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<SEC-DOCUMENT>0000950152-03-003197.txt : 20030321
<SEC-HEADER>0000950152-03-003197.hdr.sgml : 20030321
<ACCEPTANCE-DATETIME>20030321110309
ACCESSION NUMBER: 0000950152-03-003197
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 18
CONFORMED PERIOD OF REPORT: 20021231
FILED AS OF DATE: 20030321
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: KEYCORP /NEW/
CENTRAL INDEX KEY: 0000091576
STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021]
IRS NUMBER: 346542451
STATE OF INCORPORATION: OH
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-11302
FILM NUMBER: 03611514
BUSINESS ADDRESS:
STREET 1: 127 PUBLIC SQ
CITY: CLEVELAND
STATE: OH
ZIP: 44114-1306
BUSINESS PHONE: 2166896300
MAIL ADDRESS:
STREET 1: 127 PUBLIC SQ
CITY: CLEVELAND
STATE: OH
ZIP: 44114-1306
FORMER COMPANY:
FORMER CONFORMED NAME: SOCIETY CORP
DATE OF NAME CHANGE: 19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>l97974ae10vk.txt
<DESCRIPTION>KEYCORP 12-31-2002
<TEXT>
<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-850
[KEYCORP LOGO]
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO
---------------------------
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
127 PUBLIC SQUARE, CLEVELAND, OHIO
---------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
34-6542451
---------------------------------------
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
44114-1306
----------------
(ZIP CODE)
(216) 689-6300
----------------------------------------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
<Table>
<S> <C>
Securities registered pursuant Securities registered pursuant
to Section 12(b) of the Act: to Section 12(g) of the Act:
Common Shares, $1 par value
Rights to Purchase Common Shares None
- ------------------------------------------------ ------------------------------------------------
(TITLE OF EACH CLASS) (TITLE OF CLASS)
New York Stock Exchange
- ------------------------------------------------
(NAME OF EACH EXCHANGE ON WHICH REGISTERED)
</Table>
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X]
No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes [X]
No [ ]
The aggregate market value of voting stock held by nonaffiliates of the
Registrant was approximately $10,038,678,546 at February 28, 2003. (The
aggregate market value has been computed using the closing market price of the
stock as reported by the New York Stock Exchange on February 28, 2003.)
423,037,444 Shares
- --------------------------------------------------------------------------------
(NUMBER OF KEYCORP COMMON SHARES OUTSTANDING AS OF FEBRUARY 28, 2003)
Certain specifically designated portions of KeyCorp's 2002 Annual Report to
Shareholders are incorporated by reference into Parts I, II and IV of this Form
10-K. Certain specifically designated portions of KeyCorp's definitive Proxy
Statement for its 2003 Annual Meeting of Shareholders are incorporated by
reference into Part III of this Form 10-K.
<PAGE>
KEYCORP
2002 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
<Table>
<Caption>
ITEM PAGE
NUMBER NUMBER
- ------ ------
<C> <S> <C>
PART I
1 Business.................................................... 1
2 Properties.................................................. 8
3 Legal Proceedings........................................... 8
4 Submission of Matters to a Vote of Security Holders......... 8
PART II
5 Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 8
6 Selected Financial Data..................................... 9
7 Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 9
7A Quantitative and Qualitative Disclosures about Market
Risk...................................................... 9
8 Financial Statements and Supplementary Data................. 9
9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 9
PART III
10 Directors and Executive Officers of the Registrant.......... 9
11 Executive Compensation...................................... 9
12 Security Ownership of Certain Beneficial Owners and
Management................................................ 10
13 Certain Relationships and Related Transactions.............. 10
14 Controls and Procedures..................................... 10
PART IV
15 Exhibits, Financial Statement Schedules, and Reports on Form
8-K....................................................... 11
Signatures.................................................. 15
Management Certifications................................... 16
Exhibits....................................................
</Table>
<PAGE>
PART I
ITEM 1. BUSINESS
OVERVIEW
KeyCorp is a legal entity separate and distinct from its banking and other
subsidiaries. Accordingly, the right of KeyCorp, its security holders and its
creditors to participate in any distribution of the assets or earnings of
KeyCorp's banking and other subsidiaries is subject to the prior claims of the
respective creditors of such banking and other subsidiaries, except to the
extent that KeyCorp's claims in its capacity as creditor of such banking and
other subsidiaries may be recognized.
KeyCorp, organized in 1958 under the laws of the state of Ohio, is headquartered
in Cleveland, Ohio. It has elected to be a bank holding company and a financial
holding company under the Bank Holding Company Act of 1956, as amended ("BHCA").
At December 31, 2002, KeyCorp was one of the nation's largest bank-based
financial services companies with consolidated total assets of $85.2 billion.
Its subsidiaries provide a wide range of retail and commercial banking,
commercial leasing, investment management, consumer finance and investment
banking products and services to individual, corporate and institutional clients
through three major business groups: Key Consumer Banking, Key Corporate Finance
and Key Capital Partners. As of December 31, 2002, these services were provided
across much of the country through subsidiaries operating 910 full-service
retail banking branches ("KeyCenters"), a telephone banking call center services
group and 2,165 ATMs in 17 states. Additional information pertaining to the
three business lines referred to above is included in the "Line of Business
Results" section beginning on page 24 and in Note 4 ("Line of Business
Results"), beginning on page 65 of the Financial Review section of KeyCorp's
2002 Annual Report to Shareholders and is incorporated herein by reference.
KeyCorp and its subsidiaries have 20,437 full-time equivalent employees as of
December 31, 2002.
In addition to the customary banking services of accepting deposits and making
loans, KeyCorp's bank and trust company subsidiaries provide specialized
services, including personal and corporate trust services, personal financial
services, customer access to mutual funds, cash management services, investment
banking and capital markets products, and international banking services.
Through its subsidiary banks, trust company and registered investment adviser
subsidiaries, KeyCorp provides investment management services to individual and
institutional clients, including large corporate and public retirement plans,
foundations and endowments, high net worth individuals and Taft-Hartley plans
(i.e., multiemployer trust funds established for providing pension, vacation or
other benefits to employees).
KeyCorp provides other financial services both inside and outside of its primary
banking markets through its nonbank subsidiaries. These services include
accident and health insurance on loans made by subsidiary banks, principal
investing, community development financing, securities underwriting and
brokerage and other financial services. KeyCorp is an equity participant in a
joint venture with Key Merchant Services, LLC, which provides merchant services
to businesses.
1
<PAGE>
The following financial data is included in the Financial Review section of
KeyCorp's 2002 Annual Report to Shareholders and is incorporated herein by
reference as indicated below:
<Table>
<Caption>
DESCRIPTION OF FINANCIAL DATA PAGE
- ----------------------------- ----
<S> <C>
Selected Financial Data..................................... 23
Average Balance Sheets, Net Interest Income and
Yields/Rates.............................................. 28
Components of Net Interest Income Changes................... 31
Composition of Loans........................................ 37
Maturities and Sensitivity of Certain Loans to Changes in
Interest Rates............................................ 40
Securities Available for Sale............................... 41
Investment Securities....................................... 41
Allocation of the Allowance for Loan Losses................. 42
Summary of Loan Loss Experience............................. 44
Summary of Nonperforming Assets and Past Due Loans.......... 45
Maturity Distribution of Time Deposits of $100,000 or
More...................................................... 46
Impaired Loans and Other Nonperforming Assets............... 72
Short-Term Borrowings....................................... 74
</Table>
The executive offices of KeyCorp are located at 127 Public Square, Cleveland,
Ohio 44114-1306, and its telephone number is (216) 689-6300.
ACQUISITIONS AND DIVESTITURES
The information presented in Note 3 ("Acquisitions and Divestitures") on page 64
of the Financial Review section of KeyCorp's 2002 Annual Report to Shareholders
is incorporated herein by reference.
COMPETITION
The market for banking and related financial services is highly competitive.
KeyCorp and its subsidiaries ("Key") compete with other providers of financial
services, such as other bank holding companies, commercial banks, savings
associations, credit unions, mortgage banking companies, finance companies,
mutual funds, insurance companies, investment management firms, investment
banking firms, broker-dealers and a growing list of other local, regional and
national institutions which offer financial services. Key competes by offering
quality products and innovative services at competitive prices.
In recent years, mergers between financial institutions have led to greater
concentration in the banking industry and placed added competitive pressure on
Key's core banking services. In addition, competition has intensified as a
consequence of the financial modernization laws that were enacted in November
1999 and permit qualifying financial institutions to expand into other
activities. For example, commercial banks are now permitted to have affiliates
that underwrite and deal in securities, underwrite insurance and make merchant
banking investments under certain conditions. See "Financial Modernization
Legislation" on page 7.
SUPERVISION AND REGULATION
The following discussion addresses certain material elements of the regulatory
framework applicable to bank holding companies and their subsidiaries and
provides certain specific information regarding Key. The regulatory framework is
intended primarily to protect customers and depositors, the deposit insurance
funds of the Federal Deposit Insurance Corporation ("FDIC") and the banking
system as a whole, and generally is not intended to protect security holders.
Set forth below is a brief discussion of selected laws, regulations and
regulatory agency policies applicable to Key. This discussion is not intended to
be comprehensive and is qualified in its entirety by reference to the full text
of the statutes, regulations and regulatory agency policies to which the
discussion refers. Changes in applicable laws, regulations and regulatory agency
policies cannot necessarily be predicted by management, yet such changes may
have a material effect on Key's business, financial condition or results of
operations.
2
<PAGE>
General
As a bank holding company, KeyCorp is subject to regulation, supervision and
examination by the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") under the BHCA. Under the BHCA, bank holding companies
may not, in general, directly or indirectly acquire the ownership or control of
more than 5% of the voting shares, or substantially all of the assets, of any
bank, without the prior approval of the Federal Reserve Board. In addition, bank
holding companies are generally prohibited under the BHCA from engaging in
commercial or industrial activities. KeyCorp's bank subsidiaries are also
subject to extensive regulation, supervision and examination by applicable
federal banking agencies. KeyCorp operates two full-service, FDIC-insured
national bank subsidiaries, KeyBank National Association ("KBNA") and Key Bank
USA, National Association ("Key Bank USA"), and one national bank subsidiary
whose activities are limited to those of a fiduciary. All of KeyCorp's national
bank subsidiaries and their subsidiaries are subject to regulation, supervision
and examination by the Office of the Comptroller of the Currency (the "OCC").
Because the deposits in KBNA and Key Bank USA are insured (up to applicable
limits) by the FDIC, the FDIC also has certain regulatory and supervisory
authority over both banking subsidiaries.
KeyCorp also has other financial services subsidiaries that are subject to
regulation, supervision and examination by the Federal Reserve Board, as well as
other applicable state and federal regulatory agencies and self-regulatory
organizations. For example, KeyCorp's brokerage and asset management
subsidiaries are subject to supervision and regulation by the Securities and
Exchange Commission (the "SEC"), the National Association of Securities Dealers,
Inc. or the New York Stock Exchange and state securities regulators, and
KeyCorp's insurance subsidiaries are subject to regulation by the insurance
regulatory authorities of the various states. Other nonbank subsidiaries of
KeyCorp are subject to other laws and regulations of both the federal government
and the various states in which they are authorized to do business.
Dividend Restrictions
The principal source of cash flow to KeyCorp, including cash flow to pay
dividends on its common shares and debt service on its indebtedness, is
dividends from its subsidiaries. Various statutory and regulatory provisions
limit the amount of dividends that may be paid by KeyCorp's bank subsidiaries
without regulatory approval. The approval of the OCC is required for the payment
of any dividend by a national bank if the total of all dividends declared by the
board of directors of such bank in any calendar year would exceed the total of:
(i) the bank's net income for the current year plus (ii) the retained net income
(as defined and interpreted by regulation) for the preceding two years, less any
required transfer to surplus or a fund for the retirement of any preferred
stock. In addition, a national bank can pay dividends only to the extent of its
undivided profits. All of KeyCorp's national bank subsidiaries are subject to
these restrictions.
If, in the opinion of a federal banking agency, a depository institution under
its jurisdiction is engaged in or is about to engage in an unsafe or unsound
practice (which, depending on the financial condition of the institution, could
include the payment of dividends), the agency may require, after notice and
hearing, that such institution cease and desist from such practice. The OCC and
the FDIC have indicated that paying dividends that would deplete a depository
institution's capital base to an inadequate level would be an unsafe and unsound
practice. Moreover, under the Federal Deposit Insurance Act (the "FDIA"), an
insured depository institution may not pay any dividend if payment would cause
it to become less than "adequately capitalized," nor may such an institution pay
any dividend while the institution is in default in the payment of any
assessment due to the FDIC. See "Regulatory Capital Standards and Related
Matters -- Prompt Corrective Action." Also, the Federal Reserve Board, the OCC
and the FDIC have issued policy statements that provide that FDIC-insured
depository institutions and their holding companies should generally pay
dividends only out of their current operating earnings.
Holding Company Structure
Transactions Involving Bank Subsidiaries. KeyCorp's national bank subsidiaries
(and their operating subsidiaries) are subject to Federal Reserve Act
provisions, which impose qualitative standards and quantitative limitations upon
certain transactions with or involving KeyCorp (and its nonbank subsidiaries
which are not operating
3
<PAGE>
subsidiaries of KeyCorp's national banks). Transactions covered by these
provisions, which include loans and other extensions of credit as well as
purchases and sales of assets, must be on arm's length terms, cannot exceed
certain amounts which are determined with reference to the bank's regulatory
capital, and if a loan or other extension of credit, must be secured by
collateral in an amount and quality expressly prescribed by statute. For
example, the aggregate of all such outstanding covered transactions by KBNA and
Key Bank USA, including their operating subsidiaries, with or involving KeyCorp
and its nonbank subsidiaries that are not operating subsidiaries of KBNA and Key
Bank USA was limited at December 31, 2002, to approximately $1.9 billion. As a
result, these provisions materially restrict the ability of KeyCorp's national
bank subsidiaries and their operating subsidiaries to fund KeyCorp and its
nonbank subsidiaries that are not operating subsidiaries of KeyCorp's national
banks.
Source of Strength Doctrine. Under Federal Reserve Board policy, a bank holding
company is expected to serve as a source of financial and managerial strength to
each of its subsidiary banks and, under appropriate circumstances, to commit
resources to support each such subsidiary bank. This support may be required by
the Federal Reserve Board at times when KeyCorp may not have the resources to
provide it, or, for other reasons, would not otherwise be inclined to provide
it. Certain loans by a bank holding company to a subsidiary bank are subordinate
in right of payment to deposits in, and certain other indebtedness of, the
subsidiary bank. In addition, the Crime Control Act of 1990 provides that in the
event of a bank holding company's bankruptcy, any commitment by a bank holding
company to a federal bank regulatory agency to maintain the capital of a
subsidiary bank will be assumed by the bankruptcy trustee and entitled to a
priority of payment.
Depositor Preference. The FDIA provides that, in the event of the "liquidation
or other resolution" of an insured depository institution, the claims of
depositors of such institution (including claims by the FDIC as subrogee of
insured depositors) and certain claims for administrative expenses of the FDIC
as a receiver would be afforded a priority over other general unsecured claims
against such an institution, including federal funds and letters of credit. If
an insured depository institution fails, insured and uninsured depositors along
with the FDIC will be placed ahead of unsecured, nondeposit creditors, including
a parent holding company, in order of priority of payment.
Liability of Commonly Controlled Institutions. Under the FDIA, an insured
depository institution which is under common control with another insured
depository institution is generally liable for any loss incurred, or reasonably
anticipated to be incurred, by the FDIC in connection with the default of such
commonly controlled institution, or any assistance provided by the FDIC to such
commonly controlled institution which is in danger of default. The term
"default" is defined generally to mean the appointment of a conservator or
receiver and the term "in danger of default" is defined generally as the
existence of certain conditions indicating that a "default" is likely to occur
in the absence of regulatory assistance.
Regulatory Capital Standards and Related Matters
Risk-Based and Leverage Regulatory Capital. Applicable law and regulation
define and prescribe minimum levels of regulatory capital for bank holding
companies and their bank subsidiaries. Adequacy of regulatory capital is
assessed periodically by the federal banking agencies in the examination and
supervision process, and in the evaluation of applications in connection with
specific transactions and activities, including acquisitions, expansion of
existing activities, and commencement of new activities.
Bank holding companies are subject to risk-based capital guidelines adopted by
the Federal Reserve Board. These guidelines establish minimum ratios of
qualifying capital to risk-weighted assets. Qualifying capital includes Tier 1
capital and Tier 2 capital. Risk-weighted assets are calculated by assigning
varying risk-weights to broad categories of assets and off-balance-sheet
exposures, based primarily on counterparty credit risk. The required minimum
Tier 1 risk-based capital ratio, calculated by dividing Tier 1 capital by
risk-weighted assets, is currently 4.00%. The required minimum total risk-based
capital ratio is currently 8.00%. It is calculated by dividing the sum of Tier 1
capital and Tier 2 capital not in excess of Tier 1 capital, after deductions for
investments in certain subsidiaries and associated companies and for reciprocal
holdings of capital instruments, by risk-weighted assets.
Tier 1 capital includes common equity, qualifying perpetual preferred equity,
and minority interests in the equity accounts of consolidated subsidiaries less
certain intangible assets (including goodwill) and certain other assets.
4
<PAGE>
Tier 2 capital includes qualifying hybrid capital instruments, perpetual debt,
mandatory convertible debt securities, perpetual preferred equity not includable
in Tier 1 capital, and limited amounts of term subordinated debt, medium-term
preferred equity, certain unrealized holding gains on certain equity securities,
and the allowance for loan and lease losses.
Bank holding companies, such as KeyCorp, whose trading activities exceed
specified levels are required to maintain capital for market risk. Market risk
includes changes in the market value of trading account, foreign exchange, and
commodity positions, whether resulting from broad market movements (such as
changes in the general level of interest rates, equity prices, foreign exchange
rates, or commodity prices) or from position specific factors (such as
idiosyncratic variation, event risk, and default risk). At December 31, 2002,
Key's Tier 1 and total capital to risk-weighted assets ratios were 8.09% and
12.51%, respectively, which include required adjustments for market risk.
In addition to the risk-based standard, bank holding companies are subject to
the Federal Reserve Board's leverage ratio guidelines. These guidelines
establish minimum ratios of Tier 1 capital to total assets. The minimum leverage
ratio, calculated by dividing Tier 1 capital by average total consolidated
assets, is 3.00% for bank holding companies that either have the highest
supervisory rating or have implemented the Federal Reserve Board's risk-based
capital measure for market risk. All other bank holding companies must maintain
a minimum leverage ratio of at least 4.00%. Neither KeyCorp nor any of its bank
subsidiaries has been advised by its primary federal banking regulator of any
specific leverage ratio applicable to it. At December 31, 2002, Key's Tier 1
capital leverage ratio was 8.15%.
KeyCorp's national bank subsidiaries are also subject to risk-based and leverage
capital requirements adopted by the OCC which are substantially similar to those
imposed by the Federal Reserve Board on bank holding companies. At December 31,
2002, each of KeyCorp's national bank subsidiaries had regulatory capital in
excess of all minimum risk-based and leverage capital requirements.
In addition to establishing regulatory minimum ratios of capital to assets for
all bank holding companies and their bank subsidiaries, the risk-based and
leverage capital guidelines also identify various organization-specific factors
and risks that are not taken into account in the computation of the capital
ratios but that affect the overall supervisory evaluation of a banking
organization's regulatory capital adequacy and can result in the imposition of
higher minimum regulatory capital ratio requirements upon the particular
organization. Neither the Federal Reserve Board nor the OCC has advised KeyCorp
or any of its national bank subsidiaries of any specific minimum risk-based or
leverage capital ratio applicable to KeyCorp or such national bank subsidiary.
Additional information regarding regulatory capital levels is included in the
"Capital" section beginning on page 48 of the Financial Review section of
KeyCorp's 2002 Annual Report to Shareholders.
Recourse Obligations, Direct Credit Substitutes, and Residual Interests. In
2002, a final rule issued by the federal banking agencies became effective that
revised the regulatory capital treatment of on-balance sheet assets and
off-balance sheet exposures consisting of recourse obligations, direct credit
substitutes, and residual interests that expose banking organizations primarily
to credit risk. The final rule treats recourse obligations and direct credit
substitutes more consistently and adds new standards for the treatment of
residual interests, including a concentration limit for credit-enhancing
interest-only strip receivables. In addition, the agencies use credit rating and
certain alternative approaches to match regulatory capital requirements more
closely to a banking organization's relative risk of loss for certain positions
in asset securitizations.
Equity Investments in Nonfinancial Companies. On April 1, 2002, the federal
banking agencies issued a final rule regarding the regulatory capital treatment
of certain equity investments made by banking organizations in companies engaged
in nonfinancial activities. It imposes marginal capital charges (applied by
making deductions from Tier 1 capital) that increase as the banking
organization's aggregate carrying amount of its covered equity investments
increase in relation to its Tier 1 capital. Such capital charges range from 8%
to 25% as such aggregate carrying amount increases from 15% to 25% of the
banking organization's Tier 1 capital. Implementation of this new rule had no
material adverse effect on Key's regulatory capital in 2002.
Subprime Lending. The federal banking agencies have heightened their
supervisory expectations with respect to regulatory capital of institutions
having subprime lending programs. For these purposes, a subprime lending
5
<PAGE>
program is one that targets borrowers with weakened credit histories or
questionable repayment capacity. In addition to regulatory capital, the
supervisory guidance regarding subprime lending addresses supervisory
expectations with respect to risk management, the allowance for loan and lease
losses, portfolio and transaction level examination review, analysis, and
classification, cure program documentation, and predatory or abusive lending
practices.
While this guidance principally applies to institutions with subprime lending
programs having an aggregate credit exposure of at least 25% of Tier 1 capital,
federal banking examiners may apply it to other subprime portfolios, such as
those that are experiencing rapid growth or adverse performance trends, those
that are administered by inexperienced management, and those that possess
inadequate or weak controls. For an institution having subprime lending
portfolio exposure aggregating 25% or more of the institution's Tier 1 capital,
the supervisory guidance indicates examiners will likely expect, as a minimum,
that the institution would hold capital against such portfolio in an amount that
is 1.5 to 3.0 times greater than what is appropriate for non-subprime assets of
a similar type.
The federal banking agencies have indicated, however, that the guidance is
neither intended nor considered by the agencies to be a capital regulation and
does not represent a change in policy by the agencies. Moreover, the agencies
have also indicated that examiners would not unilaterally require additional
reserves or capital based upon the guidance, and that any determination made by
an examiner that an institution's reserves or capital is deficient would be
discussed with the institution's management and each agency's appropriate
supervisory office before a final decision is made. Neither the Federal Reserve
Board nor the OCC has advised Key of any such deficiency.
Prompt Corrective Action. The "prompt corrective action" provisions of the FDIA
added by the FDIC Improvement Act ("FDICIA") create a statutory framework that
applies a system of both discretionary and mandatory supervisory actions indexed
to the capital level of FDIC-insured depository institutions. These provisions
impose progressively more restrictive constraints on operations, management, and
capital distributions of the institution as its regulatory capital decreases, or
in some cases, based on supervisory information other than the institution's
capital level. This framework and the authority it confers on the federal
banking agencies supplements other existing authority vested in such agencies to
initiate supervisory actions to address capital deficiencies. Moreover, other
provisions of law and regulation employ regulatory capital level designations
the same as or similar to those established by the prompt corrective action
provisions both in imposing certain restrictions and limitations and in
conferring certain economic and other benefits upon institutions. These include
restrictions on brokered deposits, FDIC deposit insurance limits on pass-through
deposits, limits on exposure to interbank liabilities, risk-based FDIC deposit
insurance premium assessments, and expedited action upon regulatory
applications.
FDIC-insured depository institutions are grouped into one of five prompt
corrective action capital categories -- well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized and critically
undercapitalized -- using the Tier 1 risk-based, total risk-based, and Tier 1
leverage capital ratios as the relevant capital measures. An institution is
considered well capitalized if it has a total risk-based capital ratio of at
least 10.00%, a Tier 1 risk-based capital ratio of at least 6.00% and a Tier 1
leverage capital ratio of at least 5.00% and is not subject to any written
agreement, order or capital directive to meet and maintain a specific capital
level for any capital measure. An adequately capitalized institution must have a
total risk-based capital ratio of at least 8.00%, a Tier 1 risk-based capital
ratio of at least 4.00% and a Tier 1 leverage capital ratio of at least 4.00%
(3.00% if the institution has achieved the highest composite rating in its most
recent examination) and is not well capitalized. At December 31, 2002, each
KeyCorp insured depository institution subsidiary met the requirements for the
"well capitalized" capital category. An institution's prompt corrective action
capital category, however, may not constitute an accurate representation of the
overall financial condition or prospects of KeyCorp or its bank subsidiaries,
and should be considered in conjunction with other available information
regarding Key's financial condition and results of operations.
6
<PAGE>
FDIC DEPOSIT INSURANCE
Because substantially all of the deposits of KeyCorp's depository institution
subsidiaries are insured up to applicable limits by the FDIC, these subsidiaries
are subject to deposit insurance premium assessments by the FDIC to maintain the
Bank Insurance Fund (the "BIF") and the Savings Association Insurance Fund (the
"SAIF") of the FDIC. The FDIC has adopted a risk-related deposit insurance
assessment system under which premiums, ranging in 2002 from zero to $.27 for
each $100 of domestic deposits, are imposed based upon the depository
institution's capitalization and federal supervisory evaluation. Each of
KeyCorp's depository institution subsidiaries in 2002 qualified for a deposit
insurance assessment rate of zero. The FDIC is authorized to increase deposit
insurance premium assessments in certain circumstances. Any such increase would
have an adverse effect on Key's earnings.
In May 2002, the U.S. House of Representatives passed H.R. 3717, the Federal
Deposit Insurance Reform Act of 2002. Under this legislation: (i) BIF and SAIF
would merge into a single Deposit Insurance Fund ("DIF"), (ii) DIF coverage
limits would significantly increase with an inflation adjustment index for
future increases in coverage, (iii) a designated reserve ratio within a range of
1.15% to 1.40% would apply to DIF replacing the 1.25% designated reserve ratio
applicable under current law to BIF and SAIF, with the FDIC determining at least
annually the designated reserve ratio within the range that will apply to DIF,
(iv) current deposit insurance assessments would be set in an amount the FDIC
determines to be appropriate (including a maximum base assessment of $.01 per
$100 of assessable deposits for insured depository institutions in the lowest
risk category, so long as the DIF reserve ratio does not fall below 1.15%), (v)
a one-time credit predicated upon the December 31, 1996, assessment base of
eligible insured depository institutions would be available (with the amount of
such credit being limited for institutions exhibiting financial, operational, or
compliance weakness, including undercapitalization), (vi) the payment of
dividends to insured depository institutions would be required whenever the DIF
reserve ratio equals or exceeds specified percentages, (vii) an on-going system
of credits to be applied against future assessments would be established on the
same basis as the payment of dividends, and (viii) restoration plans for DIF
would be required to be established and implemented by the FDIC whenever DIF's
reserve ratio falls (or is projected to fall) below its then applicable
designated reserve ratio. This proposed legislation was not enacted into law
before the adjournment of the 107th Congress. Similar legislation has been
introduced in the 108th Congress. Enactment into law of legislation similar to
H.R. 3717 can be expected to adversely affect the results of operations of all
insured depository institutions, including KBNA and Key Bank USA.
FINANCIAL MODERNIZATION LEGISLATION
The Gramm-Leach-Bliley Act (the "GLBA"), enacted in November of 1999, authorizes
new activities for qualifying financial institutions. The GLBA repeals
significant provisions of the Glass-Steagall Act to permit commercial banks,
among other things, to have affiliates that underwrite and deal in securities
and make merchant banking investments provided certain conditions are met. The
GLBA modifies the BHCA to permit bank holding companies that meet certain
specified standards (known as "financial holding companies") to engage in a
broader range of financial activities than previously permitted under the BHCA,
and allows subsidiaries of commercial banks that meet certain specified
standards (known as "financial subsidiaries") to engage in a wide range of
financial activities that are prohibited to such banks themselves under certain
circumstances. In 2000, KeyCorp elected to become a financial holding company.
Under the authority conferred by the GLBA, Key has been able to expand the
nature and scope of its equity investments in nonfinancial companies, operate
its McDonald Investments Inc. subsidiary with fewer operating restrictions, and
acquire financial subsidiaries to engage in real estate leasing activities and
insurance agency activities without geographic restriction.
GLBA also established new requirements for financial institutions to provide new
privacy protections to consumers. The federal banking agencies jointly adopted a
final regulation providing for the implementation of these protections. It
requires a financial institution to provide notice to customers about its
privacy policies and practices, describes under what conditions a financial
institution may disclose nonpublic personal information about consumers to
non-affiliated third parties, and provides an "opt-out" method for consumers to
prevent the
7
<PAGE>
financial institution from disclosing that information to non-affiliated third
parties. Financial institutions were required to be in compliance with the final
regulation by July 1, 2001.
Effective in May 2001, GLBA repealed the blanket exception for banks and savings
associations from the definitions of "broker" and "dealer" under the Securities
Exchange Act of 1934, and replaced this full exception with functional
exceptions. Under the statute, these institutions that engage in securities
activities either must conduct those activities through a broker-dealer or
conform their securities activities to those which qualify for functional
exceptions. The SEC issued interim final rules in May 2001, which include a
temporary exemption for banks from the definitions of "broker" and "dealer."
Since that time, the SEC has extended this temporary extension. The most recent
extension provides that banks are exempt from the definition of "broker" until
May 2003 and from the definition of "dealer" until February 2003. The SEC has
also indicated that it expects to amend the interim final rules, and that it
does not expect banks to develop compliance systems to bring their operations
into compliance with the interim final rules until they have been amended. In
November 2002, the SEC published proposed amendments to the interim final rules
principally with respect to the "dealer" exemption. These proposed amendments
were adopted in final form in February 2003 and become effective in September
2003.
ITEM 2. PROPERTIES
The headquarters of KeyCorp, KBNA and Key Bank USA are located in Key Tower at
127 Public Square, Cleveland, Ohio 44114-1306. At December 31, 2002, Key leased
approximately 695,000 square feet of the complex, encompassing the first
twenty-three floors, the 28th floor and the 54th through 56th floors of the
57-story Key Tower. As of the same date, the bank subsidiaries of KeyCorp owned
503 of their branch banking offices and leased 407 offices. The lease terms for
applicable branch banking offices are not individually material, with terms
ranging from month-to-month to 99-years from inception. Additional information
pertaining to Key's properties is presented in Note 1 ("Summary of Significant
Accounting Policies"), beginning on page 57 of the Financial Review section of
KeyCorp's 2002 Annual Report to Shareholders and is incorporated herein by
reference.
ITEM 3. LEGAL PROCEEDINGS
The information presented in the Legal Proceedings section of Note 19
("Commitments, Contingent Liabilities and Guarantees"), beginning on page 81 of
the Financial Review section of KeyCorp's 2002 Annual Report to Shareholders is
incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this report, no matter
was submitted to a vote of security holders of KeyCorp.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The dividend restrictions discussion on page 3 of this report and the following
disclosures included in the Financial Review section of KeyCorp's 2002 Annual
Report to Shareholders are incorporated herein by reference:
<Table>
<Caption>
PAGE
------
<S> <C>
Discussion of common shares and shareholder information
presented in the "Capital" section........................ 48
Presentation of quarterly market price and cash dividends
per common share.......................................... 51
Discussion of dividend restrictions presented in the
"Liquidity" section and in Note 5 ("Restrictions on Cash,
Dividends and Lending Activities")........................ 46, 68
</Table>
8
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The Selected Financial Data presented on page 23 of the Financial Review section
of KeyCorp's 2002 Annual Report to Shareholders is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information included under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" presented on pages 20 through 51
of the Financial Review section of KeyCorp's 2002 Annual Report to Shareholders
is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information included under the caption "Market risk management" presented on
pages 30 through 32 of the Financial Review section of KeyCorp's 2002 Annual
Report to Shareholders is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Selected Quarterly Financial Data and the financial statements and the notes
thereto, presented on page 51 and on pages 53 through 88, respectively, of the
Financial Review section of KeyCorp's 2002 Annual Report to Shareholders are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is set forth in the sections captioned
"Issue One -- ELECTION OF DIRECTORS" and "EXECUTIVE OFFICERS" contained in
KeyCorp's definitive Proxy Statement for the 2003 Annual Meeting of Shareholders
to be held May 22, 2003, and is incorporated herein by reference. The
information set forth in the sections captioned, "AUDIT REVIEW COMMITTEE
INDEPENDENCE" and "AUDIT REVIEW COMMITTEE REPORT" contained in KeyCorp's
definitive Proxy Statement for the 2003 Annual Meeting of Shareholders to be
held May 22, 2003, are not incorporated by reference in this report on Form
10-K. KeyCorp expects to file its final proxy statement on or before April 2,
2003.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is set forth in the sections captioned
"THE BOARD OF DIRECTORS AND ITS COMMITTEES," "COMPENSATION OF EXECUTIVE
OFFICERS" and "EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS" contained in
KeyCorp's definitive Proxy Statement for the 2003 Annual Meeting of Shareholders
to be held May 22, 2003, and is incorporated herein by reference. The
information set forth in the sections captioned "COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION" and "KEYCORP STOCK PRICE PERFORMANCE" contained in
KeyCorp's definitive Proxy Statement for the 2003 Annual Meeting of Shareholders
to be held May 22, 2003, is not incorporated by reference in this report on Form
10-K. KeyCorp expects to file its final proxy statement on or before April 2,
2003.
9
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is set forth in the sections captioned
"EQUITY COMPENSATION PLAN INFORMATION" and "SHARE OWNERSHIP AND PHANTOM STOCK
UNITS" contained in KeyCorp's definitive Proxy Statement for the 2003 Annual
Meeting of Shareholders to be held May 22, 2003, and is incorporated herein by
reference. KeyCorp expects to file its final proxy statement on or before April
2, 2003.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth in the section captioned
"Issue One -- ELECTION OF DIRECTORS" contained in KeyCorp's definitive Proxy
Statement for the 2003 Annual Meeting of Shareholders to be held May 22, 2003,
and is incorporated herein by reference. KeyCorp expects to file its final proxy
statement on or before April 2, 2003.
ITEM 14. CONTROLS AND PROCEDURES
As a bank holding company, KeyCorp is subject to the internal control reporting
requirements of the Federal Deposit Insurance Corporation Improvement Act, which
became effective in 1993 ("FDICIA"). FDICIA requirements include an annual
assessment by our Chief Executive Officer and Chief Financial Officer of the
effectiveness of our internal controls over financial reporting, which generally
include those controls relating to the preparation of our financial statements
in conformity with accounting principles generally accepted in the United
States. In addition, under FDICIA our independent auditors have annually
examined and attested to, without qualification, management's assertions
regarding the effectiveness of our internal controls. Accordingly, we have had
an established process of maintaining and evaluating our internal controls over
financial reporting.
In connection with recent legislation and regulations, our management has also
focused its attention on our "disclosure controls and procedures" which, as
defined by the SEC, are generally those controls and procedures designed to
ensure that financial and nonfinancial information required to be disclosed in
KeyCorp's reports filed with the SEC is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms and that
such information is accumulated and communicated to KeyCorp's management,
including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. In light
of the new requirements, we have engaged in a process of reviewing our
disclosure controls and procedures. As a result of our review, and although we
believe that our pre-existing disclosure controls and procedures were effective
in enabling us to comply with our disclosure obligations, we have implemented
enhancements, which include establishing a disclosure committee and generally
formalizing and documenting disclosure controls and procedures that we already
have in place. Any future refinements to our controls and procedures will
continue to build upon our existing framework.
Following the review described above and the establishment of our disclosure
committee and within the 90-day period prior to the filing of this report,
KeyCorp carried out an evaluation, under the supervision and with the
participation of KeyCorp's management, including our Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of
KeyCorp's disclosure controls and procedures. Based upon that evaluation,
KeyCorp's Chief Executive Officer and Chief Financial Officer concluded that the
design and operation of these disclosure controls and procedures were effective.
There have been no significant changes in internal controls that could
significantly affect internal controls subsequent to the date the Chief
Executive Officer and Chief Financial Officer completed their evaluation.
10
<PAGE>
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS
The following financial statements of KeyCorp and its subsidiaries, and the
auditor's report thereon, are incorporated herein by reference to the pages
indicated in the Financial Review section of KeyCorp's 2002 Annual Report to
Shareholders:
<Table>
<Caption>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... 52
Consolidated Financial Statements:
Consolidated Balance Sheets at December 31, 2002 and 2001... 53
Consolidated Statements of Income for the Years Ended
December 31, 2002, 2001 and 2000.......................... 54
Consolidated Statements of Changes in Shareholders' Equity
for the Years Ended December 31, 2002, 2001 and 2000...... 55
Consolidated Statements of Cash Flow for the Years Ended
December 31, 2002, 2001 and 2000.......................... 56
Notes to Consolidated Financial Statements.................. 57
</Table>
(a)(2) FINANCIAL STATEMENT SCHEDULES
All financial statement schedules for KeyCorp and its subsidiaries have been
included in the consolidated financial statements or the related footnotes, or
they are either inapplicable or not required.
(a)(3) EXHIBITS*
<Table>
<C> <S>
3.1 Amended and Restated Articles of Incorporation of KeyCorp
filed, as Exhibit 3 to Form 10-Q for the quarter ended
September 30, 1998, and incorporated herein by reference.
3.2 Amended and Restated Regulations of KeyCorp, effective May
23, 2002, filed as Exhibit 3.2 to Form 10-Q for the quarter
ended June 30, 2002, and incorporated herein by reference.
4.1 Restated Rights Agreement, dated as of May 15, 1997, between
KeyCorp and KeyBank National Association, as Rights Agent,
filed on June 19, 1997, as Exhibit 1 to Form 8-A, and
incorporated herein by reference.
10.1 Form of Change of Control Agreement between KeyCorp and
Certain Executive Officers of KeyCorp, effective January 17,
2002, filed as Exhibit 10.5 to Form 10-Q for the quarter
ended June 30, 2002, and incorporated herein by reference.
10.2 Form of Premium Priced Option Grant between KeyCorp and
Henry L. Meyer III, dated January 13, 1999, filed as Exhibit
10.3 to Form 10-Q for the quarter ended March 31, 1999, and
incorporated herein by reference.
10.3 Form of Option Grant between KeyCorp and Henry L. Meyer III,
dated November 15, 2000, filed as Exhibit 10.6 to Form 10-K
for the year ended December 31, 2000, and incorporated
herein by reference.
10.4 Form of Award of Restricted Stock (2002-2003), filed as
Exhibit 10.1 to Form 10-Q for the quarter ended March 31,
2002, and incorporated herein by reference.
10.5 Form of Award of Restricted Stock (2002-2004), filed as
Exhibit 10.2 to Form 10-Q for the quarter ended March 31,
2002, and incorporated herein by reference.
10.6 Award of Restricted Stock to Henry L. Meyer III (2002-2003),
filed as Exhibit 10.3 to Form 10-Q for the quarter ended
March 31, 2002, and incorporated herein by reference.
10.7 Award of Restricted Stock to Henry L. Meyer III (2002-2004),
filed as Exhibit 10.4 to Form 10-Q for the quarter ended
March 31, 2002, and incorporated herein by reference.
10.8 Amended and Restated Employment Agreement between KeyCorp
and Henry L. Meyer III, dated July 18, 2002, filed as
Exhibit 10.6 to Form 10-Q for the quarter ended June 30,
2002, and incorporated herein by reference.
</Table>
11
<PAGE>
<Table>
<C> <S>
10.9 Amended Employment Agreement among KeyCorp, Robert T.
Clutterbuck and McDonald Investments Inc., dated September
16, 2002, filed as Exhibit 10 to Form 10-Q for the quarter
ended September 30, 2002, and incorporated herein by
reference.
10.10 Letter Agreement between KeyCorp and Thomas W. Bunn, dated
February 11, 2002.
10.11 KeyCorp Annual Incentive Plan as amended and restated on
January 17, 2001, filed as Exhibit 10.3 to Form 10-Q for the
quarter ended March 31, 2001, and incorporated herein by
reference.
10.12 KeyCorp Amended and Restated 1991 Equity Compensation Plan
(amended as of November 21, 2002).
10.13 Society Corporation 1988 Stock Option Plan, amended as of
September 19, 1996, filed as Exhibit 10.11 to Form 10-K for
the year ended December 31, 1996, and incorporated herein by
reference.
10.14 KeyCorp 1988 Stock Option Plan, amended and restated as of
September 19, 1996, filed as Exhibit 10.20 to Form 10-K for
the year ended December 31, 1996, and incorporated herein by
reference.
10.15 McDonald & Company Investments, Inc. Stock Option Plan,
filed as Exhibit 10.39 to Form 10-K for the year ended
December 31, 1998, and incorporated herein by reference.
10.16 McDonald & Company Investments, Inc. 1995 Key Employees
Stock Option Plan, filed as Exhibit 10.40 to Form 10-K for
the year ended December 31, 1998, and incorporated herein by
reference.
10.17 KeyCorp Directors' Stock Option Plan (November 17, 1994
Restatement) filed as Exhibit 10.37 to Form 10-K for the
year ended December 31, 1994, and incorporated herein by
reference.
10.18 KeyCorp 1997 Stock Option Plan for Directors as amended and
restated on March 14, 2001, filed as Exhibit 10.1 to Form
10-Q for the quarter ended March 31, 2001, and incorporated
herein by reference.
10.19 KeyCorp Umbrella Trust for Directors between KeyCorp and
National Bank of Detroit, dated July 1, 1990, filed as
Exhibit 10.28 to Form 10-K for the year ended December 31,
1996, and incorporated herein by reference.
10.20 Amended and Restated Director Deferred Compensation Plan
(May 18, 2000 Amendment and Restatement) filed as Exhibit 10
to Form 10-Q for the quarter ended June 30, 2000, and
incorporated herein by reference.
10.21 KeyCorp Directors' Survivor Benefit Plan, effective
September 1, 1990, filed as Exhibit 10.25 to Form 10-K for
the year ended December 31, 1996, and incorporated herein by
reference.
10.22 KeyCorp Excess 401(k) Savings Plan (Amended and Restated as
of January 1, 1998), filed as Exhibit 10.31 to Form 10-K for
the year ended December 31, 1998, and incorporated herein by
reference.
10.23 KeyCorp Excess Cash Balance Pension Plan (Amended and
Restated as of January 1, 1998), filed as Exhibit 10.34 to
Form 10-K for the year ended December 31, 1998, and
incorporated herein by reference.
10.24 First Amendment to KeyCorp Excess Cash Balance Pension Plan,
effective July 1, 1999, filed as Exhibit 10.4 to Form 10-Q
for the quarter ended September 30, 1999, and incorporated
herein by reference.
10.25 KeyCorp Deferred Compensation Plan (Amended and Restated as
of January 1, 1998), filed as Exhibit 10.38 to Form 10-K for
the year ended December 31, 1998, and incorporated herein by
reference.
10.26 First Amendment to KeyCorp Deferred Compensation Plan filed
as Exhibit 10.28 to Form 10-K for the year ended December
31, 2001, and incorporated herein by reference.
10.27 Second Amendment to KeyCorp Deferred Compensation Plan filed
as Exhibit 10.29 to Form 10-K for the year ended December
31, 2001, and incorporated herein by reference.
10.28 Third Amendment to KeyCorp Deferred Compensation Plan.
</Table>
12
<PAGE>
<Table>
<C> <S>
10.29 KeyCorp Automatic Deferral Plan, filed as Exhibit 10.3 to
Form 10-Q for the quarter ended September 30, 1999, and
incorporated herein by reference.
10.30 First Amendment to KeyCorp Automatic Deferral Plan, filed as
Exhibit 10.31 to Form 10-K for the year ended December 31,
2000, and incorporated herein by reference.
10.31 McDonald Financial Group Deferral Plan.
10.32 KeyCorp Signing Bonus Plan (effective January 1, 1999).
10.33 First Amendment to KeyCorp Signing Bonus plan (effective
January 1, 2001).
10.34 Key Asset Management Long Term Incentive Plan.
10.35 KeyCorp Commissioned Deferred Compensation Plan as amended
and restated as of January 1, 2002.
10.36 KeyCorp Excess 401(k) Savings Plan.
10.37 Trust Agreement for certain amounts that may become payable
to certain executives and directors of KeyCorp, dated April
1, 1997, filed as Exhibit 10.2 to Form 10-Q for the quarter
ended June 30, 1997, and incorporated herein by reference.
10.38 Trust Agreement (Executive Benefits Rabbi Trust), dated
November 3, 1988, filed as Exhibit 10.20 to Form 10-K for
the year ended December 31, 1995, and incorporated herein by
reference.
10.39 KeyCorp Umbrella Trust for Executives between KeyCorp and
National Bank of Detroit, dated July 1, 1990, filed as
Exhibit 10.27 to Form 10-K for the year ended December 31,
1996, and incorporated herein by reference.
10.40 KeyCorp Supplemental Retirement Plan, amended, restated and
effective January 1, 2002.
10.41 KeyCorp Supplemental Retirement Benefit Plan, effective
January 1, 1981, restated August 16, 1990, amended January
1, 1995, and August 1, 1996, filed as Exhibit 10.26 to Form
10-K for the year ended December 31, 1998, and incorporated
herein by reference.
10.42 Third Amendment to KeyCorp Supplemental Retirement Benefit
Plan, effective July 1, 1999, filed as Exhibit 10.6 to Form
10-Q for the quarter ended September 30, 1999, and
incorporated herein by reference.
10.43 KeyCorp Executive Supplemental Pension Plan, amended,
restated and effective August 1, 1996, filed as Exhibit
10.29 to Form 10-K for the year ended December 31, 1996, and
incorporated herein by reference.
10.44 First Amendment to KeyCorp Executive Supplemental Pension
Plan, effective January 1, 1997, filed as Exhibit 10.27 to
Form 10-K for the year ended December 31, 1997, and
incorporated herein by reference.
10.45 Third Amendment to KeyCorp Executive Supplemental Pension
Plan, filed as Exhibit 10.42 to Form 10-K for the year ended
December 31, 2000, and incorporated herein by reference.
10.46 KeyCorp Supplemental Retirement Benefit Plan for Key
Executives, effective July 1, 1990, restated August 16,
1990, amended as of January 1, 1995, and August 1, 1996,
filed as Exhibit 10.26 to Form 10-K for the year ended
December 31, 1996, and incorporated herein by reference.
10.47 Third Amendment to KeyCorp Supplemental Retirement Benefit
Plan for Key Executives, effective July 1, 1999, filed as
Exhibit 10.7 to Form 10-Q for the quarter ended September
30, 1999, and incorporated herein by reference.
10.48 KeyCorp Survivor Benefit Plan, effective September 1, 1990,
filed as Exhibit 10.17 to Form 10-K for the year ended
December 31, 1996, and incorporated herein by reference.
12 Statement regarding Computation of Ratios.
13 KeyCorp 2002 Annual Report to Shareholders.
21 Subsidiaries of the Registrant.
23 Consent of Independent Auditors.
24 Powers of Attorney.
</Table>
13
<PAGE>
<Table>
<S> <C>
99.1 Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
99.2 Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
</Table>
KeyCorp hereby agrees to furnish the SEC upon request, copies of instruments
outstanding, including indentures, which define the rights of long-term debt
security holders.
All documents listed as Exhibits 10.1 through 10.48 constitute management
contracts or compensatory plans or arrangements.
* Copies of these Exhibits have been filed with the SEC. Shareholders may obtain
a copy of any exhibit, upon payment of reproduction costs, by writing KeyCorp
Investor Relations, at 127 Public Square (Mail Code OH-01-27-1113), Cleveland,
OH 44114-1306.
(b) REPORTS ON FORM 8-K
October 17, 2002 -- Item 5. Other Events, Item 7. Financial Statements and
Exhibits and Item 9. Regulation FD Disclosure. Reporting that on October 17,
2002, KeyCorp issued a press release announcing its earnings results for the
three-and nine-month periods ended September 30, 2002, and providing a slide
presentation reviewed in the related conference call/webcast.
No other reports on Form 8-K were filed during the fourth quarter of 2002.
INFORMATION AVAILABLE ON WEBSITE
KeyCorp makes available free of charge on its website, www.Key.com, its annual
report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K
and amendments to these reports as soon as reasonably practicable after KeyCorp
electronically files such material with, or furnishes it to, the SEC.
14
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON THE DATE INDICATED.
KEYCORP
/s/ THOMAS C. STEVENS
------------------------------------
THOMAS C. STEVENS
Vice Chairman, Chief Administrative
Officer and Secretary
March 21, 2003
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT
HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND
IN THE CAPACITIES AND ON THE DATE INDICATED.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
<S> <C>
* Henry L. Meyer III Chairman, Chief
Executive Officer,
and President
(Principal Executive
Officer), and
Director
* Jeffrey B. Weeden Chief Financial
Officer (Principal
Financial Officer)
* Lee G. Irving Executive Vice
President and Chief
Accounting Officer
(Principal Accounting
Officer)
* Cecil D. Andrus Director
* William G. Bares Director
</Table>
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
<S> <C>
* Edward P. Campbell Director
* Dr. Carol A. Director
Cartwright
* Alexander M. Cutler Director
* Henry S. Hemingway Director
* Charles R. Hogan Director
* Dr. Shirley A. Director
Jackson
* Douglas J. McGregor Director
* Eduardo R. Menasce Director
* Steven A. Minter Director
* Thomas C. Stevens Director
* Dennis W. Sullivan Director
* Peter G. Ten Eyck, II Director
</Table>
/s/ Thomas C. Stevens
------------------------------------
* By Thomas C. Stevens,
attorney-in-fact
March 21, 2003
15
<PAGE>
CERTIFICATION PURSUANT TO
SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Henry L. Meyer III, certify that:
1. I have reviewed this annual report on Form 10-K of KeyCorp;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
<Table>
<S> <C>
/s/ Henry L. Meyer III
-----------------------------------------------------
Henry L. Meyer III
Chairman, President and
Date: March 12, 2003 Chief Executive Officer
</Table>
16
<PAGE>
CERTIFICATION PURSUANT TO
SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Jeffrey B. Weeden, certify that:
1. I have reviewed this annual report on Form 10-K of KeyCorp;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
<Table>
<S> <C>
/s/ Jeffrey B. Weeden
-----------------------------------------------------
Jeffrey B. Weeden
Date: March 12, 2003 Chief Financial Officer
</Table>
17
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.10
<SEQUENCE>3
<FILENAME>l97974aexv10w10.txt
<DESCRIPTION>EX-10.10 LETTER AGREEMENT-KEYCORP/THOMAS W. BUNN
<TEXT>
<PAGE>
[KEY CORP LOGO]
Exhibit 10.10
HENRY L. MEYER III
Chairman and Chief Executive Officer KEYCORP
127 Public Square
February 11, 2002 Cleveland, OH 44114-1306
Tel: (216) 689-5715
Mr. Thomas W. Bunn
628 Hempstead Place
Charlotte, NC 28207
Dear Tom:
On behalf of KeyCorp, I am delighted to extend you our offer of employment as
the Senior Executive Vice-President for Key Corporate Finance, reporting
directly to me. In this role you will also be a member of my Senior Staff as
well as the Company's Executive Council.
I am pleased to advise you that the Compensation and Organization Committee has
approved the following employment terms, effective with your start date:
For 2002
- BASE SALARY: $500,000 per annum, payable semi-monthly. Your first
salary review will be in April 2004 and will occur annually
thereafter.
- CASH INCENTIVE: $1,250,000 guaranteed payment, payable when other
annual incentives are paid, no later than March 15, 2003.
- LONG TERM: You will be a participant in the Company's 2002-2004 Long
Term Incentive Compensation (LTIC) plan cycle. Your award for this
cycle will be $500,000 and this award will be denominated in
restricted stock shares per the terms of the plan. A description of
the plan is enclosed for your review.
- STOCK OPTIONS: You will be awarded 125,000 stock options effective
with your employment date. Of these shares, 75,000 will vest
one-third per year (fully vested in three years) from the grant
date. The remaining 50,000 options will vest three years from the
anniversary of your start date. The exercise price for all shares
will be established on your date of employment. To the maximum
extent permissible under Internal Revenue Code limitations, the
options will be incentive stock options (ISOs), with the balance
being non-qualified options (NQOs). A copy of the KeyCorp Amended
and Restated 1991 Equity Compensation Plan, which governs these
options, is enclosed.
- SPECIAL SIGNING GRANT: Effective on your start date you will be
granted a signing bonus of $600,000. This award will be denominated
in phantom stock shares, effective on your start date, and will be
paid to you in KeyCorp Common Stock at the end of the vesting
period. One-third of the amount will vest each year for three years,
on the anniversary of your start date.
<PAGE>
Mr. Thomas W. Bunn
February 11, 2002
Page 2
For 2003
- BASE SALARY: $500,000, the same as your 2002 salary.
- CASH INCENTIVE: $1,250,000 guaranteed payment, payable when other
annual awards are paid, but no later than March 15, 2004.
- LONG TERM: Similar to 2002, you will be a participant in the
Company's Long Term Incentive Compensation Plan. Under the current
plan, a new three-year cycle (2003-2005) begins each year. Your
grant will be $500,000 and will be denominated in restricted stock,
per the terms of the plan.
- STOCK OPTIONS: You will receive a stock option grant of 125,000
shares. These options will vest one third per year (fully vested in
three years) from the date of grant. The exercise price will be set
at the date of grant.
Beginning with your initial cash incentive award in the first quarter of 2003,
all amounts over $100,000 will be subject to the terms and conditions of
KeyCorp's Automatic Deferral Plan then in place. A copy of the KeyCorp Automatic
Deferral Plan Executive Compensation Communication, dated August 2000, is
enclosed.
As we agreed, your initial responsibilities will be to lead our Key Corporate
Finance organization. Further, your role will be expanded, no later than
September 1, 2002, to include responsibility for investment banking and capital
market activities.
As we discussed, we will review with you, prior to any release, external and
internal communications concerning you joining Key.
In addition, you will be eligible for the following:
CHANGE OF CONTROL AGREEMENT: You will be provided with a Change of Control
Agreement of the type generally given to other KeyCorp senior officers. A draft
copy of the current agreement is enclosed for your review.
EXECUTIVE PERQUISITES: You will be eligible for the following:
- Membership in one luncheon club in Cleveland. The company will pay
any initiation fees, if required, and your monthly dues and any
assessments. Reimbursement for monthly expenses will automatically
be made through payroll and will be grossed-up for tax purposes.
- Initiation fees in a personal country club, if you desire. Any
subsequent expenses (i.e., monthly dues, assessments, personal
expenses, annual fees) will be paid by you. Business related
expenses, of course, may be reimbursed through our expense
reimbursement process.
<PAGE>
Mr. Thomas W. Bunn
February 11, 2002
Page 3
- Membership in one "Corporate Golf Club." The Company will pay for
any initiation fees, if required, and your monthly dues and any
assessments. Reimbursement for monthly expenses will automatically
be made through payroll and will be grossed up for tax purposes.
Following the guaranteed period, beginning in 2004, you will participate in the
Short Term Incentive Compensation (STIC) program. Your current annualized target
incentive opportunity is $1,250,000. Your actual individual award will be based
on the company's performance, the performance of the businesses for which you
have responsibility and your individual contributions.
Also, in 2004 you will participate in KeyCorp's Stock Option Program. Based on
our current program you would have a stock option target of 100,000 shares.
Options currently vest one-third per year (fully vested in three years) from the
grant date and the exercise price of the options has historically been based on
the price of the stock at the time of the grant. All stock option awards are
discretionary, subject to the approval of the Compensation and Organization
Committee of KeyCorp's Board and are presently granted in accordance with the
KeyCorp Amended and Restated 1991 Equity Compensation Plan.
You will also continue to be eligible to participate in the KeyCorp Long-Term
Incentive Plan (LTIC). Your target award will be $500,000.
A copy of your relocation summary is enclosed with this letter for your
information. All of the services will be grossed up for Federal, state, local
and FICA taxes. If you voluntarily terminate your employment with KeyCorp within
one year of your hire date, you will be responsible for repayment of 100% of the
total relocation expense incurred by KeyCorp. If you voluntarily terminate after
one-year, but within two years of your hire date, you will be responsible for
repayment of one-half of the total relocation expense. Our relocation firm will
be in touch with you shortly to discuss relocation arrangements with you. We
also agree that as part of your relocation we will make the following
exceptions. First, we will provide temporary living arrangements for a maximum
of six months, if required. Second, you will be permitted two return trips home
each month during the period of your temporary living arrangements, to a maximum
of six months. Third, for purposes of your relocation, your mountain home will
be considered your primary residence.
As an employee you are also eligible for the following company benefits:
- Participation in the 401(k) and cash balance and the excess 401(k)
and cash balance plans in accordance with plan documents.
- Enrollment in Medical, Dental, Life Insurance and other insurance
coverage according to company policy and coverage limits (coverage
begins the first of the month following employment).
- In accordance with policy, beginning in 2002, you will be eligible
for 25 days of paid time off (PTO).
<PAGE>
Mr. Thomas W. Bunn
February 11, 2002
Page 4
- These and additional benefits are outlined in the New Employee
Resources Guide, which I have included. (The company reserves the
right to revise benefits at any time to comply with regulatory
changes and/or changes in company policies.)
This employment offer and the compensation payable to you as set forth above are
contingent upon satisfactory completion of the following in KeyCorp's judgment:
- Application for employment and related documents.
- Review of references, a pre-employment drug screen and a background
investigation.
- A review for FDIC prohibited offenses which includes fingerprints
taken on or about the first day of employment and which can take up
to six months to process.
- KeyCorp reserves the right to withdraw its offer of employment or to
terminate your employment (if you become employed at KeyCorp) if the
results of the applicant review are unsatisfactory in KeyCorp's
judgment.
You will report directly to me, at least through March 15, 2004. Also, in the
event that you are terminated by Key, (other than for "Cause," as defined in the
Change of Control Agreement), prior to March 15, 2004, you will be entitled to
receive the remainder of the guaranteed compensation, including base salary,
cash incentive, vesting of all options, signing bonus and restricted stock
granted to you under this letter agreement within 30 days of said termination.
Tom, we are very excited about the prospect of you joining Key and look forward
to a mutually beneficial and rewarding relationship.
Sincerely,
/s/Henry
Henry L. Meyer III
AGREED TO: /s/Thomas W. Bunn
--------------------------------
Thomas W. Bunn
Dated: February 16, 2002
--------------------------------------
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.12
<SEQUENCE>4
<FILENAME>l97974aexv10w12.txt
<DESCRIPTION>EX-10.12 AMENDED EQUITY COMPENSATION PLAN
<TEXT>
<PAGE>
EXHIBIT 10.12
AMENDED AND RESTATED
1991 EQUITY COMPENSATION PLAN
(AMENDED AS OF NOVEMBER 21, 2002)
1. PURPOSE. The KeyCorp Amended and Restated 1991 Equity
Compensation Plan is intended to promote the interests of the Corporation and
its shareholders by providing equity-based incentives for effective service and
high levels of performance to Employees selected by the Committee. To achieve
these purposes, the Corporation may grant Awards of Options, Stock Appreciation
Rights, Limited Stock Appreciation Rights, Restricted Stock, and Performance
Shares to selected Employees, all in accordance with the terms and conditions
hereinafter set forth.
2. DEFINITIONS.
2.1 1934 ACT. The term "1934 Act" shall mean the Securities
Exchange Act of 1934, as amended.
2.2 ACQUISITION PRICE. The term "Acquisition Price" with respect
to Restricted Stock shall mean such amount, if any, required by applicable law
and as may be specified by the Committee in the Award Instrument with respect to
that Restricted Stock as the consideration to be paid by the Employee for that
Restricted Stock.
2.3 AWARD. The term "Award" shall mean an award granted under the
Plan of an Option, of Stock Appreciation Rights, of Limited Stock Appreciation
Rights, of Restricted Stock, or of Performance Shares.
2.4 AWARD INSTRUMENT. The term "Award Instrument" shall mean a
written instrument evidencing an Award in such form and with such provisions as
the Committee may prescribe, including, without limitation, an agreement to be
executed by the Employee and the Corporation, a certificate issued by the
Corporation, or a letter executed by the Committee or its designee. Acceptance
of the Award Instrument by an Employee constitutes agreement to the terms of the
Award evidenced thereby.
2.5 CHANGE OF CONTROL. A "Change of Control" shall be deemed to
have occurred if, at any time after the date of the grant of the relevant Award,
there is a Change of Control under any of clauses (a), (b), (c), or (d) below.
For these purposes, the Corporation will be deemed to have become a subsidiary
of another corporation if any other corporation (which term shall include, in
addition to a corporation, a limited liability company, partnership, trust, or
other organization) owns, directly or indirectly, 50 percent or more of the
total combined outstanding voting power of all classes of stock of the
Corporation or any successor to the Corporation.
<PAGE>
(a) A Change of Control will have occurred under this clause (a)
if the Corporation is a party to a transaction pursuant to
which the Corporation is merged with or into, or is
consolidated with, or becomes the subsidiary of another
corporation and either
(i) immediately after giving effect to that transaction,
less than 65% of the then outstanding voting
securities of the surviving or resulting corporation
or (if the Corporation becomes a subsidiary in the
transaction) of the ultimate parent of the
Corporation represent or were issued in exchange for
voting securities of the Corporation outstanding
immediately prior to the transaction, or
(ii) immediately after giving effect to that transaction,
individuals who were directors of the Corporation on
the day before the first public announcement of (A)
the pendency of the transaction or (B) the intention
of any person or entity to cause the transaction to
occur, cease for any reason to constitute at least
51% of the directors of the surviving or resulting
corporation or (if the Corporation becomes a
subsidiary in the transaction) of the ultimate parent
of the Corporation.
(b) A Change of Control will have occurred under this clause (b)
if a tender or exchange offer shall be made and consummated
for 35% or more of the outstanding voting stock of the
Corporation or any person (as the term "person" is used in
Section 13(d) and Section 14(d)(2) of the 1934 Act) is or
becomes the beneficial owner of 35% or more of the outstanding
voting stock of the Corporation or there is a report filed on
Schedule 13D or Schedule 14D-1 (or any successor schedule,
form or report), each as adopted under the 1934 Act,
disclosing the acquisition of 35% or more of the outstanding
voting stock of the Corporation in a transaction or series of
transactions by any person (as defined earlier in this clause
(b)).
(c) A Change of Control will have occurred under this clause (c)
if either
(i) without the prior approval, solicitation, invitation,
or recommendation of the Corporation's Board of
Directors any person or entity makes a public
<PAGE>
announcement of a bona fide intention (A) to engage
in a transaction with the Corporation that, if
consummated, would result in a Change Event (as
defined below in this clause (c)), or (B) to
"solicit" (as defined in Rule 14a-1 under the 1934
Act) proxies in connection with a proposal that is
not approved or recommended by the Corporation's
Board of Directors, or
(ii) any person or entity publicly announces a bona fide
intention to engage in an election contest relating
to the election of directors of the Corporation
(pursuant to Regulation 14A, including Rule 14a-11,
under the 1934 Act),
and, at any time within the 24 month period immediately following the
date of the announcement of that intention, individuals who, on the day
before that announcement, constituted the directors of the Corporation
(the "Incumbent Directors") cease for any reason to constitute at least
a majority thereof unless both (A) the election, or the nomination for
election by the Corporation's shareholders, of each new director was
approved by a vote of at least two-thirds of the Incumbent Directors in
office at the time of the election or nomination for election of such
new director, and (B) prior to the time that the Incumbent Directors no
longer constitute a majority of the Board of Directors, the Incumbent
Directors then in office, by a vote of at least 75% of their number,
reasonably determine in good faith that the change in Board membership
that has occurred before the date of that determination and that is
anticipated to thereafter occur within the balance of the 24 month
period to cause the Incumbent Directors to no longer be a majority of
the Board of Directors was not caused by or attributable to, in whole
or in any significant part, directly or indirectly, proximately or
remotely, any event under subclause (i) or (ii) of this clause (c).
For purposes of this clause (c), the term "Change Event" shall mean any
of the events described in the following subclauses (x), (y), or (z) of
this clause (c):
(x) A tender or exchange offer shall be made for 25% or
more of the outstanding voting stock of the
Corporation or any person (as the term "person" is
used in Section 13(d) and Section 14(d)(2) of the
1934 Act) is or becomes the beneficial owner of 25%
or more of the outstanding voting stock of the
Corporation or there is a report filed on Schedule
<PAGE>
13D or Schedule 14D-1 (or any successor schedule,
form, or report), each as adopted under the 1934 Act,
disclosing the acquisition of 25% or more of the
outstanding voting stock of the Corporation in a
transaction or series of transactions by any person
(as defined earlier in this subclause (x)).
(y) The Corporation is a party to a transaction pursuant
to which the Corporation is merged with or into, or
is consolidated with, or becomes the subsidiary of
another corporation and, after giving effect to such
transaction, less than 50% of the then outstanding
voting securities of the surviving or resulting
corporation or (if the Corporation becomes a
subsidiary in the transaction) of the ultimate parent
of the Corporation represent or were issued in
exchange for voting securities of the Corporation
outstanding immediately prior to such transaction or
less than 51% of the directors of the surviving or
resulting corporation or (if the Corporation becomes
a subsidiary in the transaction) of the ultimate
parent of the Corporation were directors of the
Corporation immediately prior to such transaction.
(z) There is a sale, lease, exchange, or other transfer
(in one transaction or a series of related
transactions) of all or substantially all the assets
of the Corporation.
(d) A Change of Control will have occurred under this clause (d)
if there is a sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all or
substantially all of the assets of the Corporation.
2.6 COMMITTEE. The term "Committee" shall mean a committee
appointed by the Board of Directors of the Corporation to administer the Plan.
The Committee shall be composed of not less than three directors of the
Corporation. The Board of Directors may also appoint one or more directors as
alternate members of the Committee. No officer or Employee of the Corporation or
of any Subsidiary shall be a member or alternate member of the Committee. The
Committee shall at all times be so comprised (a) as to satisfy the disinterested
administration standard contained in Rule 16b-3, if required to qualify for the
Rule 16b-3 Exemption and (b) as to satisfy the outside director standard under
Section 162(m) of the Internal Revenue Code of 1986, as amended, if required to
qualify compensation paid under one or more of the provisions of the Plan as
performance-based compensation within the meaning of that section.
<PAGE>
2.7 COMMON SHARES. The term "Common Shares" shall mean common
shares of the Corporation, with a par value of $1 each.
2.8 CORPORATION. The term "Corporation" shall mean KeyCorp and
its successors, including the surviving or resulting corporation of any merger
of KeyCorp with or into, or any consolidation of KeyCorp with, any other
corporation or corporations.
2.9 DISABILITY. The term "Disability" with respect to an Employee
shall mean physical or mental impairment which entitles the Employee to receive
disability payments under any long-term disability plan maintained by the
Corporation.
2.10 EMPLOYEE. The term "Employee" shall mean any individual
employed by the Corporation or by any Subsidiary and shall include officers as
well as all other employees of the Corporation or of any Subsidiary (including
employees who are members of the Board of Directors of the Corporation or any
Subsidiary).
2.11 EMPLOYMENT TERMINATION DATE. The term "Employment Termination
Date" with respect to an Employee shall mean the first date on which the
Employee is no longer employed by the Corporation or any Subsidiary.
2.12 EXERCISE PRICE. The term "Exercise Price" with respect to an
Option shall mean the price specified in the Option at which the Common Shares
subject to the Option may be purchased by the holder of the Option.
2.13 FAIR MARKET VALUE. Except as otherwise determined by the
Committee at the time of the grant of an Award, the term "Fair Market Value"
with respect to Common Shares shall mean: (a) if the Common Shares are traded on
a national exchange, the mean between the high and low sales price per Common
Share on that national exchange on the date for which the determination of fair
market value is made or, if there are no sales of Common Shares on that date,
then on the next preceding date on which there were any sales of Common Shares,
or (b) if the Common Shares are not traded on a national exchange, the mean
between the high and low sales price per Common Share in the over-the-counter
market, National Market System, as reported by the National Quotations Bureau,
Inc. and NASDAQ on the date for which the determination of fair market value is
made or, if there are no sales of Common Shares on that date, then on the next
preceding date on which there were any sales of Common Shares.
2.14 INCENTIVE STOCK OPTION. The term "Incentive Stock Option"
shall mean an Option intended by the Committee to qualify as an "incentive stock
option" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended.
2.15 LIMITED STOCK APPRECIATION RIGHT. The term "Limited Stock
Appreciation Right" or "Limited SAR" shall mean an Award granted to an Employee
with respect to all or any part of any Option, that entitles the holder thereof
to receive from the Corporation, upon exercise of the Limited SAR and surrender
of the related Option, or
<PAGE>
any portion of the Limited SAR and the related Option, an amount equal to
(unless the Committee specifies a lesser amount at the time of the grant of the
Award):
(a) in the case of a Limited SAR granted with respect to an
Incentive Stock Option, 100% of the excess, if any, measured
at the time of the exercise of the Limited SAR, of (i) the
Fair Market Value of the Common Shares subject to the
Incentive Stock Option with respect to which the Limited SAR
is exercised over (ii) the Exercise Price of those Common
Shares under the Incentive Stock Option, or
(b) in the case of a Limited SAR granted with respect to a
Nonqualified Option, 100% of the highest of:
(i) the excess, measured at the time of the exercise of
the Limited SAR, of (A) the Fair Market Value of the
Common Shares subject to the Nonqualified Option with
respect to which the Limited SAR is exercised over
(B) the Exercise Price of those Common Shares under
the Nonqualified Option,
(ii) the excess of (A) the highest gross price (before
brokerage commissions and soliciting dealers' fees)
paid or to be paid for a Common Share (whether in
cash or in property and whether by way of exchange,
conversion, distribution upon liquidation, or
otherwise) in connection with any Change of Control
multiplied by the number of Common Shares subject to
the Nonqualified Option with respect to which the
Limited SAR is exercised over (B) the Exercise Price
of those Common Shares under the Nonqualified Option,
or
(iii) the excess of (A) the highest Fair Market Value of
the Common Shares subject to the Nonqualified Option
with respect to which the Limited SAR is exercised on
any one day during the period beginning on the
sixtieth day prior to the date on which the Limited
SAR is exercised multiplied by the number of Common
Shares subject to the Nonqualified Option with
respect to which the Limited SAR is exercised over
(B) the Exercise Price of those Common Shares under
the Nonqualified Option.
2.16 NONQUALIFIED OPTION. The term "Nonqualified Option" shall
mean an Option intended by the Committee not to qualify as an "incentive stock
option" under Section 422 of the Internal Revenue Code of 1986, as amended.
<PAGE>
2.17 OPTION. The term "Option," (a) when used otherwise than in
connection with the term Stock Appreciation Right or Limited Stock Appreciation
Right, shall mean an Award entitling the holder thereof to purchase a specified
number of Common Shares at a specified price during a specified period of time,
and (b) when used in connection with the term Stock Appreciation Right or
Limited Stock Appreciation Right, shall mean (i) any such Award or (ii) any
award under any other plan maintained or assumed by the Corporation entitling
the holder thereof to purchase a specified number of Common Shares at a
specified price during a specified period of time.
2.18 OPTION EXPIRATION DATE. The term "Option Expiration Date"
with respect to any Option shall mean the date selected by the Committee after
which, except as provided in Section 10.4 in the case of the death of the
Employee to whom the option was granted, the Option may not be exercised.
2.19 PERFORMANCE GOAL. The term "Performance Goal" shall mean a
performance goal specified by the Committee in connection with the potential
grant of Performance Shares and may include, without limitation, goals based
upon cumulative earnings per Common Share, return on investment, return on
shareholders' equity, or achievement of any other goals, whether or not readily
expressed in financial terms, that are related to the performance by the
Corporation, by any Subsidiary, or by any Employee or group of Employees in
connection with services performed by that Employee or those Employees for the
Corporation, a Subsidiary, or any one or more subunits of the Corporation or of
any Subsidiary.
2.20 PERFORMANCE PERIOD. The term "Performance Period" shall mean
such one or more periods of time, which may be of varying and overlapping
durations, as the Committee may select, over which the attainment of one or more
Performance Goals will be relevant in connection with one or more Awards of
Performance Shares.
2.21 PERFORMANCE SHARES. The term "Performance Shares" shall mean
an Award denominated in Common Shares and contingent upon attainment of one or
more Performance Goals by the Corporation or a Subsidiary or any subunit of the
Corporation or of any Subsidiary over a Performance Period.
2.22 PLAN. The term "Plan" shall mean this KeyCorp Amended and
Restated 1991 Equity Compensation Plan as from time to time hereafter amended in
accordance with Section 20.
2.23 RESTRICTED STOCK. The term "Restricted Stock" shall mean
Common Shares of the Corporation delivered to an Employee pursuant to an Award
subject to such restrictions, conditions and contingencies as the Committee may
provide in the relevant Award Instrument, including (a) the restriction that the
Employee not sell, transfer, otherwise dispose of, or pledge or otherwise
hypothecate the Restricted Stock during the applicable Restriction Period, (b)
the requirement that, subject to the provisions of Section 10, if the Employee's
employment terminates so that the Employee is no longer
<PAGE>
employed by the Corporation or any Subsidiary before the end of the applicable
Restriction Period, the Employee will offer to sell to the Corporation at the
Acquisition Price each Common Share of Restricted Stock held by the Employee at
the Employment Termination Date with respect to which, as of that date, any
restrictions, conditions, or contingencies have not lapsed, and (c) such other
restrictions, conditions, and contingencies, if any, as the Committee may
provide in the Award Instrument with respect to that Restricted Stock.
2.24 RESTRICTION PERIOD. The term "Restriction Period" with
respect to an Award of Restricted Stock shall mean the period selected by the
Committee and specified in the Award Instrument with respect to that Restricted
Stock during which the Employee may not sell, transfer, otherwise dispose of, or
pledge or otherwise hypothecate that Restricted Stock.
2.25 RULE 16b-3. Term "Rule 16b-3" shall mean Rule 16b-3 or any
rule promulgated in replacement thereof or in substitution therefor under the
1934 Act.
2.26 RULE 16b-3 EXEMPTION. The term "Rule 16b-3 Exemption" shall
mean the exemption from Section 16(b) of the 1934 Act that is available under
Rule 16b-3.
2.27 SECTION 16(b) EMPLOYEE. The term "Section 16(b) Employee"
shall mean an individual who is, or at any time within the preceding six months
was, a director, officer, or 10% shareholder of the Corporation within the
meaning of Section 16(b) of the 1934 Act.
2.28 STOCK APPRECIATION RIGHT. The term "Stock Appreciation Right
"or "SAR" shall mean an Award granted to an Employee with respect to all or any
part of any Option that entitles the holder thereof to receive from the
Corporation, upon exercise of the SAR and surrender of the related Option, or
any portion of the SAR and the related Option, an amount equal to 100%, or such
lesser percentage as the Committee may determine at the time of the grant of the
Award, of the excess, if any, measured at the time of the exercise of the SAR,
of (a) the Fair Market Value of the Common Shares subject to the Option with
respect to which the SAR is exercised over (b) the Exercise Price of those
Common Shares under the Option.
2.29 SUBSIDIARY. The term "Subsidiary" shall mean any corporation,
partnership, joint venture, or other business entity in which the Corporation
owns, directly or indirectly, 50 percent or more of the total combined voting
power of all classes of stock (in the case of a corporation) or other ownership
interest (in the case of any entity other than a corporation).
2.30 TANDEM AWARD. The term "Tandem Award" shall mean any two or
more Awards that are linked by the terms of any such Awards so that the exercise
of one such Award, in whole or in part, requires or will automatically result in
the surrender or cancellation, in whole or in proportionate part, of the other
such Awards.
<PAGE>
2.31 TRANSFEREE. The term "Transferee" shall mean, with respect to
Nonqualified Options only, any person or entity to which an Employee is
permitted by the Committee to transfer or assign all or part of his or her
Options.
3. ADMINISTRATION. The Plan shall be administered by the
Committee. No Award may be made under the Plan to any member or alternate member
of the Committee. The Committee shall have authority, subject to the terms of
the Plan, (a) to determine the Employees who are eligible to participate in the
Plan, the type, size, and terms of Awards to be granted to any Employee, the
time or times at which Awards shall be exercisable or at which restrictions,
conditions, and contingencies shall lapse, and the terms and provisions of the
instruments by which Awards shall be evidenced, (b) to establish any other
restrictions, conditions, and contingencies on Awards in addition to those
prescribed by the Plan, (c) to interpret the Plan, and (d) to make all
determinations necessary for the administration of the Plan.
The construction and interpretation by the Committee of any provision
of the Plan or any Award Instrument delivered pursuant to the Plan and any
determination by the Committee pursuant to any provision of the Plan or any
Award Instrument shall be final and conclusive. No member or alternate member of
the Committee shall be liable for any such action or determination made in good
faith.
The Committee may act only by a majority of its members. Any
determination of the Committee may be made, without a meeting, by a writing or
writings signed by all of the members of the Committee. In addition, the
Committee may authorize any one or more of their number or any officer of the
Corporation to execute and deliver documents on behalf of the Committee and the
Committee may delegate to one or more employees, agents, or officers of the
Corporation, or to one or more third party consultants, accountants, lawyers, or
other advisors, such ministerial duties related to the operation of the Plan as
it may deem appropriate.
4. ELIGIBILITY. Awards may be granted to Employees of the
Corporation or any Subsidiary selected by the Committee in its sole discretion.
The granting of any Award to an Employee shall not entitle that Employee to, nor
disqualify the Employee from, participation in any other grant of an Award. The
maximum number of Common Shares with respect to which any Employee may receive
Awards during any calendar year shall be the lesser of 400,000 Common Shares or
..2% of the outstanding Common Shares of the Corporation on the date such award
was made, which maximum number shall be subject to adjustment as provided in
Section 13 of the Plan.
5. STOCK SUBJECT TO THE PLAN. The stock that may be issued and
distributed to Employees in connection with Awards granted under the Plan shall
be Common Shares and may be authorized and unissued Common Shares, treasury
Common Shares, or Common Shares acquired on the open market specifically for
distribution under the Plan, as the Board of Directors may from time to time
determine.
<PAGE>
Subject to adjustment as provided in Section 13, the number of Common
Shares available for grant of Awards under the Plan shall be determined from
time to time as follows: (a) on the date of the 1994 Annual Meeting of
Shareholders of the Corporation (at which meeting an amendment and restatement
of the Plan was submitted for approval of the shareholders of the Corporation),
the number of Common Shares available for grant of Awards under the Plan shall
equal two percent of the total number of Common Shares outstanding on March 31,
1994, and (b) on January 2, 1995 and on each January 2 occurring thereafter
during the life of the Plan, the number of Common Shares available for grant of
Awards under the Plan shall be increased by adding to the number of Common
Shares then available for grant of Awards under the Plan, the number of Common
Shares of the Corporation that, when added to the number of Common Shares that
otherwise remain available for grant of additional Awards under the Plan on that
January 2, equals two percent of the total number of Common Shares of the
Corporation outstanding on December 31st of the next proceeding year.
The number of Common Shares remaining available for grants of
additional Awards under the Plan at any particular time during a calendar year
shall be reduced, upon the granting thereafter of any Award under the Plan, by
the full number of Common Shares subject to that Award except that, in the case
of any particular Tandem Award, the number of Common Shares counted as being
subject to such Tandem Award shall be the maximum number of Common Shares with
respect to which the Employee may receive value under such Tandem Award. If any
Award for any reason expires or is terminated, in whole or in part, without the
receipt by an Employee of Common Shares (or the equivalent thereof in cash or
other property), the Common Shares subject to that part of the Award that has so
expired or terminated shall again be available for the future grant of Awards
under the Plan.
Notwithstanding any other provision of the Plan, but subject to
adjustment under Section 13, (a) the maximum number of Common Shares that may be
issued under the Plan pursuant to Incentive Stock Options shall be 9,600,000
Common Shares, and (b) the maximum number of Common Shares that may be issued
under the Plan as Restricted Stock during any calendar year shall be that number
of Common Shares that is equal to five percent of the total number of Common
Shares available for grant of Awards under the Plan as of January 2 of that
calendar year.
6. STOCK OPTIONS.
6.1 TYPE AND DATE OF GRANT OF OPTIONS.
(a) The Award Instrument pursuant to which any Incentive Stock
Option is granted shall specify that the Option granted
thereby shall be treated as an Incentive Stock Option. The
Award Instrument pursuant to which any Nonqualified Option is
granted shall specify that the Option granted thereby shall
not be treated as an Incentive Stock Option.
<PAGE>
(b) The day on which the Committee authorizes the grant of an
Incentive Stock Option shall be the date on which that Option
is granted. No Incentive Stock Option may be granted on any
date after the tenth anniversary of the date of adoption, on
March 17, 1994, by the Board of Directors of the Corporation,
of the Plan as amended and restated.
(c) The day on which the Committee authorizes the grant of a
Nonqualified Option shall be considered the date on which that
Option is granted, unless the Committee specifies a later
date.
6.2 EXERCISE PRICE. The Exercise Price under any Option shall be
not less than the Fair Market Value of the Common Shares subject to the Option
on the date the Option is granted.
6.3 OPTION EXPIRATION DATE. The Option Expiration Date under any
Incentive Stock Option shall be not later than ten years from the date on which
the Option is granted. The Option Expiration Date under any Nonqualified Option
shall not be later than ten years and one month from the date on which the
Option is granted.
6.4 EXERCISE OF OPTIONS.
(a) Except as otherwise provided in Section 10, an Option may be
exercised only while the Employee to whom the Option was
granted is in the employ of the Corporation or of a
Subsidiary. Subject to this requirement, each Option shall
become exercisable in one or more installments at the time or
times provided in the Award Instrument evidencing the Option.
Once any portion of an Option becomes exercisable, that
portion shall remain exercisable until expiration or
termination of the Option. An Employee to whom an Option is
granted or, with respect to Nonqualified Options, the
Employee's Transferee may exercise the Option from time to
time, in whole or in part, up to the total number of Common
Shares with respect to which the Option is then exercisable,
except that no fraction of a Common Share may be purchased
upon the exercise of any Option.
(b) An Employee or, with respect to Nonqualified Options, any
Transferee electing to exercise an Option shall deliver to the
Corporation (i) the Exercise Price payable in accordance with
Section 6.5 and (ii) written notice of the election that
states the number of whole Common Shares with respect to which
the Employee is exercising the Option.
<PAGE>
6.5 PAYMENT FOR COMMON SHARES. Upon exercise of an Option by an
Employee or, with respect to Nonqualified Options, any Transferee, the Exercise
Price shall be payable by the Employee or Transferee in cash or in such other
form of consideration as the Committee determines may be accepted, including
without limitation, securities or other property, or any combination of cash,
securities or other property, or by delivery by the Employee or Transferee (with
the written notice of election to exercise) of irrevocable instructions to a
broker registered under the 1934 Act promptly to deliver to the Corporation the
amount of sale or loan proceeds to pay the Exercise Price. The Committee, in its
sole discretion, may grant to an Employee or, with respect to Nonqualified
Options, any Transferee the right to transfer Common Shares acquired upon the
exercise of a part of an Option in payment of the Exercise Price payable upon
immediate exercise of a further part of the Option.
6.6 CONVERSION OF INCENTIVE STOCK OPTIONS. The Committee may at
any time in its sole discretion take such actions as may be necessary to convert
any outstanding Incentive Stock Option (or any installments or portions of
installments thereof) into a Nonqualified Option with or without the consent of
the Employee to whom that Incentive Stock Option was granted and whether or not
that Employee is an Employee at the time of the conversion.
7. STOCK APPRECIATION RIGHTS AND LIMITED STOCK APPRECIATION
RIGHTS.
7.1 GRANT OF SARS AND LIMITED SARS. An SAR may be granted only in
connection with an Option. An SAR granted in connection with an Incentive Stock
Option may be granted only when the Incentive Stock Option is granted. An SAR
granted in connection with a Nonqualified Option may be granted either when the
related Nonqualified Option is granted or at any time thereafter including, in
the case of any Nonqualified Option resulting from the conversion of an
Incentive Stock Option, simultaneously with or after the conversion. Similarly,
a Limited SAR may be granted only in connection with an Option. A Limited SAR
granted in connection with an Incentive Stock Option may be granted only when
the Incentive Stock Option is granted. A Limited SAR granted in connection with
a Nonqualified Option may be granted either when the related Nonqualified Option
is granted or at any time thereafter including, in the case of any Nonqualified
Option resulting from the conversion of an Incentive Stock Option,
simultaneously with or after the conversion.
7.2 EXERCISE OF SARS AND LIMITED SARS.
(a) An Employee electing to exercise an SAR or a Limited SAR shall
deliver written notice to the Corporation of the election
identifying the SAR or Limited SAR and the related Option with
respect to which the SAR or Limited SAR was granted to the
Employee and specifying the number of whole Common Shares with
respect to which the Employee is exercising the SAR or Limited
SAR. Upon exercise of the SAR or Limited SAR, the related
Option shall be
<PAGE>
deemed to be surrendered to the extent that the SAR or Limited
SAR is exercised.
(b) SARs and Limited SARs may be exercised only (i) after the
expiration of six months from the date of grant of the SAR or
Limited SAR, (ii) on a date when the SAR or Limited SAR is "in
the money" (i.e., when there would be positive consideration
received upon exercise of the SAR or Limited SAR), (iii) at a
time and to the same extent as the related Option is
exercisable, (iv) unless otherwise provided in the relevant
Award Instrument, by surrender to the Corporation,
unexercised, of the related Option or any applicable portion
thereof, and (v) in compliance with all restrictions set forth
in or specified by the Committee pursuant to Section 7.2(c)
(in the case of SARs) or Section 7.2(d) (in the case of
Limited SARs).
(c) The Committee may specify in the Award Instrument pursuant to
which any SAR is granted waiting periods and restrictions on
permissible exercise periods in addition to the restrictions
on exercise set forth in Section 7.2(b), including, without
limitation, any restriction necessary to make applicable the
Rule 16b-3 Exemption.
7.3 PAYMENT FOR SARS AND LIMITED SARS. The amount payable upon
exercise of an SAR or Limited SAR may be paid by the Corporation in cash, or, if
the Committee shall determine in its sole discretion, in whole Common Shares
(taken at their Fair Market Value at the time of exercise of the SAR or Limited
SAR) or in a combination of cash and whole Common Shares; provided, however,
that in no event shall the total number of Common Shares that may be paid to an
Employee pursuant to the exercise of an SAR or Limited SAR exceed the total
number of Common Shares subject to the related Option.
7.4 TERMINATION, AMENDMENT, OR SUSPENSION OF SARS AND LIMITED
SARS. SARs and Limited SARs shall terminate and may no longer be
exercised upon the first to occur of (a) exercise or termination of the related
Option, (b) any termination date specified by the Committee at the time of grant
of the SAR or Limited SAR, or (c) the transfer by the Employee of the related
Option. In addition, the Committee may in its sole discretion at any time before
the occurrence of a Change of Control amend, suspend, or terminate any SAR or
Limited SAR theretofore granted under the Plan without the holder's consent;
provided that, in the case of amendment, no provision of the SAR or Limited SAR,
as amended, shall be in conflict with any provision of the Plan.
<PAGE>
8. RESTRICTED STOCK.
8.1 ADDITIONAL CONDITIONS ON RESTRICTED STOCK. In addition to the
restrictions on disposition of Restricted Stock during the Restriction Period
and the requirement to offer Restricted Stock to the Corporation if the
Employee's employment terminates during the Restriction Period, the Committee
may provide in the Award Instrument with respect to any Award of Restricted
Stock other restrictions, conditions, and contingencies, which other
restrictions, conditions, and contingencies, if any, may relate to, in addition
to such other matters as the Committee may deem appropriate, the Employee's
personal performance, corporate performance, or the performance of any subunit
of the Corporation or any Subsidiary, in each case measured in such manner as
may be specified by the Committee. The Committee may impose different
restrictions, conditions, and contingencies on separate Awards of Restricted
Stock granted to different Employees, whether at the same or different times,
and on separate Awards of Restricted Stock granted to the same Employee, whether
at the same or different times. The Committee may specify a single Restriction
Period for all of the Restricted Stock subject to any particular Award
Instrument or may specify multiple Restriction Periods so that the restrictions
with respect to the Restricted Stock subject to the Award will expire in stages
according to a schedule specified by the Committee and set forth in the Award
Instrument; provided, however, that no Restriction Period with respect to any
Restricted Stock shall end earlier than one year after the date on which that
Restricted Stock is granted.
8.2 PAYMENT FOR RESTRICTED STOCK. Each Employee to whom an Award
of Restricted Stock is made shall pay the Acquisition Price with respect to that
Restricted Stock to the Corporation not later than 30 days after the delivery to
the Employee of the Award Instrument with respect to that Restricted Stock. If
any Employee fails to pay the Acquisition Price with respect to any Award of
Restricted Stock within that 30 day period, the Employee's right under that
Award shall be forfeited.
8.3 RIGHTS AS A SHAREHOLDER. Upon payment by an Employee in full
of the Acquisition Price for Restricted Stock under an Award, the Employee shall
have all of the rights of a shareholder with respect to the Restricted Stock,
including voting and dividend rights, subject only to such restrictions and
requirements referred to in Section 8.1 as may be incorporated in the Award
Instrument with respect to that Restricted Stock.
9. PERFORMANCE SHARES.
9.1 DISCRETION OF COMMITTEE WITH RESPECT TO PERFORMANCE SHARES.
The Committee shall have full discretion to select the Employees to whom Awards
of Performance Shares are made, the number of Performance Shares to be granted
to any Employee so selected, the kind and level of the Performance Goals and
whether those Performance Goals are to apply to the Corporation, a Subsidiary,
or any one or more subunits of the Corporation or of any Subsidiary, and the
dates on which each
<PAGE>
Performance Period shall begin and end, and to determine the form and provisions
of the Award Instrument to be used in connection with any Award of Performance
Shares.
9.2 CONDITIONS TO PAYMENT FOR PERFORMANCE SHARES.
(a) Unless otherwise provided in the relevant Award Instrument, an
Employee must be employed by the Corporation or a Subsidiary
on the last day of a Performance Period to be entitled to
payment for any Performance Shares.
(b) The Committee may establish, from time to time, one or more
formulas to be applied against the Performance Goals to
determine whether all, some portion but less than all, or none
of the Performance Shares granted with respect to a
Performance Period are treated as earned pursuant to any
Award. An Employee will be entitled to receive payments with
respect to any Performance Shares only to the extent that
those Performance Shares are treated as earned under one or
more such formulas.
9.3 PAYMENT FOR PERFORMANCE SHARES. The Corporation shall pay
each Employee who is entitled to payment for Performance Shares earned with
respect to any Performance Period an amount for those Performance Shares (a) in
cash (based upon the per share Fair Market Value of Common Shares on the last
day of the Performance Period), (b) in Common Shares (one Common Share for each
Performance Share earned), (c) in Restricted Stock (one Common Share of
Restricted Stock for each Performance Share earned), or (d) any combination of
the foregoing, in such proportions as the Committee may determine. Restricted
Stock issued by the Corporation in payment of Performance Shares shall be
subject to all the provisions of Section 8.
10. TERMINATION OF EMPLOYMENT. After an Employee's Employment
Termination Date, the rules set forth in this Section 10 shall apply. All
factual determinations with respect to the termination of an Employee's
employment that may be relevant under this Section 10 shall be made by the
Committee in its sole discretion.
10.1 TERMINATION OTHER THAN UPON DEATH, DISABILITY, OR CERTAIN
RETIREMENTS. Upon any termination of an Employee's employment for any reason
other than the Employee's retirement (under any retirement plan of the
Corporation or of a Subsidiary) as provided in Section 10.2, disability as
provided on Section 10.3, or death as provided in Section 10.4:
(a) Unless otherwise provided in the relevant Award Instrument,
the Employee or, with respect to Nonqualified Options, any
Transferee shall have the right (i) during the period ending
six months after the Employment Termination Date, but not
later than the Option Expiration Date, to exercise any
Nonqualified Options and related
<PAGE>
SARs that were outstanding on the Employment Termination Date,
if and to the same extent as those Options and SARs were
exercisable by the Employee or Transferee (as the case may be)
on the Employment Termination Date, and (ii) during the period
ending three months after the Employment Termination Date, but
not later than the Option Expiration Date, to exercise any
Incentive Stock Options and related SARs that were outstanding
on the Employment Termination Date, if and to the same extent
as those Options and SARs were exercisable by the Employee on
the Employment Termination Date. Notwithstanding the preceding
sentence, if within two years after a Change of Control an
Employee's Employment Termination Date occurs other than as a
result of a Voluntary Resignation, unless otherwise provided
in the relevant Award Instrument, the Employee or, with
respect to Nonqualified Options, any Transferee shall have the
right, during the Extended Period, but not later than the
Option Expiration Date, to exercise any Options and related
SARs that were outstanding on the Employment Termination Date,
if and to the same extent as those Options and SARs were
exercisable by the Employee or Transferee (as the case may be)
on the Employment Termination Date (even though, in the case
of Incentive Stock Options, exercise of those Options more
than three months after the Employment Termination Date may
cause the Option to fail to qualify for Incentive Stock Option
treatment under the Internal Revenue Code of 1986, as
amended). As used in the immediately preceding sentence, the
term "Extended Period" means the longer of the period that the
Option or SAR would otherwise be exercisable in the absence of
the immediately preceding sentence or the period ending with
the second anniversary date of the Change of Control last
occurring before the Employment Termination Date and the term
"Voluntary Resignation" means that the Employee shall have
terminated his or her employment with the Corporation and its
Subsidiaries by voluntarily resigning at his or her own
instance without having been requested to so resign by the
Corporation or its Subsidiaries except that any resignation by
the Employee will not be deemed to be a Voluntary Resignation
if, after the Change of Control, the Employee's base salary
was reduced or the Employee was required to relocate his or
her principal place of employment more than 35 miles,
(b) Unless otherwise provided in the relevant Award Instrument,
the Employee shall offer for resale at the Acquisition Price
to the Corporation each Common Share of Restricted Stock held
by the Employee at the Employment Termination Date with
respect to
<PAGE>
which, as of that date, any restrictions, conditions, or
contingencies have not lapsed, and
(c) Unless otherwise provided in the relevant Award Instrument,
the Employee shall forfeit each Performance Share with respect
to which, as of that date, any restrictions, conditions, or
contingencies have not lapsed.
10.2 TERMINATION DUE TO CERTAIN RETIREMENTS. Upon any termination
of an Employee's employment with the Corporation or any Subsidiary under
circumstances entitling the Employee to immediate payment of normal retirement
or early retirement benefits under any retirement plan of the Corporation or of
a Subsidiary (whether the Employee elects to commence or defer receipt of such
payment):
(a) Unless otherwise provided in the relevant Award Instrument,
the Employee or, with respect to Nonqualified Options, any
Transferee shall have the right (i) to exercise, from time to
time during the period ending three years (two years if the
Option was granted prior to January 1, 2002) after the
Employment Termination Date, but not later than the Option
Expiration Date, any Nonqualified Options and related SARs
that were outstanding on the Employment Termination Date, if
and to the same extent as those Options and SARs were
exercisable by the Employee or Transferee (as the case may be)
on the Employment Termination Date, and (ii) to exercise, from
time to time during the period ending three years (two years
if the Option was granted prior to January 1, 2002) after the
Employment Termination Date, but no later than the Option
Expiration Date, any Incentive Stock Options and related SARs
that were outstanding on the Employment Termination Date, if
and to the same extent as those Options and SARs were
exercisable by the Employee on the Employment Termination Date
(even though exercise of the Incentive Stock Option more than
three months after the Employment Termination Date may cause
the Option to fail to qualify for Incentive Stock Option
treatment under the Internal Revenue Code of 1986, as
amended),
(b) The relevant Award Instrument may provide that the Employee
or, with respect to Nonqualified Options, any Transferee will
have the right to exercise, from time to time until not later
than the Option Expiration Date, Nonqualified Stock Options
and SARs and Incentive Stock Options and SARs to the extent
such Options and SARs become exercisable by their terms prior
to the Option Expiration Date (or such earlier date as
specified in the relevant Award Instrument), notwithstanding
the fact that such Options and SARs were not exercisable in
whole or in part (whether because a
<PAGE>
condition to exercise had not yet occurred or a specified time
period had not yet elapsed or otherwise) on the Employment
Termination Date,
(c) Unless otherwise provided in the relevant Award Instrument,
the Employee shall offer for resale at the Acquisition Price
to the Corporation each Common Share of Restricted Stock held
by the Employee at the Employment Termination Date with
respect to which, as of that date, any restrictions,
conditions, or contingencies have not lapsed, and
(d) Unless otherwise provided in the relevant Award Instrument,
the Employee shall forfeit each Performance Share with respect
to which, as of that date, any restrictions, conditions, or
contingencies have not lapsed.
10.3 TERMINATION DUE TO DISABILITY. Upon any termination of an
Employee's employment due to disability:
(a) Unless otherwise provided in the relevant Award Instrument,
the Employee, the Employee's attorney in fact or legal
guardian or, with respect to Nonqualified Options, any
Transferee shall have the right (i) to exercise, from time to
time during the period ending three years (two years if the
Option was granted prior to January 1, 2002) after the
Employment Termination Date, but not later than the Option
Expiration Date, any Nonqualified Options and related SARs
that were outstanding on the Employment Termination Date, if
and to the same extent those Options and SARs were exercisable
by the Employee or Transferee (as the case may be) on the
Employment Termination Date, and (ii) to exercise, from time
to time during the period ending three years (two years if the
Option was granted prior to January 1, 2002) after the
Employment Termination Date, but no later than the Option
Expiration Date, any Incentive Stock Options and related SARs
that were outstanding on the employment Termination Date, if
and to the same extent as those Options and SARs were
exercisable by the Employee on the Employment Termination Date
(even though exercise of the Incentive Stock Option more than
one year after the Employment Termination Date may cause the
Option to fail to qualify for Incentive Stock Option treatment
under the Internal Revenue Code of 1986, as amended),
(b) Unless otherwise provided in the relevant Award Instrument,
the Employee shall offer for resale at the Acquisition Price
to the Corporation each Common Share of Restricted Stock held
by the
<PAGE>
Employee at the Employment Termination Date with respect to
which, as of that date, any restrictions, conditions, or
contingencies have not lapsed, and
(c) Unless otherwise provided in the relevant Award Instrument,
the Employee shall forfeit each Performance Share with respect
to which, as of that date, any restrictions, conditions, or
contingencies have not lapsed.
10.4. DEATH OF AN EMPLOYEE. Upon the death of an Employee while
employed by the Corporation or any Subsidiary or within any of the periods
referred to in any Section 10.1, 10.2, or 10.3 during which any particular
Option or SAR remains potentially exercisable:
(a) Unless otherwise provided in the relevant Award Instrument, if
the Option Expiration Date of any Nonqualified Option that had
not expired before the Employee's death would otherwise expire
before the first anniversary of the Employee's death, that
Option Expiration Date shall automatically be extended to the
first anniversary of the Employee's death or such other date
as provided in the relevant Award Instrument,
(b) Unless otherwise provided in the relevant Award Instrument,
the Employee's executor or administrator, the person or
persons to whom the Employee's rights under any Option or SAR
are transferred by will or the laws of descent and
distribution or, with respect to Nonqualified Options, any
Transferee shall have the right to exercise, from time to time
during the period ending three years (two years if the Option
was granted prior to January 1, 2002) after the date of the
Employee's death, but not later than the Option Expiration
Date, any Options and related SARs that were outstanding on
the date of the Employee's death, if and to the same extent as
those Options and SARs were exercisable by the Employee or
Transferee (as the case may be) on the date of the Employee's
death,
(c) Unless otherwise provided in the relevant Award Instrument,
the Employee shall offer for resale at the Acquisition Price
to the Corporation each Common Share of Restricted Stock held
by the Employee at the Employment Termination Date with
respect to which, as of that date, any restrictions,
conditions, or contingencies have not lapsed, and
(d) Unless otherwise provided in the relevant Award Instrument,
the Employee shall forfeit each Performance Share with respect
to
<PAGE>
which, as of that date, any restrictions, conditions, or
contingencies have not lapsed.
11. ACCELERATION UPON CHANGE OF CONTROL. Unless otherwise
specified in the relevant Award Instrument, upon the occurrence of a Change of
Control of the Corporation, each Award theretofore granted to any Employee that
then remains outstanding shall be automatically treated as follows: (a) any
outstanding Option shall become immediately exercisable in full, (b) SARs and
Limited SARs related to any such Options shall also become immediately
exercisable in full, (c) the Restriction Period with respect to all outstanding
Awards of Restricted Stock shall immediately terminate, and (d) the
restrictions, conditions, or contingencies on any Performance Shares shall be
modified in such manner as the Committee may specify to give the Employee the
benefit of those Performance Shares through the date of Change of Control.
12. ASSIGNABILITY. Nonqualified Options may not be assigned or
transferred (other than by will or by the laws of descent and distribution)
unless the Committee, in its sole discretion, determines to allow such
assignment or transfer and, if the Committee determines to allow any such
assignment or transfer, the Transferee shall have the power to exercise such
Nonqualified Option in accordance with the terms of the Award and the provisions
of this Plan. No Incentive Stock Option, SAR, Limited SAR, Restricted Stock
during the Restriction Period, or Performance Share may be transferred other
than by will or by the laws of descent and distribution. During an Employee's
lifetime, only the Employee (or in the case of incapacity of an Employee, the
Employee's attorney in fact or legal guardian) may exercise any Incentive Stock
Option, SAR, Limited SAR, Restricted Stock during the Restriction Period, or
Performance Share requiring or permitting exercise.
13. ADJUSTMENT UPON CHANGES IN COMMON SHARES. Automatically and
without Committee action, in the event of any stock dividend, stock split, or
share combination of the Common Shares, or by appropriate Committee action in
the event of any reclassification, recapitalization, merger, consolidation,
other form of business combination, liquidation, or dissolution involving the
Corporation or any spin-off or other distribution to shareholders of the
Corporation (other than normal cash dividends), appropriate adjustments to (a)
the maximum number of Common Shares that may be issued under the Plan pursuant
to Section 5, the maximum number of Common Shares that may be issued under the
Plan pursuant to Incentive Stock Options as provided in Section 5, and the
maximum number of Common Shares with respect to which any Employee may receive
Awards during any calendar year as provided in Section 4, and (b) the number and
kind of shares subject to, the price per share under, and the terms and
conditions of each then outstanding Award shall be made to the extent necessary
and in such manner that the benefits of Employees under all then outstanding
Awards shall be maintained substantially as before the occurrence of such event.
Any such adjustment shall be conclusive and binding for all purposes of the Plan
and shall be effective, in the event of any stock dividend, stock split, or
share combination, as of the date of such stock
<PAGE>
dividend, stock split, or share combination, and in all other cases, as of such
date as the Committee may determine.
14. PURCHASE FOR INVESTMENT. Each person acquiring Common Shares
pursuant to any Award may be required by the Corporation to furnish a
representation that he or she is acquiring the Common Shares so acquired as an
investment and not with a view to distribution thereof if the Corporation, in
its sole discretion, determines that such representation is required to insure
that a resale or other disposition of the Common Shares would not involve a
violation of the Securities Act of 1933, as amended, or of applicable blue sky
laws. Any investment representation so furnished shall no longer be applicable
at any time such representation is no longer necessary for such purposes.
15. WITHHOLDING OF TAXES. The Corporation will withhold from any
payments of cash made pursuant to the Plan such amount as is necessary to
satisfy all applicable federal, state, and local withholding tax obligations.
The Committee may, in its discretion and subject to such rules as the Committee
may adopt from time to time, permit or require an Employee (or other person
exercising an Option with respect to withholding taxes upon exercise of such
Option) to satisfy, in whole or in part, any withholding tax obligation that may
arise in connection with the grant of an Award, the lapse of any restrictions
with respect to an Award, the acquisition of Common Shares pursuant to any
Award, or the disposition of any Common Shares received pursuant to any Award by
having the Corporation hold back some portion of the Common Shares that would
otherwise be delivered pursuant to the Award or by delivering to the Corporation
an amount equal to the withholding tax obligation arising with respect to such
grant, lapse, acquisition, or disposition in (a) cash, (b) Common Shares, or (c)
such combination of cash and Common Shares as the Committee may determine. The
Fair Market Value of the Common Shares to be so held back by the Company or
delivered by the Employee shall be determined as of the date on which the
obligation to withhold first arose.
16. HARMFUL ACTIVITY. If an Employee shall engage in any "harmful
activity" prior to or within six months after termination of employment with
Key, then any Profits realized upon the exercise of any Covered Option on or
after one year prior to the termination of employment with Key shall inure to
the Corporation. The aforementioned restriction shall not apply in the event
that employment with Key terminates within two years after a Change of Control
of the Corporation if any of the following have occurred: a relocation of an
Employee's principal place of employment more than 35 miles from an Employee's
principal place of employment immediately prior to the Change of Control, a
reduction in an Employee's base salary after a Change of Control, or termination
of employment under circumstances in which an Employee is entitled to severance
benefits or salary continuation or similar benefits under a change of control
agreement, employment agreement, or severance or separation pay plan. If any
Profits realized upon the exercise of any Covered Option inure to the benefit of
the Corporation in accordance with the first sentence of this paragraph, an
Employee shall pay all such Profits to the Corporation within 30 days after
first engaging in any harmful activity and all unexercised Covered Options shall
immediately be forfeited and canceled. Consistent
<PAGE>
with the provisions of Section 3 of the Plan, the determination by the Committee
as to whether an Employee engaged in "harmful activity" prior to or within six
months after termination of employment with Key shall be final and conclusive.
A "harmful activity" shall have occurred if an Employee shall do any one or more
of the following:
a. Use, publish, sell, trade or otherwise disclose Non-Public
Information of the Key unless such prohibited activity was inadvertent,
done in good faith and did not cause significant harm to Key.
b. After notice from the Corporation, fail to return to Key
any document, data, or thing in an Employee's possession or to which an
Employee has access that may involve Non-Public Information of Key.
c. After notice from the Corporation, fail to assign to Key
all right, title, and interest in and to any confidential or
non-confidential Intellectual Property which an Employee created, in
whole or in part, during employment with Key, including, without
limitation, copyrights, trademarks, service marks, and patents in or to
(or associated with) such Intellectual Property.
d. After notice from the Corporation, fail to agree to do any
acts and sign any document reasonably requested by Key to assign and
convey all right, title, and interest in and to any confidential or
non-confidential Intellectual Property which an Employee created, in
whole or in part, during employment with Key, including, without
limitation, the signing of patent applications and assignments thereof.
e. Upon an Employee's own behalf or upon behalf of any other
person or entity that competes or plans to compete with Key, solicit or
entice for employment or hire any Employee of Key.
f. Upon an Employee's own behalf or upon behalf of any other
person or entity that competes or plans to compete with Key, call upon,
solicit, or do business with (other than business which does not
compete with any business conducted by Key) any customer of Key an
Employee called upon, solicited, interacted with, or became acquainted
with, or learned of through access to information (whether or not such
information is or was non-public) while employed at Key unless such
prohibited activity was inadvertent, done in good faith, and did not
involve a customer whom an Employee should have reasonably known was a
customer of Key.
g. Upon an Employee's own behalf or upon behalf of any other
person or entity that competes or plans to compete with Key, engage in
any business activity in competition with Key in the same or a closely
related activity that an Employee
<PAGE>
was engaged in for Key during the one year period prior to the
termination of employment.
For purposes of this Section 16:
"Covered Option" means any Option granted on or after January
1, 2001 unless the granting resolution expressly excludes the
Option from the provisions of this Section 16.
"Intellectual Property" shall mean any invention, idea,
product, method of doing business, market or business plan,
process, program, software, formula, method, work of
authorship, or other information, or thing.
"Key" shall mean the Corporation and its Subsidiaries
collectively.
"Non-Public Information" shall mean, but is not limited to,
trade secrets, confidential processes, programs, software,
formulas, methods, business information or plans, financial
information, and listings of names (e.g., employees,
customers, and suppliers) that are developed, owned, utilized,
or maintained by an employer such as Key, and that of its
customers or suppliers, and that are not generally known by
the public.
"Profit" shall mean, with respect to any Covered Option, the
spread between the Fair Market Value of a Common Share on the
date of exercise and the exercise price multiplied by the
number of shares exercised under the Covered Option.
17. AWARDS IN SUBSTITUTION FOR AWARDS GRANTED BY OTHER COMPANIES.
Awards, whether Incentive Stock Options, Nonqualified Options, SARs, Limited
SARs Restricted Stock, or Performance Shares, may be granted under the Plan in
substitution for awards held by employees of a company who become Employees of
the Corporation or a Subsidiary as a result of the merger or consolidation of
the employer company with the Corporation or a Subsidiary, or the acquisition by
the Corporation or a Subsidiary of the assets of the employer company, or the
acquisition by the Corporation or a Subsidiary of stock of the employer company
as a result of which it becomes a Subsidiary. The terms, provisions, and
benefits of the substitute Awards so granted may vary from the terms, provisions
and benefits set forth in or authorized by the Plan to such extent as the
Committee at the time of the grant may deem appropriate to conform, in whole or
in part, to the terms, provisions, and benefits of the awards in substitution
for which they are granted.
<PAGE>
18. LEGAL REQUIREMENTS. No Awards shall be granted and the
Corporation shall have no obligation to make any payment under the Plan, whether
in Common Shares, cash, or any combination thereof, unless such payment is,
without further action by the Committee, in compliance with all applicable
Federal and state laws and regulations, including, without limitation, the
United States Internal Revenue Code and Federal and state securities laws.
19. DURATION AND TERMINATION OF THE PLAN. The Plan shall become
effective and shall be deemed to have been adopted on the date on which it is
approved by the shareholders of the Corporation and shall remain in effect
thereafter until terminated by action of the Board of Directors. No termination
of the Plan shall adversely affect the rights of any Employee with respect to
any Award granted before the effective date of the termination.
20. AMENDMENTS. The Board of Directors, or a duly authorized
committee thereof, may alter or amend the Plan from time to time prior to its
termination in any manner the Board of Directors, or such duly authorized
committee, may deem to be in the best interests of the Corporation and its
shareholders, except that no amendment may be made without shareholder approval
if shareholder approval is required under Rule 16b-3 to qualify for the Rule
16b-3 Exemption, is required by any applicable securities law or tax law, or is
required by the rules of any exchange on which the Common Shares of the
Corporation are traded or, if the Common Shares are not listed on an exchange,
by the rules of the registered national securities association through whose
inter-dealer quotation system the Common Shares are quoted. The Committee shall
have the authority to amend these terms and conditions applicable to outstanding
Awards (a) in any case where expressly permitted by the terms of the Plan or of
the relevant Award Instrument or (b) in any other case with the consent of the
Employee to whom the Award was granted. Except as expressly provided in the Plan
or in the Award Instrument evidencing the Award, the Committee may not, without
the consent of the holder of an Award granted under the Plan, amend the terms
and conditions applicable to that Award in a manner adverse to the interests of
the Employee.
21. PLAN NONCONTRACTUAL. Nothing herein contained shall be
construed as a commitment to or agreement with any person employed by the
Corporation or a Subsidiary to continue such person's employment with the
Corporation or the Subsidiary, and nothing herein contained shall be construed
as a commitment or agreement on the part of the Corporation or any Subsidiary to
continue the employment or the annual rate of compensation of any such person
for any period. All Employees shall remain subject to discharge to the same
extent as if the Plan had never been put into effect.
22. INTEREST OF EMPLOYEES. Any obligation of the Corporation
under the Plan to make any payment at any future date merely constitutes the
unsecured promise of the Corporation to make such payment from its general
assets in accordance with the Plan, and no Employee shall have any interest in,
or lien or prior claim upon, any property of the Corporation or any Subsidiary
by reason of that obligation.
<PAGE>
23. CLAIMS OF OTHER PERSONS. The provisions of the Plan shall in
no event be construed as giving any person, firm, or corporation any legal or
equitable right against the Corporation or any Subsidiary, their officers,
employees, agents, or directors, except any such rights as are specifically
provided for in the Plan or are hereafter created in accordance with the terms
and provisions of the Plan.
24. ABSENCE OF LIABILITY. No member of the Board of Directors of
the Corporation or a Subsidiary, of the Committee, of any other committee of the
Board of Directors, or any officer or Employee of the Corporation or a
Subsidiary shall be liable for any act or action under the Plan, whether of
commission or omission, taken by any other member, or by any officer, agent, or
Employee, or except in circumstances involving his bad faith or willful
misconduct, for anything done or omitted to be done by himself.
25. SEVERABILITY. The invalidity or unenforceability of any
particular provision of the Plan shall not affect any other provision hereof,
and the Plan shall be construed in all respects as if such invalid or
unenforceable provision were omitted herefrom.
26. GOVERNING LAW. The provisions of the Plan shall be governed
and construed in accordance with the laws of the State of Ohio.
27. DURATION AND TERMINATION OF THE PLAN. The Plan shall remain
in effect through June 30, 2012, and shall then terminate, unless terminated at
an earlier date by action of the Board of Directors or a duly authorized
Committee thereof; provided, however, that termination of the Plan shall not
affect Awards granted prior thereto.
28. PLAN EFFECTIVE DATE. The Plan, originally named the Society
Corporation 1991 Equity Compensation Plan, was approved by the Corporation's
shareholders at the Annual Meeting of Shareholders held on April 16, 1991 and
became effective on that date. On March 17, 1994, the Corporation's Board of
Directors adopted, subject to shareholder approval, certain amendments to the
Plan, then renamed the KeyCorp Amended and Restated 1991 Equity Compensation
Plan. The shareholders approved these amendments at the Corporation's Annual
Meeting of Shareholders held on May 19, 1994. The Plan was further amended by
action of the Committee on July 17, 1996 to amend the definition of Change of
Control as set forth in Section 2.5 of the Plan, which amendment was effective
as of January 1, 1996. If the Corporation hereafter enters into a transaction
intended to be accounted for as a pooling of interests and the Committee
determines, based on the written advice of the Corporation's independent
accountants, that the July 17, 1996 amendment or the operation thereof would
conflict with or jeopardize the pooling of interests accounting treatment for
such transaction, then the July 17, 1996 amendment shall be inoperative and
shall be treated as if it had never been effected so that the definition of
Change of Control would be as in effect prior to such amendment. The Plan was
further amended and restated as of September 19, 1996, to
<PAGE>
provide for the transferability of Options granted hereunder. The Plan was
further amended by action of the Equity Based Compensation Subcommittee of the
Compensation and Organization Committee on May 6, 1998 to amend Section 10.1(a)
of the Plan to extend the option exercise period for terminated employees upon a
change of control in certain circumstances. The amendment to Section 10.1(a)
only applies to Awards and Award Instruments granted or entered into on or after
January 1, 1999. If the Corporation enters into a transaction intended to
qualify as a pooling of interests for accounting purposes prior to January 1,
1999, the amendment to Section 10.1(a) shall become null and void. The
Subcommittee also amended the Plan to delete Section 17 of the Plan and all
cross-references thereto. References in the Plan to specific numbers of Common
Shares have been adjusted pursuant to Section 13 to reflect the two-for-one
split in the Common Shares effective March 6, 1998. With respect to clause (a)
of the last paragraph of Section 5, as of May 6, 1998, Incentive Stock Options
covering 451,823 Common Shares had been theretofore granted and not expired or
terminated unexercised, leaving 9,148,177 Common Shares then available for
future grant of Incentive Stock Options (subject to increase in the event that
outstanding Incentive Stock Options expire or terminate unexercised). The Plan
was further amended by action of the Compensation and Organization Committee on
March 15, 2000 to amend Section 1 of the Plan to clarify that Awards under the
Plan may be made to any Employee of the Corporation. The Plan was amended on
January 17, 2001 to amend Section 6.4(a) to remove the requirement that an
Option will not become exercisable unless an Optionee has been continuously
employed by the Corporation for at least six months from the date of grant. The
Plan was also amended to add a new Section 16 entitled "Harmful Activity" which
states that, if an Optionee engages in a "harmful activity" prior to or within
six months of termination of employment, profits from the exercise of a Covered
Option will inure to the benefit of the Corporation in certain circumstances.
Section 16 does not apply to Options granted prior to January 1, 2001. The Plan
was amended on March 14, 2001 to amend Sections 10.2, 10.3, and 10.4 to extend
the period during which Options are exercisable pursuant to these sections to
three years after retirement, disability, or death. The amendment only applies
to Options granted on or after January 1, 2002. The Plan was amended on November
14, 2001 to amend Section 2.2 to change the consideration required for
Restricted Stock. The Plan was amended on November 21, 2002 to terminate the
Plan on June 30, 2012.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.28
<SEQUENCE>5
<FILENAME>l97974aexv10w28.txt
<DESCRIPTION>EX-10.28 3RD AMENDMNT TO KEYCORP DEFERD COMPNSTN P
<TEXT>
<PAGE>
Exhibit 10.28
THIRD AMENDMENT TO THE
KEYCORP
DEFERRED COMPENSATION PLAN
WHEREAS, KeyCorp has established the KeyCorp Deferred Compensation Plan
("Plan") for certain employees of KeyCorp, and
WHEREAS, the Board of Directors of KeyCorp has authorized its Compensation
and Organization Committee to permit amendments to the Plan, and
WHEREAS, the Compensation and Organization Committee of the Board of
Directors of KeyCorp has determined it desirable to amend the Plan and has
accordingly authorized the execution of this Third Amendment,
NOW THEREFORE, pursuant to such action of the Compensation and Organization
Committee, the Plan is hereby amended as follows:
1. Section 5.1 shall be amended to delete it in its entirety and to
substitute therefore the following:
"5.1 CREDITING OF CORPORATION CONTRIBUTIONS. Corporate Contributions
shall be credited on a bookkeeping basis to the Participant's Plan
Account in proportion to the respective amount of the Participant's
Participant Deferrals made to the Plan during the applicable Deferral
Period. Corporate Contributions shall be credited to the Participant's
Plan Account as of the date that the Participant's Participant
Deferrals are credited to the Plan.
Notwithstanding the forgoing provisions of this Section 5.1,
however, if the Participant is an "Officer" of the Corporation, as
that term is defined in accordance with Section 16 of the Securities
Act of 1934, such Corporate Contributions shall be credited to the
Participant's Plan Account as follows:
a. INCENTIVE COMPENSATION DEFERRALS. Corporate Contributions
shall be credited on a bookkeeping basis to the Participant's
Plan Account as of the date the Incentive Compensation Deferrals
would have been payable to the Participant but for the
Participant's election to defer such Incentive Compensation to
the Plan.
b. SALARY DEFERRALS. Corporate Contributions shall be credited to
the Participant's Plan Account as of June 30 and December 31 of
each Plan year, provided, however, that if a Participant has
elected on a bookkeeping basis to invest his or her Salary
Deferrals in the Plan's Common Stock Account then such Salary
Deferrals shall be credited with Corporate Contributions as of
the date such Salary Deferrals would have been paid to the
Participant but for the Participant's election to defer such
Salary Deferrals to the Plan.
Participant Deferrals invested on a bookkeeping basis in the
Plan's Interest Bearing Fund and/or Investment Funds shall be credited
with Corporate Contributions equal to 6% of such Participant's
Participant Deferrals; Participant Deferrals invested on a bookkeeping
basis in the Plan's Common Stock Account shall be credited with
Corporate Contributions equal to 10% of such Participant's Participant
Deferrals. Corporate Contributions (equal to 6% or 10%, as the case
may be) shall also be
-1-
<PAGE>
credited on behalf of those Participants whose Participant Deferrals
become mandated under the requirements of Section 162(m) of the Code."
2. Except as specifically amended herein, the Plan shall remain in full
force and effect.
IN WITNESS WHEREOF, KeyCorp has caused this Third Amendment to the
Plan to be executed by its duly authorized officer to be effective as of January
1, 2003.
KEYCORP
BY: /s/ Steven N. Bulloch
------------------------------
TITLE: Assistant Secretary
----------------------------
-2-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.31
<SEQUENCE>6
<FILENAME>l97974aexv10w31.txt
<DESCRIPTION>EX-10.31 MCDONALD FINANCIAL GROUP DEFERRAL PLAN
<TEXT>
<PAGE>
Exhibit 10.31
MCDONALD FINANCIAL GROUP
DEFERRAL PLAN
ARTICLE I
The McDonald Financial Group Deferral Plan ("Plan") is established
effective January 1, 2003, to maintain on a bookkeeping basis, those unvested
discretionary bonus awards that are granted under the various KeyCorp sponsored
Incentive Compensation Plan(s) that mandate the automatic deferral of such
unvested awards. The Plan, as structured, is also intended to provide those
Employees of KeyCorp with a tax-favorable savings vehicle, while providing
KeyCorp with a means of retaining such Employees continued employment. It is the
intention of KeyCorp, and it is the understanding of those Participants covered
under the Plan, that the Plan is unfunded.
ARTICLE II
DEFINITIONS
-----------
2.1 MEANING OF DEFINITIONS. For the purposes of this Plan, the following
words and phrases shall have the meanings hereinafter set forth, unless a
different meaning is clearly required by the context:
(a) "BENEFICIARY" shall mean the person, persons or entity entitled under
Article VIII to receive any Plan benefits payable after a
Participant's death.
(b) "BOARD" shall mean the Board of Directors of KeyCorp, the Board's
Compensation and Organization Committee, or any other committee
designated by the Board or a subcommittee designated by the Board's
Compensation and Organization Committee.
(c) "CHANGE OF CONTROL" shall be deemed to have occurred if under a rabbi
trust arrangement established by KeyCorp ("Trust"), as such Trust may
from time to time be amended or substituted, the Corporation is
required to fund the Trust because of a "Change of Control."
(d) "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time, together with all regulations promulgated thereunder.
Reference to a section of the Code shall include such section and any
comparable section or sections of any future legislation that amends,
supplements, or supersedes such section.
(e) "COMMON STOCK ACCOUNT" shall mean the investment account established
under the Plan for bookkeeping purposes, in which a Participant may
elect to have his or her Discretionary Bonus awards credited.
Discretionary Bonus awards invested in the Common Stock Account shall
be credited based on a bookkeeping allocation of KeyCorp Common Shares
(both whole and fractional rounded to the nearest one-hundredth of a
share) that shall be equal to the amount of Discretionary Bonus awards
and Corporate Contributions invested by the Participant and by the
Corporation in the Common Stock Account. The Common Stock Account
shall also reflect on a bookkeeping basis all dividends, gains, and
losses attributable to such Common Shares. All Corporate
<PAGE>
Contributions and all Discretionary Bonus awards credited to the
Common Stock Account, shall be based on the ten-day average of the New
York Stock Exchange's closing price for such Common Shares immediately
preceding, up to, and including the day such Discretionary Bonus
awards and Corporate Contributions are credited to the Participants'
Plan Account.
(f) "CORPORATE CONTRIBUTIONS" shall mean the dollar amount that an
Employer has agreed to contribute on a bookkeeping basis to the
Participant's Plan Account in accordance with the provisions of
Article V of the Plan.
(g) "CORPORATION" shall mean KeyCorp, an Ohio corporation, its corporate
successors, and any corporation or corporations into or with which it
may be merged or consolidated.
(h) "DEFERRAL PERIOD" shall mean each applicable calendar year.
(i) "DETERMINATION DATE" shall mean the last business day of each calendar
quarter.
(j) "DISABILITY" shall mean (1) the physical or mental disability of a
permanent nature which prevents a Participant from performing the
duties such Participant was employed to perform for his or her
Employer when such disability commenced, (2) qualifies for disability
benefits under the federal Social Security Act within 30 months
following the Participant's disability, and (3) qualifies the
Participant for disability coverage under the KeyCorp Long Term
Disability Plan.
(k) "DISCHARGE FOR CAUSE" shall mean the termination (whether by the
Participant or the Employer) of a Participant's employment from his or
her Employer and any other Employer that is the result of (1) serious
misconduct as an Employee, including, but not limited to, a continued
failure after notice to perform a substantial portion of his or her
duties and responsibilities unrelated to illness or incapacity,
unethical behavior such as acts of self-dealing or self-interest,
harassment, violence in the workplace, or theft; (2) the commission of
a crime involving a controlled substance, moral turpitude, dishonesty,
or breach of trust; or (3) the Employer being directed by a regulatory
agency or self-regulatory agency to terminate or suspend the
Participant or to prohibit the Participant from performing services
for the Employer. The Corporation in its sole and absolute discretion
shall determine whether a Participant has been Discharged for Cause,
as provided for in this Section 2.1(k), provided, however, that for a
period of two years following a Change of Control, any determination
by the Corporation that an Employee has been Discharged for Cause
shall be set forth in writing with the factual basis for such
Discharge for Cause clearly specified and documented by the
Corporation.
(l) "DISCRETIONARY BONUS AWARDS" shall mean those unvested discretionary
bonus award(s) granted to an Employee under the terms of an Incentive
Compensation Plan during the applicable Deferral Period, which shall
be subject to the automatic deferral and vesting provisions of Article
III and Article VI of the Plan. For purposes of this Section 2.1(l),
the term "Discretionary Bonus Awards" shall not include any
compensation paid to the Employee during the applicable Deferral
Period which constitutes any form of a hiring bonus, sales
commissions, referral awards, recognition awards, and /or corporate
long-term incentive compensation plan awards.
-2-
<PAGE>
(m) "EMPLOYEE" shall mean a common law employee who is employed by an
Employer.
(n) "EMPLOYER" shall mean the Corporation and any of its subsidiaries or
affiliates, unless specifically excluded as an Employer for Plan
purposes by written action by an officer of the Corporation. An
Employer's Plan participation shall be subject to all conditions and
requirements made by the Corporation, and each Employer shall be
deemed to have appointed the Plan Administrator as its exclusive agent
under the Plan as long as it continues as an Employer.
(o) "HARMFUL ACTIVITY" shall have occurred if the Participant shall do any
one or more of the following:
(i) Use, publish, sell, trade or otherwise disclose Non-Public
Information of KeyCorp unless such prohibited activity was
inadvertent, done in good faith and did not cause significant
harm to KeyCorp.
(ii) After notice from KeyCorp, fail to return to KeyCorp any
document, data, or thing in his or her possession or to which the
Participant has access that may involve Non-Public Information of
KeyCorp.
(iii) After notice from KeyCorp, fail to assign to KeyCorp all right,
title, and interest in and to any confidential or
non-confidential Intellectual Property which the Participant
created, in whole or in part, during employment with KeyCorp,
including, without limitation, copyrights, trademarks, service
marks, and patents in or to (or associated with) such
Intellectual Property.
(iv) After notice from KeyCorp, fail to agree to do any acts and sign
any document reasonably requested by KeyCorp to assign and convey
all right, title, and interest in and to any confidential or
non-confidential Intellectual Property which the Participant
created, in whole or in part, during employment with KeyCorp,
including, without limitation, the signing of patent applications
and assignments thereof.
(v) Upon the Participant's own behalf or upon behalf of any other
person or entity that competes or plans to compete with KeyCorp,
solicit or entice for employment or hire any KeyCorp employee.
(vi) Upon the Participant's own behalf or upon behalf of any other
person or entity that competes or plans to compete with KeyCorp,
call upon, solicit, or do business with (other than business
which does not compete with any business conducted by KeyCorp)
any KeyCorp customer the Participant called upon, solicited,
interacted with, or became acquainted with, or learned of through
access to information (whether or not such information is or was
non-public) while the Participant was employed at KeyCorp unless
such prohibited activity was inadvertent, done in good faith, and
did not involve a customer whom the Participant should have
reasonably known was a customer of KeyCorp.
-3-
<PAGE>
(vii) Upon the Participant's own behalf or upon behalf of any other
person or entity that competes or plans to compete with KeyCorp,
after notice from KeyCorp, continue to engage in any business
activity in competition with KeyCorp in the same or a closely
related activity that the Participant was engaged in for KeyCorp
during the one year period prior to the termination of the
Participant's employment.
For purposes of this Section 2.1(o) the term:
"INTELLECTUAL PROPERTY" shall mean any invention, idea, product,
method of doing business, market or business plan, process,
program, software, formula, method, work of authorship, or other
information, or thing relating to KeyCorp or any of its
businesses.
"NON-PUBLIC INFORMATION" shall mean, but is not limited to, trade
secrets, confidential processes, programs, software, formulas,
methods, business information or plans, financial information,
and listings of names (e.g., employees, customers, and suppliers)
that are developed, owned, utilized, or maintained by an employer
such as KeyCorp, and that of its customers or suppliers, and that
are not generally known by the public.
"KEYCORP" shall include KeyCorp, its subsidiaries, and its
affiliates.
(p) "INCENTIVE COMPENSATION PLAN" shall mean a line of business or
management incentive compensation plan that is sponsored by KeyCorp or
an affiliate of KeyCorp that mandates the deferral of unvested
discretionary bonus awards granted under an applicable Incentive
Compensation Plan and which the Corporation in its sole discretion has
determined constitutes an Incentive Compensation Plan for purposes of
the Plan.
(q) "INTEREST BEARING ACCOUNT" shall mean the investment account
established under the Plan for bookkeeping purposes in which a
Participant may elect to have his or her Discretionary Bonus awards
credited. Discretionary Bonus awards invested for bookkeeping purposes
in the Interest Bearing Account shall be credited with earnings as of
each Determination Date which shall be based on the effective annual
yield of the average of Moody's Average Corporate Bond Yield Index for
the previous calendar month increased by 50 basis points. In the event
that Moody's Investor Services, Inc. ceases to publish such Index (or
any successor publisher thereto) the Board, in its sole and absolute
discretion, shall select a substantially similar index to be used in
crediting earnings under the Interest Bearing Account.
(r) "INVESTMENT ACCOUNTS" shall collectively mean those investment
accounts established under the Plan for bookkeeping purposes in which
a Participant may elect to have his or her Discretionary Bonus awards
credited. Investment Accounts shall include the Plan's (1) Interest
Bearing Account, (2) Common Stock Account, and (3) Investment Funds.
(s) "INVESTMENT FUNDS" shall mean those investment accounts established
under the Plan for bookkeeping purposes in which a Participant may
elect to have his or her Discretionary Bonus awards credited and which
mirror the investment funds established under Article VIII of the
KeyCorp 401(k) Savings Plan ("Savings Plan") as may be amended from
time to time, provided, however, that the Savings Plan's Corporation
-4-
<PAGE>
Stock Fund, for Plan purposes, shall be excluded from the definition
of Investment Funds. Discretionary Bonus awards invested for
bookkeeping purposes in the Investment Funds shall be credited on a
bookkeeping basis with those earnings, gains, and losses experienced
by the Savings Plan's investment funds.
(t) "INVOLUNTARY TERMINATION" shall mean the termination (by the Employer)
of a Participant's employment from his or her Employer and from any
other Employer, other than a Discharge for Cause or a Termination
Under Limited Circumstances.
(u) "PARTICIPANT" shall mean an Employee who meets the eligibility and
participation requirements set forth in Section 3.1 of the Plan.
(v) "PLAN" shall mean the McDonald Financial Group Deferral Plan with all
amendments, modifications and revisions as hereafter made.
(w) "PLAN ACCOUNT" shall mean those bookkeeping accounts established by
the Corporation for each Plan Participant, which shall reflect all
Discretionary Bonus awards and Corporate Contributions invested for
bookkeeping purposes in the Plan's Investment Accounts, with all
earnings, dividends, gains, and losses thereon. Plan Accounts shall
not constitute separate Plan funds or separate Plan assets. Neither
the maintenance of, nor the crediting of amounts to such Plan Accounts
shall be treated (i) as the allocation of any Corporation assets to,
or a segregation of any Corporation assets in any such Plan Accounts,
or (ii) as otherwise creating a right in any person or Participant to
receive specific assets of the Corporation.
(x) "PLAN YEAR" shall mean the calendar year.
(y) "RETIREMENT" shall mean the termination of a Participant's employment
any time after the Participant's attainment of age 55 and completion
of 5 years of Vesting Service but shall not include the Participant's
(i) Discharge for Cause, (ii) Involuntary Termination, (iii)
Termination Under Limited Circumstances, (iv) Disability, or (v)
death.
(z) "TERMINATION UNDER LIMITED CIRCUMSTANCES" shall mean the termination
(whether by the Participant or the Employer) of a Participant's
employment from his or her Employer, and from any other Employer (i)
under circumstances in which the Participant is entitled to receive
severance benefits or salary continuation benefits under the KeyCorp
Separation Pay Plan, (ii) under circumstances in which the Participant
is entitled to severance benefits or salary continuation or similar
benefits under a change of control agreement or employment agreement
within two years after a change of control (as defined by such
agreement) has occurred, or (iii) as otherwise expressly approved by
the Corporation or the Compensation and Organization Committee, in
their sole discretion.
(aa) "VESTING SERVICE" for purposes of Section 2.1(aa) shall be calculated
by measuring the period of service commencing on the Employee's
employment commencement date and ending on the Employee's termination
date and shall be computed based on each full calendar month that the
Employee is employed by an Employer.
-5-
<PAGE>
(bb) "VOLUNTARY TERMINATION" shall mean a voluntary termination of the
Participant's employment from his or her Employer and from any other
Employer, whether by resignation or otherwise, but shall not include
the Participant's Discharge for Cause, Involuntary Termination,
Retirement, Termination Under Limited Circumstances, or termination as
a result of Disability or death.
2.2 PRONOUNS. The masculine pronoun wherever used herein includes the
feminine in any case so requiring, and the singular may include the
plural.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
-----------------------------
3.1 ELIGIBILITY AND PARTICIPATION. An Employee shall participate in the
Plan, and shall automatically become a Plan Participant upon (i) the Employee's
meeting the applicable Incentive Compensation Plan's annual production criteria
established by the Corporation for the applicable Deferral Period, and (ii) the
Employee being awarded a unvested, discretionary bonus award under his or her
applicable Incentive Compensation Plan.
3.2 AUTOMATIC DEFERRAL REQUIREMENTS. An Employee meeting the eligibility
and automatic participation requirements of Section 3.1 hereof, shall
automatically have his or her Discretionary bonus awards deferred to the Plan.
Such Discretionary Bonus awards shall be maintained in the Plan until vested or
forfeited.
3.3 DEFERRAL LIMITED BY TERMINATION UNDER LIMITED CIRCUMSTANCES,
INVOLUNTARY TERMINATION, RETIREMENT, DISABILITY, OR DEATH. As of a Participant's
Termination Under Limited Circumstances, Involuntary Termination, Retirement,
Disability or death, the Participant shall be relieved from and, further, shall
not be permitted to have any further bonus awards deferred to the Plan, and any
Discretionary Bonus that thereafter would have been subject to the Automatic
Deferral Requirements of Section 3.2 hereof, if and to the extent payable, shall
be paid directly to the Participant in accordance with the terms of the
applicable Incentive Compensation Plan.
3.4 CHANGE IN PARTICIPATION STATUS. During those Deferral Periods in which
the Participant does not automatically defer Discretionary Bonus awards to the
Plan, Discretionary Bonus awards and Corporate Contributions previously credited
to the Participant's Plan Account shall remain in the Plan and shall continue to
vest under the terms of Section 6.1 hereof; such Discretionary Bonus awards and
Corporate Contributions with all earnings, gains, or losses thereon when vested
shall be distributed to the Participant in accordance with the provisions of
Article VII of the Plan.
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<PAGE>
ARTICLE IV
DISCRETIONARY BONUS AWARDS
--------------------------
4.1 PLAN ACCOUNT/INVESTMENT OF DISCRETIONARY BONUS AWARDS. Discretionary
Bonus awards and Corporate Contributions shall be credited on a bookkeeping
basis to a Plan Account established in the Participant's name. Each Participant
shall direct the manner in which his or her Discretionary Bonus awards are to be
invested for bookkeeping purposes under the Plan. All Discretionary Bonus awards
may be invested for bookkeeping purposes in any one or more of the Plan's
Investment Accounts, in such amounts as the Participant shall select, provided
that such election amounts are expressed in five percent increments.
Participants may modify their investment elections at such times and in such
manner as permitted by the Corporation.
4.2 CREDITING OF DISCRETIONARY BONUS AWARDS. Discretionary Bonus awards
shall be credited to the Participant's Plan Account as of the date that the
Participant's Discretionary Bonus awards would have been payable to the
Participant under an Incentive Compensation Plan but for the Incentive
Compensation Plan's mandatory deferral requirements.
4.3 DEFAULT INVESTMENT ELECTION. In the event that a Participant fails to
direct the manner in which his or her Discretionary Bonus award(s) shall be
invested for bookkeeping purposes under the Plan, then such Discretionary Bonus
award(s) when credited to the Participant's Plan Account shall be automatically
invested on a bookkeeping basis in the Plan's Interest Bearing Account.
ARTICLE V
CORPORATE CONTRIBUTIONS
-----------------------
5.1 CREDITING OF CORPORATION CONTRIBUTIONS. Matching Corporate
Contributions equal to 15% of the Participant's Discretionary Bonus awards for
the applicable Deferral Period shall be credited on a bookkeeping basis to the
Participant's Plan Account as of the payroll date on which the Participant's
Discretionary Bonus awards are automatically deferred and credited to the Plan.
5.2 INVESTMENT OF CORPORATE CONTRIBUTIONS. All Corporate Contributions
credited to the Participant's Plan Account shall be invested for bookkeeping
purposes in the Plan's Common Stock Account. Corporate Contributions are not
subject to Participant investment direction.
5.3 DETERMINATION OF AMOUNT. The Plan Administrator shall verify the amount
of Discretionary Bonus awards, Corporate Contributions, dividends, and earnings,
if any, to be credited to each Participant's Plan Account in accordance with the
provisions of the Plan. The reasonable and equitable decision of the Plan
Administrator as to the value of each Plan Account shall be conclusive and
binding upon all Participants and the Beneficiary of each deceased Participant
having any interest, direct or indirect in the Participant's Plan Account. As
soon as reasonably practicable after the close of the Plan Year, the Corporation
shall send to each Participant an itemized accounting statement that shall
reflect the Participant's Plan Account balance.
5.4 CORPORATE ASSETS. All Discretionary Bonus awards, Corporate
Contributions, dividends, earnings and any other gains and losses credited to a
Participant's Plan Account on a bookkeeping basis, remain the assets and
property of the Corporation, which shall be subject to distribution to the
Participant only in accordance with Article VII of the Plan. Participants and
-7-
<PAGE>
Beneficiaries shall have the status of general unsecured creditors of the
Corporation. Nothing contained in the Plan shall create, or be construed as
creating a trust of any kind or any other fiduciary relationship between the
Participant, the Corporation, or any other person. It is the intention of the
Corporation and it is the understanding of the Participant that the Plan be
unfunded.
5.5 NO PRESENT INTEREST. Subject to any federal statute to the contrary, no
right or benefit under the Plan and no right or interest in each Participant's
Plan Account shall be subject to anticipation, alienation, sale, assignment,
pledge, encumbrance, or charge, and any attempt to anticipate, alienate, sell,
assign, pledge, encumber, or charge any right or benefit under the Plan, or
Participant's Plan Account shall be void. No right, interest, or benefit under
the Plan or Participant's Plan Account shall be liable for or subject to the
debts, contracts, liabilities, or torts of the Participant or Beneficiary. If
the Participant or Beneficiary becomes bankrupt or attempts to alienate, sell,
assign, pledge, encumber, or charge any right under the Plan or Participant's
Plan Account, such attempt shall be void and unenforceable.
ARTICLE VI
----------
VESTING
-------
6.1 VESTING IN DISCRETIONARY BONUS AWARDS AND CORPORATE CONTRIBUTIONS. The
calculation of a Participant's vested interest in those Discretionary Bonus
awards and Corporate Contributions credited on a bookkeeping basis to the
Participant's Plan Account shall be measured from the last day of the applicable
calendar quarter in which Discretionary Bonus awards and Corporate Contributions
are credited to the Participant's Plan Account ("Quarterly Deferral Date"). A
Participant shall become vested in his or her Discretionary Bonus awards and
Corporate Contributions with all earnings, gains, and losses thereon under the
following three-year graded vesting schedule:
<TABLE>
<CAPTION>
<S> <C> <C>
(a) From the date the Participant's Discretionary Bonus awards and
Corporate Contributions are credited to the Participant's Plan Account
until one full calendar year from the Quarterly Deferral Date.......... 0%.
(b) One full calendar year from the Quarterly Deferral Date of the
Participant's Discretionary Bonus awards and Corporate Contributions
to the Plan but less than two full calendar years from such Quarterly
Deferral Date...........................................................33%.
(c) Two Full Calendar Years from the Quarterly Deferral Date of the
Participant's Discretionary Bonus awards and Corporate Contributions
to the Plan But less than three full calendar years from such
Quarterly Deferral Date.................................................66%.
(d) Three full calendar years from the date of the Quarterly Deferral Date
of the Participant's Discretionary Bonus awards and Corporate
Contributions to the Plan..............................................100%.
</TABLE>
Notwithstanding the foregoing provisions of this Section 6.1, a Participant
shall become fully vested in all Discretionary Bonus awards and Corporate
Contributions credited on a bookkeeping basis to the Participant's Plan Account
upon the Participant's Termination Under Limited Circumstances, Disability or
death.
-8-
<PAGE>
6.2 CONTINUED VESTING UPON RETIREMENT. Subject to the provisions of Section
7.2 of the Plan, upon the Participant's Retirement, the Participant's unvested
Discretionary Bonus awards and Corporate Contributions credited to the
Participant's Plan Account with all earnings and gains thereon, shall remain in
the Plan and shall continue to vest under the vesting provisions of Section 6.1
of the Plan.
6.3 FORFEITURE OF CORPORATE CONTRIBUTIONS. In the event of the
Participant's Involuntary Termination, as that term is defined in accordance
with Section 2.1(t) of the Plan, the Participant shall become immediately vested
in those Discretionary Bonus awards allocated on a bookkeeping basis to the
Participant's Plan Account with all earnings and gains thereon. All unvested
Corporate Contributions and related earnings credited on a bookkeeping basis to
the Participant's Plan Account shall be forfeited as of the Participant's last
day of employment.
6.4 FORFEITURE OF DISCRETIONARY BONUS AWARDS AND CORPORATE CONTRIBUTIONS.
Notwithstanding any provision of the Plan to the contrary, upon the
Participant's Discharge for Cause or the Participant's Voluntary Termination,
the Participant shall automatically forfeit all Discretionary Bonus awards and
Corporate Contributions allocated on a bookkeeping basis to the Participant's
Plan Account with all earnings and gains thereon that have unvested in
accordance with the vesting provisions of Section 6.1 of the Plan as of the
Participant's last day of employment.
ARTICLE VII
DISTRIBUTION OF PLAN BENEFITS
-----------------------------
7.1 DISTRIBUTION OF INTEREST BEARING ACCOUNT AND/OR INVESTMENT FUNDS.
Subject to the provisions of Section 7.8 and Section 7.9 hereof, a Participant
shall receive a distribution of his or her vested Plan Account balance from the
Plan's Interest Bearing Account and /or Investment Funds as a single lump sum
cash distribution.
7.2 DISTRIBUTION FOR COMMON STOCK ACCOUNT. Subject to the provisions of
Section 7.5 and Section 7.6 of the Plan, a Participant shall receive a
distribution of his or her vested Plan Account balance from the Plan's Common
Stock Account as a single lump sum distribution. Distributions of Discretionary
Bonus awards and vested Corporate Contributions from the Plan's Common Stock
Account shall be made in KeyCorp Common Shares.
7.3 DISTRIBUTION OF ACCOUNT BALANCE. The Participant's vested Plan Account
shall be valued as of the Determination Date immediately preceding his or her
Termination, Retirement or Disability (the "valuation date"), and such lump sum
distribution shall be made as soon as reasonably practicable following the
Participant's Termination, Death or Disability date.
7.4 DISTRIBUTIONS FOLLOWING RETIREMENT. Upon the Participant's Retirement,
the Participant's Plan Account balance shall continue to be maintained within
the Plan and all Discretionary Bonus awards and Corporate Contributions credited
to the Participant's Plan Account with all earnings, gains, and losses thereon,
shall continue to vest under the vesting provisions of Section 6.1 of the Plan,
and when vested, shall be distributed to the Participant in accordance with the
provisions of Section 7.1 and 7.2 hereof. Notwithstanding the foregoing
provisions of this Section 7.5, however, in the event of the Participant's
Retirement, and within twelve months of such Retirement, the Participant engages
in any "Harmful Activity" as that term is defined in accordance with Section 2.1
(o) of the Plan, such
-9-
<PAGE>
Participant's unvested Plan Account balance shall be immediately forfeited and
the Participant shall automatically cease Plan participation.
7.5 DISTRIBUTIONS FOLLOWING TERMINATION UNDER LIMITED CIRCUMSTANCES,
DISABILITY OR DEATH. Upon the Participant's Termination Under Limited
Circumstances, or termination of employment due to Disability or death, all
Discretionary Bonus awards and Corporate Contributions credited to the
Participant's Plan Account with all earnings, gains, and losses thereon shall
become immediately vested and shall be distributed to the Participant in a
single lump sum amount of cash and Common Shares.
7.6 DISTRIBUTIONS FOLLOWING INVOLUNTARY TERMINATION. In accordance with the
provisions of Section 6.3 of the Plan, upon the Participant's Involuntary
Termination, all Discretionary Bonus awards credited to the Participant's Plan
Account with all earnings, gains and losses thereon, shall become immediately
vested and shall be distributed to the Participant in a single lump sum
distribution. All unvested Corporate Contributions credited to the Participant's
Plan Account with all related earnings thereon shall be forfeited by the
Participant as of his or her last day of employment.
7.7 DISTRIBUTIONS FOLLOWING VOLUNTARY TERMINATION OR DISCHARGE FOR CAUSE.
Upon the Participant's Voluntary Termination or Discharge for Cause, all
unvested Discretionary Bonus awards and Corporate Contributions credited to the
Participant's Plan Account with all earnings, gains, and losses thereon shall be
forfeited by the Participant as of his or her last day of employment.
7.8 WITHHOLDING. The withholding of taxes with respect to the Participant's
Discretionary Bonus awards, Corporate Contributions, and all earnings and gains
thereon shall be made at such time as it becomes required by any state, federal
or local law; such taxes shall be withheld from the Participant's Discretionary
Bonus awards and Corporate Contributions in accordance with applicable law to
the maximum extent possible.
7.9 FACILITY OF PAYMENT. If it is found that any individual to whom an
amount is payable hereunder is incapable of attending to his or her financial
affairs because of any mental or physical condition, including the infirmities
of advanced age, such amount (unless prior claim therefor shall have been made
by a duly qualified guardian or other legal representative) may, in the
discretion of the Corporation, be paid to another person for the use or benefit
of the individual found incapable of attending to his or her financial affairs
or in satisfaction of legal obligations incurred by or on behalf of such
individual. Any such payment shall be charged to the Participant's Plan Account
from which any such payment would otherwise have been paid to the individual
found incapable of attending to his or her financial affairs, and shall be a
complete discharge of any liability therefor under the Plan.
ARTICLE VIII
BENEFICIARY DESIGNATION
-----------------------
8.1 BENEFICIARY DESIGNATION. Subject to Section 8.3 hereof, each
Participant shall have the right, at any time, to designate one or more persons
or an entity as Beneficiary (both primary as well as secondary) to whom benefits
under this Plan shall be paid in the event of Participant's death prior to
complete distribution of the Participant's vested Plan Account. Each Beneficiary
designation shall be in a written form prescribed by the Corporation and shall
be effective only when filed with the Corporation during the Participant's
lifetime.
-10-
<PAGE>
8.2 CHANGING BENEFICIARY. A Beneficiary designation may be changed by the
Participant without the consent of the previously named Beneficiary by the
Participant's filing of a new designation with the Corporation. The filing of a
new designation shall cancel all designations previously filed by the
Participant.
8.3 NO BENEFICIARY DESIGNATION. If a Participant fails to designate a
Beneficiary in the manner provided above, if the designation is void, or if the
Beneficiary (including all contingent Beneficiaries) designated by a deceased
Participant dies before the Participant, the Participant's Beneficiary shall be
the Participant's estate.
ARTICLE IX
ADMINISTRATION
--------------
9.1 ADMINISTRATION. The Corporation shall be responsible for the general
administration of the Plan, for carrying out the provisions hereof, and for
making payments hereunder. The Corporation shall have the sole and absolute
discretionary authority and power to carry out the provisions of the Plan,
including, but not limited to, the authority and power (a) to determine all
questions relating to the eligibility for and the amount of any benefit to be
paid under the Plan, (b) to determine all questions pertaining to claims for
benefits and procedures for claim review, (c) to resolve any and all questions
arising under the Plan, including any question of construction and/or
interpretation, and (d) to take such further action as the Corporation deems
necessary or advisable in the administration of the Plan. All findings,
decisions, and determinations of any kind made by the Plan Administrator shall
not be disturbed unless the Plan Administrator has acted in an arbitrary and
capricious manner. Subject to the requirements of law, the Plan Administrator
shall be the sole judge of the standard of proof required in any claim for
benefits and in any determination of eligibility for a benefit. All decisions of
the Plan Administrator shall be final and binding on all parties. The
Corporation may employ such attorneys, investment counsel, agents, and
accountants as it may deem necessary or advisable to assist it in carrying out
its duties hereunder. The actions taken and the decisions made by the
Corporation hereunder shall be final and binding upon all interested parties
subject, however, to the provisions of Section 9.2. The Plan Year, for purposes
of Plan administration, shall be the calendar year.
9.2 CLAIMS REVIEW PROCEDURE. Whenever the Plan Administrator decides for
whatever reason to deny, whether in whole or in part, a claim for benefits under
this Plan filed by any person (herein referred to as the "Claimant"), the Plan
Administrator shall transmit a written notice of its decision to the Claimant,
which notice shall be written in a manner calculated to be understood by the
Claimant and shall contain a statement of the specific reasons for the denial of
the claim and a statement advising the Claimant that, within 60 days of the date
on which he or she receives such notice, he or she may obtain review of the
decision of the Plan Administrator in accordance with the procedures hereinafter
set forth. Within such 60-day period, the Claimant or his or her authorized
representative may request that the claim denial be reviewed by filing with the
Plan Administrator a written request therefor, which request shall contain the
following information:
(a) the date on which the request was filed with the Plan Administrator;
provided, however, that the date on which the request for review was
in fact filed with the Plan Administrator shall control in the event
that the date of the actual filing is later than the date stated by
the Claimant pursuant to this paragraph (a);
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<PAGE>
(b) the specific portions of the denial of his or her claim which the
Claimant requests the Plan Administrator to review;
(c) a statement by the Claimant setting forth the basis upon which he or
she believes the Plan Administrator should reverse its previous denial
of the claim and accept the claim as made; and
(d) any written material which the Claimant desires the Plan Administrator
to examine in its consideration of his or her position as stated
pursuant to paragraph (b) above.
In accordance with this Section, if the Claimant requests a review of the
Claim decision, such review shall be made by the Plan Administrator who shall,
within sixty (60) days after receipt of the request form, review and render a
written decision on the claim containing the specific reasons for the decision
including reference to Plan provisions upon which the decision is based. All
findings, decisions, and determinations of any kind made by the Plan
Administrator shall not be modified unless the Plan Administrator has acted in
an arbitrary and capricious manner. Subject to the requirements of law, the Plan
Administrator shall be the sole judge of the standard of proof required in any
claim for benefits, and any determination of eligibility for a benefit. All
decisions of the Plan Administrator shall be binding on the claimant and upon
all other Persons. If the Participant or Beneficiary shall not file written
notice with the Plan Administrator at the times set forth above, such individual
shall have waived all benefits under the Plan other than as already provided, if
any, under the Plan.
ARTICLE X
AMENDMENT AND TERMINATION OF PLAN
---------------------------------
10.1 RESERVATION OF RIGHTS. The Corporation reserves the right to terminate
the Plan at any time by action of the Corporation, or any duly authorized
committee thereof, and to modify or amend the Plan, in whole or in part, at any
time and for any reason, subject to the following:
(a) PRESERVATION OF ACCOUNT BALANCE. No termination, amendment, or
modification of the Plan shall reduce (i) the amount of Discretionary
Bonus awards and Corporate Contributions, and (ii) all earnings and
gains on such Discretionary Bonus awards and Corporate Contributions
that have accrued up to the effective date of the termination,
amendment, or modification.
(b) CHANGES IN EARNINGS RATE. No amendment or modification of the Plan
shall reduce the rate of earnings to be credited on all Discretionary
Bonus awards and Corporate Contribution, and all earnings and gains
accrued thereon under the Common Stock Account until the close of the
applicable Plan Year in which such amendment or modification is made.
10.2 EFFECT OF PLAN TERMINATION. Notwithstanding anything to the contrary
contained in the Plan, the termination of the Plan shall terminate the liability
of the Corporation and all Employers to make further Corporate Contributions to
the Plan.
-12-
<PAGE>
ARTICLE XI
CHANGE OF CONTROL
-----------------
11.1 CHANGE OF CONTROL. Notwithstanding any other provision of the Plan to
the contrary, in the event of a Change of Control as defined in accordance with
Section 2.1(c) of the Plan, no amendment or modification of the Plan may be made
at any time on or after such Change of Control (1) to reduce or modify a
Participant's Pre-Change of Control Account Balance, (2) to reduce or modify the
Common Stock Accounts' method of calculating earnings, gains, and/or losses on
the Participant's Pre-Change of Control Account Balance, or (3) to reduce or
modify the Participant's Discretionary Bonus awards and/or Corporate
Contributions to be credited to the Participant's Plan Account for the
applicable Deferral Period. For purposes of this Section 11.1, the term
"Pre-Change of Control Account Balance" shall mean, with regard to any Plan
Participant, the aggregate amount of the Participant's Discretionary Bonus
awards and Corporate Contributions with all earnings, gains, and losses thereon
which are credited to the Participant's Plan Account through the close of the
calendar year in which such Change of Control occurs.
11.2 COMMON STOCK CONVERSION. In the event of a transaction or occurrence
in which the Common Shares of the Corporation are converted into or exchanged
for securities, cash and/or other property as a result of any capital
reorganization or reclassification of the capital stock of the Corporation, or
consolidation or merger of the Corporation with or into another corporation or
entity, or the sale of all or substantially all of its assets to another
corporation or entity, the Corporation shall cause the Common Stock Account to
reflect on a bookkeeping basis the securities, cash and other property that
would have been received in such reorganization, reclassification,
consolidation, merger or sale in an equivalent amount of Common Shares equal to
the balance in the Common Stock Account and, from and after such reorganization,
reclassification, consolidation, merger or sale, the Common Stock Account shall
reflect on a bookkeeping basis all dividends, interest, earnings and losses
attributable to such securities, cash, and other property.
11.3 AMENDMENT IN THE EVENT OF A CHANGE OF CONTROL. On and after a Change
of Control, the provisions of Article II, Article III, Article IV, Article V,
Article VI, Article VII, Article VIII, Article IX, Article X, and this Article
XI may not be amended or modified as such Sections and Articles apply with
regard to the Participants' Pre-Change of Control Account Balances.
ARTICLE XII
MISCELLANEOUS PROVISIONS
------------------------
12.1 UNFUNDED PLAN. This Plan is an unfunded plan maintained primarily to
provide deferred compensation benefits for a select group of "management or
highly-compensated employees."
13.2 NO COMMITMENT AS TO EMPLOYMENT. Nothing herein contained shall be
construed as a commitment or agreement upon the part of any Employee hereunder
to continue his or her employment with an Employer, and nothing herein contained
shall be construed as a commitment on the part of any Employer to continue the
employment, rate of compensation, or terms and conditions of employment of any
Employee hereunder for any period. All Participants shall remain subject to
discharge to the same extent as if the Plan had never been put into effect.
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<PAGE>
12.3 BENEFITS. Nothing in the Plan shall be construed to confer any right
or claim upon any person, firm, or corporation other than the Participants,
former Participants, and Beneficiaries.
12.4 ABSENCE OF LIABILITY. No member of the Board of Directors of the
Corporation or a subsidiary or committee authorized by the Board of Directors,
or any officer of the Corporation or a subsidiary or officer of a subsidiary
shall be liable for any act or action hereunder, whether of commission or
omission, taken by any other member, or by any officer, agent, or Employee,
except in circumstances involving bad faith or willful misconduct, for anything
done or omitted to be done.
12.5 EXPENSES. The expenses of administration of the Plan shall be paid by
the Corporation.
12.6 PRECEDENT. Except as otherwise specifically agreed to by the
Corporation in writing, no action taken in accordance with the Plan by the
Corporation shall be construed or relied upon as a precedent for similar action
under similar circumstances.
12.7 WITHHOLDING. The Corporation shall withhold any tax which the
Corporation in its discretion deems necessary to be withheld from any payment to
any Participant, former Participant, or Beneficiary hereunder, by reason of any
present or future law.
12.8 VALIDITY OF PLAN. The validity of the Plan shall be determined and the
Plan shall be construed and interpreted in accordance with the provisions of the
laws of the State of Ohio. The invalidity or illegality of any provision of the
Plan shall not affect the validity or legality of any other part thereof.
12.9 PARTIES BOUND. The Plan shall be binding upon the Employers,
Participants, former Participants, and Beneficiaries hereunder, and, as the case
may be, the heirs, executors, administrators, successors, and assigns of each of
them.
12.10 HEADINGS. All headings used in the Plan are for convenience of
reference only and are not part of the substance of the Plan.
12.11 DUTY TO FURNISH INFORMATION. The Corporation shall furnish to each
Participant, former Participant, or Beneficiary any documents, reports, returns,
statements, or other information that it reasonably deems necessary to perform
its duties imposed hereunder or otherwise imposed by law.
12.12 VALIDITY. In case any provision of this Plan shall be held illegal or
invalid for any reason, said illegality or invalidity shall not affect the
remaining parts hereof, but this Plan shall be construed and enforced as if such
illegal and invalid provision had never been inserted herein.
12.13 NOTICE. Any notice required or permitted under the Plan shall be
deemed sufficiently provided if such notice is in writing and hand delivered or
sent by registered or certified mail. Such notice shall be deemed given as of
the date of delivery or, if delivery is made by mail, as of the date shown on
the postmark or on the receipt for registration or certification. Mailed notice
to the Corporation shall be directed to the Corporation's address, attention:
KeyCorp Compensation and Benefits Department. Mailed notice to a Participant or
Beneficiary shall be directed to the individual's last known address in the
Employer's records.
12.14 SUCCESSORS. The provisions of this Plan shall bind and inure to the
benefit of each Employer and its successors and assigns. The term successors as
used herein shall include any corporate
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<PAGE>
or other business entity, which shall, whether by merger, consolidation,
purchase or otherwise, acquire all or substantially all of the business and
assets of an Employer.
KEYCORP
By:
-------------------------------------
Title: Exec. VP
----------------------------------
<PAGE>
ADDENDUM A
The terms of this Addendum A shall apply only to those Employees (i)
who have been specifically authorized by the Compensation and Organization
Committee of the KeyCorp Board of Directors ("Committee") to participate in the
McDonald Financial Group Deferral Plan ("Plan") under an enhanced benefit
structure, and (ii) whose average annual gross production averages a minimum of
$7,500,000 over the immediately preceding 3-year period under such criteria as
is authorized by the Corporation ("Authorized Employees"). In accordance with
the authorization granted by the Committee, the Plan is hereby modified with
regard to such Authorized Employees as follows:
1. Section 3.1 of the Plan shall be disregarded under the terms
of this Addendum, and the following new Section shall become
applicable with regard to such Authorized Employees:
"CREDITING OF CORPORATION CONTRIBUTIONS. Matching
Corporate Contributions equal to 2 times the Authorized
Employee's Deferred Bonus award for the applicable
Deferral Period shall be credited on a bookkeeping
basis to the Authorized Employee's Plan Account as of
the payroll date on which the Authorized Employee's
Discretionary Bonus award is automatically deferred and
credited to the Plan.
Notwithstanding the foregoing provisions of
this Addendum, however, in the event that the
Authorized Employee's Branch Profit Margin (or where
applicable, the Branch Profit Margin for such
Authorized Employees) fail to equal or exceed (i) 20%
for the 2003 Plan year, (ii) 22% for the 2004 Plan
year, or (iii) 24% for the 2005 Plan year and for each
succeeding Plan years thereafter, then the provisions
of this Addendum shall be null and void for purposes of
allocating matching Corporate Contributions to such
Authorized Employee for the applicable Plan year and
the terms of Section 3.1 shall become applicable to
such Authorized Employees."
For purposes of this Addendum A, the following words and phrases shall
have the meanings hereinafter set forth:
1. "BRANCH PROFIT MARGIN" shall mean the branch profit margin per the
branch financial statements, calculated as branch revenues less production and
direct expenses. For purposes of calculating the branch's direct expenses, the
dollar cost of the Authorized Employee's Discretionary Bonus award and matching
Corporate Contribution will be included as part of the
<PAGE>
Branch's direct expenses for the year in which the Discretionary Bonus award is
earned rather than paid. Direct expenses, however, shall specifically exclude
all allocated expenses such as marketing, operations, and trading costs.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.32
<SEQUENCE>7
<FILENAME>l97974aexv10w32.txt
<DESCRIPTION>EX-10.32 SIGNING BONUS PLAN
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Exhibit 10.32
KEYCORP
SIGNING BONUS PLAN
ARTICLE I
The KeyCorp Signing Bonus Plan ("Plan") is established effective January
1, 1999 to require certain select Employees of KeyCorp to defer all or a
percentage of the total amount of their signing bonus to be provided to the
Employee in conjunction with his or her employment with an Employer to the Plan.
As structured, the Plan is intended to provide those select Employees of KeyCorp
with a tax-favorable savings vehicle, while providing KeyCorp with a means of
retaining the Employee's continued employment. It is the intention of KeyCorp,
and it is the understanding of those Participants covered under the Plan, that
the Plan is unfunded for tax purposes and for purposes of Title I of the
Employee Retirement Income Security Act of 1974, as amended.
ARTICLE II
DEFINITIONS
2.1 MEANING OF DEFINITIONS. For the purposes of this Plan, the following
words and phrases shall have the meanings hereinafter set forth, unless a
different meaning is clearly required by the context:
(a) "BENEFICIARY" shall mean the person, persons or entity entitled
under Article VIII to receive any Plan benefits payable after a
Participant's death.
(b) "BOARD" shall mean the Board of Directors of KeyCorp, the Board's
Compensation and Organization Committee, or any other committee
designated by the Board or a subcommittee designated by the Board's
Compensation and Organization Committee.
(c) "CHANGE OF CONTROL" shall be deemed to have occurred if under a
rabbi trust arrangement established by KeyCorp ("Trust"), as such
Trust may from time to time be amended or substituted, the
Corporation is required to fund the Trust because a "Change of
Control", as defined in the Trust, has occurred on and after January
1, 1999.
(d) "COMMON STOCK ACCOUNT" shall mean the investment account established
under the Plan for bookkeeping purposes in which the Participant
shall have his or her Signing Bonus Deferral credited. Signing Bonus
Deferrals shall be credited based on a bookkeeping allocation of
KeyCorp Common Shares (both whole and fractional rounded to the
nearest one-hundredth of a share) ("Common Shares") which, on the
date credited, shall be equal in market value (as determined under
the last sentence of this Section 2.1(d)) to the amount of the
Signing Bonus Deferral deferred. The Common Stock Account shall also
reflect on a bookkeeping basis all dividends, gains, and losses
attributable to such Common Shares. All Signing Bonus Deferrals
credited to the Common Stock Account shall be based on the New York
Stock Exchange's closing price for such Common Shares as of the day
such Signing Bonus Deferral is credited to the Participant's Plan
Account.
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(e) "CORPORATION" shall mean KeyCorp, an Ohio corporation, its corporate
successors, and any corporation or corporations into or with which
it may be merged or consolidated. "Date of Hire" shall mean the
first day an Employee commences active employment with an Employer.
(f) "DETERMINATION DATE" shall mean the last business day of each
calendar quarter.
(g) "DISABILITY" shall mean (1) the physical or mental disability of a
permanent nature which prevents a Participant from performing the
duties such Participant was employed to perform for his or her
Employer when such disability commenced, (2) qualifies for
disability benefits under the federal Social Security Act within 30
months following the Participant's disability, and (3) qualifies the
Participant for disability coverage under the KeyCorp Long Term
Disability Plan.
(h) "DISTRIBUTION AGREEMENT" shall mean the executed agreement submitted
by the Participant to the Corporation a minimum of twelve months
prior to the Participant's vesting in his or her Signing Bonus
Deferral which shall contain, in pertinent part, the Participant's
distribution instructions for such Signing Bonus Deferral when
vested. In the event the Participant elects or is required to
transfer his or her Signing Bonus Deferral to the KeyCorp Deferred
Compensation Plan, the Participant, at the time of such transfer,
shall be required to execute a new Distribution Agreement which
shall control the distribution of such transferred Plan benefits.
(i) "EMPLOYEE" shall mean a common law employee who is employed by an
Employer.
(j) "EMPLOYER" shall mean the Corporation and any of its subsidiaries or
affiliates, unless specifically excluded as an Employer for Plan
purposes by written action by an officer of the Corporation. An
Employer's Plan participation shall be subject to all conditions and
requirements made by the Corporation, and each Employer shall be
deemed to have appointed the Plan Administrator as its exclusive
agent under the Plan as long as it continues as an Employer.
(k) "HARMFUL ACTIVITY" shall have occurred if the Participant shall do
any one or more of the following:
(i) Use, publish, sell, trade or otherwise disclose Non-Public
Information of KeyCorp unless such prohibited activity was
inadvertent, done in good faith and did not cause significant
harm to KeyCorp.
(ii) After notice from KeyCorp, fail to return to KeyCorp any
document, data, or thing in his or her possession or to which
the Participant has access that may involve Non-Public
Information of KeyCorp.
(iii) After notice from KeyCorp, fail to assign to KeyCorp all
right, title, and interest in and to any confidential or
non-confidential Intellectual Property which the Participant
created, in whole or in part, during employment with KeyCorp,
including, without limitation, copyrights, trademarks, service
marks, and patents in or to (or associated with) such
Intellectual Property.
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(iv) After notice from KeyCorp, fail to agree to do any acts and
sign any document reasonably requested by KeyCorp to assign
and convey all right, title, and interest in and to any
confidential or non-confidential Intellectual Property which
the Participant created, in whole or in part, during
employment with KeyCorp, including, without limitation, the
signing of patent applications and assignments thereof.
(v) Upon the Participant's own behalf or upon behalf of any other
person or entity that competes or plans to compete with
KeyCorp, solicit or entice for employment or hire any KeyCorp
employee.
(vi) Upon the Participant's own behalf or upon behalf of any other
person or entity that competes or plans to compete with
KeyCorp, call upon, solicit, or do business with (other than
business which does not compete with any business conducted by
KeyCorp) any KeyCorp customer the Participant called upon,
solicited, interacted with, or became acquainted with, or
learned of through access to information (whether or not such
information is or was non-public) while the Participant was
employed at KeyCorp unless such prohibited activity was
inadvertent, done in good faith, and did not involve a
customer whom the Participant should have reasonably known was
a customer of KeyCorp.
(vii) Upon the Participant's own behalf or upon behalf of any other
person or entity that competes or plans to compete with
KeyCorp, after notice from KeyCorp, continue to engage in any
business activity in competition with KeyCorp in the same or a
closely related activity that the Participant was engaged in
for KeyCorp during the one year period prior to the
termination of the Participant's employment.
For purposes of this Section 2.1(k) the term:
"INTELLECTUAL PROPERTY" shall mean any invention, idea,
product, method of doing business, market or business plan,
process, program, software, formula, method, work of
authorship, or other information, or thing relating to KeyCorp
or any of its businesses.
"NON-PUBLIC INFORMATION" shall mean, but is not limited to,
trade secrets, confidential processes, programs, software,
formulas, methods, business information or plans, financial
information, and listings of names (e.g., employees,
customers, and suppliers) that are developed, owned, utilized,
or maintained by an employer such as KeyCorp, and that of its
customers or suppliers, and that are not generally known by
the public.
"KEYCORP" shall include KeyCorp, its subsidiaries, and its
affiliates.
(l) "SIGNING BONUS DEFERRAL" shall mean all or any portion of the
Employee's employment-signing bonus as negotiated and agreed
to by and between the Employee and the Employer as an
inducement for the Employee's acceptance of employment with an
Employer which has been deferred to the Plan.
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(m) "PARTICIPANT" shall mean an Employee who meets the eligibility
and participation requirements set forth in Section 3.1 of the
Plan.
(n) "PLAN" shall mean the KeyCorp Signing Bonus Plan with all
amendments hereafter made.
(o) "PLAN ACCOUNT" shall mean the bookkeeping account established
by the Corporation for each Plan Participant, which shall
reflect the Participant's Signing Bonus Deferral invested for
bookkeeping purposes in the Plan's Common Stock Account, with
all earnings, dividends, gains, and losses thereon. Plan
Accounts shall not constitute separate Plan funds or separate
Plan assets. Neither the maintenance of, nor the crediting of
amounts to such Plan Accounts shall be treated (i) as the
allocation of any Corporation assets to, or a segregation of
any Corporation assets in any such Plan Accounts, or (ii) as
otherwise creating a right in any person or Participant to
receive specific assets of the Corporation.
(p) "PLAN YEAR" shall mean the calendar year.
(q) "TERMINATION UNDER LIMITED CIRCUMSTANCES" shall mean the
termination (whether by the Participant or the Employer) of a
Participant's employment from his or her Employer, and from
any other Employer (i) under circumstances in which the
Participant is entitled to receive severance benefits or
salary continuation benefits under the KeyCorp Separation Pay
Plan, (ii) under circumstances in which the Participant is
entitled to severance benefits or salary continuation or
similar benefits under a change of control agreement or
employment agreement within two years after a change of
control (as defined by such agreement) has occurred, or (iii)
as otherwise expressly approved by the Corporation or the
Compensation and Organization Committee, in their sole
discretion.
(r) "VESTING SERVICE" for purposes of Section 5.1 of the Plan,
shall be calculated by measuring the period of service
commencing on the Employee's commencement date of active
employment with an Employer and ending on the Employee's
termination date and shall be computed based on each full
calendar month that the Employee is employed by an Employer.
(s) "TERMINATION OF EMPLOYMENT" shall mean the voluntary or
involuntary termination of the Participant's employment from
his or her Employer and from any other Employer, but shall not
include the Participant's Termination Under Limited
Circumstances or termination as a result of Disability or
death.
2.2 PRONOUNS. The masculine pronoun wherever used herein includes
the feminine in any case so requiring, and the singular may
include the plural.
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ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 ELIGIBILITY AND PARTICIPATION. An Employee shall be required to
participate in the Plan, and shall automatically become a Plan Participant upon
the Employer's grant of an employment-signing bonus to the Employee with such
grant being conditioned on the requirement that all or a portion of such bonus
be deferred to the Plan.
3.2 AUTOMATIC DEFERRAL REQUIREMENTS. An Employee meeting the eligibility
and participation requirements of Section 3.1 hereof, shall in accordance with
the negotiated terms of the Employee's employment with his or her Employer,
defer such portion (as determined by the Employer) of the Employee's
employment-signing bonus to the Plan.
ARTICLE IV
SIGNING BONUS DEFERRALS
4.1 CREDITING OF SIGNING BONUS DEFERRALS. All Signing Bonus Deferrals
shall be credited on a bookkeeping basis to a Plan Account established in the
Participant's name as of the payroll date on which the Participant's Signing
Bonus would have been payable to the Participant but for the deferral provisions
of the Plan and the Employer's deferral requirements mandated in conjunction
with the Employee's receipt of his or her signing bonus.
4.2 INVESTMENT OF SIGNING BONUS DEFERRALS. Signing Bonus Deferrals shall
be automatically invested on a bookkeeping basis in the Plan's Common Stock
Account.
4.3 DETERMINATION OF AMOUNT. The Plan Administrator shall verify the
amount of each Participant's Signing Bonus Deferral, with all dividends, and
earnings, if any, to be credited to each Participant's Plan Account in
accordance with the provisions of the Plan. The reasonable and equitable
decision of the Plan Administrator as to the value of each Plan Account shall be
conclusive and binding upon all Participants and the Beneficiary of each
deceased Participant having any interest, direct or indirect in the
Participant's Plan Account. As soon as reasonably practicable after the close of
the Plan Year, the Corporation shall send to each Participant an itemized
accounting statement that shall reflect the Participant's Plan Account balance.
4.4 CORPORATE ASSETS. All Signing Bonus Deferrals, dividends, earnings and
any other gains and losses credited to each Participant's Plan Account on a
bookkeeping basis, remain the assets and property of the Corporation, which
shall be subject to distribution to the Participant only in accordance with
Articles VI, IX and X of the Plan. Distributions made under the Plan shall be in
the form of Common Shares or as a plan-to-plan transfer to the KeyCorp Deferred
Compensation Plan as provided for in Article VI hereof. Participants and
Beneficiaries shall have the status of general unsecured creditors of the
Corporation. Nothing contained in the Plan shall create, or be construed as
creating a trust of any kind or any other fiduciary relationship between the
Participant, the Corporation, or any other person. It is the intention of the
Corporation and it is the understanding of the Participant that the Plan be
unfunded for tax purposes and for purposes of ERISA.
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4.5 NO PRESENT INTEREST. Subject to any federal statute to the contrary,
no right or benefit under the Plan and no right or interest in each
Participant's Plan Account shall be subject to anticipation, alienation, sale,
assignment, pledge, encumbrance, or charge, and any attempt to anticipate,
alienate, sell, assign, pledge, encumber, or charge any right or benefit under
the Plan, or Participant's Plan Account shall be void. No right, interest, or
benefit under the Plan or Participant's Plan Account shall be liable for or
subject to the debts, contracts, liabilities, or torts of the Participant or
Beneficiary. If the Participant or Beneficiary becomes bankrupt or attempts to
alienate, sell, assign, pledge, encumber, or charge any right under the Plan or
Participant's Plan Account, such attempt shall be void and unenforceable.
ARTICLE V
VESTING
5.1 VESTING IN PARTICIPANT SIGNING BONUS DEFERRALS. The calculation of a
Participant's vested interest in his or her Signing Bonus Deferral credited on a
bookkeeping basis to the Participant's Plan Account shall be measured from the
Participant's commencement date of active employment with an Employer. A
Participant shall become vested in his or her Signing Bonus Deferral with all
earnings, gains, and losses thereon after three full years of Vesting Service.
Alternatively, at the Employer's election, with such election having been
clearly communicated to the Employee prior to the Employee's date of hire with
the Employer, a Participant shall become vested in his or her Signing Bonus
Deferral under the following three-year graded vesting schedule (or such other
three year vesting schedule as is expressly agreed to in writing by the Employee
and Employer prior to the Employee's date of hire):
(a) From the date the Participant's Signing Bonus Deferral is
credited to the Participant's Plan Account ("Deferral Date") until
one full calendar year from the deferral
date.............................................................0%.
(b) One full calendar year from the Deferral Date of the
Participant's Signing Bonus Deferral to the Plan but less than two
full calendar years from such Deferral
Date............................................................33%.
(c) Two full calendar years from the Deferral Date of the
Participant's Signing Bonus Deferral to the Plan but less than three
full calendar years from such Deferral
Date............................................................66%.
(d) Three full calendar years from the Deferral Date of the
Participant's Signing Bonus Deferral to the
Plan...........................................................100%.
Notwithstanding the foregoing provisions of this Section 5.1, however, a
Participant shall become fully vested in his or her Signing Bonus Deferral as
credited on a bookkeeping basis to the Participant's Plan Account upon the
Participant's Termination Under Limited Circumstances, Disability or death.
5.2 FORFEITURE OF THE PARTICIPANT'S SIGNING BONUS DEFERRAL.
Notwithstanding any provision of the Plan to the contrary, upon the
Participant's Termination of Employment, the Participant shall automatically
forfeit his or her Signing Bonus Deferral that has been credited on a
bookkeeping basis to the Participant's Plan Account with all earnings and gains
thereon that have not vested in accordance with the vesting provisions of
Section 5.1 of the Plan as of the Participant's last day of employment.
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ARTICLE VI
DISTRIBUTION OF PLAN BENEFITS
6.1 DISTRIBUTION OF DEFERRAL. A Participant's vested Signing Bonus
Deferral with all earnings and gains thereon, shall be distributed to the
Participant as of the Determination Date concurrently with or immediately
following the Participant's vesting in his or her Plan benefit in accordance
with the distribution directions provided by the Participant in his or her
Distribution Agreement, as follows:
(a) as a single lump sum distribution of Common Shares, or
(b) as a plan-to-plan transfer of the Participant's vested
bookkeeping Plan Account balance to the KeyCorp Deferred
Compensation Plan's Common Stock Account.
Subject to the withholding provisions of Section 6.4 hereof, lump sum
distributions from the Plan shall be made in Common Shares based on the
bookkeeping number of whole and fractional Common Shares attributable to the
Participant's vested Signing Bonus Deferral maintained in the Plan's Common
Stock Account as of the Determination Date concurrently with or immediately
preceding the date of such distribution. Participants' Plan Account balances
transferred to the KeyCorp Deferred Compensation Plan's Common Stock Account
will not be subject to investment diversification and/or reallocation under the
KeyCorp Deferred Compensation Plan.
Notwithstanding the foregoing provisions of this Section 6.1, however, in the
event a Participant who is subject to the Corporation Stock Ownership Guidelines
fails to meet his or her Stock Ownership Guidelines requirements at the time of
his or her Plan distribution and the Participant has elected to receive a lump
sum distribution from the Plan, the Corporation in its discretion may (1)
withhold such portion of the Participant's lump sum distribution of Common
Shares until the Participant has otherwise met his or her obligations under the
Corporation Stock Ownership Guidelines, or (2) issue to the Participant
restricted Common Shares whose transferability will be restricted until the
Participant otherwise meets his or her obligations under the Stock Ownership
Guidelines.
6.2 DISTRIBUTIONS FOLLOWING TERMINATION UNDER LIMITED CIRCUMSTANCES,
DISABILITY OR DEATH. Upon the Participant's Termination Under Limited
Circumstances, termination of the Participant's employment due to Disability or
termination of the Participant's employment due to death, the Participant's
Signing Bonus Deferral, as credited to the Participant's Plan Account with all
earnings, gains, and losses thereon shall become immediately vested and shall be
distributed to the Participant or the Participant's Beneficiary in a single lump
sum distribution of Common Shares, net of withholding.
6.3 FORFEITURE FOLLOWING TERMINATION OF EMPLOYMENT. Upon the Participant's
Termination of Employment, the Participant's non-vested Signing Bonus Deferral,
as credited to the Participant's Plan Account with all earnings, gains, and
losses thereon shall be forfeited by the Participant as of his or her last day
of employment.
6.4 WITHHOLDING. The withholding of taxes with respect to the
Participant's Signing Bonus Deferral with all earnings and gains thereon shall
be made at such time as it becomes required by any state, federal or local law;
such taxes shall be withheld from the Participant's Signing Bonus Deferral in
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accordance with applicable law and shall be paid by reducing the number of
Common Shares to be distributed to the Participant based on such Common Shares'
market value as of the distribution date.
6.5 DISTRIBUTION LIMITATION. If the Corporation determines that a Signing
Bonus Deferral with all earnings and gains thereon:
1. would not be deductible by the Corporation if paid in accordance
with the distribution instructions specified by the Participant in his or
her Distribution Agreement by reason of the disallowance rules of Section
162(m) of the Code, but
2. would be deductible by the Corporation if deferred and paid in a
later Plan Year, the Corporation reserves the right to defer the
distribution of all or any portion of such Participant's Signing Bonus
Deferral with all earnings, gains or loses thereon until such time as the
Corporation determines that the distribution of all or any portion of such
Participant's Signing Bonus Deferral will be payable without the
disallowance of the deduction prescribed by Code Section 162(m)
("Deferrals"). Such unpaid Deferral shall be transferred to the Deferred
Compensation Plan and shall be held in the KeyCorp Deferred Compensation
Plan's Common Stock Account and the provisions of the KeyCorp Deferred
Compensation Plan thereafter shall become applicable with regard to such
Deferral.
Notwithstanding any other provision of this Section 6.5, however, a
Participant's Signing Bonus Deferral transferred to the KeyCorp Deferred
Compensation Plan together with all earnings, gains, and losses thereon, shall
be distributed to the Participant no later than April 15 of the year following
the employment termination date of the Participant, regardless of the
deductibility of such distribution.
6.6 FACILITY OF PAYMENT. If it is found that any individual to whom an
amount is payable hereunder is incapable of attending to his or her financial
affairs because of any mental or physical condition, including the infirmities
of advanced age, such amount (unless prior claim therefor shall have been made
by a duly qualified guardian or other legal representative) may, in the
discretion of the Corporation, be paid to another person for the use or benefit
of the individual found incapable of attending to his or her financial affairs
or in satisfaction of legal obligations incurred by or on behalf of such
individual. Any such payment shall be charged to the Participant's Plan Account
from which any such payment would otherwise have been paid to the individual
found incapable of attending to his or her financial affairs, and shall be a
complete discharge of any liability therefor under the Plan.
ARTICLE VII
BENEFICIARY DESIGNATION
7.1 BENEFICIARY DESIGNATION. Subject to Section 7.3 hereof, each
Participant shall have the right, at any time, to designate one or more persons
or an entity as Beneficiary (both primary as well as secondary) to whom benefits
under this Plan shall be paid in the event of Participant's death prior to
complete distribution of the Participant's vested Plan Account. Each Beneficiary
designation shall be in a written form prescribed by the Corporation and shall
be effective only when filed with the Corporation during the Participant's
lifetime.
7.2 CHANGING BENEFICIARY. Any Beneficiary designation may be changed by
the Participant without the consent of the previously named Beneficiary by the
Participant's filing of a new designation
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with the Corporation. The filing of a new designation shall cancel all
designations previously filed by the Participant.
7.3 NO BENEFICIARY DESIGNATION. If a Participant fails to designate a
Beneficiary in the manner provided above, if the designation is void, or if the
Beneficiary (including all contingent Beneficiaries) designated by a deceased
Participant dies before the Participant, the Participant's Beneficiary shall be
the Participant's estate.
ARTICLE VIII
ADMINISTRATION
8.1 ADMINISTRATION. The Corporation, as the "Plan Administrator" shall be
responsible for the general administration of the Plan, for carrying out the
provisions hereof, and for making payments hereunder. The Corporation shall have
the sole and absolute discretionary authority and power to carry out the
provisions of the Plan, including, but not limited to, the authority and power
(a) to determine all questions relating to the eligibility for and the amount of
any benefit to be paid under the Plan, (b) to determine all questions pertaining
to claims for benefits and procedures for claim review, (c) to resolve all other
questions arising under the Plan, including any questions of construction and/or
interpretation, and (d) to take such further action as the Corporation shall
deem necessary or advisable in the administration of the Plan. All findings,
decisions, and determinations of any kind made by the Plan Administrator shall
not be disturbed unless the Plan Administrator has acted in an arbitrary and
capricious manner. Subject to the requirements of law, the Plan Administrator
shall be the sole judge of the standard of proof required in any claim for
benefits and in any determination of eligibility for a benefit. All decisions of
the Plan Administrator shall be final and binding on all parties. The
Corporation may employ such attorneys, investment counsel, agents, and
accountants as it may deem necessary or advisable to assist it in carrying out
its duties hereunder. The actions taken and the decisions made by the
Corporation hereunder shall be final and binding upon all interested parties
subject, however, to the provisions of Section 8.2. The Plan Year, for purposes
of Plan administration, shall be the calendar year.
8.2 CLAIMS REVIEW PROCEDURE. Whenever the Plan Administrator decides for
whatever reason to deny, whether in whole or in part, a claim for benefits under
this Plan filed by any person (herein referred to as the "Claimant"), the Plan
Administrator shall transmit a written notice of its decision to the Claimant,
which notice shall be written in a manner calculated to be understood by the
Claimant and shall contain a statement of the specific reasons for the denial of
the claim and a statement advising the Claimant that, within 60 days of the date
on which he or she receives such notice, he or she may obtain review of the
decision of the Plan Administrator in accordance with the procedures hereinafter
set forth. Within such 60-day period, the Claimant or his or her authorized
representative may request that the claim denial be reviewed by filing with the
Plan Administrator a written request therefor, which request shall contain the
following information:
(a) the date on which the request was filed with the Plan Administrator;
provided, however, that the date on which the request for review was
in fact filed with the Plan Administrator shall control in the event
that the date of the actual filing is later than the date stated by
the Claimant pursuant to this paragraph (a);
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(b) the specific portions of the denial of his or her claim which the
Claimant requests the Plan Administrator to review;
(c) a statement by the Claimant setting forth the basis upon which he or
she believes the Plan Administrator should reverse its previous
denial of the claim and accept the claim as made; and
(d) any written material which the Claimant desires the Plan
Administrator to examine in its consideration of his or her position
as stated pursuant to paragraph (b) above.
In accordance with this Section 8.2, if the Claimant requests a review of
the claim decision, such review shall be made by the Plan Administrator, who
shall, within sixty (60) days after receipt of the request form, review and
render a written decision on the claim containing the specific reasons for the
decision including reference to Plan provisions upon which the decision is
based. All findings, decisions, and determinations of any kind made by the Plan
Administrator shall not be modified unless the Plan Administrator has acted in
an arbitrary and capricious manner. Subject to the requirements of law, the Plan
Administrator shall be the sole judge of the standard of proof required in any
claim for benefits, and any determination of eligibility for a benefit. All
decisions of the Plan Administrator shall be binding on the claimant and upon
all other persons or entities. If the Participant or Beneficiary shall not file
written notice with the Plan Administrator at the times set forth above, such
individual shall have waived all benefits under the Plan other than as already
provided, if any, under the Plan.
ARTICLE IX
AMENDMENT AND TERMINATION OF PLAN
9.1 RESERVATION OF RIGHTS. The Corporation reserves the right to terminate
the Plan at any time by action of the Board of Directors of the Corporation, or
any duly authorized committee thereof, and to modify or amend the Plan, in whole
or in part, at any time and for any reason, subject to the following:
(a) PRESERVATION OF ACCOUNT BALANCE. No termination, amendment, or
modification of the Plan shall reduce (i) the amount of a
Participant's Signing Bonus Deferral, and (ii) all earnings and
gains on such Participant's Signing Bonus Deferral that have accrued
up to the effective date of the termination, amendment, or
modification.
(b) CHANGES IN EARNINGS RATE. No amendment or modification of the Plan
shall reduce the rate of earnings to be credited on a Participant's
Signing Bonus Deferral with all earnings and gains accrued thereon
under the Common Stock Account until the close of the applicable
Plan Year in which such amendment or modification is made.
9.2 EFFECT OF PLAN TERMINATION. If the Corporation terminates the Plan,
either in whole or in part, the following will apply:
(a) PARTIAL TERMINATION. The Corporation may partially terminate the
Plan by instructing the Plan Administrator to not accept any
additional Signing Bonus Deferrals. If such a partial termination
occurs, the Plan shall continue to operate and to be effective with
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regard to those Participant's Signing Bonus Deferrals deferred prior
to the effective date of such partial termination.
(b) COMPLETE TERMINATION. The Corporation may completely terminate the
Plan by instructing the Plan Administrator to not accept any
additional Participant Deferrals and to fully vest all Participants'
Plan Account balances. If such a complete termination occurs, the
Plan shall cease to operate and the Plan Administrator shall
distribute each Participant's Plan Account balance. Participants'
distributions shall be made in a lump sum distribution of Common
Shares, net of withholding, based on the value of each Participant's
Plan Account balance as of the Participant's Plan distribution date.
Notwithstanding the foregoing provisions of this Section 9.2, however, in
the event a Participant who is subject to the Corporation Stock Ownership
Guidelines fails to meet his or her Stock Ownership Guidelines requirements at
the time of his or her Plan distribution and the Participant has elected to
receive a lump sum distribution from the Plan, the Corporation in its discretion
may (1) withhold such portion of the Participant's lump sum distribution of
Common Shares until the Participant has otherwise met his or her obligations
under the Corporation Stock Ownership Guidelines, or (2) issue to the
Participant restricted Common Shares whose transferability will be restricted
until the Participant otherwise meets his or her obligations under the Stock
Ownership Guidelines.
ARTICLE X
CHANGE OF CONTROL
10.1 CHANGE OF CONTROL. Notwithstanding any other provision of the Plan to
the contrary, in the event of a Change of Control as defined in accordance with
Section 2.1(c) of the Plan, no amendment or modification of the Plan may be made
at any time on or after such Change of Control (1) to reduce or modify a
Participant's Pre-Change of Control Account Balance, or (2) to reduce or modify
the Common Stock Accounts' method of calculating earnings, gains, and/or losses
on the Participant's Pre-Change of Control Account Balance. For purposes of this
Section 10.1, the term "Pre-Change of Control Account Balance" shall mean, with
regard to any Plan Participant, the aggregate undistributed amount of the
Participant's Signing Bonus Deferral with all earnings, gains, and losses
thereon which are credited to the Participant's Plan Account through the close
of the calendar year in which such Change of Control occurs.
10.2 COMMON STOCK CONVERSION. In the event of a transaction or occurrence
in which the Common Shares of the Corporation are converted into or exchanged
for securities, cash and/or other property as a result of any capital
reorganization or reclassification of the capital stock of the Corporation, or
consolidation or merger of the Corporation with or into another corporation or
entity, or the sale of all or substantially all of its assets to another
corporation or entity, the Corporation shall cause the Common Stock Account to
reflect on a bookkeeping basis the securities, cash and other property that
would have been received in such reorganization, reclassification,
consolidation, merger or sale in an equivalent amount of Common Shares equal to
the balance in the Common Stock Account and, from and after such reorganization,
reclassification, consolidation, merger or sale, the Common Stock Account shall
reflect on a bookkeeping basis all dividends, interest, earnings and losses
attributable to such securities, cash, and other property.
11
<PAGE>
10.3 AMENDMENT IN THE EVENT OF A CHANGE OF CONTROL. On and after a Change
of Control, the provisions of Article II, Article IV, Article V, Article VI,
Article VII, Article VIII, Article IX, and this Article X, may not be amended or
modified as such Sections and Articles apply with regard to the Participants'
Pre-Change of Control Account Balances.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 UNFUNDED PLAN. This Plan is an unfunded plan maintained primarily to
provide deferred compensation benefits for a select group of "management or
highly-compensated employees."
11.2 NO COMMITMENT AS TO EMPLOYMENT. Nothing herein contained shall be
construed as a commitment or agreement upon the part of any Employee hereunder
to continue his or her employment with an Employer, and nothing herein contained
shall be construed as a commitment on the part of any Employer to continue the
employment, rate of compensation, or terms and conditions of employment of any
Employee hereunder for any period. All Participants shall remain subject to
discharge to the same extent as if the Plan had never been put into effect.
11.3 BENEFITS. Nothing in the Plan shall be construed to confer any right
or claim upon any person, firm, or corporation other than the Participants,
former Participants, and Beneficiaries.
11.4 ABSENCE OF LIABILITY. No member of the Board of Directors of the
Corporation or a subsidiary or committee authorized by the Board of Directors,
or any officer of the Corporation or a subsidiary or officer of a subsidiary
shall be liable for any act or action hereunder, whether of commission or
omission, taken by any other member, or by any officer, agent, or Employee,
except in circumstances involving bad faith or willful misconduct, for anything
done or omitted to be done.
11.5 EXPENSES. The expenses of administration of the Plan shall be paid by
the Corporation.
11.6 PRECEDENT. Except as otherwise specifically agreed to by the
Corporation in writing, no action taken in accordance with the Plan by the
Corporation shall be construed or relied upon as a precedent for similar action
under similar circumstances.
11.7 WITHHOLDING. The Corporation shall withhold any tax which the
Corporation in its discretion deems necessary to be withheld from any payment to
any Participant, former Participant, or Beneficiary hereunder, by reason of any
present or future law.
11.8 VALIDITY OF PLAN. The validity of the Plan shall be determined and
the Plan shall be construed and interpreted in accordance with the laws of the
State of Ohio. The invalidity or illegality of any provision of the Plan shall
not affect the validity or legality of any other part thereof.
11.9 PARTIES BOUND. The Plan shall be binding upon the Employers,
Participants, former Participants, and Beneficiaries hereunder, and, as the case
may be, the heirs, executors, administrators, successors, and assigns of each of
them.
11.10 HEADINGS. All headings used in the Plan are for convenience of
reference only and are not part of the substance of the Plan.
12
<PAGE>
11.11 DUTY TO FURNISH INFORMATION. The Corporation shall furnish to each
Participant, former Participant, or Beneficiary any documents, reports, returns,
statements, or other information that it reasonably deems necessary to perform
its duties imposed hereunder or otherwise imposed by law.
11.12 TRUST FUND. At its discretion, the Corporation may establish one or
more trusts, with such trustees as the Corporation may approve, for the purpose
of providing for the payment of benefits owed under the Plan. Although such a
trust may be irrevocable, in the event of insolvency or bankruptcy of the
Corporation, such assets will be subject to the claims of the Corporation's
general creditors. To the extent any benefits provided under the Plan are paid
from any such trust, the Employer shall have no further obligation to pay them.
If not paid from the trust, such benefits shall remain the obligation of the
Employer.
11.13 VALIDITY. In case any provision of this Plan shall be held illegal
or invalid for any reason, said illegality or invalidity shall not affect the
remaining parts hereof, but this Plan shall be construed and enforced as if such
illegal and invalid provision had never been inserted herein.
11.14 NOTICE. Any notice required or permitted under the Plan shall be
deemed sufficiently provided if such notice is in writing and hand delivered or
sent by registered or certified mail. Such notice shall be deemed given as of
the date of delivery or, if delivery is made by mail, as of the date shown on
the postmark or on the receipt for registration or certification. Mailed notice
to the Corporation shall be directed to the Corporation's address, attention:
KeyCorp Compensation and Benefits Department. Mailed notice to a Participant or
Beneficiary shall be directed to the individual's last known address in the
Employer's records.
11.15 SUCCESSORS. The provisions of this Plan shall bind and inure to the
benefit of each Employer and its successors and assigns. The term successors as
used herein shall include any corporate or other business entity, which shall,
whether by merger, consolidation, purchase or otherwise, acquire all or
substantially all of the business and assets of an Employer.
KEYCORP
By: /s/ Thomas E. Helfrich
------------------------------------
Title: Executive Vice President
---------------------------------
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.33
<SEQUENCE>8
<FILENAME>l97974aexv10w33.txt
<DESCRIPTION>EX-10.33 FIRST AMENDMENT TO SIGNING BONUS PLAN
<TEXT>
<PAGE>
EXHIBIT 10.33
FIRST AMENDMENT TO THE
KEYCORP SIGNING BONUS PLAN
WHEREAS, KeyCorp has established the KeyCorp Signing Bonus Plan
("Plan") for certain employees of KeyCorp, and
WHEREAS, the Board of Directors of KeyCorp has authorized its
Compensation and Organization Committee to permit amendments to the Plan, and
WHEREAS, the Compensation and Organization Committee of the Board of
Directors of KeyCorp has determined it desirable to amend the Plan and has
accordingly authorized the execution of the First Amendment,
NOW, THEREFORE, pursuant to such action of the Compensation and
Organization Committee, the Plan is hereby amended as follows:
1. Section 6.1 of the Plan is amended to delete it in its
entirety and to substitute therefore the following:
"6.1 DISTRIBUTION OF DEFERRAL. A Participant's vested Signing
Bonus Deferral with all earnings and gains thereon, shall be
distributed to the Participant as of the Determination Date
concurrently with or immediately following the Participant's vesting in
his or her Plan benefit in accordance with the distribution directions
provided by the Participant in his or her Distribution Agreement, as
follows:
(a) as a single lump sum distribution of Common Shares, or
(b) if the participant is otherwise eligible to participate
in the KeyCorp Deferred Compensation Plan based on the
Participant's job grade (or job grade equivalent) at
the time of his or her Signing Bonus Deferral, then
such Participant may make a plan-to-plan transfer of
the Participant's vested bookkeeping Plan Account
balance to the KeyCorp Deferred Compensation Plan's
Common Stock Account.
Subject to the withholding provisions of Section 6.4 hereof,
distributions from the Plan shall be made in Common Shares based on the
bookkeeping number of whole and fractional Common Shares attributable
to the Participant's vested Signing Bonus Deferral maintained in the
Plan's Common Stock Account as of the Determination Date concurrently
with or immediately preceeding the date of such distribution.
Participants' Plan Account balances transferred to the KeyCorp Deferred
Compensation Plan's Common Stock Account will not be subject to
investment diversification and/or reallocation under the KeyCorp
Deferred Compensation Plan.
Notwithstanding the foregoing provisions of this Section 6.1, however,
in the event a Participant who is subject to the Corporation Stock
Ownership Guidelines fails to meet his or her Stock Ownership
Guidelines requirements at the time of his or her Plan distribution,
and the Participant has elected to receive a lump sum distribution from
the Plan, the Corporation in its discretion may (1) withhold such
portion of the Participant's lump sum distribution of Common Shares
until the Participant has otherwise met his or her obligations under
the Corporation Stock Ownership Guidelines, or (2) issue to the
Participant restricted Common Shares whose transferability will be
<PAGE>
restricted until the Participant otherwise meets his or her obligations
under the Stock Ownership Guidelines."
2. Except as specifically amended herein, the Plan shall remain
in full force and effect.
IN WITNESS WHEREOF, KeyCorp has caused this First Amendment to the Plan
to be executed by its duly authorized officer to be effective as of the first
day of January, 2001.
KEYCORP
By: /s/ Steven N. Bulloch
----------------------------------
Title: Assistant Secretary
------------------------------
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.34
<SEQUENCE>9
<FILENAME>l97974aexv10w34.txt
<DESCRIPTION>EX-10.34 KEY ASSET MGMNT LONG TERM INCENTIVE PLAN
<TEXT>
<PAGE>
EXHIBIT 10.34
KEYCORP
1998 INCENTIVE COMPENSATION
KEY ASSET MANAGEMENT LONG TERM INCENTIVE PLAN
("KAM PLAN")
- ------------------------------------------------------------------------------
SECTION 1: PLAN SUMMARY
OBJECTIVE:
To recognize and reward existing key contributors and other selected new hires
in the KAM organization for the profitable growth and success of our asset
management business over a three year performance period.
EFFECTIVE DATE:
This plan is effective January 1, 1998 through December 31, 2000, unless
otherwise revised or revoked.
ELIGIBLE POSITIONS:
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------
Senior Managing Directors and selected
Eligible Positions: Managing Directors. (See Attachment A)
- ---------------------------------------------------------------------------------------
Number of Employees Eligible: 17 (As of 1998)
- ---------------------------------------------------------------------------------------
</TABLE>
PLAN FUNDING AND AWARD ALLOCATION MEASURES:
Plan funding is based on net operating income inclusive of long-term award
costs. Participants will receive target awards for meeting target NOI goals.
Awards in excess of target will be distributed to participants on a
discretionary basis.
The plan provides value to plan participants through two distinct components.
The first component is a long-term cash award which provides participants with a
chance to share in the growth created directly by the KAM group. This cash award
represents two thirds of the total long-term incentive opportunity for plan
participants. Phantom stock is the second component and is intended to represent
one third of the total incentive opportunity for plan participants. Incentive
calculations are detailed in Section 2.
PLAN ADMINISTRATOR:
The Plan administrator will prepare and present award recommendations to an
independent Compensation Committee comprised of H. Meyer, Y. Heisler, P.
Jamieson and L. Gilmer, who will review and approve the recommendation list for
KAM long term awards and will have final authority to modify/approve such
awards.
<TABLE>
<CAPTION>
INDEX:
<S> <C>
Plan Summary............................................................ Section 1
Plan Funding and award allocation measures.............................. Section 2
Other Terms, Rules and Conditions....................................... Section 3
Definitions............................................................. Section 4
Example................................................................. Attachment C
APPROVALS:
</TABLE>
<TABLE>
<S> <C>
/s/ Yank Heisler 10/19/98 /s/ Henry L. Meyer II 10/19/98
- --------------------------------------- -----------------------------------------
Executive Sponsor Date Executive Sponsor Date
Yank Heisler Henry Meyer
/s/ W. Lawrence Gilmer 10/7/98 /s/ Patty Jamieson 10/5/98
- --------------------------------------- -----------------------------------------
Incentive Compensation Date Finance Date
W. Lawrence Gilmer Patty Jamieson
</TABLE>
1
<PAGE>
SECTION 2:
PLAN FUNDING AND AWARD ALLOCATION MEASURES.
The KAM Plan is self-funded, meaning, the participants must first meet the net
operating income targets and fund the cost of long-term incentive awards before
any long-term awards are paid out. See Attachment B for the 1998-2000 plan cycle
financials.
CALCULATING METHODOLOGY
At the beginning of the 3 year cycle, cumulative 3 year net operating income
(NOI) growth targets will be set. Performance against these goals will be
measured at the end of the cycle and target award will be paid for meeting the
growth target. If the growth target has been achieved, participants will share
in the excess growth according to the following schedule:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
PERFORMANCE AGAINST
GROWTH TARGET AMOUNT OF AWARD
---------------------------------------------------------------------------
<S> <C>
---------------------------------------------------------------------------
100% Target award
---------------------------------------------------------------------------
Target award, plus 10% of
>100% and <105% excess NOI dollars
-
---------------------------------------------------------------------------
Target award, plus 20% of
excess incremental
>105% NOI dollars over 105%
---------------------------------------------------------------------------
</TABLE>
Target awards for each participant will be set at the beginning of the cycle and
will generally be based on market data for that position. There is no cap on the
maximum award amount that can be paid under the plan.
DISTRIBUTION OF POOL
If the NOI growth target has been achieved, each participant shall receive their
target cash award. Any excess pool resulting from performance above targeted NOI
will be distributed on a discretionary basis. The award recommendations will be
made by KAM senior management and will be presented to the Compensation
Committee, as defined on Page 1. Dividends on the deferred shares will be
accrued during the deferral period. Cash awards will be paid out as soon as
possible after the end of the 3 year cycle.
The phantom stock component of this long-term plan will be valued at the time of
the award at a price consistent with the average of the high and low of KeyCorp
stock as reported on the NYSE. Once awarded, these phantom stock units will vest
in two increments, 50% after 1 year from the date of the award and 50% after 2
years from the date of the award. Distributions to participants will be in
actual shares of KeyCorp stock. The Committee reserves the right to accelerate
vesting of the phantom stock as they see fit.
It is intended that the value of the phantom stock to KAM participants plus any
long-term cash awards constitute the target total long-term opportunity relative
to market. Any upside award above target will be delivered in the discretionary
cash award.
PARTICIPATION
The Committee reserves the right to terminate a Participant's participation in
the Plan during the 3 year cycle if the Participant's job responsibilities
and/or performance no longer warrants such participation. In this event, the
Participant will receive a prorated award at the end of the 3 years cycle, based
on the full number of months of participation.
2
<PAGE>
SECTION 3:
OTHER TERMS, RULES AND CONDITIONS:
3.1 INTENT OF THE PLAN:
The KAM Plan was developed to incent and reward eligible Plan
Participants for meeting and exceeding the performance objectives of
their respective employment positions with KeyCorp while increasing
KeyCorp's revenues and business opportunities. ACCORDINGLY, THE
EXPRESSED INTENT OF THE PLAN IS TO BENEFIT BOTH KEYCORP AND KAM PLAN
PARTICIPANTS.
3.2 ENTITLEMENT OF PLAN BENEFITS:
The Participant acknowledges the Participant maintains no present
interest or entitlement to Plan benefits other than those determined by
KeyCorp and the Compensation Committee to be payable under the terms of
the Plan for which payment has been made.
3.3 CHANGE OF EVENTS:
In the event of a material change of events such as a merger, a
significant increase in allocated operating expense, or a major market
change (up or down more than 20%), that the KAM group has no control
over, the Committee reserves the right to increase or decrease the NOI
targets as necessary to maintain the integrity of the Plan for the
remainder of the three year cycle. Any changes to the NOI target would
be based on overall KAM performance relative to the external market.
3.4 NEW HIRES, PROMOTED, REACTIVATED, TRANSFERRED-IN EMPLOYEES:
Newly hired, promoted, reactivated and transferred-in employees will be
eligible to participate in this Plan on an annual basis starting the
first full year of employment. Participants would be eligible for a
prorated share of any awards made under this plan.
3.5 RESPONSIBILITIES FOR CALCULATIONS AND PLAN PAYMENTS:
Responsibilities for Plan administration will reside within KAM. KAM
Senior Management will be responsible for calculating and submitting
recommendations to the Compensation Committee. The KAM group will be
responsible for submitting incentive payment requests.
3.6 PLAN ADMINISTRATION:
The Compensation Committee, which shall be the "Administrator" of the
Plan, shall be responsible for the general administration of the Plan,
for carrying out the provisions hereof, and for making payments
hereunder. The Compensation Committee shall have the sole and absolute
discretionary authority and power to carry out the provisions of the
Plan, including, but not limited to, the authority and power (a) to
determine all questions relating to the eligibility for and the amount
of any benefit to be paid under the Plan, (b) to determine all questions
pertaining to claims for benefits under the Plan, (c) to resolve all
other questions arising under the Plan, including any questions of
construction and/or interpretations, and (d) to take such further action
as the Compensation Committee shall deem necessary or advisable in the
administration of the Plan. All finding, decisions and determinations of
any kind made by the Plan Administrator shall not be disturbed. Subject
to the requirements of law, the Plan Administrator shall be the sole
judge of the standard of proof required in any claim for benefit and in
any determination of eligibility for a benefit. All decisions of the
Plan Administrator shall be final and binding on all parties.
3
<PAGE>
SECTION 3: cont'd.
OTHER TERMS, RULES AND CONDITIONS:
3.7 AMENDMENT AND TERMINATION:
KeyCorp reserves the right to amend or terminate this Plan at any time,
for any reason.
3.8 ASSIGNMENT OF INCENTIVE AWARDS:
No benefits received under the Plan shall be subject to transfer,
assignment, or encumbrance in any manner, either by the Participant or
any other person. Any attempt by the Participant to assign his or her
benefit thereunder shall result in Participant's forfeiture of such Plan
benefits.
3.9. INTEREST IN PLAN AWARDS:
With respect to payments of awards under the Plan, Participants shall
have rights against KeyCorp only as general, unsecured creditors.
3.10 DEATH, DISABILITY, LEAVE OF ABSENCE, OUT-PLACEMENT,
RETIREMENT, AND TRANSFERS:
In the event of a Participant's death, disability, medical leave of
absence, out-placement, retirement or transfer, the Plan Administrator
and the Compensation Committee will determine what incentives, if any,
are payable to the Participant under the terms of the Plan.
3.11 TERMINATION:
Termination (voluntary or involuntary) of a Participant's employment
from KeyCorp for any reason other than death, disability, medical leave
of absence, outplacement or retirement during the performance cycle,
will result in the forfeiture of any potential awards.
3.12 NO COMMITMENT AS TO EMPLOYMENT:
Nothing herein contained shall be construed as a commitment or agreement
upon the part of any Participant hereunder to continue his or her
employment with KeyCorp, and nothing herein contained shall be construed
as a commitment on the part of KeyCorp to continue the employment, rate
of compensation or terms and conditions of employment of any Participant
hereunder for any period. All Participants shall remain subject to
discharge to the same extent as if the Plan had never been put into
effect.
3.13 PRECEDENT:
Except as otherwise specifically agreed to by KeyCorp in writing, no
action taken in accordance with the Plan by KeyCorp shall be construed
or relied upon as a precedent for similar action under similar
circumstances.
4
<PAGE>
SECTION 4:
DEFINITIONS:
For purposes of this incentive plan, the following words and phrases shall have
the meaning indicated.
COMPENSATION COMMITTEE:
An independent committee comprised of representatives from Executive Management,
Finance and Human Resources, who will review and approve the recommendation list
for KAM long-term awards and will resolve any issues/disputes regarding such
awards and/or modifications to the plan.
PERFORMANCE PERIOD:
The period during which his plan will be effective: January 1, 1998 through
December 31, 2000, unless otherwise revised or revoked.
NET OPERATING INCOME:
Net operating income is pre-tax income including level 3 expenses (Key Services
and management overhead charges).
5
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.35
<SEQUENCE>10
<FILENAME>l97974aexv10w35.txt
<DESCRIPTION>EX-10.35 COMMISSIONED DEFERRED COMPENSATION PLAN
<TEXT>
<PAGE>
EXHIBIT 10.35
KEYCORP
COMMISSIONED DEFERRED COMPENSATION PLAN
(AMENDED AND RESTATED AS OF JANUARY 1, 2002)
ARTICLE I
The KeyCorp Commissioned Deferred Compensation Plan ("Plan") is hereby
established effective January 1, 2001, and amended and restated as of January 1,
2002, to provide certain selected employees of KeyCorp with the opportunity to
defer their immediate receipt of compensation to the Plan and thereby defer the
receipt of their taxable income to a later date. The Plan, as structured, is
accordingly intended to provide a current tax planning opportunity for such
employees. It is the intention of KeyCorp, and it is the understanding of those
Participants covered under the Plan, that the Plan constitutes a short-term
deferred compensation plan which is unfunded for tax purposes and for purposes
of Title I of the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
ARTICLE II
DEFINITIONS
2.1 MEANING OF DEFINITIONS. For the purposes of this Plan, the
following words and phrases shall have the meanings hereinafter set forth,
unless a different meaning is clearly required by the context:
(a) "BENEFICIARY" shall mean the person, persons or entity
entitled under Article VII to receive any Plan benefits
payable after a Participant's death.
(b) "CHANGE OF CONTROL" shall be deemed to have occurred if under
any rabbi trust arrangement maintained by the Corporation, the
Corporation is required under the terms of such arrangement to
fund such rabbi trust to secure the payment of any
Participants' Plan benefits which become payable hereunder
because a "Change of Control" as defined in such rabbi trust
has occurred on and after January 1, 2001.
(c) "CODE" shall mean the Internal Revenue Code of 1986, as
amended from time to time, together with all regulations
promulgated thereunder. Reference to a section of the Code
shall include such section and any comparable section or
sections of any future legislation that amends, supplements,
or supersedes such section.
(d) "COMMISSION" shall mean those commissions or incentive
payout(s) awarded to the Employee that are tied to the
Employee's direct performance in conjunction with a KeyCorp
sales event(s) and are generally defined as a percent, share,
or dollar amount of the direct sale or profit generated to
KeyCorp as a result of such event.
(e) "COMMON STOCK ACCOUNT" shall mean the investment account
established under the Plan for bookkeeping purposes, in which
a Participant may elect to have his or her Participant
Deferrals credited. Participant Deferrals to the Common Stock
Account shall be credited based on a bookkeeping allocation of
KeyCorp Common Shares (both whole and fractional rounded to
the nearest one-hundredth of a share) which shall be equal to
-1-
<PAGE>
the amount of Participant Deferrals and Corporate
Contributions invested by the Participant and by the
Corporation in the Common Stock Account. The Common Stock
Account shall also reflect on a bookkeeping basis all
Dividends, gains, and losses attributable to such Common
Shares. All Corporate Contributions and all Participant
Deferrals credited to the Common Stock Account, shall be based
on the ten-day average of the New York Stock Exchange's
closing price for such Common Shares immediately preceding, up
to, and including the day such Participant Deferrals and
Corporate Contributions are credited to the Participants' Plan
Account.
(f) "CORPORATE CONTRIBUTIONS" shall mean the contribution amount
which an Employer has agreed to contribute on a bookkeeping
basis to the Participant's Plan Account in accordance with the
provisions of Article V of the Plan.
(g) "CORPORATION" shall mean KeyCorp, an Ohio corporation, its
corporate successors, and any corporation or corporations into
or with which it may be merged or consolidated.
(h) "DEFERRAL PERIOD" shall mean each Plan Year, provided however,
that a Participant's initial Deferral Period shall be from his
or her first day of participation in the Plan through the last
day of the applicable Plan Year.
(i) "DETERMINATION DATE" shall mean the last business day of each
calendar quarter.
(j) "DISABILITY" shall mean (1) the physical or mental disability
of a permanent nature which prevents a Participant from
performing the duties that such Participant was employed to
perform for his or her Employer when such disability
commenced, (2) qualifies for disability benefits under the
Federal Social Security Act within 30 months following the
Participant's disability, and (3) qualifies the Participant
for disability coverage under the KeyCorp Long Term Disability
Plan.
(k) "DISCHARGE FOR CAUSE" shall mean the termination (whether by
the Participant or the Employer) of a Participant's employment
from his or her Employer and any other Employer that is the
result of (1) serious misconduct as an Employee, including,
but not limited to, a continued failure after notice to
perform a substantial portion of his or her duties and
responsibilities unrelated to illness or incapacity, unethical
behavior such as acts of self-dealing or self-interest,
harassment, violence in the workplace, or theft; (2) the
commission of a crime involving a controlled substance, moral
turpitude, dishonesty, or breach of trust; or (3) the Employer
being directed by a regulatory agency or self-regulatory
agency to terminate or suspend the Participant or to prohibit
the Participant from performing services for the Employer. The
Corporation in its sole and absolute discretion shall
determine whether a Participant has been Discharged for Cause,
as provided for in this Section 2.1(k), provided, however,
that for a period of two years following a Change of Control,
any determination by the Corporation that an Employee has been
Discharged for Cause shall be set forth in writing with the
factual basis for such Discharge for Cause clearly specified
and documented by the Corporation.
(l) "DIVIDENDS" shall mean those quarterly earnings approved by
the KeyCorp Board of Directors and awarded by the Corporation
to all shareholders of record as of each applicable
ex-dividend date which shall be payable in such form and at
such time as the Corporation shall determine.
-2-
<PAGE>
(m) "EARLY RETIREMENT" shall mean the Participant's retirement
from his or her employment with an Employer on or after the
Participant's attainment of age 55 and completion of a minimum
of five years of Vesting Service, but prior to the
Participant's Normal Retirement Date.
(n) "EMPLOYEE" shall mean a common law employee who is employed by
an Employer.
(o) "EMPLOYER" shall mean the Corporation and any of its
subsidiaries, unless specifically excluded as an Employer for
Plan purposes by written action by an Officer of the
Corporation. An Employer's participation in the Plan shall be
subject to all conditions and requirements made by the
Corporation, and each Employer shall be deemed to have
appointed the Plan Administrator as its exclusive agent under
the Plan as long as it continues as an Employer.
(p) "HARMFUL ACTIVITY" shall have occurred if the Participant
shall do any one or more of the following:
(i) Use, publish, sell, trade or otherwise disclose
Non-Public Information of KeyCorp unless such
prohibited activity was inadvertent, done in good
faith and did not cause significant harm to KeyCorp.
(ii) After notice from KeyCorp, fail to return to KeyCorp
any document, data, or thing in his or her possession
or to which the Participant has access that may
involve Non-Public Information of KeyCorp.
(iii) After notice from KeyCorp, fail to assign to KeyCorp
all right, title, and interest in and to any
confidential or non-confidential Intellectual
Property which the Participant created, in whole or
in part, during employment with KeyCorp, including,
without limitation, copyrights, trademarks, service
marks, and patents in or to (or associated with) such
Intellectual Property.
(iv) After notice from KeyCorp, fail to agree to do any
acts and sign any document reasonably requested by
KeyCorp to assign and convey all right, title, and
interest in and to any confidential or
non-confidential Intellectual Property which the
Participant created, in whole or in part, during
employment with KeyCorp, including, without
limitation, the signing of patent applications and
assignments thereof.
(v) Upon the Participant's own behalf or upon behalf of
any other person or entity that competes or plans to
compete with KeyCorp, solicit or entice for
employment or hire any KeyCorp employee.
(vi) Upon the Participant's own behalf or upon behalf of
any other person or entity that competes or plans to
compete with KeyCorp, call upon, solicit, or do
business with (other than business which does not
compete with any business conducted by KeyCorp) any
KeyCorp customer the Participant called upon,
solicited, interacted with, or became acquainted
with, or learned of through access to information
(whether or not such information is or was
non-public) while the Participant was employed at
KeyCorp unless such prohibited activity was
inadvertent, done in
-3-
<PAGE>
good faith, and did not involve a customer whom the
Participant should have reasonably known was a
customer of KeyCorp.
(vii) Upon the Participant's own behalf or upon behalf of
any other person or entity that competes or plans to
compete with KeyCorp, after notice from KeyCorp,
continue to engage in any business activity in
competition with KeyCorp in the same or a closely
related activity that the Participant was engaged in
for KeyCorp during the one year period prior to the
termination of the Participant's employment.
For purposes of this Section 2.1(p) the term:
"INTELLECTUAL PROPERTY" shall mean any invention,
idea, product, method of doing business, market or
business plan, process, program, software, formula,
method, work of authorship, or other information, or
thing relating to KeyCorp or any of its businesses.
"NON-PUBLIC INFORMATION" shall mean, but is not
limited to, trade secrets, confidential processes,
programs, software, formulas, methods, business
information or plans, financial information, and
listings of names (e.g., employees, customers, and
suppliers) that are developed, owned, utilized, or
maintained by an employer such as KeyCorp, and that
of its customers or suppliers, and that are not
generally known by the public.
"KEYCORP" shall include KeyCorp, its subsidiaries,
and its affiliates.
(q) "INVOLUNTARY TERMINATION" shall mean the termination (by the
Employer) of a Participant's employment from his or her
Employer and from any other Employer, other than a Discharge
for Cause or a Termination Under Limited Circumstances.
(r) "NORMAL RETIREMENT" shall mean the Participant's retirement
under the KeyCorp Cash Balance Pension Plan on or after the
Participant's Normal Retirement Date.
(s) "PARTICIPANT" shall mean an Employee who meets the eligibility
requirements set forth in Section 3.1(a) and becomes a Plan
Participant pursuant to Section 3.1(b) or Section 3.1(c) of
the Plan.
(t) "PARTICIPANT DEFERRALS" shall mean the percentage or whole
dollar amount of the Participant's Commissions that are earned
by the Participant during the applicable Plan Year which the
Participant has elected in accordance with his or her
Participation Agreement to defer to the Plan.
(u) "PARTICIPATION AGREEMENT" shall mean the executed agreement
submitted by the Participant to the Corporation prior to the
beginning of each applicable Deferral Period, which contains,
in pertinent part, the Participant's deferral commitment for
such Deferral Period, and the distribution option selected by
the Participant for the payment of such Participant Deferrals,
Dividends, and Corporate Contributions upon the Participants
full vesting in such Dividends and Corporate Contributions.
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(v) "PLAN" shall mean the KeyCorp Commissioned Deferred
Compensation Plan with all amendments hereafter made.
(w) "PLAN ACCOUNT" shall mean the bookkeeping account established
by the Corporation for each Plan Participant, which shall
reflect all Corporate Contributions, Participant Deferrals,
and Dividends invested for bookkeeping purposes in the Plan's
Common Stock Account with all gains and losses thereon. Plan
Accounts shall not constitute separate Plan funds or separate
Plan assets. Neither the maintenance of, nor the crediting of
amounts to such Plan Accounts shall be treated (i) as the
allocation of any Corporation assets to, or a segregation of
any Corporation assets in any such Plan Accounts, or (ii) as
otherwise creating a right in any person or Participant to
receive specific assets of the Corporation. All benefits under
the Plan shall be paid from the general assets of the
Corporation.
(x) "PLAN YEAR" shall mean the calendar year.
(y) "RETIREMENT" shall mean the termination of a Participant's
employment any time after the Participant's attainment of age
55 and completion of 5 years of Vesting Service under the
KeyCorp Cash Balance Pension Plan, but shall not include the
Participant's (i) Discharge for Cause, (ii) Involuntary
Termination, (iii) Termination under Limited Circumstances,
(iv) Disability or Death.
(z) "TERMINATION" shall mean the voluntary or involuntary and
permanent termination of a Participant's employment from his
or her Employer and any other Employer, whether by resignation
or otherwise, but shall not include the Participant's
Retirement.
(aa) "TERMINATION UNDER LIMITED CIRCUMSTANCES" shall mean a
Participant's termination (whether by the Participant or the
Employer) of the Participant's employment from his or her
Employer and from any other Employer (i) within two years
after a Change of Control under circumstances in which the
Participant is entitled to severance benefits or salary
continuation or similar benefits under a Change of Control
agreement, employment agreement, or severance or separation
pay plan, (ii) under circumstances in which the Participant is
entitled to receive severance benefits or salary continuation
under the KeyCorp Separation Pay Plan, (iii) due to Disability
or death, or (iv) as otherwise expressly approved by the
Compensation and Organization Committee, in its sole
discretion.
(bb) "VOLUNTARY TERMINATION" shall mean a voluntary termination of
the Participant's employment from his or her Employer and from
any other Employer, whether by resignation or otherwise, but
shall not include the Participant's Discharge for Cause,
Involuntary Termination, Retirement, Termination Under Limited
Circumstances, or termination as a result of Disability or
death.
2.2 ADDITIONAL REFERENCE. All other words and phrases used herein
shall have the meaning given them in the KeyCorp Cash Balance Pension Plan,
unless a different meaning is clearly required by the context.
2.3 PRONOUNS. The masculine pronoun wherever used herein includes
the feminine in any case so requiring, and the singular may include the plural.
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ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 ELIGIBILITY AND PARTICIPATION.
(a) ELIGIBILITY. An Employee shall be eligible to participate in
the Plan if (1) the Employee earns Commissions during any Plan
year in excess of $100,000, and (2) the Corporation selects
such Employee to participate in the Plan.
(b) PARTICIPATION. An Employee meeting the eligibility criteria of
Section 3.1(a) may elect to participate in the Plan with
respect to any Deferral Period by submitting a Participation
Agreement to the Corporation prior to the beginning of the
applicable Deferral Period or such other deadline as
established by the Corporation.
(c) MID-YEAR PARTICIPATION. When an Employee first becomes
eligible to participate in the Plan during a Deferral Period,
the Participant shall be required to submit a Participation
Agreement to the Corporation within thirty (30) days after the
Corporation notifies the Employee of his or her Plan
eligibility. Such Participation Agreement will be effective
when received by the Corporation.
3.2 DEFERRAL LIMITATIONS. A Participant may defer to the Plan no
more than 50% of the Participant's earned Commissions in excess of $100,000 (in
5% increments) that are payable to the Participant during the applicable
Deferral Period.
3.3 COMMITMENT LIMITED BY TERMINATION, RETIREMENT, DISABILITY OR
DEATH. As of the Participant's Termination date, Retirement date, date of
Disability or date of death, all Participant Deferrals under the Plan shall
cease.
3.4 MODIFICATION OF DEFERRAL COMMITMENT. A Participant's deferral
commitment as evidenced by his or her Participation Agreement for the applicable
Deferral Period shall be irrevocable.
3.5 CHANGE IN EMPLOYMENT STATUS. If the Corporation determines
that a Participant's performance is no longer at the level that deserves to be
rewarded through participation in the Plan, but does not terminate the
Participant's employment, the Participant's Participant Deferrals under the Plan
shall continue until the end of the applicable Deferral Period. Thereafter, the
Corporation shall not permit the Participant to make any further deferrals to
the Plan.
ARTICLE IV
PARTICIPANT DEFERRALS
4.1 PLAN ACCOUNT. All Participant Deferrals and Corporate
Contributions shall be credited on a bookkeeping basis to a Plan Account
established in the Participant's name. Separate sub-accounts shall be
established to reflect all Dividends attributable to such Participant Deferrals
and Corporate Contributions.
4.2 INVESTMENT OF PARTICIPANT DEFERRALS. All Participant
Deferrals shall be invested for bookkeeping purposes in the Plan's Common Stock
Account.
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4.3 CREDITING OF PARTICIPANT DEFERRALS; WITHHOLDING. Participant
Deferrals shall be credited to the Participant's Plan Account as of the date the
Participant's Commission would have been paid to the Participant "but for" the
Participant's election to defer such Commission to the Plan. The withholding of
taxes with respect to all Participant Deferrals as required by state, federal or
local law shall be withheld from the Participant's compensation to the maximum
extent possible; thereafter, any taxes remaining due shall be paid by reducing
the amount of Participant Deferrals to be credited to the Participant's Plan
Account.
ARTICLE V
CORPORATE CONTRIBUTIONS
5.1 CREDITING OF CORPORATION CONTRIBUTIONS. Corporate
Contributions in an amount equal to 15% of the Participant's Participant
Deferrals deferred to the Plan for any applicable Deferral Period shall be
credited on a bookkeeping basis to the Participant's Plan Account as of the date
on which the Participant's Participant Deferrals are deferred and credited to
the Plan.
5.2 INVESTMENT OF CORPORATE CONTRIBUTIONS. All Corporate
Contributions credited to the Participant's Plan Account shall be invested for
bookkeeping purposes in the Plan's Common Stock Account.
5.3 DETERMINATION OF AMOUNT. The Plan Administrator shall verify
the amount of Participant Deferrals, Corporate Contributions, Dividends, and
earnings, if any, to be credited to each Participant's Plan Account in
accordance with the provisions of the Plan. The reasonable and equitable
decision of the Plan Administrator as to the value of each Plan Account shall be
conclusive and binding upon all Participants and the Beneficiary of each
deceased Participant having any interest, direct or indirect in the
Participant's Plan Account. As soon as reasonably practicable after the close of
the Plan Year, the Corporation shall send to each Participant an itemized
accounting statement that shall reflect the Participant's Plan Account balance.
5.4 CORPORATE ASSETS. All Participant Deferrals, Corporate
Contributions, Dividends, earnings and any other gains and losses credited to a
Participant's Plan Account on a bookkeeping basis, remain the assets and
property of the Corporation, which shall become subject to distribution to the
Participant only in accordance with the provisions of Articles VII, X and XI of
the Plan. Distributions made under the Plan shall be in the form of Common
Shares. All Participants and Beneficiaries shall have the status of general
unsecured creditors of the Corporation. Nothing contained in the Plan shall
create, or shall be construed as creating a trust of any kind or any other
fiduciary relationship between the Participant, the Corporation, or any other
person. It is the intention of the Corporation and it is the understanding of
the Participant that the Plan is not funded for tax purposes as well as for
purposes of Title I of the Employee Retirement Income Security Act of 1974, as
amended.
5.5 NO PRESENT INTEREST. Subject to any federal statute to the
contrary, no right or benefit under the Plan and no right or interest in each
Participant's Plan Account shall be subject to anticipation, alienation, sale,
assignment, pledge, encumbrance, or charge. Any attempt to anticipate, alienate,
sell, assign, pledge, encumber, or charge any right or benefit under the Plan,
or to the Participant's Plan Account shall be void. No right, interest, or
benefit under the Plan or Participant's Plan Account shall be liable for or
subject to the debts, contracts, liabilities, or torts of the Participant or
Beneficiary. If the Participant or Beneficiary becomes bankrupt or attempts to
alienate, sell, assign, pledge, encumber, or
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<PAGE>
charge any right under the Plan or Participant's Plan Account such attempt shall
be void and unenforceable.
ARTICLE VI
VESTING
6.1 VESTING IN DIVIDENDS AND CORPORATE CONTRIBUTIONS. The
calculation of a Participant's vested interest in his or her Corporate
Contributions and all Dividends credited on a bookkeeping basis to the
Participant's Plan Account shall be measured from the last day of the applicable
calendar quarter in which such Participant Deferrals and matching Corporate
Contributions are credited to the Participant's Plan Account ("Quarterly
Deferral Date"). A Participant shall become vested in those Corporate
Contributions and in those Dividends credited to the Participant's Plan Account
with regard to the applicable Participant Deferrals and Corporate Contributions,
upon the Participant's completion of three years of vested service. For purposes
of this Section 6.1, the term "vested service" shall be determined from the
Quarterly Deferral Date and shall be based upon full calendar years.
Notwithstanding the foregoing provisions of this Section 6.1, however, a
Participant shall become fully vested in all Dividends and Corporate
Contributions credited on a bookkeeping basis to the Participant's Plan Account
upon the Participant's Termination Under Limited Circumstances.
6.2 CONTINUED VESTING UPON RETIREMENT. Subject to the provisions
of Section 7.2 of the Plan, upon the Participant's Retirement, the Participant's
not-vested Dividends and not-vested Corporate Contributions credited to the
Participant's Plan Account with all gains and losses thereon, shall remain in
the Plan and shall continue to vest under the vesting provisions of Section 6.1
hereof.
6.3 FORFEITURE OF CORPORATE CONTRIBUTIONS AND DIVIDENDS. In the
event of the Participant's Termination all not-vested Corporate Contributions
and all not-vested Dividends that are credited on a bookkeeping basis to the
Participant's Plan Account shall be forfeited as of the Participant's last day
of employment.
ARTICLE VII
DISTRIBUTION OF PLAN BENEFITS
7.1 DISTRIBUTIONS PRIOR TO TERMINATION, TERMINATION UNDER LIMITED
CIRCUMSTANCES, OR RETIREMENT. A Participant's vested Participant Deferrals,
vested Corporate Contributions and vested Dividends shall be distributed to the
Participant as of the Determination Date concurrently with or immediately
following the Participant's vesting in his or her Plan benefit in accordance
with the distribution directions provided by the Participant in his or her
Distribution Agreement, as follows:
(a) as a single lump sum distribution of Common Shares,
or
(b) in substantially equal annual installments payments
of Common Shares over a five (5) year period.
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Lump sum distributions from the Plan of Participant Deferrals, vested Corporate
Contributions, and vested Dividends shall be made in Common Shares based on the
bookkeeping number of whole and fractional Common Shares attributable to those
Participant Deferrals, vested Corporate Contributions and vested Dividends
maintained in the Plan's Common Stock Account as of the Determination Date
concurrently with or immediately following the Participant's vesting date.
Distributions shall be made as soon as reasonably practicable following the
applicable Determination Date.
7.2 DISTRIBUTIONS FOLLOWING RETIREMENT. Upon the Participant's
Retirement, the Participant's Plan Account balance shall continue to be
maintained in the Plan and all Corporate Contributions and Dividends credited to
the Participant's Plan Account with any and all gains and losses thereon, shall
continue to vest under the vesting provisions of Section 6.1 of the Plan, and
when vested, shall be distributed to the Participant in accordance with the
provisions of Section 7.1 hereof. Notwithstanding the foregoing provisions of
this Section 7.2, however, in the event of the Participant's Retirement, and
within twelve months of such Retirement the Participant engages in any "Harmful
Activity" as that term is defined in accordance with Section 2.1(o) of the Plan,
such Participant's not-vested Corporate Contributions and not-vested Dividends
shall be immediately forfeited and the Participant shall automatically receive a
lump sum distribution of his or her Participant Deferrals under the Plan.
7.3 DISTRIBUTIONS FOLLOWING TERMINATION UNDER LIMITED
CIRCUMSTANCES. Upon the Participant's Termination Under Limited Circumstances,
all Participant Deferrals, Corporate Contributions, and Dividends credited to
the Participant's Plan Account with any and all gains and losses thereon shall
become immediately vested and shall be distributed to the Participant in a
single lump sum distribution of Common Shares.
7.4 DISTRIBUTIONS FOLLOWING INVOLUNTARY TERMINATION. Upon the
Participant's Involuntary Termination, all Participant Deferrals credited to the
Participant's Plan Account with all Dividends, gains and losses thereon, shall
become immediately vested and shall be distributed to the Participant in a
single lump sum distribution. All not-vested Corporate Contributions and all
not-vested Dividends credited on such Corporate Contributions with all related
earnings and or losses thereon shall be forfeited by the Participant as of his
or her last day of employment.
7.5 DISTRIBUTIONS FOLLOWING VOLUNTARY TERMINATION OR DISCHARGE FOR
CAUSE. Upon the Participant's Voluntary Termination or Discharge for Cause, all
not-vested Corporate Contributions and not-vested Dividends credited to the
Participant's Plan Account with all gains and losses thereon shall be forfeited
by the Participant as of his or her last day of employment, and the Participant
shall receive a lump sum distribution of his or her Participant Deferrals.
7.6 WITHHOLDING. The withholding of taxes with respect to the
Participant's Participant Deferrals, Corporate Contributions, and Dividends
shall be made at such time as it becomes required by any state, federal or local
law. All required taxes shall be withheld from the Participant's Participant
Deferrals and Corporate Contributions in accordance with applicable law to the
maximum extent possible.
7.7 DISTRIBUTION OF ACCOUNT BALANCE. The Participant's vested
Plan Account balance shall be valued as of the Determination Date immediately
following his or her date of Termination or Retirement (the "valuation date"):
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(a) LUMP SUM DISTRIBUTIONS. If a Participant has elected to
receive a lump sum distribution of all of his or her vested Plan
Account balance, such lump sum distribution of Common Shares shall be
made as soon as reasonably practicable following the Participant's
valuation date.
(b) INSTALLMENT DISTRIBUTIONS. If a Participant has elected
to receive an installment distribution of all of his or her vested Plan
Account, such installment distribution of Common Shares shall commence
as soon as reasonably practicable following the Participant's valuation
date. The Participant's vested unpaid Plan Account balance invested for
bookkeeping purposes in the Plan's Common Stock Account shall be
reflected as a number of whole and fractional Common Shares in a
distribution sub-account and shall be credited with Dividends on a
bookkeeping basis which shall be reinvested in the Plan's Common Stock
Account throughout the installment distribution period; all such
reinvested Dividends shall be paid to the Participant in Common Shares
in conjunction with the Participant's final installment payment under
the Plan.
7.8 DISTRIBUTION OF SMALL ACCOUNTS. Notwithstanding the
provisions of Sections 7.1 and 7.2 hereof, if the value of a Participant's
vested Account balance as of the Determination Date immediately preceding the
Participant's date of Termination or Retirement is under $50,000, such balance
shall be distributed to the Participant as a single distribution as soon as
reasonably practicable following such date.
7.9 DISTRIBUTION LIMITATION. If the Corporation determines that
any amount of a Participant's Participant Deferrals, Dividends, and/or Corporate
Contributions with all interest and earnings thereon:
(1) would not be deductible by the Corporation if paid in
accordance with the distribution instructions specified by the
Participant in his or her Participation Agreement by reason of
the disallowance rules of Section 162(m) of the Code, but
(2) would be deductible by the Corporation if deferred and paid in
a later Plan Year,
the Corporation reserves the right to defer the distribution of all or any
portion of such Participant's Participant Deferrals, Dividends, and/or Corporate
Contributions with all interest and earnings thereon until such time as the
Corporation determines that the distribution of all or any portion of such
Participant's Participant Deferrals, Dividends, and/or Corporate Contributions
will be payable without the disallowance of the deduction prescribed by Code
Section 162(m) ("Deferrals"). Such Deferrals shall continue to be held in the
Participant's Plan Account and shall continue to be credited, on a bookkeeping
basis, with all earnings, gains, and losses thereon. If it is thereafter
determined by the Corporation that such Deferrals will not be deductible even if
paid in a later year, then such Deferrals with all interest and earnings thereon
shall become immediately payable to the Participant.
Notwithstanding any other provision of this Section 7.9 to the
contrary, in the event of the Participant's Termination or Retirement all
Deferrals required to be continued under this Section 7.9 contrary to the
Participant's distribution elections, shall be paid to the Participant on or
immediately following April 15th of the year immediately following the
Participant's Termination or Retirement, regardless of the deductibility of such
payment.
7.10 FACILITY OF PAYMENT. If it is found that any individual to
whom an amount is payable hereunder is incapable of attending to his or her
financial affairs because of any mental or physical
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condition, including the infirmities of advanced age, such amount (unless prior
claim therefor shall have been made by a duly qualified guardian or other legal
representative) may, in the discretion of the Corporation, be paid to another
person for the use or benefit of the individual found incapable of attending to
his or her financial affairs or in satisfaction of legal obligations incurred by
or on behalf of such individual. Any such payment shall be charged to the
Participant's Plan Account from which any such payment would otherwise have been
paid to the individual found incapable of attending to his or her financial
affairs, and shall be a complete discharge of any liability therefor under the
Plan.
ARTICLE VIII
BENEFICIARY DESIGNATION
8.1 BENEFICIARY DESIGNATION. Subject to Section 8.3 hereof, each
Participant shall have the right, at any time, to designate one or more persons
or an entity as Beneficiary (both primary as well as secondary) to whom benefits
under this Plan shall be paid in the event of Participant's death prior to
complete distribution of the Participant's Plan Account. Each Beneficiary
designation shall be in a written form prescribed by the Corporation and shall
be effective only when filed with the Corporation during the Participant's
lifetime.
8.2 CHANGING BENEFICIARY. Subject to Section 8.3, a Participant's
Beneficiary designation may be changed by the Participant without the consent of
the previously named Beneficiary by the filing of a new designation with the
Corporation. The filing of a new designation shall cancel all previously filed
designations.
8.3 NO BENEFICIARY DESIGNATION. If a Participant fails to
designate a Beneficiary in the manner provided above, if the designation is
void, or if the Beneficiary (including all contingent Beneficiaries) designated
by a deceased Participant dies before the Participant or before complete
distribution of the Participant's benefits, the Participant's Beneficiary shall
be the person in the first of the following classes in which there is a
survivor:
(a) The Participant's spouse;
(b) The Participant's children in equal shares, except that if any
of the children predeceases the Participant but leaves issue
surviving, then such issue shall take, by right of
representation the share the parent would have taken if
living;
(c) The Participant's estate.
8.4 DISTRIBUTION UPON DEATH. If a Participant dies after the
distribution of his or her interest under the Plan has commenced, the remaining
portion of the Participant's entire interest under the Plan, if any, shall be
distributed to the Participant's Beneficiary under the method of distribution
being used as of the Participant's date of death. If the Participant dies before
the distribution of the Participant's Plan Account has commenced, the
Participant's entire interest under the Plan shall be valued as of the
Determination Date immediately following the Participant's date of death, and
shall be distributed to his or her Beneficiary in a lump sum payment as soon as
reasonably practicable following the Participant's date of death.
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ARTICLE IX
ADMINISTRATION
9.1 ADMINISTRATION. The Corporation shall be responsible for the
general administration of the Plan, for carrying out the provisions hereof, and
for making payments hereunder. The Corporation shall have the sole and absolute
discretionary authority and power to carry out the provisions of the Plan,
including, but not limited to, the authority and power (a) to determine all
questions relating to the eligibility for and the amount of any benefit to be
paid under the Plan, (b) to determine all questions pertaining to claims for
benefits and procedures for claim review, (c) to resolve any and all questions
arising under the Plan, including any question of construction and/or
interpretation, and (d) to take such further action as the Corporation deems
necessary or advisable in the administration of the Plan. All findings,
decisions, and determinations of any kind made by the Plan Administrator shall
not be disturbed unless the Plan Administrator has acted in an arbitrary and
capricious manner. Subject to the requirements of law, the Plan Administrator
shall be the sole judge of the standard of proof required in any claim for
benefits and in any determination of eligibility for a benefit. All decisions of
the Plan Administrator shall be final and binding on all parties. The
Corporation may employ such attorneys, investment counsel, agents, and
accountants as it may deem necessary or advisable to assist it in carrying out
its duties hereunder. The actions taken and the decisions made by the
Corporation hereunder shall be final and binding upon all interested parties
subject, however, to the provisions of Section 9.2. The Plan Year, for purposes
of Plan administration, shall be the calendar year.
9.2 CLAIMS REVIEW PROCEDURE. Whenever the Plan Administrator
decides for whatever reason to deny, whether in whole or in part, a claim for
benefits under this Plan filed by any person (herein referred to as the
"Claimant"), the Plan Administrator shall transmit a written notice of its
decision to the Claimant, which notice shall be written in a manner calculated
to be understood by the Claimant and shall contain a statement of the specific
reasons for the denial of the claim and a statement advising the Claimant that,
within 60 days of the date on which he or she receives such notice, he or she
may obtain review of the decision of the Plan Administrator in accordance with
the procedures hereinafter set forth. Within such 60-day period, the Claimant or
his or her authorized representative may request that the claim denial be
reviewed by filing with the Plan Administrator a written request therefor, which
request shall contain the following information:
(a) the date on which the request was filed with the Plan
Administrator; provided, however, that the date on which the
request for review was in fact filed with the Plan
Administrator shall control in the event that the date of the
actual filing is later than the date stated by the Claimant
pursuant to this paragraph (a);
(b) the specific portions of the denial of his or her claim which
the Claimant requests the Plan Administrator to review;
(c) a statement by the Claimant setting forth the basis upon which
he or she believes the Plan Administrator should reverse its
previous denial of the claim and accept the claim as made; and
(d) any written material which the Claimant desires the Plan
Administrator to examine in its consideration of his or her
position as stated pursuant to paragraph (b) above.
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In accordance with this Section, if the Claimant requests a review of
the Plan Administrator's decision, such review shall be made by the Plan
Administrator who shall, within sixty (60) days after receipt of the request
form, review and render a written decision on the claim containing the specific
reasons for the decision including reference to Plan provisions upon which the
decision is based. All findings, decisions, and determinations of any kind made
by the Plan Administrator shall not be modified unless the Plan Administrator
has acted in an arbitrary and capricious manner. Subject to the requirements of
law, the Plan Administrator shall be the sole judge of the standard of proof
required in any claim for benefits, and any determination of eligibility for a
benefit. All decisions of the Plan Administrator shall be binding on the
claimant and upon all other Persons. If the Participant or Beneficiary shall not
file written notice with the Plan Administrator at the times set forth above,
such individual shall have waived all benefits under the Plan other than as
already provided, if any, under the Plan.
ARTICLE X
AMENDMENT AND TERMINATION OF PLAN
10.1 RESERVATION OF RIGHTS. The Corporation reserves the right to
terminate the Plan at any time, and to modify or amend the Plan, in whole or in
part, at any time and for any reason, subject to the following:
(a) PRESERVATION OF ACCOUNT BALANCE. No termination, amendment, or
modification of the Plan shall reduce (i) the amount of
Participant Deferrals, Corporate Contributions, and Dividends
allocated to the Participants' Accounts as of the date of such
termination, amendment, or modification, and (ii) all earnings
and gains on such Participant Deferrals, Corporate
Contributions, and Dividends that have accrued up to the
effective date of the termination, amendment, or modification.
(b) CHANGES IN EARNINGS RATE. No amendment or modification of the
Plan shall reduce the rate of earnings to be credited under
the Common Stock Account until the close of the applicable
Deferral Period in which such amendment or modification is
made.
10.2 EFFECT OF PLAN TERMINATION. If the Corporation terminates the
Plan either in whole or in part, the following will apply:
(a) PARTIAL TERMINATION. The Corporation may partially terminate
the Plan by instructing the Plan Administrator to not accept
any additional Participation Agreements. If such a partial
termination occurs, the Plan shall continue to operate and be
effective with regard to Participation Agreements entered into
prior to the effective date of such partial termination.
(b) COMPLETE TERMINATION. The Corporation may completely
terminate the Plan by instructing the Plan Administrator to
not accept any additional Participation Agreements and by
terminating all ongoing Participation Agreements. If such a
complete termination occurs, the Plan shall cease to operate,
and all Plan Participants shall become fully vested in their
Plan Account balance. Payment of each Participant's Plan
Account balance shall thereafter be made in equal monthly
installments over the following period, based on the value of
each Participant's Plan Account balance:
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<TABLE>
<CAPTION>
Account Balance Payout Period
--------------- -------------
<S> <C>
Equal to or less than $100,000 Lump Sum
More than $100,000 3 Years
</TABLE>
Plan distributions shall commence within sixty-five (65) days after the
Corporation terminates the Plan. The Participant's unpaid Plan Account balance
invested for bookkeeping purposes in the Plan's Common Stock Account shall be
reflected as a number of whole and fractional Common Shares in a distribution
sub-account and shall be credited with Dividends on a bookkeeping basis which
shall be reinvested in the Plan's Common Stock Account throughout the payout
period; all such reinvested Dividends shall be paid to the Participant as Common
Shares in conjunction with the Participant's final distribution under the Plan.
10.3 EFFECT OF PLAN TERMINATION. Notwithstanding anything to the
contrary contained in the Plan, the termination of the Plan shall terminate the
liability of the Corporation and all employees to make further Corporate
Contributions to the Plan.
ARTICLE XI
CHANGE OF CONTROL
11.1 CHANGE OF CONTROL. Notwithstanding any other provision of the
Plan to the contrary, in the event of a Change of Control as defined in
accordance with Section 2.2 of the Plan, no amendment or modification of the
Plan may be made at any time on or after such Change of Control (1) to reduce or
modify a Participant's Pre-Change of Control Account Balance, (2) to reduce or
modify the Common Stock Accounts' method of calculating all earnings, gains,
and/or losses on a Participant's Pre-Change of Control Account Balance, or (3)
to reduce or modify the Participant's Participant Deferrals and/or Corporate
Contributions to be credited to a Participant's Plan Account for the applicable
Deferral Period. For purposes of this Section 11.1, the term "Pre-Change of
Control Account Balance" shall mean, with regard to any Plan Participant, the
aggregate amount of such Participant's Participant Deferrals and Corporate
Contributions and Dividends with all earnings, gains, and losses thereon which
are credited to the Participant's Plan Account through the close of the calendar
year in which such Change of Control occurs.
11.2 COMMON STOCK CONVERSION. In the event of a Change of Control
in which the common shares of the Corporation are converted into or exchanged
for securities, cash and/or other property as a result of any capital
reorganization or reclassification of the capital stock of the Corporation, or
consolidation or merger of the Corporation with or into another corporation or
entity, or the sale of all or substantially all of its assets to another
corporation or entity, the Corporation shall cause the Common Stock Account to
reflect on a bookkeeping basis the securities, cash and other property that
would have been received in such reorganization, reclassification,
consolidation, merger or sale on an equivalent amount of common shares equal to
the balance in the Common Stock Account and, from and after such reorganization,
reclassification, consolidation, merger or sale, the Common Stock Account shall
reflect on a bookkeeping basis all Dividends, interest, earnings and losses
attributable to such securities, cash, and other property.
11.3 DISTRIBUTION PROVISIONS. In the event of a Change of Control,
the provisions of Section 7.2 of the Plan which limit a Participant's ability to
provide services to a financial services organization, business, or company upon
the Participant's voluntary Termination, Retirement or Disability shall
-14-
<PAGE>
become null and void, and such Participant's distribution elections as contained
within the Participant's Participation Agreement shall control the method and
timing of the Participant's distribution of his or her Plan Account balances.
11.4 AMENDMENT IN THE EVENT OF A CHANGE OF CONTROL. On or after a
Change of Control, the provisions of Article II, Article IV, Article V, Article
VI, Article VII, Article VIII, Article IX, Article X and Article XI may not be
amended or modified as such Sections and Articles apply with regard to the
Participants' Pre-Change of Control Account Balances.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 NO COMMITMENT AS TO EMPLOYMENT. Nothing herein contained
shall be construed as a commitment or agreement upon the part of any Employee
hereunder to continue his or her employment with an Employer, and nothing herein
contained shall be construed as a commitment on the part of any Employer to
continue the employment, rate of compensation or terms and conditions of
employment of any Employee hereunder for any period. All Participants shall
remain subject to discharge to the same extent as if the Plan had never been put
into effect.
12.2 BENEFITS. Nothing in the Plan shall be construed to confer any
right or claim upon any person, firm, or corporation other than the
Participants, former Participants, and Beneficiaries.
12.3 ABSENCE OF LIABILITY. No member of the Board of Directors of
the Corporation or a subsidiary or committee authorized by the Board of
Directors, or any officer of the Corporation or a subsidiary or officer of a
subsidiary shall be liable for any act or action hereunder, whether of
commission or omission, taken by any other member, or by any officer, agent, or
Employee, except in circumstances involving bad faith or willful misconduct, for
anything done or omitted to be done.
12.4 EXPENSES. The expenses of administration of the Plan shall be
paid by the Corporation.
12.5 PRECEDENT. Except as otherwise specifically agreed to by the
Corporation in writing, no action taken in accordance with the Plan by the
Corporation shall be construed or relied upon as a precedent for similar action
under similar circumstances.
12.6 WITHHOLDING. The Corporation shall withhold any tax that the
Corporation in its discretion deems necessary to be withheld from any payment to
any Participant, former Participant, or Beneficiary hereunder, by reason of any
present or future law.
12.7 VALIDITY OF PLAN. The validity of the Plan shall be
determined and the Plan shall be construed and interpreted in accordance with
the provisions the laws of the State of Ohio. The invalidity or illegality of
any provision of the Plan shall not affect the validity or legality of any other
part thereof.
12.8 PARTIES BOUND. The Plan shall be binding upon the Employers,
Participants, former Participants, and Beneficiaries hereunder, and, as the case
may be, the heirs, executors, administrators, successors, and assigns of each of
them.
12.9 HEADINGS. All headings used in the Plan are for convenience
of reference only and are not part of the substance of the Plan.
-15-
<PAGE>
12.10 DUTY TO FURNISH INFORMATION. The Corporation shall furnish to
each Participant, former Participant, or Beneficiary any documents, reports,
returns, statements, or other information that it reasonably deems necessary to
perform its duties imposed hereunder or otherwise imposed by law.
12.11 VALIDITY. In case any provision of this Plan shall be held
illegal or invalid for any reason, said illegality or invalidity shall not
affect the remaining parts hereof, but this Plan shall be construed and enforced
as if such illegal and invalid provision had never been inserted herein.
12.12 NOTICE. Any notice required or permitted under the Plan shall
be deemed sufficiently provided if such notice is in writing and hand delivered
or sent by registered or certified mail. Such notice shall be deemed given as of
the date of delivery or, if delivery is made by mail, as of the date shown on
the postmark or on the receipt for registration or certification. Mailed notice
to the Corporation shall be directed to the Corporation's address, attention:
KeyCorp Compensation and Benefits Department. Mailed notice to a Participant or
Beneficiary shall be directed to the individual's last known address in the
Employer's records.
12.13 SUCCESSORS. The provisions of this Plan shall bind and inure
to the benefit of each Employer and its successors and assigns. The term
successors as used herein shall include any corporate or other business entity
which shall, whether by merger, consolidation, purchase or otherwise, acquire
all or substantially all of the business and assets of an Employer.
KEYCORP
By: /s/ Steven N. Bulloch
------------------------------------
Title: Assistant Secretary
---------------------------------
-16-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.36
<SEQUENCE>11
<FILENAME>l97974aexv10w36.txt
<DESCRIPTION>EX-10.36 KEYCORP EXCESS 401K SAVINGS PLAN
<TEXT>
<PAGE>
EXHIBIT 10.36
KEYCORP
EXCESS 401(K) SAVINGS PLAN
The KeyCorp Excess 401(k) Savings Plan ("Plan") is hereby amended and
restated in its entirety to be effective January 1, 1998. The Plan as amended
and restated is intended to provide certain key employees of KeyCorp with a Plan
benefit that is generally equal to the benefit that the Participant would have
been eligible to receive under the KeyCorp 401(k) Savings Plan but for the
contribution limits imposed by Section 402(g) of the Internal Revenue Code of
1986, as amended (Code) and the compensation limits imposed by Section
401(a)(17) of the Code. It is the intention of KeyCorp, and it is the
understanding of those Participants covered under the Plan that the Plan is
unfunded for tax purposes and for purposes of Title I of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA").
ARTICLE I
DEFINITIONS
1.1 MEANING OF DEFINITIONS. For the purposes hereof, the
following words and phrases shall have the meanings hereinafter set forth,
unless a different meaning is plainly required by the context:
(a) "401(k) SAVINGS PLAN" shall mean the KeyCorp 401(k)
Savings Plan, as shall be amended from time to time.
(b) "BENEFICIARY" shall mean the same person, persons or
entity as designated by the Participant under the 401(k) Savings Plan
to receive any Plan benefits payable after a Participant's death.
(c) "CHANGE OF CONTROL" shall be deemed to have occurred
if under any rabbi trust arrangement maintained by the Corporation, the
Corporation is required under the terms of such arrangement to fund
such rabbi trust to secure the payment of any Participants' Plan
benefits payable hereunder because a "Change of Control" as defined in
such rabbi trust has occurred after January 1, 1997.
(d) "CODE" shall mean the Internal Revenue Code of 1986,
as amended from time to time, together with all regulations promulgated
thereunder. Reference to a section of the Code includes such section
and any comparable section or sections of any future legislation that
amends, supplements, or supersedes such section.
(e) "COMPENSATION" of a Participant for any Plan Year or
any partial Plan Year in which the Participant incurs a Severance From
Service Date shall mean the entire amount of compensation paid to such
Participant during such period by reason of his or her employment with
an Employer, as reported for federal income tax purposes, plus that
compensation which would have been paid except for (1) the timing of an
Employer's payroll processing operations, (2) the provisions of the
401(k) Savings Plan, or (3) the provisions of the KeyCorp Flexible
Benefits Plan, provided, however, that the term shall not include:
<PAGE>
(i) any amount attributable to the Employee's receipt of
stock appreciation rights and the amount of any gain
to the Employee upon the exercise of a stock option;
(ii) any amount attributable to the Employee's receipt of
non-cash remuneration which is included in the
Employee's income for federal income tax purposes;
(iii) any amount attributable to the Employee's receipt of
moving expenses and any relocation bonus paid to the
Employee during the Plan Year;
(iv) any amount attributable to any severance paid by an
Employer or the Corporation to the Employee;
(v) any amount attributable to fringe benefits (cash and
non-cash), regardless of whether any or all such
items are includible in such Participant's gross
income for federal tax purposes;
(vi) any amount attributable to any bonus or payment made
as an inducement for the Employee to accept
employment with an Employer;
(vii) any amount attributable to compensation of any type
including bonus or incentive compensation payments
paid on or after the Employee's Severance From
Service Date; or
(viii) any amount attributable to compensation deferred by
the Participant.
In determining a Participant's Compensation under the
provisions of this Section 1.1(e), for those Plan Participants who
participate in a line of business incentive plan, only that
Compensation up to a maximum amount of $500,000 minus the amount of the
Participant's Compensation utilized in computing his or her 401(k)
Savings Plan benefit in accordance with Section 401(a)(17) of the Code
shall be utilized in calculating the Participant's Participant
Deferrals under this Plan.
(f) "CORPORATE CONTRIBUTIONS" shall mean the amount an
Employer has agreed to credit on a bookkeeping basis to the
Participant's Plan Account in accordance with the provisions of Article
IV of the Plan.
(g) "CORPORATION STOCK FUND" shall mean the investment
account established under the Plan for bookkeeping purposes under which
a Participant may elect to have his or her Participant Deferrals
credited and which mirrors the Corporation Stock Fund established in
accordance with and pursuant to Article VIII of the 401(k) Savings
Plan, as shall be amended from time to time. Participant Deferrals to
the Corporation Stock Fund shall be credited based on a bookkeeping
allocation of KeyCorp Common Shares (both whole and fractional rounded
to the nearest one-hundredth of a share) which shall be equal to the
amount of Participant Deferrals invested by the Participant in the
Corporation Stock Fund. The Corporation Stock Fund shall also reflect
on a bookkeeping basis all dividends, gains, and losses attributable to
such Common Shares. All Corporate Contributions and all Participant
Deferrals credited to the Corporation Stock Fund, shall be based on the
New York Stock Exchange's closing price for such
<PAGE>
Common Shares as of the day such Participant Deferrals are credited to
the Participants' Plan Account.
(h) "CORPORATION" shall mean KeyCorp, an Ohio
Corporation, its corporate successors, and any corporation or
corporations into or with which it may be merged or consolidated.
(i) "DEFERRAL COMMENCEMENT DATE" shall mean the first pay
period coinciding with or immediately following the date on which the
Participant reaches his or her maximum contribution limit under Section
402(g) of the Code and/or the Participant's maximum compensation limit
under Section 401(a)(17) of the Code which effectively terminates the
Participant's deferral of Compensation under the 401(k) Savings Plan.
(j) "DEFERRAL ELECTION" shall mean the commitment made by
the Participant to defer up to 6% of his or her Compensation on a per
pay basis under the Plan, commencing as of the Participant's Deferral
Commencement Date; a Participant's Deferral Election shall be made in
such manner and at such time as the Corporation shall direct.
(k) "DEFERRAL PERIOD" shall mean each Plan year,
provided, however, that a Participant's initial Deferral Period shall
be from his or her first day of participation in the Plan through the
last day of the applicable Plan year.
(l) "EMPLOYEE" shall mean a common law employee who is
employed by an Employer; provided, however, the term "Employee" shall
not include any person who at the time services are performed is not
classified as a common law employee by the Employer even though such
person may for federal income tax purposes, federal employment tax
purposes, or any other purpose be reclassified by the Employer as a
common law employee retroactive to when such services were performed by
reason of administrative, judicial, regulatory or other governmental
action.
(m) "EMPLOYER" shall mean the Corporation and any of its
subsidiaries, unless specifically excluded as an Employer for Plan
purposes by written action of an officer of the Corporation. An
Employer's participation shall be subject to all conditions and
requirements made by the Corporation, and each Employer shall be deemed
to have appointed the Plan Administrator as its exclusive agent under
the Plan as long as it continues as a subsidiary.
(n) "INVESTMENT FUNDS" shall mean those investment
accounts established under the Plan for bookkeeping purposes in which a
Participant may elect to have his or her Participant Deferrals credited
and which mirror the investment funds established in accordance with
and pursuant to Article VIII of the 401(k) Savings Plan as shall be
amended from time to time. Participant Deferrals invested for
bookkeeping purposes in the Investment Funds shall be credited on a
bookkeeping basis with the same earnings, gains, and losses as
experienced by the 401(k)Savings Plan's investment funds.
<PAGE>
(o) "MATCHING EMPLOYER CONTRIBUTIONS" shall mean the
amount which an Employer has agreed to contribute to the Plan in
accordance with the provisions of Article IV of the Plan.
(p) "PARTICIPANT" shall mean an Employee who meets the
eligibility requirements set forth in Section 2.1 and becomes a Plan
Participant pursuant to Section 2.2 of the Plan.
(q) "PARTICIPANT DEFERRALS" shall mean the Participant's
elective deferral of Compensation under this Plan.
(r) "PLAN" shall mean the KeyCorp Excess 401(k) Savings
Plan, with all amendments hereafter made.
(s) "PLAN ACCOUNT" shall mean those bookkeeping accounts
established by the Corporation for each Plan Participant, which shall
reflect all Participant Deferrals and Corporate Contributions with all
earnings, gains, and losses attributable thereto, if such Participant
Deferrals and Corporate Contributions had been invested pursuant to
Article V of the Plan in the various Plan Investment Funds. Plan
Accounts shall not constitute separate Plan funds or Plan assets.
Neither the maintenance of, nor the crediting of amounts on a
bookkeeping basis to such Plan Accounts shall be treated as (i) the
allocation of any Corporation assets to, or a segregation of any
Corporation assets in any such Plan Accounts, or (ii) as otherwise
creating a right in any person or Participant to receive specific
assets of the Corporation. Benefits under the Plan shall be paid from
the general assets of the Corporation.
(t) "PROFIT SHARING CONTRIBUTIONS" shall mean those
discretionary contributions which an Employer may contribute to the
Plan pursuant to Article IV of the Plan.
(u) "VALUATION DATE" shall mean each "business day" or
"business days" designated by the Plan Administrator on which
Investment Funds will be valued for bookkeeping purposes.
(v) "RETIREMENT" shall mean the termination of employment
of a Participant under circumstances in which the Participant begins to
receive an Early Retirement or Normal Retirement Date benefit under the
KeyCorp Cash Balance Pension Plan or, which pursuant to a written
employment agreement with the Corporation, the Participant is expressly
treated as if he or she had retired for purposes of the Plan or other
deferred compensation arrangement of the Corporation.
(w) "TERMINATION" shall mean the voluntary or involuntary
and permanent termination of a Participant's employment from his or her
Employer and any other Employer, whether by resignation or otherwise,
but shall not include the Participant's Retirement or termination as a
result of Disability.
1.2 PRONOUNS: The masculine pronoun wherever used herein includes
the feminine in any case so requiring, and the singular may include the plural.
<PAGE>
1.3 ADDITIONAL REFERENCE: All other words and phrases used herein
shall have the meaning given them in the 401(k) Savings Plan, unless a different
meaning is clearly required by the context.
ARTICLE II
EMPLOYEE PARTICIPATION
2.1 EMPLOYEE ELIGIBILITY. An Employee shall be eligible to
participate in the Plan, provided (1) the Employee is a participant in the
401(k) Savings Plan, (2) the Employee's elective deferrals of compensation under
the 401(k) Savings Plan reach the deferral limitations prescribed by Section
402(g) of the Code, and/or the compensation limitations prescribed by Section
401(a)(17) of the Code, and (3) the Corporation selects such Employee to
participate in the Plan.
2.2 NOTIFICATION OF NEW PARTICIPANTS. The Corporation shall
notify an Employee of his or her eligibility to participate in the Plan; the
Employee's election to defer Compensation under the Plan shall be made at such
time and in such a manner as the Corporation shall direct.
2.3 EFFECT AND DURATION. Upon becoming a Participant, an Employee
shall be entitled to the benefits and shall be bound by all terms and conditions
of the Plan. If the Corporation determines that a Participant's performance is
no longer at a level that deserves to be rewarded through participation in the
Plan, but does not terminate the Participant's employment with an Employer, the
Participant's Plan participation shall terminate at the end of the Deferral
Period and no new Participant Deferrals thereafter may be made by the
Participant.
2.4 AUTHORIZED LEAVE OF ABSENCE. A Participant on an authorized
leave of absence who is not receiving Compensation during such leave period
shall continue as a Plan Participant during such leave, provided, however, that
no Corporate Contributions shall be credited to the Participant's Plan Account
on behalf of the Participant during such leave period. Upon the Participant's
return to active employment with an Employer, the Participant's Participant
Deferrals shall automatically resume in accordance with the Participant's
Deferral Election as in effect prior to the Participant's leave period unless
otherwise modified by the Participant.
ARTICLE III
PARTICIPANT DEFERRALS
3.1 PARTICIPANT DEFERRALS. Upon meeting the eligibility criteria
contained within Section 2.1 hereof, a Participant may defer not less than one
percent nor more than six percent of his or her Compensation under the Plan.
Such Participant Deferrals shall commence with the first payment of Compensation
to the Participant coinciding with (1) the date on which the Participant's
elective deferral of Compensation under the 401(k) Savings Plan reaches the
maximum deferral limitations prescribed under Section 402(g) of the Code, or (2)
the date on which the Participant's elective deferral of Compensation under the
401(k) Savings Plan reaches the maximum compensation limits prescribed under
Section 401(a)(17) of the Code. Participant Deferrals shall be credited on a
bookkeeping basis to the Participant's Plan Account as of each applicable pay
period in which the Participant makes Participant Deferrals under the Plan.
<PAGE>
ARTICLE IV
CORPORATE CONTRIBUTIONS
4.1 MATCHING EMPLOYER CONTRIBUTIONS. Matching Employer
Contributions shall be credited on a bookkeeping basis to the Participant's Plan
Account as of each pay period in proportion to the respective amount of the
Participant's Participant Deferrals deferred under the Plan for such pay period.
Credited Matching Employer Contribution shall equal 100% of those Participant
Deferrals deferred under the Plan for such pay period.
4.2 PROFIT SHARING CONTRIBUTIONS. Profit Sharing Contributions,
if any, shall be credited to Participant's Plan Account at such time and in such
manner as the Corporation directs.
ARTICLE V
INVESTMENTS
5.1 PLAN ACCOUNT. All Participant Deferrals and Corporate
Contributions shall be credited on a bookkeeping basis to a Plan Account
established in the Participant's name. Separate sub-accounts may be established
to reflect Participant's investment elections on a bookkeeping basis, with all
earnings, gains, or losses attributable to such elections.
5.2 INVESTMENT OF PARTICIPANT DEFERRALS. Each Participant shall
direct the manner in which his or her Participant Deferrals are to be invested
for bookkeeping purposes under the Plan. All Participant Deferrals may be
invested for bookkeeping purposes in the Plan's Corporation Stock Fund or any
one or more of the Plan Investment Funds in such amount as the Participant shall
select provided that such election amounts are expressed in five percent
increments. Participants may modify their investment elections at such times and
in such manner as permitted by the Corporation.
5.3 INVESTMENT OF CORPORATE CONTRIBUTIONS. All Corporate
Contributions credited to the Participant's Plan Account shall be invested for
bookkeeping purposes in the Corporation Stock Fund. Corporate Contributions are
not subject to Participant investment directives.
5.4 VESTING IN CORPORATE CONTRIBUTIONS. A Participant shall
become vested in those Corporate Contributions credited on a bookkeeping basis
to the Participant's Plan Account upon the Participant's (1) completion of three
years of vested service, (2) Disability, or (3) death. For purposes of this
Section 5.4 hereof, the term "vested service" shall be calculated based on the
Participant's employment commencement date through the Participant's Termination
or Retirement date (which ever shall first occur), and shall be based on
consecutive twelve-month periods during which time the Participant is employed
by an Employer.
5.5 VALUATION OF PLAN ACCOUNTS. As of each Valuation Date, the
Plan Administrator shall verify the amount of Participant Deferrals, Corporate
Contributions, dividends, earnings, and losses, if any, to be credited to the
Participant's Plan Account in accordance with the provisions of the Plan. The
reasonable and equitable decision of the Plan Administrator as to the value of
the Participant's Plan Account shall be conclusive and binding upon all
Participants and the Beneficiary of each deceased Participant having any
interest, direct or indirect in the Participant's Plan Account. The value of the
Participant's Plan Account on any day not a Valuation Date, shall be the value
on the last preceding Valuation Date.
<PAGE>
5.6 CORPORATE ASSETS. All Participant Deferrals, Corporate
Contributions, dividends, and all earnings and losses credited to a
Participant's Plan Account remain the assets and property of the Corporation,
which shall be subject to distribution to the Participant only in accordance
with Articles VI and VII of the Plan. All payments hereunder shall be in the
form of cash and KeyCorp Common Shares and shall be made from the general assets
of the Corporation, and Participants and Beneficiaries shall have the status of
general unsecured creditors of the Corporation. Nothing contained in the Plan
shall create, or be construed as creating a trust of any kind or any other
fiduciary relationship between the Participant, the Corporation, or any other
person. It is the intention of the Corporation and the Participant that the Plan
be unfunded for tax purposes and for purposes of Title I of the Employee
Retirement Income Security Act of 1974, as amended.
5.7 NO PRESENT INTEREST. Subject to any federal statute to the
contrary, no right or benefit under the Plan and no right or interest in each
Participant's Plan Account shall be subject to anticipation, alienation, sale,
assignment, pledge, encumbrance, or charge, and any attempt to anticipate,
alienate, sell, assign, pledge, encumber, or charge any right or benefit under
the Plan, or Participant's Plan Account shall be void. No right, interest, or
benefit under the Plan or Participant's Plan Account shall be liable for or
subject to the debts, contracts, liabilities, or torts of the Participant or
Beneficiary. If the Participant or Beneficiary becomes bankrupt or attempts to
alienate, sell, assign, pledge, encumber, or charge any right under the Plan or
Participant's Plan Account, such attempt shall be void and unenforceable.
5.8 EFFECT OF PLAN TERMINATION. Notwithstanding anything to the
contrary contained in the Plan, the termination of the Plan or the termination
of the 401(k) Savings Plan shall terminate the liability of the Corporation to
make further Corporate Contributions to the Plan.
ARTICLE VI
DISTRIBUTION OF PLAN BENEFITS
6.1 DISTRIBUTION OPTIONS. Subject to the provisions of Section
6.3 and Section 6.4 hereof, a Participant shall elect, as reflected in the
Participant's Distribution Election Agreement, to receive a distribution of his
or her vested Plan Account balance from the Plan's Investment Funds (other than
from the Corporation Stock Account) under the following payment options:
(a) a single lump sum distribution, or
(b) a series of monthly installment distributions over a period of
60, 120, or 180 months.
Distributions of Participant Deferrals from the Plan's Investment Funds
other than the Corporation Stock Fund shall be made in cash.
6.2 DISTRIBUTION OPTIONS FROM THE CORPORATION STOCK ACCOUNT.
Subject to the provisions of Section 6.3 and Section 6.4 of the Plan, a
Participant shall elect, as reflected in the Participant's Distribution Election
Agreement, to receive a distribution of his or her vested Plan Account balance
from the Plan's Corporation Stock Account under the following payment options:
(a) a single lump sum distribution, or
(b) a series of annual installment distributions over a period of
5, 10, or 15 years.
<PAGE>
Distributions of Participant Deferrals and vested Corporate
Contributions from the Plan's Corporation Stock Fund made or commenced prior to
January 1, 1999 shall be made in cash; distributions from the Corporation Stock
Fund made or commenced on or after January 1, 1999 shall be made in KeyCorp
Common Shares; provided, however, that in the event that the Corporation enters
into a transaction intended to qualify as a pooling of interests for accounting
purposes prior to January 1, 1999, all distributions from the Corporation Stock
Fund shall continue to be made in cash.
6.3 DISTRIBUTIONS FOLLOWING TERMINATION, RETIREMENT OR DISABILITY.
(a) Upon a Participant's Termination, the Participant's
vested Plan Account balance shall be distributed to the Participant in
a single lump sum payment.
(b) Upon a Participant's Retirement, or Disability, the
Participant's vested Plan Account balance shall be distributed to the
Participant in accordance with the distribution elections contained
within the Participant's Distribution Election Agreement; provided,
however, that if the Participant has failed to complete a Distribution
Election Agreement, then the Participant's vested Plan Account balance
shall be distributed as a single lump sum payment. Notwithstanding the
foregoing provisions of this Section 6.3, however, in the event of the
Participant's Retirement and thereafter within twelve months of such
Retirement, without the prior written approval of the Corporation, the
Participant provides services in any capacity to a financial services
organization, or other competitor of the Corporation or any of its
subsidiaries, such Participant's distribution election as contained
within the Participant's Distribution Election Agreement shall be null
and void, and the Participant shall receive an immediate lump sum
distribution of his or her vested Plan Account balance.
6.4 TIMING OF DISTRIBUTIONS. The Participant's vested Plan
Account shall be valued as of the Valuation Date immediately preceding his or
her Termination, Retirement or Disability (the "valuation date").
(a) LUMP SUM DISTRIBUTION. If a Participant has elected
to receive a lump sum distribution of his or her vested Plan Account
upon his or her Termination, Retirement or Disability date, such lump
sum distribution shall be made as soon as reasonably practicable
immediately following the Participant's Termination, Retirement or
Disability date.
(b) INSTALLMENT DISTRIBUTION. If a Participant has
elected to receive an installment distribution of his or her Plan
Account upon his or her Retirement or Disability, such installment
distribution shall commence as soon as reasonably practicable following
the Participant's Retirement or Disability date.
(i) The Participant's vested unpaid Plan Account balance
invested for bookkeeping purposes in the Plan's Investment
Funds (other than Corporation Stock Fund) shall be reflected
in a distribution sub-account, which shall be credited with
all earnings, gains and losses on such Investment Funds during
the Participant's installment distribution period.
(ii) The Participant's vested unpaid Plan Account balance
invested for bookkeeping purposes in the Plan's Corporation
Stock Fund shall be reflected as a number of whole and
fractional Common Shares in a distribution sub-account and
shall be credited with dividends on a bookkeeping basis which
shall be reinvested in the Plan's Corporation
<PAGE>
Stock Fund throughout the installment distribution period; all
such reinvested dividends shall be paid to the Participant in
Common Shares in conjunction with the Participant's final
installment payment under the Plan.
6.5 DISTRIBUTION OF SMALL ACCOUNTS. Notwithstanding the
provisions of Sections 6.1, 6.2, 6.3, and 6.4 hereof, if the value of a
Participant's vested Account balance as of the Valuation Date immediately
preceding the Participant's Retirement or Disability date is under $50,000, such
balance shall be distributed to the Participant as a single lump sum
distribution as soon as reasonably practicable following such Retirement or
Disability date.
6.6 FACILITY OF PAYMENT. If it is found that any individual to
whom an amount is payable hereunder is incapable of attending to his or her
financial affairs because of any mental or physical condition, including the
infirmities of advanced age, such amount (unless prior claim therefor shall have
been made by a duly qualified guardian or other legal representative) may, in
the discretion of the Corporation, be paid to another person for the use or
benefit of the individual found incapable of attending to his or her financial
affairs or in satisfaction of legal obligations incurred by or on behalf of such
individual. Any such payment shall be charged to the Participant's Plan Account
from which any such payment would otherwise have been paid to the individual
found incapable of attending to his or her financial affairs, and shall be a
complete discharge of any liability therefor under the Plan.
ARTICLE VII
BENEFICIARY DESIGNATION
7.1 BENEFICIARY DESIGNATION. Subject to Section 7.3 hereof, the
Participant shall have the right, at any time, to designate one or more persons
or an entity as Beneficiary (both primary as well as secondary) to whom benefits
under this Plan shall be paid in the event of Participant's death prior to
complete distribution of the Participant's Plan Account. Each Beneficiary
designation shall be in a written form prescribed by the Corporation and shall
be effective only when filed with the Corporation during the Participant's
lifetime.
7.2 CHANGING BENEFICIARY. Subject to Section 7.3, any Beneficiary
designation may be changed by a Participant without the consent of the
previously named Beneficiary by the filing of a new designation with the
Corporation. The filing of a new designation shall cancel all designations
previously filed.
7.3 NO BENEFICIARY DESIGNATION. If any Participant fails to
designate a Beneficiary in the manner provided above, if the designation is
void, or if the Beneficiary (including all contingent Beneficiaries) designated
by a deceased Participant dies before the Participant or before complete
distribution of the Participant's benefits, the Participant's Beneficiary shall
be the person in the first of the following classes in which there is a
survivor:
(a) The Participant's spouse;
(b) The Participant's children in equal shares, except that if any
of the children predeceases the Participant but leaves issue
surviving, then such issue shall take, by right of
representation the share the parent would have taken if
living:
<PAGE>
(c) The Participant's estate.
7.4 DISTRIBUTION UPON DEATH. If a Participant dies after the
distribution of his or her vested interest under the Plan has commenced, the
remaining portion of the Participant's entire interest under the Plan, if any,
shall be distributed to the Participant's Beneficiary under the method of
distribution being used as of the Participant's date of death. If the
Participant dies before the distribution of the Participant's Plan Account has
commenced, the Participant's entire interest under the Plan shall be valued as
of the Valuation Date immediately preceding the Participant's date of death, and
shall be distributed to his or her Beneficiary in a lump sum payment as soon as
reasonably practicable following the Participant's date of death.
ARTICLE VIII
ADMINISTRATION
8.1 ADMINISTRATION. The Corporation, which shall be the
"Administrator" of the Plan for purposes of ERISA and the "Plan Administrator"
for purposes of the Code, shall be responsible for the general administration of
the Plan, for carrying out the provisions hereof, and for making payments
hereunder. The Corporation shall have the sole and absolute discretionary
authority and power to carry out the provisions of the Plan, including, but not
limited to, the authority and power (a) to determine all questions relating to
the eligibility for and the amount of any benefit to be paid under the Plan, (b)
to determine all questions pertaining to claims for benefits and procedures for
claim review, (c) to resolve all other questions arising under the Plan,
including any questions of construction and/or interpretation, and (d) to take
such further action as the Corporation shall deem necessary or advisable in the
administration of the Plan. All findings, decisions, and determinations of any
kind made by the Plan Administrator shall not be disturbed unless the Plan
Administrator has acted in an arbitrary and capricious manner. Subject to the
requirements of law, the Plan Administrator shall be the sole judge of the
standard of proof required in any claim for benefits and in any determination of
eligibility for a benefit. All decisions of the Plan Administrator shall be
final and binding on all parties. The Plan Administrator may employ such
attorneys, investment counsel, agents, and accountants as it may deem necessary
or advisable to assist it in carrying out its duties hereunder. The actions
taken and the decisions made by the Plan Administrator hereunder shall be final
and binding upon all interested parties subject, however, to the provisions of
Section 8.2. The Plan Year, for purposes of Plan administration, shall be the
calendar year.
8.2 CLAIMS REVIEW PROCEDURE. Whenever the Plan Administrator
decides for whatever reason to deny, whether in whole or in part, a claim for
benefits under this Plan filed by any person (herein referred to as the
"Claimant"), the Plan Administrator shall transmit a written notice of its
decision to the Claimant, which notice shall be written in a manner calculated
to be understood by the Claimant and shall contain a statement of the specific
reasons for the denial of the claim and a statement advising the Claimant that,
within 60 days of the date on which he or she receives such notice, he or she
may obtain review of the decision of the Plan Administrator in accordance with
the procedures hereinafter set forth. Within such 60-day period, the Claimant or
his or her authorized representative may request that the claim denial be
reviewed by filing with the Plan Administrator a written request therefor, which
request shall contain the following information:
(a) the date on which the request was filed with the Plan
Administrator; provided, however, that the date on which the
request for review was in fact filed with the Plan
<PAGE>
Administrator shall control in the event that the date of the
actual filing is later than the date stated by the Claimant
pursuant to this paragraph (a);
(b) the specific portions of the denial of his or her claim which
the Claimant requests the Plan Administrator to review;
(c) a statement by the Claimant setting forth the basis upon which
he or she believes the Plan Administrator should reverse its
previous denial of the claim and accept the claim as made; and
(d) any written material which the Claimant desires the Plan
Administrator to examine in its consideration of his or her
position as stated pursuant to paragraph (b) above.
In accordance with this Section, if the claimant requests a review of
the Plan Administrator's decision, such review shall be made by the Plan
Administrator, who shall, within sixty (60) days after receipt of the request
form, review and render a written decision on the claim containing the specific
reasons for the decision including reference to Plan provisions upon which the
decision is based. All findings, decisions, and determinations of any kind made
by the Plan Administrator shall not be modified unless the Plan Administrator
has acted in an arbitrary and capricious manner. Subject to the requirements of
law, the Plan Administrator shall be the sole judge of the standard of proof
required in any claim for benefits, and any determination of eligibility for a
benefit. All decisions of the Plan Administrator shall be binding on the
claimant and upon all other Persons. If the Participant or Beneficiary shall not
file written notice with the Plan Administrator at the times set forth above,
such individual shall have waived all benefits under the Plan other than as
already provided, if any, under the Plan.
ARTICLE IX
AMENDMENT AND TERMINATION OF PLAN
9.1 RESERVATION OF RIGHTS. The Corporation reserves the right to
terminate the Plan at any time by action of the Board of Directors of the
Corporation, or any duly authorized committee thereof, and to modify or amend
the Plan, in whole or in part, at any time and for any reason, subject to the
following:
(a) PRESERVATION OF ACCOUNT BALANCE. No termination, amendment, or
modification of the Plan shall reduce (i) the amount of
Participant Deferrals and Corporate Contributions, and (ii)
all earnings and gains on such Participant Deferrals and
Corporate Contributions that have accrued up to the effective
date of the termination, amendment, or modification.
(b) CHANGES IN EARNINGS RATE. No amendment or modification of the
Plan shall reduce or modify the method of accruing earnings,
gains, and losses under the Plan's Investment Funds that
differ from the method of accruing earnings, gains, and losses
under the 401(k) Savings Plan's investment funds until the
close of the applicable Deferral Period in which such
amendment or modification is made.
<PAGE>
ARTICLE X
CHANGE OF CONTROL
10.1 CHANGE OF CONTROL. Notwithstanding any other provision of the
Plan to the contrary, in the event of a Change of Control as defined in
accordance with Section 1.1 of the Plan, no amendment or modification of this
Plan may be made at any time on or after such Change of Control (1) to reduce or
modify a Participant's Pre-Change of Control Account Balance, (2) to reduce or
modify the Corporation Stock Fund's method of calculating all earnings, gains,
and/or losses on a Participant's Pre-Change of Control Account Balance, (3) to
reduce or modify any other Investment Funds' method of calculating all earnings,
gains, and/or losses on a Participant's Pre-Change of Control Account Balance,
or (4) to reduce or modify the Participant's Participant Deferrals and/or
Corporate Contributions to be credited to a Participant's Plan Account for the
applicable Deferral Period. For purposes of this Section 10.1, the term
"Pre-Change of Control Account Balance" shall mean, with regard to any Plan
Participant, the aggregate amount of such Participant's Participant Deferrals
and Corporate Contributions with all earnings, gains, and losses thereon which
are credited to the Participant's Plan Account through the close of the calendar
year in which such Change of Control occurs.
10.2 COMMON STOCK CONVERSION. In the event of a Change of Control
in which the common shares of the Corporation are converted into or exchanged
for securities, cash and/or other property as a result of any capital
reorganization or reclassification of the capital stock of the Corporation, or
consolidation or merger of the Corporation with or into another corporation or
entity, or the sale of all or substantially all of its assets to another
corporation or entity, the Corporation shall cause the Corporation Stock Fund to
reflect on a bookkeeping basis the securities, cash and other property that
would have been received in such reorganization, reclassification,
consolidation, merger or sale on an equivalent amount of common shares equal to
the balance in the Corporation Stock Fund and, from and after such
reorganization, reclassification, consolidation, merger or sale, the Corporation
Stock Fund shall reflect on a bookkeeping basis all dividends, interest,
earnings and losses attributable to such securities, cash, and other property.
10.3 DISTRIBUTION PROVISIONS. In the event of a Change of Control,
the provisions of Section 6.3 of the Plan which limit a Participant's ability to
provide services to a financial services organization, business, or company upon
the Participant's Retirement, shall become null and void, and such Participant's
distribution elections as contained within the Participant's Agreement shall
control the method and timing of the Participant's distribution of his or her
Plan Account balances.
10.4 AMENDMENT IN THE EVENT OF A CHANGE OF CONTROL. On or after a
Change of Control, the provisions of Article II, Article IV, Article V, Article
VI, Article VII, Article VIII, Article IX and Article X may not be amended or
modified as such Sections and Articles apply with regard to the Participants'
Pre-Change of Control Account Balances.
<PAGE>
ARTICLE XI
SECURITIES LAWS COMPLIANCE
11.1 RESTRICTIONS IMPOSED ON TRANSACTIONS INVOLVING THE CORPORATION
STOCK FUND. Notwithstanding any contrary provision in this Plan, the
Corporation may, in its discretion, but in a uniform, non-discriminatory manner,
delay, suspend or otherwise limit any investment in or withdrawal from the
Corporation Stock Fund for such time and to the extent the Corporation, on
advice of legal counsel, determines is necessary or desirable to avoid violating
any applicable state or federal securities laws, rules or regulations.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 UNFUNDED PLAN. This Plan is an unfunded plan maintained
primarily to provide deferred compensation benefits for a select group of
"management or highly-compensated employees" within the meaning of Sections 201,
301, and 401 of ERISA, and therefore is exempt from the provisions of Parts 2,
3, and 4 of Title I of ERISA.
12.2 NO COMMITMENT AS TO EMPLOYMENT. Nothing herein contained
shall be construed as a commitment or agreement upon the part of any Employee
hereunder to continue his or her employment with an Employer, and nothing herein
contained shall be construed as a commitment on the part of any Employer to
continue the employment, rate of compensation or terms and conditions of
employment of any Employee hereunder for any period. All Participants shall
remain subject to discharge to the same extent as if the Plan had never been put
into effect.
12.3 BENEFITS. Nothing in the Plan shall be construed to confer
any right or claim upon any person, firm, or corporation other than the
Participants, former Participants, and Beneficiaries.
12.4 ABSENCE OF LIABILITY. No member of the Board of Directors of
the Corporation or a subsidiary or committee authorized by the Board of
Directors, or any officer of the Corporation or a subsidiary or officer of a
subsidiary shall be liable for any act or action hereunder, whether of
commission or omission, taken by any other member, or by any officer, agent, or
Employee, except in circumstances involving bad faith or willful misconduct, for
anything done or omitted to be done.
12.5 EXPENSES. The expenses of administration of the Plan shall be
paid by the Corporation.
12.6 PRECEDENT. Except as otherwise specifically agreed to by the
Corporation in writing, no action taken in accordance with the Plan by the
Corporation shall be construed or relied upon as a precedent for similar action
under similar circumstances.
12.7 WITHHOLDING. The Corporation shall withhold any tax which the
Corporation in its discretion deems necessary to be withheld from any payment to
any Participant, former Participant, or Beneficiary hereunder, by reason of any
present or future law.
12.8 VALIDITY OF PLAN. The validity of the Plan shall be
determined and the Plan shall be construed and interpreted in accordance with
the provisions of ERISA, the Code, and, to the extent
<PAGE>
applicable, the laws of the State of Ohio. The invalidity or illegality of any
provision of the Plan shall not affect the validity or legality of any other
part thereof.
12.9 PARTIES BOUND. The Plan shall be binding upon the Employers,
Participants, former Participants, and Beneficiaries hereunder, and, as the case
may be, the heirs, executors, administrators, successors, and assigns of each of
them.
12.10 HEADINGS. All headings used in the Plan are for convenience
of reference only and are not part of the substance of the Plan.
12.11 DUTY TO FURNISH INFORMATION. The Corporation shall furnish to
each Participant, former Participant, or Beneficiary any documents, reports,
returns, statements, or other information that it reasonably deems necessary to
perform its duties imposed hereunder or otherwise imposed by law.
12.12 TRUST FUND. At its discretion, the Corporation may establish
one or more trusts, with such trustees as the Corporation may approve, for the
purpose of providing for the payment of benefits owed under the Plan. Although
such a trust may be irrevocable, in the event of insolvency or bankruptcy of the
Corporation, such assets will be subject to the claims of the Corporation's
general creditors. To the extent any benefits provided under the Plan are paid
from any such trust, the Employer shall have no further obligation to pay them.
If not paid from the trust, such benefits shall remain the obligation of the
Employer.
12.13 VALIDITY. In case any provision of this Plan shall be held
illegal or invalid for any reason, said illegality or invalidity shall not
affect the remaining parts hereof, but this Plan shall be construed and enforced
as if such illegal and invalid provision had never been inserted herein.
12.14 NOTICE. Any notice required or permitted under the Plan shall
be deemed sufficiently provided if such notice is in writing and hand delivered
or sent by registered or certified mail. Such notice shall be deemed given as of
the date of delivery or, if delivery is made by mail, as of the date shown on
the postmark or on the receipt for registration or certification. Mailed notice
to the Corporation shall be directed to the Corporation's address, attention:
KeyCorp Compensation and Benefits Department. Mailed notice to a Participant or
Beneficiary shall be directed to the individual's last known address in the
Employer's records.
12.15 SUCCESSORS. The provisions of this Plan shall bind and inure
to the benefit of each Employer and its successors and assigns. The term
successors as used herein shall include any corporate or other business entity
which shall, whether by merger, consolidation, purchase or otherwise, acquire
all or substantially all of the business and assets of an Employer.
KEYCORP
By: /s/ Thomas E. Helfrich
-------------------------------------
Title: Executive Vice President
----------------------------------
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.40
<SEQUENCE>12
<FILENAME>l97974aexv10w40.txt
<DESCRIPTION>EX-10.40 KEYCORP SUPPLEMENTAL RETIREMENT PLAN
<TEXT>
<PAGE>
EXHIBIT 10.40
KEYCORP
SUPPLEMENTAL RETIREMENT PLAN
ARTICLE I
THE PLAN
The KeyCorp Supplemental Retirement Plan (the "Plan"), as amended and
restated as of August 1, 1996, is hereby amended and restated in its entirety to
be effective as of January 1, 2002. The Plan, as amended, is designed to provide
a supplemental retirement benefit to certain key employees of KeyCorp and its
subsidiaries who became covered under the Plan in their capacity as a key
employee of Society Corporation, and who in accordance with the terms of the
Plan constitute a "Grandfathered Employee" as that term is defined below. It is
the intention of KeyCorp and it is the understanding of the Grandfathered
Employees covered under the Plan, that the Plan is unfunded for tax purposes and
for purposes of Title I of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA").
ARTICLE II
DEFINITIONS
2.1 MEANINGS OF DEFINITIONS. As used herein, the following words
and phrases shall have the meanings hereinafter set forth, unless a different
meaning is plainly required by the context:
(a) "AVERAGE INTEREST CREDIT" shall mean the average of the
Interest Credits (as defined in the Retirement Plan) for the
three (3) consecutive calendar years ending with the year of
the Grandfathered Employee's termination.
(b) "AVERAGE TREASURY RATE" shall mean the average of the Treasury
Rates (as defined in the Retirement Plan) for the three (3)
consecutive calendar years ending with the year of the
Grandfathered Employee's termination.
(c) "BENEFICIARY" shall mean the Grandfathered Employee's
surviving spouse or such other Beneficiary determined pursuant
to Article VII of the Retirement Plan in the event the
Grandfathered Employee dies before his or her Supplemental
Retirement Benefit shall have been distributed to him or her
in full.
(d) "COMPENSATION" for any Plan year or any partial Plan year in
which the Grandfathered Employee incurs a severance from
service date shall mean the entire amount of base compensation
paid to such Grandfathered Employee during such period by
reason of his employment as an Employee as reported for
federal income tax purposes, or such base compensation which
would have been paid
-1-
<PAGE>
except for (1) the timing of an Employer's payroll processing
operations, (2) the Grandfathered Employee's election to
participate in the KeyCorp 401(k) Savings Plan, KeyCorp Excess
401(k) Savings Plan, the KeyCorp Flexible Benefits Plan, the
KeyCorp Automatic Deferral Plan, and/or (3) the Grandfathered
Employee's election to defer such base compensation election
of under the KeyCorp Deferred Compensation Plan for the
applicable Plan year(s), provided, however, that the term
Compensation shall specifically exclude:
(i) any amount attributable to the Grandfathered
Employee's exercise of stock appreciation rights and
the amount of any gain to the Grandfathered Employee
upon the exercise of stock options;
(ii) any amount attributable to the Grandfathered
Employee's receipt of non-cash remuneration whether
or not it is included in the Grandfathered Employee's
income for federal income tax purposes;
(iii) any amount attributable to the Grandfathered
Employee's receipt of moving expenses and any
relocation bonus paid to the Grandfathered Employee
during the Plan year;
(iv) any amount attributable to a lump sum severance
payment paid by an Employer or the Corporation to the
Grandfathered Employee;
(v) any amount attributable to fringe benefits (cash and
non-cash);
(vi) any amount attributable to any bonus or payment made
as an inducement for the Grandfathered Employee to
accept employment with an Employer;
(vii) any amount paid to the Grandfathered Employee during
the Plan year which is attributable to interest
earned and any KeyCorp matching contributions
allocated on compensation deferred under a plan of an
Employer or the Corporation.
(viii) any amount attributable to salary deferrals paid to
the Grandfathered Employee during the Plan year,
which have been previously included as compensation
under the Plan; and
(ix) any amount paid for any period after the
Grandfathered Employee's termination or retirement
date.
-2-
<PAGE>
(e) "CORPORATION" shall mean KeyCorp, an Ohio corporation, its
corporate successors, and any corporation or corporations into
or with which it may be merged or consolidated.
(f) "EARLY RETIREMENT DATE" shall mean the date of the
Grandfathered Employee's retirement from his or her employment
with an Employer on or after the Grandfathered Employee's
attainment of age 55 and completion of a minimum of ten years
of Benefit Service, but prior to the Grandfathered Employee's
Normal Retirement Date.
(g) "EMPLOYEE" shall mean any person who is employed by an
Employer, provided, however, that as of December 31, 1994 all
Employees who are Plan Grandfathered Employees (other than
Grandfathered Employees) shall cease any further future
benefit accrual under the Plan and such Employees'
Supplemental Retirement Plan benefit shall be valued in
accordance with the provisions of Article IX hereof and
transferred to KeyCorp Excess Cash Balance Pension Plan.
Thereafter, effective January 1, 1995, the term "Employee"
shall include only Grandfathered Employees.
(h) "EMPLOYER" shall mean the Corporation and any of its
subsidiaries or affiliates unless specifically excluded as an
Employer for Plan purposes by written action of an officer of
the Corporation. An Employer's participation shall be subject
to any conditions or requirements made by the Corporation, and
each Employer shall be deemed to appoint the Corporation as
its exclusive agent under the Plan as long as it continues as
an Employer.
(i) "FINAL AVERAGE COMPENSATION" shall mean with respect to any
Grandfathered Employee, the annual average of his or her
highest aggregate Compensation for any period of five
consecutive years within the period of ten consecutive full
years immediately prior to his or her retirement or other
termination of employment, or any termination of the Plan,
whichever first occurs; provided, however, that if a
Grandfathered Employee is employed for less than five
consecutive years prior to such date, the term shall mean the
monthly average of the aggregate amount of his or her
Compensation for the entire period of the Grandfathered
Employee's employment, multiplied by 12. If a Grandfathered
Employee receives no Compensation for any portion of such five
consecutive years because of absence from work, there shall be
treated as Compensation received during such period of absence
an amount equal to the Compensation he or she would have
received had the Grandfathered Employee not been absent, such
amount to be determined by the Corporation on the basis of
such Grandfathered Employee's salary or wage rate in effect
immediately prior to such absence; provided, however, that no
Compensation shall be credited hereunder for the period during
which the Grandfathered Employee is permanently and totally
disabled and for which he receives benefits under the long
term disability program maintained in effect by his Employer.
-3-
<PAGE>
(j) "GRANDFATHERED EMPLOYEE" shall mean an Employee who is listed
on Exhibit A attached hereto.
(k) "HARMFUL ACTIVITY" shall have occurred if the Grandfathered
Employee shall do any one or more of the following:
(i) Use, publish, sell, trade or otherwise disclose
Non-Public Information of KeyCorp unless such
prohibited activity was inadvertent, done in good
faith and did not cause significant harm to KeyCorp.
(ii) After notice from KeyCorp, fail to return to KeyCorp
any document, data, or thing in his or her possession
or to which the Grandfathered Employee has access
that may involve Non-Public Information of KeyCorp.
(iii) After notice from KeyCorp, fail to assign to KeyCorp
all right, title, and interest in and to any
confidential or non-confidential Intellectual
Property which the Grandfathered Employee created, in
whole or in part, during employment with KeyCorp,
including, without limitation, copyrights,
trademarks, service marks, and patents in or to (or
associated with) such Intellectual Property.
(iv) After notice from KeyCorp, fail to agree to do any
acts and sign any document reasonably requested by
KeyCorp to assign and convey all right, title, and
interest in and to any confidential or
non-confidential Intellectual Property which the
Grandfathered Employee created, in whole or in part,
during employment with KeyCorp, including, without
limitation, the signing of patent applications and
assignments thereof.
(v) Upon the Grandfathered Employee's own behalf or upon
behalf of any other person or entity that competes or
plans to compete with KeyCorp, solicit or entice for
employment or hire any KeyCorp employee.
(vi) Upon the Grandfathered Employee's own behalf or upon
behalf of any other person or entity that competes or
plans to compete with KeyCorp, call upon, solicit, or
do business with (other than business which does not
compete with any business conducted by KeyCorp) any
KeyCorp customer the Grandfathered Employee called
upon, solicited, interacted with, or became
acquainted with, or learned of through access to
information (whether or not such information is or
was non-public) while the Grandfathered Employee was
employed at KeyCorp unless such prohibited activity
was inadvertent, done in good faith, and did not
involve a customer whom the Grandfathered Employee
should have reasonably known was a customer of
KeyCorp.
-4-
<PAGE>
(vii) Upon the Grandfathered Employee's own behalf or upon
behalf of any other person or entity that competes or
plans to compete with KeyCorp, after notice from
KeyCorp, continue to engage in any business activity
in competition with KeyCorp in the same or a closely
related activity that the Grandfathered Employee was
engaged in for KeyCorp during the one year period
prior to the termination of the Grandfathered
Employee's employment.
For purposes of this Section 2.1(k) the term:
"INTELLECTUAL PROPERTY" shall mean any invention,
idea, product, method of doing business, market or
business plan, process, program, software, formula,
method, work of authorship, or other information, or
thing relating to KeyCorp or any of its businesses.
"NON-PUBLIC INFORMATION" shall mean, but is not
limited to, trade secrets, confidential processes,
programs, software, formulas, methods, business
information or plans, financial information, and
listings of names (e.g., employees, customers, and
suppliers) that are developed, owned, utilized, or
maintained by an employer such as KeyCorp, and that
of its customers or suppliers, and that are not
generally known by the public.
"KEYCORP" shall include KeyCorp, its subsidiaries,
and its affiliates.
(l) "INCENTIVE COMPENSATION AWARD" for any Plan year shall
collectively mean the short term incentive compensation award
(whether in cash or common shares of the Corporation, and
whether paid or deferred, or a combination of both) and the
long term incentive compensation award (whether in cash or
common shares of the Corporation, and whether paid or
deferred, or a combination of both) (if any) granted to a
Grandfathered Employee under an Incentive Compensation Plan,
as follows:
- An incentive compensation award granted under the
KeyCorp Annual Incentive Plan, the KeyCorp Short Term
Incentive Compensation Plan, the KeyCorp Management
Incentive Compensation Plan, and/or such other
Employer-sponsored line of business Incentive
Compensation Plan which shall constitute an incentive
compensation award for the year in which the award is
earned (without regard to the actual time of
payment).
- An incentive compensation award granted under the
KeyCorp Long Term Incentive Compensation Plan ("LTIC
Plan") with respect to any multi-year performance
period which shall be deemed to be for the last year
of the multi-year period without regard to the actual
time of payment of the award. Accordingly, an
incentive compensation award granted under the LTIC
Plan
-5-
<PAGE>
with respect to the three-year performance period of
1993, 1994, and 1995 will be deemed to be for 1995
(without regard to the actual time of payment), and
the entire Incentive Compensation award under the
LTIC Plan for that performance period will be a LTIC
Plan award for the year 1995.
- An incentive compensation award granted under the
KeyCorp Long Term Incentive Plan ("Long Term Plan")
with respect to any multi-year period which shall be
deemed to be for the last year of the multi-year
performance period and for the year immediately
following such year (without regard to the actual
time of payment). Accordingly, an award granted under
the Long Term Plan with respect to the four-year
performance period of 1998, 1999, 2000, and 2001
shall be deemed to be for the years 2001 and 2002,
with one-half the award allocated to the year 2001,
and one-half the award allocated to the year 2002.
- An incentive compensation award granted in the form
of restricted stock under the KeyCorp Amended and
Restated 1991 Equity Compensation Plan with respect
to any multi-year period (but specifically excluding
those awards applicable to the 2002-2003 multi-year
period), which shall be deemed to be for the year in
which the award (grant) is made to the Grandfathered
Employee; provided, however, that only those shares
of restricted stock that have vested as of the
Grandfathered Employee's termination date shall be
utilized for purposes of determining the
Grandfathered Employee's incentive compensation
award. The fair market value of such shares as of the
date of the restricted stock grant multiplied by the
number of vested shares as of the Grandfathered
Employee's termination date shall determine the value
of such incentive compensation award for purposes of
calculating the Grandfathered Employee's Supplemental
Retirement Benefit under the provisions of Article
III of the Plan.
Notwithstanding the foregoing, however, if at the
time of the Grandfathered Employee's termination
date, the Grandfathered Employee maintains shares of
not forfeited restricted stock and such restricted
stock later vests in conjunction with the passage of
time or with the Corporation's attainment of certain
performance criteria, or otherwise, then as of such
vesting date(s), the Grandfathered Employee's Monthly
Supplemental Retirement Benefit shall be recalculated
to include such newly vested shares for purposes of
determining the value of the Grandfathered Employee's
incentive compensation award(s) in accordance with
Article III of the Plan.
- An incentive compensation award granted in the form
of either restricted stock and/or phantom shares
(hereinafter collectively referred to as "shares")
under the KeyCorp Chief Executive Officer Plan with
respect to any multi-year period (but specifically
excluding those awards applicable to the 2002-
-6-
<PAGE>
2003 multi-year period), which shall be deemed to be
for the year in which the award (grant) is made to
the Grandfathered Employee; provided, however, that
only those shares that have vested as of the
Grandfathered Employee's termination date shall be
utilized for purposes of determining the
Grandfathered Employee's incentive compensation
award. The fair market value of such shares as of the
date of the share grant multiplied by the number of
vested shares as of the Grandfathered Employee's
termination date shall determine the value of such
incentive compensation award for purposes of
calculating the Grandfathered Employee's Supplemental
Retirement Benefit under the provisions of Article
III of the Plan.
Notwithstanding the foregoing, however, if at the
time of the Grandfathered Employee's termination
date, the Grandfathered Employee maintains not
forfeited shares, and such shares later vest in
conjunction with the passage of time or with the
Corporation's attainment of certain performance
criteria, or otherwise, then as of such vesting
date(s), the Grandfathered Employee's Monthly
Supplemental Retirement Benefit shall be recalculated
to include such newly vested shares for purposes of
determining the value of the Grandfathered Employee's
incentive compensation award(s) in accordance with
Article III of the Plan.
(m) "INCENTIVE COMPENSATION PLAN" shall mean the KeyCorp
Management Incentive Compensation Plan, the KeyCorp Annual
Incentive Plan, the KeyCorp Short Term Incentive Compensation
Plan, the KeyCorp Long Term Incentive Compensation Plan, the
KeyCorp Long Term Incentive Plan, the KeyCorp Amended and
Restated 1991 Equity Compensation Plan, the KeyCorp Chief
Executive Officer Plan and/or such other Employer-sponsored
line of business incentive compensation plan that KeyCorp in
its sole discretion determines constitutes an "Incentive
Compensation Plan" for purposes of this Section 2.1(m), as may
be amended from time to time.
(n) "KEYCORP CHIEF EXECUTIVE OFFICER PLAN" shall mean the KeyCorp
Chief Executive Officer Restricted Stock Plan, as may be
amended from time to time, including any other successor or
replacement plan.
(o) "NORMAL RETIREMENT DATE" shall mean the first day of the month
coinciding with or immediately following a Grandfathered
Employee's 65th birthday, or if later, the fifth anniversary
of the Grandfathered Employee's employment commencement date.
(p) "RETIREMENT PLAN" shall mean the KeyCorp Cash Balance Pension
Plan with all amendments, modifications and supplements which
may be made thereto, as in effect on the date of a
Grandfathered Employee's retirement, death, or other
termination of employment.
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(q) "SUPPLEMENTAL RETIREMENT BENEFIT" shall mean the benefit paid
under this Plan as determined under Article III of the Plan.
All other capitalized and undefined terms used herein shall have the
meanings given them in the Retirement Plan for Employees of Society Corporation
and Subsidiaries (January 1, 1993 Restatement) ("Society Retirement Plan"),
unless a different meaning is plainly required by the context.
The masculine gender includes the feminine, and singular references
include the plural, unless the context clearly requires otherwise.
ARTICLE III
SUPPLEMENTAL RETIREMENT BENEFIT
3.1 ELIGIBILITY. A Grandfathered Employee shall be eligible for a
Supplemental Retirement Benefit hereunder if the Grandfathered Employee (i)
retires on or after age 65 with five or more years of Benefit Service, (ii)
terminates employment with an Employer on or after age 55 with ten or more years
of Benefit Service, (iii) terminates his or her active employment with an
Employer upon becoming Disabled after completing five or more years of Benefit
Service and disability benefits have ceased under the KeyCorp Long-Term
Disability Plan due to the Grandfathered Employee's election for Early or Normal
Retirement under the Retirement Plan, or (iv) dies after completing five or more
years of Benefit Service, and has a Beneficiary who is eligible for a benefit
under the Retirement Plan.
3.2 AMOUNT AND PAYMENT. Subject to the provisions of Section 3.4
hereof, a Grandfathered Employee's Supplemental Retirement Benefit shall be
determined as follows:
Effective as of December 5, 1989, the monthly Supplemental Retirement
Benefit payable to a Grandfathered Employee shall be such amount as is
required, when added to the monthly benefit payable (before the
reduction applicable to any optional method of payment) under the
Retirement Plan, to produce an aggregate monthly benefit equal to the
monthly benefit which would have been payable (determined without
regard to the annual limitation on Plan benefits imposed pursuant to
Section 415 of the Code, the limitation on annual compensation imposed
pursuant to Section 401(a)(17) of the Code, or the reduction applicable
to any optional method of payment) under either the Society Retirement
Plan formula in effect on and after January 1, 1989, or the applicable
Society Retirement Plan formula in effect prior to January 1, 1989,
whichever results in a larger monthly benefit, if there was added to
the Grandfathered Employee's Final Average Monthly Compensation an
amount equal to the monthly average of the highest five Incentive
Compensation Awards granted to him or her under an Incentive
Compensation Plan during the ten-year period preceding the earliest of
his retirement, death, disability, or other termination of employment.
Notwithstanding the foregoing, if a Grandfathered Employee was granted
fewer than five awards, such monthly average is determined by
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adding the amounts of such awards and dividing by 60. Solely for
purposes of reference, the alternative benefit formulas in effect under
the Society Retirement Plan prior to January 1, 1989, and the
eligibility criteria applicable to each are reproduced in Exhibit B
attached hereto.
3.3 EARLY RETIREMENT ELECTION. Subject to the provisions of
Section 3.4 hereof, if a Grandfathered Employee elects to receive his or her
Supplemental Retirement Benefit on or after the Grandfathered Employee's Early
Retirement Date but prior to the Grandfathered Employee's Normal Retirement
Date, the Grandfathered Employee's Supplemental Retirement Benefit shall be
calculated in accordance with the provisions of Section 3.2 hereof, provided,
however, that the benefit payable under the Retirement Plan for purposes of
Section 3.2 and this Section 3.3 hereof, shall be the Grandfathered Employee's
Normal Retirement Date benefit. In calculating this Normal Retirement Date
benefit, if the Grandfathered Employee is not eligible for, or chooses not to
elect his or her monthly benefit under the provisions of Section 6.5(b) of the
Retirement Plan, then such Grandfathered Employee's Retirement Plan benefit as
of his or her termination date shall be increased for purposes of this Plan with
an imputed Average Interest Credit to reflect the Grandfathered Employee's
benefit at his or her Normal Retirement Date, and shall be converted to the form
of a single life annuity option using the Average Treasury Rate and GATT
Mortality Table. The amount of the Grandfathered Employee's monthly Supplemental
Retirement Benefit otherwise determined under this Section 3.3 hereof shall then
be reduced by .3% for each month between ages 55 and 60 and .4% for each month
after age 60 in which the commencement of the Grandfathered Employee's
Supplemental Retirement Benefit precedes his or her Normal Retirement Date.
3.4 RECALCULATION AS A RESULT OF HARMFUL ACTIVITY. Notwithstanding
the foregoing provisions of Section 3.2 and Section 3.3 hereof, the Corporation
reserves the right at all times to recalculate a Grandfathered Employee's
Supplemental Retirement Benefit, if it is determined that within six months of
the Grandfathered Employee's termination date the Grandfathered Employee engaged
in any Harmful Activity, as that term is defined in accordance with Section
2.1(k) of the Plan, which resulted in the forfeiture of all or any portion of
the Grandfathered Employee's restricted share award(s) under the KeyCorp Amended
and Restated 1991 Equity Compensation Plan or the KeyCorp Chief Executive
Officer Plan. Such recalculation shall relate back to the Grandfathered
Employee's original date of termination, and any Supplemental Retirement Benefit
payment paid to the Grandfathered Employee in excess of such recalculated
Supplemental Retirement Benefit amount shall be offset against any future
Supplemental Retirement Benefit payments to be paid to the Grandfathered
Employee.
3.5 ACTUARIAL FACTORS. The Supplemental Retirement Benefit
payable to a Grandfathered Employee or Grandfathered Employee's Beneficiary in a
form other than a single life annuity shall be actuarially equivalent to such
single life annuity payment option. In making the determination provided for in
this Article III, the Corporation shall rely upon calculations made by the
independent actuaries for the Plan, who shall determine actuarially equivalent
benefits under the Plan by applying the UP-1984 Mortality Table (set back two
years) and using an interest rate of 6%.
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ARTICLE IV
PAYMENT OF SUPPLEMENTAL RETIREMENT BENEFIT
4.1 IMMEDIATE PAYMENT UPON TERMINATION OR RETIREMENT OF
GRANDFATHERED EMPLOYEE. Subject to the provisions of Section 4.2 hereof, a
Grandfathered Employee meeting the age and service eligibility requirements of
Section 3.1 shall receive an immediate distribution of his or her Supplemental
Retirement Benefit upon the Grandfathered Employee's retirement or termination
of employment, in the form of a single life annuity, unless the Grandfathered
Employee elects in writing a minimum of thirty days prior to his or her
retirement or termination date, to receive payment of his or her Supplemental
Retirement Benefit under a different form of payment. The forms of payment from
which a Grandfathered Employee may elect shall be identical to those forms of
payment specified in the Retirement Plan, provided, however, that the lump sum
payment option available under the Retirement Plan shall not be available under
this Plan. Such method of payment, once elected by the Grandfathered Employee,
shall be irrevocable.
4.2 DEFERRED BENEFIT PAYMENT. A Grandfathered Employee who
retires or terminates his or her employment with an Employer after meeting the
age and service requirements of Section 3.1, may elect to defer receipt of his
or her Supplemental Retirement Benefit until a date specified by the
Grandfathered Employee, provided, (1) the Grandfathered Employee notifies the
Corporation in writing of his or her deferral election a minimum of one year
prior to the Grandfathered Employee's retirement or termination of employment,
(2) the Grandfathered Employee specifies the future date on which such
Supplemental Retirement Benefit shall be distributed, and (3) the Grandfathered
Employee commences distribution of his or her Supplemental Retirement Benefit no
later than the first day of the month immediately following the Grandfathered
Employee's sixty-fifth (65th) birthday. The election to defer, once made by the
Grandfathered Employee, shall be irrevocable.
Notwithstanding the foregoing, in the case of an "unforeseeable
emergency", upon written application by the Grandfathered Employee to the
Corporation, the Corporation, in its sole discretion, may accelerate the
distribution of the Grandfathered Employee's deferred Supplemental Retirement
Benefit. For purposes of this Section 4.2, the term "unforeseeable emergency"
shall mean an unanticipated emergency that is caused by an event beyond the
control of the Grandfathered Employee that would result in severe financial
hardship to the Grandfathered Employee if such premature distribution were not
permitted.
4.3 PAYMENT UPON DEATH OF GRANDFATHERED EMPLOYEE.
(a) Upon the death of a Grandfathered Employee who has met the
service requirement of Section 3.1, but who has not yet
commenced distribution of his or her Supplemental Retirement
Benefit there shall be paid to the Grandfathered Employee's
Beneficiary 50% of the Supplemental Retirement Benefit which
the Grandfathered Employee would have been entitled to receive
had he or she retired
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on his or her Normal Retirement Date and elected to receive
his or her Supplemental Retirement Benefit.
For purposes of this Section 4.3(a) only, the following shall
apply:
(i) The Grandfathered Employee's Benefit Service shall be
calculated as of the Grandfathered Employee's date of
death.
(ii) The Grandfathered Employee's Retirement Plan benefit
shall be calculated under the provisions of Article
IV of the Retirement Plan as if the Grandfathered
Employee retired on his or her Normal Retirement
Date, with such Retirement Plan benefit being
increased for purposes of this Section 4.3(a) with an
imputed Average Interest Credit to reflect what the
Grandfathered Employee's Retirement Plan benefit
would have been as of the Grandfathered Employee's
Normal Retirement Date; such Retirement Plan benefit
shall be converted to a single life annuity option
using the Average Treasury Rate and the Gatt
Mortality Table.
Payment of this death benefit shall be made in the
form of a single life annuity, and will be subject to
distribution any time after the date the
Grandfathered Employee would have attained his or her
Early Retirement Date, which shall be calculated in
accordance with the actuarial reduction provisions
contained within Section 3.3 hereof, if paid prior to
the Grandfathered Employee's Normal Retirement Date.
(b) In the event of a Grandfathered Employee's death after the
Grandfathered Employee has commenced distribution of his or
her Supplemental Retirement Benefit, there shall be paid to
the Grandfathered Employee's Beneficiary only those survivor
benefits provided under the form of benefit payment elected by
the Grandfathered Employee.
4.4 PAYMENT UPON GRANDFATHERED EMPLOYEE'S ATTAINMENT OF AGE
70-1/2. A Grandfathered Employee shall be required to commence distribution of
his or her Supplemental Retirement Benefit no later than April 1 of the calendar
year following the year in which the Grandfathered Employee attains age 70-1/2.
ARTICLE V
ADMINISTRATION AND CLAIMS PROCEDURE
5.1 ADMINISTRATION. The Corporation, which shall be the
"Administrator" of the Plan for purposes of ERISA and the "Plan Administrator"
for purposes of the Code, shall be responsible for the general administration of
the Plan, for carrying out the provisions hereof, and for making payments
hereunder. The Corporation shall have the sole and absolute discretionary
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authority and power to carry out the provisions of the Plan, including, but not
limited to, the authority and power (a) to determine all questions relating to
the eligibility for and the amount of any benefit to be paid under the Plan, (b)
to determine all questions pertaining to claims for benefits and procedures for
claim review, (c) to resolve all other questions arising under the Plan,
including any questions of construction, and (d) to take such further action as
the Corporation shall deem necessary or advisable in the administration of the
Plan. All findings, decisions, and determinations of any kind made by the
Corporation shall not be disturbed unless the Corporation has acted in an
arbitrary and capricious manner. Subject to the requirements of law, the
Corporation shall be the sole judge of the standard of proof required in any
claim for benefits and in any determination of eligibility for a benefit. All
decisions of the Corporation shall be final and binding on all parties. The
Corporation may employ such attorneys, investment counsel, agents, and
accountants, as it may deem necessary or advisable to assist it in carrying out
its duties hereunder. The actions taken and the decisions made by the
Corporation hereunder shall be final and binding upon all interested parties
subject, however, to the provisions of Section 5.2. The Plan year, for purposes
of Plan administration, shall be the calendar year.
5.2 CLAIMS REVIEW PROCEDURE. Whenever the Corporation decides for
whatever reason to deny, whether in whole or in part, a claim for benefits under
this Plan filed by any person (herein referred to as the "Claimant"), the
Corporation shall transmit a written notice of its decision to the Claimant,
which notice shall be written in a manner calculated to be understood by the
Claimant and shall contain a statement of the specific reasons for the denial of
the claim and a statement advising the Claimant that, within 60 days of the date
on which he receives such notice, he may obtain review of the decision of the
Corporation in accordance with the procedures hereinafter set forth. Within such
60-day period, the Claimant or his authorized representative may request that
the claim denial be reviewed by filing with the Corporation a written request
therefore, which request shall contain the following information:
(a) the date on which the request was filed with the Corporation;
provided, however, that the date on which the request for
review was in fact filed with the Corporation shall control in
the event that the date of the actual filing is later than the
date stated by the Claimant pursuant to this paragraph (a);
(b) the specific portions of the denial of his claim which the
Claimant requests the Corporation to review;
(c) a statement by the Claimant setting forth the basis upon which
he believes the Corporation should reverse its previous denial
of his or her claim and accept his or her claim as made; and;
(d) any written material which the Claimant desires the
Corporation to examine in its consideration of the Claimant's
position as stated pursuant to paragraph (c) above.
In accordance with this Section, if the Claimant requests a review of
the Corporation's decision, such review shall be made by the Corporation, who
shall, within sixty (60) days after receipt of the request form, review and
render a written decision on the claim containing the
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specific reasons for the decision including reference to Plan provisions upon
which the decision is based. All findings, decisions, and determinations of any
kind made by the Corporation shall not be modified unless the Corporation has
acted in an arbitrary and capricious manner. Subject to the requirements of a
law, the Corporation shall be the sole judge of the standard of proof required
in any claim for benefits, and any determination of eligibility for a benefit.
All decisions of the Corporation shall be binding on the Claimant and upon all
other Persons. If the Claimant shall not file written notice with the
Corporation at the times set forth above, such individual shall have waived all
benefits under the Plan other than as already provided, if any, under the Plan.
ARTICLE VI
FUNDING
All benefits under the Plan shall be payable solely in cash from the
general assets of the Corporation or a subsidiary, and Grandfathered Employees,
and Grandfathered Employees' Beneficiaries shall have the status of general
unsecured creditors of the Corporation. The obligations of the Corporation to
make distributions in accordance with the provisions of the Plan constitute a
mere promise to make payments in the future. The Corporation shall have no
obligation to establish a trust or fund to fund its obligation to pay benefits
under the Plan or to insure any benefits under the Plan. Notwithstanding any
provision of this Plan, the Corporation may, in its sole discretion, combine the
payment due and owing under this Plan with one or more other payments owing to a
Grandfathered Employee, or a Grandfathered Employee's Beneficiary under any
other plan, contract, or otherwise (other than any payment due under the
Retirement Plan), in one check, direct deposit, wire transfer, or other means of
payment. Finally, it is the intention of the Corporation and the Grandfathered
Employees that the Plan be unfunded for tax purposes and for the purposes of
Title I of the Employee Retirement Income Security Act of 1974, as amended.
ARTICLE VII
AMENDMENT AND TERMINATION
The Corporation reserves the right to amend or terminate the Plan at
any time by action of its Board of Directors or a duly authorized committee of
such Board of Directors; provided, however, that no such action shall adversely
affect the benefit accrued up to the date of the Plan amendment or termination
for any Grandfathered Employee who has met the age and service requirements of
Section 3.1 of the Plan, or any Grandfathered Employee or Grandfathered
Employee's Beneficiary who is receiving a Supplemental Retirement Benefit,
unless an equivalent benefit is provided under another plan maintained by an
Employer.
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ARTICLE VIII
MISCELLANEOUS
8.1 INTEREST OF GRANDFATHERED EMPLOYEE. The obligation of the
Corporation under the Plan to provide a Grandfathered Employee, or Grandfathered
Employee's Beneficiary, with a Supplemental Retirement Benefit merely
constitutes the unsecured promise of the Corporation to make payments as
provided herein, and no person shall have any interest in, or a lien or prior
claim on, any property of the Corporation.
8.2 NO COMMITMENT AS TO EMPLOYMENT. Nothing herein contained
shall be construed as a commitment or agreement upon the part of any
Grandfathered Employee hereunder to continue his employment with an Employer,
and nothing herein contained shall be construed as a commitment on the part of
any Employer to continue the employment or rate of compensation of any
Grandfathered Employee hereunder for any period. All Grandfathered Employees
shall remain subject to discharge to the same extent as if the Plan had never
been put into effect.
8.3 BENEFITS. Nothing in the Plan shall be construed to confer
any right or claim upon any person, firm, or corporation other than
Grandfathered Employees, or Grandfathered Employees' Beneficiaries who become
entitled to a benefit under the Plan.
8.4 RESTRICTIONS ON ALIENATION. Except to the extent permitted by
law, no benefit under the Plan shall be subject to anticipation, alienation,
assignment (either at law or in equity), encumbrance, garnishment, levy,
execution, or other legal or equitable process. No person shall have power in
any manner to anticipate, transfer, assign, (either at law or in equity),
alienate or subject to attachment, garnishment, levy, execution, or other legal
or equitable process, or in any way encumber his benefits under the Plan, or any
part thereof, and any attempt to do so shall be void.
8.5 ABSENCE OF LIABILITY. No member of the Board of Directors of
the Corporation or a subsidiary or any officer of the Corporation or a
subsidiary shall be liable for any act or action hereunder, whether of
commission or omission, taken by any other member, or by any officer, agent, or
employee, except in circumstances involving his bad faith or willful misconduct,
for anything done or omitted to be done by himself.
8.6 EXPENSES. The expenses of administration of the Plan shall be
paid by the Corporation.
8.7 PRECEDENT. Except as otherwise specifically provided, no
action taken in accordance with the Plan by the Corporation shall be construed
or relied upon as a precedent for similar action under similar circumstances.
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8.8 DUTY TO FURNISH INFORMATION. The Corporation shall furnish to
each Grandfathered Employee or Grandfathered Employee's Beneficiary any
documents, reports, returns statements, or other information that it reasonably
deems necessary to perform its duties imposed hereunder or otherwise imposed by
law.
8.9 WITHHOLDING. The Corporation shall withhold any tax required
by any present or future law to be withheld from any payment hereunder to any
Grandfathered Employee or Grandfathered Employee's Beneficiary.
8.10 VALIDITY OF PLAN. The validity of the Plan shall be
determined and the Plan shall be construed and interpreted in accordance with
the provisions of the Act, the Code, and, to the extent applicable, the laws of
the State of Ohio. The invalidity or illegality of any provision of the Plan
shall not affect the validity or legality of any other part thereof.
8.11 PARTIES BOUND. The Plan shall be binding upon the Employer,
all Grandfathered Employees, and all Grandfathered Employees' Beneficiaries, and
the executors, administrators, successors, and assigns of each of them.
8.12 HEADINGS. All headings used in the Plan are for convenience
of reference only and are not part of the substance of the Plan.
ARTICLE IX
TRANSFER OF EMPLOYEES' SUPPLEMENTAL
RETIREMENT PLAN BENEFIT INTO THE KEYCORP
EXCESS CASH BALANCE PENSION PLAN
9.1 TRANSFER OF EMPLOYEES' SUPPLEMENTAL RETIREMENT PLAN BENEFIT
INTO THE KEYCORP EXCESS CASH BALANCE RETIREMENT PLAN. Effective December 31,
1994, all benefit accruals under the Plan for Employees (other than
Grandfathered Employees) shall cease, and the Plan benefits for such Employees
(other than Grandfathered Employees) shall be calculated and reduced to a lump
sum cash benefit by applying the Pension Benefit Guarantee Corporation interest
rate for determining lump sum cash benefits as in effect on January l, 1995 and
the UP-1984 Mortality Table (no set-back). Effective January l, 1995, the lump
sum value of each Employee's (other than Grandfathered Employees') Supplemental
Retirement Benefit, as so calculated, shall be transferred to the KeyCorp Excess
Cash Balance Pension Plan, and each Employee's Supplemental Retirement Benefit
shall become the Employee's opening account balance under the KeyCorp Excess
Cash Balance Pension Plan.
9.2 APPLICABILITY OF PLAN PROVISIONS. Notwithstanding anything to
the contrary contained in this Plan, the sole provisions of this Plan which
continue to have any effect with respect to Employees (other than Grandfathered
Employees) on and after January 1, 1995 shall be the provisions of this Article
IX, and such Employees shall cease to be Plan Employees as of such date.
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9.3 EFFECT OF TRANSFER. The Plan shall not be deemed terminated
or discontinued by reason of this Article IX and the transfer of Employees'
Supplemental Retirement Benefits into the KeyCorp Excess Cash Balance Retirement
Plan; such transfer shall be applicable only to Employees and shall have no
effect on Grandfathered Employees' continued Plan participation and accrual of
Plan benefits on and after January 1, 1995. No Supplemental Retirement Benefit
or any other benefit shall be paid under this Plan to an Employee on or after
January 1, 1995.
ARTICLE X
CHANGE OF CONTROL
Notwithstanding any other provision of the Plan to the contrary, in the
event of a Change of Control, a Grandfathered Employee's interest in his or her
Supplemental Retirement Benefit shall vest, and the Grandfathered Employee shall
be entitled to receive an immediate distribution of his or her Supplemental
Retirement Benefit, if on and after a Change of Control the Grandfathered
Employee has at least five (5) years of Benefit Service, and (i) the
Grandfathered Employee's employment is terminated by his or her Employer and any
other Employer without cause, or (ii) the Grandfathered Employee resigns within
two years following a Change of Control as a result of the Grandfathered
Employee's mandatory relocation, reduction in the Grandfathered Employee's base
salary, reduction in the Grandfathered Employee's average annual incentive
compensation (unless such reduction is attributable to the overall corporate or
business unit performance), or the Grandfathered Employee's exclusion from stock
option programs as compared to comparably situated Employees.
For purposes of this Article X hereof, a "Change of Control" shall be
deemed to have occurred if under a rabbi trust arrangement established by the
Corporation ("Trust"), as such Trust may from time to time be amended or
substituted, the Corporation is required to fund the Trust to secure the payment
of any Grandfathered Employees' Plan benefits payable hereunder because a
"Change of Control" as defined in the Trust has occurred.
KEYCORP
By: /s/ Thomas E. Helfrich
-----------------------------------
Title: Executive Vice President
--------------------------------
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EXHIBIT A
LIST OF GRANDFATHERED EMPLOYEE
NAME OF EMPLOYEE NAME OF EMPLOYEE
Andrews, James McGuire, James
Auletta, Patrick McDaniel, D.A.
Bailey, Raymond McGinty, Kevin
Barger, C. Michael Melluzzo, Sebastian
Beran, John Meyer, John R.
Blake, John T. Meyer III, Henry
Brooks, Craig Moody Jr., John
Bullard, Janet Murray, Bruce
Carlini, Lawrence Neel, Thomas M.
Colao Jr., Anthony Newman, Michael
Cortelli, John Noall, Roger
Cruse Jr., Donald Nucerino, Donald
Deal, Frederick O'Donnell, F. Scott
Doland, Michael Patrick, Robert
Dorland, David Platt, Craig T.
Edmonds, David Ponchak, Frank
Egan, Richard Purinton II, Arthur
Fishell, James Rapacz, Richard
Flowers, James Rasmussen, Eric
Gill, Michael Roark, Michael
Gillespie, Jr., Robert Rusnak, Joseph
Greer, Michael Saddler, Thomas
Gula, Allen Schaedel, Elroy
Haas, Robert Seink, Edward
Hancock, John Simon, William
Hann, Jr., William Smith, James J.
Hartman, Sheldon Swisher, Trace
Hawthorne, Douglas Tracy, Robert
Hedberg, Douglas Trigg, Michael
Heintel, Jr., Carl Uzl, Ralph R.
Heisler, Jr., Robert Walker, Martin
Herron, David Wall, Stephen
Heyworth, Anthony Wert, James W.
Hitchcock, Thomas Willet, Richard
Holloway, Ruben L.
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Johannsen, Rolland D.
Jones, Robert G.
Kamerer, James
Kaplan, Stephen
Karnatz, William
Kleinhenz, Karen R.
Klimas, Daniel
Knapp, Peter O.
Koontz, Cary
Kucler, Jack
Malone, Michael
Mayer, George
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EXHIBIT B
FOR PERIODS OF TIME PRIOR TO JANUARY 1, 1989, THREE ALTERNATIVE BENEFIT
FORMULAS WERE IN EFFECT UNDER THE SOCIETY RETIREMENT PLAN. THE MONTHLY AMOUNT OF
THE NORMAL RETIREMENT BENEFIT PAYABLE TO AN ELIGIBLE GRANDFATHERED EMPLOYEE WAS
EQUAL TO:
(a) IF HE BECAME A GRANDFATHERED EMPLOYEE AND THEREFORE BEGAN TO ACCRUE
BENEFITS UNDER THE PLAN PRIOR TO JULY 1, 1981, THE GREATER OF:
(i) his final average monthly compensation multiplied by the sum
of:
(A) 3.2% multiplied by his years of benefit service not
in excess of 15, plus
(B) 1% multiplied by his years of benefit service in
excess of 15 but not in excess of 25, plus
(C) 0.5% multiplied by his years of benefit service in
excess of 25; reduced by:
(D) 3.33% of his Social Security Benefit Amount
multiplied by his years of benefit service not in
excess of 15; or
(ii) the amount determined in accordance with the formula set forth
in paragraph (b) below which is otherwise applicable to a
person who becomes an Employee on or after July 1, 1981; or
(b) IF HE BECAME AN EMPLOYEE AND THEREFORE BEGAN TO ACCRUE BENEFITS
UNDER THE PLAN ON OR AFTER JULY 1, 1981, HIS FINAL AVERAGE MONTHLY COMPENSATION
MULTIPLIED BY THE SUM OF:
(i) 2% multiplied by his years of benefit service not in excess of
30, plus
(ii) 0.5% multiplied by his years of benefit service in excess of
30; reduced by:
(iii) 1.67% of his Social Security Benefit Amount multiplied by his
years of benefit service not in excess of 30 to a maximum of
50% of such Amount; or
(c) IF HE BECAME AN EMPLOYEE AND THEREFORE BEGAN TO ACCRUE BENEFITS
UNDER THE PLAN ON JANUARY 1, 1985, AND IMMEDIATELY PRIOR TO SUCH DATE WAS A
GRANDFATHERED EMPLOYEE IN THE THIRD NATIONAL BANK AND TRUST COMPANY OF DAYTON,
OHIO RETIREMENT PLAN, THE GREATER OF:
(i) the amount determined in accordance with the formula set forth
in paragraph (b) above which is otherwise applicable to a
person who becomes an Employee on or after July 1, 1981; or
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(ii) the sum of:
(A) 2.2% of his final average monthly compensation,
reduced by 2% of his Social Security Benefit Amount;
the difference to be multiplied by his years of
benefit service at normal retirement date not in
excess of 25, plus
(B) 1.1% of his final average monthly compensation,
reduced by 1% of his Social Security Benefit Amount;
the difference to be multiplied by his years of
benefit service at normal retirement date in excess
of 25, adjusted as necessary to produce the actuarial
equivalent value on a straight life annuity basis of
a benefit otherwise payable on a ten-year certain and
continuous basis; provided, however, that in the case
of each Employee who was in the employment of Society
National Bank of Cleveland on December 31, 1971, and
whose continuous service is not broken after the date
and prior to the date of his retirement, the monthly
amount of his normal retirement benefit otherwise
determined under this Section shall be not less than
the monthly amount of his normal retirement benefit
determined under the normal retirement benefit
formula of the Plan as in effect on December 31,
1971, based on the assumption that he received no
increases in the rate of his compensation after
December 31, 1971, and using the rules for computing
continuous service specified in Article II of the
Plan as in effect on June 30, 1976 (hereinafter
referred to as his "minimum benefit"); and provided,
further, that the monthly amount so determined under
the provisions of this Exhibit B shall be reduced to
the extent provided in Section 14.10 of the Society
Retirement Plan as in effect on December 31, 1988.
Notwithstanding anything to the contrary contained in
the Society Retirement Plan, in no event shall an
Employee receive a benefit commencing at his normal
retirement date which is less than the largest early
retirement benefit to which he had been entitled
under the Society Retirement Plan prior to his normal
retirement date.
-20-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12
<SEQUENCE>13
<FILENAME>l97974aexv12.txt
<DESCRIPTION>EX-12 COMPUTATION OF RATIOS
<TEXT>
<PAGE>
EXHIBIT 12
KEYCORP
COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(DOLLARS IN MILLIONS)
(UNAUDITED)
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
------------------------------------------
2002 2001 2000 1999 1998
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
COMPUTATION OF EARNINGS
Net income.................................................. $ 976 $ 132 $1,002 $1,107 $ 996
Add: Provision for income taxes............................. 336 102 515 577 483
Less: Cumulative effect of accounting changes, net of tax... -- (25) -- -- --
------ ------ ------ ------ ------
Income before income taxes and cumulative effect of
accounting changes................................... 1,312 259 1,517 1,684 1,479
Fixed charges, excluding interest on deposits............... 747 1,367 1,820 1,649 1,517
------ ------ ------ ------ ------
Total earnings for computation, excluding interest on
deposits............................................. 2,059 1,626 3,337 3,333 2,996
Interest on deposits........................................ 897 1,478 1,768 1,305 1,359
------ ------ ------ ------ ------
Total earnings for computation, including interest on
deposits............................................. $2,956 $3,104 $5,105 $4,638 $4,355
====== ====== ====== ====== ======
COMPUTATION OF FIXED CHARGES
Net rental expense.......................................... $ 142 $ 145 $ 146 $ 173 $ 139
====== ====== ====== ====== ======
Portion of net rental expense deemed representative of
interest.................................................. $ 27 $ 43 $ 41 $ 46 $ 35
Interest on short-term borrowed funds....................... 169 500 715 646 801
Interest on long-term debt, including capital securities.... 551 824 1,064 957 681
------ ------ ------ ------ ------
Total fixed charges, excluding interest on deposits..... 747 1,367 1,820 1,649 1,517
Interest on deposits........................................ 897 1,478 1,768 1,305 1,359
------ ------ ------ ------ ------
Total fixed charges, including interest on deposits..... $1,644 $2,845 $3,588 $2,954 $2,876
====== ====== ====== ====== ======
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Preferred stock dividend requirement on a pre-tax basis..... -- -- -- -- --
Total fixed charges, excluding interest on deposits......... $ 747 $1,367 $1,820 $1,649 $1,517
------ ------ ------ ------ ------
Combined fixed charges and preferred stock dividends,
excluding interest on deposits....................... 747 1,367 1,820 1,649 1,517
Interest on deposits........................................ 897 1,478 1,768 1,305 1,359
------ ------ ------ ------ ------
Combined fixed charges and preferred stock dividends,
including interest on deposits....................... $1,644 $2,845 $3,588 $2,954 $2,876
====== ====== ====== ====== ======
RATIO OF EARNINGS TO FIXED CHARGES
Excluding deposit interest.................................. 2.76X 1.19x 1.83x 2.02x 1.97x
Including deposit interest.................................. 1.80X 1.09x 1.42x 1.57x 1.51x
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
Excluding deposit interest.................................. 2.76X 1.19x 1.83x 2.02x 1.97x
Including deposit interest.................................. 1.80X 1.09x 1.42x 1.57x 1.51x
</Table>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>14
<FILENAME>l97974aexv13.txt
<DESCRIPTION>EX-13 2002 ANNUAL REPORT TO SHAREHOLDERS
<TEXT>
<PAGE>
.
.
.
EXHIBIT 13
FINANCIAL REVIEW
MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION & RESULTS OF OPERATIONS
<TABLE>
<S> <C>
Introduction 20
Highlights of Key's 2002 Performance 21
Line of Business Results 24
Results of Operations
Net Interest Income 27
Market Risk Management 30
Noninterest Income 32
Noninterest Expense 34
Income Taxes 36
Financial Condition
Loans 36
Securities 40
Asset Quality 40
Deposits and Other Sources of Funds 46
Liquidity 46
Capital 48
Fourth Quarter Results 50
REPORT OF MANAGEMENT 52
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS 52
CONSOLIDATED FINANCIAL STATEMENTS 53
</TABLE>
19
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS KEYCORP AND SUBSIDIARIES
INTRODUCTION
This section generally reviews the financial condition and results of operations
of KeyCorp and its subsidiaries for each of the past three years. Some tables
may cover a longer period to comply with disclosure requirements or to
illustrate trends in greater depth. When you read this discussion, you should
also refer to the consolidated financial statements and related notes that
appear on pages 53 through 88.
SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES
Key's business is dynamic and complex. Consequently, management must exercise
judgment in choosing and applying accounting policies and methodologies in many
areas. These choices are important; not only are they necessary to comply with
accounting principles generally accepted in the United States, they also reflect
management's view of the most appropriate manner in which to record and report
Key's overall financial performance. All accounting policies are important, and
all policies described in Note 1 ("Summary of Significant Accounting Policies"),
which begins on page 57, should be reviewed for a greater understanding of how
Key's financial performance is recorded and reported.
In management's opinion, some accounting policies are more likely than others to
have a significant effect on Key's financial results and to expose those results
to potentially greater volatility. These policies apply to areas of relatively
greater business importance or require management to make assumptions and
estimates that affect amounts reported in the financial statements. Because
these assumptions and estimates are based on current circumstances, they may
change over time or prove to be inaccurate based on actual experience. For Key,
the areas that rely most heavily on the use of assumptions and estimates include
accounting for the allowance for loan losses, loan securitizations, contingent
obligations arising from litigation and tax exposures, principal investments,
goodwill, and pension and other postretirement obligations. A brief discussion
of each of these areas appears below.
ALLOWANCE FOR LOAN LOSSES. Management determines probable losses inherent in
Key's loan portfolio (which represents by far the largest category of assets on
Key's balance sheet) and establishes an allowance that is sufficient to absorb
those losses by considering factors including historical loss rates, expected
cash flows and estimated collateral values. In assessing these factors,
management benefits from a lengthy organizational history and experience with
credit decisions and related outcomes. Nonetheless, if management's underlying
assumptions prove to be inaccurate, the allowance for loan losses would have to
be adjusted. Our accounting policy related to the allowance is disclosed in Note
1 under the heading "Allowance for Loan Losses" on page 58.
LOAN SECURITIZATIONS. Key securitizes certain types of loans and accounts for
such transactions as sales when the criteria set forth in Statement of Financial
Accounting Standards ("SFAS") No. 140, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishment of Liabilities" are met. If future events
were to preclude accounting for such transactions as sales, the loans would have
to be placed back on Key's balance sheet. This could have a potentially adverse
effect on Key's capital ratios and other unfavorable financial implications. In
addition, determining the gain or loss resulting from securitization
transactions and the subsequent carrying amount of retained interests is
dependent on underlying assumptions made by management, the most significant of
which are described in Note 8 ("Loan Securitizations and Variable Interest
Entities"), which begins on page 70. The use of alternative ranges of possible
outcomes for these assumptions would change the amount of the initial gain or
loss recognized. It could also result in changes in the carrying amount of
retained interests, with related effects on results of operations. Our
accounting policy related to loan securitizations is disclosed in Note 1 under
the heading "Loan Securitizations" on page 59.
CONTINGENT OBLIGATIONS. A detailed description of contingent obligations arising
from litigation and their potential effects on Key's results of operations is
contained in Note 19 ("Commitments, Contingent Liabilities and Guarantees"),
which begins on page 81.
In the normal course of business, Key is routinely subject to examinations and
challenges from tax authorities regarding the amount of taxes due in connection
with investments and business activities. Currently, the Internal Revenue
Service is challenging Key's tax treatment of certain leveraged lease
investments. This and other challenges by tax authorities may result in
adjustments to the timing or amount of Key's taxable income or deductions or the
allocation of income among tax jurisdictions. Management believes these
challenges will be resolved without having any material effect on Key's
financial condition or results of operations.
VALUATION METHODOLOGIES. Valuation methodologies employed by management often
involve a significant degree of judgment, particularly when there are no
observable liquid markets for the items being valued. The outcome of valuations
performed by management have a direct bearing on the carrying amounts of certain
assets and liabilities, such as principal investments, goodwill, and pension and
other postretirement benefit obligations. To determine the values of these
assets and liabilities, as well as the extent to which related assets may be
impaired, management makes assumptions and estimates related to discount rates,
asset returns, repayment rates and other factors. The use of different discount
rates or other valuation assumptions could produce significantly different
results, which could have material positive or negative effects on Key's results
of operations.
The valuation methodology management uses for principal investments is
summarized in Note 21 ("Fair Value Disclosures of Financial Instruments") on
page 86 and the methodology used in the testing for goodwill impairment is
summarized in Note 1 under the heading "Goodwill and Other Intangible Assets" on
page 59. The primary assumptions used in determining Key's pension and other
postretirement benefit obligations and related expenses are presented in Note 16
("Employee Benefits"), which begins on page 78.
When a potential asset impairment is identified through testing, observable
changes in liquid markets or other means, management must also exercise judgment
in determining the nature of the potential impairment (i.e., whether the
impairment is temporary or other than temporary) in order to apply the
appropriate accounting treatment. For example, unrealized losses on securities
available for sale that are deemed temporary are recorded in shareholders'
equity, whereas those deemed "other than temporary" are recorded in earnings.
REVENUE RECOGNITION
In recent months, corporate improprieties related to revenue recognition have
received a great deal of attention by regulatory authorities and the news media.
Although all companies face the risk of intentional or unintentional
misstatements, such misstatements are less likely in the
20
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS KEYCORP AND SUBSIDIARIES
financial services industry because most of the revenue (i.e., interest
accruals) recorded is driven by nondiscretionary formulas based on written
contracts, such as loan agreements.
TERMINOLOGY
This report contains some shortened names and industry-specific terms. We want
to explain some of these terms at the outset so you can better understand the
discussion that follows.
- - KEYCORP refers solely to the parent holding company.
- - KBNA refers to Key's lead bank, KeyBank National Association.
- - KEY refers to the consolidated entity consisting of KeyCorp and its
subsidiaries.
- - A KEYCENTER is one of Key's full-service retail banking facilities or
branches.
- - Key engages in CAPITAL MARKETS ACTIVITIES. These activities encompass a
variety of products and services. Among other things, we trade securities as
a dealer, enter into derivative contracts (both to accommodate clients'
financing needs and for proprietary trading purposes), and conduct
transactions in foreign currencies (both to accommodate clients' needs and
to benefit from fluctuations in exchange rates).
- - All earnings per share data included in this discussion are presented on a
DILUTED basis, which takes into account all common shares outstanding as
well as potential common shares that could result from the exercise of
outstanding stock options. Some of the financial information tables also
include BASIC earnings per share, which takes into account only common
shares outstanding.
- - For regulatory purposes, capital is divided into two classes. Federal
regulations prescribe that at least one-half of a bank or bank holding
company's TOTAL RISK-BASED CAPITAL must qualify as TIER 1. Both total and
Tier 1 capital serve as bases for several measures of capital adequacy,
which is an important indicator of financial stability and condition. You
will find a more detailed explanation of total and Tier 1 capital and how
they are calculated in the section entitled "Capital," which begins on page
48.
- - When we want to draw your attention to a particular item in Key's Notes to
Consolidated Financial Statements, we refer to NOTE ___, giving the
particular number, name and starting page number.
FORWARD-LOOKING STATEMENTS
This report may contain "forward-looking statements" about issues like
anticipated earnings, anticipated levels of net loan charge-offs and
nonperforming assets and anticipated improvement in profitability and
competitiveness. These statements usually can be identified by the use of
forward-looking language such as "our goal," "our objective," "our plan," "will
likely result," "will be," "are expected to," "as planned," "is anticipated,"
"intends to," "is projected," or similar words. Forward-looking statements by
their nature are subject to assumptions, risks and uncertainties. For a variety
of reasons, including the following, actual results could differ materially from
those contained in or implied by the forward-looking statements.
- - Interest rates could change more quickly or more significantly than we
expect, which may have an adverse effect on our financial results.
- - If the economy or segments of the economy fail to recover or, decline
further, the demand for new loans and the ability of borrowers to repay
outstanding loans may decline.
- - The stock and bond markets could suffer additional declines or disruptions,
which may have adverse effects on our financial condition and that of our
borrowers, and on our ability to raise money by issuing new securities.
- - It could take us longer than we anticipate to implement strategic
initiatives designed to increase revenues or manage expenses; we may be
unable to implement certain initiatives; or the initiatives may be
unsuccessful.
- - Acquisitions and dispositions of assets, business units or affiliates could
adversely affect us in ways that management has not anticipated.
- - We may become subject to new legal obligations, or the resolution of pending
litigation may have an adverse effect on our financial results.
- - Terrorist activities or military actions could further disrupt the economy
and the general business climate, which may have an adverse effect on our
financial results or condition and that of our borrowers.
- - We may become subject to new accounting, tax, or regulatory practices or
requirements.
HIGHLIGHTS OF KEY'S 2002 PERFORMANCE
FINANCIAL PERFORMANCE
The primary measures of Key's financial performance for 2002, 2001 and 2000 are
summarized below.
- - Net income for 2002 was $976 million, or $2.27 per common share, compared
with $132 million, or $.31 per share for 2001, and $1.0 billion, or $2.30
per share, for 2000.
- - Key's return on average equity was 14.96% for 2002. This result compares
with a return of 2.01% for 2001 and a return of 15.39% for 2000.
- - Key's 2002 return on average total assets was 1.19%. This result compares
with a return of .16% for 2001 and a return of 1.19% for 2000.
In the second and fourth quarters of 2001, we announced a series of strategic
initiatives designed to sharpen our business focus and strengthen Key's
financial performance. These included:
- - Accelerating Key's revenue growth by delivering our products and services to
customers through a seamless, integrated sales process called 1Key.
- - Achieving 100% of the savings from our competitiveness initiative discussed
on page 22.
- - Re-emphasizing our commitment to our relationship-based activities, and
committing to re-establish a conservative credit culture while
de-emphasizing high-risk, low-return businesses.
Specific actions related to these initiatives included exiting the automobile
leasing business, de-emphasizing indirect prime automobile lending,
discontinuing many credit-only relationships in the leveraged financing and
nationally syndicated lending businesses, and increasing the allowance for loan
losses.
21
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS KEYCORP AND SUBSIDIARIES
As a result of these actions, Key recorded 2001 charges aggregating $1.1 billion
($774 million after tax) that hinder a direct comparison of financial results
over the past three years. Specifically, in the second quarter of 2001, we
recorded a $150 million write-down of goodwill associated with Key's 1995
acquisition of AutoFinance Group, Inc. This charge reflects our intention to
significantly downsize the automobile finance business. We also increased the
provision for loan losses by $300 million ($189 million after tax) to facilitate
the exiting of credits in the leveraged financing and nationally syndicated
lending businesses. Finally, we recorded a $40 million ($25 million after tax)
charge to establish a reserve for losses incurred on the residual values of
leased vehicles.
In the fourth quarter of 2001, we recorded an additional provision for loan
losses of $590 million ($372 million after tax) as a result of both the rapid
downturn in the economy and further erosion in credit quality experienced after
the events of September 11. In the same quarter, we recorded a $45 million ($28
million after tax) write-down of our principal investing portfolio and a $15
million ($9 million after tax) charge to increase our reserve for customer
derivative losses.
Results for 2001 also were adversely affected by a $39 million ($24 million
after tax) charge resulting from a prescribed change in accounting principles
generally accepted in the United States applicable to retained interests in
securitized assets and a $20 million ($13 million after tax) increase in
litigation reserves.
The charges summarized above and the primary reasons that Key's specific revenue
and expense components changed over the past three years are reviewed in greater
detail throughout the remainder of this discussion.
Figure 1 summarizes Key's financial performance for each of the past six years.
CORPORATE STRATEGY
Our goal is to achieve revenue and earnings per share growth that is
consistently above the median for stocks that make up the Standard & Poor's 500
Banks Index. Our strategy for achieving this goal comprises the following four
primary elements:
- - FOCUS ON OUR CORE BUSINESSES. We intend to focus on businesses that enable
us to build relationships with our clients. We will focus on our "footprint"
businesses that serve individuals, small businesses and middle market
companies. In addition, we intend to focus nationwide on our commercial real
estate lending, asset management, home equity lending and equipment leasing
businesses. These are businesses in which we believe we possess resources of
the scale necessary to compete nationally.
- - PUT OUR CLIENTS FIRST. We will work to deepen our relationship with our
existing clients, and to build relationships with new clients who have the
potential to purchase multiple products and services or to generate repeat
business. One way in which we are pursuing this goal is by emphasizing
deposit growth across all of our lines of business. We also want to ensure
that our clients are receiving a distinctive level of service, so we are
putting considerable effort into enhancing our service quality.
- - ENHANCE OUR BUSINESS. We intend to build on the success of our
competitiveness initiative by pursuing a continuous improvement process. We
will continue to focus on increasing revenues, controlling expenses and
better serving our clients, and we will also continue to leverage
technology -- both to reduce costs and to enhance service quality. Over
time, we also intend to diversify our revenue mix by emphasizing the growth
of fee income while investing in higher-growth and higher-return
businesses.
- - CULTIVATE A WORKFORCE THAT DEMONSTRATES KEY'S VALUES AND WORKS TOGETHER FOR
A COMMON PURPOSE. Key intends to achieve this by:
-- paying for performance, but only if achieved in ways that are consistent
with Key's values;
-- attracting, developing and retaining a quality, high-performing and
inclusive workforce;
-- developing leadership at all levels in the company; and
-- creating a positive, stimulating and entrepreneurial work environment.
STATUS OF COMPETITIVENESS INITIATIVE
Key launched a major initiative in November 1999, the first phase of which was
completed in 2000. This initiative was designed to improve Key's profitability
by reducing the costs of doing business, focusing on the most profitable growth
businesses and enhancing revenues. During the initial phase, we reduced our
annual operating expenses by approximately $100 million by outsourcing certain
nonstrategic support functions, consolidating sites in a number of our
businesses and reducing management layers.
During 2002, we completed the implementation of all projects related to the
second and final phase of the initiative, referred to as PEG (Perform, Excel,
Grow). In this phase, we reduced our annual operating expenses by an additional
$200 million by:
- - consolidating 22 business lines into 10 to simplify Key's business
structure;
- - streamlining and automating business operations and processes;
- - standardizing product offerings and internal processes;
- - consolidating operating facilities and service centers; and
- - outsourcing additional noncore activities.
Due primarily to the success of the overall initiative, noninterest expense for
2002 was lower than it has been for any year since 1998.
Management expected the competitiveness initiative to reduce Key's workforce by
approximately 4,000 positions (comprising both staffed and vacant positions).
During 2002, Key completed its workforce reduction bringing the total number of
positions eliminated in the initiative to nearly 4,100.
Since the inception of the competitiveness initiative, we have recorded related
net charges of $270 million. The section entitled "Noninterest expense," which
begins on page 34, and Note 18 ("Restructuring Charges") on page 81 provide more
information about Key's restructuring charges.
22
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS KEYCORP AND SUBSIDIARIES
FIGURE 1 SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
COMPOUND
ANNUAL RATE
OF CHANGE
dollars in millions, except per share amounts 2002 2001 2000 1999 1998 1997 (1997-2002)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
Interest income $ 4,366 $ 5,627 $ 6,277 $ 5,695 $ 5,525 $ 5,262 (3.7)%
Interest expense 1,617 2,802 3,547 2,908 2,841 2,517 (8.5)
Net interest income 2,749 2,825 2,730 2,787 2,684 2,745 --
Provision for loan losses 553 1,350 490 348 297 320 11.6
Noninterest income 1,769 1,725 2,194 2,315 1,600 1,315 6.1
Noninterest expense 2,653 2,941 2,917 3,070 2,508 2,395 2.1
Income before income taxes and cumulative
effect of accounting changes 1,312 259 1,517 1,684 1,479 1,345 (.5)
Income before cumulative effect
of accounting changes 976 157 1,002 1,107 996 919 1.2
Net income 976 132 1,002 1,107 996 919 1.2
- -----------------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE
Income before cumulative effect
of accounting changes $ 2.29 $ .37 $ 2.32 $ 2.47 $ 2.25 $ 2.09 1.8%
Income before cumulative effect
of accounting changes--
assuming dilution 2.27 .37 2.30 2.45 2.23 2.07 1.9
Net income 2.29 .31 2.32 2.47 2.25 2.09 1.8
Net income--assuming dilution 2.27 .31 2.30 2.45 2.23 2.07 1.9
Cash dividends paid 1.20 1.18 1.12 1.04 .94 .84 7.4
Book value at year end 16.12 14.52 15.65 14.41 13.63 11.83 6.4
Market price at year end 25.14 24.34 28.00 22.13 32.00 35.41 (6.6)
Dividend payout ratio 52.40% 380.65% 48.28% 42.11% 41.78% 40.19% 5.4
Weighted average common shares (000) 425,451 424,275 432,617 448,168 441,895 439,042 (.6)
Weighted average common shares and
potential common shares (000) 430,703 429,573 435,573 452,363 447,437 444,544 (.6)
- -----------------------------------------------------------------------------------------------------------------------------------
AT DECEMBER 31,
Loans $ 62,457 $ 63,309 $ 66,905 $ 64,222 $ 62,012 $ 53,380 3.2%
Earning assets 73,635 71,672 77,316 73,733 70,240 64,246 2.8
Total assets 85,202 80,938 87,270 83,395 80,020 73,699 2.9
Deposits 49,346 44,795 48,649 43,233 42,583 45,073 1.8
Long-term debt 15,605 14,554 14,161 15,881 12,967 7,446 15.9
Shareholders' equity 6,835 6,155 6,623 6,389 6,167 5,181 5.7
Full-time equivalent employees 20,437 21,230 22,142 24,568 25,862 24,595 (3.6)
KeyCenters 910 911 922 936 968 1,015 (2.2)
- -----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE RATIOS
Return on average total assets 1.19% .16% 1.19% 1.37% 1.32% 1.33% N/A
Return on average equity 14.96 2.01 15.39 17.68 17.97 18.89 N/A
Net interest margin (taxable equivalent) 3.97 3.81 3.69 3.93 4.08 4.54 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
CAPITAL RATIOS AT DECEMBER 31,
Equity to assets 8.02% 7.60% 7.59% 7.66% 7.71% 7.03% N/A
Tangible equity to tangible assets 6.73 6.29 6.12 6.03 5.93 5.52 N/A
Tier 1 risk-based capital 8.09 7.43 7.72 7.68 7.21 6.65 N/A
Total risk-based capital 12.51 11.41 11.48 11.66 11.69 10.83 N/A
Leverage 8.15 7.65 7.71 7.77 6.95 6.40 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Key completed several acquisitions and divestitures during the six-year period
shown in this table. One or more of these transactions may have had a
significant effect on Key's results, making it difficult to compare results from
one year to the next. Note 3 ("Acquisitions and Divestitures") on page 64
contains specific information about the acquisitions and divestitures that Key
completed in the past three years to help you understand how those transactions
may have impacted Key's financial condition and results of operations.
N/A = Not Applicable
23
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS KEYCORP AND SUBSIDIARIES
LINE OF BUSINESS RESULTS
This section summarizes the financial performance and related strategic
developments of each of Key's three major business groups: Key Consumer Banking,
Key Corporate Finance and Key Capital Partners. To better understand this
discussion, see Note 4 ("Line of Business Results"), which begins on page 65.
Note 4 includes a brief description of the products and services offered by each
of the three major business groups, more detailed financial information
pertaining to the groups and their respective lines of business and brief
descriptions of "Other Segments" and "Reconciling Items" included in Figure 2.
Figure 2 summarizes the contribution made by each major business group to Key's
taxable-equivalent revenue and net income for each of the past three years.
FIGURE 2 MAJOR BUSINESS GROUPS--TAXABLE-EQUIVALENT REVENUE AND NET INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, CHANGE 2002 VS 2001
--------------------
dollars in millions 2002 2001 2000 AMOUNT PERCENT
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUE (TAXABLE EQUIVALENT)
Key Consumer Banking $ 2,302 $ 2,300 $ 2,232 $ 2 .1%
Key Corporate Finance 1,361 1,351 1,264 10 .7
Key Capital Partners 1,109 1,159 1,188 (50) (4.3)
Other Segments (76) (73) 57 (3) (4.1)
- ------------------------------------------------------------------------------------------------
Total segments 4,696 4,737 4,741 (41) (.9)
Reconciling Items (58) (142)(b) 211(b) 84 59.2
- ------------------------------------------------------------------------------------------------
Total $ 4,638 $ 4,595 $ 4,952 $ 43 .9%
======= ======= ======== =======
NET INCOME (LOSS)
Key Consumer Banking $ 422 $ 358(a) $ 356 $ 64 17.9%
Key Corporate Finance 394 429 396 (35) (8.2)
Key Capital Partners 156 129 142 27 20.9
Other Segments (20) (20) 58 -- --
- ------------------------------------------------------------------------------------------------
Total segments 952 896 952 56 6.3
Reconciling Items 24 (764)(b) 50(b) 788 N/M
- ------------------------------------------------------------------------------------------------
Total $ 976 $ 132 $ 1,002 $ 844 639.4%
======= ======= ======== =======
- ------------------------------------------------------------------------------------------------
</TABLE>
(a) Results for 2001 include a one-time cumulative charge of $39 million ($24
million after tax) resulting from a prescribed change, applicable to all
companies, in the accounting for retained interests in securitized assets.
(b) Significant items included in Reconciling Items are as follows:
Year ended December 31, 2001:
- Noninterest income includes a $40 million ($25 million after tax) charge
taken to establish a reserve for losses incurred on the residual values of
leased vehicles and a $15 million ($9 million after tax) increase in the
reserve for customer derivative losses.
- The provision for loan losses includes an additional $400 million ($252
million after tax) taken to increase the allowance for loan losses for Key's
continuing loan portfolio and an additional $490 million ($309 million after
tax) recorded primarily in connection with Key's decision to discontinue
certain credit-only commercial relationships.
- Noninterest expense includes a goodwill write-down of $150 million
associated with the downsizing of the automobile finance business and
charges of $20 million ($13 million after tax) taken to establish additional
litigation reserves.
Year ended December 31, 2000:
- Noninterest income includes a gain of $332 million ($207 million after tax)
from the sale of Key's credit card portfolio.
- The provision for loan losses includes an additional $121 million ($76
million after tax) recorded in connection with the implementation of an
enhanced methodology for assessing credit risk, particularly in the
commercial loan portfolio.
- Noninterest expense includes $127 million ($80 million after tax), primarily
restructuring charges, recorded in connection with strategic actions taken
to improve Key's operating efficiency and profitability.
N/M = Not Meaningful
KEY CONSUMER BANKING
As shown in Figure 3, net income for Key Consumer Banking was $422 million for
2002, up from $358 million for 2001 and $356 million for 2000. The improvement
in 2002 reflects the cumulative effect of the 2001 accounting change presented
in the figure, as well as an increase in noninterest income and a reduction in
noninterest expense. These positive results were partially offset by a decrease
in taxable-equivalent net interest income. The provision for loan losses was
essentially unchanged.
Taxable-equivalent net interest income decreased by $13 million, or 1%, from
2001 as a more favorable interest rate spread on average earning assets and a
21% increase in average home equity loans were more than offset by the adverse
effects of a narrower spread on deposits and a decline in average deposits
outstanding. The decrease in deposits reflected declines in time deposits
resulting from reduced rates paid for those deposits, as well as consumer
preferences for alternative investments that provide higher levels of liquidity.
At the same time, savings deposits rose in response to more aggressive pricing
implemented in mid-2002, while noninterest-bearing deposits grew significantly
as a result of intensified cross-sell efforts and the introduction of new
products, including free checking.
24
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS KEYCORP AND SUBSIDIARIES
FIGURE 3 KEY CONSUMER BANKING
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, CHANGE 2002 VS 2001
-------------------
dollars in millions 2002 2001 2000 AMOUNT PERCENT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net interest income (TE) $ 1,805 $ 1,818 $ 1,757 $ (13) (.7)%
Noninterest income 497 482 475 15 3.1
- ------------------------------------------------------------------------------------------------------------
Total revenue (TE) 2,302 2,300 2,232 2 .1
Provision for loan losses 303 300 281 3 1.0
Noninterest expense 1,324 1,366 1,356 (42) (3.1)
- ------------------------------------------------------------------------------------------------------------
Income before income taxes (TE) and
cumulative effect of accounting change 675 634 595 41 6.5
Allocated income taxes and TE adjustments 253 252 239 1 .4
- ------------------------------------------------------------------------------------------------------------
Income before cumulative effect
of accounting change 422 382 356 40 10.5
Cumulative effect of accounting change -- (24)(a) -- 24 100.0
- ------------------------------------------------------------------------------------------------------------
Net income $ 422 $ 358 $ 356 $ 64 17.9%
======= ======= ======= =======
Percent of consolidated net income 43% 271% 36% N/A N/A
AVERAGE BALANCES
Loans $27,806 $27,673 $26,690 $ 133 .5%
Total assets 29,970 30,398 29,637 (428) (1.4)
Deposits 33,942 35,221 35,370 (1,279) (3.6)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Results for 2001 include a one-time cumulative charge of $39 million ($24
million after tax) resulting from a prescribed change, applicable to all
companies, in the accounting for retained interests in securitized assets.
TE = Taxable Equivalent, N/A = Not Applicable
ADDITIONAL KEY CONSUMER BANKING DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, CHANGE 2002 VS 2001
-------------------
dollars in millions 2002 2001 2000 AMOUNT PERCENT
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AVERAGE DEPOSITS OUTSTANDING
Noninterest-bearing deposits $ 5,136 $ 4,802 $ 4,935 $ 334 7.0%
MMDA and other savings deposits 13,054 12,832 13,154 222 1.7
Time deposits 15,752 17,587 17,281 (1,835) (10.4)
- ----------------------------------------------------------------------------------------------------------------------
Total deposits $33,942 $35,221 $35,370 $(1,279) (3.6)%
======= ======= ======= =======
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RETAIL NATIONAL KEY CONSUMER
BANKING HOME EQUITY BANKING
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOME EQUITY LOANS (2002) OTHER DATA (2002)
Average balance / % change from 2001 $6,619 / 28% $4,906 / 11% On-line clients / % penetration 575,894 / 32%
Average loan-to-value ratio 71 80 KeyCenters 910
Percent first lien positions 51 79 Automated teller machines 2,165
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Noninterest income grew by $15 million, or 3%, due primarily to a $15 million
decrease in net losses from derivatives in the National Home Equity line of
business, an aggregate $7 million increase in service charges on deposit
accounts contributed by the Retail Banking and Small Business lines and higher
fees from mortgage lending and electronic banking services. The growth in
deposit service charges resulted from new pricing implemented in mid-2001 in
connection with Key's competitiveness improvement initiative, but was moderated
by the introduction of free checking products in the third quarter of 2002.
These favorable results more than offset a $19 million increase in losses
incurred on the residual values of leased vehicles in the Indirect Lending line
of business.
Noninterest expense decreased by $42 million, or 3%, from 2001. The improvement
reflects an approximate $38 million reduction in goodwill amortization, which
resulted from the adoption of new accounting guidance, and lower costs for
software amortization. These reductions were partially offset by higher
personnel expense and an increase in marketing costs associated with the growth
in the National Home Equity line of business.
25
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS KEYCORP AND SUBSIDIARIES
In 2001, the increase in net income reflected a $61 million, or 3%, increase in
net interest income due to an improved interest rate spread on earning assets
and a favorable change in the composition of earning assets resulting from Key's
decision to retain (rather than securitize and sell) home equity loans starting
in 2000. The growth in net interest income was substantially offset by the
effect of the 2001 accounting change mentioned on page 25.
KEY CORPORATE FINANCE
As shown in Figure 4, net income for Key Corporate Finance was $394 million for
2002, compared with $429 million for 2001 and $396 million for 2000. The
decrease from 2001 resulted from a significantly higher provision for loan
losses and lower noninterest income. These adverse results were offset in part
by moderate growth in net interest income and improvement in noninterest
expense.
FIGURE 4 KEY CORPORATE FINANCE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, CHANGE 2002 VS 2001
-------------------
dollars in millions 2002 2001 2000 AMOUNT PERCENT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net interest income (TE) $ 1,123 $ 1,092 $ 1,011 $ 31 2.8%
Noninterest income 238 259 253 (21) (8.1)
- ----------------------------------------------------------------------------------------------------------
Total revenue (TE) 1,361 1,351 1,264 10 .7
Provision for loan losses 236 140 125 96 68.6
Noninterest expense 495 517 497 (22) (4.3)
- ----------------------------------------------------------------------------------------------------------
Income before income taxes (TE) 630 694 642 (64) (9.2)
Allocated income taxes and TE adjustments 236 265 246 (29) (10.9)
- ----------------------------------------------------------------------------------------------------------
Net income $ 394 $ 429 $ 396 $ (35) (8.2)%
======= ======= ======= =======
Percent of consolidated net income 41% 325% 39% N/A N/A
AVERAGE BALANCES
Loans $29,278 $31,098 $30,592 $(1,820) (5.9)%
Total assets 30,568 32,593 32,086 (2,025) (6.2)
Deposits 3,384 3,093 2,815 291 9.4
- ----------------------------------------------------------------------------------------------------------
</TABLE>
TE = Taxable Equivalent, N/A = Not Applicable
During 2002, taxable-equivalent net interest income increased by $31 million, or
3%. The increase was due primarily to a higher taxable-equivalent adjustment
related to portions of the equipment leasing portfolio, which became subject to
a lower income tax rate in the latter half of 2001. A more favorable interest
rate spread on earning assets and the growth in average deposits also
contributed to the improvement. These positive results were partially offset by
the adverse effect of a decline in average loans outstanding.
During the same time, noninterest income decreased by $21 million, or 8%. The
decrease was due principally to losses from residual values of leased equipment
in the National Equipment Finance line of business in 2002, compared with gains
in the prior year. Lower fees generated by Corporate Banking also contributed to
the decline. These adverse results more than offset increases in
nonyield-related loan fees and loan sale gains in the National Commercial Real
Estate line and growth in service charges on deposit accounts in the Corporate
Banking line.
Noninterest expense improved by $22 million, or 4%, reflecting a $16 million
reduction in goodwill amortization following the adoption of a new accounting
standard. The provision for loan losses rose by $96 million, or 69%, due largely
to higher levels of net charge-offs in the Corporate Banking and National
Equipment Finance lines.
In 2001, an $81 million, or 8%, improvement in net interest income drove the
increase in net income relative to the prior year. This growth was attributable
largely to a more favorable interest rate spread on earning assets, as well as
loan growth in both the National Commercial Real Estate and National Equipment
Finance lines of business.
KEY CAPITAL PARTNERS
As shown in Figure 5, Key Capital Partners' net income was $156 million for
2002, compared with $129 million for 2001 and $142 million for 2000. The
improvement in 2002 was attributable to a substantial decrease in noninterest
expense and growth in taxable-equivalent net interest income. These positive
results more than offset a decline in noninterest income, while the provision
for loan losses was essentially unchanged.
Taxable-equivalent net interest income increased by $19 million, or 9%, from
2001. The growth was due primarily to a more favorable interest rate spread on
earning assets.
Noninterest income decreased by $69 million, or 7%, as market-sensitive
businesses were adversely affected by the weak economy. The reduction was
attributable mainly to an aggregate decline of $51 million in trust and
investment services income in the High Net Worth and Victory Capital Management
lines and lower income from trading activities and derivatives in the Capital
Markets line. In addition, revenue for 2001 benefited from a net gain from the
sale of residential mortgage loans associated with the private banking business.
These factors more than offset an $18 million increase in investment banking
income.
26
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS KEYCORP AND SUBSIDIARIES
FIGURE 5 KEY CAPITAL PARTNERS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, CHANGE 2002 VS 2001
-------------------
dollars in millions 2002 2001 2000 AMOUNT PERCENT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net interest income (TE) $ 235 $ 216 $ 214 $ 19 8.8%
Noninterest income 874 943 974 (69) (7.3)
- -----------------------------------------------------------------------------------------------------
Total revenue (TE) 1,109 1,159 1,188 (50) (4.3)
Provision for loan losses 14 13 4 1 7.7
Noninterest expense 846 926 944 (80) (8.6)
- -----------------------------------------------------------------------------------------------------
Income before income taxes (TE) 249 220 240 29 13.2
Allocated income taxes and TE adjustments 93 91 98 2 2.2
- -----------------------------------------------------------------------------------------------------
Net income $ 156 $ 129 $ 142 $ 27 20.9%
====== ====== ====== ======
Percent of consolidated net income 16% 98% 14% N/A N/A
AVERAGE BALANCES
Loans $4,904 $5,266 $5,439 $ (362) (6.9)%
Total assets 8,382 8,965 8,994 (583) (6.5)
Deposits 3,924 3,679 3,480 245 6.7
- -----------------------------------------------------------------------------------------------------
</TABLE>
TE = Taxable Equivalent, N/A = Not Applicable
ADDITIONAL KEY CAPITAL PARTNERS DATA
<TABLE>
<CAPTION>
DECEMBER 31, 2002
dollars in millions
<S> <C>
- --------------------------------------------------------------
Assets under management $61,694
Nonmanaged and brokerage assets 64,968
High Net Worth sales personnel 807
- --------------------------------------------------------------
</TABLE>
Noninterest expense decreased by $80 million, or 9%, in 2002, due primarily to
an approximate $25 million reduction in amortization expense following the
prescribed change in accounting for goodwill, lower variable compensation
expense associated with revenue generation and reduced software amortization.
In 2001, net income decreased primarily as a result of a $31 million, or 3%,
reduction in noninterest income. Weak conditions in the capital markets led to a
$39 million, or 6%, decline in income from trust and investment services.
OTHER SEGMENTS
Other Segments, which consists primarily of Treasury, Principal Investing and
the net effect of funds transfer pricing, generated net losses of $20 million in
both 2002 and 2001. In 2002, net losses from principal investing activities
decreased by $64 million ($40 million after tax), or 81%. This improvement was
offset by a $55 million ($34 million after tax), or 40%, decline in net interest
income, due primarily to the chan