<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement [ ] Confidential, For Use of
[ ] Definitive proxy statement the Commission Only
[ ] Definitive additional materials (as permitted by Rule 14
[ ] Soliciting material pursuant to Rule a-6(e)(2))
14a-11(c) or Rule 14a-12
KEYCORP
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
KEYCORP
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Not Applicable
(2) Aggregate number of securities to which transaction applies:
Not Applicable
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:
Not Applicable
(4) Proposed maximum aggregate value of transaction:
Not Applicable
(5) Total fee paid:
Not Applicable
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
Not Applicable
(2) Form, schedule or registration statement no.:
Not Applicable
(3) Filing party:
Not Applicable
(4) Date filed:
Not Applicable
<PAGE> 2
KeyCorp
[LOGO]
127 PUBLIC SQUARE
CLEVELAND, OHIO 44114
April , 1997
DEAR SHAREHOLDER:
You are cordially invited to attend the 1997 Annual Meeting of Shareholders
of KeyCorp which will be held at The Forum Conference Center, 1375 East 9th
Street, Cleveland, Ohio 44114, on Thursday, May 15, 1997, at a.m., local
time.
All holders of record of KeyCorp Common Shares as of March 18, 1997, are
entitled to vote at the 1997 Annual Meeting.
As described in the accompanying Notice and Proxy Statement, you will be
asked to elect seven directors for three-year terms expiring in 2000, to
consider two proposals to amend KeyCorp's Regulations, to consider two proposals
submitted by KeyCorp's shareholders, and to ratify the appointment of Ernst &
Young LLP as independent auditors for 1997.
KeyCorp's Annual Report for the year ended December 31, 1996, was mailed to
all shareholders of record as of March 18, 1997.
Your proxy card is enclosed. Please indicate your voting instructions and
sign, date, and mail this proxy card promptly in the return envelope.
Sincerely,
/s/ ROBERT W. GILLESPIE
ROBERT W. GILLESPIE
Chairman of the Board,
President and Chief Executive
Officer
<PAGE> 3
KeyCorp
[LOGO]
127 PUBLIC SQUARE
CLEVELAND, OHIO 44114
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 15, 1997
The 1997 Annual Meeting of Shareholders of KeyCorp will be held at The
Forum Conference Center, 1375 East 9th Street, Cleveland, Ohio 44114, on
Thursday, May 15, 1997, at a.m., local time, for the following purposes:
1. To elect seven directors to serve for terms expiring in 2000;
2. To amend KeyCorp's Regulations to reduce the size of KeyCorp's
Board of Directors to no fewer than 17 and no more than 20 directors;
3. To amend and restate KeyCorp's Regulations to remove or revise
certain provisions added in connection with the merger of the former
KeyCorp with Society Corporation in 1994;
4. To consider and act upon a shareholder proposal to withdraw
management's discretion to vote unmarked proxies;
5. To consider and act upon a shareholder proposal to require annual
election of all directors;
6. To ratify the appointment by the Board of Directors of Ernst &
Young LLP as independent auditors for KeyCorp for the fiscal year ending
December 31, 1997; and
7. To transact such other business as may properly come before the
meeting or any postponement or adjournment thereof.
Only holders of KeyCorp Common Shares of record as of the close of business
on March 18, 1997, have the right to receive notice of and to vote at the Annual
Meeting and any postponement or adjournment thereof.
By Order of the Board of Directors
/s/ THOMAS C. STEVENS
THOMAS C. STEVENS
Secretary
April , 1997
------------------------
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, DATE, SIGN, AND MAIL THE ENCLOSED
PROXY CARD AT YOUR EARLIEST CONVENIENCE. PLEASE USE THE RETURN ENVELOPE ENCLOSED
WITH THE PROXY CARD FOR THAT PURPOSE.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
NOTICE OF ANNUAL MEETING
PROXY STATEMENT....................................................................... 1
ISSUE ONE -- Election of Directors.................................................... 1
Nominees for Terms Expiring in 2000................................................. 2
Continuing Directors for Terms Expiring in 1998..................................... 4
Continuing Directors for Terms Expiring in 1999..................................... 5
The Board of Directors and Its Committees........................................... 8
ISSUE TWO -- Amendment to Regulations Concerning Size of the Board of Directors....... 11
ISSUE THREE -- Amendment and Restatement of Regulations............................... 11
ISSUE FOUR -- Shareholder Proposal to Withdraw Management's Discretion to Vote
Unmarked Proxies.................................................................... 16
ISSUE FIVE -- Shareholder Proposal to Require Annual Election of All Directors........ 18
ISSUE SIX -- Independent Auditors..................................................... 20
Executive Officers.................................................................... 21
Compensation of Executive Officers.................................................... 23
Section 16(a) Beneficial Ownership Reporting Compliance............................... 27
Employment and Change of Control Agreements........................................... 28
Compensation and Organization Committee and Equity Based Compensation Committee Joint
Report on Executive Compensation.................................................... 33
KeyCorp Stock Price Performance....................................................... 37
Share Ownership and Phantom Stock Units............................................... 38
1998 Shareholder Proposals............................................................ 39
General............................................................................... 39
</TABLE>
<PAGE> 5
KeyCorp
[LOGO]
127 PUBLIC SQUARE
CLEVELAND, OHIO 44114
PROXY STATEMENT
This Proxy Statement is furnished commencing on or about April , 1997,
in connection with the solicitation on behalf of the Board of Directors of
KeyCorp of proxies to be voted at the 1997 Annual Meeting of Shareholders on May
15, 1997, and at all postponements and adjournments thereof. All holders of
record of KeyCorp Common Shares at the close of business on March 18, 1997, are
entitled to vote. On that date there were KeyCorp Common Shares
outstanding and entitled to vote at the meeting, and each such share is entitled
to one vote on each matter to be considered. At the meeting, a majority of the
outstanding Common Shares shall constitute a quorum.
ISSUE ONE
ELECTION OF DIRECTORS
In accordance with KeyCorp's current Regulations, without giving effect to
the proposed amendments to the Regulations to be acted upon at the 1997 Annual
Meeting, the Board of Directors of KeyCorp (also sometimes referred to herein as
the "Board") has established the size of the Board at 20 members, divided into
two classes of seven members each and one class of six members. The terms of
these classes as of the 1997 Annual Meeting will expire in 1998, 1999 and 2000,
respectively. Seven nominees for directors for terms expiring in 2000 are listed
below. All properly executed and returned proxy cards will be voted for these
nominees unless contrary specifications are properly made in writing directly on
the proxy card in the space indicated for that purpose, in which case the proxy
will be voted in accordance with such specifications. With the exception of
, the nominees are all current members of the Board. Should any
nominee become unable to accept nomination or election, the proxy cards (unless
a contrary specification is properly made on the proxy card) will be voted for
the election of such person, if any, as shall be recommended by the Board, or
for holding a vacancy to be filled by the Board at a later date. The Board has
no reason to believe that the persons listed as nominees will be unable to
serve. At the election of directors, the properly nominated candidates receiving
the greatest number of votes shall be elected.
Pursuant to rules promulgated under the Securities Exchange Act of 1934
(the "Exchange Act"), the following information lists, as of January 31, 1997,
as to nominees for director and directors whose terms of office will continue
after the 1997 Annual Meeting, the principal occupation or employment, age, the
year in which each first became a director of KeyCorp, and directorships in
registered investment companies or companies having securities which are
registered pursuant to, or which are subject to certain provisions of, the
Exchange Act. KeyCorp was formed as a result of the merger on March 1, 1994 (the
"Merger") of the former KeyCorp, a New York corporation ("Old Key"), into
Society Corporation, an Ohio corporation ("Society"),
1
<PAGE> 6
whereupon Society changed its name to KeyCorp. In the case of nominees or
continuing directors who were directors of Old Key, the year in which such
individual became a director of Old Key is also included in the following
information. Except as otherwise indicated, each nominee or continuing director
has had the same principal occupation or employment during the past five years.
NOMINEES FOR TERMS EXPIRING IN 2000
[PICTURE] WILLIAM G. BARES
Since April 1996, Chairman, President and Chief
Executive Officer, The Lubrizol Corporation (chemicals
for use in lubricants and fuels). Previously, President
and Chief Executive Officer (January 1996-April 1996),
The Lubrizol Corporation; President and Chief Operating
Officer, The Lubrizol Corporation. Age 55. KeyCorp
director since 1987. Director, The Lubrizol Corporation,
Applied Industrial Technologies (Bearings), Inc., and
Oglebay Norton Company.
[PICTURE] ROBERT W. GILLESPIE
Since 1996, Chairman, President and Chief Executive
Officer, KeyCorp. Previously, President and Chief
Executive Officer (1995-1996), KeyCorp; President and
Chief Operating Officer (1994-1995), KeyCorp; Chairman,
President and Chief Executive Officer, Society. Age 52.
KeyCorp director since 1982.
[PICTURE] HENRY S. HEMINGWAY
President, Town & Country Life Insurance Company (life
insurance). Age 43. KeyCorp director since 1994 (Old Key
director since 1987).
2
<PAGE> 7
[PICTURE] HENRY L. MEYER III
Since 1996, Vice Chairman of the Board, Senior Executive
Vice President and Chief Operating Officer, KeyCorp.
Previously, Senior Executive Vice President and Chief
Operating Officer (1995-1996), KeyCorp; Senior Executive
Vice President and Chief Banking Officer (1994-1995),
KeyCorp; Vice Chairman of the Board and Chief Banking
Officer (1991-1994), Society. Age 46. KeyCorp director
since 1996.
[PICTURE] STEVEN A. MINTER
Executive Director and President, The Cleveland
Foundation (philanthropic foundation). Age 58. KeyCorp
director since 1987. Director, Consolidated Natural Gas
Company, Goodyear Tire and Rubber Company, and
Rubbermaid, Inc.
[PICTURE] RONALD B. STAFFORD
Partner, Stafford, Trombley, Purcell, Lahtinen, Owens &
Curtin, P. C. (law firm); member of the New York State
Senate. Age 61. KeyCorp director since 1994 (Old Key
director since 1983).
[PICTURE]
"Text for additional nominee to come"
3
<PAGE> 8
CONTINUING DIRECTORS WHOSE TERMS EXPIRE 1998
[PICTURE] CECIL D. ANDRUS
Since 1995, Chairman, Andrus Center for Public
Policy-Boise State University (non-profit educational
center). Previously, Governor, State of Idaho. Age 65.
KeyCorp director since 1996. Director, Albertson's, Inc.
and Coeur d'Alene Mines Corp.
[PICTURE] THOMAS A. COMMES
President and Chief Operating Officer, The
Sherwin-Williams Company (paints and painting supplies
manufacture and distribution). Age 54. KeyCorp director
since 1987. Director, The Sherwin-Williams Company and
Centerior Energy Corporation.
[PICTURE] STEPHEN R. HARDIS
Since 1995, Chairman and Chief Executive Officer, Eaton
Corporation (diversified manufacturing company).
Previously, Vice Chairman and Chief Financial and
Administrative Officer, Eaton Corporation. Age 61.
KeyCorp director since 1985. Director, Eaton
Corporation, Lexmark International, Inc., Nordson
Corporation, and Progressive Corporation.
[PICTURE] DOUGLAS J. MCGREGOR
Since 1997, President and Chief Executive Officer, M.A.
Hanna Company (specialty chemicals). Previously,
President and Chief Operating Officer, M.A. Hanna
Company. Age 56. KeyCorp director since 1995. Director,
M.A. Hanna Company and Vulcan Materials Company.
4
<PAGE> 9
[PICTURE] PETER G. TEN EYCK, II
President, Indian Ladder Farms (commercial orchard). Age
58. KeyCorp director since 1994 (Old Key director since
1979).
[PICTURE] NANCY B. VEEDER
President, Veeder Realty, Inc.; Partner, Veedergate
Realty, L.P., doing business as Residence Inn by
Marriott (hotel operation). Age 70. KeyCorp director
since 1994 (Old Key director since 1981).
CONTINUING DIRECTORS WHOSE TERMS EXPIRE IN 1999
[PICTURE] ALBERT C. BERSTICKER
Since 1996, Chairman and Chief Executive Officer, Ferro
Corporation (industrial specialty chemicals).
Previously, President since 1988, and Chief Executive
Officer since 1991, Ferro Corporation. Age 62. KeyCorp
director since 1991. Director, Ferro Corporation, Brush
Wellman Inc., Centerior Energy Corporation, and Oglebay
Norton Company.
5
<PAGE> 10
[PICTURE] KENNETH M. CURTIS
Since 1994, Senior Member, Curtis, Thaxter, Stevens,
Broder & Micoleau LLC (law firm). Previously, President,
Maine Maritime Academy (ocean-oriented college). Age 65.
KeyCorp director since 1994 (Old Key director since
1993). Director, Bowater Incorporated.
[PICTURE] JOHN C. DIMMER
President, Firs Management Corporation (real estate and
investment company). Age 68. KeyCorp director since 1994
(Old Key director since 1993).
[PICTURE] CHARLES R. HOGAN
Co-Owner and Chief Executive Officer, C.R.H.
Investments, Inc. (shopping center and real estate
development). Age 60. KeyCorp director since 1994 (Old
Key director since 1993).
[PICTURE] M. THOMAS MOORE
Chairman, President and Chief Executive Officer,
Cleveland-Cliffs Inc (iron ore producer). Age 62.
KeyCorp director since 1992. Director, Cleveland-Cliffs
Inc, Capitol American Financial Corporation, and The LTV
Corporation.
6
<PAGE> 11
[PICTURE] RICHARD W. POGUE
Since 1994, Senior Advisor, Dix & Eaton (public
relations). Previously, Senior Partner, Jones, Day,
Reavis & Pogue (law firm) (1993-1994); Managing Partner,
Jones, Day, Reavis & Pogue. Age 68. KeyCorp director
since 1992. Director, Continental Airlines, Inc., Derlan
Industries Ltd., M.A. Hanna Company, OHM Corporation,
Redland PLC, Rotek Incorporated and TRW Inc.
[PICTURE] DENNIS W. SULLIVAN
Executive Vice President, Parker-Hannifin Corporation
(industrial and aerospace motion control components and
systems). Age 58. KeyCorp director since 1993. Director,
Parker-Hannifin Corporation and Ferro Corporation.
Messrs. Curtis and Stafford, directors of KeyCorp, are members of law firms
that KeyCorp utilizes for legal services.
Some of KeyCorp's executive officers and directors were customers of one or
more of KeyCorp's subsidiary banks or other subsidiaries during 1996 and had
transactions with such banks in the ordinary course of business. In addition,
some of the directors are officers of, or have a relationship with, corporations
or are members of partnerships which were customers of such banks during 1996
and had transactions with such banks in the ordinary course of business. All
loans included in such transactions were made on substantially the same terms,
including rates and collateral, as those prevailing at the time for comparable
transactions with other persons, and did not involve more than normal risks of
collectibility or present other unfavorable features. Similar transactions
continue to be effected during 1997.
7
<PAGE> 12
THE BOARD OF DIRECTORS AND ITS COMMITTEES*
Board of Directors. During the year ended December 31, 1996, there were six
meetings of KeyCorp's Board of Directors. Each continuing member of KeyCorp's
Board attended at least 75% of the aggregate of the meetings held by KeyCorp's
Board of Directors and the meetings held by the committees of the Board on which
such member served during 1996.
KeyCorp's Board of Directors currently exercises certain of its powers
through its Audit, Community Responsibility, Compensation and Organization,
Equity Based Compensation, Executive and Nominating Committees.
Audit Committee. Messrs. Bares (Chair), Hemingway, Hogan, Moore, Pogue,
Stafford, Sullivan, and Ten Eyck are the current members of KeyCorp's Audit
Committee. The functions of this Committee include review of the adequacy of
internal administrative, operating, and accounting policies and controls of
KeyCorp and its affiliates, review of the financial information provided to
shareholders and regulatory authorities, recommendation of the appointment of
KeyCorp's independent auditors, review of all services and fees of the
independent public accountants, review with KeyCorp's management and its
independent public accountants of the basis for annual reports, management's
reports concerning internal controls and compliance, and the independent
auditors' reports relating thereto as required by the Federal Deposit Insurance
Corporation Improvement Act of 1991, review of KeyCorp's credit review
activities as they relate to examinations for compliance with credit and related
policies, review of the examinations of KeyCorp and its affiliates conducted by
federal and state regulatory and supervisory authorities, oversight of the audit
committees of KeyCorp's subsidiaries, review of the audit plans of the internal
audit and credit review staff and of the independent auditors and the results
and effectiveness of their audits, and supervision and direction of any special
projects or investigations considered necessary. KeyCorp's Audit Committee met
five times in 1996.
Community Responsibility Committee. Messrs. Andrus, Dimmer, Minter, and Ms.
Veeder (Chair) are the current members of KeyCorp's Community Responsibility
Committee. The functions of this Committee include review of the Community
Reinvestment Act programs and community development activities of KeyCorp and
its bank subsidiaries, review of KeyCorp's compliance program, and review of
KeyCorp's compliance with applicable law and regulation. KeyCorp's Community
Responsibility Committee met six times in 1996.
Compensation and Organization Committee. Messrs. Bersticker, Commes,
Curtis, Ms. Fjeldstad, Messrs. Hardis (Chair) and McGregor are the current
members of KeyCorp's Compensation and Organization Committee. The functions of
this Committee include review and approval of KeyCorp's salary administration
programs, determination of the compensation and terms of employment of senior
management, determination of participants and awards under executive and
incentive compensation plans and supplemental compensation plans except for
equity based compensation plans, approval of (or amendments to) employee and
officer retirement, compensation and benefit plans, review and recommendation of
director compensation and retirement plans except for equity based compensation
plans, review of organization structure and staffing, and review of management
structure, development, and succession planning. KeyCorp's Compensation and
Organization Committee met seven times in 1996.
- ---------------
* Ms. Fjeldstad will not stand for re-election at the Annual Meeting. She is,
however, included in the description of KeyCorp's current Board of Directors
and its committees. Ms. Fjelstad will continue as a director until the Annual
Meeting.
8
<PAGE> 13
Equity Based Compensation Committee. Messrs. Bersticker, Commes, Ms.
Fjeldstad, Messrs. Hardis (Chair) and McGregor are the current members of
KeyCorp's Equity Based Compensation Committee. The functions of this Committee
include approval of (or amendments to) KeyCorp's equity based compensation plans
including any excess benefit or deferred compensation plan with an equity based
compensation component and plans under which "qualified performance-based
compensation" is to be paid, determination of participants and awards under
KeyCorp's equity based compensation plans, and the granting of stock options.
KeyCorp's Equity Based Compensation Committee was established in September of
1996 and met once in 1996.
Executive Committee. Messrs. Bares, Curtis, Gillespie (Chair), Hardis,
Meyer, Pogue, and Ms. Veeder are the current members of KeyCorp's Executive
Committee. The functions of the Executive Committee are to exercise the
authority of the Board of Directors, to the extent permitted by law, on any
matter requiring Board or Board committee action between Board or Board
committee meetings. KeyCorp's Executive Committee did not meet in 1996.
KeyCorp's current Regulations provide that, through December 31, 1998, Mr.
Gillespie will be a member of KeyCorp's Executive Committee as long as he is a
director of KeyCorp. If KeyCorp's shareholders approve the amendment and
restatement of KeyCorp's Regulations as proposed under Issue Three below (see
pages to of this Proxy Statement), this provision of the Regulations will be
removed.
Nominating Committee. Messrs. Curtis, Gillespie, and Hardis are the current
members of KeyCorp's Nominating Committee. The functions of the Nominating
Committee include identifying and reviewing the qualifications of prospective
directors and recommending candidates for election as directors. Through
December 31, 1998, under KeyCorp's current Regulations, nominations for the
election of directors by KeyCorp's Board of Directors may only be made by the
affirmative vote of three-quarters of the Board of Directors and three-quarters
of the Nominating Committee, except that there is an alternative procedure in
the event that the Nominating Committee is unable to approve by the requisite
vote a nomination for election of a particular director or directors. The
Nominating Committee will consider shareholder suggestions concerning qualified
candidates for election as directors that are forwarded to such Committee. Any
shareholder recommendation for a director nominee should contain background
information concerning the recommended nominee, including, (a) the name, age,
business, and residence address of such person; (b) the principal occupation or
employment of such person for the last five years; (c) the class and number of
shares of capital stock of KeyCorp that are beneficially owned by such person;
(d) all positions of such person as a director, officer, partner, employee, or
controlling shareholder of any corporation or other business entity; (e) any
prior position as a director, officer, or employee of a depository institution
or any company controlling a depository institution; and (f) a statement of
whether such individual would be willing to serve if nominated or elected. Any
shareholder recommendation should also include, as to the shareholder giving the
written notice, (a) a representation that the shareholder is a holder of record
of shares of KeyCorp entitled to vote at such meeting and (b) a description of
all arrangements or understandings between the shareholder and such recommended
person and any other person or persons (naming such person or persons).
KeyCorp's Nominating Committee met twice in 1996.
The provisions in the current Regulations with respect to the Nominating
Committee were included as a part of the management succession planning in
connection with the Merger. If KeyCorp's shareholders approve the amendment and
restatement of KeyCorp's Regulations as proposed under Issue Three below (see
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<PAGE> 14
pages to of this Proxy Statement), these special merger-related provisions
will be amended by eliminating the Nominating Committee and providing that
nominations for the election of directors by KeyCorp's Board of Directors may be
made by a majority of directors then in office. In the event Issue Three is
approved, the Board of Directors currently intends to assign the functions of
the Nominating Committee to the Compensation and Organization Committee.
Director Compensation. Directors (other than Messrs. Gillespie and Meyer
who receive no director fees) receive fees consisting of a $27,000 annual
retainer, payable in quarterly installments, and $1,500 for attendance at each
Board or committee meeting. Outside directors who serve as committee
chairpersons receive additional compensation of $2,500 per quarter. Under the
KeyCorp Director Deferred Compensation Plan, directors are given the opportunity
to defer payment of director fees for future distribution. All such deferred
payments are invested in either an interest bearing account (at an interest rate
equal to 1/2% higher than the effective annual yield of the Moody's Average
Corporate Bond Yield Index) or a KeyCorp Common Share account (which is a
phantom stock account in which the directors' deferred compensation earns a
yield based on the amount of dividends that would have been payable on an equal
number of KeyCorp Common Shares and the increase or decrease in the market price
of KeyCorp Common Shares, in both cases during the period that the deferred fees
are invested in the Common Share account). All payments to the directors under
the Director Deferred Compensation Plan are in the form of cash.
Under KeyCorp's Directors' Stock Option Plan (the "Directors' Plan"), each
of the non-employee directors is automatically granted options to purchase 3,500
KeyCorp Common Shares annually. Messrs. Gillespie and Meyer were not eligible to
participate in the Directors' Plan during 1996 because they were employees of
KeyCorp. All options granted under the Directors' Plan are non-qualified stock
options. Options generally expire ten years after grant. The purchase price of
the option shares is equal to their fair market value on the date of grant and
may be paid in cash or by the surrender of previously acquired KeyCorp Common
Shares. In the event that KeyCorp Common Shares are changed into or exchanged
for a different number or kind of securities, or in the event of a stock split,
then the number and exercise price of options and the limits on the aggregate
totals of shares available for grants under the Directors' Plan will be
proportionately amended.
KeyCorp and Victor J. Riley, Jr. (who served as Chief Executive Officer of
KeyCorp until September 1, 1995 and as Chairman of the Board of KeyCorp until he
resigned as a director of KeyCorp on September 19, 1996) are parties to an
employment and consulting agreement. Pursuant to that agreement, Mr. Riley was
to be retained by KeyCorp as an independent contractor from January 1, 1996
through December 31, 1998 at an annual base compensation of $600,000. If Mr.
Riley's status as an independent contractor were to terminate prior to December
31, 1998 for any reason (except by KeyCorp for cause), the agreement provides
that KeyCorp would pay Mr. Riley a lump sum equal to the remaining base
compensation that would have been payable to him had he continued to perform
services through December 31, 1998. Mr. Riley's status as an independent
contractor terminated in September 1996 when he ceased to be Chairman of the
Board, and KeyCorp made the lump sum payment required under the agreement in the
amount of the remaining balance of compensation due to Mr. Riley through
December 31, 1998. Mr. Riley is entitled to continuing indemnification to the
fullest extent permitted by Ohio law for actions against him by reason of his
having been a director or officer of KeyCorp, and KeyCorp has agreed to continue
to provide Mr. Riley furnished office space, amenities and secretarial support.
10
<PAGE> 15
ISSUE TWO
AMENDMENT TO REGULATIONS
CONCERNING SIZE OF THE BOARD OF DIRECTORS
Currently, the size of the Board of Directors is fixed at 20 members
divided into two classes of seven members each and one class of six members.
Under the Regulations as presently in effect, the size of the Board of Directors
is required to be between 20 and 24 members. The shareholders are being asked to
amend the Regulations to reduce the potential size of the Board to between 17
and 20 members. The effect of this amendment will be to reduce the maximum Board
size to 20 and the minimum Board size to 17.
The Board of Directors is recommending this amendment because it is of the
opinion that a smaller Board can operate more efficiently for the benefit of
KeyCorp's shareholders.
At the 1997 Annual Meeting of Shareholders, the size of the Board of
Directors will be fixed at 20 members, with two classes having seven members
each and the third class having six members. The Regulations will continue to
provide that, if the Board of Directors or shareholders change the number of
directors, the three classes of the Board of Directors will be divided into as
equal a number of directors as possible.
KeyCorp's Regulations will continue to provide that no reduction in the
size of the Board shall of itself shorten the term of any incumbent director. In
the event the shareholders increase the number of directors and fail to fill the
vacancy or vacancies created thereby, or in the event the Board of Directors
increases the number of directors and thereby creates a vacancy or vacancies,
the Board of Directors may fill such vacancy or vacancies for the respective
unexpired terms.
The text of the proposed amendment is set forth in Appendix A to this Proxy
Statement.
Vote Required. Pursuant to Article X of the Regulations, Article II,
Section 1 of the Regulations, which is the section of the Regulations
establishing the size of the Board of Directors, may be amended by the
affirmative vote of holders of shares entitled to exercise three-quarters of the
voting power on such proposal, unless such amendment is recommended by
three-quarters of the members of the Board of Directors, in which case the
requisite vote is a majority of the voting power of KeyCorp. Because at least
three-quarters of the members of the Board of Directors have recommended this
proposed amendment, the affirmative vote of the holders of KeyCorp Common Shares
entitling them to exercise a majority of the voting power of KeyCorp is required
to adopt this amendment to the Regulations.
THE BOARD OF DIRECTORS OF KEYCORP RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" ADOPTION OF THIS AMENDMENT TO THE REGULATIONS.
ISSUE THREE
AMENDMENT AND RESTATEMENT OF REGULATIONS
In connection with the Merger, KeyCorp's Regulations were extensively
amended to include special provisions relating to management succession, the
maintenance of a balance of Old Key and Society directors on the Board of
Directors and various committees, requiring certain super-majority votes by the
Board of
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<PAGE> 16
Directors, and in various other respects. These provisions were intended to
assure and facilitate an orderly integration of the management structure of the
constituent companies. Many of these provisions, by their express terms, were to
expire on December 31, 1998.
The integration of the constituent companies has proceeded even more
rapidly than was envisioned at the time of the Merger, and the Board of
Directors has concluded that these special merger related provisions are, in
large part, no longer necessary or relevant. Consequently, the Board of
Directors is recommending that the shareholders adopt an amendment and
restatement of KeyCorp's Regulations (the "Amended and Restated Regulations") as
set forth in Appendix B to this Proxy Statement.
The following summary is a brief description of the principal amendments to
the Regulations made by the amendment and restatement. This summary is subject
to the express provisions of the Amended and Restated Regulations, a copy of
which is attached to this Proxy Statement as Appendix B. With respect to the
second paragraph of Section 1, Article II of the Amended and Restated
Regulations, Appendix B was based on the assumption that the shareholders
approve the amendment proposed under Issue Two above. Issues Two and Three are
independent of each other.
Special Management Succession Provisions. KeyCorp's Regulations currently
contain numerous interrelated provisions regarding the positions to be held by
Messrs. Riley and Gillespie until December 31, 1998. First, the Regulations
contain a specific provision regarding the positions of Chairman of the Board,
Chairman of the Executive Committee, and chairmen of other committees of the
Board. Through December 31, 1998 or Mr. Riley's earlier death, resignation or
removal, the Regulations provide that Mr. Riley is intended to be Chairman of
the Board and Chairman of the Executive Committee, after which time Mr.
Gillespie would assume such offices. Prior to Mr. Gillespie becoming Chairman of
the Board and Chairman of the Executive Committee, the Regulations provide that
no person shall be designated vice chairman of the board or any similar title.
The Regulations also provide that Messrs. Riley and Gillespie are intended to be
members of the Executive Committee as long as they are directors of KeyCorp.
Second, the Regulations as currently in effect contain specific provisions
regarding the offices of Chief Executive Officer and President. These provisions
state that, through December 31, 1998, so long as the office of Chief Executive
Officer and President are held by two separate individuals, the Chief Executive
Officer shall be the most senior officer of the corporation and the President
shall be the second most senior officer. The Regulations provide that Mr. Riley
is intended to serve as Chief Executive Officer until December 31, 1995, at
which time Mr. Gillespie would assume such office. The current Regulations
specifically state that after December 31, 1995, the office of Chief Executive
Officer and President will be held by the same individual and that the office of
Chairman of the Board will be a director position only, and not an officer
position of KeyCorp. The current Regulations also provide that the Chief
Executive Officer, if he is a director, shall serve as Chairman of the Board and
Chairman of the Executive Committee.
Finally, the Regulations as currently in effect require a vote of
three-quarters of the entire authorized Board of Directors to remove Messrs.
Riley and Gillespie from their officer positions.
Mr. Riley retired as Chief Executive Officer on September 1, 1995. He has
also resigned as Chairman of the Board and as a director on September 19, 1996.
Mr. Gillespie now holds the offices of Chief Executive Officer, President, and
Chairman of the Board. He also serves as Chairman of the Executive Committee. As
a result, the provisions directing the succession of offices between Messrs.
Riley and Gillespie are no longer
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relevant. In addition, in September 1996, KeyCorp announced that it intends to
elect Henry L. Meyer III as President after the 1997 Annual Meeting of
Shareholders and that Mr. Gillespie would continue to be Chairman of the Board
and Chief Executive Officer. This management plan depends upon the amendment to
the provisions of the Regulations discussed above.
If the shareholders adopt the Amended and Restated Regulations, the
Regulations would be amended to delete all of the management succession
provisions summarized above. The effect of this amendment would be that the
Regulations would contain no provisions specifying the individuals who will hold
certain offices and that the Regulations will not specifically address
management succession issues. Under the Amended and Restated Regulations: (i)
the position of Chairman of the Board will now be an officer position (which is
typical under Ohio law) in addition to being a director position; (ii) the
position of Chief Executive Officer will be the most senior officer position of
KeyCorp; (iii) the offices of Chief Executive Officer and President may be held
by two separate individuals; and (iv) the removal of the most senior officer of
KeyCorp will require a majority vote of the entire authorized Board of
Directors. The Regulations will continue to provide that all other officers can
be removed by the Board of Directors or any of its committees or by any superior
officer upon whom such authority has been conferred by the Board or any of its
committees. Finally, a provision will be added to the Regulations to provide
that all officers, including the most senior officer, are subject to annual
election at the annual organizational meeting of the directors.
The text of Article IV, Sections 1, 2, and 3 of the Amended and Restated
Regulations, which are the sections of the Amended and Restated Regulations
dealing with the election and term of office of KeyCorp's officers, authority
and duties of officers, and removal of officers, respectively, are set forth in
Appendix B to this Proxy Statement.
Elimination of Certain Restrictions on Board Composition. KeyCorp's
Regulations currently provide that, through December 31, 1996, any change in the
size of the Board must be made by two or a multiple of two. In addition, the
Regulations state that, through December 31, 1998, not more than two directors
of KeyCorp may be individuals who were, on March 1, 1994, a current or former
officer of Society, Old Key, or any of their subsidiaries or predecessors. Mr.
Hemingway is specifically excluded from this number because he was a director at
the time of the Merger and was an officer of a predecessor of Old Key.
KeyCorp's current Regulations also state that, through December 31, 1998,
nominations for director may be made by the affirmative vote of three-quarters
of the entire authorized Board and three-quarters of the Nominating Committee.
If the Nominating Committee is unable to approve the nomination by the requisite
vote, the Regulations provide that a committee comprised of all the directors
who were, immediately prior to the Merger, members of the Board of Directors of
Old Key if the director position to be filled was originally held by a director
of Old Key, or of Society if the director position to be filled was originally
held by a director of Society must approve the nomination. After December 31,
1998, nominations for director may be made by the affirmative vote of two-thirds
of the entire authorized Board.
These provisions were added in connection with the Merger to assure that
the Board of Directors of KeyCorp, as the surviving corporation, would continue
to be composed of equal numbers of members from the former Society and Old Key
boards. By adopting the Amended and Restated Regulations, the Regulations would
be amended to delete the provision stating that changes in the size of the Board
must be made by two or
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a multiple of two (which provision lapsed by its terms on December 31, 1996) and
the provision limiting the number of former Old Key and Society officers on the
Board of KeyCorp. Also by adopting the Amended and Restated Regulations, the
provision stating that nominations for director must be approved by the
affirmative vote of three-quarters of the Board and three-quarters of the
Nominating Committee or special committee replacing the Nominating Committee
would be deleted. Under the Amended and Restated Regulations, nominations for
director may be made by the affirmative vote of a majority of the directors then
in office (see additional discussion of this provision under the subheading
"Super -- Majority Vote Requirements for Certain Director Actions" on pages to
of this Proxy Statement). The text of Article II, Section 1 of the Amended and
Restated Regulations (including as proposed to be amended under Issue Two),
which is the section of the Amended and Restated Regulations relating to the
composition of the Board, and Article II, Section 2 of the Amended and Restated
Regulations, which is the section of the Amended and Restated Regulations
relating to director nominations, is set forth in Appendix B to this Proxy
Statement.
Provisions Relating to Nominating Committee. KeyCorp's current Regulations
provide for a Nominating Committee of the Board of Directors through December
31, 1998. The Nominating Committee is to be comprised of four members designated
annually by a vote of at least two-thirds of the entire authorized Board. The
members shall be comprised of two members who were serving as directors of
Society on March 1, 1994, one of which shall be Mr. Gillespie (so long as he is
a director), and two members who were serving as directors of Old Key on March
1, 1994, one of which shall be Mr. Riley (so long as he was a director, which he
ceased to be on September 19, 1996). Vacancies on the Nominating Committee may
be filled by a vote of two-thirds of the entire authorized Board.
As was the case for the restrictions on board composition discussed above,
the provisions relating to the Nominating Committee were added in connection
with the Merger to assure that the Board of Directors of KeyCorp, as the
surviving corporation, would continue to be composed of equal numbers of members
from the former Society and Old Key boards for the period of time necessary to
complete the post-merger integration process.
By adopting the Amended and Restated Regulations, the Regulations would be
amended to eliminate all provisions relating to the special Nominating
Committee. If the Amended and Restated Regulations are adopted by the
shareholders, the Board of Directors intends to assign the functions of the
Nominating Committee (i.e., reviewing the qualifications of and recommending to
the full Board candidates for election as directors) to the Compensation and
Organization Committee of the Board of Directors.
Super-Majority Vote Requirements for Certain Director Actions. KeyCorp's
current Regulations require a super-majority vote (either two-thirds or
three-quarters of the entire authorized Board) by the Board of Directors for
approval of certain actions. Many of these super-majority vote provisions were
added in connection with the Merger to require both constituencies of KeyCorp's
Board of Directors to approve significant transactions or changes to KeyCorp's
governing documents during the post-merger integration process. These actions
include: fixing or changing the size of the Board or of any class of directors;
filling vacancies in the Board of Directors or its committees; nominating
candidates to stand for election as director; approving or recommending any
transaction with or which creates a 10% or greater shareholder of KeyCorp or any
merger or consolidation transaction with a company which has assets equal to 50%
or more of the assets of KeyCorp; designating members of the Executive Committee
or other committees of the Board of Directors; removing Messrs. Riley and
Gillespie from office through December 31, 1998; recommending to KeyCorp's
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shareholders amendments to the Regulations; and approving or recommending any
transaction that would require an amendment to KeyCorp's Articles of
Incorporation or its Regulations, which amendment would otherwise require a
super-majority vote for director approval.
The shareholders are being asked to amend the Regulations to reduce these
super-majority voting requirements for the following director actions: (i)
fixing or changing the size of the Board or of any class of directors; (ii)
filling vacancies in the Board of Directors or its committees; (iii) nominating
candidates to stand for election as director; (iv) designating members of the
Executive Committee or other committees of the Board of Directors; and (v)
approving or recommending any transaction that would require an amendment to
KeyCorp's Articles of Incorporation or its Regulations, which amendment would
otherwise require a super-majority vote for director approval. The specific
provision regarding removal of Messrs. Riley and Gillespie through December 31,
1998 will be deleted as discussed above under the subheading "Special Management
Succession Provisions."
The text of the provisions of the Amended and Restated Regulations as
proposed to be amended, are set forth in Appendix B to this Proxy Statement,
including Article II, Section 1 (fixing or changing the size of the Board or any
class of directors); Article II, Section 2 (nominating candidates to stand for
election as director); Article II, Section 3 (matters requiring the affirmative
vote of two-thirds of the entire authorized Board of Directors for approval);
Article II, Section 12 (filling vacancies in the Board); Article III, Section 1
(designating members of and filling vacancies in the Executive Committee);
Article III, Section 2 (filling vacancies in other Board committees); and
Article X (amending the Regulations).
Conforming and Technical Changes. In addition to the amendments described
above, incidental and related conforming amendments to the Regulations were
made. For example, cross-references have been conformed to adjust to the revised
section numbers and headings, and certain clarifying definitions and
descriptions have been added.
In addition to the conforming changes, incidental technical amendments to
the Regulations were made. For example, Section 7 of Article I of the current
Regulations requires that shareholders give at least 60 days' advance notice
prior to a shareholders meeting of a shareholder proposal or of a nomination of
an individual for election as a director. This provision states that no such
proposals shall be considered at an annual or special meeting of shareholders
unless such advance notice is given. The Amended and Restated Regulations
clarify that the advance notice provisions of the Regulations are subject to
rules promulgated by the Securities and Exchange Commission ("SEC") governing
shareholder proposals. The amendments would provide that such rules would
prevail over the notice requirements in the Amended and Restated Regulations if
KeyCorp is required, pursuant to the SEC's Rule 14a-8, to include a shareholder
proposal in its proxy statement. Consistent with Ohio law, the Amended and
Restated Regulations also clarify that shareholder proposals or nominations are
not the proper subject of a special meeting of the shareholders unless such
proposal or nomination was the purpose for the special meeting.
Vote Required. Pursuant to Article X of the Regulations, the Amended and
Restated Regulations may be adopted if approved by the affirmative vote of
holders of shares entitled to exercise three-quarters of the voting power on
such proposal, unless such Amended and Restated Regulations are recommended by
three-quarters of the members of the Board of Directors, in which case the
requisite shareholder vote is a majority of the voting power of KeyCorp. Because
three-quarters of the members of the Board of Directors have
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recommended the Amended and Restated Regulations, the affirmative vote of the
holders of KeyCorp Common Shares entitling them to exercise a majority of the
voting power of KeyCorp is required to adopt the Amended and Restated
Regulations.
THE BOARD OF DIRECTORS OF KEYCORP RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
ADOPTION OF THE AMENDED AND RESTATED REGULATIONS.
ISSUE FOUR
SHAREHOLDER PROPOSAL TO WITHDRAW MANAGEMENT'S
DISCRETION TO VOTE UNMARKED PROXIES
The following proposal was submitted for inclusion in this Proxy Statement
by Dr. Allen Wolff, 1553 So. Carpenter Road, Brunswick, Ohio 44212. Dr. Wolff
owns approximately 500 KeyCorp Common Shares.
Shareholder Proposal and Statement. I, Allen Wolff, 1553 So.
Carpenter Road, Brunswick, Ohio 44212-3826, feel that there are a number of
indiscretions allowing for increased executive remuneration often in spite
of decreased earnings, declining market confidence and shareholder rewards
and for reaffirmations of reigning directors and management-sponsored (and
often self serving) resolutions because of a triple standard in counting
proxies. The space allowed me here will not adequately permit me to address
these issues.
Did you ever wonder how managements put up such high numbers in shares
represented, shares voted for THEIR proposals and AGAINST shareholder
proposals? Shareholder-proposals garnering 10-45% of the vote SHOULD get
some attention from the incumbent management but so often they rest on the
fact that it failed. In addition to counting votes on shares they may NEVER
own (SARs and stock options), they count differently (1) proxies signed but
not marked are counted in favor of management's position (2) proxies held
in street names may be voted in favor of management's slate perhaps without
receipt by the real owner and without any input from him and (3) unvoted
proxies held in employee 401K plans may be COUNTED as voted in the same
proportion as those actually voted. In these days of mergers and downswing,
sometimes employees are AFRAID to vote against management, sometimes
feeling intimidated by communications from management.
Management provides only one slate of director-candidates. It is "take
it or leave it" and opposition can come only from well-financed
renegades -- sometimes with less than the best interest of the company in
mind. If anything anti-management comes up at the annual meeting, they
already have your proxy to vote on ANYTHING ELSE if the CEO allows a vote.
Most managements will say that they use the parameters of the SEC in
revealing or not revealing management perks and they may use the date of
the last merger or name change in revealing just how long an individual has
been tenured. Managements say that they boldly tell how unmarked proxies
will be voted and feel that their shareholders appreciate not being
required to make a few Xs after intelligently wading through 20 or more
pages of the proxy statement. Get real! Just because the SEC may allow
something does not make it right. Many things are legal, but immoral.
Management doesn't tell you how
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to get your proxy from a street name holder, nor how to appoint another
proxy to represent you, nor how to vote for someone else for director (BUT
I WILL).
MY PROPOSAL IS TO ELIMINATE ALL DISCRETIONARY VOTING WHEN THE
INDIVIDUAL (NOT THE TECHNICAL) SHAREHOLDER HAS NOT ACTUALLY VOTED BY
MARKING THE CARD. For those employee-shareholders who are afraid to vote
unconfidentially, but don't agree with management, at least ABSTAIN. That
means your vote will not be counted FOR nor AGAINST. For the independent,
but astute shareholder, I ask you to vote FOR. If you don't understand,
ABSTAIN. If you leave it blank, it will be counted AGAINST.
Board of Directors Recommendation and Statement. The Board of Directors
recommends that shareholders vote AGAINST this proposal for the following
reasons.
If adopted, this proposal would mean that any proxy cards which are
returned without specific voting instructions would not be voted at meetings of
shareholders and, since many shareholders do not mark their proxy cards, would
become in effect votes against the issue being voted upon whether or not the
shareholders objected to the issue. Authorizing management to vote unmarked
proxy cards provides KeyCorp shareholders with a convenient way to participate
in shareholders' meetings. KeyCorp understands that many institutional
shareholders who sign a great many proxy cards for numerous companies in which
they have investments appreciate the convenience of voting as management
recommends without the necessity of marking each proposal box, a process which
is of little inconvenience for one proxy card but a burden when dealing with
many proxy cards. With approximately 47% of KeyCorp's shares held by
institutional shareholders, it is important for KeyCorp to make voting by those
shareholders as convenient as possible in order to have sufficient shares
represented at its shareholder meetings to have a quorum.
In addition, this proposal assumes that many shareholders who sign and
return their proxy cards do not intend to cast any vote -- an assumption KeyCorp
cannot make. Rather, KeyCorp believes that every shareholder that returns a
properly signed proxy card does intend either to cast a vote or to select a
proxy to represent that shareholder's interests at a meeting he or she chooses
not to attend. The Board of Directors is obligated to give effect to the
opinions of all shareholders who wish to participate, whether those shareholders
choose to do so by marking the proxy card with a specific vote or simply by
returning the proxy card without specific voting instructions and thereby
conferring authority in a proxy to vote on the shareholder's behalf.
Since the Proxy Statement and proxy card clearly state in several places
that any unmarked proxies will be voted in accordance with the recommendations
of the Board of Directors and since a shareholder who is willing to take the
time to sign their proxy card will probably observe that statement, it seems
unlikely that many shareholders would be confused or surprised by the procedure.
KeyCorp feels it is important for shareholders to understand exactly what
this proposal will address. It is true, as the proponent states, that if
shareholders adopt this proposal, unmarked proxies will no longer be voted by
management in its discretion.
Shareholders must understand, however, that this proposal will NOT affect
the way brokers vote shares held in street name or the way shares held by
KeyCorp's employees in KeyCorp's 401(k) plan will be voted by the plan trustee.
For example, if a shareholder holding shares in street name fails to return a
proxy card to their broker, brokers do have the ability to vote such
shareholder's shares with respect to certain types of issues
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as the broker sees fit. Sometimes brokers vote with management and sometimes
they do not. This proposal will not change the ability of brokers to vote shares
at their discretion.
Second, if a shareholder holds shares in KeyCorp's 401(k) plan and does not
return a voting instruction card with respect to those shares, the shares will
be voted by the plan trustee. The trustee is obligated by the plan documents to
vote unvoted shares in the same proportion as voted shares. For example, suppose
participants holding 50% of the plan's shares return their voting instruction
cards, with 60% of the voted shares voted for a certain issue and 40% of the
voted shares voted against. The plan trustee MUST vote the unvoted portion of
the plan's shares in the same proportion: 60% for and 40% against. This proposal
will not change the way the plan trustee is required to vote shares.
Finally, no votes with respect to stock appreciation rights (SARs) or stock
options are voted. SARs and options are instruments which convey only financial
risks and rewards of the underlying shares to their holders. Neither the holder
of an SAR or option nor KeyCorp has any voting power with respect to those
underlying shares.
Vote Required. Approval of this proposal will require the affirmative vote
of a majority of the KeyCorp Common Shares represented in person or by proxy at
the Annual Meeting.
ISSUE FIVE
SHAREHOLDER PROPOSAL TO REQUIRE ANNUAL ELECTION OF ALL DIRECTORS
The following proposal was submitted for inclusion in this Proxy Statement
by Mr. Gerald R. Armstrong, P.O. Box 18546, Capitol Hill Station, Denver,
Colorado 80218. Mr. Armstrong owns over 9,611 KeyCorp Common Shares.
Shareholder Proposal. "Resolved: That the shareholders of KeyCorp,
assembled in person and by proxy in an annual meeting, now request that the
Board of Directors take those steps necessary to restore annual elections
for all directors by providing that at future elections in annual meetings,
all directors be elected annually and not by classes as is now provided and
that on the expiration of the present terms their subsequent election shall
also be on an annual basis."
Supporting Statement. In last year's annual meeting, KeyCorp's
shareholders voted 64,512,901 shares in favor of this proposal.
In 1996, Ameritech adopted one year terms for its Directors.
Time-Warner has stated it will do so in 1997. Lockheed-Martin Corp.,
Campbell Soups, Atlantic Richfield Company, Pacific Enterprises, KATY
Industries, Hanover Direct, Westinghouse, and other corporations have
replaced three year terms with the annual election of all Directors.
It is significant that shareholders of Chase Manhattan received one
year terms for their directors upon the merger with Chemical Bank.
THESE ACTIONS HAVE INCREASED SHAREHOLDER VOTING RIGHTS BY 300% -- and,
at no cost to the shareholders.
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At KeyCorp, this procedure will allow shareholders an opportunity to
register annually their reviews of the performance of the board
collectively and of each director, individually. Concern that annual
elections of all directors would leave KeyCorp without experienced
directors is unfounded.
The proponent of this proposal is an investor who recognizes that
greater accountability -- one year terms for directors -- can be an
indication of greater profits and dividends -- not unsound investments in
derivatives.
The 1994 Atlantic Richfield Company proxy statement, in support of
replacing three year terms with one year terms for its directors states:
"The Board . . . . . . recognizes that many institutional
stockholders now believe that the annual election of all directors is
appropriate. The Board does not believe that the advantages of a
classified board (one with three year terms) are sufficient to offset
the disadvantages."
In our 1994 annual meeting of shareholders, our chairman Victor J.
Riley, stated KeyCorp, because of its size, could not be vulnerable to a
take-over. Most staggered systems (three year terms for directors) are
created as an effort against take-overs.
Moreover, no current Director opposed management's elimination of the
ratification by shareholders of the independent accountants leaving me to
challenge an attitude of "In management we trust, we have three year
terms." Have Ohio investors forgotten that Baldwin-United Corp. refused to
eliminate three year terms just a year before its collapse?
I believe that the current system produces only a facade of continuity
which should be displaced; and accountability and performance be
substituted as the basis for re-election to our board of directors.
If you agree, please vote FOR this proposal. If you disagree, vote
against it. If your proxy card is unmarked on this issue, your shares will
be automatically voted "AGAINST" this proposal.
Board of Directors Recommendation and Statement. The Board of Directors
recommends that shareholders vote AGAINST this proposal for the following
reasons.
KeyCorp's Board of Directors is divided into three classes of directors,
each of which serve for staggered three year terms. These staggered terms are an
effort to balance two very important concerns, those being the need for
shareholders to express their opinion about the Board's performance each year
and the need for KeyCorp's directors to focus on KeyCorp's long-term success.
The Board believes that KeyCorp's success in producing long-term
shareholder value, as reflected in dividend growth and stock price appreciation,
requires long-term strategic planning, capital commitments and careful and
consistent application of financial and other resources.
In the opinion of KeyCorp's Board, a classified board of directors
facilitates continuity and stability of leadership and policy by assuring that
experienced individuals familiar with the corporation and its business will be
on the board of directors at all times. A classified board of directors is also
intended to prevent precipitous changes in the composition of the board and,
thereby, serves to moderate corresponding precipitous changes in the
corporation's policies, business strategies and operations. As current newspaper
headlines demonstrate, no company, regardless of its size, is immune to a
take-over attempt. Board
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classification is intended to encourage any person seeking to acquire control of
KeyCorp to initiate such an action through arm's-length negotiations with the
Board of Directors.
Election of directors by classes is a common practice that has been adopted
by many companies and currently exists at over half of the 500 companies
comprising the 1996 Standard & Poor's Stock Price Index.
This proposal requests the Board to take all steps necessary to restore
annual elections of all directors. One of those steps would be to amend
KeyCorp's Regulations. Under KeyCorp's Regulations, the provisions providing for
a classified Board may only be amended, repealed or altered by the affirmative
vote of the holders of shares entitling them to exercise three-quarters of the
voting power of KeyCorp on such proposal unless such amendment, repeal, or
alteration is recommended by three-quarters of the entire authorized Board of
Directors (two-thirds of the Board after December 31, 1998 or if the Amended and
Restated Regulations under Issue Three (see pages to of this Proxy
Statement) are adopted), in which case the amendment, repeal or alteration would
require the affirmative vote of the holders of shares entitling them to exercise
a majority of the voting power of KeyCorp on such proposal. Because the Board of
Directors is recommending a vote "AGAINST" this proposal and has not recommended
a repeal or amendment of the provisions in KeyCorp's Regulations providing for a
classified Board, implementation of this proposal would require management to
submit at a future shareholder's meeting an appropriate amendment to KeyCorp's
Regulations and such amendment would require the affirmative vote of
three-quarters of KeyCorp's Common Shares. A vote in favor of this proposal is
only an ADVISORY recommendation to the Board of Directors.
Vote Required. Approval of this proposal will require the affirmative vote
of a majority of the KeyCorp Common Shares represented in person or by proxy at
the Annual Meeting.
ISSUE SIX
INDEPENDENT AUDITORS
The Board of Directors of KeyCorp, acting upon the recommendation of its
Audit Committee, has appointed Ernst & Young LLP as its independent auditors to
examine the financial statements of KeyCorp and its subsidiaries for the year
1997. Ernst & Young LLP has conducted the annual audit of KeyCorp's financial
statements since 1959. The Board of Directors recommends ratification of the
appointment of Ernst & Young LLP. The favorable vote of the holders of a
majority of the KeyCorp Common Shares represented in person or by proxy at the
Annual Meeting will be required for such ratification.
A representative of Ernst & Young LLP will be present at the meeting with
an opportunity to make a statement if such representative desires to do so and
to respond to appropriate questions.
Although shareholder approval of this appointment is not required by law or
binding on the Board, the Board believes that shareholders should be given the
opportunity to express their views. If the shareholders do not ratify the
appointment of Ernst & Young LLP as KeyCorp's independent auditors, the Board
will consider this vote in determining whether or not to continue the engagement
of Ernst & Young LLP.
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EXECUTIVE OFFICERS
The executive officers of KeyCorp are principally responsible for making
policy for KeyCorp, subject to the supervision and direction of KeyCorp's Board
of Directors. Mr. Gillespie is Chairman of the Board, President and Chief
Executive Officer of KeyCorp for a term expiring, under KeyCorp's current
Regulations, on December 31, 1998. If the shareholders approve the Amended and
Restated Regulations as proposed under Issue Three above (see pages to
of this Proxy Statement), all officers (including Mr. Gillespie) are
subject to annual election at the annual organization meeting of the directors.
The Board of Directors has announced its intention to elect Henry L. Meyer III,
who is currently Vice Chairman of the Board and Chief Operating Officer of
KeyCorp, as President of KeyCorp at its organizational meeting to be held on May
15, 1997. Under KeyCorp's current Regulations, all executive officers (other
than Mr. Gillespie) hold their respective office or offices for such term as may
be prescribed by the Board (generally, officers are elected annually) and until
such persons' successors have been chosen. Messrs. Gillespie and Allen have
employment agreements with KeyCorp. All executive officers other than Mr.
Gillespie have change of control agreements with KeyCorp.
There are no family relationships among directors, nominees or executive
officers. Other than Messrs. Cone, Helfrich, Simonson, Somers and Stevens, all
have been employed in officer capacities with KeyCorp, Old Key, or their
subsidiaries for at least the past five years.
Set forth below are the names and ages of the executive officers of KeyCorp
as of January 31, 1997, positions held by them during the past five years and
the year from which held, and, in parentheses, the year they first became
executive officers of either KeyCorp or Old Key.
GARY R. ALLEN (48)
1994 to present: Senior Executive Vice President and Chief Banking Officer,
KeyCorp; 1993-1994: Executive Vice President and Chief Banking Officer, Old Key;
1991-1993: President and Chief Executive Officer, Key Bank of New York
(subsidiary of KeyCorp); 1988-1993: Chief Executive Officer, Key Bank of Western
New York (former subsidiary of KeyCorp). (1993)
KEVIN M. BLAKELY (45)
1994 to present: Executive Vice President, KeyCorp; 1992-1994: Executive
Vice President, Credit Policy and Risk Management, Society National Bank
(subsidiary of KeyCorp); 1990-1992: Senior Vice President, Loan Review,
Ameritrust Company, N.A. (former subsidiary of KeyCorp). (1994)
STEPHEN A. CONE (46)
1994 to present: Executive Vice President, KeyCorp; 1993-1994: Executive
Vice President, Citicorp (financial services company); 1987-1993: Senior Vice
President, American Express Corporation (financial services company). (1996)
ROBERT W. GILLESPIE (52)
1996 to present, Chairman, President and Chief Executive Officer, KeyCorp;
1995-1996: Chief Executive Officer and President, KeyCorp; 1994-1995: President
and Chief Operating Officer, KeyCorp; 1988-1994: Chairman, Chief Executive
Officer, and President, Society. (1981)
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ALLEN J. GULA, JR. (42)
1994 to present: Executive Vice President, KeyCorp; 1992-1994: Executive
Vice President and Group Executive, Information Technology and Operations,
Society; 1990-1992: Senior Vice President, Society. (1992)
THOMAS E. HELFRICH (46)
1995 to present: Executive Vice President, KeyCorp; 1986-1995: Senior Vice
President-Human Resources, The Travelers Inc. (insurance and financial services
company) (1995)
LEE IRVING (48)
1995 to present: Executive Vice President and Chief Accounting Officer,
KeyCorp; 1994-1995: Executive Vice President, Treasurer, and Chief Accounting
Officer, KeyCorp; 1986-1994: Senior Vice President and Treasurer, Old Key.
(1986)
HENRY L. MEYER III (47)
1996 to present: Vice Chairman of the Board, Senior Executive Vice
President and Chief Operating Officer, KeyCorp; 1995-1996: Senior Executive Vice
President and Chief Operating Officer, KeyCorp; 1994-1995: Senior Executive Vice
President and Chief Banking Officer, KeyCorp; 1991-1994: Vice Chairman of the
Board and Chief Banking Officer, Society. (1987)
JOHN A. SIMONSON (51)
1995 to present: Executive Vice President and Treasurer, KeyCorp;
1992-1995: Executive Vice President, Society National Bank; 1991 to present:
Owner, Maple Grove Tree Farm (sole proprietorship). (1995)
K. BRENT SOMERS (48)
1996 to present: Senior Executive Vice President and Chief Financial
Officer, KeyCorp; 1994-1995: Executive Vice President and Chief Financial
Officer, The United States Shoe Corporation (manufacturing); 1990-1994: Vice
President and Chief Financial Officer, The United States Shoe Corporation.
(1996)
THOMAS C. STEVENS (47)
1996 to present: Executive Vice President, General Counsel and Secretary,
KeyCorp; 1991-1996: Managing Partner, Thompson Hine & Flory LLP (law firm).
(1996)
BRUCE E. TOFTE (53)
1994 to present: Executive Vice President, KeyCorp; 1987-1994: Executive
Vice President and Chief Control Officer, Old Key. (1987)
22
<PAGE> 27
COMPENSATION OF EXECUTIVE OFFICERS
Summary. The following table sets forth the compensation paid by KeyCorp
and its subsidiaries for each of the previous three years to the individual who
served as KeyCorp's Chief Executive Officer during 1996 and each of the
remaining four highest paid executive officers of KeyCorp at December 31, 1996.
Mr. Somers joined KeyCorp in February 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION ---------------- ----------
-------------------------------------- SECURITIES LONG-TERM
OTHER ANNUAL UNDERLYING INCENTIVE ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS/SARS(#) PAYOUTS COMPENSATION
- ------------------------------- ---- -------- -------- ------------ ---------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert W. Gillespie 1996 $830,000 520,000(1) $ 71,738(2) 65,000 $378,909(4) $122,063(6)
Chairman of the Board, 1995 754,167 404,000(1) -- (3) 40,000 407,451(5) 109,974(7)
President and Chief 1994 685,000 465,000(1) -- (3) 120,000 390,757(5) 108,094(8)
Executive Officer
Henry L. Meyer III 1996 470,250 215,000(1) -- (3) 25,000 182,526(4) 59,187(9)
Vice Chairman of the Board, 1995 435,750 187,000(1) -- (3) 20,000 244,112(5) 58,793(10)
Senior Executive Vice 1994 407,250 230,000(1) -- (3) 60,000 237,281(5) 59,115(11)
President and Chief
Operating Officer
Gary R. Allen 1996 459,000 190,000(1) -- (3) 25,000 178,638(4) 56,543(12)
Senior Executive Vice 1995 435,750 187,000(1) -- (3) 35,868 0 44,310(13)
President and Chief 1994 425,927 230,000(1) 350,043(2) 70,585 0 27,575(14)
Banking Officer
Roger Noall 1996 455,250 187,000(2) -- (3) 25,000 178,638(4) 65,310(15)
Senior Executive Vice 1995 435,750 187,000(1) -- (3) 20,000 244,112(5) 67,304(16)
President and Chief 1994 407,250 230,000(1) -- (3) 60,000 237,281(5) 69,010(17)
Administrative Officer
K. Brent Somers 1996 386,586 172,000(1) 58,408(2) 50,000 -- 33,515(18)
Senior Executive Vice
President and Chief
Financial Officer
</TABLE>
- ---------------
(1) Amounts awarded under KeyCorp's Short Term Incentive Compensation Plan for
the respective fiscal years, whether paid in cash or deferred.
(2) Each perquisite or other personal benefit which exceeds 25% of the total
perquisites and other personal benefits received by Messrs. Gillespie,
Allen and Somers are as follows: Mr. Gillespie (1996) -- $33,285 (club
dues), $35,869 (tax gross-up on perquisites and personal benefits); Mr.
Allen (1994) -- $175,056 (moving allowance), $161,052 (tax gross-up on
moving allowance); Mr. Somers (1996) -- $35,663 (moving allowance), $22,745
(tax gross-up on moving allowance).
(3) Other annual compensation received in the respective fiscal years was in
the form of perquisites, the amount of which did not exceed the lesser of
$50,000 or 10% of the total annual salary and bonus reported for the
executive.
(4) Amounts awarded under the KeyCorp Long Term Cash Incentive Compensation
Plan for the three year cycle ending in fiscal year 1996, whether paid in
cash or deferred.
(5) Amounts awarded under the Society Corporation Long Term Incentive
Compensation Plan for the three year cycles ending in the respective fiscal
years, whether paid in cash or deferred.
(6) $9,000 (amounts contributed under the KeyCorp 401(k) Savings Plan); $94,735
(amounts contributed under the KeyCorp Excess 401(k) Savings Plan; $18,328
(universal life insurance premiums).
(7) $9,000 (amounts contributed under the KeyCorp 401(k) Savings Plan); $84,937
(amounts contributed under KeyCorp Excess 401(k) Savings Plan); $16,037
(universal life insurance premiums).
23
<PAGE> 28
(8) $9,240 (amounts contributed under the Society Employee Stock Purchase and
Savings Plan); $83,205 (amounts contributed under KeyCorp Excess 401(k)
Savings Plan); $15,649 (universal life insurance premiums).
(9) $9,000 (amounts contributed under the KeyCorp 401(k) Savings Plan); $43,067
(amounts contributed under the KeyCorp Excess 401(k) Savings Plan; $7,120
(universal life insurance premiums).
(10) $9,000 (amounts contributed under the KeyCorp 401(k) Savings Plan); $43,012
(amounts contributed under KeyCorp Excess 401(k) Savings Plan); $6,781
(universal life insurance premiums).
(11) $9,240 (amounts contributed under the Society Employee Stock Purchase and
Savings Plan); $43,232 (amounts contributed under KeyCorp Excess 401(k)
Savings Plan); $6,643 (universal life insurance premiums).
(12) $9,000 (amounts contributed under the KeyCorp 401(k) Savings Plan; $40,658
(amounts contributed under the KeyCorp Excess 401(k) Savings Plan; $6,885
(split dollar life insurance premiums).
(13) $9,000 (amounts contributed under the KeyCorp 401(k) Savings Plan); $28,365
(amounts contributed under KeyCorp Excess 401(k) Savings Plan); $6,945
(split-dollar life insurance premiums).
(14) $6,750 (amounts contributed under the Old Key Profit Sharing Plus Plan);
$13,800 (amounts contributed under KeyCorp Excess 401(k) Savings Plan);
$7,025 (split-dollar life insurance premiums).
(15) $9,000 (amounts contributed under the KeyCorp 401(k) Savings Plan; $40,253
(amounts contributed under the KeyCorp Excess 401(k) Savings Plan; $16,057
(universal life insurance premiums).
(16) $9,000 (amounts contributed under the KeyCorp 401(k) Savings Plan); $43,012
(amounts contributed under KeyCorp Excess 401(k) Savings Plan); $15,292
(universal life insurance premiums).
(17) $9,240 (amounts contributed under the Society Employee Stock Purchase and
Savings Plan); $43,232 (amounts contributed under KeyCorp Excess 401(k)
Savings Plan); $16,538 (universal life insurance premiums).
(18) $9,000 (amounts contributed under the KeyCorp 401(k) Savings Plan; $24,515
(amounts contributed under the KeyCorp Excess 401(k) Savings Plan).
Option Grants. The following table provides information regarding grants of
stock options made during the year ended December 31, 1996, to each of the
executive officers named in the Summary Compensation Table.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR TEN
UNDERLYING GRANTED TO OR BASE YEAR OPTION TERM
OPTIONS EMPLOYEES PRICE EXPIRATION ------------------------
NAME GRANTED(#) IN FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- --------------------------- -------------- -------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Gillespie 65,000(1) 3.0% $34.250 (3) 1/17/06 1,400,077 3,548,069
Henry L. Meyer III 25,000(1) 1.1% 34.250 (3) 1/17/06 538,491 1,364,642
Gary R. Allen 25,000(1) 1.1% 34.250 (3) 1/17/06 538,491 1,364,642
Roger Noall 25,000(1) 1.1% 34.250 (3) 1/17/06 538,491 1,364,642
K. Brent Somers 50,000(2) 2.3% 36.625 (3) 2/5/06 1,151,663 2,918,541
</TABLE>
- ---------------
(1) These options were granted under the Amended and Restated 1991 Equity
Compensation Plan. These options vest one-third each year from the date of
grant, resulting in full vesting after three years.
(2) These options were granted under the Amended and Restated 1991 Equity
Compensation Plan. 25,000 of these options vest one-third each year from the
date of grant. The remaining 25,000 will vest three years from the date of
grant.
(3) The exercise price equals the market price of a KeyCorp Common Share on the
date of the option grant.
- ---------------
The options reported in the preceding table (other than those granted to
Mr. Somers) were granted on January 17, 1996, at an exercise price equal to the
market price of KeyCorp Common Shares on that date, which was $34.25. Based on
this stock price, the market value of KeyCorp Common Shares at the end of the
24
<PAGE> 29
ten year option period using 5% and 10% compounded annual returns would be
$55.79 and $88.84, respectively.
Option Exercises and Values. The following table provides information
regarding exercises of stock options during the year ended December 31, 1996, by
the executive officers named in the Summary Compensation Table, and the value of
such officers' unexercised stock options as of December 31, 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/ IN-THE-MONEY OPTIONS/
SHARES SARS AT FY-END (#) SARS AT FY-END($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED UNEXERCISABLE UNEXERCISABLE(1)
- ----------------------------------- ------------ -------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
Robert W. Gillespie 40,000 $888,748 276,000/ 6,773,000/
225,000 4,655,000
Henry L. Meyer III 8,000 159,750 209,242/ 5,950,173/
105,000 2,200,000
Gary R. Allen 54,095 307,033 13,402/ 461,902/
65,000 1,309,000
Roger Noall 0 0 100,000/ 2,196,250/
105,000 2,200,000
K. Brent Somers 0 0 0/ 0/
50,000 731,250
<FN>
- ---------------
(1) Based on a December 31, 1996 mean between high and low prices for KeyCorp
Common Shares which equaled $51.25.
</TABLE>
Long Term Incentive Compensation. During 1996, KeyCorp's Compensation and
Organization Committee selected participants in the KeyCorp Long Term Cash
Incentive Compensation Plan for the 1996-1998 three-year compensation period.
Messrs. Gillespie, Allen, Meyer, Noall, and Somers were included as
participants. The Committee has determined objective criteria by which KeyCorp's
financial performance should be judged and distributions under the Plan should
be made. These criteria were based on the Committee's judgment of a range of
return on common equity that would warrant satisfactory to excellent results for
KeyCorp for the compensation period. Based on KeyCorp's 1996 job grade market
points (i.e., average salaries for executives in the marketplace in similar
positions) upon which payments under the Plan will be based (which may change by
the time the awards are actually determined), the officers in the Summary
Compensation Table would be eligible to receive the following payments for the
compensation periods indicated.
25
<PAGE> 30
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS
PERFORMANCE --------------------------------------------
NAME PERIOD THRESHOLD(1) TARGET MAXIMUM
- ----------------------------------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C>
Robert W. Gillespie 1996-1998 $ 62,550 $250,200 $578,588
Henry L. Meyer III 1996-1998 31,766 127,063 293,832
Gary R. Allen 1996-1998 26,563 106,250 245,703
Roger Noall 1996-1998(2) 10,330 41,319 95,551
K. Brent Somers 1996-1998 26,563 106,250 245,703
<FN>
- ---------------
(1) If the threshold is not met, no payouts will be made.
(2) Mr. Noall ceased to be a participant in the KeyCorp Long Term Cash Incentive
Compensation Plan at February 28, 1997. As a result, his award under this
plan for the 1996-1998 compensation period will be prorated based on the 14
months of the compensation period that he was a participant in the KeyCorp
Long Term Cash Incentive Compensation Plan.
</TABLE>
These executives, with the exception of Mr. Somers, are also participants
in the KeyCorp Long Term Cash Incentive Compensation Plan for the 1994-1996 and
the 1995-1997 compensation periods. Payouts under the 1994-1996 compensation
period are reflected in the Summary Compensation Table on page of this Proxy
Statement under the heading "Long-Term Incentive Payouts."
Pension Plan. KeyCorp's pension plan was revised effective January 1, 1995.
Substantially all officers and employees of KeyCorp and participating
subsidiaries are participants in the KeyCorp Cash Balance Pension Plan (the
"Pension Plan"). Certain officers, including all executives named in the Summary
Compensation Table on page of this Proxy Statement, also participate in
related supplemental and excess retirement plans. The Pension Plan is a cash
balance plan that provides a pension based upon a hypothetical account balance
maintained for the participant to which accruals are made equal to a percentage
of the participant's compensation and to which interest is credited.
Certain officers have the option of electing grandfathered benefits under
the Pension Plan, which benefits are based upon years of participation in the
Pension Plan and average annual compensation for either the five highest
consecutive years during the last ten years of employment for former Society
employees or the three highest consecutive years during the last five years of
employment for former Old Key employees. All executives named in the Summary
Compensation Table have elected to receive grandfathered benefits. The following
table sets forth the estimated maximum annual benefits payable under the Pension
Plan to participants who (1) have elected grandfathered benefits under the
Pension Plan and are participants in a supplemental retirement plan, (2)
attained the Social Security retirement age on December 31, 1996, and (3) elect
to receive a straight lifetime annuity.
26
<PAGE> 31
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFITS
AVERAGE WITH INDICATED YEARS OF PARTICIPATION
FINAL ----------------------------------------------------------------------
COMPENSATION 15 20 25 30 35
- ------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 400,000 $ 220,000 $ 260,000 $ 300,000 $ 300,000 $ 300,000
500,000 275,000 325,000 375,000 375,000 375,000
600,000 330,000 390,000 450,000 450,000 450,000
700,000 385,000 455,000 525,000 525,000 525,000
800,000 440,000 520,000 600,000 600,000 600,000
900,000 495,000 585,000 675,000 675,000 675,000
1,000,000 550,000 650,000 750,000 750,000 750,000
1,200,000 660,000 780,000 900,000 900,000 900,000
1,400,000 770,000 910,000 1,050,000 1,050,000 1,050,000
1,600,000 880,000 1,040,000 1,200,000 1,200,000 1,200,000
1,800,000 990,000 1,170,000 1,350,000 1,350,000 1,350,000
2,000,000 1,100,000 1,300,000 1,500,000 1,500,000 1,500,000
2,400,000 1,320,000 1,560,000 1,800,000 1,800,000 1,800,000
2,600,000 1,430,000 1,690,000 1,950,000 1,950,000 1,950,000
</TABLE>
All benefit amounts are subject to the annual pension limitations imposed
by the Internal Revenue Code for qualified plans; however, the extent of any
reduction will vary according to the limits existing at the time pension
payments commence. Amounts under the Pension Plan reduced by Internal Revenue
Code limitation may be paid under an excess benefit retirement plan. The
benefits are not subject to any deduction for social security or any other
offset.
Compensation for purposes of computing benefits under the Pension Plan and
excess and supplemental plans is total base pay and incentive compensation paid
during a calendar year, plus amounts deducted for the 401(k) and flexible
benefits plans during such year, but does not include amounts attributable to
stock options or receipt of non-cash remuneration that is included in the
participant's income for Federal income tax purposes. Compensation for purposes
of the Pension Plan and excess and supplemental plans is substantially the same
as shown in the Summary Compensation Table after excluding stock options, "all
other compensation," and "other annual compensation." Normal retirement age is
65. The Pension Plan requires 5 years of service for vesting. The excess and
supplemental plans require 5 years of service for vesting for the former Old Key
employees, including Mr. Allen, and 10 years of service and the attainment of
age 55 for former Society employees, including Messrs. Gillespie, Meyer, and
Noall. Messrs. Gillespie, Allen, Meyer and Noall were credited under the excess
and supplemental plans with 27, 23, 23, and 12 years and Mr. Somers with 11
months service, respectively, at year-end 1996.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, KeyCorp's directors and
certain officers are required to report their ownership and changes in ownership
of KeyCorp Common Shares to the SEC. The SEC has established certain due dates
for these reports. Mr. Gillespie was late in filing a single report in 1996
involving the sale of 200 KeyCorp Common Shares held in a custody account for a
minor child. The 200 shares represented a small portion of the total assets held
in the account which were converted to mutual funds.
27
<PAGE> 32
Messrs. Allen and Tofte were also late in filing single reports with Mr. Allen's
report consisting of four transactions and Mr. Tofte's report consisting of one
transaction. Messrs. Allen and Tofte fully complied with KeyCorp's internal
reporting procedures designed to ensure that reports were filed in a timely
manner. Nevertheless, KeyCorp's representative in charge of Section 16
compliance inadvertently failed timely to file reports on behalf of Messrs.
Allen and Tofte.
EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS
KeyCorp is a party to employment agreements and change of control
agreements with Mr. Gillespie and certain of its other executive officers.
Employment Agreement With Mr. Gillespie. KeyCorp and Mr. Gillespie are
parties to an employment agreement pursuant to which Mr. Gillespie is to be
employed by KeyCorp as Chairman of the Board and Chief Executive Officer through
May 31, 2000. Under the employment agreement, Mr. Gillespie is to be paid a base
salary of not less than $840,000 per year and is entitled to participate in all
KeyCorp executive incentive compensation plans including KeyCorp's short and
long term incentive compensation plans. The employment agreement provides for an
additional two years of compensation and benefits to Mr. Gillespie (through May
31, 2002) if, in 2000, the employment agreement is not mutually extended or a
new employment agreement is not entered into.
Under the employment agreement, Mr. Gillespie may terminate his employment
for good reason (and receive post-termination benefits) under certain
circumstances whether or not a change of control of KeyCorp occurs. Those
circumstances that will constitute good reason under the employment agreement
whether or not a change of control occurs include (a) demotion or removal of Mr.
Gillespie from either of his executive positions (i.e., Chairman of the Board
and Chief Executive Officer); (b) a reduction in Mr. Gillespie's base salary or
participation in benefit plans; (c) a good faith determination by Mr. Gillespie
that his responsibilities, duties, and authority have been materially reduced
from those contemplated by the employment agreement; or (d) relocation of Mr.
Gillespie's principal place of employment outside the Cleveland metropolitan
area. Those circumstances that will constitute good reason under the employment
agreement after a change of control of KeyCorp occurs also include any reduction
in Mr. Gillespie's incentive compensation or a good faith determination by Mr.
Gillespie that his responsibilities or duties have been materially reduced from
their level before the change of control or that he is unable to carry out the
responsibilities of his positions as a result of the change of control.
Under the employment agreement, if Mr. Gillespie's employment with KeyCorp
is terminated before his 65th birthday for any reason other than voluntary
resignation by Mr. Gillespie (without good reason) before May, 2000, or
termination by KeyCorp for cause, and Mr. Gillespie (or his estate or designated
beneficiary) is entitled to receive retirement benefits under any KeyCorp
retirement plan after March 26, 1999 (Mr. Gillespie's 55th birthday), KeyCorp
will pay a supplemental retirement benefit in an amount sufficient to provide
Mr. Gillespie the same aggregate benefit that he would have received if he had
continued in the employ of KeyCorp through his 65th birthday (by eliminating any
reduction because he started receiving benefits before his 65th birthday and
giving him credit for additional years of service for the period after his
termination date and before his 65th birthday). Under the employment agreement,
KeyCorp will have "cause" to terminate Mr. Gillespie's employment before a
change of control if he commits a felony, acts
28
<PAGE> 33
dishonestly in a way that is materially inimical to the best interests of
KeyCorp, competes with KeyCorp, or totally abandons his duties and
responsibilities. KeyCorp will have "cause" to terminate Mr. Gillespie's
employment after a change of control if he is convicted of a felony, acts
dishonestly and feloniously in a way that is materially inimical to the best
interests of KeyCorp, or competes with KeyCorp.
If a change of control occurs while Mr. Gillespie is employed under the
employment agreement and an exercise by him of the right referred to in this
paragraph would not conflict with the treatment for accounting purposes of any
transaction entered into in connection with the change of control as a pooling
of interests, Mr. Gillespie will be entitled to surrender his rights in any
outstanding KeyCorp stock options (whether or not then exercisable) in return
for a payment equal to the spread on those options.
If any amount of compensation otherwise payable to Mr. Gillespie as earned
would not be deductible by KeyCorp by reason of the disallowance rules of
Section 162(m) of the Internal Revenue Code (which rules generally disallow
deductions for certain compensation paid to any of certain "covered employees"
of a publicly held corporation in excess of $1,000,000 per year), but would be
deductible if it were deferred until a later year, that amount of compensation
will be so deferred until the earlier of the first date on which the
compensation can be paid without disallowance of the deduction to KeyCorp or
April 15 of the year immediately following the year in which Mr. Gillespie
ceases to be a covered employee of KeyCorp. Upon payment of any such deferred
amounts of compensation, KeyCorp will pay to Mr. Gillespie an additional amount
for interest on the deferred amounts.
Under the employment agreement, Mr. Gillespie is entitled to continuing
indemnification to the fullest extent permitted by Ohio law for actions against
him by reason of his being or having been a director or officer of KeyCorp or
any related entity; to payment of certain legal fees incurred in enforcing his
rights under his employment agreement; to ancillary benefits incident to the
performance of his duties under that agreement; and to a special supplemental
death benefit if he dies while employed by KeyCorp and he is survived by his
wife. The special supplemental death benefit, if payable, would consist of
monthly installments to Mr. Gillespie's wife (or to her estate), through the
15th anniversary of Mr. Gillespie's death. Each monthly payment would be in an
amount that, when added to the monthly survivor benefits, if any, payable to Mr.
Gillespie's wife under all KeyCorp retirement plans, equals one third of Mr.
Gillespie's monthly compensation (base salary and incentive compensation). The
employment agreement also provides that if Mr. Gillespie's employment is
terminated for any reason other than cause, voluntary resignation before May,
2000, death, or disability, KeyCorp is to provide to Mr. Gillespie a furnished
office, amenities, and secretarial support, appropriate to his status as a
former Chairman of the Board and Chief Executive Officer, through May 31, 2007.
Regulations Provision Regarding Positions To Be Held by Mr. Gillespie.
KeyCorp's current Regulations provide in part that Mr. Gillespie may not be
removed by action of the Board of Directors from any office held by him except
by the affirmative vote of three-quarters of the entire authorized Board of
Directors and that any such removal shall be without prejudice to his contract
rights. If KeyCorp's shareholders approve the amendment and restatement of
KeyCorp's Regulations as proposed under Issue Three above (see pages to of
this Proxy Statement), this provision would be modified to allow the removal of
the most senior officer of KeyCorp by majority vote of the entire authorized
Board of Directors without prejudice to such officer's contract rights.
29
<PAGE> 34
Events Constituting a Change of Control. Under the employment agreement
with Mr. Gillespie as well as under the change of control agreements with
certain other executive officers that are described below, a change of control
will be deemed to have occurred (a) if KeyCorp merges with another corporation
and either (i) KeyCorp shareholders receive less than 65 percent of the
outstanding voting securities of the surviving corporation or (ii) directors of
KeyCorp cease to constitute at least 51% of the directors of the surviving
corporation; (b) a person becomes the beneficial owner of 35% or more of
KeyCorp's outstanding stock or files a report disclosing the acquisition of that
amount of such stock; (c) there is sale, lease, exchange, or other transfer (in
one transaction or a series of related transactions) of all or substantially all
of the assets of KeyCorp, or (d), without the prior approval of the Board of
Directors of KeyCorp, an announcement is made of an intention to engage in a
transaction that, if consummated, would result in a "change event," or to
solicit proxies in connection with a proposal that is not approved or
recommended by the Board of Directors or to engage in an election contest
relating to the election of directors of KeyCorp and at any time within 24
months after the announcement, individuals who constituted the directors of
KeyCorp when the announcement was made (the "incumbent directors") cease to
constitute at least a majority thereof unless both all new directors have been
approved by at least 2/3 of the incumbent directors in office at the time of
nomination of each new director and the incumbent directors determine that the
change in composition of the Board that results in incumbent directors no longer
being a majority of the Board was not attributable to any change event. For
these purposes, a "change event" includes the making of a tender offer for 25%
or more of the outstanding voting stock of KeyCorp, any person becoming the
beneficial owner of 25% or more of the outstanding voting stock of KeyCorp, or
the filing of any report disclosing the acquisition of 25% or more of the
outstanding voting stock of KeyCorp; a merger of KeyCorp with another
corporation in a transaction that results in less than 50% of the outstanding
voting securities of the surviving corporation having been issued in exchange
for voting securities of KeyCorp or less than 51% of the directors of the
surviving corporation being individuals who were directors of KeyCorp
immediately before the transaction; or a sale or other transfer (in one
transaction or in a series of related transactions) of all or substantially all
the assets of KeyCorp.
Amended Employment Agreement With Mr. Allen. KeyCorp and Mr. Allen are
parties to a preexisting employment agreement that was amended in anticipation
of the Merger. In general, as amended, the employment agreement provides for the
employment of Mr. Allen through June 30, 1998. If Mr. Allen's employment is
terminated by KeyCorp without cause at any time before June 30, 1998, Mr. Allen
will be entitled to receive all payment and benefits (including retirement
benefits) to which he would have been entitled had he continued to perform
services under the employment agreement through June 30, 1998. For purposes of
Mr. Allen's amended employment agreement, "cause" includes a material breach of
the agreement by Mr. Allen, misconduct as an executive of KeyCorp, unreasonable
neglect or refusal to perform assigned duties, conviction of a crime involving
moral turpitude, adjudication as a bankrupt, failure to follow reasonable
instructions of superior executive officers, or imposition by a bank regulatory
agency of a final order of suspension or removal for improper conduct.
Employment Agreement With Mr. Noall. KeyCorp and Mr. Noall are parties to
an employment agreement pursuant to which (a) Mr. Noall was employed by KeyCorp
as its Chief Administrative Officer through February 28, 1997 and (b) Mr.
Noall's status as an employee of KeyCorp is to be continued through February 29,
2000 (the end of the "Supplemental Term") with such duties and responsibilities
as KeyCorp and he may mutually agree. During the Supplemental Term KeyCorp will
pay to Mr. Noall compensation at a
30
<PAGE> 35
rate equal to the sum of his base salary (at the end of the Scheduled Term) and
his average annual incentive compensation (the average of his two highest years
of short-term incentive compensation and the average of his two highest years of
the long-term incentive compensation, in both cases during the five calendar
year period preceding the end of the Scheduled Term). If Mr. Noall dies during
Supplemental Term, the compensation that would otherwise have been payable to
him during the Supplemental Term is to be paid to his estate or to a beneficiary
designated by him.
The employment agreement provides that following any termination of Mr.
Noall's employment, KeyCorp will provide a supplemental retirement benefit to
Mr. Noall so that he will receive, in the aggregate, the amounts of retirement
benefits to which he would have been entitled under all KeyCorp retirement plans
if his employment with Society had commenced on June 20, 1973. If a change of
control occurs while Mr. Noall is employed under the employment agreement and an
exercise by him of the right referred to in this sentence would not conflict
with the treatment for accounting purposes of any transaction entered into in
connection with the change of control as a pooling of interests, Mr. Noall will
be entitled to surrender his rights in any outstanding KeyCorp stock options
(whether or not then exercisable) that have been outstanding for at least six
months, in return for a payment equal to the spread on those options.
New Change of Control Agreements. KeyCorp has entered into new change of
control agreements with each of its executive officers other than Mr. Gillespie
(including Messrs. Allen, Meyer, and Somers) which provide that if, at any time
within two years after the occurrence of a change of control, the officer's
employment is terminated by KeyCorp (except for cause) or the officer terminates
employment because the officer's base salary is reduced or relocation is made a
condition of the officer's employment, KeyCorp will pay to the officer a lump
sum severance benefit equal to two and one half years' compensation (base salary
and average annual incentive compensation) and will pay the cost of continuing
health benefits until the earlier of the expiration of the continuation period
required by Federal law or the date the officer secures other employment. Each
new change of control agreement also provides a three-month window period,
commencing 15 months after the date of a change of control, during which the
officer may voluntarily resign and receive a lump sum severance benefit equal to
one and one half years' compensation (base salary and average annual incentive
compensation) if, at any time before the executive's resignation, (a) the
executive determines in good faith that the executive's position,
responsibilities, duties, or status with KeyCorp are 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) 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 KeyCorp executives generally participate, or (c) the
headquarters that was the executive's principal place of employment before the
change of control (whether KeyCorp'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. For purposes of the new
change in control agreements, "cause" includes conviction of a felony,
dishonesty in the course of employment that constitutes a felony and is inimical
to the best interest of KeyCorp or a subsidiary, imposition by a bank regulatory
agency of a final order of suspension or removal, or competing with KeyCorp.
Section 280G Limitation on Payments. In general, the employment, severance,
and change of control agreements to which KeyCorp is a party provide, in effect,
that if any payments thereunder would otherwise be treated as "excess parachute
payments" under Section 280G of the Internal Revenue Code (and would
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<PAGE> 36
therefore be nondeductible by KeyCorp and subject to a 20% excise tax upon
receipt by the officer), the aggregate amount of those payments is to be reduced
to the extent necessary to avoid that treatment. If, however, any officer is
required to defer compensation so that KeyCorp will not lose a deduction for
that compensation under Section 162(m) of the Internal Revenue Code, this
general policy does not apply. In these circumtances, it is KeyCorp's policy
that the officer's employment, severance, and/or change of control agreement not
contain a provision reducing payments to the Section 280G limit and that
instead, the officer would be provided a tax gross-up if any payment exceeds the
Section 280G limits so that the officer will receive the same after-tax payment
as would have been the case if Section 280G did not apply. Mr. Gillespie is the
only officer of KeyCorp who has been required to defer compensation as a result
of Section 162(m) and he is, therefore, entitled to a tax gross-up under his
employment agreement if Section 280G is applicable.
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<PAGE> 37
COMPENSATION AND ORGANIZATION COMMITTEE
AND EQUITY BASED COMPENSATION COMMITTEE
JOINT REPORT ON EXECUTIVE COMPENSATION
KeyCorp's Board of Directors has delegated to its Compensation and
Organization Committee ("C&O Committee") and its Equity Based Compensation
Committee ("EBC Committee") (jointly referred to herein as "the Committees")
responsibility for executive compensation. The EBC Committee has responsibility
for equity based compensation and compensation plans with an equity based
component, and also plans under which "qualified performance-based compensation"
is to be paid (compensation that is to be excluded from the restrictions of tax
deductibility under Section 162(m) of the Internal Revenue Code). The C&O
Committee has responsibility for all other forms of executive compensation.
In designing KeyCorp's executive compensation program, KeyCorp and the
Committees concluded that the program should:
- Operate as a primary motivator in driving executive decisions and
activities to enhance shareholder value.
- Pay total compensation that is commensurate with KeyCorp's performance as
compared with other comparable financial institutions.
- Promote a strong pay for performance culture by ensuring that highly
competitive compensation is conditioned on the attainment of challenging
objectives.
- Permit KeyCorp to attract, retain, and motivate the best available
executive talent.
- Encourage substantial share ownership by executives.
The executive compensation program -- including the establishment of job
grades, salary ranges, and market points (the approximate average salary for
executives in similar jobs in the marketplace), and the assignment of senior
executives to job grades based upon their executive responsibilities -- was
designed and implemented with the aid of an independent outside executive
compensation consultant.
Under the compensation program adopted by KeyCorp and the Committees,
executive positions are compensated (on a total compensation basis) by
comparison with comparable positions in peer bank holding companies. The
Committees each year identify the companies to be included in the peer group.
The peer group includes bank holding companies that, in the Committees'
judgment, have similar characteristics as KeyCorp. The 1996 peer group included
bank holding companies with assets ranging from approximately $30 billion to
$230 billion as of the beginning of 1996. All of the companies in the peer group
were included in the KBW 50 Index (which is used in the stock price performance
graph on page of this Proxy Statement).
Adjustments to an individual executive's salary are considered annually
using competitive market comparisons and considering the executive's
contribution to KeyCorp's success and accomplishment of individual and unit
goals. Incentive compensation amounts are determined as described in more detail
below.
The Committees have determined that KeyCorp will be better able to attract,
retain and motivate executives to achieve superior financial performance if a
relatively large portion of senior executive compensation is "at risk," i.e.,
subject to incentive compensation plans. Thus, KeyCorp's compensation for senior
executives is designed in a manner whereby KeyCorp's senior executives will
receive less total compensation than that of senior executives of peer companies
in periods when KeyCorp's performance is
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<PAGE> 38
poorer than performance of peer companies and receive superior total
compensation when performance is superior to the performance of such companies.
Under KeyCorp's short term incentive compensation plan, after the close of
the year the C&O Committee establishes a percentage of the target pool to be
paid out as short term incentive compensation (a range of 0% to 200% of the
target pool). The target pool is the sum of individual incentive targets.
Individual targets range from 10% to 50% of the individual's market point.
Individual payouts can range from zero to the greater of (a) 200% of the
individual's incentive target or (b) 150% of the target pool percentage times
the individual's incentive target. In evaluating corporate performance for
purposes of setting the percentage of the target pool to be paid out, the C&O
Committee evaluates KeyCorp's performance as compared with its profit plan for
the year and evaluates financial results (generally, return on average common
equity and return on average assets) as compared with companies in the peer
group. The C&O Committee also considers such financial performance over a number
of years versus performance by the companies in the peer group. In addition to
evaluation of KeyCorp's financial performance, the C&O Committee considers
certain non-financial factors as well, including KeyCorp's strategic direction.
In establishing the percentage of the target pool to be paid, the C&O Committee
gives most weight to financial results.
During 1996, KeyCorp took one-time charges relating to (1) a $17.5 million
government mandated fee to recapitalize the Savings Association Insurance Fund
and (2) a $100 million restructuring charge in order to accelerate certain
strategic actions designed to complete KeyCorp's transformation to a nationwide
financial services company. Excluding these charges, earnings per share exceeded
KeyCorp's profit plan for 1996. (These one-time charges are covered in detail on
pages to of KeyCorp's 1996 Annual Report.) Also excluding these
charges, for 1996, KeyCorp ranked in the middle third of the peer group in
return on average common equity and return on average assets. In the C&O
Committee's judgment, KeyCorp has achieved consistency of satisfactory financial
performance over a number of years. The C&O Committee also considered the
strategic initiatives undertaken by KeyCorp's management, including First Choice
2000 (which is designed to enhance the revenue growth of KeyCorp) and Resource
2000 (which is KeyCorp's expense reduction initiative). The C&O Committee is
satisfied with these strategic initiatives and notes the favorable market
reaction to them. The C&O Committee was satisfied with the overall performance
of the senior executives during 1996. The C&O Committee determined that the
short term incentive compensation pool for 1996 would be 110% of the target
pool. Individual awards were paid or credited in the first quarter of 1997 among
participants in the short term plan based upon individual and group
contributions to the financial and other results of KeyCorp for the year.
Under KeyCorp's long term incentive compensation plan, the C&O Committee
establishes objective criteria by which KeyCorp's financial performance should
be judged for each three year cycle. The criteria are based on the C&O
Committee's judgment of a return on average common equity that will warrant
satisfactory to excellent results for the three year period. For the three year
period 1996-1998, the established criteria could result in a payout that ranges
from zero to 250% of target. The maximum amount for the 1996-1998 performance
period will be earned if return on average common equity for such three year
period, after adjustments which the C&O Committee deems to be appropriate,
equals or exceeds 20%. An individual executive's target is either 20%, 25%, or
30% of the executive's market point.
Under the criteria established for the three year period 1994-1996, the
payout could range from zero to 233.25% of target. The average return on common
equity for this three year period was 17.32%. This resulted in a payout of 168%
of target. The awards were paid or credited to participating executives in the
first quarter of 1997.
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<PAGE> 39
The Committees believe that senior executives will be motivated, and their
financial interests will be aligned with those of common shareholders, if stock
options are awarded to senior executives. The EBC Committee determines the stock
option policies and makes the actual grants of options. In general, the number
of options granted to an executive is based on the executive's job grade. Prior
to 1996, with limited exceptions, the same number of options were granted to all
executives in the same job grade. Except in the case of the Chief Executive
Officer and senior officers reporting directly to the Chief Executive Officer
(for these executives the Committee determined that a set number of options
should be granted to motivate and reward these executives as a group), the
approach to determining the number of options granted was changed for 1996 and
thereafter. For options granted in 1996 the Committee continued to use job
grades as a basis for the number of options to be granted, but established a
threshold, targeted, and maximum number of options for each job grade. The
Committee felt that this change in the number of options that may be granted
provides valuable flexibility, as, within the confines of the threshold and
maximum number of options for the job grade, the actual grants are based on the
executive's contributions and/or anticipated contributions to the long-term
financial and other results of KeyCorp. The aggregate number and vesting terms
of options may vary depending on the EBC Committee's judgment of the best form
of long-term motivation appropriate under the particular circumstances. In most
instances prior to 1996, options vested one year from the date of the grant. The
EBC Committee determined that for options granted in 1996 and thereafter, the
general policy would be to grant options that vest one-third each year from the
date of the grant, resulting in full vesting after three years. Management felt,
and the EBC Committee concurred, that this vesting schedule would aid in
retaining executives, would result in options being held for a longer period of
time, and would be more cost effective. In determining stock options grants, the
EBC Committee does not feel it relevant and does not take into account options
previously awarded to the executive (whether or not the options remain
outstanding).
During 1996, 618 executives of KeyCorp were awarded options covering
2,065,000 KeyCorp Common Shares. In addition, beginning in 1996, KeyCorp adopted
a program whereby stock options can be granted to those employees in lower
positions identified as exceptional high performers and/or the future leaders of
the organization. Under this program, in 1996, 255 of these employees received
options covering a total of 136,700 KeyCorp Common Shares.
In all instances the option price was 100% of the market price of the stock
at the time the option was granted.
In order to facilitate estate planning by senior executives, in 1996 the
EBC Committee determined that certain nonqualified stock options granted to
senior executives would be transferable by the executive to family members or
trusts for family members. No senior executive may transfer options to a family
member or a trust for a family member unless the executive is in compliance with
KeyCorp's stock ownership guidelines.
In 1996, KeyCorp established stock ownership guidelines for its senior
executives which specify that KeyCorp's Chief Executive Officer should own
KeyCorp Common Shares with a value equal to at least three times his annual
salary, senior executives on KeyCorp's Management Committee (included among
which in 1996 were Messrs. Allen, Meyer, Noall and Somers) should own KeyCorp
Common Shares with a value equal to at least two times their salary, and all
other senior executives participating in KeyCorp's long term incentive
compensation plan should own KeyCorp Common Shares with a value at least equal
to their salary. Newly hired executives and executives whose stock ownership did
not meet the guidelines at the time established have a reasonable period of time
to achieve the levels of ownership set forth in the guidelines. For purposes of
these guidelines, Common Shares includes shares actually owned by the executives
as well as
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<PAGE> 40
phantom shares owned under KeyCorp's Excess 401(k) Savings Plan and Deferred
Compensation Plan.
Salary adjustments for senior executives of KeyCorp, the short term and
long term incentive compensation payments to such executives, and the grant of
stock options are based upon the above methodology. In the case of executives
with employment contracts, the same methodology is applied subject to complying
with salary minimums specified in such contracts. In the case of executives
other than Mr. Gillespie, the Committees also solicited from Mr. Gillespie an
evaluation of such executive's performance and a compensation recommendation,
which evaluation and recommendation are additional factors considered by the
Committees, in their sole discretion, in applying the above methodology.
Internal Revenue Code Section 162(m), enacted in 1993, precludes a public
corporation from taking an income tax deduction for compensation in excess of $1
million for its chief executive officer or any of its four other highest paid
executive officers. Certain performance-based compensation is specifically
exempt from the limit upon deductibility. (For example, any compensation derived
from the exercise of stock options under employee stock option plans of KeyCorp
is exempt from this limit.) KeyCorp's short term and long term incentive
compensation plans provide that the C&O Committee, in its sole discretion, has
the authority to require deferral of payment of all or a portion of awards under
any such plan if the C&O Committee determines that KeyCorp would be denied a
deduction for federal income tax purposes for such award or the portion thereof.
Mr. Gillespie is subject to an employment agreement with KeyCorp (see pages
of this Proxy Statement). As of April 1, 1996, the C&O Committee
established Mr. Gillespie's base salary at $840,000 per annum. Under the short
term incentive compensation plan, Mr. Gillespie's award for 1996 was $520,000.
The Committee, in determining Mr. Gillespie's award, took into account the same
factors as discussed above in connection with short term incentive compensation
awards paid to other senior executives and, in addition, considered Mr.
Gillespie's leadership in defining the strategy and direction of KeyCorp. The
Committee also considered information on total compensation earned by chief
executive officers of peer companies. As in the case of other senior executives,
Mr. Gillespie is a participant in KeyCorp's long term incentive compensation
plan for the three year periods 1994-1996, 1995-1997 and 1996-1998. For the
three year period 1994-1996 his award under the plan was $378,909 (see page
of this Proxy Statement).
In determining Mr. Gillespie's base salary and total compensation, the
Committees reviewed and took into consideration the base salaries and total
compensation paid to chief executive officers of peer companies as well as the
performance of KeyCorp as compared with performance of peer companies and
performance of KeyCorp compared with KeyCorp's plans and strategies.
Compensation and Organization Committee Equity Based Compensation Committee
Board of Directors Board of Directors
KeyCorp KeyCorp
Albert C. Bersticker Albert C. Bersticker
Thomas A. Commes Thomas A. Commes
Kenneth M. Curtis Lucie J. Fjeldstad
Lucie J. Fjeldstad Stephen R. Hardis (Chair)
Stephen R. Hardis (Chair) Douglas J. McGregor
Douglas J. McGregor
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<PAGE> 41
KEYCORP STOCK PRICE PERFORMANCE
The following graph compares the stock price performance of KeyCorp's
Common Shares (assuming reinvestment of dividends) with that of the Standard &
Poor's 500 Index and the KBW 50 Index. The Standard & Poor's 500 Index is an
index of 500 stocks designed to measure the performance of the broad domestic
economy. The KBW 50 Index is an index of the stock of fifty banks of the United
States, including all money-center and most major regional banks. KeyCorp's
stock is included in the KBW 50 Index and in the Standard & Poor's 500 Index.
KEYCORP STOCK
PERFORMANCE GRAPH*
(1991-1996)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) KEYCORP KBW 50 S&P 500
<S> <C> <C> <C>
12/31/91 100 100 100
112 107 97
6/30/92 120 113 99
117 110 102
12/31/92 134 127 108
146 137 112
6/30/93 149 136 113
137 141 116
12/31/93 129 134 118
131 132 114
6/30/94 141 142 114
136 139 120
12/31/94 113 128 120
129 145 132
6/30/95 145 185 144
160 192 157
12/31/95 171 204 165
184 226 174
6/30/96 186 227 182
214 255 187
12/31/96 247 289 203
</TABLE>
* This stock price performance is not necessarily indicative of future
price performance. The stock price performance in the graph above for the
period prior to March 1, 1994 is for Society.
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<PAGE> 42
SHARE OWNERSHIP AND PHANTOM STOCK UNITS
Five Percent Beneficial Ownership. To the best of KeyCorp's knowledge, no
person beneficially owns more than 5% of the outstanding KeyCorp Common Shares.
Beneficial Ownership of Common Shares and Investment in Phantom Stock
Units. The following table lists current directors of and nominees for director
of KeyCorp, the executive officers included in the Summary Compensation Table,
and all directors, nominees, and executive officers of KeyCorp as a group. The
table sets forth, as of January 31, 1997, certain information with respect to
(1) the amount and nature of beneficial ownership of KeyCorp Common Shares, (2)
the number of phantom stock units, if any, and (3) total phantom stock units and
beneficial ownership of KeyCorp Common Shares for such current directors,
nominees for director, and executive officers.
<TABLE>
<CAPTION>
TOTAL PHANTOM
AMOUNT AND NATURE OF PERCENT OF PHANTOM STOCK UNITS AND
BENEFICIAL OWNERSHIP COMMON SHARES STOCK BENEFICIAL OWNERSHIP
NAME OF COMMON SHARES OUTSTANDING(4) UNITS(5) OF COMMON SHARES
- ------------------------------- -------------------- ------------- ----------- --------------------
<S> <C> <C> <C> <C>
Gary R. Allen.................. 74,916(1)(2) 1,806 76,722
Cecil D. Andrus................ 4,500(2) 0 4,500
William G. Bares............... 12,900(2) 5,373 18,273
Albert C. Bersticker........... 12,500(2) 2,203 14,703
Thomas A. Commes............... 20,500(2) 0 20,500
Kenneth M. Curtis.............. 4,705(2) 0 4,705
John C. Dimmer................. 446,853(2) 0 446,853
Lucie J. Fjeldstad............. 27,007(2) 0 27,007
Robert W. Gillespie............ 449,357(1)(2) 21,585 470,942
Stephen R. Hardis.............. 20,500(2) 37,539 58,039
Henry S. Hemingway............. 138,933(2)(3) 0 138,933
Charles R. Hogan............... 166,071(2) 0 166,071
Douglas J. McGregor............ 4,294(2) 2,165 6,459
Henry L. Meyer III............. 267,524(1)(2) 8,833 276,357
Steven A. Minter............... 12,279(2) 8,279 20,558
M. Thomas Moore................ 12,500(2) 4,425 16,925
Roger Noall.................... 184,946(1)(2) 10,007 194,953
Richard W. Pogue............... 27,500(2) 0 27,500
K. Brent Somers................ 18,668(1)(2) 0 18,668
Ronald B. Stafford............. 46,341(2) 0 46,341
Dennis W. Sullivan............. 11,700(2) 19,365 31,065
Peter G. Ten Eyck, II.......... 47,413(2) 0 47,413
Nancy B. Veeder................ 45,592(2) 0 45,592
[Nominee]
All directors, nominees and
executive officers as a group
(32).........................
</TABLE>
- ---------------
(1) With respect to KeyCorp Common Shares beneficially held by these individuals
or other executive officers under the KeyCorp 401(k) Savings Plan, the
shares included are as of December 31, 1996.
(2) Includes options vested as of April 1, 1997. The directors, nominees, and
executive officers listed above hold options as follows: Mr.
Allen -- 41,735; Mr. Andrus -- 3,500; Mr. Bares -- 10,500; Mr.
Bersticker -- 10,500; Mr. Commes -- 10,500; Mr. Curtis -- 3,500; Mr.
Dimmer -- 15,018; Ms. Fjeldstad -- 26,766; Mr. Gillespie -- 337,667; Mr.
Hardis -- 10,500; Mr. Hemingway -- 19,536; Mr. Hogan -- 15,018; Mr.
McGregor -- 3,500; Mr. Meyer -- 216,334; Mr. Minter -- 10,500; Mr.
Moore -- 10,500; Mr. Noall -- 128,334; Mr. Pogue -- 10,500; Mr.
Somers -- 16,668; Mr. Stafford -- 40,320; Mr. Sullivan -- 10,500; Mr. Ten
Eyck -- 40,320; Ms. Veeder -- 8,018; all directors, nominees, and executive
officers as a group -- .
(3) Certain of these KeyCorp Common Shares are held in trusts over which Mr.
Hemingway, as a co-trustee, has shared power to vote and dispose of such
Common Shares.
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<PAGE> 43
(4) No director or executive officer beneficially owns more than 1% of the total
of outstanding KeyCorp Common Shares plus options vested as of April 1,
1997.
(5) Investments in phantom stock units by directors are made pursuant to the
KeyCorp Director Deferred Compensation Plan, whereby directors may defer
payment of all or a portion of their directors fees into a Common Share
Account consisting of "phantom stock units." On a quarterly basis, the
Common Share Account is credited with an additional number of phantom stock
units equal to the number of Common Shares that could be purchased at market
value with the sum of the director's deferred fees for the quarter, plus the
amount of quarterly dividends on the phantom stock units in the Common Share
Account during the quarter as if such phantom stock units were Common
Shares. The Common Share Account is distributed only in cash (and never in
Common Shares) and, at the time of distribution, each phantom stock unit is
paid based on the market value of a Common Share at the end of the preceding
calendar quarter. Investments in phantom stock units by executive officers
are made pursuant to KeyCorp's Excess 401(k) Savings Plan (the "Supplemental
Plan"), an excess benefit plan established by KeyCorp. Under the
Supplemental Plan, a "phantom stock" account is established for each
participant and credited with the amount of matching employer and profit
sharing contributions that cannot be credited to the participant's account
in the KeyCorp 401(k) Savings Plan (the "401(k) Plan") because of Internal
Revenue Code limitations. In addition, each participant's phantom stock
account is credited with dividends and other earnings as if it were invested
in the Corporation Stock Fund of the 401(k) Plan. Though contributions to a
participant's phantom stock account are treated as if they were invested in
KeyCorp's Common Shares, a participant's account balance may be paid only in
cash (and never in Common Shares). Because no Common Shares are actually
issued in connection with the Director Deferred Compensation Plan or the
Supplemental Plan (i.e. they are "phantom stock" plans), directors and
executive officers participating in these plans do not have any voting
rights or investment power with respect to or on account of the phantom
stock units, and the phantom stock units do not result in the directors or
executive officers having beneficial ownership of the Common Shares.
1998 SHAREHOLDER PROPOSALS
The deadline for shareholders to submit proposals to be considered for
inclusion in the Proxy Statement for next year's Annual Meeting of Shareholders
is December , 1997.
GENERAL
The Board of Directors knows of no other matters which will be presented at
the meeting. However, if other matters properly come before the meeting or any
adjournment, the person or persons voting the proxy cards will vote them in
accordance with their best judgment on such matters.
Certain rules promulgated by the SEC governing proxy disclosure specify the
circumstances under which KeyCorp is required to include in its proxy statement
a shareholder proposal, including the requirement for timely submission of the
proposal to KeyCorp by the shareholder. If a shareholder desires to bring a
proposal before the Annual Meeting of Shareholders which has not been included
in KeyCorp's proxy statement, the shareholder must strictly comply with the
applicable notice and procedural requirements set forth in KeyCorp's
Regulations. A copy of the Regulations is available to any shareholder, without
charge, upon request to the Secretary of KeyCorp. Pursuant to KeyCorp's current
Regulations, a shareholder must notify KeyCorp not less than 60 nor more than 90
days prior to the meeting of any business the shareholder proposes to bring
before the meeting for a shareholder vote. These provisions of the Regulations
govern proper submission of items to be put to a shareholder vote and do not
preclude discussion by any shareholder of any business properly brought before
the meeting. The Amended and Restated Regulations proposed for adoption by the
shareholders in Issue Three of this Proxy Statement (see pages to ) will not
materially change this procedure.
Shareholders may only nominate a person for election as a director of
KeyCorp at a meeting of shareholders if the nominating shareholder has strictly
complied with the applicable notice and procedural requirements set forth in
KeyCorp's Regulations, including, without limitation, timely providing to the
Secretary of KeyCorp the requisite notice of the proposed nominee(s) containing
all the information specified by the Regulations. KeyCorp will provide to any
shareholder, without charge, a copy of the applicable
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<PAGE> 44
procedures governing nomination of directors set forth in KeyCorp's Regulations
upon request to the Secretary of KeyCorp.
KeyCorp will bear the expense of preparing, printing, and mailing this
Proxy Statement. In addition to solicitation by mail, officers and regular
employees of KeyCorp and its subsidiaries may solicit the return of proxies.
KeyCorp has engaged the services of Morrow & Co., Inc. to assist in the
solicitation of proxies at an anticipated cost of $ plus expenses. KeyCorp
will request brokers, banks, and other custodians, nominees, and fiduciaries to
send proxy material to beneficial owners and will, upon request, reimburse them
for their expense in so doing.
You are urged to complete, date, sign, and return your proxy card promptly
in order to make certain your shares are voted at the meeting. KeyCorp Common
Shares represented by properly executed proxy cards will be voted in accordance
with any specification made thereon and, if no specification is made, will be
voted for the election as directors of the nominees named herein (Issue One of
this Proxy Statement), for the proposed amendments to KeyCorp's Regulations
(Issues Two and Three of this Proxy Statement), against all shareholder
proposals (Issues Four and Five of this Proxy Statement), and in favor of
ratifying the appointment of Ernst & Young LLP as independent auditors for the
fiscal year ending December 31, 1997 (Issue Six of this Proxy Statement). Unless
a broker's authority to vote on a particular matter is limited, abstentions and
broker non-votes are counted in determining the votes present at a meeting.
Consequently, an abstention or a broker non-vote has the same effect as a vote
against a proposal, as each abstention or broker non-vote would be one less vote
in favor of a proposal. You may revoke your proxy by a later proxy received by,
or by giving notice to, KeyCorp, or in open meeting, without affecting any vote
previously taken. However, your mere presence at the meeting will not operate to
revoke your proxy.
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<PAGE> 45
APPENDIX A
The proposed amendment will delete the first sentence of the second
paragraph and the first clause of the first sentence of the third paragraph of
Article II, Section 1 of KeyCorp's Regulations, which currently read as follows:
At the Effective Time (as defined in Section 2 of Article IV of these
Regulations), the number of directors of the Corporation shall be 22,
divided into three classes as follows: one class of seven directors whose
term will expire at the next annual meeting of shareholders occurring after
the Effective Time, one class of seven directors whose term will expire at
the second annual meeting of shareholders occurring after the Effective
Time, and one class of eight directors whose term will expire at the third
annual meeting of shareholders occurring after the Effective Time . . .
The Board of Directors or the shareholders may from time to time fix
or change the size of the Board of Directors to a total number of no fewer
than 20 directors and no more than 24 directors; . . . .
These provisions will be replaced by adding the following sentences at the
beginning of the third paragraph of Article II, Section 1 of KeyCorp's
Regulation:*
As of the conclusion of the 1997 annual meeting of shareholders of the
Corporation, the Board of Directors shall consist of 20 members, divided
into three classes as follows: one class of six directors whose term will
expire at the 1998 annual meeting of shareholders, and two classes of seven
directors whose terms will expire at the 1999 and 2000 annual meetings of
shareholders, respectively. The Board of Directors or the shareholders may
from time to time fix or change the size of the Board of Directors to a
total number of no fewer than 17 and no more than 20 directors (the size of
the Board as from time to time so established being herein referred to as
the "entire authorized Board");
*NOTE: If KeyCorp's shareholders approve the amendment and restatement
of KeyCorp's Regulations as proposed under Issue Three of this Proxy
Statement, the balance of the second paragraph and of the first sentence of
the third paragraph of Article II, Section 1 of KeyCorp's Regulations would
be deleted. Article II, Section 1 would read, in its entirety, as set forth
in Appendix B, pages B-3 to B-4.
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APPENDIX B
AMENDED AND RESTATED
REGULATIONS
OF
KEYCORP
(Effective , 1997)
ARTICLE I
SHAREHOLDERS
Section 1. Place of Meeting. All meetings of the shareholders of the
Corporation shall be held at the office of the Corporation or at such other
places, within or without the State of Ohio, as may from time to time be
determined by the Board of Directors, the Chairman of the Board, or the
President and specified in the notice of such meeting.
Section 2. Annual Meetings. The annual meeting of the shareholders of the
Corporation for the election of directors, the consideration of reports to be
laid before such meeting, and the transaction of such other business as may
properly come before the meeting shall be held (i) on the third Wednesday in May
in each year, if not a legal holiday under the laws of the place where the
meeting is to be held, and, if a legal holiday, then on the next succeeding day
not a legal holiday under the laws of such place, or (ii) on such other date and
at such hour as may from time to time be determined by the Board of Directors,
the Chairman of the Board, or the President.
Section 3. Special Meetings. Except as otherwise required by law and
subject to the rights of the holders of any class or series of preferred stock
of the Corporation, special meetings of the shareholders for any purpose or
purposes may be called only by (i) the Chairman of the Board, (ii) the
President, or, in the case of the President's absence, death, or disability, the
vice president authorized to exercise the authority of the President, (iii) the
Board of Directors by action at a meeting or a majority of the Board of
Directors acting without a meeting, or (iv) persons holding 50% of all shares
outstanding and entitled to vote at the special meeting.
Upon request in writing delivered either in person or by registered mail to
the Chairman of the Board, the President, or the Secretary by any persons
entitled to call a meeting of shareholders, such officer shall forthwith cause
to be given to the shareholders entitled thereto notice of a meeting to be held
on a date not less than ten nor more than 60 days after the receipt of such
request, as such officer may fix. If such notice is not given within 30 days
after the delivery or mailing of such request, the persons calling the meeting
may fix the time of the meeting and give notice thereof in the manner provided
by law or as provided in these Regulations, or cause such notice to be given by
any designated representative.
Section 4. Notice of Meetings. Except as otherwise required by law,
written notice of each meeting of the shareholders, whether annual or special,
shall be given, either by personal delivery or by mail, not less than seven nor
more than 60 days before the date of the meeting to each shareholder of record
entitled to notice of the meeting, by or at the direction of the Chairman of the
Board, President or Secretary or any other person or
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persons required or permitted by these Regulations to give such notice. If
mailed, such notice shall be deemed given when deposited in the United States
mail, postage prepaid, directed to the shareholder at such shareholder's address
as it appears on the records of the Corporation. Each such notice shall state
the place, date, and hour of the meeting, and the purpose or purposes for which
the meeting is called. Notice of adjournment of a meeting of shareholders need
not be given if the time and place to which it is adjourned are fixed and
announced at such meeting.
Section 5. Quorum. Except as otherwise required by law or by the Articles
of Incorporation of the Corporation, the holders of shares entitled to exercise
a majority of the voting power of the Corporation at the meeting shall
constitute a quorum for the transaction of business at any meeting of the
shareholders; provided, however, that no action required by law, by the Articles
of Incorporation of the Corporation, or by these Regulations to be authorized or
taken by the holders of a designated proportion of the shares of any particular
class or of each class of the Corporation may be authorized or taken by a lesser
proportion.
Section 6. Adjournments. The holders of a majority of the voting shares
represented at a meeting, whether or not a quorum is present, may adjourn such
meeting from time to time.
Section 7. Advance Notice of Shareholder Proposals. At any annual meeting
of shareholders, proposals by shareholders and nominations for election as
directors by shareholders shall be considered if advance notice thereof has been
timely given as provided in this Section 7 in the case of proposals by
shareholders, and as provided in Section 2(b) of Article II in the case of
nominations for election as directors by shareholders, and such proposals or
nominations are otherwise proper for consideration under applicable law and the
Articles of Incorporation of the Corporation. Notice of any proposal to be
presented by any shareholder shall be given in writing to the Secretary of the
Corporation, delivered to or mailed and received at the Corporation's principal
executive offices, not less than 60 nor more than 90 days prior to the
shareholders' meeting; provided, however, that in the event that less than 75
days' notice to the shareholders or prior public disclosure of the date of the
meeting is given or made, the written notice of such shareholder's intent to
make such proposal must be given to the Secretary not later than the close of
business on the fifteenth day following the earlier of the day on which such
notice of the date of the meeting was mailed or such public disclosure was made.
Any shareholder who gives notice of any such proposal shall deliver therewith
the text of the proposal to be presented and a brief written statement of the
reasons why such shareholder favors the proposal and setting forth such
shareholder's name and record address, the number and class of all shares of
each class of stock of the Corporation beneficially owned (within the meaning of
Rule 13d-3 promulgated under the Securities Exchange Act of 1934) by such
shareholder and any material interest of such shareholder in the proposal (other
than as a shareholder). The person presiding at the meeting, in addition to
making any other determinations that may be appropriate to the conduct of the
meeting, shall determine whether such notice under this Section 7 or under
Section 2(b) of Article II, as applicable, has been duly given and shall direct
that proposals and nominees not be considered if such notice (together with all
required information to be submitted by such shareholder under this Section 7 or
under Section 2(b) of Article II, as applicable) has not been given. No
proposals by shareholders or nominations for election as director shall be
considered at any special meeting of shareholders unless such special meeting
was called for the purpose of considering such proposal or nomination. If,
pursuant to Rule 14a-8 promulgated under the Securities Exchange Act of 1934
(including as such Rule 14a-8 may be from time to time amended or any rule
promulgated in place thereof or covering the same subject matter; collectively
being herein referred to as "Rule 14a-8") the Corporation is
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required to set forth a proposal of a shareholder in its proxy statement, the
provisions of Rule 14a-8, to the extent applicable, shall prevail over any
conflicting provisions of this Section 7 with respect to that shareholder
proposal.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Number, Classification, and Term of Office. The Board of
Directors shall be divided into three classes. The respective terms of the three
classes of directors are staggered so that at any time the term of one class
will expire at the next annual meeting of shareholders thereafter occurring, the
term of a second class will expire at the second annual meeting of shareholders
thereafter occurring, and the term of a third class will expire at the third
annual meeting of shareholders thereafter occurring. At each annual meeting of
shareholders of the Corporation, the successors to the directors of the class
whose term will expire in that year shall be elected to hold office for a term
expiring at the annual meeting of shareholders occurring in the third year after
the date of their election. In each instance directors shall hold office until
their successors are chosen and qualified, or until the earlier death,
retirement, resignation, or removal of any such director as provided in Section
11 of this Article II.
As of the conclusion of the 1997 annual meeting of shareholders of the
Corporation, the Board of Directors shall consist of 20 members, divided into
three classes as follows: one class of six directors whose term will expire at
the 1998 annual meeting of shareholders, and two classes of seven directors
whose terms will expire at the 1999 and 2000 annual meetings of shareholders,
respectively. The Board of Directors or the shareholders may from time to time
fix or change the size of the Board of Directors to a total number of no fewer
than 17 directors and no more than 20 directors (the size of the Board as from
time to time so established being herein referred to as the "entire authorized
Board"). The Board of Directors may, subject to the limitation contained in the
immediately preceding sentence regarding the number of directors, fix or change
the number of directors by the affirmative vote of a majority of the entire
authorized Board. The shareholders may, subject to the limitation contained in
the second sentence of this paragraph regarding the number of directors, fix or
change the number of directors at a meeting of the shareholders called for the
purpose of electing directors (i) by the affirmative vote of the holders of
shares entitling them to exercise three-quarters of the voting power of the
Corporation represented at the meeting and entitled to elect directors or (ii)
if the proposed change in the number of directors is recommended by a majority
of the entire authorized Board of Directors, by the affirmative vote of the
holders of shares entitling them to exercise a majority of the voting power of
the Corporation represented at the meeting and entitled to elect directors. If
the Board of Directors or the shareholders change the number of directors as
provided above in this paragraph, the three classes of the Board of Directors
shall be divided into as equal a number of directors as possible, with the Board
of Directors or the shareholders, as the case may be, fixing or determining the
adjustment to be made in each class. No reduction in the number of directors
shall of itself have the effect of shortening the term of any incumbent
director. In the event that the Board of Directors increases the number of
directors, it may fill the vacancy or vacancies created by the increase in the
number of directors for the respective unexpired terms in accordance with the
provisions of Section 12 of this Article II. In the event the shareholders
increase the number of directors and fail to fill the vacancy or vacancies
created thereby, the
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Board of Directors may fill such vacancy or vacancies for the respective
unexpired terms in accordance with the provisions of Section 12 of this Article
II.
The number of directors and the number of directors of any class may not be
fixed or changed by the shareholders or directors, except (i) by amending these
Regulations in accordance with the provisions of Article X of these Regulations,
(ii) pursuant to an agreement of merger or consolidation approved by two-thirds
of the members of the entire authorized Board of Directors and adopted by the
shareholders at a meeting held for such purpose by the affirmative vote of the
holders of shares entitling them to exercise a majority of the voting power of
the Corporation on such proposal, or (iii) as provided in the immediately
preceding paragraph of this Section 1 or in the next following paragraph.
The foregoing provisions of this Section 1 are subject to the automatic
increase by two in the authorized number of directors and the right of the
holders of any class or series of preferred stock of the Corporation to elect
two directors of the Corporation during any time when dividends payable on such
shares are in arrears, all as set forth in the Articles of Incorporation of the
Corporation and/or the express terms of the preferred stock of the Corporation.
Section 2. Nominations. Only persons who are nominated in accordance with
the following procedures shall be eligible for election as directors. Subject to
the rights of the holders of any class or series of preferred stock of the
Corporation, nominations for the election of directors may be made only:
(a) by the affirmative vote of a majority of the directors then in
office, and
(b) by any shareholder of the Corporation entitled to vote for the
election of directors at a meeting, but only if written notice of such
shareholder's intent to make such nomination is given to the Secretary of
the Corporation, delivered to or mailed and received at the Corporation's
principal executive offices, not less than 60 nor more than 90 days prior
to the meeting; provided, however, that in the event that less than 75
days' notice to the shareholders or prior public disclosure of the date of
the meeting is given or made, the written notice of such shareholder's
intent to make such nomination must be given to the Secretary not later
than the close of business on the fifteenth day following the earlier of
the day on which such notice of the date of the meeting was mailed or such
public disclosure was made. Each such notice of a shareholder's intent to
make a nomination shall set forth: (A) as to each person who is not an
incumbent director when the shareholder proposes to nominate such person
for election as a director, (1) the name, age, business, and residence
address of such person, (2) the principal occupation or employment of such
person for the last five years, (3) the class and number of shares of
capital stock of the Corporation which are beneficially owned by such
person, (4) all positions of such person as a director, officer, partner,
employee, or controlling shareholder of any corporation or other business
entity, (5) any prior position as a director, officer, or employee of a
depository institution or any company controlling a depository institution,
(6) any other information regarding such person that would be required
pursuant to paragraphs (a), (e), and (f) of Item 401 of Regulation S-K
adopted by the Securities and Exchange Commission (or the corresponding
provisions of any regulations subsequently adopted by the Securities and
Exchange Commission applicable to the Corporation) to be included in a
proxy statement filed pursuant to the proxy rules of the Securities and
Exchange Commission had such person been nominated, or intended to be
nominated, by the Board of Directors, and (7) the written consent of each
nominee to serve as a director of the Corporation if so elected, and (B) as
to the
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shareholder giving the notice, (1) the name and record address of such
shareholder, (2) a representation that the shareholder is a holder of
record of shares of the Corporation entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice, (3) a description of all
arrangements or understandings between the shareholder and each nominee and
any other person or persons (naming such person or persons) pursuant to
which the nomination or nominations are to be made by the shareholder, and
(4) the class and number of shares of capital stock of the Corporation
which are beneficially owned (within the meaning of Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended) by such shareholder.
No person shall be eligible for election as a director unless nominated in
compliance with the provisions of this Section 2.
Section 3. Quorum, Adjournments, and Manner of Acting. Except as otherwise
required by law, the Articles of Incorporation of the Corporation, or these
Regulations, a majority of the entire authorized Board of Directors shall
constitute a quorum for the transaction of business at any meeting of the Board.
Except as otherwise required by law, the Articles of Incorporation of the
Corporation, or these Regulations, the affirmative vote of a majority of the
directors present at any meeting at which a quorum is present shall be the act
of the Board. In the absence of a quorum, a majority of the directors present at
a meeting duly held may adjourn the meeting to another time and place. At any
adjourned meeting at which a quorum is present, any business may be transacted
which might have been transacted at the originally called meeting.
Notwithstanding any contrary provisions of these Regulations, the
affirmative vote of at least two-thirds of the entire authorized Board of
Directors shall be required for the approval or recommendation of any of the
following transactions: (a) any merger or consolidation of the Corporation (i)
with any interested shareholder, as such term is defined in Chapter 1704 of the
Ohio General Corporation Law, or (ii) with any other corporation (which term, as
used in this paragraph, includes, in addition to a corporation, a limited
liability company, partnership, business trust or other entity) if the merger or
consolidation is caused by any interested shareholder, (b) any transaction as a
result of which any person or entity will become an interested shareholder, (c)
any merger or consolidation involving the Corporation with or into any other
corporation if such other corporation, taken on a consolidated basis with its
"parent", if any, and its and its parent's "subsidiaries" (as both terms are
defined by Rule 12b-2 under the Securities Exchange Act of 1934, as amended),
has assets having an aggregate book value equal to 50% or more of the aggregate
book value of all the assets of the Corporation determined on a consolidated
basis, (d) any liquidation or dissolution of the Corporation, (e) any sale,
lease, exchange, mortgage, pledge, transfer, or other disposition (in one
transaction or a series of transactions) to or with an interested shareholder of
assets of the Corporation which assets have an aggregate book value equal to 10%
or more of the aggregate book value of all the assets of the Corporation
determined on a consolidated basis, (f) any sale, lease, exchange, mortgage,
pledge, transfer, or other disposition (in one transaction or a series of
transactions) to or with any person or entity of assets of the Corporation which
assets have an aggregate book value equal to 25% or more of the aggregate book
value of all the assets of the Corporation determined on a consolidated basis,
(g) any transaction which results in the issuance or transfer by the Corporation
to any person or entity of voting stock of the Corporation in an amount greater
than 15% of the outstanding voting stock of the Corporation before giving effect
to the issuance or transfer, (h) any transaction involving the Corporation which
has the effect, directly or indirectly, of increasing the proportionate share of
the stock or securities of any class or series of the Corporation which is
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owned by an interested shareholder, and (i) any transaction which results in the
receipt by an interested shareholder, other than proportionately as a
shareholder of the Corporation, of the benefit, directly or indirectly, of any
loans, advances, guarantees, pledges, or other financial benefits provided
through the Corporation.
Section 4. Place of Meeting. The Board of Directors may hold its meetings
at such place or places within or without the State of Ohio as the Board may
from time to time determine or as shall be specified or fixed in the respective
notices or waivers of notice thereof.
Section 5. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such times and places as the Board shall from time to time
determine. If any day fixed for a regular meeting shall be a legal holiday under
the laws of the place where the meeting is to be held, the meeting which would
otherwise be held on that day shall be held at the same hour on the next
succeeding business day or at such other time and place as the Board shall
determine.
Section 6. Special Meetings. Special meetings of the Board of Directors
shall be held whenever called by the Chairman of the Board or the President or
by a majority of the directors then in office.
Section 7. Notice of Meetings. Notice of regular meetings of the Board of
Directors or of any adjourned meeting thereof need not be given. Notice of each
special meeting of the Board shall be mailed to each director, addressed to such
director at such director's residence or usual place of business, at least two
days before the day on which the meeting is to be held or shall be sent to such
director at such place by telegraph, telex, or telecopier (or similar facsimile
transmission), or be given personally or by telephone, not later than the day
before the meeting is to be held, but notice need not be given to any director
who shall, either before or after the meeting, submit a signed waiver of such
notice or who shall attend such meeting without protesting prior to or at its
commencement, the lack of notice to such director. Every such notice shall state
the time and place but need not state the purpose of the meeting.
Section 8. Participation in Meeting by Means of Communications
Equipment. Any one or more members of the Board of Directors or any committee
thereof may participate in any meeting of the Board or of any such committee by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at such meeting.
Section 9. Action Without Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors or any committee thereof may be
authorized or taken without a meeting with the affirmative vote or approval of,
and in a writing or writings signed by, all the directors or all the committee
members, which writing or writings shall be filed with or entered upon the
records of the Corporation.
Section 10. Resignations. Any director of the Corporation may resign at
any time by oral statement to that effect made at a meeting of the Board of
Directors or any committee thereof or by giving written notice to the Board of
Directors, the Chairman of the Board, the President, or the Secretary of the
Corporation. Such resignation shall take effect at the date of receipt of such
notice or at any later date specified therein and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
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Section 11. Removal of Directors. The Board of Directors may remove any
director and thereby create a vacancy on the Board: (a) if by order of court the
director has been found to be of unsound mind or if the director is adjudicated
a bankrupt or (b) if within 60 days from the date of such director's election
the director does not qualify by accepting in writing the election to such
office or by acting at a meeting of directors.
All the directors, or all of the directors of a particular class, or any
individual director, may be removed from office, without assigning any cause, by
the affirmative vote of the holders of shares entitling them to exercise
three-quarters of the voting power of the Corporation entitled to elect
directors in place of those to be removed. In case of any such removal, a new
director nominated in accordance with Section 2 of this Article II may be
elected at the same meeting for the unexpired term of each director removed.
Failure to elect a director to fill the unexpired term of any director removed
shall be deemed to create a vacancy on the Board.
Section 12. Vacancies. Any vacancies on the Board of Directors resulting
from death, resignation, removal, or other cause may be filled by the
affirmative vote of a majority of the directors then in office, even though less
than a quorum of the Board of Directors, or by a sole remaining director. Newly
created directorships resulting from any increase in the number of directors by
action of the Board of Directors may be filled by the affirmative vote of a
majority of the directors then in office, or if not so filled, by the
shareholders at the next annual meeting thereof or at a special meeting called
for that purpose in accordance with Section 3 of Article I of these Regulations.
In the event the shareholders increase the authorized number of directors in
accordance with these Regulations but fail at the meeting at which such increase
is authorized, or an adjournment of that meeting, to elect the additional
directors provided for, or if the shareholders fail at any meeting to elect the
whole authorized number of directors, such vacancies may be filled by the
affirmative vote of a majority of the directors then in office. Any director
elected in accordance with the three preceding sentences of this Section 12
shall hold office for the remainder of the full term of the class of directors
in which the new directorship was created or the vacancy occurred and until such
director's successor shall have been elected and qualified. The provisions of
this Section 12 shall not restrict the rights of holders of any class or series
of preferred stock of the Corporation to fill vacancies in directors elected by
such holders as provided by the express terms of the preferred stock.
ARTICLE III
EXECUTIVE AND OTHER COMMITTEES
Section 1. Executive Committee. The Board of Directors may, by resolution
adopted by the affirmative vote of a majority of the entire authorized Board,
designate annually (i) four or more of its members to constitute members of an
Executive Committee of the Board of Directors of the Corporation (the "Executive
Committee") and (ii) one or more of its members to be alternate members of the
Executive Committee to take the place of any absent member or members at any
meeting of the Executive Committee. The Executive Committee shall have and may
exercise, between meetings of the Board, all the powers and authority of the
Board in the management of the business and affairs of the Corporation,
including, without limitation, the power and authority to declare a dividend and
to authorize the issuance of stock, and may authorize the seal of the
Corporation to be affixed to all papers which may require it, except that the
Executive Committee shall
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not have such power or authority in reference to filling vacancies on the Board
or on any committee of the Board, including the Executive Committee.
The Board shall have power at any time by the affirmative vote of a
majority of the entire authorized Board to change the membership of the
Executive Committee, to fill all vacancies in it, and to discharge it, either
with or without cause.
Section 2. Other Committees. The Board of Directors may, by resolution
adopted by the affirmative vote of a majority of the entire authorized Board,
designate from among its members one or more other committees, each of which
shall (i) consist of not less than three directors, together with such
alternates as the Board of Directors may appoint to take the place of any absent
member or members at any meeting of such committee, and (ii) except as otherwise
prescribed by law, have such authority of the Board as may be specified in the
resolution of the Board designating such committee. The Board shall have power
at any time, by the affirmative vote of a majority of the entire authorized
Board, to change the membership of, to fill all vacancies in, and to discharge
any such committee, either with or without cause.
Section 3. Procedure, Meetings, and Quorum. Regular meetings of the
Executive Committee or any other committee of the Board of Directors, of which
no notice shall be necessary, may be held at such times and places as may be
fixed by a majority of the members thereof. Special meetings of the Executive
Committee or any other committee of the Board shall be called at the request of
the Chairman of the Board or the President or the chairman of any committee.
Notice of each special meeting of the Executive Committee or any other committee
of the Board shall be sent by mail to each member thereof at such member's
residence or usual place of business, at least two days before the day on which
the meeting is to be held, or shall be sent to such member at such place by
telegraph, telex, or telecopier (or similar facsimile transmission), or be given
personally or by telephone to each member thereof not later than the day before
the day on which the meeting is to be held, but notice need not be given to any
member who shall, either before or after the meeting, submit a signed waiver of
such notice or who shall attend such meeting without protesting, prior to or at
its commencement, the lack of such notice to such member. Any special meeting of
the Executive Committee or any other committee of the Board shall be a legal
meeting without any notice thereof having been given, if all the members thereof
shall be present thereat. Notice of any adjourned meeting of any committee of
the Board need not be given. The Executive Committee or any other committee of
the Board may adopt such rules and regulations not inconsistent with the
provisions of law, the Articles of Incorporation of the Corporation, or these
Regulations for the conduct of its meetings as the Executive Committee or any
other committee of the Board may deem proper. A majority of the members of the
Executive Committee or any other committee of the Board shall constitute a
quorum for the transaction of business at any meeting, and the vote of a
majority of the members thereof present at any meeting at which a quorum is
present shall be the act of such committee. The Executive Committee or any other
committee of the Board of Directors shall keep written minutes of its
proceedings and shall report on such proceedings to the Board.
ARTICLE IV
OFFICERS
Section 1. Election and Term of Office. The officers of the Corporation
shall consist of a President, a Secretary, a Treasurer, and such other officers
(including, without limitation, if so desired by the Board of
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Directors, a Chairman of the Board, a Chief Executive Officer, a Chief Operating
Officer, a Chief Financial Officer, and one or more Vice Presidents) and
assistant officers, all with such titles, authorities, and duties as the Board
of Directors may from time to time determine. The officers shall be elected by
the Board of Directors. The Chairman of the Board, if one is elected, shall be a
director. Any two or more offices may be held by the same person, but no officer
shall execute, acknowledge, or verify any instrument in more than one capacity
if such instrument is required by law, the Articles of Incorporation of the
Corporation, or these Regulations to be executed, acknowledged, or verified by
two or more officers. Unless the directors expressly elect an officer for a
longer or shorter term, each officer shall hold office until the next annual
organization meeting of the directors following election of the officer (or, if
neither such officer nor a successor is elected at such annual organization
meeting, until such officer or such officer's successor is elected) or until the
earlier resignation, removal from office, or death of the officer.
Section 2. Authority and Duties of Officers. The officers of the
Corporation shall have such authority and shall perform such duties as are
customarily incident to their respective offices, or as may be determined by the
Board of Directors, regardless of whether such authority and duties are
customarily incident to such offices. Unless otherwise determined by the Board
of Directors, the Chairman of the Board, if any, shall preside at all meetings
of the Board of Directors and at all meetings of the shareholders. In the event
a Chairman of the Board has not been elected or is otherwise absent, the
President (or such other officer designated by the Board of Directors) shall
preside at such meetings.
Section 3. Removal. Any officer may at any time be removed, either with or
without cause, by the Board of Directors or any authorized committee thereof or
by any superior officer upon whom such power may be conferred by the Board or
any authorized committee thereof; provided however, that the removal of the most
senior (in authority) officer of the Corporation shall require the affirmative
vote of at least a majority of the entire authorized Board. The removal of any
officer shall be without prejudice to the contract rights, if any, of such
officer.
Section 4. Resignation. Any officer may resign at any time by giving
notice to the Board of Directors, the Chairman of the Board, the President, or
the Secretary of the Corporation. Any such resignation shall take effect at the
date of receipt of such notice or at any later date specified therein and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 5. Vacancies. A vacancy in any office because of death,
retirement, resignation, removal, or any other cause may be filled by the Board
of Directors.
ARTICLE V
INDEMNIFICATION
The Corporation shall indemnify, to the full extent permitted or authorized
by the Ohio General Corporation Law as it may from time to time be amended, any
person 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 he or she is or was a director,
officer, or employee of the Corporation, or is or was serving at the request of
the Corporation as a director, trustee, officer, or employee of a bank, other
corporation, partnership, joint venture, trust, or other enterprise. In the case
of a merger into this Corporation
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of a constituent corporation which, if its separate existence had continued,
would have been required to indemnify directors, officers, or employees in
specified situations prior to the merger, any person who served as a director,
officer, or employee of the constituent corporation, or served at the request of
the constituent corporation as a director, trustee, officer, or employee of a
bank, other corporation, partnership, joint venture, trust, or other enterprise,
shall be entitled to indemnification by this Corporation (as the surviving
corporation) for acts, omissions, or other events or occurrences prior to the
merger to the same extent he or she would have been entitled to indemnification
by the constituent corporation if its separate existence had continued. The
indemnification provided by this Article V shall not be deemed exclusive of any
other rights to which any person seeking indemnification may be entitled under
the Articles of Incorporation of the Corporation or these Regulations, or any
agreement, vote of shareholders or disinterested directors, or otherwise, both
as to action in his or her official capacity and as to action in another
capacity while holding such office, and shall continue as to a person who has
ceased to be a director, trustee, officer, or employee and shall inure to the
benefit of the heirs, executors, and administrators of such a person.
ARTICLE VI
CAPITAL STOCK
Section 1. Certificates for Shares. Certificates representing shares of
stock of each class of the Corporation, whenever authorized by the Board of
Directors, shall be in such form as shall be approved by the Board or by the
Chairman of the Board or President or a Vice President and the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer. The certificates
representing shares of stock of each class shall be signed by, or in the name
of, the Corporation by the Chairman of the Board or the President or a Vice
President and by the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer of the Corporation. Any or all such signatures may be
facsimiles, engraved, stamped, or printed if countersigned by an incorporated
transfer agent or registrar. Although any officer, transfer agent or registrar
whose manual or facsimile signature is affixed to such a certificate ceases to
be such officer, transfer agent, or registrar before such certificate has been
delivered, such certificate nevertheless shall be effective in all respects when
delivered. The Corporation may issue shares of any class of its capital stock
without issuing certificates therefor.
Section 2. Transfer of Shares. Transfers of shares of stock of each class
of the Corporation shall be made only on the books of the Corporation by the
holder thereof, or by such holder's attorney thereunto authorized by a power of
attorney duly executed and filed with the Secretary of the Corporation or a
transfer agent for such stock, if any, and on surrender of the certificate or
certificates for such shares properly endorsed or accompanied by a duly executed
stock transfer power and the payment of all taxes thereon. The person in whose
name shares stand on the books of the Corporation shall be deemed the owner
thereof for all purposes as regards the Corporation. No transfer of shares shall
be valid as against the Corporation and its shareholders and creditors for any
purpose until it shall have been entered in the stock records of the Corporation
by an entry showing from and to whom transferred.
Section 3. Lost, Destroyed, and Mutilated Certificates. The holder of any
share of stock of the Corporation shall immediately notify the Corporation of
any loss, theft, destruction, or mutilation of the certificate therefor; the
Corporation may issue to such holder a new certificate or certificates for
shares, upon
B-10
<PAGE> 56
the surrender of the mutilated certificate or, in the case of loss, theft, or
destruction of the certificate, upon satisfactory proof of such loss, theft, or
destruction; the Corporation, or the transfer agents and registrars for the
stock, may, in their discretion, require the owner of the lost, stolen, or
destroyed certificate, or such person's legal representative, to provide the
Corporation a bond in such sum and with such surety or sureties as they may
direct to indemnify the Corporation and such transfer agents and registrars
against any claim that may be made on account of the alleged loss, theft, or
destruction of any such certificate or the issuance of such new certificate.
Section 4. Regulations. The Board of Directors may make such additional
rules and regulations as it may deem expedient concerning the issue and transfer
of certificates representing shares of stock of each class of the Corporation
and may make such rules and take such action as it may deem expedient concerning
the issue of certificates in lieu of certificates claimed to have been lost,
destroyed, stolen, or mutilated.
ARTICLE VII
RECORD DATES
For any lawful purpose, including the determination of the shareholders who
are entitled to receive notice of or to vote at a meeting of the shareholders,
the Board of Directors may fix a record date in accordance with the provisions
of the Ohio General Corporation Law. The record date for the purpose of the
determination of the shareholders who are entitled to receive notice of or to
vote at a meeting of the shareholders shall continue to be the record date for
all adjournments of the meeting unless the Board of Directors or the persons who
shall have fixed the original record date shall, subject to the limitations set
forth in the Ohio General Corporation Law, fix another date and shall cause
notice thereof and of the date to which the meeting shall have been adjourned to
be given to shareholders of record as of the newly fixed date in accordance with
the same requirements as those applying to a meeting newly called. The Board of
Directors may close the share transfer books against transfers of shares during
the whole or any part of the period provided for in this Article VII, including
the date of the meeting of the shareholders and the period ending with the date,
if any, to which adjourned. If no record date is fixed therefor, the record date
for determining the shareholders who are entitled to receive notice of a meeting
of the shareholders shall be the date next preceding the day on which notice is
given, and the record date for determining the shareholders who are entitled to
vote at a meeting of shareholders shall be the date next preceding the day on
which the meeting is held.
ARTICLE VIII
CORPORATE SEAL
The corporate seal of this Corporation shall be circular in form and shall
contain the name of the Corporation. Failure to affix the seal to any instrument
or document executed on behalf of the Corporation shall not affect the validity
of such instrument or document unless otherwise expressly provided by law.
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<PAGE> 57
ARTICLE IX
OFFICES
The headquarters and principal executive offices of the Corporation shall
be located in the City of Cleveland, County of Cuyahoga, State of Ohio. The
Corporation may also have such other office or offices, and keep the books and
records of the Corporation, except as may otherwise be required by law, at such
other place or places, either within or without the State of Ohio, as the Board
of Directors may from time to time determine or the business of the Corporation
may require.
ARTICLE X
AMENDMENTS
These Regulations may be amended, repealed, or altered or new Regulations
may be adopted (i) at a meeting of shareholders, by the affirmative vote of the
holders of shares entitling them to exercise three-quarters of the voting power
of the Corporation on such proposal, provided, however, if such amendment,
repeal, alteration, or adoption is recommended by at least two-thirds of the
entire authorized Board of Directors, the shareholder vote required shall be the
affirmative vote of the holders of shares entitling them to exercise a majority
of the voting power of the Corporation on such proposal, or (ii) without a
meeting, by the written consent of the holders of shares entitling them to
exercise 100% of the voting power of the Corporation on such proposal.
It is the intent that these Regulations be enforced to the maximum extent
permitted by law. If in any judicial proceeding, a court shall refuse to enforce
any provision of these Regulations for the reason that such provision (or
portion thereof) is deemed to be unenforceable or invalid under applicable law,
then it is the intent that such otherwise unenforceable or invalid provision (or
portion thereof) be enforced and valid to the maximum extent permitted by
applicable law. The invalidity or unenforceability of any provision (or portion
thereof) of these Regulations shall not invalidate or render unenforceable any
other provision (or the balance of the otherwise enforceable or valid provision)
of these Regulations, as each provision (and portion thereof) is intended to be
severable.
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<PAGE> 58
[KEYCORP LOGO]
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
KEYCORP FOR THE ANNUAL MEETING ON MAY 15, 1997.
P The undersigned hereby constitutes and appoints Robert W.
R Gillespie, Henry L. Meyer III, and Thomas C. Stevens, and each of
O them, his/her true and lawful agents and proxies with full power of
X substitution in each to represent the undersigned at the Annual
Y Meeting of Shareholders of KeyCorp to be held on May 15, 1997, and
at any adjournments or postponements thereof, on all matters
properly coming before said meeting.
<TABLE>
<S> <C>
1. Election of Directors: The nominees of the Board of Directors to the class (Change of Address/Comments)
whose term of office will expire in 2000 are:
William G. Bares, Robert W. Gillespie, Henry S. Hemingway, ------------------------------------------
Henry L. Meyer III, Steven A. Minter, Ronald B. Stafford, ________.
------------------------------------------
2. Amendment to Regulations concerning size of the Board of Directors.
------------------------------------------
3. Amendment and Restatement of Regulations.
------------------------------------------
4. Proposal withdrawing management's authority to vote unmarked proxy (If you have written in the above space,
cards. please mark the corresponding box on the
reverse side of this card.)
5. Proposal requiring the annual election of all directors.
6. Proposal to ratify the appointment of Ernst & Young LLP as independent
auditors for the fiscal year ending December 31, 1997.
</TABLE>
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE
APPROPRIATE BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES
IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS'
RECOMMENDATIONS. YOUR SHARES CANNOT BE VOTED UNLESS YOU SIGN AND
RETURN THIS CARD.
SEE REVERSE
SIDE
<PAGE> 59
<TABLE>
<S> <C> <C> <C>
[X] PLEASE MARK YOUR SHARES IN YOUR NAME REINVESTMENT SHARES
VOTES AS IN THIS
EXAMPLE.
</TABLE>
<TABLE>
<CAPTION>
FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Election of [ ] [ ] 2. Amendment to [ ] [ ] [ ] 3. Amendment and [ ] [ ] [ ]
Directors Regulations Restatement of
(see reverse) Concerning Size Regulations.
of Board of
Directors. THE BOARD OF DIRECTORS RECOMMENDS A VOTE
For, except vote withheld from FOR ISSUE 3.
the following nominee(s): THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR ISSUE 2. 4. Proposal [ ] [ ] [ ]
withdrawing
_______________________________ management's
authority
to vote unmarked
proxy cards.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST ISSUE 4.
5. Proposal [ ] [ ] [ ]
requiring the
annual election
of all directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST ISSUE 5.
6. Ratification of [ ] [ ] [ ]
appointment of
independent
auditors.
[ ] THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR ISSUE 6.
Change of
Address/Comments This proxy when properly
on Reverse Side. executed will be voted in
the manner directed herein
by the undersigned
shareholder. If no
direction is made, this
proxy will be voted FOR the
election of the nominees
listed on the reverse, FOR
Issues 2, 3 and 6 and
AGAINST Issues 4 and 5.
In accordance with their
judgment, the proxies are
authorized to vote upon any
other matters that may
SIGNATURE(S) _____________________________________________ DATE______________ properly come before the
meeting. The signer hereby
revokes all proxies
SIGNATURE(S) _____________________________________________ DATE______________ heretofore given by the
NOTE: Please sign exactly as name appears hereon. Joint owners should each signer to vote at said
sign. When signing as attorney, executor, administrator, trustee or meeting or any adjournments
guardian, please give full title as such. thereof.
</TABLE>
