the first quarter of 1995, Key also issued fixed-rate debt totaling
$245 million. While these actions reduced Key's exposure to changes in
short-term interest rates, net interest income and the net interest margin were
negatively impacted due to increased reliance on fixed rate market priced
funding at higher interest rates.
During the latter half of 1995, a number of actions were taken in connection
with the execution of asset/liability management strategies designed to fund
loan growth, improve liquidity, reduce longer-term interest rate exposure and
enhance capital management flexibility. These actions included the
securitization and sale of low margin prime auto loans (in the amount of $299
million), the sale of approximately $1.0 billion of residential mortgage loans,
the reclassification of approximately $8.0 billion of securities from the
investment securities to the securities available-for-sale portfolio in
connection with a one-time opportunity provided by the Financial Accounting
Standards Board ("FASB"), the sale of $1.3 billion of securities and the
execution of $1.0 billion of indexed amortizing receive fixed swaps and $1.0
billion of pay fixed swaps. During the same period, Key repurchased 5,813,450 of
its Common Shares.
Similar actions were taken in 1996 as Key sold residential mortgage loans
totaling $500 million and securitized and sold sub-prime auto loans totaling
$212 million. Other actions taken during 1996 included the repurchase of
14,620,000 Common Shares and the continued run-off of lower-yielding securities
and residential mortgage loans. In addition, Key continued to utilize both
portfolio interest rate swaps, which are more fully discussed below, and
interest rate caps and floors to manage its interest rate risk. Management will
continue to evaluate strategies to securitize and/or sell loans, taking into
account the strategies' impacts on liquidity, capital and earnings.
Portfolio Interest Rate Swap Contracts
In addition to Key's securities portfolios and debt issuances, management has
utilized interest rate swaps to manage interest rate risk by modifying the
repricing or maturity characteristics of specified on-balance sheet assets and
liabilities. Interest rate swaps used for this purpose are designated as
portfolio swaps. The decision to use portfolio interest rate swaps versus
on-balance sheet securities or debt to manage interest rate risk depends on
various factors, including the mix and cost of funding sources, liquidity and
capital requirements. As summarized in Figure 13, Key's portfolio swaps totaled
$12.3 billion and $11.1 billion at December 31, 1996 and 1995, respectively, and
consisted principally of contracts wherein Key receives a fixed rate of interest
while paying a variable rate.
Financial Page 18 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 19
Figure 13 Interest Rate Swap Portfolio
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
- ------------------------------------------------------------------------------------------------ --------------------
Weighted Average Rate
Notional Fair Maturity --------------------- Notional Fair
dollars in millions Amount Value (years) Receive Pay Amount Value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Receive fixed/pay variable--
indexed amortizing(1) $ 5,078 $ (8) 2.1 6.77% 5.56% $ 6,200 $ 70
Receive fixed/pay variable--
conventional 3,505 21 7.1 6.75 5.56 2,497 104
Pay fixed/receive variable--
conventional 3,312 (5) 1.1 5.50 6.09 2,412 (21)
Basis swaps 400 -- .6 5.52 5.48 -- --
- ------------------------------------------------------------------------------------------------------------------------
Total portfolio swaps 12,295 8 3.2 6.38 5.70 11,109 153
Customer swaps 5,644 20 4.8 6.26 6.23 2,844 11
- ------------------------------------------------------------------------------------------------------------------------
Total interest rate swaps $17,939 $28 3.7 6.34% 5.87% $13,953 $164
======= === ======= ====
- ------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Maturity is based upon expected average lives rather than contractual maturity.
</TABLE>
Conventional interest rate swap contracts involve the receipt of amounts based
on fixed or variable rates in exchange for payments based on variable or fixed
rates, without an exchange of the underlying notional amount. Under an indexed
amortizing swap contract, the notional amount remains constant for a specified
period of time after which, based upon the level of an index at each review
date, the swap contract will mature, the notional amount will amortize, or the
swap will continue in effect until its contractual maturity. Otherwise, the
characteristics of these swaps are similar to those of conventional swap
contracts. Under basis swap contracts, interest payments based on different
floating indices are exchanged.
The weighted average rates presented in Figure 13 are those in effect at
December 31, 1996. Portfolio interest rate swaps increased net interest income
and the net interest margin by $66 million and by 11 basis points, respectively,
during 1996. These increases reflected the impact of a positive spread on the
1996 swap portfolio, which more than offset the amortization of deferred losses
from swaps terminated in prior periods. As of December 31, 1996, the spread on
portfolio interest rate swaps, which excludes the amortization of deferred swap
gains and losses, provided a positive impact on net interest income (since the
weighted average rate received exceeded the weighted average rate paid by 68
basis points). The portfolio had an aggregate fair value of $8 million at the
same date. The aggregate fair value was estimated through the use of discounted
cash flow models which contemplate interest rates using the applicable forward
yield curve. As shown in Figure 13, the estimated fair value of Key's portfolio
interest rate swaps decreased during 1996 from a fair value of $153 million at
December 31, 1995. The decline in fair value over the past year reflected the
financial markets' expectations, as measured by the forward yield curve, for a
future increase in interest rates and the fact that Key's swap portfolio is
primarily in a receive fixed position. During 1995, swaps with an aggregate
notional amount of $1.4 billion were terminated prior to their maturities,
resulting in net deferred losses of $49 million. This was followed by the 1996
termination of swaps with a notional amount of $800 million, resulting in a
deferred gain of $.3 million.
Figure 14 Portfolio Swap Activity
<TABLE>
<CAPTION>
Receive Fixed
--------------------------- Total
Indexed Pay Fixed- Basis Forward- Portfolio
in millions Amortizing Conventional Conventional Swaps Starting Swaps
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993 $5,250 $2,309 $ 150 $150 $500 $ 8,359
Additions 3,750 2,163 1,807 200 50 7,970
Maturities 600 1,512 100 150 -- 2,362
Terminations 2,500 -- 400 -- 500 3,400
Forward-starting becoming effective -- 50 -- -- (50) --
Amortization 114 -- -- -- -- 114
- -----------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994 5,786 3,010 1,457 200 -- 10,453
Additions 2,010 217 2,030 -- -- 4,257
Maturities -- 605 1,075 200 -- 1,880
Terminations 1,300 125 -- -- -- 1,425
Amortization 296 -- -- -- -- 296
- -----------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995 6,200 2,497 2,412 -- -- 11,109
Additions -- 1,341 2,232 400 -- 3,973
Maturities -- 133 732 -- -- 865
Terminations -- 200 600 -- -- 800
Amortization 1,122 -- -- -- -- 1,122
- -----------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 $5,078 $3,505 $3,312 $400 -- $12,295
====== ====== ====== ==== ==== =======
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 19
<PAGE> 20
Such gains and losses are amortized, generally, over the projected remaining
life of the related swap contract at its termination, and recorded as an
adjustment of the yield on the respective on-balance sheet instrument that was
being managed. A summary of Key's deferred swap gains and losses at December 31,
1996, is presented in Note 19, Financial Instruments with Off-Balance Sheet
Risk, beginning on page 64. Each swap termination was in response to a unique
set of circumstances and for various reasons; however, the decision to terminate
a swap contract is integrated strategically with asset and liability management
and other appropriate processes. These terminations as well as other portfolio
swap activity are summarized in Figure 14.
A summary of the notional and fair values of portfolio swaps by interest rate
management strategy at December 31, 1996, is presented in Figure 15. The fair
value at any given date represents the estimated income (if positive) or cost
(if negative) that would be recognized if the portfolio were to be liquidated at
that date. However, because the portfolio interest rate swaps are used to alter
the repricing or maturity characteristics of specific assets and liabilities,
the net unrealized gains and losses related to the swaps are not recognized in
earnings. Rather, interest from these swaps is recognized on an accrual basis as
an adjustment of the interest income or expense from the asset or liability
being managed.
Figure 15 Portfolio Swaps by Interest Rate Management Strategy
<TABLE>
<CAPTION>
December 31,
1996 1995
----------------------- -----------------------
Notional Fair Notional Fair
in millions Amount Value Amount Value
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Convert variable rate loans to fixed $ 6,443 $(20) $ 7,567 $113
Convert variable rate deposits and short-term
borrowings to fixed 3,082 (4) 2,275 (18)
Convert variable rate long-term debt to fixed 230 (1) 137 (3)
Convert fixed rate long-term debt to variable 2,140 33 1,130 61
Basis swaps 400 -- -- --
- -----------------------------------------------------------------------------------------------------------------
Total portfolio swaps $12,295 $ 8 $11,109 $153
======= ==== ======= ====
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The notional amount of the interest rate swap contracts represents only an
agreed upon amount on which calculations of interest payments to be exchanged
are based. It does not represent the potential for gain or loss on such
positions, nor an obligation to pay the notional amount. Similarly, the notional
amount is not indicative of the market risk or the credit risk of the positions
held. Credit risk is the possibility that the counterparty will not meet the
terms of the swap contract and is measured as the cost of replacing, at current
market rates, contracts in an unrealized gain position. The credit risk exposure
to the counterparty on each interest rate swap is monitored by a credit
committee. Based upon detailed credit reviews of the counterparties, limits on
the total credit exposure Key may have with each counterparty, and whether
collateral is required, are determined.
At December 31, 1996, Key had 18 different counterparties to portfolio swaps and
swaps entered into to offset the risk of customer swaps discussed on the
following page. Of these counterparties, Key had an aggregate credit exposure of
$28 million to eleven, with the largest credit exposure to an individual
counterparty amounting to $7 million. Although Key is exposed to credit related
losses in the event of nonperformance by the counterparties, based on
management's assessment, as of December 31, 1996, all counterparties were
expected to meet their obligations. The expected average maturities of the
portfolio swaps at December 31, 1996, are summarized in Figure 16.
Figure 16 Expected Average Maturities of Portfolio Swaps
<TABLE>
<CAPTION>
December 31, 1996
Receive Fixed
---------------------------- Total
Indexed Pay Fixed- Basis Portfolio
in millions Amortizing Conventional Conventional Swaps Swaps
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Due in one year or less $ 286 $ 200 $1,880 $400 $ 2,766
Due after one through five years 4,607 130 1,430 -- 6,167
Due after five through ten years 185 2,940 2 -- 3,127
Due after ten years -- 235 -- -- 235
- -------------------------------------------------------------------------------------------------------------
Total portfolio swaps $5,078 $3,505 $3,312 $400 $12,295
====== ====== ====== ==== =======
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Financial Page 20 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 21
In June 1996, the FASB issued an Exposure Draft of a proposed SFAS, "Accounting
for Derivative and Similar Financial Instruments and for Hedging Activities." If
adopted in its present form, this SFAS would eliminate indexed amortizing swaps
as a permitted instrument for hedging activities and, therefore, would likely
alter Key's use of this instrument in the future. It is not clear whether this
SFAS will be adopted in its present form, and it is not currently practicable to
estimate the potential effects of any final standard.
Key also uses interest rate caps and floors, and futures contracts to manage the
risk associated with the potential impact of adverse movements in interest
rates. Futures contracts are commitments to either purchase or sell designated
financial instruments at future dates for specific prices. Key had caps and
floors with a notional amount and fair value of $1.4 billion and $7 million,
respectively, at December 31, 1996. There were no futures contracts outstanding
at the same date.
Customer Interest Rate
Swap Contracts
While not directly related to asset and liability management, in addition to
portfolio swaps Key has entered into interest rate swap contracts to accommodate
the needs of its customers, typically commercial loan customers, and other
positions with third parties that are intended to mitigate the interest rate
risk of the customer positions. As shown in Figure 13, the notional amount of
these swaps totaled $5.6 billion and $2.8 billion at December 31, 1996 and 1995,
respectively. At December 31, 1996, these swaps included $3.2 billion of
interest rate swaps that receive a fixed rate and pay a variable rate and $2.4
billion of interest rate swaps that pay a fixed rate and receive a variable
rate. Adjustments to the fair values of such swaps are included in other income
on the income statement. Further information pertaining to these contracts as
well as caps and floors, and futures contracts used for trading purposes is
included in Note 19, Financial Instruments with Off-Balance Sheet Risk,
beginning on page 64.
Noninterest Income
As shown in Figure 17, noninterest income totaled $1.1 billion in 1996, up $154
million, or 17%, from the prior year. Included in 1995 results were net
securities losses recorded in connection with the balance sheet reconfiguration,
discussed previously in the Asset and Liability Management section beginning on
page 17, and a positive accounting adjustment of $12 million for
better-than-expected performance of student loan securitizations completed in
prior periods. Excluding, for comparative purposes, all securities transactions
and the accounting adjustment, noninterest income for 1996 was up $124 million,
or 13%, from the prior year. After similarly adjusting for such transactions,
1995 noninterest income increased $65 million, or 7%, relative to 1994. In both
1996 and 1995, noninterest income in comparison with the respective prior year
periods benefited from the impact of seven acquisitions completed since the 1994
year end.
The improvement in noninterest income in 1996 reflected growth in all major
fee-based revenues, with the exception of mortgage banking income and loan
securitization income. As shown in Figure 17, the growth from the prior year
came principally from higher levels of service charges on deposit accounts and
trust and asset management income (both up $15 million), insurance and brokerage
income (up $9 million), credit card fees (up $8 million) and other income (up
$88 million). These increases were partially offset by decreases in mortgage
banking income and loan securitization income of $19 million and $4 million,
respectively.
In 1996 and 1995, the growth in service charges on deposit accounts reflected
the repricing of fees by certain affiliate banks, enhanced collection efforts
and the introduction of
Figure 17 Noninterest income
<TABLE>
<CAPTION>
Year ended December 31,
Change 1996 vs 1995
---------------------
dollars in millions 1996 1995 1994 Amount Percent
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Service charges on deposit accounts $ 293 $278 $263 $ 15 5.4%
Trust and asset management income 247 232 220 15 6.5
Loan securitization income 62 66 3 (4) (6.1)
Credit card fees 93 85 76 8 9.4
Insurance and brokerage income 70 61 59 9 14.8
Mortgage banking income 22 41 88 (19) (46.3)
Net securities gains (losses) 1 (41) (14) 42 N/M
Other income:
Corporate owned life insurance 58 30 16 28 93.3
Venture capital income 23 12 17 11 91.7
Letter of credit fees 16 15 12 1 6.7
Special asset management fees -- 6 17 (6) (100.0)
Miscellaneous income 202 148 126 54 36.5
- ---------------------------------------------------------------------------------------------------------
Total other income 299 211 188 88 41.7
- ---------------------------------------------------------------------------------------------------------
Total noninterest income $1,087 $933 $883 $154 16.5%
====== ==== ==== ====
- ---------------------------------------------------------------------------------------------------------
<FN>
N/M = Not Meaningful
</TABLE>
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 21
<PAGE> 22
certain services into new markets in 1995. The 1995 increase also reflected a
modestly larger deposit base in comparison with the prior year.
Trust and asset management income, including fees associated with investment
advisory services, continued to be a major source of noninterest income. In
1996, the increase in trust and asset management income resulted from continued
strong performance of both the stock and bond markets, new business and an array
of new products. The positive impact of these factors was partially offset,
however, by the effect of the December 1995 sale of Key's bond servicing
business. In 1995, the increase in trust and asset management income was due, in
large part, to the April 1995 acquisition of Spears, Benzak, Salomon & Farrell,
Inc. ("Spears Benzak"), a New York-based investment management firm. Also
contributing to 1995 growth were the strong performance of both the stock and
bond markets and the impact of new products. At December 31, 1996, Key, through
its bank, trust and registered investment advisory subsidiaries, had
discretionary assets (excluding corporate trust assets) of $50 billion, compared
with $47 billion at the end of 1995. Fees from investment advisory services
accounted for approximately 26% and 24% of Key's total trust and asset
management income in 1996 and 1995, respectively. Additional detail pertaining
to trust income and assets is presented in Figure 19.
The 1996 increase in insurance and brokerage income was due primarily to a
higher volume of investment advisory fees and brokerage commissions. Brokerage
commissions rose by more than 40% from the prior year with the largest
contribution coming from mutual funds.
The 1996 growth in credit card fees relative to the prior year reflected the
establishment of new business relationships, a higher volume of transactions and
customer reaction to a new product introduced during the first half of 1996
which offers cardholders added payment flexibility. Under this new program
cardholders are given the choice of three payment options under which the level
of the interest rate charged is lower based on a larger payment made for the
respective billing cycle.
In 1996, the increase in other income reflected a number of items, including a
$28 million increase in income from corporate owned life insurance, an $11
million increase in venture capital income, an $11 million gain on the sale of a
$101 million out-of-franchise credit card portfolio and an $8 million gain on
the sale of SFF. The increase in other income in 1995 resulted primarily from a
$6 million gain from the sale of Key's bond servicing business, increases of $8
million and $14 million in income from dealer swap activities and corporate
owned life insurance, respectively, and $5 million of interest recorded in 1995
on Federal income tax refunds.
In both 1996 and 1995 the growth in noninterest income was moderated by
decreases of $19 million and $47 million, respectively, in mortgage banking
income. These decreases resulted primarily from the March 1995 sale of the
residential mortgage loan servicing business. This transaction as well as the
acquisitions and the divestiture of SFF referred to previously are more fully
disclosed in Note 2, Mergers, Acquisitions and Divestitures, beginning on page
49. The lower level of mortgage banking income in 1996 also reflected the impact
of transitioning to a telephone based method of processing loan originations.
This change is expected to yield significant cost savings.
Starting in 1995, loan securitization income became a major component of Key's
core noninterest income. The significant contribution of this category over the
past two years reflects the impact of Key's continued strategy of securitizing
and/or selling student loans, sub-prime auto loans and other loans with lower
spreads which do not meet certain return on equity, credit or other internal
standards. As shown in Figure 18, loan securitization income in 1995 included a
$12 million adjustment for better-than-expected performance of student loan
securitizations completed in prior years. Excluding this adjustment, loan
securitization income was up $8 million, or 15%, in 1996, due to higher
servicing fees. The decrease in gains relative to the prior year resulted from a
lower volume of securitizations. Effective January 1, 1997, Key adopted SFAS No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," which impacts the manner in which certain
assets subject to prepayment and recorded in connection with a securitization
are classified and accounted for. As a result, it is expected that future gains
recorded upon the sale of securitized loans will be lower and that the
incremental decrease will be offset by a higher level of interest income
recognized over the life of the securitization. The growth in servicing fees is
expected to continue as a result of the increasing level of loans serviced.
Shown in Figure 18 are securitized loans which are either administered or
serviced by Key and are not recorded on its balance sheet.
Figure 18 Loan Securitizations
<TABLE>
<CAPTION>
in millions 1996 1995 1994
- ------------------------------------------------------------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31,
Servicing fees $22 $ 3 --
Gains on sales of securitized loans 39 49 $3
Miscellaneous income 1 14(1) --
- ------------------------------------------------------------------
Total loan securitization income $62 $66 $3
====== ====== ====
- ------------------------------------------------------------------
DECEMBER 31,
Student loans securitized(2) $2,089 $1,605 $695
Auto loans securitized(2) 386 414 --
- ------------------------------------------------------------------
Total student and auto loans
securitized(2) $2,475 $2,019 $695
====== ====== ====
- ------------------------------------------------------------------
<FN>
(1) Includes a $12 million adjustment for better-than-expected performance of
student loan securitizations, with $9 million and $3 million related to
securitizations completed in 1994 and 1993, respectively.
(2) Represents the balance of loans securitized, sold and administered/
serviced by Key for others.
</TABLE>
Financial Page 22 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 23
Figure 19 Trust and Asset Management
<TABLE>
<CAPTION>
Change 1996 vs 1995
---------------------
dollars in millions 1996 1995 1994 Amount Percent
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
Personal asset management and custody fees $147 $136 $124 $11 8.1%
Institutional asset management and custody fees 64 57 60 7 12.3
Bond services 13 20 22 (7) (35.0)
All other fees 23 19 14 4 21.1
- ------------------------------------------------------------------------------------------------------------------
Total trust and asset management income $247 $232 $220 $15 6.5%
==== ==== ==== ===
dollars in billions
- ------------------------------------------------------------------------------------------------------------------
DECEMBER 31,
Discretionary assets $50 $47 $32 $ 3 6.4%
Non-discretionary assets 46 34 33 12 35.3
- ------------------------------------------------------------------------------------------------------------------
Total trust assets $96 $81 $65 $15 18.5%
=== === === ===
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Noninterest Expense
Noninterest expense, as shown in Figure 20, totaled $2.5 billion in 1996, up
$152 million, or 7%, from the 1995 level. Included in noninterest expense for
1996 was a restructuring charge of $100 million recorded during the fourth
quarter in connection with previously announced strategic actions to be taken
over the next year to complete Key's transformation to a nationwide, bank-based
financial services company. Further information regarding these charges is
provided on the following page. Also included in 1996 expense was a one-time
charge of $17 million incurred in the third quarter to provide for an assessment
mandated by the Deposit Insurance Funds Act of 1996 ("Funds Act") passed by
Congress on September 30 to recapitalize the SAIF. Excluding these charges, and
similarly adjusting for $33 million of write-offs of certain obsolete software
previously developed for internal use and a sublease loss in 1995, noninterest
expense for 1996 was up $68 million, or 3%, from the prior year. This followed
an increase of $111 million, or 5%, in 1995, after adjusting for the same 1995
items.
The higher level of adjusted noninterest expense in 1996 was primarily due to
increases in personnel expense (up $75 million), marketing expense (up $17
million), amortization of intangibles (up $11 million) and other expense (up $13
million). These increases were substantially reduced by the effect of the
elimination of the Bank Insurance Fund ("BIF") assessment rate which took effect
as of January 1, 1996, and is discussed in greater detail on page 24. In
general, the increases summarized above also reflected the impact of seven
acquisitions completed since the 1994 year end, offset in part by the overall
reduction in costs (primarily personnel) resulting from the sales of KeyCorp
Mortgage, Inc. ("KMI") and Schaenen Wood in March 1995 and April 1995,
respectively,
Figure 20 Noninterest Expense
<TABLE>
<CAPTION>
Year ended December 31,
Change 1996 vs 1995
---------------------
dollars in millions 1996 1995 1994 Amount Percent
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Personnel $1,190 $1,115 $1,060 $ 75 6.7%
Net occupancy 219 218 217 1 .5
Equipment 161 156 158 5 3.2
FDIC insurance assessments 25 59 99 (34) (57.6)
Amortization of intangibles 88 77 59 11 14.3
Professional fees 70 73 50 (3) (4.1)
Marketing 88 71 59 17 23.9
Restructuring charge 100 -- -- 100 100.0
Other expense:
OREO expense (net of income of $4, $6, $5) 3 (1) 2 4 N/M
Equity and gross receipts based taxes 35 42 33 (7) (16.7)
Miscellaneous 485 502 431 (17) (3.4)
- -----------------------------------------------------------------------------------------------------------------------
Total other expense 523 543 466 (20) (3.7)
- -----------------------------------------------------------------------------------------------------------------------
Total noninterest expense $2,464 $2,312 $2,168 $152 6.6%
====== ====== ====== ====
Full-time equivalent employees at year end 27,689 29,563 29,211
Efficiency ratio 60.84% 63.03% 59.39%
Overhead ratio 45.46 49.66 46.14
- -----------------------------------------------------------------------------------------------------------------------
<FN>
N/M = Not Meaningful
</TABLE>
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 23
<PAGE> 24
and the June 1996 sale of SFF. The acquisitions and sales are more fully
disclosed in Note 2, Mergers, Acquisitions and Divestitures, beginning on page
49.
In 1996, the increase in personnel expense, the largest category of noninterest
expense, reflected the impact of normal annual merit increases (which take
effect in April for the majority of Key's employees), an increase in employee
benefits expense, higher costs associated with various incentive programs
(including commissions related to the venture capital income discussed
previously in the Noninterest Income section) and the overall impact of
additional costs associated with the implementation of strategic initiatives.
The $55 million increase in 1995 was due, in large part, to normal annual merit
increases, higher benefits expense and the impact of acquisitions, including the
resulting increase in the number of full-time equivalent employees. At December
31, 1996, the number of full-time equivalent employees was 27,689, compared with
29,563 and 29,211 at the end of 1995 and 1994, respectively.
The growth in marketing expense in both 1996 and 1995 was due largely to
incremental costs related to continued strategic efforts aimed at strengthening
consumer identification of the KeyBank brand name as well as other marketing
activities. The higher level of amortization related to intangibles in these
periods reflected the impact of acquisitions consummated over the past two
years. Excluding the write-offs of obsolete internally developed software and
sublease loss in 1995, other expense was up $13 million and $44 million in 1996
and 1995, respectively, reflecting the impact of acquisitions as well as
increases in various operating expense components. Also included in other
expense are equity and gross receipts based taxes which are assessed in lieu of
an income tax in certain states in which Key operates. These taxes totaled $35
million, $42 million and $33 million in 1996, 1995 and 1994, respectively
(representing 91, 115, and 90 basis points of Key's efficiency ratio for each
respective year). The extent to which such taxes impact the level of noninterest
expense will vary among companies based on the geographic locations in which
they conduct their business.
In addition to the factors discussed above, professional fees were higher in
1995 relative to the prior year due to approximately $24 million of costs
incurred in connection with the implementation of strategic initiatives.
The 1996 and 1995 increases in the noninterest expense categories summarized
above were substantially offset by the effect of reductions in the level of the
BIF assessment rate for well-capitalized banks (including all of Key's banks).
During the latter half of 1995 the assessment rate for well-capitalized banks
was reduced from $.23 per $100 of insured deposits to $.04 per $100 for the
period June through December 1995. This was followed by a further reduction of
the rate to zero effective January 1, 1996. The SAIF assessment rate was
maintained at $.23 per $100 of insured deposits during 1995 and in 1996 through
the date of enactment of the Funds Act referred to in the first paragraph of
this section. As a result of the above actions, after excluding the impact of
the one-time SAIF assessment referred to previously, the cost of insurance
assessments in 1996 decreased $51 million, or 86%, following a decrease of $40
million, or 41%, in 1995. In accordance with the Funds Act, effective January 1,
1997, the Federal Deposit Insurance Corporation ("FDIC") will require all
insured institutions to begin servicing the bonds issued in the late 1980s to
fund government assistance payments made necessary by a higher volume of
insolvencies in the thrift industry. The servicing will take the form of an
annual assessment equal to $.0129 per $100 of BIF-assessable deposits and $.0644
per $100 of SAIF-assessable deposits. This will result in a 1997 expense for Key
of approximately $5 million.
As stated previously, during the fourth quarter of 1996, Key recorded a $100
million ($66 million after tax, $.29 per Common Share) restructuring charge in
connection with strategic actions to be taken over the next year to complete its
transformation to a nationwide, bank-based financial services company in 1997.
The primary actions to be taken include: (i) the formation of a nationwide bank
from Key's current network of banks in 13 states and four regions of the United
States (KeyBank USA will not take part in this consolidation), (ii) the
consolidation of nearly 140 of Key's branch offices, known as KeyCenters, into
other KeyCenters, and (iii) the reduction of approximately 2,700 positions, or
10% of Key's employment base, distributed throughout Key at substantially all
levels of responsibility. Key also announced its intention to divest another 140
KeyCenters, a strategic action for which expected costs are not encompassed in
the restructuring charge.
Included in the restructuring charge are accruals for expenses, primarily
consisting of severance payments ($54 million), consolidation costs related to
banking offices identified for closure ($18 million) and costs related to the
write-off of certain obsolete software previously developed for internal use
($28 million). Remaining reserves at December 31, 1996, totaled $100 million.
The severance portion of the restructuring charge liability will be funded by
normal operating cash flows and none of the charge components will have a
material impact on Key's liquidity.
The execution of these strategic actions is expected to result in an annualized
earnings benefit of approximately $110 million by the end of 1997. Coupled with
the impact of the expense reduction programs outlined earlier this year,
management expects that Key's efficiency ratio will improve to the previously
announced target of 55% by the end of 1997, with further improvement thereafter.
The foregoing sentences are forward looking statements. Actual results could
differ materially for a variety of factors, including those specified in the
second paragraph of the Introduction on page 3.
Income Taxes
The provision for income taxes for 1996 was $360 million compared with $368
million (before the extraordinary net gain resulting from the sales of KMI and
Schaenen Wood) in 1995 and $430 million in 1994. The effective income tax rate
(provision for income taxes as a percentage of income before income taxes) was
31.5% in 1996, 31.8% in 1995 and 33.5% in 1994. The slight decrease in both the
1996 tax provision and
Financial Page 24 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 25
effective income tax rate was the result of a number of factors, but was
primarily attributable to higher income from corporate owned life insurance and
increased credits associated with investments in low-income housing projects.
The lower 1995 tax provision and effective income tax rate resulted primarily
from the recognition during the first quarter of 1995 of one-time tax benefits
totaling $16 million related to acquisitions made in years prior to 1992 and an
increase in tax-advantaged assets (such as tax-exempt securities and corporate
owned life insurance) and credits associated with investments in low-income
housing projects.
FINANCIAL CONDITION
Loans
As shown in Figure 21, at December 31, 1996, total loans outstanding were $49.2
billion, up from $48.3 billion at December 31, 1995, and $46.6 billion at
December 31, 1994. The moderate increase in loans outstanding from the December
31, 1995, level reflected the impact of Key's continued strategy of securitizing
and/or selling student loans, sub-prime auto loans, and other loans with lower
spreads which do not meet certain return on equity, credit or other internal
standards. In 1996, this activity included the sale of $1.0 billion of student
loans (of which $711 million was associated with securitizations), $500 million
of residential mortgage loans, and the securitization and sale of sub-prime auto
loans totaling $212 million. Generally, Key sells or securitizes student loans
in order to reduce the credit risk that arises when a borrower enters repayment
status.
Figure 21 Composition of Loans
<TABLE>
<CAPTION>
December 31,
1996 1995 1994
------------------------ ------------------------ -----------------------
dollars in millions Amount % of Total Amount % of Total Amount % of Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMMERCIAL
Commercial, financial and agricultural $12,309 25.0% $11,655 24.1% $10,288 22.1%
Real estate--commercial mortgage 7,151 14.5 7,254 15.0 6,775 14.5
Real estate--construction 1,666 3.4 1,520 3.1 1,287 2.8
Commercial lease financing 2,671 5.4 2,248 4.7 1,742 3.7
- -----------------------------------------------------------------------------------------------------------------------------
Total commercial loans 23,797 48.3 22,677 46.9 20,092 43.1
CONSUMER
Real estate--residential mortgage 6,229 12.7 8,291 17.2 9,872 21.2
Home equity 4,793 9.7 3,886 8.0 3,695 7.9
Credit card 1,799 3.7 1,564 3.2 1,419 3.0
Consumer--direct 2,245 4.6 1,934 4.0 2,447 5.3
Consumer--indirect 8,062 16.4 7,258 15.1 6,882 14.8
- -----------------------------------------------------------------------------------------------------------------------------
Total consumer loans 23,128 47.1 22,933 47.5 24,315 52.2
LOANS HELD FOR SALE 2,310 4.6 2,722 5.6 2,172 4.7
- -----------------------------------------------------------------------------------------------------------------------------
Total $49,235 100.0% $48,332 100.0% $46,579 100.0%
======= ===== ======= ===== ======= =====
- -----------------------------------------------------------------------------------------------------------------------------
1993 1992
- -------------------------------------------------------------------------------------------------
Amount % of Total Amount % of Total
- -----------------------------------------------------------------------------------------------------------------------------
COMMERCIAL
Commercial, financial and agricultural $ 9,029 21.8% $ 8,970 24.3%
Real estate--commercial mortgage 6,228 15.0 5,937 16.1
Real estate--construction 1,161 2.8 1,448 3.9
Commercial lease financing 1,702 4.1 1,225 3.3
- -----------------------------------------------------------------------------------------------------------------------------
Total commercial loans 18,120 43.7 17,580 47.6
CONSUMER
Real estate--residential mortgage 11,026 26.6 8,289 22.4
Home equity See note(1) -- See note(1) --
Credit card 1,429 3.5 1,448 3.9
Consumer--direct See note(2) -- See note(2) --
Consumer--indirect 7,847 19.0 7,634 20.7
- -----------------------------------------------------------------------------------------------------------------------------
Total consumer loans 20,302 49.1 17,371 47.0
LOANS HELD FOR SALE 2,974 7.2 2,009 5.4
- -----------------------------------------------------------------------------------------------------------------------------
Total $41,396 100.0% $36,960 100.0%
======= ===== ======= =====
- -----------------------------------------------------------------------------------------------------------------------------
<FN>
(1) For years prior to 1994, home equity loans are included in real
estate--residential mortgage loans.
(2) For years prior to 1994, consumer--direct loans are included in
consumer--indirect loans.
</TABLE>
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 25
<PAGE> 26
Additionally, all sub-prime auto loan originations are targeted for
securitization. Other factors restricting the increase in total loans over the
past year were the sale of a $101 million out-of-franchise credit card portfolio
and the sale of $763 million of loans (primarily residential real estate) in
conjunction with the divestiture of SFF. This latter transaction is described in
greater detail in Note 2, Mergers, Acquisitions and Divestitures, beginning on
page 49.
Excluding the impact of the sales summarized above, loan portfolios targeted for
growth (which exclude one-to-four family mortgages) increased $4.8 billion,
reflecting higher levels of commercial loans (up $1.1 billion), consumer loans
(up $2.6 billion) and loans held for sale (up $1.1 billion). As shown in Figure
21, the growth in commercial loans occurred in all portfolios with the exception
of commercial mortgages. The growth reflected the general strength of the
economy as well actions taken to increase the commercial lease financing
portfolio late in 1996 in order to realize certain tax advantages. After
adjusting for sales, the largest increase in targeted consumer loans came from
the indirect portfolio (comprised primarily of auto, marine and recreational
vehicle loans) which rose $1.0 billion. Also contributing to the growth in
consumer loans were increases of $907 million in home equity loans and $336
million in credit cards. The improvement in loans held for sale reflected a $1.2
billion increase in student loans and a $73 million reduction in mortgage loans.
The growth in targeted loan portfolios was substantially offset, however, by a
$1.3 billion reduction in residential mortgages, as the proceeds from maturing
loans were reinvested in new loans with wider interest rate spreads. At December
31, 1996, targeted loans comprised 87% of total loans and 64% of total assets
compared with 83% and 60%, respectively, at the end of 1995.
As shown in Figure 22, new loan volume during 1996 was largely attributable to
the Consumer Finance companies, which include KeyBank USA and AFG. KeyBank USA,
a nationally chartered bank formed from Key's existing Community Banking
franchise during the third quarter of 1995, serves as the national platform for
credit card lending, student loans, mortgage loan originations and all
non-branch consumer finance business, while AFG, acquired during the third
quarter of 1995, is one of the nation's leading sub-prime automobile finance
companies. The majority of new loan volume generated by the Consumer Finance
companies is either participated to Key's other banks or securitized and sold.
Figure 23 shows the portions of the construction and commercial mortgage loan
portfolios at December 31, 1996, which are collateralized by nonowner-occupied
(by industry concentration) and owner-occupied properties. At December 31, 1996,
54% of the construction loan portfolio and commercial mortgage loan portfolio
were secured by owner-occupied properties. These borrowers are engaged in
business activities other than real estate, and the primary source of repayment
is not solely dependent on the real estate market. Key manages risk exposure in
the construction and commercial mortgage portfolios through prudent underwriting
criteria and by monitoring loan concentrations by geographic region and property
type.
Figure 22 Period End Loan Growth by Region
<TABLE>
<CAPTION>
Net Intercompany
December 31, Originations/ Participations/ Acquired/ December 31, Percent
dollars in millions 1995 (Repayments) (Sales) (Sold) 1996 Change
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Northeast Region $14,198 $ (798) $ 1,352 $ (641) $14,111 (.6)%
Great Lakes Region 19,211 (1,376) 2,297 (43) 20,089 4.6
Rocky Mountain Region 3,836 (68) 101 (36) 3,833 (.1)
Northwest Region 9,008 (97) 816 (20) 9,707 7.8
Consumer Finance companies 2,249 6,016 (4,359) (1,138) 2,768 23.1
Eliminations/other(1) (170) (133) (207) (763) (1,273) N/M
- ----------------------------------------------------------------------------------------------------------------------
Total $48,332 $ 3,544 -- $(2,641) $49,235 1.9%
======= ======= ====== ======= =======
- ----------------------------------------------------------------------------------------------------------------------
<FN>
(1) Eliminations/other includes loans sold in connection with the SFF divestiture.
N/M = Not Meaningful
</TABLE>
Figure 23 Construction and Commercial Mortgage Loans
<TABLE>
<CAPTION>
December 31, 1996
Commercial
in millions Construction Mortgage Total
- ----------------------------------------------------------------
<S> <C> <C> <C>
Nonowner-occupied:
Retail $ 281 $ 696 $ 977
Multi-family properties 156 719 875
Office buildings 57 572 629
Hotels/Motels -- 223 223
Health facilities 3 73 76
Manufacturing facilities 3 51 54
Warehouses 41 220 261
Other 224 748 972
- ----------------------------------------------------------------
765 3,302 4,067
Owner-occupied 901 3,849 4,750
- ----------------------------------------------------------------
Total $1,666 $7,151 $8,817
====== ====== ======
- ----------------------------------------------------------------
</TABLE>
Financial Page 26 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 27
The maturities and sensitivity of certain loans to changes in interest rates are
summarized in Figure 24. Floating and adjustable rates are those which vary in
relation to some other interest rate (such as the base lending rate) or some
other variable index which may change during the term of the loan. Predetermined
interest rates are those which are either fixed or will change during the term
of the loan on a pre-established basis. As shown in the figure, at December 31,
1996, more than 40% of these loans were scheduled to mature within one year and
loans with maturities greater than one year included $8.4 billion with floating
or adjustable rates and $7.5 billion with predetermined rates.
<TABLE>
Figure 24 Maturities and Sensitivity of Certain Loans to Changes in Interest Rates
December 31, 1996
<CAPTION>
Within 1-5 Over
in millions 1 Year Years 5 Years Total
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $ 8,217 $2,752 $1,340 $12,309
Real estate--construction 1,113 396 157 1,666
Real estate--residential and commercial mortgage 2,180 4,659 6,541 13,380
- -----------------------------------------------------------------------------------------------------
$11,510 $7,807 $8,038 $27,355
======= ====== ====== =======
Loans with floating or adjustable rates $4,427 $3,946
Loans with predetermined interest rates 3,380 4,092
- -----------------------------------------------------------------------------------------------------
$7,807 $8,038
====== ======
- -----------------------------------------------------------------------------------------------------
</TABLE>
Securities
At December 31, 1996, the securities portfolio totaled $9.3 billion, consisting
of $7.7 billion of securities available for sale and $1.6 billion of investment
securities. This compares to a total portfolio of $9.7 billion, comprised of
$8.0 billion of securities available for sale and $1.7 billion of investment
securities, at December 31, 1995. Certain information pertaining to the
composition, yields and maturities of the securities available for sale and
investment securities portfolios is presented in Figure 25 and Figure 26,
respectively.
The reduction in the overall portfolio since year end 1995 reflects the planned
runoff of lower-yielding securities pursuant to balance sheet management
strategies developed in mid-1995. These strategies are more fully discussed in
the Asset and Liability Management section beginning on page 17.
At December 31, 1996, Key had $6.7 billion invested in collateralized mortgage
obligations ("CMO") and other mortgaged-backed securities within the
available-for-sale portfolio, unchanged from the amount held at December 31,
1995. A CMO is a mortgaged-backed security that is comprised of classes of bonds
created by prioritizing the cash flows from the underlying mortgage pool in
order to meet different objectives of investors. Other mortgaged-backed
securities depend on the underlying pool of mortgage loans to provide a cash
flow "pass-through" of principal and interest, without prioritization in
classes. Key had $3.1 billion invested in CMO securities at December 31, 1996,
compared with $2.8 billion at December 31, 1995. The increase in CMO securities
in 1996 was primarily the result of the previously discussed programs instituted
to better manage the collateral requirements of the affiliate banks by utilizing
CMOs in lieu of lower-yielding securities with shorter maturities. The CMO
securities held by Key are primarily shorter-maturity class bonds that were
structured to have more predictable cash flows by being less sensitive to
prepayments during periods of changing interest rates than other longer-term
class bonds similarly available. Key had $3.6 billion invested in other
mortgaged-backed securities at December 31, 1996. At December 31, 1996,
substantially all of the mortgaged-backed securities held by Key were issued or
backed by Federal agencies.
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 27
<PAGE> 28
Figure 25 Securities Available for Sale
<TABLE>
<CAPTION>
Other
U.S. Treasury, States and Collateralized Mortgage- Weighted
Agencies and Political Mortgage Backed Other Average
dollars in millions Corporations Subdivisions Obligations(1) Securities(1) Securities Total Yield(2)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1996
Maturity:
One year or less $594 $ 5 $ 255 $ 18 $ 53 $ 925 5.81%
After one through five years 137 15 2,893 1,103 18 4,166 6.90
After five through ten years 14 13 1 1,960 7 1,995 7.14
After ten years 114 3 -- 498 27(3) 642 6.92
- ------------------------------------------------------------------------------------------------------------------------------
Fair value $859 $36 $3,149 $3,579 $105 $7,728 --
Amortized cost 857 36 3,169 3,570 104 7,736 6.83%
Weighted average yield 5.95% 7.18% 6.51% 7.38% 5.40% 6.83% --
Weighted average maturity 3.6 years 5.6 years 2.6 years 6.7 years 2.6 years 4.6 years --
- ------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1995
Fair value $1,201 $26 $2,751 $3,901 $181 $8,060 --
Amortized cost 1,176 25 2,767 3,850 176 7,994 6.86%
- ------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1994
Fair value $1,053 $26 $10 $1,218 $214 $2,521 --
Amortized cost 1,068 29 10 1,324 223 2,654 6.40%
- ------------------------------------------------------------------------------------------------------------------------------
<FN>
1 Maturity is based upon expected average lives rather than contractual
terms.
2 Weighted average yields are calculated on the basis of amortized cost. Such
yields have been adjusted to a taxable-equivalent basis using a 35% tax
rate for all years presented.
3 Includes equity securities with no stated maturity.
</TABLE>
Figure 26 Investment Securities
<TABLE>
<CAPTION>
Other
U.S. Treasury, States and Collateralized Mortgage- Weighted
Agencies and Political Mortgage Backed Other Average
dollars in millions Corporations Subdivisions Obligations(1) Securities(1) Securities Total Yield(2)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1996
Maturity:
One year or less -- $ 577 -- -- $ 1 $ 578 7.27%
After one through five years -- 561 -- -- 61 622 8.29
After five through ten years -- 210 -- -- -- 210 10.33
After ten years -- 53 -- -- 138 191 4.74
- -------------------------------------------------------------------------------------------------------------------------------
Amortized cost -- $1,401 -- -- $200 $1,601 7.76%
Fair value -- 1,437 -- -- 200 1,637 --
Weighted average yield -- 8.38% -- -- 3.40% 7.76% --
Weighted average maturity -- 3.0 years -- -- 3.3 years 3.0 years --
- -------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1995
Amortized cost $5 $1,424 -- -- $259 $1,688 8.34%
Fair value 5 1,474 -- -- 259 1,738 --
- -------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1994
Amortized cost $533 $1,508 $3,778 $4,057 $400 $10,276 7.03%
Fair value 499 1,535 3,521 3,842 360 9,757 --
- -------------------------------------------------------------------------------------------------------------------------------
<FN>
1 Maturity is based upon expected average lives rather than contractual
terms.
2 Weighted average yields are calculated on the basis of amortized cost. Such
yields have been adjusted to a taxable-equivalent basis using a 35% tax
rate for all years presented.
</TABLE>
Financial Page 28 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 29
Asset Quality
Key's Credit Risk Management Group evaluates and monitors the level of risk in
Key's credit-related assets, and formulates underwriting standards and
guidelines for line management. Geographic diversification throughout Key is a
significant factor in managing credit risk. The Credit Risk Management Group is
also responsible for reviewing the adequacy of the allowance for loan losses
("Allowance"). Furthermore, Key's Credit Policy/Risk Management Group reviews
corporate assets other than loans, leases and OREO to evaluate the credit
quality and risk inherent in such assets. This group is also responsible for
commercial and consumer credit policy development, concentration management and
credit systems development.
The allocation of Key's Allowance by loan type at December 31 is shown in Figure
27. Management has developed methodologies designed to assess the adequacy of
the Allowance. The Allowance allocation methodologies applied at Key focus on
changes in the size and character of the loan portfolio, changes in the levels
of impaired and other nonperforming and past due loans, the risk inherent in
specific loans, concentrations of loans to specific borrowers or industries,
existing and prospective economic conditions and historical losses on a
portfolio basis. In addition, indirect risk in the form of off-balance sheet
exposure for unfunded commitments is taken into consideration. Management
continues to target and maintain an Allowance equal to the allocated requirement
plus an unallocated portion, as deemed necessary. Management believes this is an
appropriate posture in light of current and expected economic conditions and
trends, the geographic and industry mix of the loan portfolio and similar
risk-related matters.
<TABLE>
<CAPTION>
Figure 27 Allocation of the Allowance for Loan Losses
December 31,
1996 1995 1994
------------------ ------------------- -------------------
Percent of Percent of Percent of
Loan Type to Loan Type to Loan Type to
dollars in millions Amount Total Loans Amount Total Loans Amount Total Loans
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and agricultural $177 25.0% $205 24.1% $119 22.1%
Real estate--commercial mortgage 97 14.5 100 15.0 75 14.5
Real estate--construction 22 3.4 21 3.1 18 2.8
Commercial lease financing 16 5.4 23 4.7 24 3.7
- -------------------------------------------------------------------------------------------------------------------
Total commercial loans 312 48.3 349 46.9 236 43.1
Real estate--residential mortgage 10 12.7 9 17.2 14 21.2
Home equity 5 9.7 5 8.0 6 7.9
Credit card 44 3.7 25 3.2 44 3.0
Other consumer 93 21.0 52 19.1 49 20.1
- -------------------------------------------------------------------------------------------------------------------
Total consumer loans 152 47.1 91 47.5 113 52.2
Loans held for sale 3 4.6 3 5.6 3 4.7
Unallocated 403 -- 433 -- 478 --
- -------------------------------------------------------------------------------------------------------------------
Total $870 100.0% $876 100.0% $830 100.0%
==== ===== ==== ===== ==== =====
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1993 1992
------------------- -------------------
Percent of Percent of
Loan Type to Loan Type to
Amount Total Loans Amount Total Loans
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $178 21.8% $207 24.3%
Real estate--commercial mortgage 77 15.0 108 16.1
Real estate--construction 22 2.8 27 3.9
Commercial lease financing 14 4.1 5 3.3
- -----------------------------------------------------------------------------------------
Total commercial loans 291 43.7 347 47.6
Real estate--residential mortgage 14 26.6 5 22.4
Home equity See note (1) See note (1) See note (1) See note (1)
Credit card See note (2) 3.5 See note (2) 3.9
Other consumer 113 19.0 147 20.7
- -----------------------------------------------------------------------------------------
Total consumer loans 127 49.1 152 47.0
Loans held for sale -- 7.2 -- 5.4
Unallocated 385 -- 284 --
- -----------------------------------------------------------------------------------------
Total $803 100.0% $783 100.0%
==== ===== ==== =====
- -----------------------------------------------------------------------------------------
</TABLE>
1 For years prior to 1994, home equity loans and the respective allocation of
Allowance are included in the real estate--residential mortgage category.
2 For years prior to 1994, the Allowance allocated to credit card receivables
is included in the other consumer category.
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 29
<PAGE> 30
As shown in Figure 28, net loan charge-offs in 1996 were $195 million, or .40%
of average loans, compared with $99 million, or .21% of average loans, in 1995
and $109 million, or .25% in 1994. The higher level of net charge-offs in 1996
was attributable to continued increases from historically low net charge-off
levels in most loan categories with the largest increases coming from the
commercial, indirect auto and credit card portfolios. The $33 million increase
in commercial loan net charge-offs reflected a lower level of recoveries
relative to 1995 and the charge-off of two large credits totaling $17 million.
The $22 million increase in consumer--indirect net charge-offs (primarily
indirect auto loans) and the $29 million increase in credit card net charge-offs
reflected the impact of a strategy adopted by Key to expand its consumer
customer base to include various credit risk profiles. This strategy also
includes risk-adjusted pricing to address the relative credit risk of various
strata of the customer base. Despite a widespread nationwide deterioration in
consumer credit quality, as indicated by a record number of bankruptcies during
1996, Key's portfolio performed at or better than industry averages for similar
risk profiles. As a result of the higher level of net charge-offs, the provision
for loan losses in 1996 was increased to $197 million, up from $100 million in
1995 and $125 million in 1994. This increase reflected management's intention to
continue to maintain the provision for loan losses at a level equal to or above
net charge-offs.
Figure 28 Summary of Loan Loss Experience
<TABLE>
<CAPTION>
Year ended December 31,
dollars in millions 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average loans outstanding during the year $48,216 $48,012 $43,463 $39,363 $36,025
- ------------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses at beginning of year $ 876 $ 830 $ 803 $ 783 $ 793
Loans charged off:
Commercial, financial and agricultural 71 42 61 103 145
Real estate--commercial mortgage 16 22 19 See note (1) See note (1)
Real estate--construction 2 2 7 25 25
Commercial lease financing 8 5 3 3 10
- ------------------------------------------------------------------------------------------------------------------------------
Total commercial loans 97 71 90 131 180
Real estate--residential mortgage 9 11 15 57 100
Home equity 2 2 1 See note (1) See note (1)
Credit card 83 50 49 See note (2) See note (2)
Consumer--direct 27 20 16 See note (2) See note (2)
Consumer--indirect 83 53 37 115 160
- ------------------------------------------------------------------------------------------------------------------------------
Total consumer loans 204 136 118 172 260
Loans held for sale 2 1 1 -- --
- ------------------------------------------------------------------------------------------------------------------------------
303 208 209 303 440
Recoveries:
Commercial, financial and agricultural 45 53 48 33 26
Real estate--commercial mortgage 8 5 4 See note (1) See note (1)
Real estate--construction 1 3 2 6 1
Commercial lease financing 2 2 2 2 5
- ------------------------------------------------------------------------------------------------------------------------------
Total commercial loans 56 63 56 41 32
Real estate--residential mortgage 3 8 6 10 9
Home equity -- 1 1 See note (1) See note (1)
Credit card 15 11 13 See note (2) See note (2)
Consumer--direct 7 7 7 See note (2) See note (2)
Consumer--indirect 27 19 16 39 39
- ------------------------------------------------------------------------------------------------------------------------------
Total consumer loans 52 46 43 49 48
Loans held for sale -- -- 1 -- --
- ------------------------------------------------------------------------------------------------------------------------------
108 109 100 90 80
- ------------------------------------------------------------------------------------------------------------------------------
Net loans charged off (195) (99) (109) (213) (360)
Provision for loan losses 197 100 125 212 339
Allowance acquired/sold, net (8) 44 11 21 11
Transfer of OREO allowance -- 1 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses at end of year $ 870 $ 876 $ 830 $ 803 $ 783
======== ======== ======== ======== ========
- ------------------------------------------------------------------------------------------------------------------------------
Net loan charge-offs to average loans .40% .21% .25% .54% 1.00%
Allowance for loan losses to year-end loans 1.77 1.81 1.78 1.94 2.12
Allowance for loan losses to nonperforming loans 249.28 263.15 324.27 238.69 141.54
- ------------------------------------------------------------------------------------------------------------------------------
<FN>
1 For periods prior to 1994, activity related to real estate--commercial
mortgage loans and home equity loans is included in real
estate--residential mortgage loans.
2 For periods prior to 1994, activity related to credit card receivables and
consumer--direct loans is included in consumer--indirect loans.
</TABLE>
Financial Page 30 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 31
The Allowance at December 31, 1996, was $870 million, or 1.77% of loans,
compared with $876 million, or 1.81% of loans, at December 31, 1995. The slight
decrease in the Allowance was primarily the result of loan sales and
securitization activities. Included in the 1996 Allowance was $26 million
specifically allocated for impaired loans compared with $40 million in 1995. For
a further discussion of impaired loans see Note 6, Impaired Loans and Other
Nonperforming Assets, beginning on page 52. At December 31, 1996, the Allowance
was 249.28% of nonperforming loans, compared with 263.15% at December 31, 1995.
Although this percentage is not the primary factor used by management in
determining the adequacy of the Allowance, it has general short to medium-term
relevance. As indicated in Figure 27, the unallocated portion of the Allowance
decreased slightly in 1996, primarily as a result of an increase in the portion
of the Allowance allocated to the consumer loan portfolio. Approximately 46% of
the Allowance remained unallocated to any specific category, a position that
management believes appropriate in light of the growth experienced in the
Corporate Banking portfolio, the risk-based strategies employed within the
National Consumer Finance line of business and the expected return in 1997 of
all net charge-off ratios to more normalized, higher levels.
The composition of nonperforming assets is shown in Figure 29. These assets
totaled $400 million at December 31, 1996, and represented .81% of loans, OREO
and other nonperforming assets compared with $379 million, or .78%, at December
31, 1995. The $16 million increase in nonperforming loans in 1996 is
attributable primarily to higher levels of consumer activity, primarily related
to secured automobile and home equity products. OREO (net of the allowance)
increased by $6 million, due primarily to an additional $42 million placed in
OREO, offset in part by sales of $34 million. Additional information pertaining
to changes in nonaccrual loans and OREO and the percentage of nonperforming
loans to period end loans by type within Key's geographically dispersed banking
regions is presented in Figures 30 and 31, respectively.
Figure 29 Summary of Nonperforming Assets and Past Due Loans
<TABLE>
<CAPTION>
Year ended December 31,
dollars in millions 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Impaired loans(1) $209 $205 -- -- --
Other nonaccrual loans 139 125 $254 $330 $551
Restructured loans 1 3 2 6 2
- --------------------------------------------------------------------------------------------------------------------
Total nonperforming loans 349 333 256 336 553
Other real estate owned 56 56 100 186 350
Allowance for OREO losses (8) (14) (21) (35) (18)
- --------------------------------------------------------------------------------------------------------------------
Other real estate owned, net of allowance 48 42 79 151 332
Other nonperforming assets 3 4 5 13 15
- --------------------------------------------------------------------------------------------------------------------
Total nonperforming assets $400 $379 $340 $500 $900
===== ===== ===== ===== =====
- --------------------------------------------------------------------------------------------------------------------
Accruing loans past due 90 days or more $103 $ 97 $50 $52 $70
- --------------------------------------------------------------------------------------------------------------------
Nonperforming loans to year end loans .71% .69% .55% .81% 1.50%
Nonperforming assets to year end loans
plus other real estate owned and other
nonperforming assets .81 .78 .73 1.20 2.41
- --------------------------------------------------------------------------------------------------------------------
<FN>
1 Effective January 1, 1995, Key adopted SFAS No. 114, which requires
separate disclosure of impaired loans. Prior to January 1, 1995, impaired
loans were included in other nonaccrual loans.
</TABLE>
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 31
<PAGE> 32
Figure 30 Summary of Changes in Impaired and Other Nonaccrual Loans and OREO
<TABLE>
<CAPTION>
SUMMARY OF CHANGES IN IMPAIRED AND OTHER NONACCRUAL LOANS
1996 Quarters
------------------------------------------------
in millions Full Year Fourth Third Second First
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at beginning of year $ 330 $ 343 $ 325 $ 338 $ 330
Loans placed on nonaccrual 321 77 75 88 81
Charge-offs(1) (75) (16) (15) (25) (19)
Payments (126) (28) (32) (45) (21)
Loans sold (55) (17) -- (18) (20)
Transfers to OREO (23) (4) (6) (5) (8)
Loans returned to accrual (24) (7) (4) (8) (5)
- --------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 348 $ 348 $ 343 $ 325 $ 338
===== ===== ===== ===== =====
- --------------------------------------------------------------------------------------------------------------------
SUMMARY OF CHANGES IN OREO(2)
1996 Quarters
------------------------------------------------
in millions Full Year Fourth Third Second First
- --------------------------------------------------------------------------------------------------------------------
Balance at beginning of year $ 42 $ 49 $ 42 $ 45 $ 42
Additions 42 8 16 6 12
OREO sold (34) (11) (4) (10) (9)
Charge-offs and write-downs (6) (2) (2) (1) (1)
Divestiture (1) -- -- (1) --
Other 5 4 (3) 3 1
- --------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 48 $ 48 $ 49 $ 42 $ 45
===== ===== ===== ===== =====
- --------------------------------------------------------------------------------------------------------------------
<FN>
1 Represents the gross charge-offs taken against nonaccrual loans; excluded
are charge-offs taken against accruing loans and credit card receivables,
and interest reversals.
2 Net of allowance for OREO losses.
</TABLE>
Figure 31 Percentage of Nonperforming Loans to Period End Loans by Loan Type
<TABLE>
<CAPTION>
December 31, 1996
Commercial, Real Estate-- Real Estate--
Financial and Commercial Real Estate-- Commercial Residential
Agricultural Mortgage Construction Leases Mortgage Consumer(1) Total
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Northeast Region 1.38% 2.05% .61% .23% 1.45% .24% 1.05%
Great Lakes Region .47 .86 1.92 .34 1.14 .23 .53
Rocky Mountain Region 1.88 .89 .05 .19 1.19 .39 .96
Northwest Region .54 .58 1.13 .03 1.18 .28 .54
Financial Services -- -- -- -- -- .03 .03
- ---------------------------------------------------------------------------------------------------------------------------
Total .98% 1.18% 1.15% .29% 1.28% .25% .71%
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
1 Excludes credit card receivables.
</TABLE>
Financial Page 32 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 33
Figure 32 Nonperforming Assets
<TABLE>
<CAPTION>
(in millions)
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
Other nonperforming assets $ 15 $ 13 $ 5 $ 4 $ 3
Restructured loans 2 6 2 3 1
Other real estate owned 332 151 79 42 48
Impaired and other nonaccrual loans 551 330 254 330 348
</TABLE>
Deposits and Other Sources of Funds
Core deposits, defined as domestic deposits other than certificates of deposit
of $100,000 or more, are Key's primary source of funding. During 1996, these
deposits averaged $40.4 billion and represented 70% of Key's funds supporting
earning assets compared with $41.7 billion and 69%, respectively, in 1995 and
$40.8 billion and 72%, respectively, in 1994. As shown in Figure 6 beginning on
page 14, over the past year the mix of core deposits has changed significantly.
Primary among the factors contributing to this change is a new program started
during the fourth quarter of 1995. Deposit balances (above a defined threshold)
in certain NOW and noninterest-bearing checking accounts are transferred to
money market deposit accounts, thereby reducing the level of deposit reserves
required to be maintained with the Federal Reserve. Based on certain
limitations, funds are periodically transferred back to the checking accounts to
cover checks presented for payment or withdrawals. As a result of this program,
during 1996, demand deposits and NOW account balances averaging $1.4 billion and
$2.9 billion, respectively, were transferred to the money market deposit account
category and a pre-tax cost savings of approximately $17 million was realized.
In Figure 6, the demand deposits transferred continue to be reported as
noninterest-bearing deposits, while the NOW accounts transferred are included in
the money market deposit account category. During the second quarter of 1996,
the implementation of this program was completed in the last of Key's four
banking regions. Contributing to the overall decrease in core deposits relative
to the prior year was the impact of investment alternatives pursued by customers
in response to the continued strength of the stock and bond markets, and the
impact of the SFF divestiture early in June 1996. The slight increase in the
average amount of core deposits in 1995 was primarily attributable to the impact
of acquisitions, offset in part by the pursuit of other alternatives by
customers.
Purchased funds, which are comprised of large certificates of deposit, deposits
in foreign offices and short-term borrowings, averaged $13.5 billion for 1996,
down $1.3 billion, or 9%, from the prior year. As illustrated in Figure 6, the
decrease was attributable to reductions in certificates of deposit of $100,000
or more and deposits in foreign offices of $300 million and $1.2 billion,
respectively, as less expensive sources were used to fund earning assets.
Figure 33 Maturity Distribution of Time Deposits of $100,000 or More
<TABLE>
<CAPTION>
December 31, 1996
Domestic Foreign
in millions Offices Offices Total
- ------------------------------------------------------------
Time remaining to maturity:
<S> <C> <C> <C>
Three months or less $1,828 $1,338 $3,166
Over three through six months 555 -- 555
Over six through twelve months 575 -- 575
Over twelve months 661 -- 661
- ------------------------------------------------------------
Total $3,619 $1,338 $4,957
====== ====== ======
- ------------------------------------------------------------
</TABLE>
Liquidity
Liquidity represents the availability of funding to meet the needs of
depositors, borrowers and creditors at a reasonable cost on a timely basis and
without adverse consequences. Key's ALCO actively analyzes and manages Key's
liquidity in coordination with similar committees at each affiliate bank. The
affiliate banks individually maintain liquidity in the form of short-term money
market investments, securities available for sale, anticipated prepayments and
maturities on securities, the maturity structure of their loan portfolios and
the ability to securitize and package loans for sale. Liquidity is also enhanced
by a sizable concentration of core deposits, previously discussed, which are
generated by more than 1,200 full-service banking offices in 15 states. The
affiliate banks individually monitor deposit flows and evaluate alternate
pricing structures with respect to their deposit base. This process is supported
by a Central Funding Unit within Key's Funds & Investment Management Group. This
group monitors the overall mix of funding sources in conjunction with the
affiliate banks' deposit pricing and in response to the structure of the earning
assets portfolio. In addition, the affiliate banks have access to various
sources of non-core market funding (such as Federal funds purchased, securities
sold under repurchase agreements and bank notes) and borrowings from the Federal
Reserve system for short-term liquidity requirements should the need arise.
During 1996, Key's affiliate banks raised $4.5 billion under Key's Bank Note
Program which allows for the issuance of up to $12.3 billion, covering eleven
affiliate banks. Of the notes issued during this period, $832 million have
original maturities in excess of one year and are included in long-term debt,
while $3.7 billion have original maturities of
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 33
<PAGE> 34
one year or less and are included in other short-term borrowings. As of December
31, 1996, the program had an unused capacity of $7.3 billion. Additionally,
KeyBank USA has a line of credit with the Federal Reserve which provides for
overnight borrowings of up to $1.2 billion and is secured by $1.7 billion of
KeyBank USA's credit card receivables at December 31, 1996. There were no
borrowings outstanding under this line of credit as of December 31, 1996 and
1995.
The parent company's Commercial Paper/Note Program established in 1995 provides
for the availability of up to $500 million of additional short-term funding. The
proceeds from this program may be used for general corporate purposes, including
future acquisitions, and the funding of AFG's lending activities in conjunction
with quarterly securitizations of its auto loans. In 1995, the parent company
also entered into a four-year, revolving credit agreement with several banks
under which the banks have agreed to lend collectively up to $500 million to the
parent company. In October 1996, the parent company exercised its option to
extend the term of the agreement for one year. The line of credit is used
primarily as a backup source of liquidity for the Commercial Paper/Note Program.
There were no borrowings outstanding under either of these facilities as of
December 31, 1996.
Medium-term notes and subordinated debt issued by the parent company during 1996
totaled $100 million and $450 million, respectively, and have original
maturities of more than one year. During the third quarter of 1996, the parent
company filed a new universal shelf registration statement with the SEC to
provide for the possible issuance of up to $1.2 billion of debt and equity
securities in addition to the unused capacity under a previous shelf
registration. Accordingly, at December 31, 1996, unused capacity under the 1996
shelf registration totaled $1.3 billion, of which $750 million is reserved for
future issuance as medium-term notes. The proceeds from issuances under the
shelf registration and the Bank Note Program discussed above may be used for
general corporate purposes, including future acquisitions.
During the fourth quarter of 1996, the parent company supplemented its funding
sources through the formation of two wholly owned statutory business trusts
which issued capital securities in the amount of $350 million and $150 million,
respectively. The proceeds from the issuance of the capital securities and the
issuance of $15 million of common securities were concurrently used by the
trusts to purchase $515 million of junior subordinated deferrable interest
debentures of the parent company which carry interest rates equal to the
dividend yields on the capital securities. The common securities are wholly
owned by the parent company. The proceeds from the issuance of the subordinated
debentures may be used for general corporate purposes. The capital securities
are particularly advantageous in that Key is permitted to treat them as Tier I
capital for financial reporting purposes, since their characteristics are much
like preferred stock with regard to preferences related to cash distributions,
and amounts payable upon liquidation, redemption or otherwise. At the same time,
the interest paid on the subordinated debentures is deductible for income tax
purposes. The capital securities are more fully described in Note 11, "Capital
Securities," on page 56.
The liquidity requirements of the parent company, primarily for dividends to
shareholders, servicing of debt and other corporate purposes, are met
principally through regular dividends from affiliate banks. In 1996, affiliated
companies paid a total of $1.0 billion in dividends to the parent company. As of
December 31, 1996, an additional $499 million was available in the affiliate
banks for the payment of dividends to the parent company without prior
regulatory approval. Excess funds are maintained in short-term investments. The
parent company has ready access to the capital markets as a result of its
favorable debt ratings which, at December 31, 1996, were as follows:
<TABLE>
<CAPTION>
Senior Subordinated
Commercial Long-Term Long-Term
Paper Debt Debt
- -------------------------------------------------------------
<S> <C> <C> <C>
Duff & Phelps D-1+ AA- A+
Standard & Poor's A-2 A- BBB+
Moody's P-1 A1 A2
</TABLE>
Further information pertaining to Key's sources and uses of cash for the years
ended December 31, 1996, 1995 and 1994 is presented in the Consolidated
Statements of Cash Flow on page 45.
Capital and Dividends
Total shareholders' equity at December 31, 1996, was $4.9 billion, down $272
million, or 5%, from the balance at the end of 1995. This followed a 1995
increase of $462 million, or 10%, from the balance at December 31, 1994. In
1996, the decrease was due primarily to the share repurchases discussed below
and dividends paid to shareholders. The reduction also reflected the redemption
of all $160 million of Key's 10% Cumulative Preferred Stock as of June 30, 1996,
and net unrealized losses of $54 million on securities. These securities losses
resulted in cumulative net unrealized securities losses of $6 million as of
December 31, 1996, and were recorded in connection with SFAS No. 115,
"Accounting for Investments in Certain Debt and Equity Securities." In 1995, the
increase in shareholders' equity resulted principally from the retention of net
income after dividends paid to shareholders. Other factors contributing to the
change in shareholders' equity during 1996 are shown in the Statement of Changes
in Shareholders' Equity presented on page 44.
In January 1996, the Board of Directors approved a share repurchase program,
representing an addition to previously existing programs, which authorized the
repurchase of up to 12,000,000 Common Shares in 1996. In November 1996,
subsequent to the completion of this program, the Board of Directors approved a
new share repurchase program which authorized the repurchase of an additional
12,000,000 Common Shares by the end of 1997. As under the old program, shares
will be repurchased under the new
Financial Page 34 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 35
program from time to time in the open market or through negotiated transactions.
During 1996, Key repurchased 14,620,000 shares at a total cost of $617 million
(an average of $42.25 per share). The repurchased shares were placed in
Treasury, from which 270,263 Treasury Shares were reissued in connection with an
acquisition and 4,100,953 shares were reissued for employee benefit plans. The
22,490,353 Treasury Shares at December 31, 1996, are expected to be reissued
over time in connection with employee stock purchase, 401(k), stock option and
dividend reinvestment plans and for other corporate purposes.
Capital adequacy is an important indicator of financial stability and
performance. Overall, Key's capital position remains strong with a ratio of
total shareholders' equity to total assets of 7.22% at December 31, 1996,
compared with 7.77% at December 31, 1995, and 7.03% at December 31, 1994.
Banking industry regulators define minimum capital ratios for bank holding
companies and their banking subsidiaries. Based on the risk-adjusted capital
rules and definitions prescribed by the banking regulators, Key's Tier I and
total risk-adjusted capital ratios at December 31, 1996, were 7.98% and 13.01%,
respectively. As indicated in Figure 34, these compare favorably with the
minimum requirements of 4.0% for Tier I and 8.0% for total capital. The
regulatory leverage ratio standard prescribes a minimum ratio of 3.0%, although
most banking organizations are expected to maintain ratios of at least 100 to
200 basis points above the minimum. At December 31, 1996, Key's leverage ratio
was 6.93%, substantially higher than the minimum requirement. Figure 35 presents
the details of Key's regulatory capital position at December 31, 1996 and 1995.
Failure to meet applicable capital guidelines could result in enforcement
remedies available to the banking industry regulators, including a limitation on
the ability to pay dividends, the issuance of a directive to increase capital,
the termination of deposit insurance by the FDIC, and (in severe cases) the
appointment of a conservator or receiver. Management believes that as of
December 31, 1996, the parent company and its banking subsidiaries meet all
capital adequacy guidelines to which they are subject.
Under the Federal Deposit Insurance Act, the Federal bank regulators group
FDIC-insured depository institutions into five broad categories based on certain
capital ratios. The five categories are "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized" and
"critically undercapitalized." All of Key's affiliate banks qualified as
"well-capitalized" at December 31, 1996. Although these provisions are not
directly applicable to Key under existing laws and regulations, based upon its
ratios Key would qualify as "well capitalized" at December 31, 1996. The
FDIC-defined capital categories may not constitute an accurate representation of
the overall financial condition or prospects of Key or its affiliates.
Additional information pertaining to capital adequacy, including risk-adjusted
capital amounts and ratios of the parent company's significant subsidiaries, is
presented in Note 12, "Shareholders' Equity," beginning on page 57.
At December 31, 1996, book value per Common Share was $21.84 based on
223,454,037 shares outstanding, compared with $21.36 based on 233,702,821 shares
outstanding at December 31, 1995. Key's Common Shares are traded on the New York
Stock Exchange under the symbol KEY. The sales price ranges of the Common Shares
and per Common Share net income and dividends by quarter for each of the last
two years are presented in Figure 36. At year end 1996, the closing sales price
of a Key Common Share on the New York Stock Exchange was $50.50. This price was
231% of year end book value per share, and would result in a dividend yield of
3.01% based on the then-current amount of the dividend. On January 16, 1997, the
quarterly dividend on Common Shares was increased by 10.5% to $.42 per Common
Share, up from $.38 per Common Share in 1996. There were 50,584 holders of
record of Key Common Shares at December 31, 1996.
Figure 34 Capital Ratios
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Total risk-based capital ratio
regulatory
minimum 8.0% 8.0%
Tier 1 risk-based capital ratio
regulatory
minimum 4.0% 4.0%
Leverage ratio
regulatory
minimum 3.0% 3.0%
Total risk-based capital ratio 10.85% 13.01%
Tier I risk-based capital ratio 7.53% 7.98%
Leverage ratio 6.20% 6.93%
</TABLE>
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 35
<PAGE> 36
Figure 35 Capital Components and Risk-Adjusted Assets
<TABLE>
<CAPTION>
December 31,
dollars in millions 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C>
TIER I CAPITAL
Common shareholders' equity(1) $4,887 $4,945
Qualifying preferred stock -- 160
Capital securities 500 --
Less: Goodwill (824) (899)
Other intangible assets(2) (121) (143)
- -----------------------------------------------------------------------------
Total Tier I capital 4,442 4,063
- -----------------------------------------------------------------------------
TIER II CAPITAL
Allowance for loan losses(3) 698 677
Qualifying long-term debt 2,103 1,114
- -----------------------------------------------------------------------------
Total Tier II capital 2,801 1,791
- -----------------------------------------------------------------------------
Total capital $7,243 $5,854
======== ========
RISK-ADJUSTED ASSETS
Risk-adjusted assets on balance sheet $52,228 $49,555
Risk-adjusted off-balance sheet exposure 4,541 5,619
Less: Goodwill (824) (899)
Other intangible assets(2) (121) (143)
- -----------------------------------------------------------------------------
Gross risk-adjusted assets 55,824 54,132
Less: Excess allowance for loan losses(3) (172) (199)
- -----------------------------------------------------------------------------
Net risk-adjusted assets $55,652 $53,933
======== ========
AVERAGE QUARTERLY TOTAL ASSETS $65,063 $66,543
======== ========
CAPITAL RATIOS
Tier I risk-adjusted capital ratio 7.98% 7.53%
Total risk-adjusted capital ratio 13.01 10.85
Leverage ratio 6.93 6.20
- -----------------------------------------------------------------------------
<FN>
(1) Common shareholders' equity excludes the impact of net unrealized gains or
losses on securities, except for net unrealized losses on marketable equity
securities.
(2) Intangible assets (excluding goodwill and portions of purchased credit card
relationships) recorded after February 19, 1992, and deductible portions of
purchased mortgage servicing rights.
(3) The allowance for loan losses included in Tier II capital is limited to
1.25% of gross risk-adjusted assets.
</TABLE>
FOURTH QUARTER RESULTS
As shown in Figure 36, net income for the fourth quarter of 1996 was $151
million, or $.67 per Common Share, compared with $207 million, or $.86 per
Common Share, for the same period in 1995. Financial results in both periods
were significantly impacted by nonrecurring items. Earnings for the fourth
quarter of 1996 included a restructuring charge of $100 million ($66 million
after tax, $.29 per Common Share) recorded in connection with certain strategic
actions to be taken over the next year to complete Key's transformation to a
nationwide, bank-based financial services company. The 1995 period was impacted
by a positive accounting adjustment of $18 million ($12 million after tax, $.05
per Common Share) resulting from better-than-expected performance of student
loan securitizations completed in prior periods and $33 million ($20 million
after tax, $.08 per Common Share) of write-offs of obsolete internally developed
software and a sublease loss.
Excluding the nonrecurring items described above, earnings for the fourth
quarter of 1996 were $217 million, or a record high $.96 per Common Share, up
from $215 million, or $.89 per Common Share in the prior year. The increase in
adjusted earnings resulted from a $22 million, or 3%, increase in taxable
equivalent net interest income and a $14 million, or 13%, decrease in income
taxes, partially offset by increases of $23 million, or 68%, in the provision
for loan losses and $11 million, or 2%, in noninterest expense. Excluding the
1995 accounting adjustment related to student loan securitizations, noninterest
income in 1996 was consistent with the prior year level. On an annualized basis,
the return on average total assets for the fourth quarter of 1996 was .92%
compared with 1.23% for the fourth quarter of 1995. The annualized return on
average total equity for the fourth quarters of 1996 and 1995 were 12.53% and
16.11%, respectively. Excluding the restructuring charge, Key's fourth quarter
1996 returns on average total assets and equity were 1.33% and 18.01%,
respectively.
The increase in taxable equivalent net interest income in the fourth quarter of
1996 as compared with the fourth quarter of 1995 reflected a net interest margin
which rose 27 basis points to 4.80% and more than offset the impact of a managed
reduction of $1.6 billion, or 3%, in average earning assets. Income taxes
declined as a result of a number of factors, including: higher income from
corporate owned life insurance, increased credits associated with investments in
low-income housing projects, and the benefit derived from a contribution of
appreciated marketable securities to Key's charitable foundation. The provision
for loan losses increased in the current year in response to the higher level of
net charge-offs and reflected management's intention to continue to maintain the
provision at a level equal to or above net charge-offs. The slight growth in
noninterest expense relative to the fourth quarter of last year was due
primarily to higher personnel expense, largely offset by lower costs associated
with deposit insurance, professional fees and other expenses.
Financial Page 36 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 37
Figure 36 Selected Quarterly Financial Data
<TABLE>
<CAPTION>
1996
-----------------------------------------------------------
dollars in millions,
except per share amounts Fourth Third Second First
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOR THE QUARTER
Interest income $ 1,243 $ 1,238 $ 1,234 $ 1,236
Interest expense 560 555 552 567
Net interest income 683 683 682 669
Provision for loan losses 57 49 47 44
Noninterest income before
net securities gains (losses) 285 289 263 249
Net securities gains (losses) -- -- 1 --
Noninterest expense 700 615 579 570
Income before income taxes
and extraordinary item 211 308 320 304
Income before extraordinary item 151 207 217 208
Net income 151 207 217 208
Net income applicable to Common Shares 151 207 213 204
- -----------------------------------------------------------------------------------------------------------
PER COMMON SHARE
Income before extraordinary item $ .67 $ .90 $ .92 $ .88
Net income .67 .90 .92 .88
Cash dividends .38 .38 .38 .38
Book value at period end 21.84 21.91 21.63 21.43
Market price:
High 54.25 44.38 40.25 39.13
Low 43.69 36.25 36.75 33.38
Close 50.50 44.00 38.75 38.63
Weighted average Common Shares (000) 225,562 229,668 231,341 233,100
- -----------------------------------------------------------------------------------------------------------
AT PERIOD END
Loans $ 49,235 $ 48,373 $ 47,928 $ 48,273
Earning assets 59,260 57,640 57,404 57,941
Total assets 67,621 65,356 64,764 65,052
Deposits 45,317 44,523 44,417 45,401
Long-term debt 4,213 4,664 4,174 4,266
Common shareholders' equity 4,881 4,976 4,996 4,964
Total shareholders' equity 4,881 4,976 4,996 5,124
- -----------------------------------------------------------------------------------------------------------
PERFORMANCE RATIOS
Return on average total assets .92% 1.28% 1.35% 1.28%
Return on average common equity 12.53 16.73 17.15 16.42
Return on average total equity 12.53 16.73 16.93 16.22
Efficiency 60.92 60.71 60.50 61.22
Overhead 44.89 44.40 45.53 47.07
Net interest margin (TE) 4.80 4.82 4.80 4.70
- -----------------------------------------------------------------------------------------------------------
CAPITAL RATIOS AT PERIOD END
Equity to assets(1) 7.22% 7.61% 7.71% 7.88%
Tangible equity to tangible assets(1) 5.88 6.20 6.27 6.38
Tier I risk-adjusted capital 7.98 7.49 7.60 7.71
Total risk-adjusted capital 13.01 12.50 11.72 11.45
Leverage 6.93 6.38 6.43 6.43
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
1995
------------------------------------------------------
dollars in millions,
except per share amounts Fourth Third Second First
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOR THE QUARTER
Interest income $ 1,278 $ 1,299 $ 1,299 $ 1,245
Interest expense 618 633 632 602
Net interest income 660 666 667 643
Provision for loan losses 34 27 21 18
Noninterest income before
net securities gains (losses) 303 235 220 216
Net securities gains (losses) 1 -- 3 (45)
Noninterest expense 622 561 568 561
Income before income taxes
and extraordinary item 308 313 301 235
Income before extraordinary item 207 209 199 174
Net income 207 209 199 210
Net income applicable to Common Shares 203 205 195 206
- -----------------------------------------------------------------------------------------------------
PER COMMON SHARE
Income before extraordinary item $ .86 $ .90 $ .83 $ .71
Net income .86 .90 .83 .86
Cash dividends .36 .36 .36 .36
Book value at period end 21.36 20.74 19.71 19.57
Market price:
High 37.25 35.13 32.13 29.50
Low 33.25 30.38 26.00 24.50
Close 36.25 34.25 31.38 28.25
Weighted average Common Shares (000) 235,753 228,187 235,329 239,999
- -----------------------------------------------------------------------------------------------------
AT PERIOD END
Loans $ 48,332 $ 49,069 $ 48,791 $ 48,186
Earning assets 58,762 60,847 60,946 61,167
Total assets 66,339 67,967 67,481 67,709
Deposits 47,282 47,905 48,672 48,812
Long-term debt 4,003 4,048 4,020 3,725
Common shareholders' equity 4,993 4,923 4,514 4,658
Total shareholders' equity 5,153 5,083 4,674 4,818
- -----------------------------------------------------------------------------------------------------
PERFORMANCE RATIOS
Return on average total assets 1.23% 1.25% 1.19% 1.28%
Return on average common equity 16.31 18.07 16.86 18.26
Return on average total equity 16.11 17.79 16.63 17.99
Efficiency 63.67 61.27 63.05 64.12
Overhead 47.36 47.89 51.10 52.36
Net interest margin (TE) 4.53 4.50 4.49 4.38
- -----------------------------------------------------------------------------------------------------
CAPITAL RATIOS AT PERIOD END
Equity to assets(1) 7.77% 7.48% 6.93% 7.12%
Tangible equity to tangible assets(1) 6.25 5.98 5.75 6.02
Tier I risk-adjusted capital 7.53 7.55 7.45 7.96
Total risk-adjusted capital 10.85 10.84 10.82 11.05
Leverage 6.20 6.19 5.88 6.24
- -----------------------------------------------------------------------------------------------------
<FN>
(1) Including capital securities, these ratios at December 31, 1996, are 7.96%
and 6.63%, respectively.
</TABLE>
The comparability of the information presented above is affected by certain
acquisitions and divestitures completed by Key in the time periods presented.
For further information concerning these transactions, refer to Note 2, Mergers,
Acquisitions and Divestitures beginning on page 49.
TE = Taxable Equivalent
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 37
<PAGE> 38
Figure 37 Banking Services Data by Region
<TABLE>
<CAPTION>
Year ended December 31,
Northeast Region Great Lakes Region
---------------- ------------------
dollars in millions 1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSET QUALITY RATIOS
Nonperforming loans to year end loans 1.05% 1.06% .53% .57%
Allowance for loan losses to year end loans 1.47 1.42 2.08 2.32
Net loan charge-offs to average loans .41 .34 .12 .04
AVERAGE BALANCES
Loans $13,935 $13,943 $19,620 $19,875
Earning assets 17,525 18,006 23,952 25,498
Total assets 19,083 19,425 26,569 28,189
Deposits 14,008 14,680 17,010 18,682
- ----------------------------------------------------------------------------------------------
Rocky Mountain Region Northwest Region
--------------------- ----------------
1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------
ASSET QUALITY RATIOS
Nonperforming loans to year end loans .96% .69% .54% .48%
Allowance for loan losses to year end loans 1.39 1.29 1.35 1.35
Net loan charge-offs to average loans .54 .32 .18 .15
AVERAGE BALANCES
Loans $3,824 $3,661 $ 9,252 $ 8,982
Earning assets 4,730 4,663 10,716 10,398
Total assets 5,196 5,098 11,842 11,387
Deposits 3,955 3,950 9,136 8,865
- ----------------------------------------------------------------------------------------------
Consumer Finance Companies
--------------------------
1996 1995
- --------------------------------------------------------------------
ASSET QUALITY RATIOS
Nonperforming loans to year end loans .03% --
Allowance for loan losses to year end loans 1.79 1.73%
Net loan charge-offs to average loans 3.02 2.70
AVERAGE BALANCES
Loans $2,421 $608
Earning assets 2,438 683
Total assets 2,906 776
Deposits 722 187
- --------------------------------------------------------------------
</TABLE>
Financial Page 38 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 39
Figure 38 Six-Year Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
Compound
Annual Rate
of Change
dollars in millions 1996 1995 1994 1993 1992 1991 (1991-1996)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 3,444 $ 3,444 $ 3,511 $ 2,778 $ 3,080 $ 3,151 1.8%
Short-term investments 696 682 670 107 986 1,693 (16.3)
Securities available for sale 7,728 8,060 2,521 1,727 2,459 -- 25.7
Investment securities 1,601 1,688 10,276 11,122 8,976 10,288 (31.1)
Loans 49,235 48,332 46,580 41,397 36,960 36,226 6.3
Less: Allowance for loan losses 870 876 830 803 783 793 1.9
- --------------------------------------------------------------------------------------------------------------------------------
Net loans 48,365 47,456 45,750 40,594 36,177 35,433 6.4
Premises and equipment 1,084 1,030 987 913 843 720 8.5
Other real estate owned, net of allowance 48 42 79 150 332 331 (32.0)
Intangible assets 961 1,070 598 549 602 629 8.8
Other assets 3,694 2,867 2,409 1,694 1,613 1,356 22.2
- --------------------------------------------------------------------------------------------------------------------------------
Total assets $67,621 $66,339 $66,801 $59,634 $55,068 $53,601 4.8%
======= ======= ======= ======= ======= =======
LIABILITIES
Deposits in domestic offices:
Noninterest-bearing $ 9,524 $ 9,281 $ 9,136 $ 8,826 $ 8,291 $ 7,086 6.1%
Interest-bearing 34,455 36,764 36,003 35,658 34,027 35,448 (.6)
Deposits in foreign offices--interest-bearing 1,338 1,237 3,425 2,015 1,115 301 34.8
- --------------------------------------------------------------------------------------------------------------------------------
Total deposits 45,317 47,282 48,564 46,499 43,433 42,835 1.1
Federal funds purchased and securities sold
under repurchase agreements 6,925 5,544 5,499 4,120 4,207 4,254 10.2
Other short-term borrowings 3,969 2,880 3,278 1,776 875 833 36.6
Other liabilities 1,816 1,477 1,200 1,090 836 937 14.1
Long-term debt 4,213 4,003 3,570 1,764 1,790 1,225 28.0
- --------------------------------------------------------------------------------------------------------------------------------
Total liabilities 62,240 61,186 62,111 55,249 51,141 50,084 4.4
Corporation-obligated mandatorily redeemable
capital securities of subsidiary trusts holding
solely junior subordinated deferrable interest
debentures of the Corporation 500 -- -- -- -- -- N/M
SHAREHOLDERS' EQUITY
Preferred stock -- 160 160 160 244 244 N/M
Common Shares 246 246 246 243 237 179 6.6
Capital surplus 1,484 1,500 1,454 1,434 1,337 1,487 --
Retained earnings 4,060 3,633 3,161 2,633 2,206 1,849 17.0
Loans to ESOP trustee (49) (51) (64) (64) (66) (65) (5.5)
Net unrealized gains (losses) on securities,
net of income taxes (6) 48 (115) -- -- -- N/M
Treasury stock at cost (854) (383) (152) (21) (31) (177) 37.0
- --------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 4,881 5,153 4,690 4,385 3,927 3,517 6.8
- --------------------------------------------------------------------------------------------------------------------------------
Total liabilities, corporation-obligated
mandatorily redeemable capital securities
and shareholders' equity $67,621 $66,339 $66,801 $59,634 $55,068 $53,601 4.8%
======= ======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------------------
<FN>
N/M = Not Meaningful
</TABLE>
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 39
<PAGE> 40
Figure 39 Six-Year Consolidated Statements of Income
<TABLE>
<CAPTION>
Year Ended December 31,
Compound
Annual Rate
of Change
dollars in millions, except per share amounts 1996 1995 1994 1993 1992 1991 (1991-1996)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 4,339 $ 4,335 $ 3,659 $ 3,388 $ 3,313 $ 3,703 3.2%
Taxable investment securities 14 521 507 556 677 678 (54.0)
Tax-exempt investment securities 76 83 90 107 120 126 (9.6)
Securities available for sale 494 135 227 141 57 60 52.4
Short-term investments 28 47 7 22 32 85 (19.9)
- --------------------------------------------------------------------------------------------------------------------------------
Total interest income 4,951 5,121 4,490 4,214 4,199 4,652 1.3
INTEREST EXPENSE
Deposits 1,469 1,705 1,325 1,233 1,469 2,136 (7.2)
Federal funds purchased and securities
sold under repurchase agreements 295 315 243 130 143 214 6.6
Other short-term borrowings 197 204 91 45 31 74 21.6
Long-term debt 273 261 138 127 107 95 23.5
- --------------------------------------------------------------------------------------------------------------------------------
Total interest expense 2,234 2,485 1,797 1,535 1,750 2,519 (2.4)
- --------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 2,717 2,636 2,693 2,679 2,449 2,133 5.0
Provision for loan losses 197 100 125 212 339 466 (15.8)
- --------------------------------------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 2,520 2,536 2,568 2,467 2,110 1,667 8.6
NONINTEREST INCOME
Service charges on deposit accounts 293 278 263 253 237 217 6.2
Trust and asset management income 247 232 220 245 251 236 .9
Loan securitization income 62 66 3 -- -- -- N/M
Credit card fees 93 85 76 73 81 71 5.5
Mortgage banking income 22 41 88 128 97 74 (21.5)
Net securities gains (losses) 1 (41) (14) 28 14 19 (44.5)
Gains on certain asset sales -- -- -- 29 23 24 N/M
Other income 369 272 247 246 222 208 12.1
- --------------------------------------------------------------------------------------------------------------------------------
Total noninterest income 1,087 933 883 1,002 925 849 5.1
NONINTEREST EXPENSE
Personnel 1,190 1,115 1,060 1,072 1,014 925 5.2
Net occupancy 219 218 217 204 190 185 3.4
Equipment 161 156 158 161 151 134 3.7
FDIC insurance assessments 25 59 99 99 96 85 (21.7)
Restructuring charge 100 -- -- -- -- -- N/M
Merger and integration charges -- -- -- 119 93 94 N/M
Other expense 769 764 634 730 626 643 3.6
- --------------------------------------------------------------------------------------------------------------------------------
Total noninterest expense 2,464 2,312 2,168 2,385 2,170 2,066 3.6
INCOME BEFORE INCOME TAXES,
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE AND EXTRAORDINARY ITEM 1,143 1,157 1,283 1,084 865 450 20.5
Income taxes 360 368 430 374 280 136 21.5
- --------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE
AND EXTRAORDINARY ITEM 783 789 853 710 585 314 20.1
Cumulative effect of accounting change -- -- -- -- 7 -- N/M
Extraordinary net gain -- 36 -- -- -- -- N/M
- --------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 783 $ 825 $ 853 $ 710 $ 592 $ 314 20.1%
======== ========= ========= ======== ======== ========
Net income applicable to Common Shares $ 775 $ 809 $ 837 $ 692 $ 568 $ 298 21.1%
Net income per Common Share:
Before cumulative effect of accounting change
and extraordinary net gain $ 3.37 $ 3.30 $ 3.45 $ 2.89 $ 2.39 $ 1.31 20.8%
After cumulative effect of accounting change
and extraordinary net gain 3.37 3.45 3.45 2.89 2.42 1.31 20.8
Weighted average Common Shares outstanding (000) 229,905 234,787 243,067 239,775 235,005 227,116 .2%
Taxable-equivalent adjustment $ 50 $ 57 $ 59 $ 63 $ 72 $ 82 (9.4)%
- --------------------------------------------------------------------------------------------------------------------------------
<FN>
N/M = Not Meaningful
</TABLE>
Financial Page 40 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 41
Report of Management
The management of Key is responsible for the preparation, content and integrity
of the financial statements and other statistical data and analyses compiled for
this annual report. The financial statements and related notes have been
prepared in conformity with generally accepted accounting principles and, in the
judgment of management, present fairly Key's financial position, results of
operations and cash flows. Management also believes that financial information
presented elsewhere in this annual report is consistent with that in the
financial statements. The amounts contained in the financial statements are
based upon management's best estimates and judgments.
Management is also responsible for establishing and maintaining a system of
internal controls designed to provide reasonable assurance as to the protection
of assets and the integrity of the financial statements. This corporate-wide
system of controls includes self-monitoring mechanisms, written policies and
procedures, proper delegation of authority and organizational division of
responsibility, and the careful selection and training of qualified personnel.
Management also maintains a code of ethics that addresses among other things,
conflicts of interest, compliance with laws and regulations, and prompt
reporting of any failure or circumvention of controls. Compliance with Key's
code of ethics is certified annually. In addition, an effective internal audit
function periodically tests the system of internal controls. Management takes
action to correct control deficiencies as they are identified. There are
inherent limitations in the effectiveness of any system of internal control,
including the possibility of human error and the circumvention or overriding of
controls. Management believes that the system of internal controls provides
reasonable assurances that financial transactions are recorded properly to
permit the preparation of reliable financial statements.
The Board of Directors discharges its responsibility for Key's financial
statements through its Audit Committee. Key's Audit Committee, composed
exclusively of outside directors, also has responsibility for recommending the
independent auditors. The Audit Committee meets regularly with the independent
auditors to review the scope of their audits and audit reports and to discuss
action to be taken. Both the independent and internal auditors have direct
access to the Audit Committee.
Management has made an assessment of Key's internal control structure and
procedures over financial reporting using criteria described in "Internal
Control--Integrated Framework" issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on that assessment, management
believes that Key maintained an effective system of internal control for
financial reporting as of December 31, 1996.
/s/ Robert W. Gillespie
Robert W. Gillespie
Chairman, President and Chief Executive Officer
/s/ K. Brent Somers
K. Brent Somers
Senior Executive Vice President and Chief Financial Officer
Report of Ernst & Young LLP, Independent Auditors
Shareholders and Board of Directors
KeyCorp
We have audited the accompanying consolidated balance sheets of KeyCorp and
subsidiaries ("Key") as of December 31, 1996 and 1995, and the related
consolidated statements of income, changes in shareholders' equity, and cash
flow for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of Key's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Key at December
31, 1996 and 1995, and the consolidated results of their operations and their
cash flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Cleveland, Ohio
January 15, 1997
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 41
<PAGE> 42
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
dollars in millions 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 3,444 $ 3,444
Short-term investments 696 682
Securities available for sale 7,728 8,060
Investment securities (fair value: $1,637 and $1,738) 1,601 1,688
Loans 49,235 48,332
Less: Allowance for loan losses 870 876
- ------------------------------------------------------------------------------------------------------------------------------
Net loans 48,365 47,456
Premises and equipment 1,084 1,030
Goodwill 824 899
Other intangible assets 137 171
Corporate owned life insurance 1,515 1,088
Other assets 2,227 1,821
- ------------------------------------------------------------------------------------------------------------------------------
Total assets $67,621 $66,339
======= =======
LIABILITIES
Deposits in domestic offices:
Noninterest-bearing $ 9,524 $ 9,281
Interest-bearing 34,455 36,764
Deposits in foreign offices--interest-bearing 1,338 1,237
- ------------------------------------------------------------------------------------------------------------------------------
Total deposits 45,317 47,282
Federal funds purchased and securities sold under repurchase agreements 6,925 5,544
Other short-term borrowings 3,969 2,880
Other liabilities 1,816 1,477
Long-term debt 4,213 4,003
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities 62,240 61,186
Corporation-obligated mandatorily redeemable capital securities of subsidiary trusts
holding solely junior subordinated deferrable interest debentures of the Corporation 500 --
SHAREHOLDERS' EQUITY
Preferred stock, $1 par value; authorized 25,000,000 shares, none issued -- --
10% Cumulative Preferred Stock Class A, $125 stated value;
authorized 1,400,000 shares, issued 1,280,000 shares in 1995 -- 160
Common Shares, $1 par value; authorized 900,000,000 shares;
issued 245,944,390 shares 246 246
Capital surplus 1,484 1,500
Retained earnings 4,060 3,633
Loans to ESOP trustee (49) (51)
Net unrealized gains (losses) on securities, net of income taxes (6) 48
Treasury stock, at cost (22,490,353 and 12,241,569 shares) (854) (383)
- ------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 4,881 5,153
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities, corporation-obligated mandatorily redeemable capital securities
and shareholders' equity $67,621 $66,339
======= =======
- ------------------------------------------------------------------------------------------------------------------------------
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
Financial Page 42 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 43
Consolidated Statements of Income
<TABLE>
<CAPTION>
Year ended December 31,
dollars in millions, except per share amounts 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Loans $4,339 $4,335 $3,659
Taxable investment securities 14 521 507
Tax-exempt investment securities 76 83 90
Securities available for sale 494 135 227
Short-term investments 28 47 7
- -----------------------------------------------------------------------------------------------------------------
Total interest income 4,951 5,121 4,490
INTEREST EXPENSE
Deposits 1,469 1,705 1,325
Federal funds purchased and securities sold under repurchase agreements 295 315 243
Other short-term borrowings 197 204 91
Long-term debt 273 261 138
- -----------------------------------------------------------------------------------------------------------------
Total interest expense 2,234 2,485 1,797
- -----------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 2,717 2,636 2,693
Provision for loan losses 197 100 125
- -----------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 2,520 2,536 2,568
NONINTEREST INCOME
Service charges on deposit accounts 293 278 263
Trust and asset management income 247 232 220
Loan securitization income 62 66 3
Credit card fees 93 85 76
Insurance and brokerage income 70 61 59
Mortgage banking income 22 41 88
Net securities gains (losses) 1 (41) (14)
Other income 299 211 188
- -----------------------------------------------------------------------------------------------------------------
Total noninterest income 1,087 933 883
NONINTEREST EXPENSE
Personnel 1,190 1,115 1,060
Net occupancy 219 218 217
Equipment 161 156 158
FDIC insurance assessments 25 59 99
Amortization of intangibles 88 77 59
Professional fees 70 73 50
Marketing 88 71 59
Restructuring charge 100 -- --
Other expense 523 543 466
- -----------------------------------------------------------------------------------------------------------------
Total noninterest expense 2,464 2,312 2,168
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM 1,143 1,157 1,283
Income taxes 360 368 430
- -----------------------------------------------------------------------------------------------------------------
INCOME BEFORE EXTRAORDINARY ITEM 783 789 853
Extraordinary net gain from the sales of subsidiaries,
net of income taxes of $25 -- 36 --
- -----------------------------------------------------------------------------------------------------------------
NET INCOME $ 783 $ 825 $ 853
======== ========= =========
Net income applicable to Common Shares $ 775 $ 809 $ 837
Per Common Share:
Income before extraordinary item $3.37 $3.30 $3.45
Net income 3.37 3.45 3.45
Weighted average Common Shares outstanding (000) 229,905 234,787 243,067
- -----------------------------------------------------------------------------------------------------------------
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 43
<PAGE> 44
Consolidated Statements of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
Loans to Net Unrealized Treasury
Preferred Common Capital Retained ESOP Securities Stock
dollars in millions, except per share amounts Stock Shares Surplus Earnings Trustee Gains (Losses) at Cost
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993 $ 160 $243 $1,434 $2,633 $(64) $ (21)
Adjustment of securities available for sale
to fair value at January 1, net of deferred
tax expense of $27 $ 46
Net income 853
Cash dividends:
Common Shares ($1.28 per share) (271)
Cumulative Preferred Stock ($12.50 per share) (12)
Declared by pooled company prior to merger:
Common stock (40)
Preferred stock (4)
Issuance of Common Shares:
Acquisitions--5,120,205 shares 3 19 62
Conversion of subordinated debentures--
120,213 shares (1) 3
Dividend reinvestment, stock option and
purchase plans--1,170,238 net shares 2 20
Repurchase of Common Shares--7,582,700 shares (216)
Change in net unrealized gains (losses) on securities,
net of deferred tax benefit of $(93) (161)
Tax benefits attributable to ESOP dividends 2
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994 160 246 1,454 3,161 (64) (115) (152)
Net income 825
Cash dividends:
Common Shares ($1.44 per share) (338)
Cumulative Preferred Stock ($12.50 per share) (16)
Issuance of Common Shares:
Acquisitions--15,507,562 shares 54 442
Dividend reinvestment, stock option and
purchase plans--1,808,592 net shares (8) 51
Repurchase of Common Shares--23,975,450 shares (724)
Change in net unrealized gains (losses) on securities,
net of deferred tax expense of $85 163
Tax benefits attributable to ESOP dividends 1
Loan payment from ESOP trustee 13
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995 160 246 1,500 3,633 (51) 48 (383)
Net income 783
Cash dividends:
Common Shares ($1.52 per share) (349)
Cumulative Preferred Stock ($6.25 per share) (8)
Redemption of 10% Cumulative Preferred Stock (160)
Issuance of Common Shares:
Acquisition--270,263 shares 2 9
Dividend reinvestment, stock option and
purchase plans--4,100,953 net shares (18) 137
Repurchase of Common Shares--14,620,000 shares (617)
Change in net unrealized gains (losses) on securities,
net of deferred tax benefit of $(21) (54)
Tax benefits attributable to ESOP dividends 1
Loan payment from ESOP trustee 2
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 -- $246 $1,484 $4,060 $(49) $(6) $(854)
===== ==== ====== ====== ==== === =====
- -------------------------------------------------------------------------------------------------------------------------------
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
Financial Page 44 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 45
Consolidated Statements of Cash Flow
<TABLE>
<CAPTION>
Year ended December 31,
in millions 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 783 $ 825 $ 853
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 197 100 125
Depreciation expense 142 138 122
Amortization of intangibles 88 77 59
Net gain from sales of subsidiaries (8) (61) --
Net securities (gains) losses (1) 41 14
Deferred income taxes 112 168 170
Net decrease in mortgage loans held for sale 573 226 997
Net (increase) decrease in trading account assets (4) 93 (90)
Net increase in accrued restructuring charge 100 -- --
Other operating activities, net (325) 810 (383)
- ------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,657 2,417 1,867
INVESTING ACTIVITIES
Net increase in loans (3,791) (3,043) (5,870)
Loans sold 1,351 1,587 548
Purchases of investment securities (782) (1,413) (4,445)
Proceeds from sales of investment securities 28 15 23
Proceeds from prepayments and maturities of investment securities 809 2,118 2,544
Purchases of securities available for sale (2,868) (697) (899)
Proceeds from sales of securities available for sale 256 2,927 2,233
Proceeds from prepayments and maturities of securities available for sale 2,905 660 517
Net (increase) decrease in other short-term investments (383) 63 (138)
Purchases of premises and equipment (279) (179) (204)
Proceeds from sales of premises and equipment 50 14 26
Proceeds from sales of other real estate owned 31 54 74
Purchases of mortgage servicing rights -- -- (44)
Purchases of corporate owned life insurance (345) (545) (240)
Proceeds from sales of subsidiaries 140 357 --
Net cash (used in) provided by acquisitions, net of cash acquired (12) (193) 40
- ------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (2,890) 1,725 (5,835)
FINANCING ACTIVITIES
Net increase (decrease) in deposits (972) (3,001) 600
Net increase (decrease) in short-term borrowings 2,468 (539) 2,858
Net proceeds from issuance of long-term debt 2,093 646 1,954
Payments on long-term debt (1,822) (286) (154)
Proceeds from issuance of capital securities 500 -- --
Loan payment received from ESOP trustee 2 13 --
Purchases of treasury shares (617) (724) (216)
Redemption of 10% Cumulative Preferred Stock (160) -- --
Proceeds from issuance of common stock pursuant to employee
stock purchase, stock option and dividend reinvestment plans 98 36 19
Cash dividends (357) (354) (359)
- ------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,233 (4,209) 4,702
- ------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS -- (67) 734
CASH AND DUE FROM BANKS AT BEGINNING OF YEAR 3,444 3,511 2,777
- ------------------------------------------------------------------------------------------------------------------
CASH AND DUE FROM BANKS AT END OF YEAR $ 3,444 $ 3,444 $ 3,511
======= ======= =======
- ------------------------------------------------------------------------------------------------------------------
Additional disclosures relative to cash flow:
Interest paid $ 2,214 $ 2,468 $ 1,754
Income taxes paid 191 255 263
Net amount received (paid) on portfolio swaps 77 (78) 79
Noncash items:
Net transfer of loans to other real estate owned 42 21 53
Net transfer of securities from investment to available-for-sale portfolio -- 8,016 2,723
Transfers of loans to mortgage loans held for sale -- 1,509 --
- ------------------------------------------------------------------------------------------------------------------
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 45
<PAGE> 46
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
ORGANIZATION
KeyCorp (the "parent company"), an Ohio corporation and a bank holding company
headquartered in Cleveland, Ohio, is a bank-based financial services company.
Its subsidiaries provide a wide range of banking, fiduciary and other financial
services to corporate, individual and institutional customers through three
primary lines of business: Corporate Banking, National Consumer Finance and
Community Banking. These services are provided across much of the country
through a network of banking subsidiaries operating more than 1,200 full-service
banking offices in 15 states, a 24-hour telephone banking call center services
group and nearly 1,900 ATMs as of December 31, 1996.
In addition to the customary banking services of accepting deposits and making
loans, the bank and trust company subsidiaries provide specialized services,
including personal and corporate trust services, personal financial services,
customer access to mutual funds, cash management services, investment banking
services and international banking services. Through its subsidiary banks, trust
companies and registered investment adviser subsidiaries, KeyCorp provides
investment management services to institutional and individual clients,
including large corporate and public retirement plans, Taft-Hartley plans,
foundations and endowments, and high net worth individuals. In addition,
investment management subsidiaries serve as investment advisers to the
proprietary mutual funds offered by other affiliates.
KeyCorp provides other financial services both in and outside of its primary
banking markets through its nonbank subsidiaries. These services include
accident and health insurance on loans made by subsidiary banks, venture
capital, community development financing, securities underwriting and brokerage,
automobile financing and other financial services. KeyCorp is an equity
participant in a joint venture with a number of other unaffiliated companies in
Electronic Payment Services, Inc., which operates ATMs throughout the country,
and Integrion Financial Network, L.L.C., which is building a platform for
electronic banking.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
judgments in determining the amounts presented in the consolidated financial
statements and related notes thereto. Accordingly, future results could be
impacted by differences from such estimates.
The accounting policies of Key conform with generally accepted accounting
principles and prevailing practices within the financial services industry.
Following is a summary of Key's significant accounting and reporting policies.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the parent company
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation. Certain reclassifications have been made
to prior year amounts to conform with the current year presentation.
BUSINESS COMBINATIONS
In business combinations accounted for as poolings of interests (mergers), the
assets, liabilities and shareholders' equity of the respective companies are
carried forward at their historical amounts. The companies' results of
operations are combined and the prior periods' financial statements are restated
to give effect to the merger, when material.
In business combinations accounted for as purchases, the results of operations
of the acquired companies are included from the respective dates of acquisition.
Net assets of the companies acquired are recorded at their fair value at the
dates of acquisition. Related purchase premiums and discounts are amortized over
the remaining lives of the respective assets or liabilities.
STATEMENT OF CASH FLOWS
Cash and due from banks are considered cash and cash equivalents for purposes of
complying with the reporting requirements prescribed by SFAS No. 95, "Statement
of Cash Flows."
SECURITIES AND TRADING ACCOUNT ASSETS
Debt securities that Key has the positive intent and ability to hold to maturity
are classified as securities held to maturity and carried at cost, adjusted for
amortization of premiums and accretion of discounts using the level yield
method. Securities held to maturity and equity securities that do not have
readily determinable fair values are presented as investment securities on the
balance sheet.
Debt and equity securities that are bought and held principally for the purpose
of selling them in the near term are classified as trading account assets,
reported at fair value ($37 million and $33 million at December 31, 1996 and
1995, respectively) and included in short-term investments on the balance sheet.
Realized and unrealized gains and losses on such assets are reported in other
income on the income statement.
Debt and equity securities that Key has not classified as investment securities
or trading account assets are classified as securities available for sale and,
as such, are reported at fair value, with unrealized gains and losses, net of
deferred taxes, reported as a component of shareholders' equity. Gains and
losses from sales of securities available for sale are computed using the
specific identification method and included in net securities gains (losses) on
the income statement.
Financial Page 46 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 47
Notes to Consolidated Financial Statements
LOANS
Loans are carried at the principal amount outstanding, net of unearned income,
including net deferred loan fees and costs. Certain nonrefundable loan
origination and commitment fees and the direct costs associated with originating
or acquiring the loans are deferred. The net deferred amount is amortized as an
adjustment to the yield over the estimated lives of the related loans.
Loans held for sale include mortgage and student loans and are carried at the
lower of aggregate cost or fair value. Fair value is determined based on prices
observed in the market for loans with similar characteristics. When commitments
to sell exist, fair value is assumed to be the contracted sales price.
IMPAIRED AND OTHER NONACCRUAL LOANS
The accrual of interest on loans is discontinued generally when payment is 90
days or more past due, unless the loan is well secured and in the process of
collection. When accrual of interest is discontinued on a loan, the interest
accrued but not collected is charged against the allowance for loan losses.
Thereafter, payments received are generally applied to principal. However, based
on management's assessment of the ultimate collectibility of a nonaccrual loan,
interest income may be recognized on a cash basis.
Effective January 1, 1995, Key adopted SFAS No. 114, "Accounting by Creditors
for Impairment of a Loan," and SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan--Income Recognition and Disclosures." In accordance with
SFAS No. 114, Key excludes smaller-balance, homogeneous loans from its
impairment evaluation. All other loans with payments 90 days or more past due
and on nonaccrual status are considered to be impaired. Impaired loans and other
nonaccrual loans (smaller-balance, homogeneous loans) are returned to accrual
status when management determines that the circumstances have improved to the
extent that there has been a sustained period (generally at least six months) of
repayment performance and both principal and interest are deemed to be
collectible.
Impaired loans are evaluated individually. Where collateral exists, the extent
of impairment is determined based on the estimated fair value of the underlying
collateral. If collateral does not exist, or is insufficient to support the
carrying amount of the loan, management looks to other means of collection.
Where the estimated fair value of the collateral and the present value of the
estimated future cash flows from other means of collection do not support the
carrying amount of the loan, management charges off that portion of the loan
balance which it believes will not ultimately be collected. In instances where
collateral or other sources of repayment are sufficient, yet uncertainty exists
regarding the ultimate repayment, an allowance is specifically allocated for in
the allowance for loan losses.
For all other nonaccrual loans (smaller-balance, homogeneous loans) management
applies historical loss experience rates, adjusted based on management's
assessment of emerging credit trends and other factors. The resulting loss
estimates are specifically allocated for by loan type in the allowance for loan
losses. In general, such loans are charged off when payment is 120-180 days past
due.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is the amount which, in the opinion of management,
is necessary to absorb potential losses in the loan portfolio. Management's
evaluation of the adequacy of the allowance is based on the market area served,
local economic conditions, the growth and composition of the loan portfolios and
their related risk characteristics, and the continual review by management of
the quality of the loan portfolio.
DERIVATIVES USED FOR ASSET AND LIABILITY MANAGEMENT PURPOSES
Key uses interest rate swaps, caps and floors, and futures in the management of
its interest rate risk. These instruments are used to modify the repricing or
maturity characteristics of specified assets or liabilities, are linked to the
related assets or liabilities being managed (at inception and throughout the
derivative contract) and changes in the fair value of the derivatives are not
included in the financial statements. The net interest income or expense
associated with such derivatives is accrued and recognized as an adjustment to
the interest income or interest expense of the asset or liability being managed.
The related interest receivable or payable from such contracts is recorded in
other assets or other liabilities on the balance sheet. Premiums paid are
amortized as an adjustment to the interest income or expense of the asset or
liability being managed. Realized gains and losses resulting from the early
termination of such contracts are deferred as an adjustment to the carrying
amount of the asset or liability. The deferred gain or loss is amortized using
the straight-line method over the shorter of the projected remaining life of the
related contract at its termination or the underlying asset or liability.
DERIVATIVES USED FOR TRADING PURPOSES
Derivatives that are not used for asset and liability management purposes are
considered to be used for trading purposes. Such derivatives are entered into
for the purpose of making a market for customers and for proprietary trading
purposes. They typically include financial futures, foreign exchange forward and
spot contracts, written and purchased options (including currency options), and
interest rate caps, floors and swaps. All derivatives used for trading purposes
are recorded at fair value and changes in fair value (including applicable
payments and receipts) are recorded in other income on the income statement. The
determination of fair value considers the remaining cost to service the
derivative and the credit risk associated with the counterparty to the
derivative. These derivatives are included in other assets on the balance sheet,
if the derivative's fair value is positive, or in other liabilities if the fair
value is negative.
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 47
<PAGE> 48
Notes to Consolidated Financial Statements
PREMISES AND EQUIPMENT
Premises and equipment, including leasehold improvements, are stated at cost
less accumulated depreciation and amortization. Depreciation of premises and
equipment is determined using the straight-line method over the estimated useful
lives of the respective assets. Leasehold improvements are amortized using the
straight-line method over the terms of the leases.
INTANGIBLE ASSETS
Goodwill, representing the excess of the cost of acquisitions over the fair
value of net assets acquired, is amortized using the straight-line method over
the estimated period to be benefited, not exceeding 25 years. Core deposit
intangibles represent the net present value of the future economic benefits
related to the use of deposits purchased. They are amortized using an
accelerated method over periods ranging from 5 to 15 years. Other intangibles
are generally amortized using the straight-line method over periods ranging from
4 to 15 years. Key periodically reviews its intangible assets for possible
impairment.
INTERNALLY DEVELOPED SOFTWARE
Key uses internal resources and contracted assistance to design, develop,
install, customize or enhance existing systems applications. Costs incurred
during the initial research and design phase of an internal software project are
expensed as incurred. Costs related to the internal development of software
provide a future economic benefit to Key and are capitalized and included in
other assets on the balance sheet. The resulting asset ($227 million and $96
million at December 31, 1996 and 1995, respectively) is used by Key internally
in its operations and is not marketed externally to customers. Software
developed for internal use is amortized using the straight-line method over its
expected useful life (not to exceed five years) and the amortization is included
in other expense on the income statement. Key begins to amortize the software
when the asset (or an identifiable component of the asset) is substantially
complete and ready for its intended use. Software developed for internal use
that has been capitalized, but which is subsequently deemed to have no future
economic benefit based upon current and future systems development requirements,
is considered impaired and written down to its fair value.
OTHER REAL ESTATE OWNED
Other real estate owned includes real estate acquired through foreclosure or a
similar conveyance of title. This asset is carried at the lower of its recorded
amount (net of allowance) or fair value, less estimated cost of disposal and is
included in other assets on the balance sheet. Write-downs of the assets at, or
prior to, the dates of acquisition are charged to the allowance for loan losses.
Subsequent write-downs, income and expenses incurred in connection with holding
such assets and gains and losses resulting from the sales of such assets are
included in other expense on the income statement.
EMPLOYEE STOCK OPTIONS
Effective January 1, 1996, Key adopted SFAS No. 123, "Accounting for Stock-Based
Compensation." Under an election available in the adoption of SFAS No. 123, Key
continues to account for stock options issued to employees in accordance with
the intrinsic value method required in Accounting Principles Board Opinion
("APBO") No. 25, "Accounting for Stock Issued to Employees." The terms of
employee stock options granted under incentive compensation plans require that
the exercise price of the options be equal to or greater than the fair value of
Key's Common Shares at the date the options are granted. Except for certain
options with performance features, Key recognizes, in accordance with APBO No.
25, no compensation expense related to options granted.
SECURITIZATION INCOME
Loan securitization income includes gains recorded upon the securitization and
sale of loans. Gains are recorded at an amount equal to the net cash proceeds,
adjusted for the recognition of an excess servicing asset. The excess servicing
asset is estimated as the present value of the loan's future cash flows (net of
the securities' obligations), in excess of income realized from the
administration or servicing of the loans. The cash flow related to this asset is
expected to accrue to Key during the life of the securitization trust. The fair
value of the excess servicing asset is recorded in other assets on the balance
sheet upon the securitization and sale of loans. Key continues to administer or
service the sold loans, and earns loan securitization income by providing these
services at rates stipulated in agreements with the various securitization
trusts. Key periodically reviews its excess servicing assets for impairment.
MARKETING COSTS
Key expenses all marketing related costs, including advertising costs, as
incurred.
INCOME TAXES
Income taxes have been provided using the liability method in accordance with
SFAS No. 109, "Accounting for Income Taxes." Key files a consolidated Federal
income tax return.
EARNINGS PER COMMON SHARE
Earnings per Common Share are computed by dividing net income, less preferred
stock dividends, by the weighted average number of Common Shares outstanding.
Financial Page 48 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 49
Notes to Consolidated Financial Statements
RECENT ACCOUNTING PRONOUNCEMENTS
AND DEVELOPMENTS
FASB SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets to Be
Disposed Of," and SFAS No. 122, "Accounting for Mortgage Servicing Rights--an
Amendment of SFAS No. 65," were adopted by Key on January 1, 1996, and did not
have a material effect on Key's financial condition or results of operations.
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," which is
effective for transfers and servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996. SFAS No. 125 requires that the
recognition of transfers and servicing of financial assets and extinguishments
of liabilities be accounted for based on the financial components approach that
focuses on control. Under this approach, the entity that exercises control over
transferred assets recognizes those financial and servicing assets it controls
and the liabilities it has incurred. Financial assets are derecognized when
control is surrendered, and liabilities are derecognized when extinguished. In
December 1996, the FASB issued SFAS No. 127, "Deferral of the Effective Date of
Certain Provisions of FASB Statement No. 125," that defers implementation of
certain aspects of SFAS No. 125 until January 1, 1998. SFAS No. 127 applies only
to transfers related to securities lending, repurchase agreements, dollar rolls
and other similar secured financings.
SFAS No. 125 requires that certain assets which are subject to prepayment and
recorded in connection with a securitization be accounted for like investments
in interest-only strips. Key adopted SFAS No. 125 on January 1, 1997, and
reclassified approximately $280 million of these assets to securities available
for sale. At the time of transfer, the difference between the fair value and the
carrying amount of these assets approximated $68 million and was recorded as an
adjustment to the carrying amount of the transferred assets and an after-tax
adjustment of $43 million to net unrealized gains (losses) on securities in
shareholders' equity. Prospectively, Key expects that the application of SFAS
No. 125 will result in lower securitization gains, offset by higher interest
income earned over the life of the securitizations, than under prior accounting
practices.
In June 1996, the FASB also issued an Exposure Draft of a proposed SFAS,
"Accounting for Derivative and Similar Financial Instruments and for Hedging
Activities." If adopted in its present form, this SFAS would eliminate indexed
amortizing swaps as permitted instruments for hedging activities and, therefore,
would likely alter Key's use of these instruments in the future. It is not clear
whether this SFAS will be adopted in its present form, and it is not currently
practicable to estimate the potential effects of any final standard.
2. Mergers, Acquisitions and Divestitures
Mergers and acquisitions completed during the three years ended December 31,
1996, along with the related accounting treatment, are as follows:
<TABLE>
<CAPTION>
Common
dollars in millions Location Date Assets Shares Issued
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
POOLINGS OF INTERESTS
The Bank of Greeley(1) Colorado December 1994 $ 60 259,697
Commercial Bancorporation of Colorado(1) Colorado March 1994 409 2,900,389
KeyCorp-Society(2) New York/Ohio March 1994 See note 2 124,351,183
PURCHASES
Carleton, McCreary, Holmes & Co. Ohio August 1996 1 See note 3
Knight Insurance Agency, Inc.(4) Massachusetts June 1996 8 --
AutoFinance Group, Inc.(2) Illinois September 1995 181 9,554,003
Spears, Benzak, Salomon & Farrell, Inc. New York April 1995 See note 5 1,910,000
OMNIBANCORP Colorado February 1995 500 4,043,559
Casco Northern Bank, National Association Maine February 1995 945 --
BANKVERMONT Corporation Vermont January 1995 661 --
First Citizens Bancorp of Indiana Indiana December 1994 347 1,960,119
State Home Savings Ohio September 1994 321 --
- ------------------------------------------------------------------------------------------------------------------------------
<FN>
1 Financial statements for periods prior to the transaction were not restated
to include the accounts and results of operations of the pooled company
because the transaction was not material to Key.
2 See the following text for more information regarding this transaction.
3 Carleton is an investment banking firm specializing in mergers and
acquisitions and other financial advisory services for mid-sized and large
corporations. In accordance with a confidentiality clause in the purchase
agreement, the terms, which are not material, have not been publicly
disclosed.
4 Knight is an education financing company doing business under the name
"Knight College Resource Group."
5 Spears Benzak is an investment management firm that had approximately $3.2
billion in assets under management on the date of acquisition.
</TABLE>
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 49
<PAGE> 50
Notes to Consolidated Financial Statements
COMPLETED MERGERS AND ACQUISITIONS
AUTOFINANCE GROUP, INC.
On September 27, 1995, the parent company acquired AFG, a Chicago-based
automobile finance company operating in 28 states, in a tax-free exchange of
stock. Under the terms of the merger agreement, 9,554,003 Common Shares, with a
value of approximately $325 million, were exchanged for all of the outstanding
shares of AFG common stock (based on an exchange ratio of .5 shares for each
share of AFG). In addition, immediately prior to the closing, AFG completed a
spin-off to its shareholders of 95.01% of its common stock interest in Patlex
Corporation, a wholly owned patent exploitation and enforcement subsidiary. In
connection with the acquisition of AFG, which was accounted for as a purchase,
the parent company recorded goodwill of approximately $270 million, which is
being amortized using the straight-line method over a period of 25 years.
KEYCORP-SOCIETY MERGER
On March 1, 1994, the former KeyCorp, a New York corporation ("old KeyCorp"),
merged into and with Society Corporation, an Ohio corporation ("Society"), which
was the surviving corporation under the name KeyCorp. Under the terms of the
merger agreement, 124,351,183 KeyCorp Common Shares were exchanged for all of
the outstanding shares of old KeyCorp common stock (based on an exchange ratio
of 1.205 shares for each share of old KeyCorp). The outstanding preferred stock
of old KeyCorp was exchanged for 1,280,000 shares of a comparable, new issue of
10% Cumulative Preferred Stock of KeyCorp. The merger was accounted for as a
pooling of interests and, accordingly, financial results for prior periods
presented have been restated to include the combined financial results of both
companies.
COMPLETED DIVESTITURES
SOCIETY FIRST FEDERAL SAVINGS BANK
On June 1, 1996, the parent company sold SFF, its Florida savings association
subsidiary. SFF had assets of approximately $1.2 billion at the time of the
transaction. Key continues to provide private banking services in Florida
through a banking affiliate located in Naples, Florida. An $8 million gain was
realized on the SFF sale and included in other income on the income statement.
SCHAENEN WOOD & ASSOCIATES, INC.
On April 21, 1995, KeyCorp Asset Management Holdings, Inc., an indirect wholly
owned subsidiary of the parent company, sold Schaenen Wood, an asset management
subsidiary. An $11 million loss was realized in connection with the sale ($6
million after tax, $.02 per Common Share) and recorded as an extraordinary item
in the first quarter of 1995.
KEYCORP MORTGAGE INC.
On March 31, 1995, the parent company sold the residential mortgage loan
servicing operations of KMI, an indirect wholly owned subsidiary. KMI serviced
approximately $25 billion of residential mortgage loans. A $72 million gain was
realized on the KMI sale ($42 million after tax, $.17 per Common Share) and
recorded as an extraordinary item.
3. Securities Available For Sale
The amortized cost, unrealized gains and losses and approximate fair values of
securities available for sale were as follows:
<TABLE>
<CAPTION>
December 31, 1996
Gross Gross
Amortized Unrealized Unrealized Fair
in millions Cost Gains Losses Value
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury, agencies and corporations $ 857 $ 3 $ 1 $ 859
States and political subdivisions 36 -- -- 36
Collateralized mortgage obligations 3,169 3 23 3,149
Other mortgage-backed securities 3,570 44 35 3,579
Other securities 104 1 -- 105
- ------------------------------------------------------------------------------------------------------------------------------
Total $7,736 $51 $59 $7,728
====== === === ======
- ------------------------------------------------------------------------------------------------------------------------------
December 31, 1995
Gross Gross
Amortized Unrealized Unrealized Fair
in millions Cost Gains Losses Value
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury, agencies and corporations $1,176 $ 25 -- $1,201
States and political subdivisions 25 1 -- 26
Collateralized mortgage obligations 2,767 8 $24 2,751
Other mortgage-backed securities 3,850 73 22 3,901
Other securities 176 5 -- 181
- ------------------------------------------------------------------------------------------------------------------------------
Total $7,994 $112 $46 $8,060
====== ==== === ======
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Financial Page 50 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 51
Notes to Consolidated Financial Statements
During the fourth quarter of 1995, the FASB granted companies a one-time
opportunity to reassess and, if appropriate, reclassify their securities from
the held-to-maturity category to the available-for-sale category without calling
into question the company's intent to hold other debt securities to maturity in
the future. This opportunity appears to have been granted in response to appeals
by the banking industry, following clarification of the position of the bank
regulatory authorities on related securities accounting matters, a position if
known prior to the effective date of SFAS No. 115 would have caused Key to
classify significantly more securities as available for sale upon adoption of
SFAS No. 115. As a result, during the fourth quarter Key reclassified
substantially all held-to-maturity debt securities, except securities of states
and political subdivisions, to the available-for-sale category. The reclassified
securities totaled approximately $8.0 billion and had an amortized cost which
approximated fair value.
At December 31, 1996, shareholders' equity was reduced by $6 million,
representing the net unrealized loss on available-for-sale securities, net of
deferred tax benefit.
Other securities consist primarily of corporate floating-rate notes and equity
securities.
Proceeds from the sales of securities available for sale were $256 million, $2.9
billion and $2.2 billion during 1996, 1995 and 1994, respectively. Gross
realized gains and losses related to those securities were $5 million and $4
million, respectively, in 1996; $15 million and $56 million, respectively, in
1995; and $15 million and $29 million, respectively, in 1994.
Securities available for sale by remaining contractual maturity were as follows,
with collateralized mortage obligations and other mortage-backed securities
included in the maturity schedule based on their expected average lives.
<TABLE>
<CAPTION>
December 31, 1996
Amortized Fair
in millions Cost Value
- ------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 924 $ 925
Due after one through five years 4,157 4,166
Due after five through ten years 2,004 1,995
Due after ten years 651 642
- ------------------------------------------------------------
Total $7,736 $7,728
====== ======
- ------------------------------------------------------------
</TABLE>
4. Investment Securities
The amortized cost, unrealized gains and losses and approximate fair values of
investment securities were as follows:
<TABLE>
<CAPTION>
December 31, 1996
Gross Gross
Amortized Unrealized Unrealized Fair
in millions Cost Gains Losses Value
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
States and political subdivisions $1,401 $37 $1 $1,437
Other securities 200 -- -- 200
- ------------------------------------------------------------------------------------------------------------------------------
Total $1,601 $37 $1 $1,637
====== === == ======
- ------------------------------------------------------------------------------------------------------------------------------
December 31, 1995
Gross Gross
Amortized Unrealized Unrealized Fair
in millions Cost Gains Losses Value
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury, agencies and corporations $ 5 -- -- $ 5
States and political subdivisions 1,424 $51 $1 1,474
Other securities 259 -- -- 259
- ------------------------------------------------------------------------------------------------------------------------------
Total $1,688 $51 $1 $1,738
====== === == ======
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Other securities consist primarily of Federal Reserve Bank stock, corporate
floating-rate notes and venture capital investments.
Proceeds from the sales of other securities, primarily venture capital
investments, were $28 million, $15 million and $23 million during 1996, 1995 and
1994, respectively.
At December 31, 1996, investment securities and available-for-sale securities
with an aggregate amortized cost of approximately $6.1 billion were pledged to
secure public and trust deposits, securities sold under repurchase agreements
and for other purposes required or permitted by law.
Investment securities by remaining contractual maturity were as follows:
<TABLE>
<CAPTION>
December 31, 1996
Amortized Fair
in millions Cost Value
- ------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 578 $ 580
Due after one through five years 622 640
Due after five through ten years 210 225
Due after ten years 191 192
- ------------------------------------------------------------
Total $1,601 $1,637
====== ======
- ------------------------------------------------------------
</TABLE>
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 51
<PAGE> 52
Notes to Consolidated Financial Statements
5. Loans
<TABLE>
<CAPTION>
Loans are summarized as follows:
December 31,
in millions 1996 1995
- --------------------------------------------------------------
<S> <C> <C>
Commercial, financial and agricultural $12,309 $11,655
Real estate--commercial mortgage 7,151 7,254
Real estate--construction 1,666 1,520
Commercial lease financing 2,671 2,248
- --------------------------------------------------------------
Total commercial loans 23,797 22,677
Real estate--residential mortgage 6,229 8,291
Home equity 4,793 3,886
Credit card 1,799 1,564
Consumer--direct 2,245 1,934
Consumer--indirect 8,062 7,258
- --------------------------------------------------------------
Total consumer loans 23,128 22,933
Loans held for sale 2,310 2,722
- --------------------------------------------------------------
Total $49,235 $48,332
======= =======
- --------------------------------------------------------------
</TABLE>
Changes in the allowance for loan losses are summarized as follows:
<TABLE>
<CAPTION>
Year ended December 31,
in millions 1996 1995 1994
- ------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 876 $ 830 $ 803
Charge-offs (303) (208) (209)
Recoveries 108 109 100
- ------------------------------------------------------------
Net charge-offs (195) (99) (109)
Provision for loan losses 197 100 125
Allowance acquired/sold, net (8) 44 11
Transfer from OREO allowance -- 1 --
- ------------------------------------------------------------
Balance at end of year $ 870 $ 876 $ 830
===== ===== =====
- ------------------------------------------------------------
</TABLE>
Portfolio interest rate swaps are used to manage interest rate risk by modifying
the repricing and maturity characteristics of certain loans. Additional
information pertaining to the notional amount, fair value and weighted average
rate of such swaps as of December 31, 1996, is presented in Note 19, Financial
Instruments with Off-Balance Sheet Risk, beginning on page 64.
6. Impaired Loans and Other Nonperforming Assets
At December 31, 1996, the recorded investment in impaired loans was $209
million. Included in this amount is $81 million of impaired loans for which the
specifically allocated allowance for loan losses is $26 million, and $128
million of impaired loans which are carried at their estimated fair value
without a specifically allocated allowance for loan losses. At the end of the
prior year, the recorded investment in impaired loans was $205 million, of which
$126 million had a specifically allocated allowance of $40 million and $79
million were carried at their estimated fair value. The average recorded
investment in impaired loans for both 1996 and 1995 was $187 million.
<TABLE>
<CAPTION>
Nonperforming assets were as follows:
December 31,
in millions 1996 1995
- ----------------------------------------------------------------
<S> <C> <C>
Impaired loans $209 $205
Other nonaccrual loans 139 125
Restructured loans 1 3
- ----------------------------------------------------------------
Total nonperforming loans 349 333
Other real estate owned 56 56
Allowance for OREO losses (8) (14)
- ----------------------------------------------------------------
Other real estate owned, net of allowance 48 42
Other nonperforming assets 3 4
- ----------------------------------------------------------------
Total nonperforming assets $400 $379
===== =====
- ----------------------------------------------------------------
</TABLE>
The effect on interest income of loans classified as nonperforming at December
31 was as follows:
<TABLE>
<CAPTION>
Year ended December 31,
in millions 1996 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income which would have been
recorded if assets had been current
under original terms $ 32 $ 31 $20
Less: Interest income recorded during
the year (12) (11) (5)
- ------------------------------------------------------------------------
Net reduction to reported interest income $ 20 $ 20 $15
==== ==== ====
- ------------------------------------------------------------------------
</TABLE>
At December 31, 1996, there were no significant commitments to lend additional
funds to borrowers with restructured loans or loans on nonaccrual status.
Key considers all nonaccrual loans to be impaired loans, except for
smaller-balance, homogeneous nonaccrual loans (shown in the preceding table as
"Other nonaccrual loans") excluded in accordance with the provisions of SFAS No.
114. A loan is not deemed impaired during a period of delay in payment of less
than 90 days if Key expects to collect all amounts due, including interest
accrued at the contractual interest rate, for the period of delay.
Financial Page 52 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 53
Notes to Consolidated Financial Statements
Key excludes smaller-balance, homogeneous nonaccrual loans from impairment
evaluation. Generally these include loans to finance residential mortgages,
automobiles, recreational vehicles, boats and mobile homes. Key applies
historical loss experience rates to these loans, adjusted based on management's
assessment of emerging credit trends and other factors. The resulting loss
estimates are specifically allocated for by loan type in the allowance for loan
losses. In general, such loans are charged off when payment is 120-180 days past
due.
<TABLE>
<CAPTION>
Changes in the allowance for OREO losses are summarized as follows:
Year ended December 31,
in millions 1996 1995 1994
- ------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $14 $21 $36
Net charge-offs (6) (16) (22)
Provision for losses on other real
estate owned -- 13 7
Allowance acquired/sold, net -- (3) --
Transfer to allowance for loan losses -- (1) --
- ------------------------------------------------------------------
Balance at end of year $ 8 $ 14 $21
==== ==== ====
- ------------------------------------------------------------------
</TABLE>
7. Premises and Equipment
Premises and equipment were as follows:
<TABLE>
<CAPTION>
December 31,
in millions 1996 1995
- ------------------------------------------------------------------
<S> <C> <C>
Land $ 107 $ 127
Buildings and leasehold improvements 886 841
Furniture and equipment 943 871
- ------------------------------------------------------------------
1,936 1,839
Accumulated depreciation and amortization (852) (809)
- ------------------------------------------------------------------
Total $1,084 $1,030
====== ======
- ------------------------------------------------------------------
</TABLE>
Depreciation and amortization expense related to premises and equipment totaled
$142 million, $138 million and $122 million in 1996, 1995, and 1994,
respectively.
At December 31, 1996, Key's affiliates were obligated under noncancelable leases
for land and buildings and for other property, consisting principally of data
processing equipment. Rental expense under all operating leases totaled $126
million in 1996, $117 million in 1995 and $124 million in 1994. Minimum future
rental payments under noncancelable leases at December 31, 1996, were as
follows: 1997--$108 million; 1998--$101 million; 1999--$90 million; 2000--$85
million; 2001--$83 million; and subsequent years--$653 million.
8. Intangible Assets and Purchased Mortgage Servicing Rights
Intangible assets, net of accumulated amortization, were as follows:
<TABLE>
<CAPTION>
December 31,
in millions 1996 1995
- -------------------------------------------------------
<S> <C> <C>
Goodwill $824 $ 899
Core deposit intangibles 119 142
Credit card intangibles 6 16
Other 12 13
- -------------------------------------------------------
Total(1) $961 $1,070
==== ======
- -------------------------------------------------------
Purchased mortgage servicing rights -- $ 1
- -------------------------------------------------------
<FN>
1 Net of accumulated amortization of $292 million and $221 million at
December 31, 1996 and 1995, respectively.
</TABLE>
The amortization expense for purchased mortgage servicing rights, which are
included in other assets on the balance sheet, totaled $.2 million, $7 million
and $37 million in 1996, 1995 and 1994, respectively. Substantially all of Key's
purchased mortgage servicing rights were sold in connection with the sale of the
residential mortgage loan servicing operations of KMI, previously described in
Note 2, Mergers, Acquisitions and Divestitures beginning on page 49.
<TABLE>
<CAPTION>
The amortization expense for intangible assets was as follows:
Year ended December 31,
in millions 1996 1995 1994
- ------------------------------------------------
<S> <C> <C> <C>
Goodwill $55 $45 $26
Core deposit intangibles 23 26 26
Credit card intangibles 3 3 3
Other 7 3 4
- ------------------------------------------------
Total $88 $77 $59
=== === ===
- ------------------------------------------------
</TABLE>
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 53
<PAGE> 54
Notes to Consolidated Financial Statements
9. Short-Term Borrowings
<TABLE>
<CAPTION>
The details of short-term borrowings were as follows:
dollars in millions 1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
FEDERAL FUNDS PURCHASED
Balance at year end $4,000 $2,983 $3,055
Average during the year 3,214 3,150 3,063
Maximum month end balance 4,027 4,187 3,322
Weighted average rate during the year 5.41% 5.91% 4.37%
Weighted average rate at December 31 5.39 5.80 4.91
- ------------------------------------------------------------------------------
SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
Balance at year end $2,925 $2,561 $2,444
Average during the year 2,629 2,473 2,787
Maximum month end balance 3,005 2,679 2,991
Weighted average rate during the year 4.60% 5.19% 3.94%
Weighted average rate at December 31 4.62 4.88 4.43
- ------------------------------------------------------------------------------
OTHER SHORT-TERM BORROWINGS
Balance at year end $3,969 $2,880 $3,278
Average during the year 3,279 3,362 1,930
Maximum month end balance 4,534 4,383 3,383
Weighted average rate during the year 6.01% 6.05% 4.71%
Weighted average rate at December 31 6.03 6.11 5.08
- ------------------------------------------------------------------------------
</TABLE>
Short-term borrowings consist primarily of Federal funds purchased and
securities sold under repurchase agreements, which generally represent overnight
borrowing transactions. Other short-term borrowings consist primarily of
medium-term bank notes with original maturities of one year or less, and
Treasury, tax and loan demand notes.
During the first quarter of 1996, Key expanded its $6.6 billion Bank Note
Program, which involved six affiliate banks, to allow for the issuance of up to
$12.3 billion covering eleven affiliate banks. At December 31, 1996 and 1995,
debt securities of $4.5 billion and $3.7 billion, respectively, were outstanding
under these programs. Of the amounts outstanding, those with original maturities
of one year or less totaled $3.3 billion at December 31, 1996, and $2.3 billion
at December 31, 1995. Additionally, KeyBank USA has a line of credit with the
Federal Reserve which provides for overnight borrowings of up to $1.2 billion
and is secured by $1.7 billion of KeyBank USA's credit card receivables at
December 31, 1996. There were no borrowings outstanding under this line of
credit as of December 31, 1996 and 1995.
In the third quarter of 1995, the parent company established a new Commercial
Paper/Note Program which provides for the availability of up to $500 million of
additional short-term funding. The parent company also entered into a four-year,
$500 million revolving credit agreement with several banks under which the banks
have agreed to lend collectively up to $500 million to the parent company. The
line of credit was established primarily as a backup source of liquidity for the
Commercial Paper/Note Program. There were no borrowings outstanding under either
of these facilities as of December 31, 1996 and 1995.
Portfolio interest rate swaps are used to manage interest rate risk by modifying
the repricing and maturity characteristics of certain short-term borrowings.
Additional information pertaining to the notional amount, fair value and
weighted average rate of such swaps as of December 31, 1996, is presented in
Note 19, Financial Instruments with Off-Balance Sheet Risk, beginning on page
64.
Financial Page 54 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 55
Notes to Consolidated Financial Statements
10. Long-Term Debt
The components of long-term debt, presented net of unamortized discount where
applicable, were as follows:
<TABLE>
<CAPTION>
December 31,
dollars in millions 1996 1995
- -------------------------------------------------------------------------
<S> <C> <C>
Senior medium-term notes due through 2005 $ 584 $ 995
Subordinated medium-term notes due through 2005 183 183
7.50% Subordinated notes due 2006 250 --
6.75% Subordinated notes due 2006 200 --
8.125% Subordinated notes due 2002 199 198
8.00% Subordinated notes due 2004 125 125
8.40% Subordinated capital notes due 1999 75 75
8.404% Notes due 1997 through 2001 49 49
8.875% Notes due 1996 -- 75
8.255% Notes due 1996 -- 23
All other long-term debt 16 --
- -------------------------------------------------------------------------
Total parent company 1,681 1,723
Senior medium-term bank notes due through 1998 1,165 1,399
7.25% Subordinated notes due 2005 200 200
7.85% Subordinated notes due 2002 200 200
6.75% Subordinated notes due 2003 200 199
7.50% Subordinated notes due 2008 165 --
7.125% Subordinated notes due 2006 125 --
7.125% Subordinated notes due 2006 125 --
7.55% Subordinated notes due 2006 75 --
7.375% Subordinated notes due 2008 70 --
Federal Home Loan Bank Advances 193 267
Industrial revenue bonds 10 10
All other long-term debt 4 5
- -------------------------------------------------------------------------
Total subsidiaries 2,532 2,280
- -------------------------------------------------------------------------
Total $4,213 $4,003
====== ======
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Scheduled principal payments on long-term debt are as follows:
in millions Parent Subsidiaries Total
- ------------------------------------------------------------
<S> <C> <C> <C>
1997 $ 98 $692 $790
1998 133 605 738
1999 107 51 158
2000 287 -- 287
2001 113 -- 113
- ------------------------------------------------------------
</TABLE>
In August 1996, the parent company filed a new universal shelf registration
statement with the SEC to provide for the possible issuance of up to $1.2
billion of debt and equity securities by the parent company in addition to
unused capacity of $62 million under a previous shelf registration. Accordingly,
at December 31, 1996, unused capacity under the 1996 shelf registration totaled
$1.3 billion, of which $750 million is reserved for future issuance as
medium-term notes. Medium-term notes issued under the former shelf registration
totaled $100 million and $414 million in 1996 and 1995, respectively, and had
original maturities of greater than one year. During 1996, the parent company
also issued $450 million of subordinated debt under the former shelf
registration. The proceeds from the above issuances were used for general
corporate purposes, including the funding of acquisitions and the repurchase of
Common Shares.
At December 31, 1996 and 1995, the parent company's senior medium-term notes, as
presented in the table, had weighted average interest rates of 6.57% and 6.62%,
respectively, and the subordinated medium-term notes had weighted average
interest rates of 6.80% and 6.88%, respectively. Both the senior and
subordinated notes had varying maturities through 2005.
The 7.50%, 6.75% and 8.125% subordinated notes may not be redeemed or prepaid
prior to maturity.
The 8.40% subordinated capital notes due 1999 may, at maturity, be exchanged for
common stock, preferred stock or other eligible securities having a market value
equal to the principal amount of the notes.
In 1989, to fund a leveraged ESOP, the parent company borrowed $72 million from
several institutional investors through the placement of unsecured notes
totaling $23 million (the "8.255% Notes") and $49 million (the "8.404% Notes").
The interest on these notes totaled $5 million in 1996 and $6 million in both
1995 and 1994. The ESOP trustee used the proceeds to purchase 5.8 million Key
Common Shares. These shares are held by the ESOP trustee for matching employee
contributions to the Plan. The net difference between the cost of the treasury
shares sold to the ESOP trustee and their market value was recorded as a
reduction to retained earnings. Except for the repayment schedule, the loans to
the ESOP trustee are on substantially similar terms as the borrowings from the
institutional investors and, in addition, are secured by the unallocated shares
held by the ESOP trustee. The ESOP trustee will repay the loans from the parent
company using corporate contributions made by the Plan for that purpose and
dividends on the Common Shares acquired with the loans. The amount of dividends
on the ESOP shares used for debt service by the ESOP trustee totaled $5 million
in both 1996 and 1995 and $4 million in 1994. As contributions and dividends are
received, a portion of the shares acquired with the loans is allocated to Plan
participants. Interest income recognized on loans to the ESOP trustee is netted
against the interest expense incurred on the notes payable to the institutional
investors. The parent company's receivable from the ESOP trustee, representing
deferred compensation to Key's employees, has been recorded as a negative
component of shareholders' equity.
During 1996, KeyBank N.A. issued $632 million of senior medium-term bank notes
and Key Bank of New York issued $200 million of senior medium-term bank notes.
The proceeds from the sales of these notes were used for general corporate
purposes. At December 31, 1996 and 1995, senior medium-term bank notes of
subsidiaries, as presented in the table, had weighted average interest rates of
6.17% and 6.71%, respectively, and mature in 1998 and 1997.
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 55
<PAGE> 56
Notes to Consolidated Financial Statements
The 7.25% subordinated notes, 7.85% subordinated notes, 6.75% subordinated notes
and one of the 7.125% subordinated notes issued in 1996 are obligations of
KeyBank N.A. and may not be redeemed prior to their respective maturity dates.
The 7.50% subordinated notes, 7.55% subordinated notes, 7.375% subordinated
notes and the other 7.125% subordinated notes were issued in 1996 and are
obligations of Key Bank of New York, KeyBank USA, Key Bank of Oregon and Key
Bank of Washington, respectively, and may not be redeemed prior to their
respective maturity dates.
Long-term advances from the Federal Home Loan Bank ("FHLB") are at adjustable
and fixed rates ranging from 5.12% to 12.125% at December 31, 1996, and mature
at various dates through 2014. Real estate loans and securities of $257 million
and $354 million at December 31, 1996, and 1995, respectively, collateralize
FHLB advances.
Industrial revenue bonds issued by affiliate banks have varying maturities
extending to the year 2009 and had weighted average interest rates of 6.95% and
6.96% at December 31, 1996 and 1995, respectively.
Other long-term debt at December 31, 1996 and 1995, consisted of capital lease
obligations and various secured and unsecured obligations of corporate
subsidiaries and had weighted average interest rates of 13.91% and 10.36%,
respectively.
Long-term debt qualifying as supplemental capital for purposes of calculating
Tier II capital under Federal Reserve Board Guidelines amounted to $2.1 billion
and $1.1 billion at December 31, 1996 and 1995, respectively.
Portfolio interest rate swaps are used to manage interest rate risk by modifying
the repricing and maturity characteristics of certain long-term debt. Additional
information pertaining to the notional amount, fair value and weighted average
rate of such swaps as of December 31, 1996, is presented in Note 19, Financial
Instruments with Off-Balance Sheet Risk, beginning on page 64.
11. Capital Securities
CAPITAL SECURITIES
In the fourth quarter of 1996, the parent company formed two wholly owned
Delaware business trusts, KeyCorp Institutional Capital A ("Capital A") and
KeyCorp Institutional Capital B ("Capital B"), which issued $350 million and
$150 million, respectively, of corporation-obligated mandatorily reedemable
capital securities of subsidiary trusts holding solely junior subordinated
deferrable interest debentures of the Corporation ("capital securities") that
qualify as Tier I capital under Federal Reserve Board guidelines. All of the
common securities of Capital A and Capital B are owned by the parent company.
The proceeds from the issuances of the capital securities ($500 million) and
common securities ($15 million) were used by Capital A and Capital B to purchase
$361 million and $154 million, respectively, of junior subordinated deferrable
interest debentures ("debentures") of the parent company which carry interest
rates of 7.826% and 8.25%, respectively. These debentures represent the sole
asset of each of the subsidiary trusts. The proceeds from the sales of the
debentures may be used by the parent company for general corporate purposes. The
debentures and related income statement effects are eliminated in Key's
financial statements.
The capital securities accrue and pay distributions semi-annually at a rate of
7.826% and 8.25%, respectively, per annum of the stated liquidation value of
$1,000 per capital security. The parent company has fully and unconditionally
guaranteed, on a subordinated basis (the "Guarantee"), payment of: (i) accrued
and unpaid distributions required to be paid on the capital securities, (ii) the
redemption price with respect to any capital securities called for redemption by
Capital A or Capital B; and (iii) payments due upon a voluntary or involuntary
termination or liquidation of Capital A or Capital B, as set forth in the
Guarantee. The Guarantee will apply to the payment of distributions only if, and
to the extent Capital A or Capital B does not have sufficient funds to make such
payments.
The capital securities are mandatorily redeemable upon the respective maturity
dates of the debentures (December 1, 2026, for debentures purchased by Capital A
and December 15, 2026, for debentures purchased by Capital B) or upon earlier
redemption as provided in the indenture. The parent company has the right to
redeem the debentures purchased by Capital A and Capital B: (i) in whole or in
part, on or after December 1, 2006, and December 15, 2006, respectively, and
(ii) in whole (but not in part) at any time within 90 days following the
occurrence and during the continuation of a tax event or capital treatment event
(as defined in the applicable offering circular). As specified in the indenture,
if the debentures are redeemed prior to maturity, the redemption price will be
expressed as a certain percentage (depending on the timing of the redemption and
related circumstances) of the principal amount plus any accrued but unpaid
interest.
Financial Page 56 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 57
Notes to Consolidated Financial Statements
12. Shareholders' Equity
COMMON SHARES AND PREFERRED STOCK
On June 30, 1996, the parent company exercised its option to redeem all $160
million of its nonvoting 10% Cumulative Preferred Stock ("Class A"). The
1,280,000 outstanding shares of Class A, represented by 6,400,000 Depositary
Shares (each Depositary Share represented a one-fifth interest in a share of
Class A), were redeemed at $125 per share (equivalent to $25 per Depositary
Share) plus accrued and unpaid dividends at redemption date.
In January 1996, the Board of Directors approved a share repurchase program,
representing an addition to previously exisiting programs, which authorized the
repurchase of up to 12,000,000 Common Shares in 1996. In November 1996,
subsequent to the completion of this program, the Board of Directors approved a
new share repurchase program which authorizes the repurchase of up to an
additional 12,000,000 Common Shares by the end of 1997. Under the new program,
shares will be repurchased from time to time in the open market or through
negotiated transactions. During 1996, Key repurchased 14,620,000 shares at a
total cost of $617 million (an average of $42.25 per share). The repurchased
shares were placed in Treasury, from which 270,263 Treasury Shares were reissued
in connection with an acquisition and 4,100,953 shares were reissued for
employee benefit plans. The 22,490,353 Treasury Shares at December 31, 1996, are
expected to be reissued over time in connection with employee stock purchase,
401(k), stock option and dividend reinvestment plans and for other corporate
purposes.
The Board of Directors adopted a Shareholder Rights Plan ("Rights") in 1989
under which each shareholder received one Right for each Common Share of Key.
Each Right represents the right to purchase a Common Share of Key at a price of
$65. The Rights become exercisable 20 days after a person or group acquires 15%
or more of the outstanding shares or commences a tender offer that could result
in such an ownership interest. Until the Rights become exercisable, they will
trade with the Common Shares, and any transfer of the Common Shares will also
constitute a transfer of associated Rights. When the Rights become exercisable,
they will begin to trade separate and apart from the Common Shares. Twenty days
after the occurrence of certain "Flip-In Events," each Right will become the
right to purchase a Common Share of Key for the then par value per share (now $1
per share) and the Rights held by a 15% or more shareholder will become void.
The parent company may redeem these Rights at its option at $.005 per Right
subject to certain limitations. Unless redeemed earlier, the Rights expire on
September 12, 1999. In 1993, the Rights were amended so as to confirm that the
KeyCorp-Society merger would not activate the provisions of the Rights.
CAPITAL ADEQUACY
The parent company and its banking subsidiaries are subject to various capital
guidelines defined by the banking industry regulators. Under these guidelines
and the regulatory framework for prompt corrective action, the parent company
and its banking subsidiaries must meet specific capital requirements that
involve quantitative measures of their respective assets, liabilities and
certain off-balance sheet items calculated in accordance with regulatory
accounting practices. The parent company's and its banking subsidiaries' capital
amounts and classifications are also subject to qualitative judgments by the
regulators about components, risk weightings and other factors.
Failure to meet the applicable capital requirements could result in enforcement
remedies available to the banking industry regulators, including a limitation on
the ability to pay dividends, the issuance of a directive to increase capital,
the termination of deposit insurance by the FDIC and (in severe cases) the
appointment of a conservator or receiver. Management believes that as of
December 31, 1996, the parent company and its banking subsidiaries meet all
capital adequacy requirements to which they are subject.
Under the Federal Deposit Insurance Act, the Federal bank regulators group
FDIC-insured depository institutions into five broad categories based on certain
capital ratios. The five categories are "well capitalized," "adequately
capitalized," "under capitalized," "significantly undercapitalized," and
"critically undercapitalized." As of December 31, 1996 and 1995, the most recent
regulatory notification categorized each of the parent company's subsidiary
banks as "well capitalized," since they exceeded the well-capitalized thresholds
of 10%, 6% and 5% for the total capital, Tier I capital and leverage ratios,
respectively. Management believes that no changes in condition or events have
occurred since the last regulatory notification which would result in changes to
the banks' categories. Although these provisions are not directly applicable to
Key under existing laws and regulations, based upon its ratios Key would qualify
as "well capitalized" at December 31, 1996 and 1995. The FDIC-defined capital
categories may not constitute an accurate representation of the overall
financial condition or prospects of Key or its affiliates.
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 57
<PAGE> 58
Notes to Consolidated Financial Statements
Presented in the table below for Key and each of the parent company's
significant subsidiaries are their actual capital amounts and ratios, their
minimum capital amounts and ratios prescribed by regulatory capital guidelines
and their capital amounts and ratios required to qualify as well capitalized
under the prompt corrective action provisions.
<TABLE>
<CAPTION>
December 31, 1996
To Meet Minimum To Qualify As Well Capitalized
Capital Adequacy Under Prompt Corrective
Actual Requirements Action Provisions
--------------------- -------------------- --------------------------
dollars in millions Amount Ratio Amount Ratio Amount Ratio
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TOTAL CAPITAL TO NET RISK-ADJUSTED ASSETS
Key $7,243 13.01% $4,452 8.00% N/A N/A
KeyBank National Association(1) 2,655 11.38 1,866 8.00 $2,333 10.00%
Key Bank of New York 1,249 10.86 920 8.00 1,151 10.00
Key Bank of Washington 779 11.40 546 8.00 683 10.00
TIER I CAPITAL TO NET RISK-ADJUSTED ASSETS
Key $4,442 7.98% $2,226 4.00% N/A N/A
KeyBank National Association(1) 1,688 7.24 933 4.00 $1,400 6.00%
Key Bank of New York 923 8.03 460 4.00 690 6.00
Key Bank of Washington 526 7.70 273 4.00 410 6.00
TIER I CAPITAL TO AVERAGE ASSETS(2)
Key $4,442 6.93% $2,565 4.00% N/A N/A
KeyBank National Association(1) 1,688 6.43 1,050 4.00 $1,313 5.00%
Key Bank of New York 923 6.12 604 4.00 755 5.00
Key Bank of Washington 526 6.75 312 4.00 390 5.00
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995
To Meet Minimum To Qualify As Well Capitalized
Capital Adequacy Under Prompt Corrective
Actual Requirements Action Provisions
------------------ ------------------ ------------------------------
dollars in millions Amount Ratio Amount Ratio Amount Ratio
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TOTAL CAPITAL TO NET RISK-ADJUSTED ASSETS
Key $5,854 10.85% $4,315 8.00% N/A N/A
KeyBank National Association(1) 2,492 10.76 1,854 8.00 $2,317 10.00%
Key Bank of New York 1,214 10.94 888 8.00 1,109 10.00
Key Bank of Washington 670 10.69 501 8.00 627 10.00
TIER I CAPITAL TO NET RISK-ADJUSTED ASSETS
Key $4,063 7.53% $2,157 4.00% N/A N/A
KeyBank National Association(1) 1,626 7.02 927 4.00 $1,390 6.00%
Key Bank of New York 1,054 9.50 444 4.00 666 6.00
Key Bank of Washington 547 8.72 251 4.00 376 6.00
TIER I CAPITAL TO AVERAGE ASSETS(2)
Key $4,063 6.20% $2,620 4.00% N/A N/A
KeyBank National Association(1) 1,649 6.13 1,075 4.00 $1,344 5.00%
Key Bank of New York 1,061 6.90 615 4.00 769 5.00
Key Bank of Washington 547 7.25 301 4.00 377 5.00
- ---------------------------------------------------------------------------------------------------------------------------------
<FN>
1 In January 1996, Key completed the merger of its Indiana and Michigan
affiliate banks as the first step in plans to combine the affiliate banks
in the Great Lakes Region. The final stage of the Great Lakes
reorganization was completed in June as the Indiana/Michigan bank was
merged with and into Society National Bank, the principal bank subsidiary,
with the resulting bank being named KeyBank National Association. The 1995
financial information presented in the above table has been restated to
include the combined results of the merged companies.
2 Also referred to as the leverage ratio. The regulatory leverage ratio
standard prescribes a minimum ratio of 3%, although most banking
organizations are expected to maintain ratios of at least 100 to 200 basis
points above the minimum.
N/A = Not Applicable
</TABLE>
Financial Page 58 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 59
Notes to Consolidated Financial Statements
13. Stock Options
Key maintains incentive compensation plans which provide for its ability to
grant stock options, stock appreciation rights, limited stock appreciation
rights, restricted stock and performance shares to selected employees and
directors. Generally, the terms of these plans stipulate that the exercise price
of the options may not be less than the fair market value of Key's Common Shares
at the date the options are granted. Generally, options granted expire not later
than ten years from the date of grant. At December 31, 1996 and 1995, options
for Common Shares available for future grant totaled 4,469,081 and 4,674,056,
respectively. At December 31, 1996, Key had approximately 955,000 options
outstanding that vest after certain performance targets are met. Key granted
approximately 45,000 performance options in 1996 and none in 1995. For options
outstanding at December 31, 1996, the option price per share ranged from $.50 to
$44.00 and the weighted average remaining contractual life of the options was
6.8 years.
The following tables present a summary of pertinent information with respect to
Key's stock options and stock appreciation rights.
<TABLE>
<CAPTION>
Stock Options 1996 1995
------------------------------ ---------------------------
Weighted Weighted
Average Option Average Option
Shares Price Per Share Shares Price Per Share
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 12,085,526 $26.15 12,102,036 $25.65
Granted 2,294,648 34.77 2,370,690 27.44
Assumed in acquisition -- -- 396,649 12.96
Exercised 4,136,611 24.31 2,134,612 22.40
Lapsed or cancelled 454,957 30.52 649,237 28.70
- ---------------------------------------------------------------------------------------------------------------------------------
Outstanding at end of year 9,788,606 $28.88 12,085,526 $26.15
- ---------------------------------------------------------------------------------------------------------------------------------
Exercisable at end of year 5,830,375 $26.60 8,079,108 $25.24
- ---------------------------------------------------------------------------------------------------------------------------------
Stock Appreciation Rights 1995
-------------------------------
Shares Option Price
- -------------------------------------------------------------------------------------------
Outstanding at beginning of year 42,000 $11.69
Exercised 30,000 11.69
Lapsed or cancelled 12,000 11.69
- -------------------------------------------------------------------------------------------
Outstanding at end of year -- --
- -------------------------------------------------------------------------------------------
Exercisable at end of year -- --
- -------------------------------------------------------------------------------------------
</TABLE>
Effective January 1, 1996, Key adopted SFAS No. 123 which prescribes the
accounting for stock-based compensation. Under an election available in the
adoption of this statement, Key continues to account for employee stock options
in accordance with the intrinsic value method required in APBO No. 25. This
election was made primarily because of the limitations inherent in the option
valuation models used under SFAS No. 123 to calculate the grant date fair value.
SFAS No. 123 requires companies that continue to use the intrinsic value method
to provide pro forma disclosures of the net income and earnings per share effect
of applying the fair value method of accounting for stock options. Accordingly,
the fair value of options granted in 1996 and 1995 at the respective grant dates
were estimated using the Black-Scholes option pricing model. Several assumptions
were used in the model, including estimates of the expected average lives of the
options, the future dividends to be paid on Key Common Shares, the price
volatility of Key Common Shares and the expected risk-free interest rate. These
assumptions were developed based on historical trends and current market
observations. The Black-Scholes option pricing model originally was developed to
estimate the fair value of exchange-traded equity options which, unlike employee
stock options, have no vesting period or transferability restrictions. Key's
employee stock options have characteristics significantly different from traded
options and changes in assumptions can materially affect the fair value
estimate.
The following pro forma disclosures present the net income and earnings per
Common Share effect of applying the fair value method of accounting for stock
options estimated using the Black-Scholes option valuation model. The model
assumes that the estimated fair value of the options is amortized over the
options' vesting periods and included in personnel expense on the income
statement. Not all options vest within one year, therefore, the pro forma
expense calculated by applying SFAS No. 123 may not be indicative of future
amounts.
<TABLE>
<CAPTION>
Year ended December 31,
in millions, except per share amounts 1996 1995
- ------------------------------------------------------------------
<S> <C> <C>
Net income--as reported $783 $825
Net income--pro forma 780 820
Net income per Common Share--as reported $3.37 $3.45
Net income per Common Share--pro forma 3.36 3.43
- ------------------------------------------------------------------
</TABLE>
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 59
<PAGE> 60
Notes to Consolidated Financial Statements
14. Restructuring Charge
During the fourth quarter of 1996, the parent company recorded a $100 million
($66 million after tax, $.29 per Common Share) restructuring charge in
connection with strategic actions to be taken over the next year to complete its
transformation to a nationwide, bank-based financial services company. The
primary actions to be taken include: (i) the formation of a nationwide bank from
Key's current network of banks in 13 states and four regions of the United
States (KeyBank USA will not take part in this consolidation), (ii) the
consolidation of nearly 140 of Key's branch offices, known as KeyCenters, into
other KeyCenters, and (iii) the reduction of approximately 2,700 positions, or
10% of Key's employment base, distributed throughout the organization at
substantially all levels of responsibility.
Included in the restructuring charge are accruals for expenses, primarily
consisting of severance payments ($54 million), consolidation costs related to
banking offices identified for closure ($18 million) and costs related to the
write-off of certain obsolete software previously developed for internal use
($28 million). Remaining reserves at December 31, 1996, totaled $100 million.
15. Employee Benefits
PENSION PLANS
Key maintains a noncontributory pension plan which covers substantially all
employees. Key's funding policy is to contribute an amount to the Key Cash
Balance Pension Plan (the "Cash Balance Plan") that meets the minimum funding
requirements set forth in the Employee Retirement Income Security Act ("ERISA")
of 1974, plus such additional amounts as Key determines to be appropriate.
The Cash Balance Plan is an account balance defined benefit plan in which the
participant has an account to which amounts are credited based on qualifying
compensation and with interest determined at a specified rate.
In 1995, Key changed from a December 31 to a September 30 measurement date for
the valuation of its pension and other postretirement benefit plans' assets and
actuarially determined obligations. The change in measurement date had no effect
on 1995 or prior years' net pension and other postretirement benefits costs.
The following table reconciles the funded status of the Cash Balance Plan at the
September 30 measurement date with the amounts recognized in the consolidated
balance sheets at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
in millions 1996 1995
- ------------------------------------------------------------------------
<S> <C> <C>
Accumulated benefit obligations,
including vested benefits of $594 and $550 $613 $571
- ------------------------------------------------------------------------
Fair value of plan assets, primarily listed stock
and fixed income securities(1) 785 653
Projected benefit obligation 624 589
- ------------------------------------------------------------------------
Excess of fair value of plan assets over
projected benefit obligation 161 64
Unrecognized net actuarial loss 63 86
Unrecognized prior service benefit (3) (3)
Unrecognized net transition asset (23) (28)
Contribution subsequent to measurement date 10 3
- ------------------------------------------------------------------------
Prepaid pension cost (included in other assets) $208 $122
==== ====
- ------------------------------------------------------------------------
<FN>
1 Includes 947,242 Key Common Shares valued at $32 million at September 30,
1995. These shares were sold during the first quarter of 1996. Dividends
paid on these shares totaled $.3 million and $1.3 million for the
twelve-month periods ended September 30, 1996 and 1995, respectively.
</TABLE>
The weighted average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of projected benefit
obligations of both the funded and unfunded plans were 7.75% and 4.17%,
respectively, at September 30, 1996, and 7.50% and 4.19%, respectively, at
September 30, 1995. The weighted average expected long-term rate of return on
pension assets used in determining net pension cost was 9.50% for 1996, 1995 and
1994.
Key also maintains several unfunded, non-qualified, supplemental executive
retirement programs that provide additional defined pension benefits for certain
officers. The following table reconciles the status of the unfunded plans at the
September 30 measurement dates with the amounts recognized in the consolidated
balance sheets at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
in millions 1996 1995
- ---------------------------------------------------------------
<S> <C> <C>
Accumulated benefit obligation,
including vested benefits of $74 and $79 $ 79 $ 79
- ---------------------------------------------------------------
Projected benefit obligation 91 90
Benefits paid subsequent to measurement date (2) (1)
Unrecognized prior service cost (8) (9)
Unrecognized transition obligation (2) (3)
Unrecognized net actuarial loss (19) (24)
Adjustment to recognize minimum liability 19 25
- ---------------------------------------------------------------
Accrued pension cost
(included in other liabilities) $ 79 $ 78
==== ====
- ---------------------------------------------------------------
</TABLE>
Financial Page 60 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 61
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
Net pension cost for all funded and unfunded plans included the following
components:
Year ended December 31,
in millions 1996 1995 1994
- ------------------------------------------------------------
<S> <C> <C> <C>
Service cost of benefits earned $ 29 $ 28 $ 23
Interest cost on projected
benefit obligation 49 50 42
Actual (return) loss on plan assets (96) (110) 3
Net amortization and deferral 39 53 (60)
- ------------------------------------------------------------
Net pension cost $ 21 $ 21 $ 8
==== ===== ====
- ------------------------------------------------------------
</TABLE>
OTHER POSTRETIREMENT BENEFIT PLANS
Key sponsors postretirement health care and life insurance plans that cover
substantially all employees. The postretirement health care plans are
contributory, with retirees' contributions adjusted annually to reflect certain
cost-sharing provisions and benefit limitations. The postretirement life
insurance plans are noncontributory. Voluntary Employees' Beneficiary
Associations ("VEBA"s) have been established to provide for prefunding the
health care and life insurance plans. The VEBA covering the health care plans
was established in December 1996. Key's policy is to make contributions to the
VEBAs in such amounts as it determines to be appropriate.
<TABLE>
<CAPTION>
Net postretirement benefits cost included the following components:
Year ended December 31,
in millions 1996 1995 1994
- ------------------------------------------------------------
<S> <C> <C> <C>
Service cost of benefits earned $ 3 $ 2 $ 3
Interest cost on accumulated
postretirement benefit obligation 7 8 9
Amortization of transition obligation
over 20 years 5 5 5
Net other amortization and deferral -- (1) 1
- ------------------------------------------------------------
Net postretirement benefits cost $15 $14 $18
=== === ===
- ------------------------------------------------------------
</TABLE>
The assumed 1997 weighted average health care cost trend rate was 7.5% for both
Medicare-eligible retirees and non-Medicare-eligible retirees. The rate is
assumed to decrease gradually to 5.5% by the year 2003 and remain constant
thereafter. Increasing or decreasing the assumed health care cost trend rates by
one percentage point in each future year would have an immaterial impact on
postretirement benefits cost due to cost-sharing provisions and benefits
limitations in the related postretirement plans. The weighted average discount
rate used in determining the accumulated postretirement benefit obligations was
7.75% and 7.5% at September 30, 1996 and 1995, respectively.
The following table reconciles the plans' combined funded status at the
September 30 measurement date with the amounts recognized in the consolidated
balance sheets at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
in millions 1996 1995
- -------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 71 $ 65
Fully eligible plan participants 5 11
Other active plan participants 28 26
- -------------------------------------------------------------------
104 102
Fair value of plan assets -- --
- -------------------------------------------------------------------
Accumulated postretirement benefit obligation
in excess of plan assets 104 102
Contribution to health care plans' VEBA
subsequent to measurement date (10) --
Health care benefits paid subsequent
to measurement date (2) (3)
Unrecognized transition obligation (83) (88)
Unrecognized net gain 13 15
- -------------------------------------------------------------------
Accrued postretirement benefits cost
(included in other liabilities) $ 22 $ 26
===== =====
- -------------------------------------------------------------------
</TABLE>
EMPLOYEE 401(K) SAVINGS PLAN
Substantially all of Key's employees are covered under a savings plan that is
qualified under Section 401(k) of the Internal Revenue Code. Under provisions of
this plan, employees may contribute 1% to 10% of eligible compensation, with up
to 6% being eligible for matching contributions from Key. At least half of such
matching contributions is in the form of Key Common Shares. The plan also
permits a discretionary profit sharing component to be distributed by Key. Total
expense associated with the plan was $40 million, $33 million and $28 million in
1996, 1995 and 1994, respectively.
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 61
<PAGE> 62
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Income Taxes
Income taxes included in the consolidated statements of income, other than those
related to the 1995 extraordinary item, are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
in millions 1996 1995 1994
- ------------------------------------------------------------
<S> <C> <C> <C>
Currently payable:
Federal $239 $212 $237
State 9 (12) 23
- ------------------------------------------------------------
248 200 260
Deferred:
Federal 89 137 152
State 23 31 18
- ------------------------------------------------------------
112 168 170
- ------------------------------------------------------------
Total income tax expense(1,2) $360 $368 $430
==== ==== ====
- ------------------------------------------------------------
<FN>
1 Income tax expense (benefit) on securities transactions totaled $.3
million, $(16) million and $(6) million in 1996, 1995 and 1994,
respectively.
2 Income tax expense excludes equity and gross receipts based taxes which are
assessed in lieu of an income tax in certain states in which Key operates.
These taxes are included in noninterest expense.
</TABLE>
The differences between income tax expense and the amount computed by applying
the statutory Federal tax rate to income before income taxes and extraordinary
item are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
in millions 1996 1995 1994
- -----------------------------------------------------------
<S> <C> <C> <C>
Income before income taxes and
extraordinary item times 35%
statutory Federal tax rate $400 $405 $449
State income tax, net of Federal
tax benefit 21 13 26
Amortization of non-deductible
intangibles 16 13 10
Tax-exempt interest income (30) (35) (35)
Corporate owned life insurance income(22) (12) (7)
Tax credits (17) (7) (4)
Other (8) (9) (9)
- ------------------------------------------------------------
Total income tax expense $360 $368 $430
==== ==== ====
- ------------------------------------------------------------
</TABLE>
Significant components of Key's deferred tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
December 31,
in millions 1996 1995
- ------------------------------------------------------------
<S> <C> <C>
Provision for loan losses $308 $301
Net unrealized securities losses 2 --
Restructuring charge 37 --
Write-down of other real estate owned 10 14
Other 49 31
- ------------------------------------------------------------
Total deferred tax assets 406 346
Leasing income reported using the
operating method for tax purposes 840 701
Net unrealized securities gains -- 19
Depreciation 31 33
Other 73 53
- ------------------------------------------------------------
Total deferred tax liabilities 944 806
- ------------------------------------------------------------
Net deferred tax liabilities $538 $460
==== ====
- ------------------------------------------------------------
</TABLE>
17. Commitments, Contingent Liabilities
and Other Disclosures
LEGAL PROCEEDINGS
In the ordinary course of business, Key is subject to legal actions which
involve claims for substantial monetary relief. Based on information presently
available to management and Key's counsel, management does not believe that any
legal actions, individually or in the aggregate, will have a material adverse
effect on the financial condition of Key.
RESTRICTIONS ON CASH, DUE FROM BANKS,
SUBSIDIARY DIVIDENDS AND LENDING ACTIVITIES
Under the provisions of the Federal Reserve Act, depository institutions are
required to maintain certain average balances in the form of cash or
noninterest-bearing balances with the Federal Reserve Bank. Average reserve
balances aggregating $723 million in 1996 were maintained in fulfillment of
these requirements.
Financial Page 62 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 63
Notes to Consolidated Financial Statements
The principal source of cash flows for the parent company, including cash flows
to pay dividends on its Common Shares and to service its debt, is dividends from
its banking and other subsidiaries. Various Federal and state statutory and
regulatory provisions limit the amount of dividends that may be paid to the
parent company by its banking subsidiaries without regulatory approval.
Under the laws, regulations and other restrictions applicable to the parent
company's banking subsidiaries, at December 31, 1996, such subsidiaries could
have declared dividends estimated to be $499 million in the aggregate, without
obtaining prior regulatory approval. Loans and advances from banking
subsidiaries to the parent company are also limited by law and are required to
be collateralized.
18. Fair Value Disclosures of Financial Instruments
The following disclosures are made in accordance with the provisions of SFAS No.
107, "Disclosures About Fair Value of Financial Instruments," which requires the
disclosure of fair value information about both on- and off-balance sheet
financial instruments where it is practicable to estimate such information.
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------------------------------------
CARRYING FAIR Carrying Fair
in millions AMOUNT VALUE Amount Value
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks(1) $ 3,444 $ 3,444 $ 3,444 $ 3,444
Short-term investments(1) 696 696 682 682
Securities available for sale(2) 7,728 7,728 8,060 8,060
Investment securities(2) 1,601 1,637 1,688 1,738
Loans, net of allowance(3) 48,365 48,890 47,456 48,334
LIABILITIES
Deposits(4) $45,317 $45,327 $47,282 $47,284
Federal funds purchased and securities sold
under repurchase agreements(1) 6,925 6,925 5,544 5,544
Other short-term borrowings(1) 3,969 3,969 2,880 2,880
Long-term debt(5) 4,213 4,124 4,003 4,167
- --------------------------------------------------------------------------------------------------------------
<FN>
Valuation Methods and Assumptions
- ----------------------------------
1 Fair value equals or approximates carrying amount.
2 Fair values of securities available for sale and investment securities
generally were based on quoted market prices. Where quoted market prices
were not available, fair values were based on quoted market prices of
similar instruments.
3 Fair values of certain loans were estimated using discounted cash flow
models. Certain residential real estate loans and student loans held for
sale were valued based on quoted market prices of similar loans offered or
sold in recent sales or securitization transactions. Lease financing
receivables, although excluded from the scope of SFAS No. 107, and mortgage
loans held for sale were included in the estimated fair value of loans at
their carrying amounts.
4 Fair values of certificates of deposit were estimated based on discounted
cash flows. For all other deposits, carrying amounts were used as a
reasonable approximation of their fair values.
5 Fair values of long-term debt were estimated based on discounted cash
flows.
</TABLE>
The estimated fair values of credit card loans, residential real estate mortgage
loans and deposits do not take into account the fair values of long-term
relationships, which are integral parts of the related financial instruments.
The disclosed estimated fair values of such instruments would increase
significantly if the fair values of the long-term relationships were considered.
In cases where quoted market prices were not available, fair values were
estimated using discounted cash flow or other valuation methods, as described
above. For financial instruments with a remaining average life to maturity of
less than six months, carrying amounts were used as an approximation of fair
values. The use of different assumptions (e.g., discount rates and cash flow
estimates) and estimation methods could have a significant effect on fair value
amounts. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that could be realized in a current market exchange.
Because SFAS No. 107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements, any aggregation of the fair value
amounts presented would not represent the underlying value of Key.
Interest rate swaps, caps and floors were valued based on discounted cash flow
models and had an aggregate fair value of $35 million and $164 million at
December 31, 1996 and 1995, respectively. Foreign exchange forward contracts,
which were valued based on quoted market prices, had a fair value which
approximated carrying amount at December 31, 1996 and 1995. Off-balance sheet
financial instruments, including their fair values, are discussed in greater
detail in the following Note 19, Financial Instruments with Off-Balance Sheet
Risk.
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 63
<PAGE> 64
Notes to Consolidated Financial Statements
19. Financial Instruments with Off-Balance Sheet Risk
Key, mainly through its affiliate banks, is party to various financial
instruments with off-balance sheet risk. The banks use these financial
instruments in the normal course of business to meet the financing needs of
their customers and to manage their exposure to market risk. Market risk is the
possibility that Key's net interest income will be adversely affected as a
result of changes in interest rates or other economic factors. The primary
financial instruments used include commitments to extend credit, standby and
commercial letters of credit, interest rate swaps, caps and floors, futures and
foreign exchange forward contracts. All of the interest rate swaps, caps and
floors, and foreign exchange forward contracts held are over-the-counter
instruments. These financial instruments may be used for lending-related, asset
and liability management and trading purposes, as discussed in the remainder of
this note. In addition to the market risks inherent in the use of these
financial instruments, each contains an element of credit risk. Credit risk is
the possibility that Key will incur a loss due to a counterparty's failure to
perform its contractual obligations.
FINANCIAL INSTRUMENTS HELD OR ISSUED
FOR LENDING-RELATED PURPOSES
These instruments involve, to varying degrees, credit risk in addition to
amounts recognized in Key's balance sheet. Key mitigates its exposure to credit
risk through internal controls over the extension of credit. These controls
include the process of credit approval and review, the establishment of credit
limits and, when deemed necessary, securing collateral.
The banks' commitments to extend credit are agreements with customers to provide
financing at predetermined terms as long as the customer continues to meet
specified criteria. Loan commitments serve to meet the financing needs of the
banks' customers and generally carry variable rates of interest, have fixed
expiration dates or other termination clauses, and may require the payment of
fees. Since the commitments may expire without being drawn upon, the total
amount of the commitments does not necessarily represent the future cash outlay
to be made by Key. The credit-worthiness of each customer is evaluated on a
case-by-case basis. The estimated fair values of these commitments and the
standby letters of credit discussed below are not material. Key does not have
any significant concentrations of credit risk.
Standby letters of credit enhance the credit-worthiness of the banks' customers
by assuring the customers' financial performance to third parties in connection
with specified transactions. Amounts drawn under standby letters of credit
generally carry variable rates of interest, and the credit risk involved is
essentially the same as that involved in the extension of loan facilities.
The following is a summary of the contractual amount of each class of
lending-related off-balance sheet financial instrument outstanding wherein Key's
maximum possible accounting loss equals the contractual amount of the
instruments.
<TABLE>
<CAPTION>
December 31,
in millions 1996 1995
- ---------------------------------------------------------------
<S> <C> <C>
Loan commitments:
Credit card lines $ 8,078 $ 6,996
Home equity 3,239 3,982
Commercial real estate and construction 1,593 1,554
Commercial and other 10,327 9,883
- ---------------------------------------------------------------
Total loan commitments 23,237 22,415
Other commitments:
Standby letters of credit 1,385 1,108
Commercial letters of credit 202 144
Loans sold with recourse 30 34
- ---------------------------------------------------------------
Total loan and other commitments $24,854 $23,701
======= =======
- ---------------------------------------------------------------
</TABLE>
FINANCIAL INSTRUMENTS HELD OR ISSUED FOR
ASSET AND LIABILITY MANAGEMENT PURPOSES
Key manages its exposure to market risk, in part, by using off-balance sheet
instruments to modify the existing interest rate risk characteristics of
specific assets and liabilities. Primary among the financial instruments used by
both the parent company and its subsidiary banks are interest rate swap
contracts. Interest rate swaps used for this purpose are designated as portfolio
swaps. The notional amount of the interest rate swap contracts represents an
agreed-upon amount on which calculations of interest payments to be exchanged
are based, and is significantly greater than the amount at risk. Credit risk is
measured as the cost of replacing, at current market rates, contracts in an
unrealized gain position. Key deals exclusively with counterparties with high
credit ratings, enters into bilateral collateral arrangements and generally
arranges master netting agreements. These agreements include legal rights of
setoff that provide for the net settlement of the subject contracts with the
same counterparty in the event of default. Although Key is exposed to
credit-related losses in the event of nonperformance by the counterparties,
based on management's assessment as of December 31, 1996, all counterparties
were expected to meet their obligations. At December 31, 1996, Key had credit
exposure of an aggregate $28 million to eleven counterparties, with the largest
credit exposure to an individual counterparty amounting to $7 million.
Under conventional interest rate swap contracts, payments based on fixed or
variable rates are received based upon the notional amounts of the swaps in
exchange for payments based on variable or fixed rates. Under an indexed
amortizing
Financial Page 64 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 65
Notes to Consolidated Financial Statements
swap contract, the notional amount remains constant for a specified period of
time after which, based upon the level of an index at each review date, the swap
contract will mature, the notional amount will begin to amortize, or the swap
will continue in effect until its contractual maturity. Otherwise, the
characteristics of these swaps are similar to those of conventional swap
contracts. At December 31, 1996, Key was party to $1.6 billion and $3.1 billion
of indexed amortizing swaps that used a London Interbank Offered Rate ("LIBOR")
index and a Constant Maturity Treasuries ("CMT") index, respectively, for the
review date measurement. Under basis swap contracts, interest payments based on
different floating indices are exchanged.
The following table summarizes the notional amount, fair value, maturity and
weighted average rate received and paid for the various types of portfolio
interest rate swaps used by Key.
<TABLE>
<CAPTION>
DECEMBER 31, 1996 December 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------
NOTIONAL FAIR MATURITY WEIGHTED AVERAGE RATE Notional Fair
dollars in millions AMOUNT VALUE (YEARS) RECEIVE PAY Amount Value
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Receive fixed/pay variable--
indexed amortizing(1) $ 5,078 $ (8) 2.1 6.77% 5.56% $ 6,200 $ 70
Receive fixed/pay variable--
conventional 3,505 21 7.1 6.75 5.56 2,497 104
Pay fixed/receive variable--
conventional 3,312 (5) 1.1 5.50 6.09 2,412 (21)
Basis swaps 400 -- .6 5.52 5.48 -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total portfolio swaps $12,295 $ 8 3.2 6.38% 5.70% $11,109 $153
======= === ======= ====
- ------------------------------------------------------------------------------------------------------------------------------
<FN>
1 Maturity is based upon expected average lives rather than contractual
terms.
</TABLE>
Based on the weighted average rates in effect at December 31, 1996, the spread
on portfolio interest rate swaps, excluding the amortization of net deferred
losses on terminated swaps, provided a positive impact on net interest income
(since the weighted average rate received exceeded the weighted average rate
paid by 68 basis points). The aggregate fair value of $8 million at the same
date was derived through the use of discounted cash flow models, which
contemplate interest rates using the applicable forward yield curve, and
represents an estimate of the unrealized gain that would be recognized if the
portfolio were to be liquidated at that date.
The following table summarizes the notional amounts, fair values and weighted
average rates of portfolio swaps by interest rate management strategy.
<TABLE>
<CAPTION>
DECEMBER 31, 1996 December 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------
NOTIONAL FAIR WEIGHTED AVERAGE RATE Notional Fair
dollars in millions AMOUNT VALUE RECEIVE PAY Amount Value
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Convert variable rate loans to fixed $ 6,443 $(20) 6.71% 5.56% $ 7,567 $113
Convert variable rate deposits and short-term
borrowings to fixed 3,082 (4) 5.51 6.08 2,275 (18)
Convert variable rate long-term debt to fixed 230 (1) 5.30 6.27 137 (3)
Convert fixed rate long-term debt to variable 2,140 33 6.92 5.56 1,130 61
Basis swaps 400 -- 5.52 5.48 -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total portfolio swaps $12,295 $ 8 6.38% 5.70% $11,109 $153
======= ==== ======= ====
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Portfolio interest rate swaps are used to manage market risk by modifying the
repricing or maturity characteristics of specified on-balance sheet assets and
liabilities. Interest from these swaps is recognized on an accrual basis over
the lives of the respective contracts as an adjustment of the interest income or
expense of the asset or liability whose risk is being managed. Gains and losses
realized upon the termination of interest rate swaps prior to maturity are
deferred and amortized, generally using the straight-line method over the
projected remaining life of the related swap contract at its termination and
recorded as an adjustment of the yield on the respective on-balance sheet
instrument that was being managed. Including the impact of both the spread on
the swap portfolio and the amortization of the deferred gains and losses
resulting from terminated swaps, portfolio interest rate swaps increased net
interest income for 1996 by $66 million, and reduced net interest income by $29
million in 1995. During 1995, swaps with a notional amount of $1.4 billion were
terminated, resulting in net deferred losses of $49 million. Key recognized $38
million of swap losses during the first quarter of 1995 in connection with the
sale of the residential mortgage loan servicing business. These recognized
losses, which were direct costs of disposing of the business, were included in
the determination of the net gain from the sale. The losses included $15 million
of the $49 million of deferred swap losses referred to previously and $23
million of deferred swap losses recorded prior to 1995. During 1996, swaps with
a notional amount of $800 million were terminated, resulting in a deferred gain
of $.3 million.
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 65
<PAGE> 66
Notes to Consolidated Financial Statements
A summary of Key's deferred swap gains and (losses) is as follows:
<TABLE>
<CAPTION>
December 31, 1996
dollars in millions
- --------------------------------------------------------------
Weighted Average
Deferred Remaining
Asset/Liability Managed Gains/(Losses) Amortization (Years)
- --------------------------------------------------------------
<S> <C> <C>
Loans $(1) 1.8
Debt 17 6.4
- --------------------------------------------------------------
Total $16
===
- --------------------------------------------------------------
</TABLE>
Key also uses interest rate caps and floors, and futures contracts to manage the
risk associated with the potential impact of adverse movements in interest rates
on specified long-term debt and other short-term borrowings. Interest rate caps
and floors involve the payment of a premium from the buyer to the seller for the
right to receive an interest differential equal to the difference between the
current interest rate and an agreed-upon interest rate ("strike rate") applied
to a notional amount. Key generally purchases or enters into net purchases (a
combination of buying and selling) of caps and floors for asset and liability
management purposes. Futures contracts are commitments to either purchase or
sell designated financial instruments at future dates for specific prices. Key
had caps and floors with a notional amount and fair value of $1.4 billion and $7
million, respectively, at December 31, 1996. There were no futures contracts
outstanding at the same date.
FINANCIAL INSTRUMENTS HELD OR ISSUED
FOR TRADING PURPOSES
Key's affiliate banks also use interest rate swap, cap and floor, and futures
contracts for dealer activities (which are generally limited to the banks'
commercial loan customers) and enter into other positions with third parties
that are intended to mitigate the interest rate risk of the customer positions.
Interest rate swap contracts entered into with customers are typically limited
to conventional swaps, as previously described. The customer swaps, caps and
floors, and futures, as well as the third party positions, are recorded at their
estimated fair values, and adjustments to fair value are included in other
income on the income statement. Key had futures contracts with a notional amount
and fair value of $2.3 billion and $.2 million, respectively, at December 31,
1996.
Key also enters into foreign exchange forward contracts to accommodate the
business needs of its customers and for proprietary trading purposes. These
contracts provide for the delayed delivery or purchase of foreign currency. The
foreign exchange risk associated with such contracts is mitigated by entering
into other foreign exchange contracts with third parties. Adjustments to the
fair value of all such foreign exchange forward contracts are included in other
income on the income statement.
At December 31, 1996, credit exposure from financial instruments held or issued
for trading purposes was limited to the aggregate fair value of each contract
with a positive fair value, or $40 million. The risk of counterparties
defaulting on their obligations is monitored on an ongoing basis. The affiliate
banks contract with counterparties of good standing and enter into master
netting agreements when possible in an effort to manage credit risk.
Trading income recognized on interest rate and foreign exchange forward
contracts totaled $6 million and $10 million, respectively, in 1996 and $10
million and $11 million, respectively, in 1995.
A summary of the notional amount and the respective fair value of derivative
financial instruments held or issued for trading purposes at December 31, 1996,
and on average for the year then ended, is presented below. The positive fair
values represent assets to Key and are recorded in other assets, while the
negative fair values represent liabilities and are recorded in other liabilities
on the balance sheet.
<TABLE>
<CAPTION>
December 31, 1996 Year ended December 31, 1996
- ------------------------------------------------------------------------------------------------------------------
Notional Fair Average Average
in millions Amount Value Notional Amount Fair Value
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest rate contracts:
Swaps:
Assets $3,951 $ 37 $2,602 $ 31
Liabilities 1,693 (17) 1,777 (15)
Caps and floors purchased 1,615 2 1,380 2
Caps and floors written 1,669 (2) 1,429 (3)
Foreign exchange forward contracts:(1)
Assets 388 13 479 13
Liabilities 335 (12) 464 (12)
- ------------------------------------------------------------------------------------------------------------------
<FN>
1 Excludes the effect of foreign spot contracts.
</TABLE>
Financial Page 66 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 67
Notes to Consolidated Financial Statements
20. Condensed Financial Information of the Parent Company
<TABLE>
CONDENSED BALANCE SHEETS
<CAPTION>
December 31,
in millions 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Interest-bearing deposits with bank subsidiaries $ 735 $ 330
Securities purchased from bank subsidiaries under resale agreements -- 3
Investment securities 17 25
Securities available for sale 3 3
Loans and advances to subsidiaries:
Banks and bank holding companies 190 164
Nonbank subsidiaries 316 204
- --------------------------------------------------------------------------------------------------
506 368
Investment in subsidiaries:
Banks and bank holding companies 5,247 5,231
Nonbank subsidiaries 401 662
- --------------------------------------------------------------------------------------------------
5,648 5,893
Other assets 430 412
- --------------------------------------------------------------------------------------------------
Total assets $7,339 $7,034
====== ======
LIABILITIES
Accrued interest and other liabilities $ 262 $ 158
Long-term debt:
Subsidiary trusts 515 --
Unaffiliated companies 1,681 1,723
- --------------------------------------------------------------------------------------------------
2,196 1,723
- --------------------------------------------------------------------------------------------------
Total liabilities 2,458 1,881
SHAREHOLDERS' EQUITY(1) 4,881 5,153
- --------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $7,339 $7,034
====== ======
- --------------------------------------------------------------------------------------------------
<FN>
1 See page 44 for the parent company's Statement of Changes in Shareholders'
Equity.
</TABLE>
<TABLE>
CONDENSED STATEMENTS OF INCOME
<CAPTION>
Year ended December 31,
in millions 1996 1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME
Dividends from subsidiaries:
Banks and bank holding companies $1,012 $1,061 $403
Nonbank subsidiaries 15 55 2
Management fees and interest income from subsidiaries 50 45 246
Other income 16 13 10
- ---------------------------------------------------------------------------------------
1,093 1,174 661
EXPENSES
Interest on borrowed funds 125 125 74
Restructuring charge 100 -- --
Personnel and other expenses 63 49 264
- ---------------------------------------------------------------------------------------
288 174 338
Income before income tax benefit and equity in
net income less dividends from subsidiaries 805 1,000 323
Income tax benefit 84 39 27
- ---------------------------------------------------------------------------------------
889 1,039 350
Equity in net income less dividends from subsidiaries (106) (214) 503
- ---------------------------------------------------------------------------------------
NET INCOME $ 783 $ 825 $853
====== ====== ====
- ---------------------------------------------------------------------------------------
</TABLE>
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 67
<PAGE> 68
Notes to Consolidated Financial Statements
<TABLE>
CONDENSED STATEMENTS OF CASH FLOW
<CAPTION>
Year ended December 31,
in millions 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 783 $ 825 $ 853
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of intangibles 9 8 8
Gain on sale of subsidiary (8) -- --
Net securities gains -- (5) (3)
Deferred income taxes (31) 4 14
Equity in net income less dividends from subsidiaries 106 214 (503)
Net (increase) decrease in other assets 2 89 (130)
Net increase (decrease) in other liabilities (5) (172) 101
Net decrease in accrued merger and integration charges -- (50) (76)
Net increase in accrued restructuring charge 100 -- --
Other operating activities, net 69 (138) 25
- -------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,025 775 289
INVESTING ACTIVITIES
Purchases of investment securities -- (5) (135)
Proceeds from prepayments and maturities of investment securities 8 24 130
Purchases of securities available for sale (4) (100) (124)
Proceeds from prepayments and maturities of securities available for sale 4 209 32
Net (increase) decrease in interest-bearing deposits (405) 199 (48)
Net (increase) decrease in security resale agreements 3 (1) 4
Net (increase) decrease in loans and advances to subsidiaries (138) 92 13
Purchases of premises and equipment -- -- (3)
Proceeds from sale of subsidiary 164 -- --
Net cash used in acquisitions, net of cash acquired -- (296) --
(Increase) decrease in investments in subsidiaries (80) 56 (72)
- -------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (448) 178 (203)
FINANCING ACTIVITIES
Net increase (decrease) in short-term borrowings -- (176) 147
Net proceeds from issuance of long-term debt 1,062 413 395
Payments on long-term debt (605) (161) (73)
Loan payment received from ESOP trustee 2 13 --
Redemption of 10% Cumulative Preferred Stock (160) -- --
Purchases of treasury shares (617) (724) (216)
Proceeds from issuance of common stock pursuant to employee
stock purchase, stock option and dividend reinvestment plans 98 36 19
Cash dividends (357) (354) (359)
- -------------------------------------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (577) (953) (87)
- -------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS -- -- (1)
CASH AND DUE FROM BANKS AT BEGINNING OF YEAR -- -- 1
- -------------------------------------------------------------------------------------------------------------
CASH AND DUE FROM BANKS AT END OF YEAR -- -- --
==== ==== ===
- -------------------------------------------------------------------------------------------------------------
</TABLE>
For the years ended December 31, 1996, 1995 and 1994, the parent company paid
interest on borrowed funds of $119 million, $135 million and $60 million,
respectively.
Financial Page 68 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 69
BANKING DISTRICT OFFICES*
<TABLE>
<S> <C> <C>
GARY R. ALLEN (800) 523-7247 STEPHEN E. WALL
Chief Executive Officer President and Chief Operating Officer
DISTRICT OFFICES MAINE DISTRICT
MICHAEL W. MCNAMARA
AKRON DISTRICT President
LINDA L. GENTILE One Canal Plaza
President Portland, ME 04101
1578 South Main Street (207) 874-7275
Akron, OH 44308
(330) 379-1409 MICHIGAN DISTRICT
GEORGE H. CRESS
ALASKA DISTRICT Chairman
MICHAEL J. BURNS
President WILLIAM S. HANN
101 West Benson Blvd., Suite 414 President
Anchorage, AK 99510-0420 100 South Main Street
(907) 564-0250 Ann Arbor, MI 48104
(313) 747-7998
ALBANY DISTRICT
ROBERT E. SMYTH NEW HAMPSHIRE DISTRICT
President KENT D. WINTERS
66 South Pearl Street, 10th floor President
Albany, NY 12207 One Bedford Farms, Kilton Road
(518) 486-8873 Bedford, NH 03110
(603) 656-1101
BOISE DISTRICT
MICHAEL M. MOONEY NORTH PUGET SOUND DISTRICT
President PEGGY A. ZORO
702 West Idaho, 12th floor President
Boise, ID 83701 101 East Holly
(208) 334-7031 Bellingham, WA 98225
(360) 676-6355
BUFFALO DISTRICT
LINDA P. DUCH OREGON DISTRICT
President JAMES J. ATKINSON
50 Fountain Plaza, 17th floor President
Buffalo, NY 14202 1211 S.W. Fifth Avenue, Suite 300
(716) 847-2229 Portland, OR 97204
(503) 790-7506
CANTON DISTRICT
MICHAEL P. GILL ROCHESTER DISTRICT
President DENNIS S. BUCHAN
202 Second Street, NE President
Canton, OH 44702 39 State Street
(330) 489-5344 Rochester, NY 14614
(716) 263-3357
CINCINNATI DISTRICT
MARTIN D. PIAZZA SALT LAKE CITY DISTRICT
President RICHARD L. NELSON
525 Vine Street, 6th floor President
Cincinnati, OH 45202 50 South Main Street
(513) 762-8203 Salt Lake City, UT 84130
(801) 535-1105
CLEVELAND DISTRICT
RUBEN L. HOLLOWAY SEATTLE DISTRICT
President JAMES A. WASHAM
800 Superior Avenue President
Cleveland, OH 44114 1325 Fourth Avenue, 12th floor
(216) 828-9661 Seattle, WA 98101
(206) 689-5999
COLUMBUS DISTRICT
TODD F. CLOSSIN SOUTH BEND DISTRICT
President MICHAEL J. HAMMES
88 East Broad Street President
Columbus, OH 43215 202 South Michigan Street
(614) 460-3493 South Bend, IN 46601
(219) 237-5344
DAYTON DISTRICT
MERVYN L. ALPHONSO SYRACUSE DISTRICT
President HUGH C. LORDON
34 North Main Street President
Dayton, OH 45402 201 South Warren Street, 3rd floor
(937) 586-8667 Syracuse, NY 13202
(315) 470-5140
DENVER DISTRICT
President TACOMA DISTRICT
3300 East First Avenue DENNIS LONG
Denver, CO 80206 President
(303) 329-7465 1119 Pacific Avenue, 3rd floor
Tacoma, WA 98402
HUDSON VALLEY DISTRICT (206) 305-7516
RICHARD M. KULBIEDA
President TOLEDO DISTRICT
One Washington Center, 5th floor JAMES A. HOFFMAN
Newburgh, NY 12550 President
(914) 563-5190 Three Seagate Tower
Toledo, OH 43604
INDIANAPOLIS DISTRICT (419) 259-8587
ANTHONY HEYWORTH
President VERMONT DISTRICT
Ten West Market Street CHARLES P. SMITH
Indianapolis, IN 46204 President
(317) 464-8090 149 Bank Street, P.O. Box 949
Burlington, VT 05402
LONG ISLAND DISTRICT (802) 660-4213
MICHAEL R. ORSINO
President WYOMING DISTRICT**
1377 Motor Parkway RANDALL L. DANCLIFF
Islandia, NY 11788 President
(516) 233-4046 1800 Carey Avenue
Cheyenne, WY 82003
(307) 771-3536
NATIONAL CONSUMER FINANCE
KEY BANK USA, NATIONAL ASSOCIATION
127 Public Square CREDIT CARD SERVICES KEY EDUCATION
Cleveland, OH 44114 LEOPOLDO C. TORALBALLA RESOURCES
(216) 689-7003 Executive Vice President RANDALL M. BEHM
127 Public Square Senior Vice President
A. JAY MEYERSON Cleveland, OH 44114 800 Superior Avenue
Chairman and (216) 689-7562 Cleveland, OH 44114
Chief Executive Officer (800) KEY-LEND
DEPOSIT SERVICES
DIVISIONS CAROLE E. GEREN MARINE/RV FINANCE
Senior Vice President KENNETH R. LANDON
KEY AUTOFINANCE 54 State Street Senior Vice President
800 Superior Avenue Albany, NY 12207 800 Superior Avenue
Cleveland, OH 44114 (800) USA-5553 Cleveland, OH 44114
(216) 828-9224 (800) 523-7247
A. E. STEINHAUS
Executive Vice President
LOUIS R. FEAGLES
Chief Operating Officer
- -------------------------------------------------------------------
AUTO FINANCE MORTGAGE SERVICES
AUTOFINANCE KEYCORP
GROUP, INC.*** FINANCE INC.***
601 Oakmont Lane 1259 S. Cedar Crest Blvd.
Suite 110 Allentown, PA 18103-6206
Westmont, IL 60559-5549 (610) 782-0880
(630) 655-7100
JAMES H. DOWNING
A. E. STEINHAUS President and
Chief Executive Officer Chief Executive Officer
LOUIS R. FEAGLES KEY MORTGAGE
Chief Operating Officer SERVICES INC.***
127 Public Square
Cleveland, OH 44114
(216) 828-9420
DENIS W. ST. MARIE
President
<FN>
* On January 13, 1997, all of KeyCorp's bank subsidiaries, with the exception
of Key Bank of Washington and Key Bank USA, National Association became
national banks and changed their names to KeyBank National Association. Key
Bank of Washington also became a national bank on March 5, 1997. KeyCorp
plans to consolidate all of its bank subsidiaries, with the exception of
Key Bank USA, National Association, into one nationwide bank in mid-1997.
** Sale is pending of KeyBank (Wyoming District) to Community First
Bankshares, Inc. (NASDAQ:CFBX), expected to close third quarter, 1997.
*** KeyCorp subsidiary.
</TABLE>
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 69
<PAGE> 70
FINANCIAL SERVICES SUBSIDIARIES--HEADQUARTERS OFFICES
Our financial services subsidiaries serve clients in markets across the U.S.
<TABLE>
<S> <C>
CORPORATE BANK KEY INVESTMENTS INC.
127 Public Square
CORPORATE BANK Cleveland, OH 44114
127 Public Square (216) 689-3000
Cleveland, OH 44114
(216) 689-3690 JACK L. KOPNISKY
President and
JAMES S. BINGAY Chief Executive Officer
Group Executive
Vice President KEY CAPITAL MARKETS, INC.
127 Public Square
KEY CORPORATE CAPITAL, INC. Cleveland, OH 44114
127 Public Square (216) 689-4889
Cleveland, OH 44114
(216) 689-5425 V. SHIV KRISHNAN
President
JAMES A. FISHELL
President and CARLETON, MCCREARY,
Chief Executive Officer HOLMES & CO.
600 Superior Avenue,
KEY GLOBAL FINANCE, LTD. 10th floor
30 Federal Street Cleveland, OH 44114
Boston, MA 02110 (216) 781-9033
(617) 654-2700
PAUL H. CARLETON
CARL R. VERCOLLONE, CFA Executive Managing Director
President and
Senior Managing Director ROBERT G. MCCREARY
Executive Managing Director
KEYCORP LEASING LTD.
54 State Street DOUGLAS Q. HOLMES
P.O. Box 655 Executive Managing Director
Albany, NY 12201-0655
(518) 486-8477 KEY EQUITY
CAPITAL CORPORATION
FREDERICK E. WOLFERT 127 Public Square
President and Cleveland, OH 44114
Chief Executive Officer (216) 689-5776
COMMUNITY DEVELOPMENT DAVID P. GIVEN
President and
KEY COMMUNITY Chief Executive Officer
DEVELOPMENT CORPORATION
127 Public Square INVESTMENT MANAGEMENT
Cleveland, OH 44114
(216) 689-8270 KEY ASSET MANAGEMENT, INC.
127 Public Square
JEROME G. MCCLAIN Cleveland, OH 44114
President (216) 689-4535
INFORMATION TECHNOLOGY WILLIAM G. SPEARS
AND OPERATIONS Chairman and
Chief Executive Officer
KEY SERVICES CORPORATION
22 Corporate Woods RICHARD J. BUONCORE
Albany, NY 12211 President and
Chief Operating Officer
2025 Ontario Street
Cleveland, OH 44114 GARY R. MARTZOLF
(216) 689-8919 Senior Managing Director
ALLEN J. GULA, JR. W. CHRISTOPHER MAXWELL
Chairman and Senior Managing Director
Chief Executive Officer
ANTHONY AVENI
ROBERT C. MELTZER Chief Investment Officer
President,
Technology Services Group VINCENT FARRELL, JR.
Chief Investment Officer
MICHAEL L. EVANS
President, CHARLES G. CRANE
Operations Services Group Chief Market Strategist
ANN M. PROCK KEY PRIVATEBANK
Chief Administrative Officer
KEY PRIVATEBANK
KEY CLEARING CORP. 127 Public Square
4900 Tiedeman Road Cleveland, OH 44114
Brooklyn, OH 44144 (216) 689-3233
(216) 813-3451
ROBERT B. HEISLER, JR.
PAUL R. RICHARDSON Group Executive
Chief Executive Officer Vice President
INSURANCE SERVICES WILLIAM M. HUNTER II
Executive Vice President
KEYCORP INSURANCE
MANAGEMENT GROUP DANIEL E. KLIMAS
127 Public Square Executive Vice President
Cleveland, OH 44114
(216) 689-8107 TRUST SERVICES
(800) 982-3811
JACK L. KOPNISKY KeyCorp has trust offices
Executive Vice President located in Alaska, Colorado,
Idaho, Indiana, Maine,
INVESTMENT BANKING/ Michigan, New York, Ohio,
CAPITAL MARKETS Oregon, Utah, Washington
and Wyoming
INVESTMENT BANKING
AND SECURITIES GROUP TRACE B. SWISHER
127 Public Square Chief Fiduciary Officer
Cleveland, OH 44114
(216) 689-3582 KEY TRUST COMPANY OF FLORIDA,
NATIONAL ASSOCIATION*
JOHN E. KOHL 3777 Tamiami Trail North
Group Executive Suite 100
Vice President Naples, FL 33940
(941) 261-0990
GERALD A. FALLON
Director of Capital Markets THOMAS R. BECKER
President and
Chief Executive Officer
*KeyCorp anticipates that Key Trust
Company of Florida will be merged
into one of KeyCorp's bank subsidiaries.
</TABLE>
Financial Page 70 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 71
<TABLE>
BOARD OF DIRECTORS
<S> <C>
ROBERT W. GILLESPIE CHARLES R. HOGAN
Chairman, President and Co-owner and
Chief Executive Officer, Chief Executive Officer,
KeyCorp C.R.H. Investments, Inc.
CECIL D. ANDRUS DOUGLAS J. MCGREGOR
Chairman, President and Chief
Andrus Center for Public Policy, Executive Officer,
Boise State University M.A. Hanna Company
WILLIAM G. BARES HENRY L. MEYER III
Chairman, President and Vice Chairman of the Board
Chief Executive Officer, and Chief Operating Officer,
The Lubrizol Corporation KeyCorp
ALBERT C. BERSTICKER STEVEN A. MINTER
Chairman and Executive Director
Chief Executive Officer, and President,
Ferro Corporation The Cleveland Foundation
THOMAS A. COMMES M. THOMAS MOORE
President and Chairman, President and
Chief Operating Officer, Chief Executive Officer,
The Sherwin-Williams Company Cleveland-Cliffs Inc
KENNETH M. CURTIS RICHARD W. POGUE
Senior Member, Senior Advisor,
Curtis, Thaxter, Stevens, Dix & Eaton
Broder & Micoleau LLC
RONALD B. STAFFORD
JOHN C. DIMMER Partner,
President, Stafford, Trombley, Purcell,
Firs Management Corporation Lahtinen, Owens & Curtin, P.C.;
Member New York State Senate
LUCIE J. FJELDSTAD
President DENNIS W. SULLIVAN
(Video and Networking Division) Executive Vice President,
Tektronix, Inc. Parker-Hannifin Corporation
STEPHEN R. HARDIS PETER G. TEN EYCK II
Chairman and President,
Chief Executive Officer, Indian Ladder Farms
Eaton Corporation
NANCY B. VEEDER
HENRY S. HEMINGWAY President,
President, Veeder Realty, Inc.;
Town & Country Life Partner,
Insurance Company Veedergate Realty, L.P.
MANAGEMENT COMMITTEE
ROBERT W. GILLESPIE THOMAS E. HELFRICH
Chairman, President and Executive Vice President
Chief Executive Officer Corporate Human Resources
GARY R. ALLEN HENRY L. MEYER III
Senior Executive Vice President Vice Chairman of the Board
and Chief Banking Officer and Chief Operating Officer
STEPHEN A. CONE K. BRENT SOMERS
Executive Vice President Senior Executive Vice President
and Chief Marketing Officer and Chief Financial Officer
ALLEN J. GULA, JR. THOMAS C. STEVENS
Executive Vice President Executive Vice President,
Information and Technology General Counsel and Secretary
OTHER KEY SENIOR EXECUTIVES
JULIA ADAMSEN LISA S. CODISPOTI
Corporate Marketing Human Resources,
Training & Development
PATRICK V. AULETTA
Community Corporate Banking ROBERT M. CURLEY
Group Executive Retail Banking
WILLIAM BARNES PETER H. FASS, M.D.
Large Corporate Banking Human Resources,
Health, Welfare and
JOHN T. BLAKE Employee Services
Community Corporate Banking
W. JOHN FULLER
KEVIN M. BLAKELY Corporate Communications
Risk Management
LAWRENCE W. GILMER
KAREN S. BLUE Human Resources, Compensation &
Human Resources, Executive Benefits
Key Services Corporation
PAMELA D. GORMLEY
PETER E. BRERETON Finance, Corporate Bank,
Government Relations Asset Management,
and Investment Banking
SUSAN P. BROCKETT & Securities
Human Resources,
Corporate Bank, LINDA A. GRANDSTAFF
Asset Management, Corporate Banking
and Investment Banking
& Securities KAREN R. HAEFLING
Corporate Marketing
CRAIG C. BROOKS
Finance, Resource 2000 HENRY HEINEMANN
Finance,
MICHAEL A. BUTLER Key Services Corporation
Loan Portfolio Management
CARL C. HEINTEL, JR.
DIANE F. COBLE Credit Administration
Human Resources,
Employee Relations,
Staffing and Diversity
(continued on next page)
</TABLE>
[LOGO] KEYCORP AND SUBSIDIARIES Financial Page 71
<PAGE> 72
<TABLE>
OTHER KEY SENIOR EXECUTIVES (continued)
<S> <C>
RALPH K. HOLLIDAY RONALD J. NICOLAS
Retail Banking Finance, National
Consumer Finance
LEE IRVING
Chief Accounting Officer, PETER K. POTCHEN
Investor Relations General Auditor
ROBERT G. JONES KEVIN P. RILEY
Consumer Banking Finance,
Group Executive Community Banking
KAREN R. KLEINHENZ JOHN M. RYAN
Public Sector Institutional Asset Services
JAMES J. MALERBA JOHN A. SIMONSON
Corporate Accounting Corporate Treasurer
SANDRA M. MALTBY PATRICK J. SWANICK
Small Business Electronic Commerce
JOHN H. MANCUSO KENTON A. THOMPSON
Deputy General Counsel Middle Market Banking
RICHARD A. MOLYNEUX ANDREW R. TYSON
Retail Banking Corporate Development
Group Executive
CRISTINA WASIAK
BRUCE D. MURPHY Financial Planning
Human Resources,
Community Banking WENDY J. WORTHINGTON
Human Resources,
National Consumer Finance
</TABLE>
Financial Page 72 [LOGO] KEYCORP AND SUBSIDIARIES
<PAGE> 1
EXHIBIT 21
KEYCORP
SUBSIDIARIES OF THE REGISTRANT AT FEBRUARY 28, 1997
<TABLE>
<CAPTION>
JURISDICTION
OF INCORPORATION
SUBSIDIARIES(1) OR ORGANIZATION PARENT COMPANY
- --------------------------------------------- ---------------- -----------------------------------
<S> <C> <C>
KeyBank National Association (Ohio) United States KeyCorp
KeyBank National Association (New York) United States Key Bancshares of New York Inc.
Key Bank of Washington Washington Key Bancshares of Washington, Inc.
Key Bank USA, National Association United States KeyCorp
</TABLE>
- ---------------
(1) Although the subsidiaries listed above are not a complete listing of all of
KeyCorp's subsidiaries, those subsidiaries not listed would not constitute a
significant subsidiary in the aggregate. Each of the subsidiaries listed is
100% owned by its parent company.
16
<PAGE> 1
EXHIBIT 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of KeyCorp of our report dated January 15, 1997, included in the 1996 Annual
Report to Shareholders of KeyCorp.
We also consent to the incorporation by reference in the following Registration
Statements of KeyCorp and in the related Prospectuses of our report dated
January 15, 1997, with respect to the consolidated financial statements
incorporated herein by reference in this Annual Report (Form 10-K) for the year
ended December 31, 1996:
Form S-3 No. 33-5064
Form S-3 No. 33-10634
Form S-3 No. 33-39733
Form S-3 No. 33-51652
Form S-3 No. 33-53643
Form S-3 No. 33-56881
Form S-3 No. 33-58405
Form S-3 No. 333-10577
Form S-4 No. 33-31569
Form S-4 No. 33-44657
Form S-4 No. 33-51717
Form S-4 No. 33-55573
Form S-4 No. 33-57329
Form S-4 No. 33-61539
Form S-4 No. 333-19151
Form S-4 No. 333-19153
Form S-8 No. 2-97452
Form S-8 No. 33-21643
Form S-8 No. 33-42691
Form S-8 No. 33-45518
Form S-8 No. 33-46278
Form S-8 No. 33-52293
Form S-8 No. 33-54819
Form S-8 No. 33-56745
Form S-8 No. 33-56879
Form S-8 No. 33-31569 (Post-Effective Amendment No. 1 to Form S-4)
Form S-8 No. 33-31569 (Post-Effective Amendment No. 2 to Form S-4)
Form S-8 No. 33-31569 (Post-Effective Amendment No. 3 to Form S-4)
Form S-8 No. 33-44657 (Post-Effective Amendment No. 1 to Form S-4)
Form S-8 No. 33-51717 (Post-Effective Amendment No. 1 to Form S-4)
/s/ Ernst & Young LLP
Cleveland, Ohio
March 21, 1997
17
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director, of KeyCorp, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "Annual Report"), hereby
constitutes and appoints K. Brent Somers, Thomas C. Stevens, and John H. Mancuso
and each of them, as attorney for the undersigned, with full power of
substitution and resubstitution, for an in the name, place, and stead of the
undersigned, to sign and file the Annual Report and exhibits thereto, and any
and all amendments thereto, with full power and authority to do and perform any
and all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand as
of March 13, 1997.
/s/Cecil D. Andrus
------------------
Typed Name: Cecil D. Andrus
------------------
<PAGE> 2
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director, of KeyCorp, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "Annual Report"), hereby
constitutes and appoints K. Brent Somers, Thomas C. Stevens, and John H. Mancuso
and each of them, as attorney for the undersigned, with full power of
substitution and resubstitution, for an in the name, place, and stead of the
undersigned, to sign and file the Annual Report and exhibits thereto, and any
and all amendments thereto, with full power and authority to do and perform any
and all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand as
of March 13, 1997.
/s/Ronald B. Stafford
---------------------
Typed Name: Ronald B. Stafford
------------------
<PAGE> 3
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director, of KeyCorp, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "Annual Report"), hereby
constitutes and appoints K. Brent Somers, Thomas C. Stevens, and John H. Mancuso
and each of them, as attorney for the undersigned, with full power of
substitufion and resubstitution, for an in the name, place, and stead of the
undersigned, to sign and file the Annual Report and exhibits thereto, and any
and all amendments thereto, with full power and authority to do and perform any
and all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand as
of March 13, 1997.
/s/Henry S. Hemingway
----------------------
Typed Name: Henry S. Hemingway
------------------
<PAGE> 4
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director, of KeyCorp, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "Annual Report"), hereby
constitutes and appoints K. Brent Somers, Thomas C. Stevens, and John H. Mancuso
and each of them, as attorney for the undersigned, with full power of
substitution and resubstitution, for an in the name, place, and stead of the
undersigned, to sign and file the Annual Report and exhibits thereto, and any
and all amendments thereto, with full power and authority to do and perform any
and all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand as
of March 13, 1997.
/s/Charles R.Hogan
------------------
Typed Name: Charles R. Hogan
------------------
<PAGE> 5
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director, of KeyCorp, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "Annual Report"), hereby
constitutes and appoints K. Brent Somers, Thomas C. Stevens, and John H. Mancuso
and each of them, as attorney for the undersigned, with full power of
substitution and resubstitution, for an in the name, place, and stead of the
undersigned, to sign and file the Annual Report and exhibits thereto, and any
and all amendments thereto, with full power and authority to do and perform any
and all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand as
of March 13, 1997.
/s/Peter G. Ten Eyck II
------------------------
Typed Name: Peter G. Ten Eyck II
---------------------
<PAGE> 6
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director, of KeyCorp, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "Annual Report"), hereby
constitutes and appoints K. Brent Somers, Thomas C. Stevens, and John H. Mancuso
and each of them, as attorney for the undersigned, with full power of
substitution and resubstitution, for an in the name, place, and stead of the
undersigned, to sign and file the Annual Report and exhibits thereto, and any
and all amendments thereto, with full power and authority to do and perform any
and all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand as
of March 13, 1997.
/s/Douglas J. McGregor
-----------------------
Typed Name: Douglas J. McGregor
--------------------
<PAGE> 7
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director, of KeyCorp, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "Annual Report"), hereby
constitutes and appoints K. Brent Somers, Thomas C. Stevens, and John H. Mancuso
and each of them, as attorney for the undersigned, with full power of
substitution and resubstitution, for an in the name, place, and stead of the
undersigned, to sign and file the Annual Report and exhibits thereto, and any
and all amendments thereto, with full power and authority to do and perform any
and all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand as
of March 13, 1997.
/s/ Dennis W. Sullivan
----------------------
Typed Name: Dennis W. Sullivan
------------------
<PAGE> 8
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director, of KeyCorp, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "Annual Report"), hereby
constitutes and appoints K. Brent Somers, Thomas C. Stevens, and John H. Mancuso
and each of them, as attorney for the undersigned, with full power of
substitution and resubstitution, for an in the name, place, and stead of the
undersigned, to sign and file the Annual Report and exhibits thereto, and any
and all amendments thereto, with full power and authority to do and perform any
and all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand as
of March 13, 1997.
/s/ John C. Dimmer
------------------
Typed Name: John C. Dimmer
------------------
<PAGE> 9
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director, of KeyCorp, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "Annual Report"), hereby
constitutes and appoints K. Brent Somers, Thomas C. Stevens, and John H. Mancuso
and each of them, as attorney for the undersigned, with full power of
substitution and resubstitution, for an in the name, place, and stead of the
undersigned, to sign and file the Annual Report and exhibits thereto, and any
and all amendments thereto, with full power and authority to do and perform any
and all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand as
of March 13, 1997.
/s/ Kennith M. Curtis
------------------
Typed Name: Kenneth M. Curtis
------------------
<PAGE> 10
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director, of KeyCorp, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "Annual Report"), hereby
constitutes and appoints K. Brent Somers, Thomas C. Stevens, and John H. Mancuso
and each of them, as attorney for the undersigned, with full power of
substitution and resubstitution, for an in the name, place, and stead of the
undersigned, to sign and file the Annual Report and exhibits thereto, and any
and all amendments thereto, with full power and authority to do and perform any
and all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand as
of March 13, 1997.
/s/ Nancy Briwa Veeder
------------------
Typed Name: Nancy Briwa Veeder
------------------
<PAGE> 11
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director, of KeyCorp, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "Annual Report"), hereby
constitutes and appoints K. Brent Somers, Thomas C. Stevens, and John H. Mancuso
and each of them, as attorney for the undersigned, with full power of
substitution and resubstitution, for an in the name, place, and stead of the
undersigned, to sign and file the Annual Report and exhibits thereto, and any
and all amendments thereto, with full power and authority to do and perform any
and all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand as
of March 13, 1997.
/s/ A.C. Bersticker
------------------
Typed Name: A.C. Bersticker
------------------
<PAGE> 12
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director, of KeyCorp, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "Annual Report"), hereby
constitutes and appoints K. Brent Somers, Thomas C. Stevens, and John H. Mancuso
and each of them, as attorney for the undersigned, with full power of
substitution and resubstitution, for an in the name, place, and stead of the
undersigned, to sign and file the Annual Report and exhibits thereto, and any
and all amendments thereto, with full power and authority to do and perform any
and all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand as
of March 13, 1997.
/s/ M. Thomas Moore
------------------
Typed Name: M. Thomas Moore
------------------
<PAGE> 13
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director, of KeyCorp, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "Annual Report"), hereby
constitutes and appoints K. Brent Somers, Thomas C. Stevens, and John H. Mancuso
and each of them, as attorney for the undersigned, with full power of
substitution and resubstitution, for an in the name, place, and stead of the
undersigned, to sign and file the Annual Report and exhibits thereto, and any
and all amendments thereto, with full power and authority to do and perform any
and all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand as
of March 13, 1997.
/s/ Steven A. Minter
------------------
Typed Name: Steven A. Minter
------------------
<PAGE> 14
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director, of KeyCorp, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "Annual Report"), hereby
constitutes and appoints K. Brent Somers, Thomas C. Stevens, and John H. Mancuso
and each of them, as attorney for the undersigned, with full power of
substitution and resubstitution, for an in the name, place, and stead of the
undersigned, to sign and file the Annual Report and exhibits thereto, and any
and all amendments thereto, with full power and authority to do and perform any
and all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
as of March 13, 1997.
/s/ Robert W. Gillespie
-------------------
Typed Name: Robert W. Gillespie
-------------------
<PAGE> 15
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director, of KeyCorp, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "Annual Report"), hereby
constitutes and appoints K. Brent Somers, Thomas C. Stevens, and John H. Mancuso
and each of them, as attorney for the undersigned, with full power of
substitution and resubstitution, for an in the name, place, and stead of the
undersigned, to sign and file the Annual Report and exhibits thereto, and any
and all amendments thereto, with full power and authority to do and perform any
and all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand as
of March 13, 1997.
/s/ Henry L. Meyer III
------------------
Typed Name: Henry L. Meyer III
------------------
<PAGE> 16
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director, of KeyCorp, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "Annual Report"), hereby
constitutes and appoints K. Brent Somers, Thomas C. Stevens, and John H. Mancuso
and each of them, as attorney for the undersigned, with full power of
substitution and resubstitution, for an in the name, place, and stead of the
undersigned, to sign and file the Annual Report and exhibits thereto, and any
and all amendments thereto, with full power and authority to do and perform any
and all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her
hand as of March 13, 1997.
/s/ Stephen R. Hardis
------------------
Typed Name: Stephen R. Hardis
------------------
<PAGE> 17
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director, of KeyCorp, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "Annual Report"), hereby
constitutes and appoints K. Brent Somers, Thomas C. Stevens, and John H. Mancuso
and each of them, as attorney for the undersigned, with full power of
substitution and resubstitution, for an in the name, place, and stead of the
undersigned, to sign and file the Annual Report and exhibits thereto, and any
and all amendments thereto, with full power and authority to do and perform any
and all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand as
of March 13, 1997.
/s/ Lucie J. Fjeldstad
------------------
Typed Name: Lucie J. Fjeldstad
------------------
<PAGE> 18
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director, of KeyCorp, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "Annual Report"), hereby
constitutes and appoints K. Brent Somers, Thomas C. Stevens, and John H. Mancuso
and each of them, as attorney for the undersigned, with full power of
substitution and resubstitution, for an in the name, place, and stead of the
undersigned, to sign and file the Annual Report and exhibits thereto, and any
and all amendments thereto, with full power and authority to do and perform any
and all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand as
of March 13, 1997.
/s/ William G. Bares
------------------
Typed Name: William G. Bares
------------------
<PAGE> 19
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director, of KeyCorp, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "Annual Report"), hereby
constitutes and appoints K. Brent Somers, Thomas C. Stevens, and John H. Mancuso
and each of them, as attorney for the undersigned, with full power of
substitution and resubstitution, for an in the name, place, and stead of the
undersigned, to sign and file the Annual Report and exhibits thereto, and any
and all amendments thereto, with full power and authority to do and perform any
and all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand as
of March 13, 1997.
/s/ K. Brent Somers
------------------
Typed Name: K. Brent Somers
------------------
<PAGE> 20
POWER OF ATTORNEY
-----------------
The undersigned, an officer or director, or both an officer and
director, of KeyCorp, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D.C., under the provisions of
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "Annual Report"), hereby
constitutes and appoints K. Brent Somers, Thomas C. Stevens, and John H. Mancuso
and each of them, as attorney for the undersigned, with full power of
substitution and resubstitution, for an in the name, place, and stead of the
undersigned, to sign and file the Annual Report and exhibits thereto, and any
and all amendments thereto, with full power and authority to do and perform any
and all acts and things whatsoever requisite and necessary to be done in the
premises, hereby ratifying and approving the acts of such attorney or any such
substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand as
of March 13, 1997.
/s/ Lee Irving
------------------
Typed Name: Lee Irving
------------------
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,444
<INT-BEARING-DEPOSITS> 217
<FED-FUNDS-SOLD> 442
<TRADING-ASSETS> 37
<INVESTMENTS-HELD-FOR-SALE> 7,728
<INVESTMENTS-CARRYING> 1,601
<INVESTMENTS-MARKET> 1,637
<LOANS> 49,235
<ALLOWANCE> 870
<TOTAL-ASSETS> 67,621
<DEPOSITS> 45,317
<SHORT-TERM> 10,894
<LIABILITIES-OTHER> 1,816
<LONG-TERM> 4,213
<COMMON> 246
500
0
<OTHER-SE> 4,635
<TOTAL-LIABILITIES-AND-EQUITY> 67,621
<INTEREST-LOAN> 4,339
<INTEREST-INVEST> 584
<INTEREST-OTHER> 28
<INTEREST-TOTAL> 4,951
<INTEREST-DEPOSIT> 1,469
<INTEREST-EXPENSE> 2,234
<INTEREST-INCOME-NET> 2,717
<LOAN-LOSSES> 197
<SECURITIES-GAINS> 1
<EXPENSE-OTHER> 2,464
<INCOME-PRETAX> 1,143
<INCOME-PRE-EXTRAORDINARY> 1,143
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 783
<EPS-PRIMARY> 3.37
<EPS-DILUTED> 3.30
<YIELD-ACTUAL> 4.78
<LOANS-NON> 348
<LOANS-PAST> 103
<LOANS-TROUBLED> 1
<LOANS-PROBLEM> 0<F1>
<ALLOWANCE-OPEN> 876
<CHARGE-OFFS> 303
<RECOVERIES> 108
<ALLOWANCE-CLOSE> 870
<ALLOWANCE-DOMESTIC> 870
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 403
<FN>
<F1>=Not Disclosed
</FN>
</TABLE>
