pre14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment
No. )
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þ Preliminary
Proxy Statement
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o Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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o Definitive
Proxy Statement
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o Definitive
Additional Materials
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o Soliciting
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KeyCorp
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127
PUBLIC SQUARE
CLEVELAND,
OHIO 44114
April ,
2011
DEAR SHAREHOLDER:
You are cordially invited to attend the 2011 Annual Meeting of
Shareholders of KeyCorp which will be held at One Cleveland
Center, 1375 East Ninth Street, Cleveland, Ohio, on Thursday,
May 19, 2011, at 8:30 a.m., local time.
All holders of record of KeyCorp Common Shares, KeyCorp
Series A Preferred Stock, and KeyCorp Series B
Preferred Stock as of March 22, 2011 are entitled to vote
at the 2011 Annual Meeting.
As described in the accompanying Notice and Proxy Statement,
holders of KeyCorp Common Shares will be asked to elect thirteen
directors for one-year terms expiring in 2012, to consider a
proposal to approve the KeyCorp 2011 Annual Performance Plan, to
consider a proposal to amend KeyCorps Regulations to
reduce shareholder voting percentage requirements, to consider a
proposal to amend KeyCorps Articles and Regulations to
revise the voting rights of the Series B Preferred Stock,
to ratify the appointment of Ernst & Young LLP as
independent auditors for 2011, to provide advisory approval of
KeyCorps executive compensation program, and to provide an
advisory vote on the frequency of the advisory vote on the
executive compensation program. Holders of Series A
Preferred Stock and Series B Preferred Stock will only be
asked to vote on the revision of the voting power of the
Series B Preferred Stock.
KeyCorps Annual Review and Annual Report on
Form 10-K
for the year ended December 31, 2010 are enclosed.
A proxy card is enclosed. Holders of KeyCorp Common Stock can
vote their shares by telephone, the internet, or by mailing
their signed proxy cards in the enclosed return envelopes.
Specific instructions for voting by telephone or the internet
are attached to the proxy cards. Holder of Series A
Preferred Stock and Series B Preferred Stock may only vote
by mailing their signed proxy cards.
Sincerely,
Beth E. Mooney
President
127
PUBLIC SQUARE
CLEVELAND, OHIO 44114
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR THE
KEYCORP SHAREHOLDER MEETING TO BE HELD ON MAY 19, 2011 AND
The 2011 Annual Meeting of Shareholders of KeyCorp will be held
at One Cleveland Center, 1375 East Ninth Street, Cleveland,
Ohio, on Thursday, May 19, 2011, at 8:30 a.m., local
time, for the following purposes:
1. To elect thirteen directors to serve for one-year terms
expiring in 2012;
2. To approve the KeyCorp 2011 Annual Performance Plan;
3. To vote upon an amendment to KeyCorps Regulations
to reduce shareholder voting requirements greater than the
statutory norm;
4. To vote upon an amendment to KeyCorps Articles and
Regulations to conform the voting rights of the Series B
Preferred Stock issued to the U.S. Treasury with the
standard terms mandated by the U.S. Treasury under the
Troubled Asset Relief Program Capital Purchase Program;
5. To ratify the appointment by the Audit Committee of the
Board of Directors of Ernst & Young LLP as independent
auditors for KeyCorp for the fiscal year ending
December 31, 2011;
6. To provide advisory approval of KeyCorps executive
compensation program;
7. To provide an advisory vote on the frequency with which
the advisory vote on the executive compensation program shall
occur; and
8. To transact such other business as may properly come
before the meeting or any postponement or adjournment thereof.
Only holders of record of KeyCorp Common Shares, KeyCorp
Series A Preferred Stock, and KeyCorp Series B
Preferred Stock at the close of business on March 22, 2011
have the right to receive notice of and to vote at the Annual
Meeting and any postponement or adjournment thereof. Holders of
Series A Preferred Stock and Series B Preferred Stock
are only entitled to vote on Issue Four.
By Order of the Board of Directors
Paul N. Harris
Secretary
April , 2011
YOUR VOTE IS IMPORTANT. HOLDERS OF KEYCORP COMMON
SHARES CAN VOTE THEIR SHARES BY TELEPHONE, THE
INTERNET, OR BY MAILING THEIR SIGNED PROXY CARDS IN THE RETURN
ENVELOPES ENCLOSED WITH THE PROXY CARD FOR THAT PURPOSE.
SPECIFIC INSTRUCTIONS FOR VOTING BY TELEPHONE OR THE
INTERNET ARE ATTACHED TO THE PROXY CARD.
HOLDERS OF KEYCORP SERIES A PREFERRED STOCK AND
SERIES B PREFERRED STOCK MAY ONLY VOTE BY MAILING THEIR
SIGNED PROXY CARDS.
THE PROXY STATEMENT, ANNUAL REVIEW AND ANNUAL REPORT ON
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2010 ARE AVAILABLE AT
WWW.ENVISIONREPORTS.COM/KEY.
TABLE OF
CONTENTS
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Page
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NOTICE OF ANNUAL MEETING
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PROXY STATEMENT
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1
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Issue One Election of Directors
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1
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Nominees for Terms Expiring in 2011
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2
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The Board of Directors and Its Committees
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Corporate Governance Guidelines
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Corporate Governance Enhancements
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Board Leadership Structure
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Board Oversight of Risk
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25
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Communications with the Board
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Director Independence
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Issue Two Approval of the 2011 KeyCorp Annual
Performance Plan
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Issue Three Amendment to Regulations
Concerning Shareholder Voting Requirements Greater than
Statutory Norm
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30
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Issue Four Amendment to Articles and
Regulations Concerning the Voting Rights of the Series B
Preferred Stock
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Issue Five Independent Auditors
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Issue Six Advisory Approval of KeyCorp
Executive Compensation Program
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Issue Seven Advisory Vote on Frequency of
Vote on Executive Compensation Program
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Executive Officers
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Compensation Discussion and Analysis
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Compensation of Executive Officers and Directors
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51
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Compensation and Organization Committee Report (Including
Discussion of Compensation Policies and Practices as They Relate
to Risk Management)
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Equity Compensation Plan Information
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Share Ownership and Other Phantom Stock Units
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Section 16(a) Beneficial Ownership Reporting Compliance
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Audit Matters
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Governance Document Information
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Shareholder Proposals for the Year 2012
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Householding Information
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General
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KeyCorp 2011 Annual Performance Plan
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A-1
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Amendment to Regulations Concerning Shareholder Voting
Requirements Greater than Statutory Norm
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B-1
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Amendment to Articles and Regulations Concerning the Voting
Rights of Series B Preferred Stock
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C-1
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Audit Committee Policy Statement on Independent Auditing
Firms Services and Related Fees
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D-1
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127
PUBLIC SQUARE
CLEVELAND, OHIO 44114
PROXY
STATEMENT
This Proxy Statement is furnished commencing on or about
April , 2011 in connection with the solicitation on
behalf of the Board of Directors of KeyCorp of proxies to be
voted at the 2011 Annual Meeting of Shareholders on May 19,
2011, and at all postponements and adjournments thereof. All
holders of record of KeyCorp Common Shares at the close of
business on March 22, 2011 are entitled to vote. On that
date there
were KeyCorp
Common Shares outstanding and entitled to vote at the meeting.
Each such share is entitled to one vote on each matter to be
considered at the meeting and a majority of the outstanding
KeyCorp Common Shares shall constitute a quorum. All holders of
Series A Non-Cumulative Perpetual Convertible Preferred
Stock (Series A Preferred Stock) and
Series B Fixed Rate Cumulative Perpetual Preferred Stock
(Series B Preferred Stock) at the close of
business on March 22, 2011 are entitled to vote on Issue
Four regarding the amendment of KeyCorps Amended and
Restated Articles of Incorporation (Articles) and
Amended and Restated Code of Regulations
(Regulations) to revise the voting rights of the
Series B Preferred Stock issued to the U.S. Department
of Treasury in connection with the Troubled Asset Relief Program
(TARP) Capital Purchase Program. On March 22,
2011, there
were shares
of Series A Preferred Stock outstanding and entitled to
vote and 25,000 shares of Series B Preferred Stock
outstanding and entitled to vote. Each of the shares of
Series A Preferred Stock and Series B Preferred Stock
shall be entitled to one vote on Issue Four.
Issue
One
ELECTION
OF DIRECTORS
In accordance with KeyCorps Regulations, the Board of
Directors of KeyCorp (also sometimes referred to herein as the
Board) has been fixed as of the 2011 Annual Meeting
at 13 members. Under KeyCorps Regulations, effective with
the 2011 Annual Meeting, the terms of all Directors expire and
they are to be elected for one-year terms. Accordingly, all
thirteen Directors will be elected for one-year terms expiring
in 2012 (or until their respective successors are elected and
qualified, whichever is later).
The nominees for directors at this Annual Meeting are listed
below. All properly appointed proxies will be voted for these
nominees unless contrary specifications are properly made, in
which case the proxy will be voted or withheld in accordance
with such specifications. All nominees are current members of
the Board. Should any nominee become unable to accept nomination
or election, the proxies will be voted for the election of such
person, if any, as shall be recommended by the Board or for
holding a vacancy to be filled by the Board at a later date. The
Board has no reason to believe that the persons listed as
nominees will be unable to serve. In the election of directors,
if a nominee receives more against votes than
for votes the following procedure will apply: the
nominee must submit an offer to resign as a director to the
KeyCorp Board of Directors. Thereafter, the Nominating and
Corporate Governance Committee of the Board of Directors will
consider the resignation and will submit its
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recommendation as to whether to accept or reject the resignation
to the Board of Directors which will act on the recommendation
and publicly disclose its decision.
Pursuant to rules promulgated under the Securities Exchange Act
of 1934, as amended (the Exchange Act), the
following information lists, as to the nominees for director,
the principal occupation or employment, age, the year in which
each first became a director of KeyCorp, directorships since
2006 in registered investment companies or companies having
securities which are registered pursuant to, or that are subject
to certain provisions of, the Exchange Act, and information
concerning each persons qualifications to serve as a
Director of KeyCorp. The information provided is as of
January 1, 2011 unless otherwise indicated.
NOMINEES
FOR DIRECTOR
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EDWARD P. CAMPBELL
Edward P. Campbell has served as a KeyCorp Director since
1999. Mr. Campbell chairs the Compensation and Organization
Committee and serves on the Nominating and Corporate Governance
Committee. He has previously served on the Risk Management
Committee as well as the Audit Committee where he served as
Chair. Mr. Campbell is qualified as a financial
expert as that term is defined by the SEC.
In 2010, Mr. Campbell retired as Chief Executive Officer
and President of Nordson Corporation. Mr. Campbell also
retired as Chairman of Nordson in 2010. Nordson is a
multi-national maker of capital equipment with approximately
3,700 employees and direct operations and sales support
offices in over 30 countries. Mr. Campbell joined Nordson
in 1988 as vice president of corporate development. He rose to
positions of greater responsibility and was elected chief
executive officer in 1997 and chairman of the board and chief
executive officer in 2004.
Prior to joining Nordson, Mr. Campbell spent 11 years
in operating and financial management positions at The Standard
Oil Company/British Petroleum, with responsibility for such
functions as capital markets, treasury, cash management,
financial planning, pension asset management, equity and fixed
income management, and investment management functions,
including fixed income and foreign exchange and derivatives
trading. Mr. Campbell also had experience leading the
retail operations of the company.
Mr. Campbell (age 61) serves on the board of The
Lubrizol Corporation (since 2009) and served on the board
of Nordson from 1994 to 2010 and of OMNOVA Solutions, Inc. from
1999 until 2009. Mr. Campbell has had leadership roles in a
number of civic and community organizations.
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JOSEPH A. CARRABBA
Mr. Carrabba joined the KeyCorp Board in 2009. He
serves on the Compensation and Organization Committee.
Since 2007, Mr. Carrabba has been the Chairman, President,
and Chief Executive Officer of Cliffs Natural Resources, Inc.
Cliffs is an international mining and natural resources company
with 2010 revenues of $4.7 billion and approximately
5,400 employees. Mr. Carrabba joined Cliffs in 2005 as
President and Chief Operating Officer and became President and
Chief Executive Officer in 2006.
Mr. Carrabba joined Cliffs from Rio Tinto, a global mining
company where he served for 22 years in a variety of
leadership capacities at locations worldwide including the
United States, Asia, Australia, Canada, and Europe. Before
relocating to Rio Tintos Diavik Diamond Mines, Inc. in
Canadas Northwest Territory where he served most recently
as president, he spearheaded the development and implementation
of Rios Six Sigma initiative (an initiative using data
measurements and statistics to identify factors to reduce waste,
defects and costs and thereby increase bottom line benefits to
customers and shareholders) at its bauxite mining operation in
Australia.
Mr. Carrabba (age 58) is a Director of Cliffs
(since 2006) and the Newmont Gold Company (since
2008) and serves in leadership roles in a number of civic
and community organizations.
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DR. CAROL A. CARTWRIGHT
Dr. Cartwright has served as a Director of KeyCorp
since 1997. Dr. Cartwright presently serves on the
Compensation and Organization Committee and previously served on
the Audit and Risk Management Committees.
Dr. Cartwright is currently president of Bowling Green
State University. She initially held that position on an interim
basis beginning in 2008 and was permanently appointed in 2009.
Previously, she served as president of Kent State University
from 1991 through 2006. Kent State serves about 34,000 students
on eight campuses and two international sites and employs 5,000
faculty and staff. Bowling Green enrolls approximately 20,000
students on two campuses and employs 3,000 faculty and staff. As
the chief executive officer of two complex higher education
organizations, Dr. Cartwright has had responsibility for
implementing strategies that meet state and national needs in
teaching and research as well as accountability for a
significant group of business units that must operate on a
profitable basis. At Kent State, she oversaw the redevelopment
of the universitys physical plant and infrastructure,
including debt financing, private philanthropy and investment
policies. Similar capital planning, fundraising and investment
responsibilities are part of her responsibilities at Bowling
Green.
Dr. Cartwright (age 69) has led a variety of
research projects and authored numerous professional
publications. She serves on the boards of FirstEnergy Corp.
(since 1997) and PolyOne Corporation (since 2000).
Dr. Cartwright maintains leadership roles in professional,
civic and community organizations.
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ALEXANDER M. CUTLER
Alexander M. Cutler has served as a KeyCorp Director since
2000. Mr. Cutler is KeyCorps Lead Director. He is the
Chair of the Nominating and Corporate Governance Committee and
also serves on the Compensation and Organization Committee
having previously served as its Chair.
Mr. Cutler is the Chairman, Chief Executive Officer, and
President of Eaton Corporation, a global diversified power
management company with approximately 70,000 employees that
sells products in more than 150 countries. As chairman and chief
executive officer of a Fortune 200 company, Mr. Cutler
regularly reviews financial reports, risk management structure,
policies and compliance activities, controls systems,
information technology systems, company pension and deferred
compensation plans, and foreign exchange and interest rate
risks.
He has extensive experience in acquisition/divestiture
negotiations and integrations.
Mr. Cutler assumed his current position at Eaton in 2000
after 25 years with the company and its predecessors.
Mr. Cutler (age 59) serves on the boards of Eaton
Corporation (since 2000) and E.I. du Pont Nemours Company
(since 2008). He served on the board of Axcelis Technologies
Inc. from 2000 to 2006 and maintains leadership roles in civic
and community organizations. He chairs The Business Roundtable
Corporate Leadership Initiative.
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H. JAMES DALLAS
Mr. Dallas joined the KeyCorp Board of Directors in
2005. He is the Chair of the Risk Management Committee and also
serves on the Nominating and Corporate Governance Committee and
previously served on the Audit Committee.
Mr. Dallas is senior vice president of quality and
operations at Medtronic, Inc., a global medical technology
company that employs approximately 38,000 people and does
business in more than 120 countries. Mr. Dallas previously
served as Senior Vice President and Chief Information Officer at
Medtronic.
In his role as senior vice president of quality and operations,
Mr. Dallas has responsibility for executing cross-business
initiatives to maximize the companys global operating
leveraging. Mr. Dallas also serves as a member of
Medtronics executive management team. Prior to joining
Medtronic in 2006, Mr. Dallas was vice president and chief
information officer at Georgia-Pacific Corporation, a maker of
forest products. At Georgia Pacific, Mr. Dallas held a
series of progressively more responsible information technology
and operating roles. Mr. Dallas began his career as an
internal auditor for C&S National Bank, a large regional
bank in Atlanta, Georgia and has experience as a cost accountant
with a focus on profitability and key profit drivers. The
majority of Mr. Dallas career has been focused on
bridging the gap between strategy and execution; specifically,
leading large, enterprise-wide projects and acquisition
integration.
Mr. Dallas (age 52) serves on the boards of civic
and community organizations.
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ELIZABETH R. GILE
Elizabeth R. Gile was elected as a KeyCorp Director in 2010.
She is currently a member of the Risk Management Committee.
In 2005, Ms. Gile retired from Deutsche Bank AG
(Deutsche Bank) where she was Managing Director and
the Global Head of the Loan Exposure Management Group (2003 to
2005). During her career, Ms. Gile had the opportunity to
focus on many aspects of credit origination and risk management.
In her role at Deutsche Bank, she created and ran a business
division to manage the banks $80 billion wholesale
loan portfolio using capital market instruments and derivatives
to reduce the volatility of financial results. Ms. Gile
also spent the first 24 years of her career at
J.P. Morgan (1977 to 2001) where she was responsible
at varying points for J.P. Morgans
North American business involving high grade credit markets
trading, credit portfolio management, corporate lending and
credit research. Following her service at J.P. Morgan,
Ms. Gile served as Vice Chair of Toronto Dominion
Securities and Head of Portfolio Management for the company from
2001-2002.
Since her retirement Ms. Gile served from 2007 to 2009 as
Managing Director and Senior Strategic Advisor to BlueMountain
Capital Management, a hedge fund management company.
Ms. Gile (age 55) is a Director of Deutsche Bank
Trust Corporation and Deutsche Bank Americas (since
2005) and serves in leadership roles in a number of civic
and community organizations.
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RUTH ANN M. GILLIS
Ms. Gillis joined the KeyCorp Board in 2009.
Ms. Gillis serves on the Audit Committee and on the
Nominating and Corporate Governance Committee. She will become
the Chair of the Audit Committee as of the 2011 Annual Meeting.
She has been designated as a financial expert as
that term is defined by the SEC.
Since 2008, Ms. Gillis has been an Executive Vice President
of the Exelon Corporation, serving as Chief Administrative
Officer and Chief Diversity Officer. Exelon is an electric
utility company. Previously, Ms. Gillis was a Senior Vice
President at Exelon from 2005 to 2008. Ms. Gillis serves as
president of Exelon Business Services Company, a subsidiary of
Exelon, which encompasses information technology, supply chain,
legal, communications, human resources and finance, as well as
other advisory, professional, technical and support services. As
President of Exelon Business Services Company, Ms. Gillis
is responsible for providing oversight for transactional and
corporate services for the Exelon system of companies.
Ms. Gillis is a member of Exelons executive
committee, pension investment committee, and the corporate risk
management committee as well as a member of the Exelon
Foundation Board. Ms. Gillis previously served as Chief
Financial Officer of Exelon.
Ms. Gillis previous experience includes service as
Unicom Corporations chief financial officer and prior
thereto as treasurer where she was responsible for overseeing
Unicom Corporations financing activities, cash management,
financial risk management, and treasury functions.
Ms. Gillis (age 56) is a director of the Potlatch
Corporation (since 2003) where she is Chair of the
Compensation Committee and also serves on the Audit Committee.
Ms. Gillis serves in leadership roles in a number of civic
and community organizations and was a director of
Archstone-Smith from 2004 until 2007.
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KRISTEN L. MANOS
Ms. Manos joined the KeyCorp Board in 2009 and serves
on the Audit Committee.
Ms. Manos is a partner at Sanderson Berry Co., a private
investment advisory services firm located in Holland, Michigan.
Ms. Manos engages in business strategy and marketing
consulting at Sanderson Berry.
Ms. Manos is a former executive vice president of Herman
Miller, Inc.
(2004-2009).
Herman Miller researches, designs, and distributes furnishings
for use worldwide in various environments including office,
healthcare, educational, and residential settings and employs
approximately 6,000 people. Ms. Manos was president of
Herman Millers North American office business. In this
role, she directly participated in corporate risk evaluation,
risk management and scenario planning for clients and their
facilities.
Ms. Manos experience spans marketing, finance,
manufacturing, and general management. She has led global
product development, business development, customer service, and
manufacturing teams, and has experience in mergers and
acquisitions.
Ms. Manos (age 51) is a member of the stewardship
committee of the Holland Hospital Board, which is responsible
for financing capital projects, oversight of the hospitals
investment portfolio, and oversight of the overall financial
health of the hospital. She is also a former member of the Audit
and Compensation Committees of Select Comfort Corporation where
she served as a director from 2007 until 2008.
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BETH E. MOONEY
Ms. Mooney has been a member of the KeyCorp Board of
Directors and its President and Chief Operating Officer since
November 18, 2010. On May 1, 2011, she will become
Chair and Chief Executive Officer of KeyCorp. Ms. Mooney
joined KeyCorp in 2006 as a Vice Chair and head of Key Community
Banking (now Key Community Bank).
Ms. Mooney has over 30 years banking experience in
retail banking, commercial lending, and real estate financing.
Prior to joining KeyCorp, beginning in 2000 she served as Senior
Executive Vice President at AmSouth Bancorp, a large regional
bank holding company that has merged with Regions Financial
Corporation, and became Chief Financial Officer at AmSouth
Bancorp as well in 2004. Ms. Mooney ran AmSouths
banking operations in Tennessee and Northern Louisiana before
becoming its Senior Executive Vice President and Chief Financial
Officer.
Prior to joining AmSouth, Ms. Mooney completed line
assignments of increasing responsibility at Bank One
Corporation, Citicorp Real Estate, Inc., Hall Financial Group
and Republic Bank of Texas/First Republic. At Bank One,
Ms. Mooney served as Regional President in Akron and
Dayton, Ohio, and then as President of Bank One Ohio, managing
major markets throughout the state.
Ms. Mooney (age 55) is a member of the Financial
Services Roundtable and serves in leadership roles in a number
of civic and community organizations.
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BILL R. SANFORD
Bill R. Sanford has been a KeyCorp Director since 1999. He
is currently a member and former Chair of the Risk Management
Committee and previously served on the Audit Committee and
Nominating and Corporate Governance Committee. Mr. Sanford
has been designated as a financial expert as that
term is defined by the SEC.
Mr. Sanford is the founder and chairman of Symark LLC, a
technology commercialization and business development
organization. Mr. Sanford is also the executive founder and
retired chairman, president and chief executive officer of
Steris Corporation, a global leader in infection and
contamination preventions systems, products, services, and
technologies that does business in more than 60 countries.
Mr. Sanford is also chairman of the board of directors of
Greatbatch, Inc., where he has been a director since 2000.
Greatbatch is a leading provider of advanced technologies to the
global medical device industry. He previously served as chair of
the audit committee and lead independent director of that
company.
Mr. Sanford is an experienced entrepreneur, executive,
consultant, investor, and board member with extensive new
venture, merger and acquisition, turnaround, senior management,
and market development experience. He has public and private
financing experience, including initial and secondary public
stock offerings, structured debt financing, public stock
mergers, and private equity and venture capital investments.
Mr. Sanford (age 66) is an active early stage and
private equity investor through Symark and serves as a board
member and advisor of public and private for-profit and
not-for-profit
corporations, investment limited partnerships, and venture
capital firms.
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BARBARA R. SNYDER
Ms. Snyder was elected as a KeyCorp Director in 2010.
She is currently a member of the Risk Management Committee.
Ms. Snyder is president of Case Western Reserve University,
a private research university located in Cleveland, Ohio and has
held this post since 2007.
Prior to becoming president of Case Western Reserve University,
Ms. Snyder served as Executive Vice President and Provost
of The Ohio State University (OSU). She previously
served as Vice President for Academic Affairs and Human
Resources at OSU. She served as a faculty member of the
universitys Moritz College of Law from 1998 to 2007. From
2000 to 2007 she held the Joanne W. Murphy/Classes of 1965 and
1973 Professorship at OSU. Ms. Snyder began her academic
career in 1983 as an assistant professor at Case Western Reserve
Universitys School of Law.
Ms. Snyder (age 55) has taken a leadership role
on the boards of several nonprofit organizations including
BioEnterprise, whose focus is on healthcare and bioresearch.
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EDWARD W. STACK
Mr. Stack was elected as a KeyCorp Director in 2010. He
is currently a member of the Audit Committee.
Since 1984, Mr. Stack has been Chairman of the Board of
Directors and Chief Executive Officer of Dicks Sporting
Goods, Inc., a leading authentic full-line sporting goods
retailer offering a broad assortment of brand name sporting
goods equipment, apparel, and footwear in a specialty store
environment. Since 1977, Mr. Stack has served in leadership
roles at Dicks in a variety of positions.
Mr. Stack has lead Dicks through a sustained period
of growth, from two stores in upstate New York to 445
Dicks stores in 42 states and 81 Golf Galaxy stores
in 30 states. During this time, he has also guided
Dicks through an IPO and strategic business acquisitions,
and has overseen the development of an
e-commerce
business and an international sourcing office in Hong Kong.
Mr. Stack (age 56) currently serves on the Board
of Directors of the National Retail Federation and the Advisory
Board of The Wharton Schools Jay H. Baker Retailing
Initiative.
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THOMAS C. STEVENS
Thomas C. Stevens is Vice Chair and Chief Administrative
Officer of KeyCorp. He has served on the Board of Directors
since 2001. He has previously served on the Risk Management
Committee and now serves on the Executive Committee.
Mr. Stevens responsibilities as Chief Administrative
Officer of KeyCorp include managing the human resources, legal,
marketing and communications, technology and operations, and
risk review groups as well as the Key Principal Partners segment
of KeyCorps operations.
Prior to joining KeyCorp in 1996, Mr. Stevens was the
managing partner of Thompson Hine LLP, a law firm serving as
counselors, advisors and advocates to a full spectrum of clients
ranging from major public and private corporations to financial
institutions, governments, nonprofit organizations, venture
capitalists and individual entrepreneurs.
Mr. Stevens (age 61) is a member of the Financial
Services Roundtable and the New York Bankers Association as
well as other professional, civic, and community organizations.
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THE BOARD
OF DIRECTORS AND ITS COMMITTEES
Board of Directors. During the year ended
December 31, 2010, there were eight meetings of
KeyCorps Board of Directors. Each member of KeyCorps
Board attended at least 75% of the aggregate of the meetings
held by KeyCorps Board of Directors and the meetings held
by the committees of the Board on which such member served
during 2010.
KeyCorp Board members are expected to attend KeyCorps
Annual Meetings of Shareholders. All Board members attended the
2010 Annual Meeting.
KeyCorps Board of Directors currently exercises certain of
its powers through its Audit, Compensation and Organization,
Executive, Nominating and Corporate Governance, and Risk
Management Committees. Each Committee has a Charter that can be
found at www.key.com/ir.
Audit Committee. Mss. Gillis and Manos and
Messrs. Bares (Chair), Menascé, and Stack (both
Mr. Bares and Mr. Menascé are retiring at the
2011 Annual Meeting) are the current members of the Audit
Committee. The functions of this Committee generally include
matters such as oversight review of the financial information
provided to KeyCorps shareholders, appointment of
KeyCorps independent auditors, review of fees and services
of the independent auditors, oversight review of the material
examinations of KeyCorp and its affiliates conducted by federal
and state regulatory and supervisory authorities, service as the
audit committee of KeyCorps banking subsidiary, oversight
review of allowance for loan and lease losses methodology
together with the Risk Management Committee, oversight review
relating to financial reporting, compliance, legal, and
information security and fraud risk matters, and supervision and
direction of any special projects or investigations deemed
necessary. A further discussion of the Committees
functions is set forth on page of this proxy
statement under the heading Board Oversight of Risk.
KeyCorps Audit Committee met thirteen times in 2010.
Compensation and Organization
Committee. Dr. Cartwright and
Messrs. Campbell (Chair), Carrabba, and Cutler are the
current members of KeyCorps Compensation and Organization
Committee. The functions of this Committee generally include:
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1.
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developing, reviewing and
approving KeyCorps compensation philosophy and related
programs,
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2.
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determining the compensation and
terms of employment of senior executives, including incentive
compensation arrangements, deferred compensation arrangements,
change of control agreements and equity compensation,
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3.
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determining participants and
awards under executive incentive compensation plans and deferred
compensation plans and in, connection therewith, approving
performance metrics and goals to provide for balanced risk
taking incentive compensation arrangements,
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4.
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reviewing with Risk Management,
the compatibility of incentive compensation arrangements with
internal controls and risk management and monitoring
performance, and reviewing the design and function of, incentive
compensation arrangements,
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5.
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approving employee and officer
retirement, compensation and benefit plans or amendments,
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6.
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reviewing organization structure
and staffing, KeyCorps management depth, management
development and succession plans, and
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7.
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reviewing the Compensation
Discussion and Analysis for the proxy statement.
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The Committee met seven times in 2010. The Committee may
delegate its authority to a subcommittee of its members.
The Committee approves the goals and objectives of the Chief
Executive Officer and other corporate senior executive officers
and thereafter evaluates their performance in light of those
goals and objectives. Based on this evaluation, the Committee
approves their compensation and any adjustments or other changes
to this compensation. The Committee takes into account, among
other factors, the recommendation of the Chief Executive Officer
and his direct reports as to the compensation of other senior
executives.
On a semi-annual basis, the Committee discusses, evaluates and
reviews with KeyCorps senior risk officers the
compensation programs of the CEO and the Named Executive
Officers (Key Officers) to ensure that these compensation
programs do not encourage Key Officers to take unnecessary and
excessive risks that threaten the value of KeyCorp. The design
and function of KeyCorps various employee compensation
programs are reviewed to identify and limit the risks posed to
KeyCorp by such programs, as well as to ensure the programs:
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do not encourage the manipulation of KeyCorps reported
earnings to enhance the compensation of any KeyCorp employees,
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do not encourage excessive risk-taking beyond the ability to
identify and mitigate risk, and
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are compatible with effective organization controls and risk
management and supported by strong corporate guidance.
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This review meets the requirements of Section 111 of the
Emergency Economic Stabilization Act of 2008 (EESA), as amended
by the American Recovery and Reinvestment Act of 2009 (ARRA).
The Committee retains Compensation Advisory Partners LLC
(Compensation Advisory Partners) to assist the
Committee in its evaluation of KeyCorps various executive
compensation programs. Compensation Advisory Partners serves as
an independent consultant at the direction and for the benefit
of the Committee and will not perform any services for any other
KeyCorp entity or affiliate. A representative of Compensation
Advisory Partners attends all Committee meetings and frequently
meets with the Committee without the presence of KeyCorp
management.
Compensation Advisory Partners services to the Committee
include:
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1.
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recommending targeted pay position
for total compensation and the desired mix between the primary
components such as base salary, short-term and long-term
incentive compensation for senior executives,
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2.
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assisting in determining an
appropriate peer group for executive compensation and
performance comparisons,
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3.
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advising on annual and long-term
incentive design and implementation, including plan structure,
performance metrics, award opportunities and vesting conditions,
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4.
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assisting in determining progress
against incentive compensation performance goals for senior
executives, and
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5.
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reporting on trends in executive
compensation, as well as any other ad hoc services relating to
executive compensation requested by the Committee.
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Compensation Advisory Partners may work with management in order
to gain an understanding of the Companys business
strategy, compensation and benefits practices and culture, scope
of executives positions and to obtain relevant data that
is not publicly disclosed. For 2010, Compensation Advisory
Partners fee was $334,184 for the services provided.
A fuller explanation of the Committee process relative to
executive compensation is presented in the Compensation
Discussion and Analysis found on page of this proxy
statement.
Executive Committee. Dr. Cartwright,
Ms. Manos, and Messrs. Bares, Carrabba, Cutler,
Menascé, Meyer (Chair), Sanford, and Stevens
(Mr. Meyer is retiring as Chair and Chief Executive Officer
and as a member of the Board of Directors of KeyCorp on
May 1, 2011) are the current members of KeyCorps
Executive Committee. The functions of the Executive Committee
are to exercise the authority of the Board of Directors, to the
extent permitted by law, on any matter requiring Board or Board
committee action between Board or Board committee meetings. The
Executive Committee did not meet in 2010.
Nominating and Corporate Governance
Committee. Messrs. Bares, Campbell, Cutler
(Chair), and Dallas and Ms. Gillis are members of
KeyCorps Nominating and Corporate Governance Committee.
The Committee serves as the nominating committee for KeyCorp
and, as such, recommends to the Board nominees or candidates to
stand for election as directors. The Committee oversees the
annual board self-assessment process, including the individual
director self-assessments, and KeyCorps policies and
practices on significant issues of corporate social
responsibility. In addition, the functions of the Committee
include matters such as oversight of board corporate governance
matters generally, the annual review and recommendation to the
Board of Directors of a director compensation program that may
include equity based and incentive compensation plans and
oversight review of KeyCorps directors and
officers liability insurance program. The Nominating and
Corporate Governance Committee met six times in 2010.
The Committee uses market data to aid it in its annual review of
KeyCorps director compensation program. No executive
officer has any role in determining the amount of director
compensation although the Committee may seek assistance from
executive officers of KeyCorp in designing equity compensation
plans. The Committee may delegate its authority to a
subcommittee of its members. No change in director compensation
was made in 2010.
The director annual cash retainer has not increased since 2003.
Equity awards are granted to directors under the Directors
Deferred Share Plan which was adopted in 2003 and replaced the
Directors Stock Option Plan. Awards under the
Directors Deferred Share Plan have not changed since the
Plans inception. Other than several adjustments to fees
paid to the Chairs of the Audit, Compensation and Organization,
and Risk Management Committees, director meeting fees have not
increased since 1994.
The Committee uses the following criteria in director
recruitment: (a) the nominee must have a record of high
integrity and other requisite personal characteristics and must
be willing to make the required time commitment; (b) the
nominee should have a demonstrated breadth and depth of
management
and/or
leadership experience, preferably in a senior leadership role,
in a large or recognized organization (profit or nonprofit,
private sector or governmental, including educational
institutions, civilian or military); (c) the nominee should
have a high level of professional or business expertise in areas
of relevance to KeyCorp (such as technology, global commerce,
marketing, finance, risk management, etc); (d) in the case
of outside directors, the nominee should meet the
independence criteria set forth in KeyCorps
Standards for Determining Independence of Directors;
(e) the nominee should not be serving as a director of more
than (i) two other public companies if he or she is a CEO
of a public company, or (ii) three other public companies
if he or she is not a CEO of a public company; (f) the
nominee
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must demonstrate the ability to think and act independently as
well as the ability to work constructively in the overall Board
process; and (g) additional factors in evaluating the above
skills would be a preference for nominees that improve the
diversity of the Board in terms of gender, race, religion
and/or
geography. The above criteria other than (a) are not rigid
rules that must be satisfied in each case, but are flexible
guidelines to assist in evaluating and focusing the search for
director candidates.
In evaluating potential first-time Board nominees, the Committee
will consider: (a) the skills and business experience
needed for the Board, (b) the current and anticipated
composition of the Board in light of the business activities and
needs of KeyCorp and the diverse communities and geographies
served by KeyCorp, and (c) the interplay of the
nominees expertise and professional/business background in
relation to the expertise and professional/business background
of current Board members, as well as such other factors
(including diversity) as the Committee deems appropriate. The
Committee considers its search for a nominee successful if a
nominee is found based on these considerations.
The invitation to join the Board as a first-time director or to
stand for election as a first-time nominee for director is
extended by the Chair of the Committee after discussion with and
approval by the Committee. Upon acceptance of the invitation by
the proposed candidate, the recommendation of the candidate by
the Committee will be made to the full Board for final approval.
The Committee has sole authority to retain and terminate any
search firm used to identify director candidates, including sole
authority to approve the search firm fees and other retention
terms. The Committee presently uses an independent search firm
in identifying candidates. The Committee is continually in the
process of identifying potential director candidates and Board
members are encouraged to submit to the Chair of the Committee
any potential nominee that any individual director would like to
suggest.
Shareholders may submit to the Chair of the Committee any
potential nominee that the shareholder would like to suggest.
Any shareholder recommendation for a director nominee should
contain background information concerning the recommended
nominee, including (a) the name, age, business, and
residence address of such person; (b) the principal
occupation or employment of such person for the last five years;
(c) the class and number of shares of capital stock of
KeyCorp that are beneficially owned by such person; (d) all
positions of such person as a director, officer, partner,
employee, or controlling shareholder of any corporation or other
business entity; (e) any prior position as a director,
officer, or employee of a depository institution or any company
controlling a depository institution; and (f) a statement
of whether such individual would be willing to serve if
nominated or elected. Any shareholder recommendation should also
include, as to the shareholder giving the written notice,
(a) a representation that the shareholder is a holder of
record of shares of KeyCorp entitled to vote at the meeting at
which directors are to be elected and (b) a description of
all arrangements or understandings between the shareholder and
such recommended person and any other person or persons (naming
such person or persons). Shareholder recommendations should be
provided to the Secretary of KeyCorp who will forward the
materials to the Chair of the Committee.
Risk Management Committee. Mss. Gile and
Snyder and Messrs. Dallas (Chair) and Sanford are the
current members of KeyCorps Risk Management Committee. The
functions of the Committee generally include matters such as
oversight review of risk management matters relating to credit
risk, market risk, and liquidity risk, asset/liability
management policies and strategies, compliance with regulatory
capital requirements, KeyCorps capital structure and
capital management strategies, including compliance with
regulatory capital requirements, KeyCorps portfolio of
Corporate-Owned Life Insurance, technology-related
plans, policies, and major capital expenditures,
17
the capital expenditure process, and together with the Audit
Committee oversight review of allowance for loan and lease
losses methodology. In addition, the Committee is charged with
exercising the authority of the Board of Directors in connection
with the authorization, sale and issuance by KeyCorp of debt and
certain equity securities and the approval of certain capital
expenditures. The Committee is charged with making
recommendations to the Board of Directors with respect to
KeyCorps dividend and share repurchase authorizations. A
further discussion of the Committees functions is set
forth on page of this proxy statement under the
heading Board Oversight of Risk. The Risk Management
Committee met six times in 2010.
CORPORATE
GOVERNANCE GUIDELINES
The Board of Directors has established and follows a corporate
governance program and has assigned the Nominating and Corporate
Governance Committee responsibility for the program. Following
are KeyCorps Corporate Governance Guidelines as adopted by
the Board of Directors upon recommendation of the Nominating and
Corporate Governance Committee.
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I.
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DIRECTOR RESPONSIBILITY
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Members of the Board of Directors are expected to exercise their
business judgment to act in what they believe to be in the best
interests of KeyCorp. In discharging this responsibility, Board
members are entitled to rely on the honesty and integrity of
KeyCorps senior officers and outside advisors and
consultants. Board members are expected to attend the Annual
Meeting of Shareholders, Board meetings and meetings of
committees upon which they serve and to review materials
distributed in advance of meetings.
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II.
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BOARD OF DIRECTORS SELF ASSESSMENT
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The Board conducts an annual self-assessment process under the
auspices of the Nominating and Corporate Governance Committee
through self-assessment questionnaires to all Board members. The
questionnaires are divided into two parts with the first part
consisting of general Board self-assessment questions and the
second part consisting of individual director self-assessment
questions. The results of the general Board portion of the
director self-assessment questionnaires are reviewed by the
Board and changes in KeyCorps corporate governance process
are based on the results of the Boards review and analysis
of the self-assessment questionnaires. Pursuant to the
self-assessment process, the Board reviews, among other matters,
agenda items, meeting presentations, advance distribution of
agendas and materials for Board meetings, interim communications
to directors, and access to and communications with senior
management. The results of the individual director
self-assessment portion of the questionnaire are reviewed by the
members of the Nominating and Corporate Governance Committee.
The Committee annually reviews the directors effectiveness
taking into account the results of the incumbent directors
individual self-assessment questionnaires, the Boards
Director Recruitment Guidelines, the existing mix of skills,
core competencies and qualifications of the Board as a whole,
and other factors that the Committee determines to be relevant.
III. EXECUTIVE SESSIONS OF OUTSIDE DIRECTORS/LEAD DIRECTOR
The outside [non-management] directors routinely meet at
regularly scheduled Board meetings in executive session without
inside directors or executive management present. The Chair of
the Nominating and Corporate Governance Committee presides over
these executive sessions and serves as KeyCorps lead
director.
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Not more than two directors will be inside directors
(i.e., directors who are at the time also officers of
KeyCorp). A retired Chief Executive Officer of KeyCorp shall no
longer serve on the Board after he or she ceases to hold such
office, except for a short interim transition period in which
such person may serve as Chairman of the Board after ceasing to
be Chief Executive Officer.
Three inside directors shall be permitted between
November 18, 2010 and May 1, 2011, the date of
Henry Meyers retirement from the Board.
The Board has adopted standards for determining
independence of directors and determined that at
least two-thirds of KeyCorps directors and all members of
the Board committees performing the audit, compensation,
corporate governance, and nominating functions must meet these
independence standards. The standards for determining
independence are [discussed on page of this proxy
statement]. In addition, members of the Audit Committee must
comply with
Rule 10A-3
of the Securities Exchange Act of 1934 which requires that an
Audit Committee member must not be affiliated with KeyCorp nor
accept directly or indirectly any fee from KeyCorp for
accounting, consulting, legal, investment banking or financial
advisory services.
In an uncontested election, any incumbent director who is a
nominee for director who receives a greater number of votes
Against his or her election than votes
For such election (a Holdover Director)
shall submit to the Board of Directors promptly following
certification of the shareholder vote a written offer to resign
as a director. Neither abstentions nor broker non-votes shall be
deemed votes cast For or Against a
nominees election. The Nominating and Corporate Governance
Committee shall consider the resignation offer and recommend to
the Board whether to accept or reject it. The Board will act on
the Nominating and Corporate Governance Committees
recommendation within 90 days following certification of
the shareholder vote. As soon as practicable thereafter, the
Board will disclose its decision (citing the reasons for
rejecting the resignation offer, if applicable) in a press
release to be disseminated in accordance with KeyCorps
Disclosure Policy. Any director who submits a written offer to
resign as a director pursuant to this provision shall not
participate in the Nominating and Corporate Governance Committee
recommendation or Board action regarding whether to accept or
reject the resignation offer. However, if each member of the
Nominating and Corporate Governance Committee is a Holdover
Director, then the directors who meet KeyCorps
independence standards and who are not Holdover Directors shall
appoint a special committee comprised exclusively of independent
directors to consider the resignation offers and recommend to
the Board to accept or reject them. Further, if the only
directors who are not Holdover Directors constitute three or
fewer directors, all directors may participate in the Board
action regarding whether to accept or reject the resignation
offers without action by the Nominating and Corporate Governance
Committee or the appointment of or action by a special committee.
VII. DIRECTOR LEGAL OR CONSULTING FEES
The Board has determined that neither a director nor a firm
affiliated with a director shall perform legal, consulting or
other advisory services for KeyCorp, unless the Nominating and
Corporate Governance Committee otherwise approves.
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VIII. DIRECTOR RETIREMENT
The Board has adopted a retirement policy whereby an incumbent
director is not eligible to stand for election as a director
upon reaching age 70. Under the policy, a director is also
requested to submit his or her resignation from the Board to the
Nominating and Corporate Governance Committee in the event that
the director retires from or otherwise leaves his or her
principal occupation or employment. The Nominating and Corporate
Governance Committee can choose to accept or reject the
resignation.
The Board has adopted a formal policy delineating director
recruitment guidelines to be utilized by the Board in
identifying and recruiting director nominees for Board
membership. The policy guidelines are designed to help insure
that KeyCorp is able to attract outstanding persons as director
nominees to the Board.
The Board has determined that approximately 50% (in value) of
the Boards compensation should be restricted or phantom
stock based compensation in order to more closely align the
economic interests of directors and shareholders. In addition,
each year the Board reviews the cash component of its
compensation which is in the form of director fees.
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XI.
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DIRECTOR STOCK OWNERSHIP GUIDELINES
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KeyCorp has adopted stock ownership guidelines for
KeyCorps outside directors which specify that each outside
director should, by the fifth anniversary of such
directors initial election, own KeyCorp Common Shares with
a value at least equal to four times KeyCorps outside
director annual retainer, of which 1,000 of such shares should
be directly owned by the director and be in the form of actual
shares. For purposes of these guidelines, except for the 1,000
actual share requirement, Common Shares include actual shares,
deferred or phantom stock units, and restricted shares.
XII. DIRECTOR ORIENTATION
A new director orientation is conducted for all new directors.
The orientation consists of meetings with the Chief Executive
Officer and other members of senior management including the
senior officer who acts as the liaison for the committee(s) upon
which the new director will serve.
XIII. DIRECTOR CONTINUING EDUCATION
Each director is encouraged to obtain the requisite training or
education to fulfill his or her director responsibilities. In
particular, if a director has accepted becoming Chair Elect of a
Committee, in the year prior to the director becoming the Chair
of the Committee, the director is encouraged to obtain director
training
and/or
attend an educational session of relevance to that Committee.
Similarly, within a year after accepting a new Committee
assignment, a director is encouraged to obtain director training
and/or
attend an educational session of relevance to that Committee.
Each director is expected to attend a director training or
education session every three calendar years. KeyCorp will
reimburse the reasonable costs and expenses of the training or
education session incurred by the director (not including
spousal expenses), including registration fees, travel, hotel
accommodations and related meals, provided, however, if a
director attends a session which will cover another company on
whose board the director also serves, KeyCorp will, if the other
company is willing, appropriately share the costs and
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expenses with the other company. Management will circulate
brochures to directors of sessions. Directors are asked to
advise management when they are signing up for a session.
XIV. LIMITATION ON PUBLIC COMPANY DIRECTORSHIPS
Unless the Nominating and Corporate Governance Committee
determines otherwise, a director should not serve as a director
of more than three other public companies (for a total of four
including KeyCorp), except that a director who is the chief
executive officer of a public company should only serve as a
director of up to two other public companies (for a total of
three including KeyCorp and his or her own company).
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XV.
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REPRICING OR BACK-DATING OPTIONS
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The Board has determined that KeyCorp will not reprice or
back-date options.
XVI. ONE YEAR HOLDING OF OPTION SHARES
The Compensation and Organization Committee has adopted a policy
that stock options granted to the Chief Executive Officer, the
Chief Administrative Officer, the Chief Financial Officer and
all other Section 16 executives of KeyCorp will contain a
provision requiring that all net shares obtained upon exercise
of the option (less the applicable exercise price and
withholding taxes) must be held for at least one year following
the exercise date or, if later, until the executives stock
ownership meets KeyCorps stock ownership guidelines. The
policy applies to all options granted to such officers from and
after the policys adoption.
XVII. SENIOR EXECUTIVE STOCK OWNERSHIP GUIDELINES
KeyCorp has adopted stock ownership guidelines for
KeyCorps senior executives which specify that the Chief
Executive Officer should own KeyCorp Common Shares with a value
equal to at least five times salary payable in cash, of which
10,000 should be in the form of actual shares, that all members
of KeyCorps Management Committee should own KeyCorp Common
Shares with a value equal to at least three times their
respective salary payable in cash, of which 5,000 should be in
the form of actual shares, and other corporate senior executives
and line of business senior executives whose compensation is
subject to individual review and approval by the Compensation
and Organization Committee should own KeyCorp Common Shares with
a value at least equal to two times their respective salary
payable in cash, of which 2,500 should be in the form of actual
shares. Newly hired executives and recently promoted executives
are encouraged to meet or exceed their required ownership levels
within three years of the date they become subject to the
guidelines and are required to comply within five years. Once an
executive has achieved compliance,
he/she will
be considered to be in compliance for up to three years unless
they take action (i.e. sale of shares) which takes them out of
compliance. For purposes of these guidelines, Common Shares
include actual shares, restricted shares and phantom stock units.
XVIII. SENIOR EXECUTIVE OFFICER COMPLIANCE WITH PROVISIONS
OF THE EMERGENCY ECONOMIC STABILIZATION ACT OF 2008
KeyCorps Senior Executive Officers, as defined by the
Emergency Economic Stabilization Act of 2008 (EESA),
shall comply with all provisions of the EESA including, without
limitation, agreeing to the recovery or clawback of
any bonus and incentive compensation paid to the Executive based
on statements of earnings, gains, or other criteria that are
later proven to be materially inaccurate.
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XIX. REVIEW OF BENEFIT PLANS FOR COMPLIANCE WITH THE
PROVISIONS OF THE EMERGENCY ECONOMIC STABILIZATION ACT OF 2008
The Compensation and Organization Committee reviews
KeyCorps incentive compensation arrangements for Senior
Executive Officers with KeyCorps Chief Risk Officer and
Chief Auditor to assure these incentive compensation
arrangements do not encourage KeyCorps Senior Executive
Officers to take unnecessary and excessive risks and thereby
threaten the value of KeyCorp.
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XX.
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EXTENSIONS OF CREDIT COLLATERALIZED BY KEYCORP STOCK
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The Board has determined that neither KeyCorp nor its
subsidiaries will extend to any director or executive officer
covered by KeyCorps stock ownership guidelines credit
collateralized by KeyCorp stock.
XXI. FORMAL EVALUATION OF CHIEF EXECUTIVE OFFICER
The Compensation and Organization Committee conducts an annual
evaluation of the Chief Executive Officer which includes
soliciting input from the full Board. The results of the annual
evaluation are discussed with the Board as a whole in executive
session.
XXII. ACCESS TO MANAGEMENT AND INDEPENDENT ADVISORS
Board members have complete access to KeyCorps management.
If the Board member feels that it would be appropriate, the
member is asked to inform the Chief Executive Officer of his or
her contact with the officer in question. Members of senior
management normally attend portions of each Board meeting. The
Board may, when appropriate, obtain advice and assistance from
outside advisors and consultants.
XXIII. SUCCESSION PLANNING/MANAGEMENT DEVELOPMENT
The Compensation and Organization Committee, as a part of its
oversight of the management and organizational structure of
KeyCorp, annually reviews and approves KeyCorps management
succession plan for the CEO and other senior officers and
annually reviews KeyCorps program for management
development and, in turn, reports on and reviews these matters,
and their independent deliberations, with the Board in executive
session.
XXIV. AUDITOR PROHIBITED FROM DOING PERSONAL TAX WORK FOR
SENIOR EXECUTIVE OFFICERS
KeyCorps independent auditors shall not serve as the
personal tax advisors or preparers for KeyCorp senior executives
who are members of KeyCorps Management Committee, officers
of KeyCorp in a financial reporting oversight role or their
immediate families unless exempted by the rules of the Public
Company Accounting Oversight Board, or executives of KeyCorp who
are expatriates.
XXV. CORPORATE GOVERNANCE FEEDBACK
The Board encourages management to meet periodically with
significant investors to discuss KeyCorps corporate
governance practices. Management reports the results of the
meetings to the Nominating and Corporate Governance Committee in
order that the Board can more readily consider the views of
significant investors when the Board shapes its corporate
governance practices.
XXVI. COMMITTEE STRUCTURE
The Board exercises certain of its powers through its Audit,
Compensation and Organization, Nominating and Corporate
Governance, Executive, and Risk Management Committees. Each
Committee has a Charter that defines
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the scope of its duties and responsibilities. Each Committee
reviews its Charter annually and recommends its approval to the
full Board which in turn approves the Charter. The Audit,
Compensation and Organization, and Nominating and Corporate
Governance Committees are comprised of only independent
directors. Each Board member sits on at least one Committee. The
frequency, length and agendas of Committee meetings are
determined by the Committee Chair in consultation with Committee
members and appropriate members of senior management. The
Committee Chair reports to the full Board on the matters
undertaken at each Committee meeting. The Audit, Compensation
and Organization, Nominating and Corporate Governance, and Risk
Management Committees meet in executive session on a regular
basis.
CORPORATE
GOVERNANCE ENHANCEMENTS
In 2010, the KeyCorp Board of Directors formed a special Board
committee to review KeyCorps executive compensation
practices with a view to enhancing these practices where
appropriate. The committee reported to the Board in December
2010 and recommended specific enhancements to KeyCorps
corporate governance practices as they relate to executive
compensation. The Board believes that these enhancements are in
the best interests of KeyCorps shareholders and constitute
best practices relative to executive compensation.
The Board and management are in the process of implementing the
committees recommendations, which are as follows:
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KeyCorp, either through the Compensation and Organization
Committee or the Board of Directors, should make an appropriate
formal response to the non-binding shareholder vote declining to
approve KeyCorps executive compensation in 2010.
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The Compensation and Organization Committee should reaffirm its
historical Pay for Performance approach to
compensation and provide for an annual Board discussion of its
philosophy on compensation, consistent with applicable
regulations, before the Compensation and Organization Committee
sets compensation for that year.
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KeyCorp should adopt a policy, consistent with the independence
of the Compensation and Organization Committee under applicable
law, to allow a full Board of Directors discussion of
KeyCorps compensation philosophy, programs and
implementation on a periodic basis to improve full Boards
awareness and understanding of executive compensation. At one
Board meeting each year, the Board should be briefed on the
structure of KeyCorps incentive compensation plans and the
compensation philosophy that drives them.
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KeyCorp should implement a mechanism for the Risk Management
Committee and Audit Committee to make the Compensation and
Organization Committee aware of issues that may impact
KeyCorps future financial performance and therefore affect
incentive compensation awards.
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The Risk Management Committee should routinely look
at concentrations of business and the incentive compensation
associated with those businesses and then advise the
Compensation and Organization Committee of its findings.
Similarly, the Audit Committee should oversee
regular audits of the compensation process, whether by
KeyCorps internal or external auditors as appropriate, and
should make the Compensation and Organization Committee aware of
the audit results as well as any other issues that may impact
KeyCorps future financial performance and therefore affect
incentive compensation awards.
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When KeyCorp has repaid TARP funds and is able to return to its
Pay for Performance approach to executive compensation without
the limitations imposed upon TARP participants, appropriate
measures should be
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implemented by which the Board of Directors can assess
KeyCorps alignment in practice with its Pay for
Performance philosophy. Performance against these measures
should be communicated to the Board and shareholders on a
regular basis.
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When KeyCorp is fully able to re-implement its Pay for
Performance approach to executive compensation, incentive
compensation should be tied primarily to performance-based
measures and
length-of-service
measures should be used sparingly. Incentive compensation also
should include risk adjustments where appropriate.
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KeyCorp should develop a policy for determining the impact of
extraordinary events on compensation decisions and for dealing
systematically with the impact that extraordinary financial
events have on incentive compensation awards.
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Where KeyCorp identifies a significant risk that potentially
affects executive compensation in a material way, the
Compensation and Organization Committee should assess whether
and how that risk should be allocated for compensation purposes.
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As an ongoing objective, KeyCorp should reduce the number and
type of incentive compensation plans currently in place to an
optimal level for aligning pay and performance.
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To assure separation of KeyCorps managements
opinions from those of the independent compensation consultant,
the Compensation and Organization Committee should consider
retaining a consultant independent of the compensation
consultant who works with KeyCorp management in developing
recommended compensation plans and performance targets, and also
should consider retaining independent counsel for the
Compensation and Organization Committee.
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To improve the communication of the linkage between its
compensation philosophy and practices, KeyCorp should review the
Compensation Discussion and Analysis format to eliminate
repetition, excess verbiage, and unnecessary use of technical
language, to develop a more reader friendly
document, and to provide as plain English an
approach to the CD&A as practicable.
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BOARD
LEADERSHIP STRUCTURE
Our governance structure follows a successful leadership model
under which our Chief Executive Officer also serves as Chairman
of the Board. Several years ago, our Board created the position
of Lead Director, and Alexander M. Cutler, who has served on our
Board since 2000, serves as Lead Director. The Lead Director
assumes specific responsibilities, including chairing executive
sessions of the Board, actively participating in setting the
agenda for Board meetings with the Chairman on behalf of the
independent directors, and acting as the primary non-management
contact for shareholders.
The Board recognizes that different leadership models may,
depending upon individual circumstances, work for other
companies and may be appropriate for our company under different
circumstances. Currently, we believe that our Company has been
well-served by the combined Chief Executive Officer and Chairman
leadership structure, complemented by an effective Lead
Director. We believe the Company has greatly benefited from
having a single person setting the tone and direction for our
Company and having primary responsibility for managing our
operations, while allowing the Board to carry out its oversight
responsibilities with the full involvement of each independent
director.
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Our Board is currently comprised of thirteen independent
directors and three members of management. Of our thirteen
independent directors, five are currently serving or have served
as a chief executive officer of a publicly traded company. Each
committee of the Board is chaired by an independent director.
Both our outgoing and new Chairman and Chief Executive Officer
have benefited from the extensive leadership experience of our
Board of Directors.
Annually, the Board evaluates the leadership structure and it
will continue to do so as circumstances change, including when a
new Chief Executive Officer is elected. We reviewed our
leadership structure when we elected Ms. Mooney as our
Chief Executive Officer (effective May 1, 2011) and
determined that our current leadership structure
under which our Chief Executive Officer serves as Chairman of
the Board, our Board committees are chaired by independent
directors, and a Lead Director assumes specified
responsibilities on behalf of the independent
directors continues to be the optimal Board
leadership structure for our Company and our shareholders.
BOARD
OVERSIGHT OF RISK
The Board of Directors has delegated the primary oversight
responsibility for risk to the Audit Committee and the Risk
Management Committee. The Audit Committee has oversight
responsibility over internal audit, financial reporting,
compliance and legal matters, the implementation, management,
and evaluation of operational risk and controls, and information
security and fraud risk. The Risk Management Committee has
oversight responsibility over credit risk, market risk and
liquidity risk. The Committees jointly provide oversight review
of the allowance for loan and lease losses methodology. The
Chairs of each Committee report to the full Board at each Board
meeting on risk oversight issues.
As part of the risk oversight process, the Board has formed a
senior level management committee called the Enterprise Risk
Management Committee (the ERM Committee). The ERM
Committee consists of Ms. Mooney and other senior officers
at KeyCorp including Mr. Hyle, KeyCorps Chief Risk
Officer. The ERM Committee meets weekly and is the central
governance committee to manage risk and to insure that the
corporate risk profile is managed in a manner consistent with
the KeyCorp risk appetite. The ERM Committee also is responsible
for implementation of KeyCorps Enterprise Risk Management
Program. This Program encompasses KeyCorps risk
philosophy, policy, framework and governance structure for the
management of risks across the entire company. The ERM Committee
reports to the Risk Management Committee. The Board of Directors
approves the Enterprise Risk Management Program as well as
KeyCorps risk appetite.
The Board through its Compensation and Organization Committee
also oversees risk as it relates to KeyCorps compensation
policies and practices. A full discussion of this issue is set
forth in the Compensation and Organization Committee Report
(Including Discussion of Compensation Policies and Practices as
They Relate to Risk Management) set forth on page of
this proxy statement.
COMMUNICATIONS
WITH THE BOARD
Interested parties may make their comments and views about
KeyCorp known to the directors by directly contacting the Lead
Director by mailing a statement of their comments and views to
KeyCorp at its corporate headquarters in Cleveland, Ohio. Such
correspondence should be addressed to the Lead Director, KeyCorp
Board of Directors, care of the Secretary of KeyCorp, and marked
Confidential.
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DIRECTOR
INDEPENDENCE AND RELATED PARTY TRANSACTIONS
As part of its Corporate Governance Guidelines, the Board has
adopted categorical standards to determine Director independence
that conform to the New York Stock Exchange independence
standards. The specific KeyCorp standards are set forth on
KeyCorps website: www.key.com/ir. Generally, under
these standards, a director is not independent:
(1) if he or she or an immediate family member has received
during any twelve-month period within the last three years more
than $100,000 in direct compensation from KeyCorp (other than
current or deferred director fees) (directly compensated
individual);
(2) if, within the past three years, he or she has been
employed by KeyCorp or an immediate family member has been an
executive officer of KeyCorp (former employee);
(3) if (a) he or she or an immediate family member is
a current partner of a firm that is KeyCorps internal or
external auditor; (b) he or she is a current employee of
such a firm; (c) he or she has an immediate family member
who is a current employee of such a firm and who participates in
the firms audit, assurance or tax compliance practice; or
(d) he or she or an immediate family member was within the
last three years (but is no longer) a partner or employee of
such a firm and personally worked on KeyCorps audit within
that time (former auditor);
(4) if, within the past three years, he or she has been
employed by a company upon whose board an executive officer of
KeyCorp concurrently serves or an immediate family member has
been employed as an executive officer by a company upon whose
compensation committee an executive officer of KeyCorp
concurrently serves (interlocking director);
(5) if he or she is employed by, or an immediate family
member is an executive officer of, a significant customer or
supplier of KeyCorp. An entity is a significant customer of
KeyCorp if during any of the last three years the customer made
payments for property or services to KeyCorp in an amount that
exceeded the greater of $1 million or 2% of the
customers consolidated gross revenues. Likewise, an entity
is a significant supplier of KeyCorp if during any of the last
three years the amount paid to the supplier by KeyCorp exceeded
the greater of $1 million or 2% of the suppliers
consolidated gross revenues (significant customer or
supplier);
(6) if he or she is an executive officer of a
not-for-profit
entity that has received significant contributions from KeyCorp
during the last three years. An entity will be deemed to have
received significant contributions from KeyCorp if
KeyCorps annual contribution to the entity exceeds the
greater of $1 million or 2% of the entitys total
annual revenues (significant charitable contribution
recipient); or
(7) if he or she has, or is affiliated with an entity that
has, a loan from KeyCorp which (a) was not made in the
ordinary course of business by a KeyCorp subsidiary,
(b) was not made on the same terms as comparable
transactions with other persons, (c) involved when made
more than the normal risk of collectability, or (d) is
characterized as criticized or classified by the KeyCorp
subsidiary (non-independent borrower).
Messrs. Meyer and Stevens and Ms. Mooney are not
independent because they are employees of KeyCorp. As an
employee of KeyCorp, Mr. Meyer and members of his immediate
family received in 2010 a standard employee discount on trust
services provided by KeyCorp totaling approximately $10,629 and
Mr. Stevens and members of his immediate family received in
2010 the same type of discount totaling approximately $2,015.
The Board of Directors has determined that all other members of
the Board of Directors (i.e., Dr. Cartwright, Mss.
Gile, Gillis, Manos, and Snyder, and Messrs. Bares,
Campbell, Carrabba, Cutler, Dallas, Menascé, Sanford, and
Stack) are
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independent and that Lauralee Martin was independent prior to
her retirement on November 18, 2010. The determination was
made by reviewing the relationship of each of these individuals
to KeyCorp in light of the KeyCorp categorical standards of
independence and such other factors, if any, as the Board deemed
relevant. Members of the Audit, Compensation and Organization,
and Nominating and Corporate Governance Committees are all
independent.
In determining the independence of the aforementioned members of
the Board of Directors, the Board considered certain
transactions, relationships, or arrangements between those
directors and KeyCorp. The Board determined that none of these
transactions, relationships, or arrangements is in conflict with
KeyCorps categorical standards of independence and that no
such transaction, relationship or arrangement is material or
impairs any directors independence for any other reason.
The transactions, relationships, and arrangements considered by
the Board and determined to be immaterial were as follows:
Dr. Cartwright, Messrs. Bares, Campbell, Carrabba,
Cutler, and Sanford, and Ms. Snyder were customers of one
or more of KeyCorps subsidiary banks or other subsidiaries
during 2010 and had transactions with such banks or other
subsidiaries in the ordinary course of business. In addition,
Dr. Cartwright, Messrs. Bares, Campbell, Carrabba,
Cutler, and Menascé, and Mss. Gillis, Martin, and Snyder
are officers of, or have a relationship with, corporations or
are members of partnerships that were customers of such banks or
other subsidiaries during 2010 and had transactions with such
banks or other subsidiaries in the ordinary course of business.
All loans included in such transactions were made on
substantially the same terms, including rates and collateral, as
those prevailing at the time for comparable transactions with
other persons not related to KeyCorp, and did not involve more
than normal risks of collectability or present other unfavorable
features. Similar transactions continue to be effected during
2011. KeyCorp entered into three unrelated transactions with
Jones Lang LaSalle, Inc. prior to Ms. Martins
retirement on November 18. Ms. Martin is the Chief
Operating and Financial Officer of Jones Lang LaSalle, Inc. The
first transaction was for property maintenance services. The
work was competitively bid and Jones Lang LaSalle was the lowest
and best bidder. The amount of the transaction is approximately
$2,400,000 which is . % of Jones
Lang LaSalles 2010 revenues. The second transaction
involved the hiring of Jones Lang LaSalle to assist in
auctioning off certain KeyCorp properties. Jones Lang LaSalle
received approximately $350,000 for this work which is
approximately . % of Jones Lang
LaSalles 2010 revenues. The third transaction was for work
as project construction manager for certain KeyCorp properties.
The amount of this project is $250,000 which is
. % of Jones Lang LaSalles
2010 revenues.
KeyCorp has adopted a Policy for Review of Transactions between
KeyCorp and its Directors, Executive Officers, and Other Related
Persons. A copy of the Policy can be found at
www.key.com/ir. The transactions subject to the Policy
include any transaction, relationship, or arrangement with
KeyCorp in which any director, executive officer or other
related person has a direct or indirect material interest other
than transactions, relationships or arrangements excepted by the
Policy. These exceptions include transactions available to all
KeyCorp employees generally, transactions involving compensation
or indemnification of executive officers or directors authorized
by the Board of Directors or one of its committees, transactions
involving reimbursement for routine expenses, and transactions
occurring in the ordinary course of business. The Nominating and
Corporate Governance Committee is responsible for applying the
Policy and uses the factors included in the Policy in making its
determinations. These factors include whether the transaction is
in conformity with KeyCorps Code of Ethics and Corporate
Governance Guidelines and is in KeyCorps best interests;
whether the transaction is on terms comparable to those that
could be obtained in arms length dealings with an
unrelated third party; whether the transaction would be
disclosable under Item 404 of
Regulation S-K
under the Exchange Act; and whether the transaction could call
into question the independence of any of KeyCorps outside
directors.
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Issue
Two
APPROVAL
OF KEYCORP
2011
ANNUAL PERFORMANCE PLAN
General
On January 20, 2011, KeyCorps Board of Directors
approved the KeyCorp 2011 Annual Performance Plan (the
Annual Plan). The purpose of the Annual Plan is to
advance the interests of KeyCorp and its shareholders and assist
KeyCorp in attracting and retaining key employees by providing
annual incentives that are intended to be deductible to the
maximum extent possible as performance-based
compensation under Section 162(m) of the Internal
Revenue Code.
The following summary describes the principal terms of the
Annual Plan. The description of the Annual Plan is qualified by
reference to the full text of the Annual Plan, which is included
as Appendix A to this Proxy Statement.
Summary
of the Annual Plan
Administration. The Annual Plan will be
administered by the Compensation and Organization Committee (the
Committee). In administering the Annual Plan, the
Committee will approve the goals, participation, target bonus
awards, actual bonus awards, timing of payment and other actions
necessary for the administration of the Annual Plan, based on
the recommendations of senior management. Senior management will
execute the provisions of the Annual Plan in accordance with the
Committees directions. The Annual Plan will be interpreted
and operated consistent with the intention that all awards
granted under the Annual Plan qualify as performance-based
compensation for purposes of Section 162(m) of the
Internal Revenue Code.
Eligibility. The individuals eligible to
participate in the Annual Plan will consist of the Chief
Executive Officer and any of the officers of KeyCorp reporting
directly to the Chief Executive Officer who are selected by the
Committee. If approved by shareholders, approximately six
officers of KeyCorp would be eligible to participate in the
Annual Plan for 2011. KeyCorps ability to make awards
under the Annual Plan will be impacted by KeyCorps status
as a TARP recipient.
Establishment of Incentive Opportunities. On
or before March 30 of each year, the Committee will select
objective performance goals to be used in determining the total
bonus pool available under the Annual Plan. The
bonus pool will be a dollar amount calculated by reference to
specified levels of or growth in any one or more of the
following corporate performance goals: earnings per
share, total revenue, net interest income, noninterest income,
net income, net income before tax, noninterest expense,
efficiency ratio, return on equity, return on assets, economic
profit added, loans, deposits, tangible equity, assets, net
charge-offs, nonperforming assets, return on risk-weighted
assets, total shareholder return, stock price, or pre-provision
net revenue. The corporate performance goals may be described in
terms of company-wide objectives or objectives that are related
to the performance of any subsidiary, division, department,
region or function of KeyCorp, and may be made relative to the
performance of other companies.
On or before March 30 of each year, the Committee will also
assign a percentage share of the bonus pool to each participant
in the Annual Plan which will be the maximum amount that a
participant can receive under the Annual Plan for that year. No
participant will be assigned a percentage share worth more than
$7,500,000.
Each year, the Committee will also establish performance goals
for each participant, which may contain corporate, business unit
and individual performance objectives. Whether or not a
participant will receive all or any
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part of the percentage share assigned to him or her will be
based on the achievement of the individual goals and corporate
and business unit financial and strategic objectives established
for that year. These corporate and business unit objectives may
be based on the goals set forth above or any other measure.
Award Determinations. At the end of each year,
the Committee will certify in writing the achievement of the
corporate performance goals and the total bonus pool based on
the results of the corporate performance goal or goals. At that
time, the Committee will also assess each participants
performance against the individual goals established for each
participant. The Committee will make a determination as to
whether, and to what extent, the goals have been achieved. Based
on this assessment, the Committee will determine whether each
participant is entitled to a bonus and, if earned, what each
participants bonus will be.
Payments. Awards under the Annual Plan will be
paid in cash within 70 days after the end of each year, but
the awards exceeding $100,000 may be required to be deferred and
paid in the form of restricted shares of KeyCorp common stock
pursuant to KeyCorps Annual Incentive Plan. Awards earned
under the Annual Plan may also be voluntarily deferred as
provided under KeyCorps Deferred Savings Plan.
Forfeiture and Recovery of Awards. The
Committee retains the right at all times to decrease or
terminate any award under the Annual Plan to ensure that awards
conform with the intent of the Annual Plan and KeyCorps
risk policies and guidelines or otherwise as provided pursuant
to the Annual Plan. In addition, awards otherwise earned under
the Annual Plan will be subject to forfeiture to, or recovery
by, KeyCorp as determined by the Committee to comply with the
requirements of the EESA, the banking regulatory agencies
Guidance on Sound Incentive Compensation Policies, the
Dodd-Frank Wall Street Reform and Consumer Protection Act, and
KeyCorps Enterprise Risk Management risk requirements and
policies.
Amendment and Termination of Annual Plan. The
Committee reserves the right to amend or terminate the Annual
Plan in whole or in part, at any time and for any reason, by
action of the KeyCorp Board of Directors. However, KeyCorp would
seek shareholder approval for the amendment or termination of
the Annual Plan to the extent required for awards granted under
the Annual Plan to qualify as performance-based
compensation under Section 162(m) of the Internal
Revenue Code.
Federal
Income Tax Consequences
Under present Federal income tax law, a participant in the
Annual Plan will be taxed at ordinary income rates on the amount
of any payment received pursuant to the Annual Plan. To the
extent that an award under the Annual Plan is paid in the form
of restricted shares of KeyCorp common stock, the participant
generally will be taxed at ordinary income rates at the time
that such restricted shares become vested and in an amount equal
to the fair market value of such shares of KeyCorp common stock
on the vesting date.
Generally, and subject to the provisions of Section 162(m)
of the Internal Revenue Code, KeyCorp will receive a Federal
income tax deduction corresponding to the amount of income
recognized by a participant in the Annual Plan.
Plan
Benefits
It is not possible to determine specific amounts that may be
awarded in the future under the Annual Plan.
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Vote
Required
The favorable vote of the holders of a majority of KeyCorp
Common Shares present in person or by proxy and entitled to vote
at the meeting will be required to approve the Annual Plan,
provided that a majority of the outstanding shares is voted with
respect hereto. If the Annual Plan is not approved, no awards
will be paid under the Annual Plan.
The Board of Directors of KeyCorp unanimously recommends that
the shareholders vote FOR the approval of the 2011 Annual
Performance Plan.
Issue
Three
AMENDMENT TO REGULATIONS TO REMOVE ALL SHAREHOLDER
VOTING REQUIREMENTS GREATER
THAN THE STATUTORY NORM
The Board of Directors is proposing that KeyCorps Code of
Regulations be amended to remove all shareholder voting
requirements greater than the statutory norms.
The decision of the Board of Directors to place the proposal
before the shareholders is based on the recommendation of the
Nominating and Corporate Governance Committee which consists
entirely of independent directors. The Committee reviewed the
matter and in reaching its decision considered the positions
articulated by KeyCorps shareholders and their advisors.
Under the proposed amendment, four provisions of the Regulations
would be amended:
First, Article I, Section 3(iv) of the Regulations
would be revised. This section presently requires shareholders
holding at least 50% of KeyCorps voting power to call a
special meeting. The Board is proposing that the section be
amended so that holders of shares holding only at least 25% of
KeyCorps voting power may call a special meeting. This is
the statutory norm under the Ohio Revised Code. The amendment
will make it easier for shareholders to call a special meeting.
Second, Article II, Section 1 would be revised. This
section presently requires that shareholders holding at least
75% of KeyCorps voting power must vote in favor of fixing
or changing the number of directors unless the Board of
Directors recommends the proposal. If the Board of Directors
recommends the proposal, only the vote of those holding a
majority of KeyCorps voting power must vote to fix or
change the number of directors. The Ohio statutory norm requires
that once a quorum exists, the affirmative vote of a majority of
KeyCorp shares represented in person or proxy at that meeting is
needed to fix or change the number of directors. The Board is
proposing that the statutory norm be followed and that only the
affirmative vote of a majority of shares represented in person
or proxy at a meeting (so long as a quorum is present) be
required to fix or change the number of directors. Again, this
amendment would make it easier for the shareholders to fix or
change the number of directors.
Third, Article I, Section 11(b) would be revised. This
section requires that shareholders holding at least 75% of
KeyCorps voting power may remove a director. The proposal
would require that the affirmative vote of shareholders holding
only a majority of KeyCorps voting power would be required
to remove a director. This is the statutory norm under the Ohio
Revised Code. This amendment would make it easier for the
shareholders to remove a director.
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Finally, Article X would be revised. This section presently
requires that shareholders holding at least 75% of
KeyCorps voting power must vote to amend the Regulations
unless the Board of Directors recommends the proposed amendment.
If the Board of Directors recommends the proposal, only the vote
of those holding a majority of KeyCorps voting power must
vote in favor of amending the Regulations. The Board of
Directors is recommending that the vote of only those holding a
majority of KeyCorps voting power be required to amend the
Regulations in all cases. This the statutory norm under the Ohio
Revise Code. This amendment would make it easier for the
shareholders to amend the Regulations.
The Regulations contain certain provisions for the protection of
holders of the preferred stock of KeyCorp. None of these
proposals affect the rights of holders of preferred stock and
therefore only a vote of the holders of Common Shares is
required on this proposal.
The text of the proposed amendment is set forth in
Appendix B to this proxy statement.
Vote Required. As stated above, the
Regulations may be amended by the affirmative vote of holders of
shares entitled to exercise 75% of the voting power on such
proposal, unless such amendment is recommended by two-thirds of
the authorized Board of Directors, in which case the requisite
vote is a majority of the voting power of KeyCorp. Because at
least two-thirds of the entire authorized Board of Directors has
recommended this proposed amendment, the affirmative vote of the
holders of KeyCorps Common Shares entitling them to
exercise a majority of the voting power of KeyCorp is required
to adopt this amendment to the Regulations.
The Board of Directors of KeyCorp unanimously recommends that
the shareholders vote FOR adoption of this amendment to the
Regulations.
Issue
Four
AMENDMENT TO ARTICLES AND REGULATIONS
CONCERNING THE VOTING RIGHTS
OF SERIES B PREFERRED STOCK
The Board of Directors is proposing that KeyCorps Articles
and Regulations be amended as set forth in Appendix C to
this proxy statement to conform the voting rights of the
Series B Preferred Stock issued to the U.S. Treasury
with the standard terms mandated by the U.S. Treasury under
the TARP Capital Purchase Program, which was created under the
EESA.
Background
On October 14, 2008, the U.S. Treasury announced the
creation of the TARP Capital Purchase Program to encourage
U.S. financial institutions to raise capital in order to
increase the flow of financing to businesses and consumers in
the U.S. The TARP Capital Purchase Program was designed to
attract broad participation by healthy financial institutions
and to do so in a way that would attract private capital to
those institutions with the goal of increasing confidence in
U.S. financial institutions and increasing the confidence
of those financial institutions to lend.
On November 14, 2008, KeyCorp and the U.S. Treasury
entered into and consummated a Letter Agreement, dated
November 14, 2008, and a Securities Purchase
Agreement Standard Terms (collectively, the
Purchase Agreement), pursuant to which KeyCorp
issued to the U.S. Treasury (i) 25,000 shares of
Series B Preferred Stock, and (ii) a warrant to
purchase 35,244,361 KeyCorp Common Shares, at an exercise price
of $10.64 per share, subject
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to certain anti-dilution and other adjustments, for an aggregate
purchase price of $2.5 billion. Pursuant to the Purchase
Agreement, KeyCorp agreed to include in its proxy statement for
the 2009 Annual Meeting of Shareholders and thereafter a
proposal to amend Article IV of KeyCorps Articles in
the form set forth on Appendix B hereto to conform the
voting rights of the Series B Preferred Stock with the
standard terms for shares of senior preferred stock issued to
the U.S. Treasury under the TARP Capital Purchase Program.
What are
these Amendments intended to accomplish?
The U.S. Treasury requires that shares of preferred stock
purchased by it pursuant to the TARP Capital Purchase Program
have certain limited class voting rights that are different from
those currently provided for under the Articles or Ohio law.
Therefore, pursuant to the Purchase Agreement, KeyCorp agreed
with the U.S. Treasury to include in its proxy statement
for the 2009 Annual Meeting of Shareholders a proposal to amend
the Articles to provide for the required voting rights. Unless
KeyCorps shareholders approve these proposed amendments to
the Articles and Regulations, KeyCorp is required to submit the
proposed amendments at each subsequent annual meeting of its
shareholders until such approval is obtained. Because
KeyCorps shareholders did not approve the proposed
amendments to the Articles and Regulations at either the 2009 or
2010 Annual Meeting, this proposal is being resubmitted to the
shareholders at this Annual Meeting.
The proposed amendments to Article IV, Part A,
Section 2(a) and Article IV, Part E of the
Articles would revise the express terms of the issued and
outstanding shares of the Series B Preferred Stock to
provide limited voting rights that conform to the standard terms
required in connection with the TARP Capital Purchase Program,
including to (1) allow shares of Series B Preferred
Stock to vote as a class with any other preferred stock having
similar voting rights for the election and removal of two
directors of KeyCorp (the Preferred Directors) in
the event KeyCorp fails to pay dividends on such shares of
preferred stock purchased by the U.S. Treasury for six
quarterly dividend periods, whether or not consecutive, and
(2) allow shares of Series B Preferred Stock to vote
as a class on certain significant corporate actions, namely the
authorization of any senior stock, any amendment to the terms of
the Series B Preferred Stock purchased by the
U.S. Treasury, and certain share exchanges,
reclassifications, mergers and consolidations.
The proposed amendment to Article II, Section 11(b) of
the Regulations would expressly provide that any standard for
removing directors contained in the Articles will govern if
there is any conflict with the standards for removing directors
set forth in the Regulations. Similarly, the proposed amendment
to Article II, Section 12 of the Regulations would
expressly provide that any procedures for filling vacancies on
the Board of Directors contained in the Articles will govern if
there is any conflict with the procedures for filling vacancies
on the Board set forth in the Regulations.
What
voting rights do shares of KeyCorps Preferred Stock
presently have?
The Articles confer the following voting rights on shares of
Preferred Stock, including the Series B Preferred Stock:
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Whenever KeyCorp fails to pay full dividends on any series of
Preferred Stock for six quarterly dividend payment periods,
whether or not consecutive, the holders of all outstanding
series of Preferred Stock, voting as a single class without
regard to series, will be entitled to vote for the election of
two additional directors until full cumulative dividends for all
past dividend payment periods on all series of Preferred Stock
have been paid or declared and set apart for payment and
non-cumulative dividends have been paid regularly for at least
one full year;
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The affirmative vote or consent of the holders of at least
two-thirds of all of the shares of the then outstanding shares
of Preferred Stock, voting as a separate class, shall be
required to amend, alter or repeal the provisions of the
Articles or Regulations which would be substantially prejudicial
to the voting powers, rights, or preferences of the holders of
such outstanding shares of Preferred Stock; provided,
however, that neither the amendment of the Articles to
authorize or to increase the authorized or outstanding number of
shares of any class ranking junior to or on a parity with
Preferred Stock, nor the amendment of the Regulations so as to
change the number of KeyCorps directors, will be deemed to
be substantially prejudicial to the voting powers, rights, or
preferences of the holders of Preferred Stock; and provided
further that if any amendment, alteration, or repeal would be
substantially prejudicial to the rights or preferences of one or
more but not all of the then outstanding series of Preferred
Stock, the affirmative vote or consent of the holders of at
least two-thirds of the then outstanding shares of the series so
affected shall also be required;
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The affirmative vote or consent of the holders of at least
two-thirds of the then outstanding shares of Preferred Stock,
voting as a single class, shall be required to effect any one or
more of the following: (i) the authorization of, or the
increase in the authorized number of, any shares of any class
ranking senior to the Preferred Stock; or (ii) the purchase
or redemption for sinking fund purposes or otherwise of less
than all of the then outstanding shares of the Preferred Stock
except in accordance with a purchase offer made to all holders
of record of such Preferred Stock, unless all dividends on all
Preferred Stock then outstanding for all previous dividend
periods shall have been declared and paid or funds sufficient
for the payment of those dividends have been set apart and all
accrued sinking fund obligations applicable thereto shall have
been complied with.
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Under Ohio law, even if shares are otherwise designated as
non-voting shares, the holders of such shares are entitled to
vote as a separate class on certain changes in the terms of the
shares of such class, including changes in the express terms or
additions to the terms in any manner substantially prejudicial
to the holders of the shares of such class. Ohio law also
requires that any merger or consolidation of a corporation with
or into any other entity in which the corporation is not the
surviving corporation shall be approved by the holders of each
class of outstanding stock, if such class of stock would be
changed in such merger or consolidation in a manner that would
have required the approval of such class if the change were
effected by an amendment to the corporations articles of
incorporation.
What
voting rights would shares of Series B Preferred Stock have
if the Amendments were adopted?
Voting Rights as to the Election of Preferred
Directors. The standard terms required by the
U.S. Treasury for Series B Preferred Stock include
that whenever, at any time or times, dividends payable on the
shares of Series B Preferred Stock have not been paid for
an aggregate of six quarterly dividend periods or more, whether
or not consecutive, the authorized number of directors of
KeyCorp shall automatically be increased by two and the holders
of the Series B Preferred Stock shall have the right, with
holders of shares of any one or more other classes or series of
KeyCorps Preferred Stock that have like voting rights with
the Series B Preferred Stock with respect to such matter,
voting together as a class, to elect the Preferred Directors to
fill such newly created directorships at KeyCorp. Such Preferred
Directors are to be in addition to the directors elected by the
holders of KeyCorps Common Shares. Holders of
Series B Preferred Stock and any voting parity Preferred
Stock will not be entitled to vote on directors elected by the
holders of Common Shares, and vice versa.
Additional Limited Series Voting
Rights. The standard terms required by the
U.S. Treasury for Series B Preferred Stock also
provide that, for so long as shares of Series B Preferred
Stock remain outstanding, in addition to any other vote or
consent of shareholders required by law or by the Articles, the
vote or consent of the holders of at
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least two-thirds of the shares of the Series B Preferred
Stock at the time outstanding, voting as a separate class, given
in person or by proxy, either in writing without a meeting or by
vote at any meeting called for the purpose, shall be necessary
for effecting or validating:
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Authorization of Senior Stock. Any
amendment or alteration of the Articles to authorize or create
or increase the authorized amount of, or any issuance of, any
shares of, or any securities convertible into or exchangeable or
exercisable for shares of, any class or series of capital stock
of KeyCorp ranking senior to Series B Preferred Stock with
respect to either or both the payment of dividends
and/or the
distribution of assets on any liquidation, dissolution or
winding up of KeyCorp;
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Amendment of Series B Preferred
Stock. Any amendment, alteration or repeal of
any provision of the Articles so as to adversely affect the
rights, preferences, privileges or voting powers of
Series B Preferred Stock; or
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Share Exchanges, Reclassifications, Mergers and
Consolidations. Any consummation of a binding
share exchange or reclassification involving Series B
Preferred Stock, or of a merger or consolidation of KeyCorp with
another corporation or other entity, unless in each case
(x) the shares of Series B Preferred Stock remain
outstanding or, in the case of any such merger or consolidation
with respect to which KeyCorp is not the surviving or resulting
entity, are converted into or exchanged for preference
securities of the surviving or resulting entity or its ultimate
parent, and (y) such shares remaining outstanding or such
preference securities, as the case may be, have such rights,
preferences, privileges and voting powers, and limitations and
restrictions thereof, taken as a whole, as are not materially
less favorable to the holders thereof than the rights,
preferences, privileges and voting powers, and limitations and
restrictions thereof, of Series B Preferred Stock
immediately prior to such consummation, taken as a whole;
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provided, however, that for all the above purposes, any
increase in the amount of the authorized Preferred Stock,
including any increase in the authorized amount of Series B
Preferred Stock necessary to satisfy preemptive or similar
rights granted by KeyCorp to other persons prior to the date
that the U.S. Treasury and KeyCorp entered into the
Purchase Agreement, or the creation and issuance, or an increase
in the authorized or issued amount, whether pursuant to
preemptive or similar rights or otherwise, of any other series
of Preferred Stock, or any securities convertible into or
exchangeable or exercisable for any other series of Preferred
Stock, ranking equally with
and/or
junior to Series B Preferred Stock with respect to the
payment of dividends (whether such dividends are cumulative or
non-cumulative) and the distribution of assets upon liquidation,
dissolution or winding up of KeyCorp will not be deemed to
adversely affect the rights, preferences, privileges or voting
powers, and shall not require the affirmative vote or consent
of, the holders of outstanding shares of the Series B
Preferred Stock.
Each share of Series B Preferred Stock issued to the
U.S. Treasury pursuant to the TARP Capital Purchase Program
has one vote per share.
A summary of the existing terms of the Series B Preferred
Stock that the U.S. Treasury purchased from KeyCorp is set
forth in
Form 8-K
filed on November 20, 2008, which is incorporated into this
proxy statement by reference. That summary is qualified in its
entirety by the express terms of the Series B Preferred
Stock set forth in that filing.
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Could the
Amendments be substantially prejudicial to the holders of the
Common Shares and/or Series A Preferred Stock?
KeyCorp believes that voting rights substantially equivalent to
the voting rights set forth in the U.S. Treasurys
standard terms for Series B Preferred Stock would be
available to the holders of such shares under existing
provisions of the Articles and Ohio law, even if not set forth
in the express terms of Series B Preferred Stock. The
material difference between the existing voting rights relating
to the Series B Preferred Stock and the voting rights of
the Series B Preferred Stock if the amendments were adopted
by shareholders is that holders of the Series B Preferred
Stock would be entitled to vote separately as an independent
voting class on those matters set forth under Additional
Limited Series Voting Rights. KeyCorp does not believe
that granting these additional voting rights to holders of
Series B Preferred Stock will be substantially prejudicial
to the holders of either Common Shares or Series A
Preferred Stock. While KeyCorp further believes that the
separate votes of the holders of shares of Series A
Preferred Stock and Series B Preferred Stock on these
amendments may not be required under the Articles
and/or the
Ohio law as it does not appear that the Amendments are
substantially prejudicial to the rights of such holders, KeyCorp
nonetheless is allowing the holders of Series A Preferred
Stock and Series B Preferred Stock to vote separately on
these amendments.
Additionally, KeyCorp believes that the limited class voting
rights set forth in the proposed amendment of the terms of the
Series B Preferred Stock issued by KeyCorp pursuant to the
TARP Capital Purchase Program will not have any potential
anti-takeover effect on KeyCorp.
What
would be the consequence of a failure to approve these
Amendments?
In the event that the shareholders of KeyCorp fail to approve
the amendments set forth in this Issue Four, KeyCorp would be
required to submit these proposed amendments at each subsequent
annual meeting of its shareholders until approval is obtained.
What is
the required vote for approval by KeyCorps shareholders of
these Amendments?
The text of the proposed amendments is set forth in
Appendix C to this proxy statement. Pursuant to
Article VI and Article IV, Part A,
Section 2(c) of the Articles, (i) the affirmative vote
of the holders of the Common Shares entitling them to exercise a
majority of the voting power of such shares, (ii) the
affirmative vote of the holders of the Series A Preferred
Stock of KeyCorp entitling them to exercise two-thirds of the
voting power of such shares and (iii) the affirmative vote
of the holders of the Series B Preferred Stock entitling
them to exercise two-thirds of the voting power of such shares,
is necessary to adopt the proposed amendments to the Articles
and Regulations.
The Board of Directors unanimously recommends that the
shareholders vote FOR adoption of these amendments to the
Articles and the Regulations.
Issue
Five
INDEPENDENT
AUDITORS
The Audit Committee of the Board of Directors of KeyCorp has
appointed Ernst & Young LLP (Ernst &
Young) as KeyCorps independent auditors to examine
the financial statements of KeyCorp and its subsidiaries for the
year 2011. The Board of Directors recommends ratification of the
appointment of Ernst & Young. The favorable vote of
the holders of a majority of the KeyCorp Common Shares
represented in person or by proxy at the Annual Meeting will be
required for such ratification.
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A representative of Ernst & Young will be present at
the meeting with an opportunity to make a statement if such
representative desires to do so and to respond to appropriate
questions.
Although shareholder approval of this appointment is not
required by law or binding on the Audit Committee, the Audit
Committee believes that shareholders should be given the
opportunity to express their views. If the shareholders do not
ratify the appointment of Ernst & Young as
KeyCorps independent auditors, the Audit Committee will
consider this vote in determining whether or not to continue the
engagement of Ernst & Young.
The Board of Directors unanimously recommends that
shareholders vote FOR the ratification of this appointment.
Issue
Six
APPROVAL
OF KEYCORPS EXECUTIVE COMPENSATION
As required by Section 111(e) (1) of the EESA,
KeyCorps Board of Directors is providing shareholders with
the opportunity to cast an advisory vote on its compensation
program at the 2011 Annual Meeting. As set forth in the EESA,
this vote will not be binding on or overrule any decisions by
KeyCorps Board of Directors, will not create or imply any
additional fiduciary duty on the part of the Board, and will not
restrict or limit the ability of KeyCorps shareholders to
make proposals for inclusion in proxy materials related to
executive compensation. However, the Compensation and
Organization Committee has taken and will take into account the
outcome of the vote when considering executive compensation
arrangements.
As described in the Compensation Discussion and Analysis section
of this proxy statement, even though KeyCorp is prohibited from
paying bonuses or other types of performance-based incentive
awards to our named executive officers while we are under TARP
regulations, KeyCorp remains committed to a pay-for-performance
philosophy. The Compensation and Organization Committee
recognized the import of the shareholders May 2010
negative advisory vote on executive compensation and determined
to consider that vote in detail at its July 2010 meeting as set
out more fully in the Compensation Discussion and Analysis.
Further, in August 2010, the Compensation and Organization
Committee reviewed the compensation data from the 2010 proxy
season and KeyCorps performance relative to goals and
peers for the first half of the year and determined to reduce
the Chief Executive Officers total direct compensation
from $5 million to $4.5 million to bring his
compensation in line with the TARP bank peer median.
KeyCorp returned to profitability in the second half of 2010 and
the company earned $.47 per common share from continuing
operations for the full year. Keys ranking relative to
peers improved on all measures in 2010 and total shareholder
return was in the
85th percentile
at year end. The company made meaningful progress in
profitability and credit quality and Keys strong capital,
liquidity and loan loss reserves position the company well to
compete in 2011.
The Board of Directors has determined that the best way to allow
shareholders to vote on KeyCorps executive pay programs
and policies is through the following resolution:
RESOLVED, that the shareholders approve on an advisory
basis KeyCorps executive compensation, as described in the
Compensation Discussion and Analysis and the tabular disclosure
regarding named executive officer compensation (together with
the accompanying narrative disclosure) in this proxy statement.
Vote Required. Approval of this proposal will
require the affirmative vote of a majority of the KeyCorp Common
Shares represented in person or by proxy at the Annual Meeting.
The Board of Directors unanimously recommends that the
shareholders vote FOR this proposal.
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Issue
Seven
FREQUENCY
OF SHAREHOLDER VOTE ON APPROVAL OF KEYCORPS EXECUTIVE
COMPENSATION
The Dodd-Frank Act requires that publicly traded companies seek
a non-binding shareholder vote on the frequency of the advisory
shareholder vote on executive compensation (as set forth in
Issue Six). The statutory alternatives for the frequency of the
advisory vote on executive compensation are annually, every two,
or every three years.
Because TARP already requires KeyCorp to submit the advisory
vote on executive compensation to shareholders annually, we are
not currently required to seek a shareholder vote on the
frequency of the executive compensation advisory vote.
Nevertheless, we are asking the shareholders for an advisory
vote on the frequency of the executive compensation vote at this
time because the Board of Directors values the
shareholders opinion on this matter and because once
KeyCorp is no longer subject to TARP, this vote (although still
only advisory) will satisfy the Dodd-Frank requirement.
As stated, we ask that the shareholders vote on whether the
advisory vote on KeyCorps executive compensation program
should occur annually, every two, or every three years. The
Board of Directors values highly regular and frequent input from
our shareholders on important issues such as executive
compensation. Accordingly, the Board of Directors recommends
that the shareholders vote in favor of an annual advisory vote
on executive compensation.
Vote Required. The frequency for the advisory
vote on executive compensation (that is, annually, every two
years, or every three years) that receives the vote of the
greatest number of the KeyCorp Common Shares represented in
person or proxy at the Annual Meeting will be the frequency
recommended by the shareholders.
The Board of Directors recommends that the shareholders vote
in favor of an annual advisory vote on executive
compensation.
EXECUTIVE
OFFICERS
The executive officers of KeyCorp are principally responsible
for making policy for KeyCorp, subject to the supervision and
direction of KeyCorps Board of Directors. All officers are
subject to annual election at the annual organizational meeting
of the directors. Mr. Meyer has an employment agreement
with KeyCorp.
There are no family relationships among directors, nominees, or
executive officers. Other than Ms. Mooney, all have been
employed in officer capacities with KeyCorp or one of its
subsidiaries for at least the past five years.
Set forth below are the names and ages of the executive officers
of KeyCorp as of January 1, 2011, positions held by them at
KeyCorp during the past five years and the year from which held,
and the year they first became executive officers of KeyCorp.
Because Ms. Mooney has been employed at KeyCorp for less
than five years, additional information is being provided
concerning her prior business experience.
CHRISTOPHER
M. GORMAN (50)
Mr. Gorman has been President, Key Corporate Bank since
December 1, 2010. He previously served as a KeyCorp Senior
Executive Vice President and head of Key National Banking
beginning March 11, 2010. He
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became an executive officer of KeyCorp on that date. Prior to
March 11, 2010, Mr. Gorman was an Executive Vice
President of KeyCorp (since 2002) and served as President
of KeyBanc Capital Markets (since 2003).
PAUL N.
HARRIS (52)
Mr. Harris has been Executive Vice President, General
Counsel, and Secretary of KeyCorp since 2003. He became an
executive officer of KeyCorp in 2004.
CHARLES
S. HYLE (59)
Mr. Hyle has been Executive Vice President and Chief Risk
Officer of KeyCorp since 2004. He also has been an executive
officer since 2004.
WILLIAM
R. KOEHLER (46)
Mr. Koehler has been President, Key Community Bank, since
December 1, 2010. Mr. Koehler previously served as
Great Lakes Regional President (during 2010); as leader of
KeyCorps Keyvolution initiative
(2008-2010);
as Michigan District President
(2007-2008);
and prior thereto, as Managing Director and Segment Leader of
the Financial Sponsors Group and Regional Banking within KeyBanc
Capital Markets. Mr. Koehler became an executive officer of
KeyCorp in 2010.
HENRY L.
MEYER III (61)
Mr. Meyer has been Chairman and Chief Executive Officer of
KeyCorp since 2001. He will retire on May 1, 2011.
Mr. Meyer has been an executive officer at KeyCorp since
1987.
BETH E.
MOONEY (55)
Ms. Mooney has been President and Chief Operating Officer
since November 18, 2010. She will become Chair and Chief
Executive Officer on May 1, 2011. Ms. Mooney joined
KeyCorp in 2006 as a Vice Chair and head of Key Community
Banking. She has been an executive officer since she joined
KeyCorp.
Ms. Mooney has over 30 years of banking experience in
retail banking, commercial lending, and real estate financing.
Prior to joining KeyCorp, beginning in 2000 she served as Senior
Executive Vice President at AmSouth Bancorp (a large regional
bank holding company that has merged into Regions Financial
Corporation) and became Chief Financial Officer at AmSouth
Bancorp as well in 2004. She held both positions until joining
KeyCorp.
ROBERT L.
MORRIS (58)
Mr. Morris has been Chief Accounting Officer of KeyCorp
since 2006. From 2000 to 2006, Mr. Morris served as
KeyCorps Controller. He has been an executive officer at
KeyCorp since 2006.
THOMAS C.
STEVENS (61)
Mr. Stevens has been Vice Chair and Chief Administrative
Officer of KeyCorp since 2003. Mr. Stevens has been an
executive officer of KeyCorp since 1996.
JEFFREY
B. WEEDEN (54)
Mr. Weeden has been a Senior Executive Vice President and
Chief Financial Officer of KeyCorp since 2002. He has also been
an executive officer of KeyCorp since 2002.
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COMPENSATION
DISCUSSION AND ANALYSIS
Executive
Summary
In 2010, we took a number of important steps that resulted in
strong operating results and a return to profitability. Our
total shareholder return was at the
85th percentile
of our peer group and we outperformed our peers on a number of
important financial metrics.
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Our profitability was due largely to improvements in both asset
quality and pre-provision net revenue (earnings before credit
costs are factored in). We beat the performance goals we set for
ourselves at the beginning of the year and were well above the
peer group on those measures.
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Our capital and liquidity positions show continued strength with
each of our Tier 1 Common, Tier 1 Capital and
loan-to-deposit
ratios ranking within the top four in our peer group.
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Credit quality has improved across the majority of loan
portfolios in both Key Community and Key Corporate Bank. As a
result, our loan losses have declined, with both net charge-offs
and non-performing loans as a percent of assets/loans below what
we had in our plan at the beginning of the year. We had the
lowest percentage of nonperforming loans among our peers.
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The bottom line is that our strong balance sheet positions us to
better serve the increase in the borrowing needs of clients that
we began to experience in the fourth quarter as the economy
improved.
Repaying TARP is a top priority for Key and we submitted a
repayment proposal on January 7, 2011 as part of a
Comprehensive Capital Assessment Plan. Keys improved
financial performance, improved risk profile, strong capital and
improved stock price should allow us to repay TARP in a less
dilutive manner that will benefit our shareholders.
The Treasurys Troubled Asset Relief Program (TARP),
prohibits us from directly linking our named executives
pay with the performance of the company through the use of
bonuses or other types of performance-based incentive awards
until the TARP investment in Key is repaid.
As a result, the total direct compensation for our named
executive
officers1
consists of (i) base salary, (ii) salary stock, which
is fully vested but cannot be sold until we repay the TARP
funds, and (iii) restricted shares, which generally have a
3-year cliff
vesting schedule.
Even though we are prohibited from paying bonuses or other types
of performance-based incentive awards to our named executive
officers while we are subject to TARP regulations, we remain
committed to a
pay-for-performance
philosophy. In this regard, we have evaluated our performance
and pay levels relative to our peer group and made appropriate
modifications to our compensation program, as illustrated by the
following actions:
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In September 2009, we reduced the total direct compensation
levels of our named executive officers to approximately 70% of
their pre-TARP target levels based on our evaluation of the
publicly available pay and performance information in relation
to our peers.
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(1) Messrs. Meyer,
Stevens, Weeden, and Gorman and Ms. Mooney.
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In August 2010, after giving consideration to the negative
voting results with respect to our
say-on-pay
proposal, reviewing the peer compensation data from the 2010
proxy season and evaluating our performance for the first two
quarters of 2010 relative to our peers, we further reduced our
CEOs total direct compensation from $5 million to
$4.5 million to bring his compensation in line with the
then available TARP bank peer median.
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The CEO and named executive officers received a grant of
performance-based restricted stock in 2008 with 3 year
cliff vesting. Key did not meet the minimum performance goals
established for the performance-based restricted stock, and
consequently, each award was forfeited.
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The CEO and named executive officers are subject to these robust
stock ownership requirements:
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Five times base salary for our CEO (including a minimum of
10,000 beneficially owned shares).
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Three times base salary for our other named executive officers
(including a minimum of 5,000 beneficially owned shares).
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Each named executive officer must hold 100% of the net shares
purchased upon the exercise of stock options for a period of one
year (or, if later, until the executive satisfies the applicable
stock ownership requirements).
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Each named executive officer is prohibited from selling any
restricted shares that vest until the applicable stock ownership
requirements are met.
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We froze our executive pension plans on December 31, 2009
and introduced a discretionary profit sharing component, the
Annual Retirement Contribution, to the defined contribution
plans beginning January 1, 2010.
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We eliminated tax
gross-ups in
the event of a change of control.
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We eliminated certain perquisites, such as reimbursement for
club dues and financial planning services. In lieu of those
benefits, we made minor adjustments to the base salaries of our
named executive officers effective as of January 1, 2010.
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We maintained our clawback policy, which allows us to recover
certain incentive compensation if it was based on financial
results that are subsequently restated.
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We also retained our right to cancel outstanding equity awards
and recover realized gains if an executive engages in certain
harmful activity.
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KeyCorp
Compensation Philosophy and Objectives
The overall objective of KeyCorps executive compensation
and benefits program is to align the compensation of our
executives with the investment interests of our shareholders.
KeyCorps program design strives to support this objective
in three ways:
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Attract, retain and motivate a talented team of executives who
are capable of leading the company to superior performance.
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Reinforce short- and long-term financial and risk management
goals and objectives and link pay to sustainable performance
relative to goals and within risk tolerances.
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Ensure that the compensation plans do not encourage employees to
manipulate earnings or take unnecessary or excessive risks that
would threaten the long-term value of KeyCorp.
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We seek to achieve these objectives by aligning compensation
with KeyCorp performance relative to our long-term goals and as
compared to our peers, and by targeting median pay for median
performance.
Risk
Assessments
During 2009 and 2010, the Compensation and Organization
Committee of KeyCorps Board of Directors (the
Compensation Committee) met with KeyCorps
Chief Risk Officer and Chief Auditor in January and July to
review our compensation program for senior executives and
identify and assess the potential risks posed by our incentive
plan designs and performance metrics with the objective of
ensuring that these risks are being effectively monitored and
managed. The Compensation Committee also reviewed the alignment
between KeyCorps governance processes and our risk
tolerance framework and approved the process by which employees
covered by the Compensation Guidance jointly released by the
Federal Reserve and Treasury will be determined. These reviews
meet TARP requirements and the results are reported in the
Compensation and Organization Committee Report (Including
Discussion of Compensation Policies and Practices as They Relate
to Risk Management) on page XX of this proxy statement.
Peer
Group
Each year, the Compensation Committee directs its executive
compensation consultant, Compensation Advisory Partners, to
analyze the financial and market performance data for our peers
as well as the total compensation and benefits our peers provide
to their named executive officers. Since 2002, the Compensation
Committee has determined that the appropriate peer group for
performance and compensation comparisons is the Standard and
Poors Regional Bank Index and the Diversified Bank Index.
The Compensation Committee determined that Wells Fargo would not
be a member of KeyCorps peer group for performance and
compensation comparisons due to the fact that Wells Fargos
market capitalization is over 20 times that of Key and three
times the size of the market capitalization of the next largest
bank (U.S. Bancorp) in the Diversified Bank Index.
The peer group consists of financial services firms with
diversified business mixes and KeyCorp competes with these firms
for executive talent. Keys asset size, loans and deposits
are just below the middle
(8th of
13) of the peer group. For 2010, the other companies in the
peer group were:
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BB&T Corp.
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Comerica Inc.
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Fifth Third Bank
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First Horizon
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Huntington Bancshares
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M&T Bank
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Marshall & Ilsley
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PNC Financial
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Regions Financial
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SunTrust Banks
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U.S. Bancorp
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Zions Bancorp
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Performance
Goals
Each year the Compensation Committee establishes performance
goals and targets for our corporate Annual Incentive Plan. In
preparation for the Compensation Committees meeting in
January 2010, Compensation Advisory Partners evaluated
KeyCorps annual and long-term financial and non-financial
performance objectives in the context of current and forecasted
peer group performance. Compensation Advisory Partners then
provided the results of their evaluation to the Compensation
Committee to assist it in setting financial targets under the
Annual Incentive Plan. The Committee established targets that
represented a significant improvement over 2009 performance and
were intended to drive Key to exceed its peer groups
median performance. While there were no specified weightings
established, the Committee reviewed Compensation Advisory
Partners analysis and determined that KeyCorps
success would be driven by improvement in credit quality. The
Compensation Committees selection of metrics for
performance, including capital ratios, net charge-offs,
non-performing assets, return on risk-weighted assets,
pre-provision net revenue and enterprise risk management goals,
emphasized, and was dependent on, improved credit quality.
The Compensation Committee supplements the performance goals
established for the Annual Incentive Plan with other financial
and non-financial objectives for the CEO and named executive
officers. Scorecard objectives are set in four categories:
1) growth, 2) profitability, 3) risk and capital,
and 4) human capital/leadership.
Our named executive officers did not participate in the Annual
Incentive Plan for 2010 because TARP restrictions prohibited us
from paying bonuses or other types of performance-based
incentive awards to our top executives. Therefore, the pay
levels for our named executive officers were not directly
related to or conditioned upon achievement of the performance
goals established under the Annual Incentive Plan. Nonetheless,
the Compensation Committee considers KeyCorps performance
relative to these goals, both on an absolute basis and relative
to our peers, as well as performance against scorecard
objectives as important factors when establishing the total
direct compensation levels for our named executive officers.
We have summarized the performance goals that the Compensation
Committee considered when re-evaluating the 2010 compensation
levels of our CEO and named executive officers and the 2010
performance relative to the goals and peers on page XX of
this proxy statement.
2010
Total Direct Compensation Levels
In February 2010, the Compensation Committee reviewed the
compensation levels for our named executive officers. At that
time, the Compensation Committee decided not to make any changes
to the total compensation levels of Messrs. Meyer, Stevens
and Weeden and Ms. Mooney. Their total direct compensation
remained at the
42
levels established by the Compensation Committee in September
2009. The Compensation Committee based its decision on the
following factors:
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Recent Pay Cuts. The named executive officers
had recently received a significant reduction in their total
direct compensation levels. Specifically, in September 2009,
based on the Compensation Committees evaluation of the
publicly available pay and performance information in relation
to our peers, we reduced the total direct compensation levels of
our named executive officers to approximately 70% of their
pre-TARP target levels.
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Limited Market Data. The Compensation
Committee had limited information about the evolving
compensation practices of our peer group because most of our
peers had not yet filed their 2010 proxy statements as of
February 2010.
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Performance Results. Although our 2009
performance fell short on several measures, there was
significant
year-over-year
improvement in absolute terms as well as relative to peers.
However, this improvement was only beginning to be reflected in
Keys stock price. Keys total shareholder return
relative to peers had improved from September 2009 to February
2010, but was still below median. In this regard, the
Compensation Committee determined that the actions taken in 2009
to strengthen capital, reserves and liquidity; address asset
quality; and invest in and reshape Keys businesses; set
the stage for KeyCorp to emerge from this extraordinary period
as a strong, competitive company.
|
In February 2010, the Compensation Committee also reviewed
competitive total compensation levels and business performance
information for Mr. Gormans then-current role and
concurred with managements recommendation to set his total
direct compensation at $2.115 million for 2010. In March
2010, the Board of Directors promoted Mr. Gorman to lead
National Banking (now Key Corporate Bank), replacing Peter
Hancock who resigned effective February 12, 2010. Because
at the time of Mr. Gormans promotion Keys
business mix was expected to change, no changes were made to
Mr. Gormans pay upon his promotion in March.
In May 2010, Key received a negative shareholder vote on its
management
say-on-pay
proposal. The Compensation Committee determined to formally
address the vote at its July meeting and the Committee Chair
solicited input from a number of Keys institutional
shareholders to understand the basis for their negative vote.
In July 2010, the Compensation Committee reviewed the input
received from those institutional shareholders about Keys
compensation practices and pay levels, as well as performance
relative to Keys goals for the first two quarters of 2010
and determined to defer action until updated peer performance
information became available for the second quarter of 2010.
In August 2010, a special Compensation Committee meeting was
held to re-evaluate the total direct compensation levels of our
named executive officers. In this regard, the Compensation
Committee reviewed the following:
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Updated Compensation Data. The Compensation
Committee examined compensation data derived from the 2010 proxy
statements of our peer group in this same period to better
understand the groups emerging market pay practices. Based
on a review of the data, Compensation Advisory Partners reported
that the CEOs total direct compensation was somewhat above
the median when compared to other TARP companies.
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43
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Performance Results. The Compensation
Committee reviewed Keys performance for the first two
quarters of 2010 relative to the goals established under the
Annual Incentive Plan. Moreover, the Committee reviewed
Keys performance compared to the median performance
achieved by the companies in the peer group. In this regard,
(i) Keys results exceeded the
year-to-date
goals established for the participants in the Annual Incentive
Plan, (ii) Keys performance was above median relative
to the capital and liquidity measures, non-performing loans and
pre-provision net revenue growth, and at or below median
relative to the profitability measures and net charge-off ratio,
and (iii) Keys total shareholder return was in the
top quartile of our peers that had repaid TARP as well as the
remaining TARP banks.
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After giving consideration to both the shareholders
negative say-on-pay vote and the evaluation of the pay and
performance relative to peers, the Compensation Committee
reduced Mr. Meyers total direct compensation level
for 2010 from $5 million to the TARP bank peer median level
of $4.5 million. The Compensation Committee decided not to
make any additional reductions to the total direct compensation
levels of the other named executive officers, given Keys
significantly improved performance for the first half of 2010,
and the significant reduction in the named executive
officers pay that occurred in September 2009.
Following a thorough succession planning process, on
November 18, 2010, Henry Meyer advised the Board of
Directors of his decision to retire on May 1, 2011. The
Board appointed Beth Mooney to serve as President and Chief
Operating Officer and member of the Board, effective
November 18, and as Chairman and CEO effective upon
Mr. Meyers retirement. As President and COO,
Ms. Mooney is responsible for the Key Community Bank and
the Key Corporate Bank, as well as the Corporate Strategy
function. In connection with this appointment, the Committee
reviewed the then available market data for
Ms. Mooneys new role, her past performance and her
expanded roles and responsibilities. Based on this assessment,
the Committee increased her cash base salary from $700,000 to
$850,000 effective December 1, 2010.
2010
Performance Relative To Goals And Peers
The Compensation Committee reviewed Keys performance for
the full year relative to the goals established under the Annual
Incentive Plan as well as Keys performance compared to the
median performance achieved by the companies in the peer group.
In this regard, (i) Key exceeded the goals established for
the participants in the Annual Incentive Plan by a wider margin
than in the mid-year review due to very strong performance the
second half of 2010, (ii) Keys ranking relative to
peers on all measures also improved in the second half of 2010
(performance was above median relative to the capital and
liquidity measures, non-performing loans and pre-provision net
revenue growth, and at or below median relative to the
profitability measures and net charge-off ratio), and
(iii) Keys total shareholder return was at the
85th
percentile of our peers that had repaid TARP as well as the
remaining TARP banks.
44
Key submitted a TARP repayment proposal to regulators on
January 7, 2011 as part of a Comprehensive Capital
Assessment Plan. Given the strength of our capital, our improved
risk profile and profitability, it is our goal to repay TARP
with minimal dilution to the benefit of our shareholders.
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Annual
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Minimum
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Target
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Actual as of
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Threshold
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Ranges
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December 31, 2010
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Ensure Soundness
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Capital and liquidity
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Tier 1 Common Equity Ratio
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6.0%
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9.31%
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Tier 1 Risk-Based Capital Ratio
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7.5%
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15.10%
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Loan to Deposit Ratio
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90-100%
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90%
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Maintain or Improve Credit Ratings
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Credit Quality
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Net Charge-Offs from continuing operations
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$1.6-2.1B
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$1.57B
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Non-Performing Assets from continuing operations
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$1.8-2.0B
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$1.34B
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Return to Sustainable Profitability
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Return on assets
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(0.15)-(0.8)%
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0.71%
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Pre-provision net revenue/risk weighted assets from continuing
operations
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1.3-1.5%
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1.86%
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Economic Profit Added
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$(1.6)-(1.3)B
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$(0.69)B
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Provide the Foundation for Growth
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Pre-provision net revenue
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$1.1-1.5B
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$1.5B
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Lead the execution of corporate initiatives
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Manage risk to Enterprise Risk Management goals
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Within or improving
toward risk tolerance
levels in all
categories
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Execute plan to repay TARP
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TARP repayment
plan submitted for
approval
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Return to sustainable profitability
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Three consecutive
profitable quarters in
2010
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Elements
Of Total Compensation
Under the requirements of TARP, Key may not pay or accrue any
bonus, retention award or incentive compensation for any of the
named executive officers or the next top 20 most highly
compensated employees. However, we may pay bonuses in the form
of restricted stock that cannot fully vest prior to the full
repayment of TARP funds and that has a maximum value of no more
than one-third of the subject executive or employees total
45
annual compensation. Moreover, we may pay base salary in the
form of salary stock. Salary stock is paid in shares
of KeyCorp common stock that may not be sold or transferred
until KeyCorp has repaid TARP.
In light of these TARP restrictions, in September 2009, the
Compensation Committee decided to allocate one-third of the
total direct compensation of our named executive officers to
restricted stock and utilize salary stock as a significant
component of base salary.
The restricted stock was granted on February 18, 2010 and
vests on the later of February 18, 2013 or the conclusion
of the period during which any obligation arising from financial
assistance provided to Key under TARP remains outstanding. The
salary stock is fully vested but cannot be sold during the TARP
investment and, unlike base salary paid in cash, it is not
counted in the calculation of employee benefits.
Since we are prohibited from paying bonuses or other types of
performance-based compensation under TARP, the Compensation
Committee wanted to ensure that the total direct compensation
levels of our named executive officers were heavily weighted to
equity awards. The restricted stock and salary stock awards
encourage our named executive officers to continue to make
decisions and to deliver results over a broader time period,
thus keeping a focus on the long-term horizon and aligning the
interests of executives with those of our shareholders.
When Key exits TARP, the Compensation Committee will review and
modify its total compensation pay mix to reflect an appropriate
pay-for-performance philosophy consistent with Keys
regulatory requirements and risk tolerance framework, as well as
Keys overall objective of increasing shareholder value.
2008-2010
Long-Term Incentive Awards
In 2008, our CEO and named executive officers each received a
grant of performance-based restricted stock under Keys
Long-Term Incentive Program. The restricted stock vested if Key
achieved cumulative Earning Per Share of $7.75, Economic Profit
Added of $313 million and an average Return on Equity of
11.6% by the end of the three-year period ending in 2010. Key
did not meet the minimum performance goals established for the
performance-based restricted stock, and consequently, our named
executive officers forfeited the award. Our named executive
officers did not participate in the Long-Term Incentive Program
in 2009 or 2010.
Internal
Revenue Code Section 162(m)
Under TARP, KeyCorp may not take a compensation deduction for
federal income tax purposes for amounts in excess of $500,000
per year paid to the named executive officers. The compensation
decisions discussed above delivered compensation in excess of
$500,000 to our CEO and each of the named executive officers.
While the Compensation Committee takes tax consequences into
consideration when making compensation decisions, it determined
that the risk to the value of KeyCorp of not delivering
compensation competitive to market levels would be greater than
the loss of the tax deduction. The impact on KeyCorps tax
liability as a result of the loss of a tax deduction on payments
to the named executive officers in excess of the $500,000 limit
is approximately $2.4 million. Because KeyCorp had a net
operating loss carry-forward from years prior to 2010, these
compensation payments did not increase our 2010 tax payments,
but did reduce our tax loss carry-forward for future years.
46
Shareholder
Alignment And Executive Retention
Executive
Stock Ownership Guidelines
KeyCorp has stock ownership guidelines for its senior
executives, as well as specific requirements for shares that
must be purchased by each executive outside of KeyCorp-sponsored
plans (beneficially owned shares). These guidelines
align the interests of our management with the interests of our
shareholders by encouraging our executives to accumulate a
meaningful stake in Key common stock. The Compensation Committee
established these ownership levels to ensure that our executive
officers would maintain an equity interest in KeyCorp at a level
sufficient to demonstrate a commitment to value creation, while
satisfying the individuals needs for portfolio
diversification. The guidelines are as follows:
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Our CEO must own common shares with a value equal to at least
five times his or her annual base salary payable in cash,
including a minimum of 10,000 beneficially owned shares.
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Our CEOs direct reports must own common shares with a
value equal to at least three times their annual base salary
payable in cash, including a minimum of 5,000 beneficially owned
shares.
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Newly-hired or promoted senior executives are expected to meet
or exceed their required ownership levels within five years but
in practice generally comply within three years after the date
they become subject to the requirements.
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The value of the stock owned is determined quarterly, using the
average of the previous twelve month-end closing market prices
of the common shares.
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Beneficially owned shares under KeyCorps 401(k) Savings
Plan and unvested restricted shares and units, as well as
phantom shares owned by the senior executives under deferred
compensation plans, count toward the ownership requirements.
Performance shares delivered in cash and unexercised stock
options do not count toward the ownership requirements.
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Our CEO and all Section 16
officers2
are required to hold 100% of the net shares obtained upon the
exercise of any stock option (less the applicable exercise price
and withholding taxes) until the later of one year following the
exercise date or the date the executive officer meets the
ownership requirements. Further, vested restricted stock may not
be sold or transferred (except as necessary to satisfy any tax
withholding obligation) until the stock ownership guidelines are
met.
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At each regularly scheduled meeting, the Compensation Committee
receives an updated report on the stock ownership status of the
senior executive team relative to the Executive Stock Ownership
Guidelines. At December 31, 2010, our CEO and named
executive officers owned, in the aggregate, 188% of the common
shares specified by their stock ownership guidelines, and each
exceeded his or her beneficial ownership guidelines.
2
Set forth on page XX of this proxy statement.
47
Other
Alignment and Retention Tools
There are several other ways that KeyCorp promotes executive
retention and aligns the compensation of employees with the
investment interests of shareholders:
Conditional awards. All restricted stock and
special retention options are awarded on the condition that the
recipient executes an agreement that:
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restricts his or her post-employment use of confidential
information; and
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prohibits the employee from soliciting KeyCorp clients or hiring
KeyCorp employees for a period of one year following termination
of employment.
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Clawback provisions. Key retains the right to
recover (clawback) any bonus, retention award or
incentive compensation paid based on financial statements that
are later proven to be materially inaccurate;
Equity Awards. If an employee engages in
harmful activity while working for KeyCorp or within
six months after termination of employment, then:
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any profits he or she realized upon exercising any option within
one year of his or her termination of employment must be
returned to KeyCorp; and
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he or she must forfeit all unexercised options.
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For these purposes, harmful activity is broadly
defined to include wrongfully using or disclosing, or failing to
return confidential KeyCorp information, soliciting KeyCorp
clients and hiring KeyCorp employees.
Benefits
Executive
Benefits
The Compensation Committee annually reviews the benefits that we
provide to our named executive officers. In July 2009, the
Compensation Committee eliminated reimbursements for tax
preparation and financial planning services and club dues,
effective January 1, 2010. Additionally, the Compensation
Committee eliminated all tax
gross-ups
for club dues, the security system and the executive health
program for the named executive officers, effective June 2009.
In lieu of those benefits, our named executive officers received
an adjustment to their base salary, which took effect on
January 1, 2010, and equaled $25,000 for Mr. Meyer,
$15,000 each for Messrs. Stevens and Weeden, and $20,000
for Ms. Mooney.
The Compensation Committee decided to continue to pay for a home
security system for Mr. Meyer, the named executive
officers executive health program (consisting of a
mandatory physical examination at the Cleveland Clinic), and the
individual disability insurance policies purchased for
Messrs. Meyer, Stevens and Weeden. These programs enhance
the stability of our leadership by ensuring the health and
safety of our executives.
KeyCorp does not permit its executive officers to use our
corporate aircraft for personal reasons.
48
Health
and Welfare Benefits
Executive officers participate in the same health and welfare
plans (medical, dental, life and long-term disability
insurance), charitable gift match, and discount programs on
KeyCorps products that are available to all employees of
Key.
Retirement
Benefits
Historically, KeyCorp maintained a company-funded Cash Balance
Pension Plan that was combined with the voluntary 401(k) Savings
Plan to provide retirement benefits to all Key employees.
Effective December 31, 2009, in response to changes in the
competitive environment, the Cash Balance Pension Plan, the
Excess Cash Balance Pension Plan and the Second Supplemental
Retirement Plan (SSRP) were frozen.
KeyCorps retirement plans now consist of two defined
contribution plans, the voluntary 401(k) Savings Plan for all
employees and the voluntary Deferred Savings Plan that provides
senior managers with similar levels of benefits on plan-eligible
compensation over the Internal Revenue Service compensation
limit of $245,000. Helping employees save for the future is a
priority. Therefore, effective January 1, 2010, KeyCorp
introduced a profit sharing component, the Annual Retirement
Contribution, to both defined contribution plans. The profit
sharing contribution will be determined annually on a
discretionary basis and can range from 0% to 6% of plan-eligible
compensation. The contribution for 2010 was 3% of eligible
compensation. In order to be eligible to receive this
contribution, employees must have one year of service and be
employed on the last day of the year.
The terms of our retirement plans are described in detail in the
narrative to the Pension Benefits Table on page of
this proxy statement.
Severance
Payments
We do not provide any golden parachute payments in
the event of involuntary termination of employment to any
employee who is eligible to participate in Keys Change of
Control Agreements or Separation Pay Plan. As long as Key is a
TARP participant, it is prohibited from making any severance
payments, including payments in connection with a change
of control, to our CEO and the other named executive officers.
Following is a summary of the employment and change of control
agreements, along with the severance plan, that are in place but
will only be effective when TARP is repaid.
Change
of Control
Historically, KeyCorp used change of control agreements to help
attract and retain executive talent. The Board of Directors
continues to believe that it is in the best interests of
shareholders to ensure that a select group of KeyCorps
executive officers are able to objectively evaluate the merits
of a potential transaction without being distracted by its
potential impact on their personal employment situations.
Change of control agreements for the CEOs direct reports,
and the CEOs employment agreement, contain the following
benefits:
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Severance benefits are generally equal to three times base
salary and average annual incentive or target bonus,
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49
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Continued participation in Keys retirement plans for three
years,
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Continued health benefits for up to eighteen months.
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Change of control agreements and vesting of all equity awards
are all double trigger and KeyCorp will not pay any
tax reimbursements in the event of a change of control.
Separation
Pay Plan
In order to assist employees at the time of a job loss through
such events as company reorganizations or downsizings, KeyCorp
maintains a Separation Pay Plan. The plan covers all employees
of Key other than the CEO and the named executive officers
prohibited under TARP and is consistent with the severance pay
practices of our peer group companies. The Separation Pay Plan
assists an employee if his or her position is eliminated or
modified and no other comparable position is available at a
KeyCorp location in the same geographic region.
The terms of our CEOs employment agreement, the Change of
Control agreements and the Separation Pay Plan are described in
detail in the narrative to the Employment and Severance
Arrangement Table on page of this proxy statement.
50
COMPENSATION
OF EXECUTIVE OFFICERS AND DIRECTORS
2010
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid by KeyCorp
to the named executive officers for the years ended
December 31, 2010, 2009 and 2008.
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Change in
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Pension
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Non-Equity
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Value and
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Incentive
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Nonqualified
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Stock
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Option
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Plan
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Deferred
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All other
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Bonus
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awards
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awards
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Compensation
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Compensation
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compensation ($)
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Name and Principal Position
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Year
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Salary
($)(1)
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($)
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($)(2)
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($)(2)
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($)
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Earnings
($)(3)
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(see chart below)
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Total ($)
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Henry L. Meyer Chairman of the Board &
CEO(4)
(Announced retirement effective 5/1/2011)
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2010
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2,999,957
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1,500,000
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2,489,478
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98,311
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7,087,746
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2009
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1,642,731
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1,247,483
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2,142,000
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3,036,920
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83,252
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8,152,386
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2008
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1,019,538
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2,499,999
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845,000
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2,273,408
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89,604
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6,727,549
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Jeffrey B. Weeden Chief Financial
Officer(5)
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2010
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1,214,882
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584,998
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16,469
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58,882
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1,875,231
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2009
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725,000
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707,867
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833,000
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54,642
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39,175
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2,359,684
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2008
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545,192
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2,375,020
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295,750
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66,850
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55,094
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3,337,906
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Beth E. Mooney President and Chief Operating
Officer(6)
(Effective 5/1/2011 Chairman and CEO)
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2010
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1,610,656
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769,998
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4,653
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63,969
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2,449,276
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2009
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|
|
849,231
|
|
|
|
|
|
|
|
607,897
|
|
|
|
833,000
|
|
|
|
|
|
|
|
38,727
|
|
|
|
48,672
|
|
|
|
2,377,527
|
|
|
|
|
2008
|
|
|
|
574,231
|
|
|
|
|
|
|
|
2,375,008
|
|
|
|
295,750
|
|
|
|
|
|
|
|
59,782
|
|
|
|
88,702
|
|
|
|
3,393,473
|
|
Christopher M. Gorman President Key Corporate
Bank(7)
|
|
|
2010
|
|
|
|
1,409,910
|
|
|
|
|
|
|
|
704,997
|
|
|
|
|
|
|
|
|
|
|
|
26,124
|
|
|
|
51,205
|
|
|
|
2,192,236
|
|
Thomas C. Stevens Vice Chair & Chief
Administrative
Officer(8)
|
|
|
2010
|
|
|
|
1,214,868
|
|
|
|
|
|
|
|
584,998
|
|
|
|
|
|
|
|
|
|
|
|
39,867
|
|
|
|
69,868
|
|
|
|
1,909,601
|
|
|
|
|
2009
|
|
|
|
798,077
|
|
|
|
|
|
|
|
664,190
|
|
|
|
833,000
|
|
|
|
|
|
|
|
92,608
|
|
|
|
52,185
|
|
|
|
2,440,060
|
|
|
|
|
2008
|
|
|
|
645,192
|
|
|
|
|
|
|
|
1,375,008
|
|
|
|
295,750
|
|
|
|
|
|
|
|
107,214
|
|
|
|
67,386
|
|
|
|
2,490,550
|
|
|
|
|
(1) |
|
Amounts reported in the Salary column include cash base pay and
salary stock, as specifically set forth for each named executive
officer in footnotes (4) through (8). Salary stock is paid
each pay period, is fully vested and may not be sold,
transferred or pledged until the earlier of the full repayment
by KeyCorp of its TARP funds or termination of employment due to
death or disability. |
|
(2) |
|
Amounts reported in the Stock Awards and Option Awards columns
represent the aggregate grant date fair value of equity awards
granted during the respective year. The accounting assumptions
used in calculating the grant date fair value for the equity
awards are described in KeyCorps Annual Report on
Form 10-K
in the Stock-Based Compensation footnote, set forth on
page XXX of the Annual Report. |
|
(3) |
|
Pension benefits were frozen at KeyCorp effective
January 1, 2010 for all employees, including the named
executive officers, as more fully described in the narrative to
the 2010 Pension Benefits Table below. No above market or
preferential earnings were paid in 2010 on deferred
compensation. For more information about |
51
|
|
|
|
|
KeyCorps retirement plans and non qualified deferred
compensation plans, see the 2010 Pension Benefits Table and the
2010 Nonqualified Deferred Compensation Table and their
respective narratives below. |
|
(4) |
|
The annualized salary for Mr. Meyer for 2010 consisted of
35% cash (or $1,045,000) and 65% equity (or $1,955,000). The
amount reported for Mr. Meyer for 2010 in the Salary column
also includes employee deferrals into the 401(k) Savings Plan
and the Deferred Savings Plan. The amount reported for 2010 in
the Change in Pension Value and Nonqualified Deferred
Compensation Earnings column is the year over year change in the
actuarial present value of Mr. Meyers accumulated
benefit in the Cash Balance Pension Plan ($42,629) and the
actuarial present value of his benefit in the Second
Supplemental Retirement Plan ($2,446,849) if he were to retire
at age 65. The Second Supplemental Retirement Plan does not
have a lump sum distribution option. Therefore, the change in
actuarial present value does not reflect the actual change in
the value of the benefit that Mr. Meyer would receive at
age 65. Mr. Meyers annual benefit at age 65
increased by $4,775. The change in the present value calculation
is not due to any contributions by KeyCorp. The change is a
function of the decrease in the discount rate from 5.25% to
4.75% (accounts for 53% of the increase), and the measurement of
the present value one year later (accounts for 47% of the
increase). |
|
(5) |
|
The annualized salary for Mr. Weeden for 2010 consisted of
52% cash (or $630,000) and 48% equity (or $585,000). The amount
reported for Mr. Weeden for 2010 in the Salary column also
includes employee deferrals into the 401(k) Savings Plan and the
Deferred Savings Plan. The amount reported for 2010 in the
Change in Pension Value and Nonqualified Deferred Compensation
Earnings column includes the following changes in actuarial
present value of his accumulated benefit in the following plans:
$3,863 (Cash Balance Pension Plan) and $12,606 (Second Excess
Cash Balance Pension Plan). |
|
(6) |
|
The annualized salary for Ms. Mooney for 2010 consisted of
44% cash (or $711,153) and 56% equity (or $900,000). The amount
reported for Ms. Mooney for 2010 in the Salary column also
includes employee deferrals into the 401(k) Savings Plan and the
Deferred Savings Plan. The amount reported for 2010 in the
Change in Pension Value and Nonqualified Deferred Compensation
Earnings column includes the following changes in actuarial
present value of her accumulated benefit in the following plans:
$1,593 (Cash Balance Pension Plan) and $3,060 (Second Excess
Cash Balance Pension Plan). |
|
(7) |
|
The annualized salary for Mr. Gorman for 2010 consisted of
86% cash (or $1,210,000) and 14% equity (or $200,000). The
amount reported for Mr. Gorman for 2010 in the Salary
column also includes employee deferrals into the 401(k) Savings
Plan. The amount reported for 2010 in the Change in Pension
Value and Nonqualified Deferred Compensation Earnings column
includes the following changes in actuarial present value of his
accumulated benefit in the following plans: $6,105 (Cash Balance
Pension Plan) and $20,019 (Second Excess Cash Balance Pension
Plan). |
|
(8) |
|
The annualized salary for Mr. Stevens for 2010 consisted of
59% cash (or $720,000) and 41% equity (or $495,000). The amount
reported for Mr. Stevens for 2010 in the Salary column also
includes employee deferrals into the 401(k) Savings Plan and the
Deferred Savings Plan. The amount reported for 2010 in the
Change in Pension Value and Nonqualified Deferred Compensation
Earnings column includes the following changes in actuarial
present value of his accumulated benefit in the following plans:
$8,523 (Cash Balance Pension Plan); $16,561 (Excess Cash Balance
Pension Plan); and $14,783 (Second Excess Cash Balance Pension
Plan). |
52
2010 ALL
OTHER COMPENSATION TABLE
The following table sets forth detail about the amounts reported
in the All Other Compensation column of the 2010
Summary Compensation Table above. In mid 2009, KeyCorp
discontinued tax reimbursements on perquisites for all named
executive officers. Effective January 2010, KeyCorp eliminated
the reimbursement of club dues, tax preparation and financial
planning benefits as well as tax reimbursements, for all
executive benefits as described in the Compensation Discussion
and Analysis above. KeyCorp will continue to provide the
executive health program, disability insurance and security
system payments, however, as KeyCorp believes that continued
provision of these particular benefits is necessary to assist
the Board with succession planning. Effective January 1,
2010, KeyCorp introduced a new Annual Retirement Contribution of
0% 6% of plan-eligible compensation to be deposited
in a separate account within the 401(k) Savings Plan and the
Deferred Savings Plan. The contribution amount for 2010 is 3% of
compensation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KeyCorp
|
|
|
|
|
|
|
Contributions to
|
|
|
|
|
Executive
|
|
Defined
|
|
Total All Other
|
Name and principal position
|
|
Benefits ($)
|
|
Contribution Plans ($)
|
|
Compensation ($)
|
|
Henry L.
Meyer(1)
|
|
|
4,261
|
|
|
|
94,050
|
|
|
|
98,311
|
|
Jeffrey B.
Weeden(2)
|
|
|
2,182
|
|
|
|
56,700
|
|
|
|
58,882
|
|
Beth E.
Mooney(3)
|
|
|
|
|
|
|
63,969
|
|
|
|
63,969
|
|
Christopher M.
Gorman(4)
|
|
|
205
|
|
|
|
51,000
|
|
|
|
51,205
|
|
Thomas C.
Stevens(5)
|
|
|
5,068
|
|
|
|
64,800
|
|
|
|
69,868
|
|
|
|
|
(1) |
|
The amount reported for Mr. Meyer for 2010 as executive
benefits includes the following: $2,961 (disability insurance)
and $1,300 (security system payments). The amount reported for
Mr. Meyer for 2010 as contributions to defined contribution
plans includes a company match of $4,823 under the KeyCorp
401(k) Savings Plan and $57,877 under the KeyCorp Deferred
Savings Plan; and a company contribution of $31,350 as part of
the Annual Retirement Contribution. |
|
(2) |
|
The amount reported for Mr. Weeden for 2010 as executive
benefits includes the following: $2,182 (disability insurance).
The amount reported for Mr. Weeden for 2010 as
contributions to defined contribution plans includes a company
match of $7,950 under the KeyCorp 401(k) Savings Plan and
$29,850 under the KeyCorp Deferred Savings Plan; and a company
contribution of $18,900 as part of the Annual Retirement
Contribution. |
|
(3) |
|
There are no amounts reported for Ms. Mooney for 2010 as
executive benefits. The amount reported for Ms. Mooney as
contributions to defined contribution plans includes a company
match of $6,415 under the KeyCorp 401(k) Savings Plan and
$36,231 under the KeyCorp Deferred Savings Plan; and a company
contribution of $21,323 as part of the Annual Retirement
Contribution. |
|
(4) |
|
The amount reported for Mr. Gorman for 2010 as executive
benefits includes the following: $205 (disability insurance).
The amount reported for Mr. Gorman as contributions to
defined contribution plans includes a company match of $14,700
under the KeyCorp 401(k) Savings Plan and a company contribution
of $36,300 as part of the Annual Retirement Contribution. |
|
(5) |
|
The amount reported for Mr. Stevens for 2010 as executive
benefits includes the following: $2,961 (disability insurance)
and $2,107 (executive health program). The amount reported for
Mr. Stevens for 2010 as contributions to defined
contribution plans includes a company match of $8,990 under the
KeyCorp 401(k) Savings Plan and $34,210 under the KeyCorp
Deferred Savings Plan; and a company contribution of $21,600 as
part of the Annual Retirement Contribution. |
53
2010
GRANTS OF PLAN-BASED AWARDS TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
Stock
|
|
|
|
|
|
|
Awards:
|
|
Grant Date
|
|
|
|
|
Number of
|
|
Fair Value of
|
|
|
|
|
Shares of
|
|
Stock and
|
|
|
|
|
Stock or
|
|
Option
|
Name
|
|
Grant Date
|
|
Units (#)
|
|
Awards
($)(1)
|
|
Henry L. Meyer
|
|
|
2/18/2010
|
|
|
|
222,552
|
|
|
|
1,500,000
|
|
Jeffrey B. Weeden
|
|
|
2/18/2010
|
|
|
|
86,795
|
|
|
|
584,998
|
|
Beth E. Mooney
|
|
|
2/18/2010
|
|
|
|
114,243
|
|
|
|
769,998
|
|
Christopher M. Gorman
|
|
|
2/18/2010
|
|
|
|
104,599
|
|
|
|
704,997
|
|
Thomas C. Stevens
|
|
|
2/18/2010
|
|
|
|
86,795
|
|
|
|
584,998
|
|
|
|
|
(1) |
|
The grant date fair value of the restricted stock awards
disclosed in this table is based on the closing KeyCorp stock
price on the grant date of February 18, 2010, which was
$6.74 per share. |
Under the requirements of TARP, KeyCorp may not pay or accrue
any bonus, retention award or incentive compensation for any of
the named executive officers or the next top 20 most highly
compensated employees. However, we may pay bonuses in the form
of restricted stock that cannot fully vest prior to the
repayment of TARP funds and that has a maximum value of no more
than one-third of the employees total annual compensation.
The terms of the award require two years of service from the
grant date and include vesting at the later of February 18,
2013 or the conclusion of the period during which any obligation
arising from financial assistance provided to KeyCorp under TARP
remains outstanding. The grant allows full shareholder rights to
vote the shares and to receive any dividends that may be paid
thereon from the date of grant.
54
2010
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
The following table provides information regarding outstanding
equity awards held at December 31, 2010 by each of the
named executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Market or
|
|
|
|
|
Option Awards
|
|
|
|
Market
|
|
Unearned
|
|
Payout Value of
|
|
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
Number of
|
|
Value
|
|
Shares,
|
|
Unearned
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Shares or
|
|
of Shares
|
|
Units or
|
|
Shares, Units or
|
|
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Units of
|
|
or Units of
|
|
Other
|
|
Other Rights
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
Option
|
|
Stock That
|
|
Stock That
|
|
Rights That
|
|
That Have Not
|
|
|
|
|
Options (#)
|
|
Options (#)
|
|
Exercise
|
|
Expiration
|
|
Have Not
|
|
Have Not
|
|
Have Not
|
|
Vested
|
Name
|
|
Grant Date
|
|
Exercisable
|
|
Unexercisable
|
|
Price ($)
|
|
Date
|
|
Vested ($)
|
|
Vested ($)
|
|
Vested
(#)(6)
|
|
($)
|
|
Henry L. Meyer
|
|
|
1/17/2001
|
|
|
|
400,000
|
|
|
|
|
|
|
|
28.2500
|
|
|
|
1/17/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/17/2002
|
|
|
|
400,000
|
|
|
|
|
|
|
|
24.6050
|
|
|
|
1/17/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/17/2003
|
|
|
|
400,000
|
|
|
|
|
|
|
|
25.6400
|
|
|
|
7/17/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/23/2004
|
|
|
|
260,000
|
|
|
|
|
|
|
|
29.2700
|
|
|
|
7/23/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/22/2005
|
|
|
|
300,000
|
|
|
|
|
|
|
|
34.3950
|
|
|
|
7/22/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/21/2006
|
|
|
|
260,000
|
|
|
|
|
|
|
|
36.3700
|
|
|
|
7/21/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/20/2007
|
|
|
|
286,000
|
|
|
|
|
|
|
|
36.2000
|
|
|
|
7/20/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/25/2008
|
|
|
|
333,334
|
|
|
|
166,666
|
|
|
|
11.1600
|
|
|
|
7/25/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/12/2009
|
|
|
|
|
|
|
|
900,000
|
|
|
|
6.1200
|
|
|
|
6/12/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate non-option
awards(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
433,548
|
|
|
|
3,836,900
|
|
|
|
54,277
|
|
|
|
|
|
Jeffrey B. Weeden
|
|
|
7/17/2003
|
|
|
|
100,000
|
|
|
|
|
|
|
|
25.6400
|
|
|
|
7/17/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/23/2004
|
|
|
|
85,000
|
|
|
|
|
|
|
|
29.2700
|
|
|
|
7/23/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/22/2005
|
|
|
|
85,000
|
|
|
|
|
|
|
|
34.3950
|
|
|
|
7/22/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/21/2006
|
|
|
|
90,000
|
|
|
|
|
|
|
|
36.3700
|
|
|
|
7/21/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/20/2007
|
|
|
|
100,000
|
|
|
|
|
|
|
|
36.2000
|
|
|
|
7/20/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/25/2008
|
|
|
|
116,667
|
|
|
|
58,333
|
|
|
|
11.1600
|
|
|
|
7/25/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/12/2009
|
|
|
|
|
|
|
|
350,000
|
|
|
|
6.1200
|
|
|
|
6/12/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate non-option
awards(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
273,075
|
|
|
|
2,416,714
|
|
|
|
18,997
|
|
|
|
|
|
Beth E. Mooney
|
|
|
5/1/2006
|
|
|
|
125,000
|
|
|
|
|
|
|
|
37.5900
|
|
|
|
5/1/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/20/2007
|
|
|
|
105,000
|
|
|
|
|
|
|
|
36.2000
|
|
|
|
7/20/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/25/2008
|
|
|
|
116,667
|
|
|
|
58,333
|
|
|
|
11.1600
|
|
|
|
7/25/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/12/2009
|
|
|
|
|
|
|
|
350,000
|
|
|
|
6.1200
|
|
|
|
6/12/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate non-option
awards(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
325,028
|
|
|
|
2,876,498
|
|
|
|
18,997
|
|
|
|
|
|
Christopher M. Gorman
|
|
|
1/17/2001
|
|
|
|
5,000
|
|
|
|
|
|
|
|
28.2500
|
|
|
|
1/17/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/17/2002
|
|
|
|
12,192
|
|
|
|
|
|
|
|
24.6050
|
|
|
|
1/17/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/17/2003
|
|
|
|
35,000
|
|
|
|
|
|
|
|
25.6400
|
|
|
|
7/17/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/23/2004
|
|
|
|
45,500
|
|
|
|
|
|
|
|
29.2700
|
|
|
|
7/23/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/22/2005
|
|
|
|
42,210
|
|
|
|
|
|
|
|
34.3950
|
|
|
|
7/22/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/21/2006
|
|
|
|
35,714
|
|
|
|
|
|
|
|
36.3700
|
|
|
|
7/21/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/20/2007
|
|
|
|
42,857
|
|
|
|
|
|
|
|
36.2000
|
|
|
|
7/20/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/25/2008
|
|
|
|
43,334
|
|
|
|
21,666
|
|
|
|
11.1600
|
|
|
|
7/25/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Market or
|
|
|
|
|
Option Awards
|
|
|
|
Market
|
|
Unearned
|
|
Payout Value of
|
|
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
Number of
|
|
Value
|
|
Shares,
|
|
Unearned
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Shares or
|
|
of Shares
|
|
Units or
|
|
Shares, Units or
|
|
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Units of
|
|
or Units of
|
|
Other
|
|
Other Rights
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
Option
|
|
Stock That
|
|
Stock That
|
|
Rights That
|
|
That Have Not
|
|
|
|
|
Options (#)
|
|
Options (#)
|
|
Exercise
|
|
Expiration
|
|
Have Not
|
|
Have Not
|
|
Have Not
|
|
Vested
|
Name
|
|
Grant Date
|
|
Exercisable
|
|
Unexercisable
|
|
Price ($)
|
|
Date
|
|
Vested ($)
|
|
Vested ($)
|
|
Vested
(#)(6)
|
|
($)
|
|
Aggregate non-option
awards(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
204,157
|
|
|
|
1,806,789
|
|
|
|
7,056
|
|
|
|
|
|
Thomas C. Stevens
|
|
|
1/17/2001
|
|
|
|
150,000
|
|
|
|
|
|
|
|
28.2500
|
|
|
|
1/17/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/17/2002
|
|
|
|
75,000
|
|
|
|
|
|
|
|
24.6050
|
|
|
|
1/17/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/17/2003
|
|
|
|
125,000
|
|
|
|
|
|
|
|
25.6400
|
|
|
|
7/17/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/23/2004
|
|
|
|
97,000
|
|
|
|
|
|
|
|
29.2700
|
|
|
|
7/23/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/22/2005
|
|
|
|
100,000
|
|
|
|
|
|
|
|
34.3950
|
|
|
|
7/22/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/21/2006
|
|
|
|
100,000
|
|
|
|
|
|
|
|
36.3700
|
|
|
|
7/21/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/20/2007
|
|
|
|
100,000
|
|
|
|
|
|
|
|
36.2000
|
|
|
|
7/20/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/25/2008
|
|
|
|
116,667
|
|
|
|
58,333
|
|
|
|
11.1600
|
|
|
|
7/25/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/12/2009
|
|
|
|
|
|
|
|
350,000
|
|
|
|
6.1200
|
|
|
|
6/12/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate non-option
awards(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
227,731
|
|
|
|
2,015,419
|
|
|
|
18,997
|
|
|
|
|
|
|
|
|
Option Awards:
|
|
The June 12, 2009 option grant was vested in full on the
grant date, but subject to a holding period during which the
options must be retained and may not be transferred or otherwise
disposed of until such time as any KeyCorp obligation under TARP
no longer remains outstanding. KeyCorps closing stock
price on December 31, 2010 was $8.85 per share, which means
that as of December 31, 2010, all stock option awards
granted prior to 2009 were underwater.
|
|
|
The unvested options from the July 25, 2008 grant will vest
in full on July 25, 2011.
|
|
|
KeyCorp sets the exercise price of all stock options using the
closing market price of its Common Shares on the option grant
date. The Compensation Committee does not re-price options.
KeyCorp has not and will not back-date options, nor does it
provide loans to employees in order to exercise options. If an
equity-based award is granted in a month in which KeyCorps
earnings are publicly disclosed, the grant date will be the date
of the Compensation Committee meeting or three days following
the earnings release, whichever is later. Otherwise, the grant
date of an equity-based award is the date of the Compensation
Committee meeting.
|
Stock Awards:
|
|
As described above in the Compensation Discussion and Analysis
section of this proxy statement, the three-year long-term
incentive compensation performance cycle for
2008-2010
ended in 2010. None of the performance goals for this three-year
cycle were achieved, and as a result these performance shares
did not vest.
|
Listed below is additional information about other outstanding
time-lapsed and performance-based awards for each named
executive officer as of December 31, 2010:
(1) For
Mr. Meyer 54,277 time-lapsed restricted shares
vested on February 21, 2011; 156,719 time-lapsed restricted
shares will vest on the later of March 12, 2012 or the full
56
repayment by KeyCorp of its TARP obligations; and 222,552
time-lapsed restricted shares will vest on the later of
February 18, 2013 or the full repayment by KeyCorp of its
TARP obligations.
(2) For
Mr. Weeden 18,997 time-lapsed restricted shares
vested on February 21, 2011; 590 time-lapsed restricted
shares vested on March 7, 2011; 39,857 time-lapsed
restricted shares will vest on May 15, 2011; 37,908
time-lapsed restricted shares will vest on September 18,
2011; 88,928 time-lapsed restricted shares will vest on the
later of March 12, 2012 or the full repayment by KeyCorp of
its TARP obligations; and 86,795 time-lapsed restricted shares
will vest on the later of February 18, 2013 or the full
repayment by KeyCorp of its TARP obligations.
(3) For
Ms. Mooney 18,997 time-lapsed restricted shares
vested on February 21, 2011; 1,696 time-lapsed restricted
shares vested on March 7, 2011; 113,723 time-lapsed
restricted shares will vest on September 18, 2011; 76,369
time-lapsed restricted shares will vest on the later of
March 12, 2012 or the full repayment of KeyCorp of its TARP
obligations; and 114,243 time-lapsed restricted shares will vest
on the later of February 18, 2013 or the full repayment of
KeyCorp of its TARP obligations.
(4) For
Mr. Gorman 7,056 time-lapsed restricted shares
vested on February 21, 2011; 2,678 time-lapsed restricted
shares vested on March 7, 2011; 89,824 time-lapsed
restricted shares will vest on the later of March 12, 2012
or the full repayment of KeyCorp of its TARP obligations; and
104,599 time-lapsed restricted shares will vest on the later of
February 18, 2013 or the full repayment of KeyCorp of its
TARP obligations.
(5) For
Mr. Stevens 18,997 time-lapsed restricted
shares vested on February 21, 2011; 590 time-lapsed
restricted shares vested on March 7, 2011; 37,908
time-lapsed restricted shares will vest on September 18,
2011; 83,441 time-lapsed restricted shares will vest on the
later of March 12, 2012 or the full repayment by KeyCorp of
its TARP obligations; and 86,795 time-lapsed restricted shares
will vest on the later of March 12, 2012 or the full
repayment by KeyCorp of its TARP obligations.
(6) Key
did not meet the minimum performance goals established for these
shares, and consequently, all shares listed in this column were
forfeited.
57
2010
OPTION EXERCISES AND STOCK VESTED TABLE
The following table provides information regarding the vesting
of restricted stock during the year ended December 31, 2010
for the named executive officers, along with the value of such
officers vested shares upon vesting (the named executive
officers did not exercise any stock options in 2010).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
Number of Shares
|
|
Value
|
|
|
Award
|
|
Acquired on
|
|
Realized on
|
Name
|
|
Vesting Date
|
|
Vesting
(#)(3)
|
|
Vesting ($)
|
|
Henry L. Meyer
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey B. Weeden
|
|
|
3/7/2010
|
(1)
|
|
|
588
|
|
|
|
4,263
|
|
Beth E. Mooney
|
|
|
3/7/2010
|
(1)
|
|
|
1,692
|
|
|
|
12,260
|
|
Christopher M. Gorman
|
|
|
2/20/2010
|
(2)
|
|
|
3,774
|
|
|
|
25,625
|
|
|
|
|
3/7/2010
|
(1)
|
|
|
2,672
|
|
|
|
19,365
|
|
Thomas C. Stevens
|
|
|
3/7/2010
|
(1)
|
|
|
588
|
|
|
|
4,263
|
|
|
|
|
(1) |
|
Messrs. Weeden, Gorman and Stevens and Ms. Mooney each
received a grant of restricted stock on March 7, 2008,
one-third of which vested on March 7, 2010. |
|
(2) |
|
Mr. Gorman received a restricted stock grant on
February 20, 2007, which vested on February 20, 2010. |
|
(3) |
|
Not shown above are grants of salary paid in common stock on a
biweekly basis. This common stock fully vests when issued, but
may not be sold, transferred or pledged until the earlier of
(1) the date on which any obligation arising from the
financial assistance provided to KeyCorp under TARP is no longer
outstanding, or (2) termination of employment due to death
or disability. This common stock is referred to as salary stock.
Total shares of salary stock awarded in 2010 are:
Mr. Meyer 250,166, Mr. Weeden
74,502, Ms. Mooney 114,627,
Mr. Gorman 24,786, and
Mr. Stevens 63,037. The value of the salary
stock awarded is included in the Salary Column of the Summary
Compensation Table. |
58
2010
PENSION BENEFITS TABLE
The following table presents information about the named
executive officers participation in KeyCorps defined
benefit pension plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present Value of
|
|
|
|
|
Number of Years
|
|
Accumulated
|
|
|
|
|
Credited
|
|
Benefits
|
Name
|
|
Plan Name
|
|
Service (#)
|
|
($)(1)
|
|
Henry L. Meyer
|
|
Cash Balance Pension Plan
|
|
|
38
|
|
|
|
1,117,019
|
|
|
|
Second Supplemental Retirement Plan
|
|
|
38
|
|
|
|
22,790,457
|
|
Jeffrey B. Weeden
|
|
Cash Balance Pension Plan
|
|
|
8
|
|
|
|
101,220
|
|
|
|
Second Excess Cash Balance Pension Plan
|
|
|
8
|
|
|
|
330,313
|
|
Beth E. Mooney
|
|
Cash Balance Pension Plan
|
|
|
4
|
|
|
|
41,743
|
|
|
|
Second Excess Cash Balance Pension Plan
|
|
|
4
|
|
|
|
80,173
|
|
Christopher M. Gorman
|
|
Cash Balance Pension Plan
|
|
|
19
|
|
|
|
159,957
|
|
|
|
Second Excess Cash Balance Pension Plan
|
|
|
19
|
|
|
|
524,567
|
|
Thomas C. Stevens
|
|
Cash Balance Pension Plan
|
|
|
14
|
|
|
|
223,321
|
|
|
|
Excess Cash Balance Pension Plan
|
|
|
14
|
|
|
|
433,938
|
|
|
|
Second Excess Cash Balance Pension Plan
|
|
|
14
|
|
|
|
387,373
|
|
|
|
|
(1) |
|
The estimated actuarial present value of the accumulated benefit
in the Second Supplemental Retirement Plan is calculated
assuming normal retirement of the named executive officer at
age 65 and that benefits are discounted at 4.75% in
accordance with the applicable accounting guidance for defined
benefit and other postretirement plans as explained in footnote
XXXX on page of KeyCorps
2010 Annual Report. The values reported for the Cash Balance
Pension Plan, Excess Cash Balance Pension Plan and the Second
Excess Cash Balance Pension Plan represent the named executive
officers respective account balances as of
December 31, 2010. |
KeyCorp Cash Balance Pension
Plan Effective December 31, 2009,
KeyCorp froze the Cash Balance Pension Plan (Pension Plan) to
new participants and to new pay credit accruals.
Participants benefits accrued up through December 31,
2009 will continue to be credited with interest credits until
the participants commence distribution of their benefits from
the Plan. The Pension Plans interest crediting rate is
established annually and is based on the rate for
30-year
U.S. Treasury securities. For 2010, the Pension Plans
interest crediting rate was 3.91%. For 2011, the Pension
Plans interest crediting rate is 4.27%. Participants
Plan distributions may be made upon the participants
retirement, termination of employment, or death. Distributions
may be made in the form of a single lump sum payment, in the
form of an annuity, or in a series of actuarially equivalent
installments.
KeyCorp Excess Cash Balance and Second Excess Cash Balance
Pension Plans The KeyCorp Excess Cash Balance
Pension Plan was frozen as of December 31, 2004 in
conjunction with the grandfathering provisions of
Section 409A of the Internal Revenue Code. A
Section 409A compliant KeyCorp Second Excess Cash Balance
Pension Plan was established January 1, 2005. On
December 31, 2009, the KeyCorp Second Excess Cash Balance
Pension Plan was frozen. Participants benefits accrued
through December 31, 2009 will continue to be credited with
interest credits until the participants commence distribution of
their benefits from the Plan(s). The Plans
59
interest crediting rate is established annually and is based on
the rate for
30-year
U.S. Treasury securities. For 2010, the Plans
interest crediting rate was 3.91%. For 2011, the Plans
interest-crediting rate is 4.27%.
To be eligible to receive a distribution from the Plan(s), a
participant must be age 55 or older with a minimum of
5 years of vesting service with KeyCorp. Participants who
are involuntarily terminated for reasons other than for cause
may receive a distribution of their Plan benefits provided the
participant maintained a minimum of 25 years of vesting
service with KeyCorp at the time of termination and the
participant enters into an employment separation agreement
(containing a full release with non-compete and non-solicitation
requirements) with KeyCorp. Distributions are in the form of an
annuity or actuarially equivalent installments (unless the
participants benefit is under $50,000 in which case it is
a mandatory lump sum payment).
Ms. Mooney and Messrs. Weeden, Gorman, and Stevens
participate in the Plan(s).
KeyCorp Second Supplemental Retirement
Plan The KeyCorp Second Supplemental
Retirement Plan (Supplemental Retirement Plan) was frozen as of
December 31, 2009. As structured, the Supplemental
Retirement Plan provides participants with a benefit that is
equal to a percentage of the participants final average
compensation (i.e., the average of the participants
highest aggregate compensation for any period of five
consecutive years within a period of ten consecutive full years
immediately prior to the participants termination date) at
normal retirement (age 65). In determining a
participants compensation, the Supplemental Retirement
Plan includes the participants base salary, pre-tax
deferrals to the 401(k) Plan and Flexible Benefits Plan, and
amounts deferred under KeyCorps deferred compensation
arrangements, as well as the five highest incentive compensation
awards granted to the participant during the ten-year period
immediately preceding the participants termination. The
term compensation does not include amounts
attributable to the participants exercise of stock
options, non-cash remuneration, moving expenses, fringe
benefits, lump sum severance payments or amounts paid following
the participants termination or retirement. Base salary
payable in the form of KeyCorp equity is also not considered in
determining the participants compensation under the Plan.
Plan distributions are in the form of an annuity.
To be eligible to receive a distribution from the Plan, a
participant must be age 55 or older with a minimum of
10 years of vesting service with KeyCorp. Participants who
are involuntarily terminated for reasons other than for cause
may receive a distribution of their Plan benefits provided the
participant maintained a minimum of 25 years of vesting
service with KeyCorp at the time of termination and the
participant enters into an employment separation agreement
(containing a full release with non-compete and non-solicitation
requirements) with KeyCorp.
Mr. Meyer is a participant in the Supplemental Retirement
Plan. As set forth on the Pension Benefits Table,
Mr. Meyers normal retirement benefit (i.e. an
age 65 benefit) is estimated at $2,293,132. Because
Mr. Meyer will retire on May 1, 2011 prior to reaching
normal retirement age, his actual retirement benefit under the
Plan will be approximately $1,892,456 (a present value of
approximately $24,514,677).
Effective January 1, 2010, KeyCorp introduced a new profit
sharing component, the Annual Retirement Contribution, to the
401(k) Savings Plan and the Deferred Savings Plan. The profit
sharing contribution will be determined annually and on a
discretionary basis and can range from 0% to 6% of plan-eligible
compensation. The contribution for 2010 was 3% of eligible
compensation. In order to be eligible to receive a contribution,
employees must have one year of service and be employed on the
last day of the year.
60
2010
NONQUALIFIED DEFERRED COMPENSATION TABLE
The following table shows the nonqualified deferred compensation
activity for the named executive officers for 2010. All
nonqualified executive contributions and KeyCorp contributions
to each plan are also included in current-year compensation
presented in the 2010 Summary Compensation Table above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
|
Aggregate
|
|
|
|
|
|
|
Executive
|
|
KeyCorp
|
|
Earnings
|
|
Aggregate
|
|
Balance
|
|
Plan
|
|
|
|
|
Contributions in
|
|
Contributions in
|
|
in Last
|
|
Withdrawals/
|
|
at Last
|
|
Entry
|
Name
|
|
Plan Name
|
|
Last FY ($)
|
|
Last FY
($)(1)
|
|
FY
($)(2)
|
|
Distributions ($)
|
|
FYE
($)(3)
|
|
Date(4)
|
|
Henry L. Meyer
|
|
Deferred Savings Plan
|
|
|
57,877
|
|
|
|
86,815
|
|
|
|
964,229
|
|
|
|
|
|
|
|
4,886,798
|
|
|
|
1987
|
|
|
|
Automatic Deferral Plan
|
|
|
|
|
|
|
|
|
|
|
20,200
|
|
|
|
70,924
|
|
|
|
|
|
|
|
1999
|
|
Jeffrey B. Weeden
|
|
Deferred Savings Plan
|
|
|
29,849
|
|
|
|
44,774
|
|
|
|
97,605
|
|
|
|
|
|
|
|
505,851
|
|
|
|
2002
|
|
|
|
Automatic Deferral Plan
|
|
|
|
|
|
|
|
|
|
|
4,415
|
|
|
|
15,502
|
|
|
|
|
|
|
|
2002
|
|
Beth E. Mooney
|
|
Deferred Savings Plan
|
|
|
36,231
|
|
|
|
54,346
|
|
|
|
184,688
|
|
|
|
|
|
|
|
907,521
|
|
|
|
2006
|
|
|
|
Automatic Deferral Plan
|
|
|
|
|
|
|
|
|
|
|
6,544
|
|
|
|
22,975
|
|
|
|
|
|
|
|
2006
|
|
Christopher M. Gorman
|
|
Deferred Savings Plan
|
|
|
|
|
|
|
28,950
|
|
|
|
323,720
|
|
|
|
|
|
|
|
2,794,794
|
|
|
|
2003
|
|
|
|
Automatic Deferral Plan
|
|
|
|
|
|
|
|
|
|
|
5,209
|
|
|
|
18,290
|
|
|
|
|
|
|
|
2003
|
|
Thomas C. Stevens
|
|
Deferred Savings Plan
|
|
|
51,314
|
|
|
|
51,315
|
|
|
|
358,857
|
|
|
|
|
|
|
|
2,488,100
|
|
|
|
1996
|
|
|
|
Automatic Deferral Plan
|
|
|
|
|
|
|
|
|
|
|
4,256
|
|
|
|
14,945
|
|
|
|
|
|
|
|
1999
|
|
|
|
|
(1) |
|
KeyCorp contributions in the last fiscal year are reflected in
the 2010 Summary Compensation Table above, under the All
Other Compensation column. |
|
(2) |
|
Aggregate earnings in the last fiscal year are not reflected in
the 2010 Summary Compensation Table above because the earnings
were neither preferential nor above-market. Each of the named
executive officers had positive earnings results in 2010 and
benefited from the gain in KeyCorps stock price as well as
KeyCorp stock dividends since the prior year end. |
|
(3) |
|
The aggregate balances at the last fiscal year-end represent the
total ending account balance (employee and company balances) at
December 31, 2010 for each named executive officer. The
named executive officers 2009 year-end balances, plus
all 2010 contributions, earnings and withdrawals/distributions,
equal the amounts reported as the aggregate balances at
December 31, 2010. The Automatic Deferral Plan was
discontinued and replaced by the Annual Incentive Paid in
Restricted Stock Award Program in 2008. The Plans final
payment was made in April 2010 and is reflected in the
Aggregate Withdrawals/Distributions column. |
|
(4) |
|
Years reported as plan entry dates represent the year in which
the named executive officer originally participated in the
Second Excess 401(k) and/or Second Deferred Compensation Plans
which were merged into the Deferred Savings Plan effective
December 31, 2006. |
Previously reported Summary Compensation Table values for
executive contribution and KeyCorp contributions under rules
adopted in 2006 include: Mr. Meyer executive contributions
$1,990,725, KeyCorp contributions $639,361; Mr. Weeden
executive contributions $554,987, KeyCorp contributions
$639,361; Ms. Mooney executive contributions $1,404,068,
KeyCorp contributions $199,545; and Mr. Stevens executive
contributions $929,295, KeyCorp contributions $245,348.
Mr. Gorman was not a named executive officer in prior years.
Deferred Savings Plan The Deferred
Savings Plan provides employees with a salary grade of 86 (or
its equivalent) and above with a nonqualified retirement
benefit, which is generally reflective of the retirement benefit
61
that they would have been entitled to receive under the
tax-qualified KeyCorp 401(k) Savings Plan, but for the various
limitations contained in the Internal Revenue Code. The Deferred
Savings Plan is an unfunded plan and the value of plan benefits
is reflected on a bookkeeping basis on KeyCorps general
ledger. Eligible employees may defer up to 50% of base salary
and up to 100% of incentive compensation awarded under a
KeyCorp-sponsored incentive compensation plan and receive a
dollar-for-dollar
company match on their contributions up to 6% of pay. Effective
January 1, 2010, KeyCorp introduced a new profit-sharing
component, the Annual Retirement Contribution. The profit
sharing contribution will be determined annually and on a
discretionary basis and can range from 0% to 6% of plan-eligible
compensation. The contribution for 2010 was 3% of eligible
compensation. Base salary paid in the form of equity is not
eligible for the plans benefit formula, but, as required
by the Internal Revenue Service, counts towards the annual
compensation limit in the qualified retirement plans. The
company match and the Annual Retirement Contribution vest after
three years of service. Employee balances and the Annual
Retirement Contribution can be invested on a bookkeeping basis
in funds mirroring those in the 401(k) Savings Plan as well as
an interest bearing fund. The interest bearing fund is credited
with monthly earnings equal to 120% of the applicable long term
federal rate as published by the Internal Revenue Service. The
employer match is invested on a bookkeeping basis in the KeyCorp
Common Stock Fund. Vested balances are distributed upon
retirement or termination as follows:
|
|
|
|
|
If a participants vested plan account balance equals or
exceeds $50,000, it will be as a 5, 10, or
15-year
installment payment, as elected by the employee. If no election
is made, a default
10-year
installment payment applies.
|
|
|
|
If a participants vested plan account balance as of
termination or retirement is under $50,000, it will be
distributed as a single lump sum cash or share payment.
|
Mr. Meyer and the other named executive officers, as well
as any other employee who meets the Internal Revenue Code
Section 409A definition of a key employee, will
have their distributions held for six months.
Automatic Deferral Plan The Annual
Incentive Paid in Restricted Stock Awards Program replaced the
Automatic Deferral Plan in 2007. There was no annual incentive
compensation earned by the named executive officers in 2010,
therefore there was no annual incentive paid in restricted
stock. Distributions continued under the Automatic Deferral Plan
through April 2010, at which point account balances were
depleted.
EMPLOYMENT
AND SEVERANCE ARRANGEMENTS
Benefits
Payable Under Individual Agreements
During 2010, KeyCorp was a party to an employment agreement with
Mr. Meyer and change of control agreements with the other
named executive officers. KeyCorp and the named executive
officers originally entered into these agreements to govern the
ways in which KeyCorp provides certain post-termination benefits
and payments to the named executive officers. However, for as
long as KeyCorp is a TARP participant, it is prohibited from
making any severance payments, including payments in connection
with a change of control, to Mr. Meyer and the other named
executive officers.
However, if KeyCorp ceases to be a TARP participant, it
anticipates that some or all of the original terms of the
employment and change of control agreements may again be
effective and govern the post-termination payments
62
for its named executive officers. As a result, the following
discussion provides a brief overview of these agreements and
amounts generally payable under these agreements absent the
restrictions under EESA, ARRA, and TARP that were in effect as
of December 31, 2010.
Employment
Agreement with Mr. Meyer
KeyCorps employment agreement with Mr. Meyer provides
that he is to be employed by KeyCorp as its Chairman, President,
and Chief Executive Officer for a renewing three-year term at a
base salary of not less than $1,000,000 per annum, plus full
participation in all incentive and other compensatory plans
available generally to KeyCorps executive officers.
On November 18, 2010, Mr. Meyer advised the Board of
Directors of his decision to retire as Chairman, President, and
Chief Executive Officer on May 1, 2011.
Mr. Meyers retirement is an Approved
Retirement/Resignation under the terms of his agreement
and he is generally entitled to the following:
|
|
|
|
|
all stock options (other than so-called performance
options, which are options that vest or become exercisable
only if certain stock price
and/or
financial performance tests are achieved) become fully
exercisable;
|
|
|
|
restricted stock grants made to Mr. Meyer after
January 1, 2008 will be treated as if Mr. Meyer had
continued in Keys employment; and
|
|
|
|
specified other benefits (membership dues at one country club,
one luncheon club and one professional or cultural club,
secretarial support and office space) for five years and meeting
fees and expenses if Mr. Meyer is requested to attend the
annual meeting of shareholders.
|
Indemnification. Mr. Meyer is
entitled to continuing indemnification to the fullest extent
permitted by Ohio law for actions against him by reason of his
being or having been a director or officer of KeyCorp or any
related entity and to payment of certain legal fees incurred in
enforcing his rights under his employment agreement.
In addition, the employment agreement would have provided the
following benefits to Mr. Meyer had he not announced his
retirement.
Severance Payable upon Involuntary
Termination. Mr. Meyers employment
agreement provides that if he had been terminated by KeyCorp
without cause at any time, he would have been generally entitled
to the following in addition to the benefits described above:
|
|
|
|
|
three times the sum of his base salary and his average annual
incentive in a lump sum payable in accordance with
Section 409A of the Internal Revenue Code;
|
|
|
|
continuing participation in KeyCorps retirement and
savings plans and continuing health and welfare benefits for
three years;
|
|
|
|
a lump sum payment of three years of company contributions that
he would have received under the KeyCorp Deferred Savings Plan
if he had deferred 6% of base salary plus incentive compensation
for three years after termination.
|
63
Severance Upon Constructive
Termination. Mr. Meyer would receive the
amounts and benefits described above if he were constructively
terminated, which generally means that his base salary had been
reduced other than in connection with an
across-the-board
salary reduction, he had been excluded from full participation
in any executive incentive or other compensatory plan, he had
been demoted or removed from office, KeyCorp requested his
resignation or retirement without grounds to terminate his
employment for cause, or his principal place of employment had
been relocated outside of the Cleveland metropolitan area.
Severance Upon Constructive Termination After a Change of
Control. Mr. Meyer would also receive
the amounts and benefits described above if he had been
constructively terminated after a change of control.
Constructive termination in this context would mean:
|
|
|
|
|
his base salary had been reduced or he had been excluded from
full participation in any incentive or other compensatory plan
that was available to him during the one-year period prior to
the change of control;
|
|
|
|
the annual incentive compensation paid to him or the equity
compensation opportunities provided to him during the two-year
period immediately following the change of control had been less
than his average annual incentive compensation or the equity
compensation opportunities provided to him before the change of
control;
|
|
|
|
his position, duties, and responsibilities had been materially
reduced;
|
|
|
|
he had been unable to continue to carry out his responsibilities
and duties as Chairman of the Board and Chief Executive
Officer; or
|
|
|
|
the headquarters of the surviving entity were outside of the
Cleveland metropolitan area.
|
Definition of Cause. Under the
Employment Agreement, KeyCorp would have had cause
to terminate Mr. Meyers employment before a change of
control if he had committed a felony, acted dishonestly in a way
that was materially inimical to the best interest of KeyCorp,
competed with KeyCorp, abandoned and consistently failed to
attempt to perform his duties, or if a bank regulatory agency
issued a final order requiring KeyCorp to terminate or suspend
his employment. KeyCorp would have had cause to
terminate Mr. Meyers employment after a change of
control if he was convicted of a felony, acted dishonestly and
feloniously in a way that was materially inimical to the best
interests of KeyCorp, competed with KeyCorp or if a bank
regulatory agency issued a final order requiring KeyCorp to
terminate or suspend his employment.
Definition of Change of Control. A
change of control would have been deemed to have occurred under
Mr. Meyers employment agreement if:
|
|
|
|
|
any other corporation owned, directly or indirectly, 50% or more
of the total combined outstanding voting power of all classes of
stock of KeyCorp;
|
|
|
|
KeyCorp was merged with another corporation and less than 65% of
the outstanding shares of the new corporation were issued in
exchange for KeyCorp stock;
|
|
|
|
any person became the beneficial owner of 35% or more of the
outstanding voting stock of KeyCorp;
|
64
|
|
|
|
|
KeyCorps incumbent directors no longer constituted at
least 51% of any surviving corporation; or
|
|
|
|
substantially all of KeyCorps assets were sold, leased,
exchanged or transferred in one or a series of transactions.
|
Despite this definition, in the event that there is a
transaction or a series of transactions that are entered into
under EESA that involve the U.S. Treasury Departments
acquisition of KeyCorp preferred stock, Common Shares, warrants
to purchase Common Shares or other types of KeyCorp equity, then
in such event, such transaction(s) shall not be treated as
resulting in a change of control for purposes of
Mr. Meyers employment agreement or the change of
control agreements with the other named executive officers
described below.
Change
of Control Agreements With the Other Named Executive
Officers
As noted above, KeyCorp is a party to change of control
agreements with the named executive officers other than
Mr. Meyer. As with Mr. Meyers employment
agreement, the change of control agreements continue to be
subject to EESA and ARRA and, as such, KeyCorp is prohibited
from making severance payments to the named executive officers
party to these agreements while the financial assistance
provided to KeyCorp under TARP remains outstanding.
The terms of the change of control agreements provide that, in
most cases, if at any time within two years following a change
of control, the officers employment was terminated by
KeyCorp (except for cause, as described in the agreements), or
the officer was determined to be constructively discharged
(because the officers base salary, incentive compensation
or long-term incentive opportunity is reduced or the executive
is required to relocate the executives principal place of
employment more than 35 miles from his or her location
prior to the change of control), severance benefits would apply.
Severance benefits would consist of:
|
|
|
|
|
three times the sum of base salary plus average annual incentive
in a lump sum in accordance with Section 409A of the
Internal Revenue Code;
|
|
|
|
continuing participation in KeyCorps retirement and
savings plans for three years;
|
|
|
|
a lump sum payment of three years of company contributions that
would have been received under the KeyCorp Deferred Savings Plan
if the officer had deferred 6% of base salary plus incentive
compensation for three years after termination;
|
|
|
|
continued health benefits for eighteen months or until the
officer secures other employment, if earlier (or if the officer
is age fifty with at least fifteen years of service at the time
of termination of employment, the officer may elect to
participate in the KeyCorp Retiree Medical Plan at
KeyCorps cost); and
|
|
|
|
vesting of restricted stock and stock options (other than
performance options) if the officer is involuntarily terminated
within two years after the change of control.
|
Each change of control agreement also provides a three-month
window period, that commences fifteen months after
the date of a change of control, during which the officer may
resign voluntarily and receive similar severance benefits based
on an eighteen-month period if the officer determines in good
faith the officers position, responsibilities, duties,
status or reporting relationships are materially less than or
reduced from those in effect before the change of control or
KeyCorps headquarters is relocated outside of the greater
Cleveland metropolitan area. For purposes of the change of
control agreements, cause includes conviction of a
felony, dishonesty in the
65
course of employment that constitutes a felony and is inimical
to the best interest of KeyCorp or a subsidiary, imposition by a
bank regulatory agency of a final order of suspension or
removal, or competing with KeyCorp.
As noted above, KeyCorp is prohibited from making severance
payments to the named executive officers party to these
agreements while the financial assistance provided to KeyCorp
under TARP remains outstanding. The table below estimates the
benefits that the change of control agreements could have
provided to the named executive officers if Key had repaid TARP
in 2010 and there had been a change of control event.
Estimated Liability of Change of Control Agreements
Involuntary Termination after Change of Control
(in 000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Meyer, Henry L.
|
|
|
Mooney, Beth E.
|
|
|
Stevens, Thomas C.
|
|
|
Weeden, Jeffrey B.
|
|
|
Gorman, Christopher M.
|
|
Total Severance
|
|
$
|
8,777
|
|
|
$
|
5,550
|
|
|
$
|
3,960
|
|
|
$
|
3,690
|
|
|
$
|
6,630
|
|
Total Continued Participation in Retirement Plans
|
|
$
|
1,130
|
|
|
$
|
579
|
|
|
$
|
395
|
|
|
$
|
371
|
|
|
$
|
674
|
|
Total Continued Welfare Benefits
|
|
$
|
45
|
|
|
$
|
8
|
|
|
$
|
14
|
|
|
$
|
14
|
|
|
$
|
21
|
|
Office and Support Staff, Club Dues
|
|
$
|
604
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Total Accelerated vesting of Equity Awards
|
|
$
|
27
|
|
|
$
|
250
|
|
|
$
|
90
|
|
|
$
|
134
|
|
|
$
|
8
|
|
Total
|
|
$
|
10,583
|
|
|
$
|
6,387
|
|
|
$
|
4,458
|
|
|
$
|
4,209
|
|
|
$
|
7,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table above includes the following assumptions for Change
of Control calculations:
|
|
|
|
|
Compensation pre-TARP compensation targets are
utilized for incentive compensation.
|
|
|
|
Ms. Mooney and Mr. Gorman utilize pre-TARP targets
from former roles as Vice Chair and Head of KeyBanc Capital
Markets, respectively.
|
|
|
|
Total Change of Control values represent pre-tax values. Taxes
that would be applied include income tax (estimated at 50%) as
well as an excise tax of up to 20% on a portion of the benefits
payable.
|
KeyCorp maintains a Separation Pay Plan for all employees,
including Mr. Meyers direct reports. Mr. Meyer
has an employment agreement, and consequently the Separation Pay
Plan would not be applicable to him his benefits
above are those outlined in his employment agreement and would
apply if he had been involuntarily terminated without a change
of control. KeyCorp is prohibited from making severance payments
to the named
66
executive officers party to these agreements while the financial
assistance provided to KeyCorp under TARP remains outstanding.
The terms of the Separation Pay Plan would consist of:
|
|
|
|
|
52 weeks of salary continuation (severance pay) which
includes base salary that is paid in cash. Salary stock is not
included;
|
|
|
|
Welfare benefits include COBRA paid by KeyCorp for twelve months
at the employees current medical coverage level;
|
|
|
|
Vesting of equity awards which is prorated for an employee that
has reached age 55 with 5 years of service.
|
Estimated Liability for Severance Payments
Not related to a Change of Control
(in 000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Meyer, Henry L.
|
|
|
Mooney, Beth E.
|
|
|
Stevens, Thomas C.
|
|
|
Weeden, Jeffrey B.
|
|
|
Gorman, Christopher M.
|
|
|
Total Severance Pay
|
|
$
|
8,777
|
|
|
$
|
711
|
|
|
$
|
720
|
|
|
$
|
630
|
|
|
$
|
1,200
|
|
Total Continued Participation in Retirement Plans
|
|
$
|
1,130
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Total Welfare Benefits
|
|
$
|
45
|
|
|
$
|
4
|
|
|
$
|
7
|
|
|
$
|
7
|
|
|
$
|
10
|
|
Office and Support Staff, Club Dues
|
|
$
|
604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prorated vesting of Equity Awards
|
|
$
|
27
|
|
|
$
|
0
|
|
|
$
|
419
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Total
|
|
$
|
10,583
|
|
|
$
|
715
|
|
|
$
|
1,146
|
|
|
$
|
637
|
|
|
$
|
1,210
|
|
Benefits
Payable Upon Retirement, Death and Disability
Equity
Incentive Plans
KeyCorps equity incentive plans require all employees who
are terminated voluntarily or involuntarily to forfeit all
rights to any unvested long-term incentive compensation awards.
However, the following benefits are payable upon retirement,
death or disability:
|
|
|
|
|
Performance-Based Restricted Stock and Stock Performance
Shares. Employees who retire at age 55
with at least five years of service or greater or who die or
become disabled would receive prorated shares at the conclusion
of the performance period based on the employees active
status during the performance period and KeyCorps
performance against target; and
|
|
|
|
Time-Lapsed Restricted Stock and Stock
Options. Employees who retire at age 55
with at least five years of service or greater or who die
or become disabled would receive a prorated award. All employees
who terminate voluntarily, involuntarily, or retire would be
able to exercise any vested stock option awards after the
termination.
|
67
The named executive officers would be paid the following
benefits upon retirement, death or disability not related to a
change of control:
Estimated Liability for Retirement, Death or Disability Benefits
Not related to a Change of Control
(in 000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Meyer, Henry L.
|
|
|
Mooney, Beth E.
|
|
|
Stevens, Thomas C.
|
|
|
Weeden, Jeffrey B.
|
|
|
Gorman, Christopher M.
|
|
|
Vested and Payable upon Retirement
|
|
$
|
31,539
|
|
|
$
|
1,072
|
|
|
$
|
4,586
|
|
|
$
|
836
|
|
|
$
|
3,675
|
|
Prorated vesting of Equity Awards
|
|
$
|
27
|
|
|
$
|
0
|
|
|
$
|
419
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Total
|
|
$
|
31,566
|
|
|
$
|
1,072
|
|
|
$
|
5,005
|
|
|
$
|
836
|
|
|
$
|
3,675
|
|
The table above includes vested balances from Keys 401(k)
Savings Plan, Deferred Savings Plan, Cash Balance Pension Plan,
and Excess Cash Balance Pension Plans as of December 31,
2010. The present value of Mr. Meyers SERP benefit
has been calculated at $24.5 million based on his announced
retirement date of May 1, 2011.
However, Mr. Meyer is not able to receive this value in a
lump sum payment. Mr. Meyer has the option of selecting a
single life annuity, joint and survivor annuity or an
installment payment. The annual benefit Mr. Meyer will
receive is estimated at $1,892,456. This is not the same value
described in the Pension Benefit Table. The Pension Benefit
Table requires the payment to be projected to an age 65
retirement date; however, as noted, Mr. Meyer plans to
retire at age 61.
Similarly, Messrs. Weeden, Gorman, and Stevens and
Ms. Mooney have Excess
and/or
Second Excess Cash Balance Pension Plan balances. The values
provided above are not available to be paid to the named
executive officers in a lump sum payment. The named executive
officers have the option of selecting a single life annuity,
joint and survivor annuity or an installment payment.
68
2010
DIRECTOR COMPENSATION TABLE
The following table sets forth certain information regarding the
compensation earned by or paid to each non-employee director who
served on the Board of Directors in 2010. Directors who are
employees are not compensated for their services as directors.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or Paid
|
|
|
Stock Awards
|
|
|
|
|
Name
|
|
in Cash ($)
|
|
|
($)(1)
|
|
|
Total ($)
|
|
|
William G. Bares
|
|
|
102,000
|
|
|
|
70,000
|
|
|
|
172,000
|
|
Edward P. Campbell
|
|
|
82,500
|
|
|
|
70,000
|
|
|
|
152,500
|
|
Joseph A. Carrabba
|
|
|
57,500
|
|
|
|
70,000
|
|
|
|
127,500
|
|
Dr. Carol A. Cartwright
|
|
|
58,500
|
|
|
|
70,000
|
|
|
|
128,500
|
|
Alexander M. Cutler
|
|
|
77,500
|
|
|
|
70,000
|
|
|
|
147,500
|
|
H. James Dallas
|
|
|
103,750
|
|
|
|
70,000
|
|
|
|
173,750
|
|
Elizabeth R. Gile
|
|
|
36,916
|
|
|
|
70,000
|
|
|
|
106,916
|
|
Ruth Ann M. Gillis
|
|
|
67,500
|
|
|
|
70,000
|
|
|
|
137,500
|
|
Kristen L. Manos
|
|
|
88,000
|
|
|
|
70,000
|
|
|
|
158,000
|
|
Lauralee E. Martin
|
|
|
55,833
|
|
|
|
70,000
|
|
|
|
125,833
|
|
Eduardo R. Menascé
|
|
|
78,500
|
|
|
|
70,000
|
|
|
|
148,500
|
|
Bill R. Sanford
|
|
|
97,000
|
|
|
|
70,000
|
|
|
|
167,000
|
|
Barbara R. Snyder
|
|
|
29,000
|
|
|
|
70,000
|
|
|
|
99,000
|
|
Edward W. Stack
|
|
|
39,416
|
|
|
|
70,000
|
|
|
|
109,416
|
|
Peter G. Ten Eyck, II
|
|
|
25,083
|
|
|
|
|
|
|
|
25,083
|
|
|
|
|
(1) |
|
Amounts reported in the Stock Awards column represent the
aggregate grant date fair value of the stock awards granted
during the year computed in accordance with Financial Accounting
Standards Board ASC Topic 718. The accounting assumptions used
in calculating the grant date fair value are described in
KeyCorps Annual Report on
Form 10-K
in the Stock-Based Compensation footnote set forth on
page XX of the Annual Report. On July 27, 2010,
Dr. Cartwright, Mss. Gile, Gillis, Manos, Martin, and
Snyder, and Messrs. Bares, Campbell, Carrabba, Cutler,
Dallas, Menascé, Sanford, and Stack received 8,313 deferred
shares at a fair market value of $70,000. One-half of this
deferred share award is payable in shares and one-half of this
award is payable in cash. |
69
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
Securities
|
|
|
|
|
Underlying
|
|
Number of Shares or
|
|
|
Unexercised
|
|
Units of Stock Held
|
|
|
Options (#)
|
|
that have not
|
Name
|
|
Exercisable
|
|
Vested (#)
|
|
William G. Bares
|
|
|
18,000
|
|
|
|
27,586
|
|
Edward P. Campbell
|
|
|
18,000
|
|
|
|
27,586
|
|
Joseph A. Carrabba
|
|
|
|
|
|
|
8,334
|
|
Dr. Carol A. Cartwright
|
|
|
18,000
|
|
|
|
27,586
|
|
Alexander M. Cutler
|
|
|
18,000
|
|
|
|
27,586
|
|
H. James Dallas
|
|
|
|
|
|
|
27,586
|
|
Elizabeth R. Gile
|
|
|
|
|
|
|
8,334
|
|
Ruth Ann M. Gillis
|
|
|
|
|
|
|
8,334
|
|
Kristen L. Manos
|
|
|
|
|
|
|
21,050
|
|
Lauralee E. Martin
|
|
|
|
|
|
|
|
|
Eduardo R. Menascé
|
|
|
|
|
|
|
27,586
|
|
Bill R. Sanford
|
|
|
18,000
|
|
|
|
27,586
|
|
Barbara R. Snyder
|
|
|
|
|
|
|
8,334
|
|
Edward W. Stack
|
|
|
|
|
|
|
8,334
|
|
Peter G. Ten Eyck, II
|
|
|
|
|
|
|
|
|
Options shown represent those granted under the 1997 Stock
Option Plan for Directors which was replaced by the
Directors Deferred Share Plan in 2003.
Directors Compensation. Directors
compensation consists of two components: cash and stock-based
(or equity) compensation. Each year, the Nominating and
Corporate Governance Committee reviews the amount and form of
directors compensation payable at KeyCorp in comparison to
directors compensation payable at peer bank holding
companies. The Nominating and Corporate Governance Committee
reports the results of its annual review to the full Board and
recommends to the full Board changes, if any, in directors
compensation.
Cash Component. Directors (other than
Messrs. Meyer and Stevens and Ms. Mooney, who receive
no director fees) receive cash fees consisting of a $35,000
annual retainer payable in quarterly installments, $1,500 for
attendance at each Board or committee meeting (except that fees
for each scheduled Board or committee telephonic meeting are
$1,000 for each meeting) and $1,500 for attendance at officially
sanctioned meetings at which the directors represent KeyCorp and
which require a substantial time commitment. Chairpersons of the
Audit, Risk Management and Compensation and Organization
Committees receive an additional compensation of $3,750 per
quarter and outside directors who serve as chairperson of other
committees receive additional compensation of $2,500 per quarter.
Stock-Based Component. The Board has
determined that approximately 50% (in value) of the Boards
compensation should be equity compensation in order to more
closely align the economic interests of directors and
shareholders. In May 2003, the shareholders of KeyCorp approved
the Directors Deferred Share Plan as a
70
replacement for the granting of stock options under the 1997
Stock Option Plan for Directors. Under the Directors
Deferred Share Plan, each of the non-employee directors is
automatically granted, on an annual basis, phantom
KeyCorp Common Shares, referred to as deferred shares, having an
aggregate fair market value on the trading day of the award
equal to 200% of the annual cash retainer payable to a director.
Each grant is subject to a minimum three-year deferral period
which is accelerated upon a directors retirement or death.
Until otherwise determined by the Nominating and Corporate
Governance Committee, the deferred shares are paid 50% in Common
Shares and 50% in cash. In 2010, Directors Dr. Cartwright,
Mss. Gile, Gillis, Manos, Martin and Snyder and
Messrs. Bares, Campbell, Carrabba, Cutler, Dallas,
Menascé, Sanford, and Stack were granted 8,323 deferred
shares. Messrs. Meyer and Stevens and Ms. Mooney are
not eligible to participate in the Directors Deferred
Share Plan because they are employees of KeyCorp. Mr. Ten
Eyck was not eligible for the award because he retired before
the grant date. Ms. Martin retired on November 18,
2010.
Terminated Director Stock Option Plans. Prior
to the Directors Deferred Share Plan, directors of KeyCorp
were awarded stock options under the 1997 Stock Option Plan for
Directors. The plan has been terminated except with respect to
awards granted prior to the date of its termination, and no
shares remain available for grant under the plan. The KeyCorp
1997 Stock Option Plan for Directors provided for grants to each
of the non-employee directors, on an annual basis, of stock
options having a value (determined on a formula basis) on the
grant date equal to 2.75 times the annual cash retainer payable
to a director. All options granted under the plan vested upon
grant and expire ten years after the grant. The purchase price
of the option shares was equal to the fair market value on the
date of grant.
Second Director Deferred Compensation
Plan. Under the KeyCorp Second Director Deferred
Compensation Plan, directors are given the opportunity to defer
for future distribution payment of directors fees and further
defer payment of deferred shares. Deferred payments of director
fees are invested; however there are no above market or
preferential earnings. Deferred payments of deferred shares are
invested solely in the Common Shares account. Distributions to
the directors under the Second Deferred Compensation Plan under
the interest bearing account are in the form of cash and under
the Common Shares account are in the form of KeyCorp Common
Shares.
COMPENSATION
AND ORGANIZATION COMMITTEE REPORT (INCLUDING DISCUSSION OF
COMPENSATION POLICIES AND PRACTICES AS THEY RELATE TO RISK
MANAGEMENT)
The Compensation and Organization Committee met with
KeyCorps Chief Risk Officer and Chief Auditor in January
and July 2010 to review KeyCorps 2010 senior executive
officer (SEO) compensation plans and employee compensation plans
and the risks these plans may pose to KeyCorp. Following is a
description of KeyCorps incentive risk assessment
framework used by the Committee in order to:
|
|
|
|
|
identify and limit the features in the SEO compensation plans
that could lead SEOs to take unnecessary and excessive risks
that could threaten the value of KeyCorp,
|
|
|
|
identify any features in the employee compensation plans that
pose risks to KeyCorp and limit those features to ensure that
KeyCorp is not unnecessarily exposed to risks, and
|
|
|
|
review each employee compensation plan and identify the features
in the plan that could encourage the manipulation of reported
earnings of KeyCorp.
|
71
A risk assessment framework was developed by Keys
compensation and risk management with oversight from Keys
management and the Committee. The framework assesses each
incentive plan in the context of three core principles. All
incentive plans are regularly reviewed to ensure ongoing
achievement of the principles. Any incentive plans that do not
achieve the principles are remediated until they achieve the
principles. For 2010, all of Keys incentive plans achieved
the three core principles. The three core principles include:
|
|
|
|
|
Discourage excessive risk-taking beyond the ability to identify
and manage risk,
|
|
|
|
Be compatible with effective controls and risk
management, and
|
|
|
|
Be supported by strong corporate governance, including active
and effective board of directors oversight.
|
Additionally, all Key incentive plan documents allowed for a
revision of the plan formula and incentive amount (including on
a retroactive basis), if the:
|
|
|
|
|
1) design, structure
and/or
operation of the Plan, 2) extraordinary events,
3) later determination of unprofitable
and/or
detrimental business or business relationships, or
4) market-related events or circumstances, result in
unanticipated, unintentional, or erroneous incentive payments(s)
to be made under the plan, or
|
|
|
|
incentive amount fails to conform to the intent of the plan or
otherwise is found to be contrary to Keys risk policies or
guidelines.
|
Key continues to retain the right at all times to modify,
discontinue, or terminate any plan or plan compensation
structure, funding or formula if the formula, structure, design,
eligibility, administration
and/or
operation of the Plan is, or would be contrary to the
achievement of KeyCorps intended risk tolerances. Plan
documents also provide Key with the unconditional right for the
correction, including the retroactive correction of any plan
formula or incentive amount, and the mandatory clawback or
repayment of any incentive amount that was or was later found to
be contrary to the intent of the plan, contrary to the safety
and soundness of KeyCorp, or based upon incorrect data,
extraordinary circumstances, or unprofitable business
relationships or transactions.
The requirements contained in the foregoing plans and the method
by which they will be administered are consistent with the
requirements of EESA, as well as the operational provisions of
the Guidance on Sound Incentive Compensation Policies.
These reviews of KeyCorps compensation plans did not
identify any plan that was reasonably likely to have a material
impact on KeyCorp. Further, based upon the foregoing, the
Committee concluded that KeyCorps compensation plans did
not incent excessive risk taking and that they were compliant
with KeyCorps risk management tolerances and safety and
soundness requirements.
In addition, the Lead Director and the chairs of the Audit,
Compensation and Organization and Risk Management Committees
reviewed the Compensation and Organization Committees
assessment of KeyCorps performance in conjunction with
risk-related principles prior to the Compensation and
Organization Committees determination of the 2010 Annual
Incentive Plan funding.
The Compensation and Organization Committee has reviewed and
discussed with management the Compensation Discussion and
Analysis set forth on page XX of this proxy statement and
based on this review, has
72
recommended to the KeyCorp Board of Directors the inclusion of
the Compensation Discussion and Analysis in this proxy statement.
Committee
Certification
The Compensation and Organization Committee of the Board of
Directors of KeyCorp hereby certifies that:
(1) It has discussed, evaluated and reviewed with senior
risk officers, the senior executive officer (SEO) compensation
plans and has made all reasonable efforts to ensure that these
plans do not encourage SEOs to take unnecessary and excessive
risks that threaten the value of KeyCorp;
(2) It has discussed, evaluated and reviewed with senior
risk officers, the employee compensation plans and has made all
reasonable efforts to limit any unnecessary risks these plans
pose to KeyCorp; and
(3) It has discussed, evaluated and reviewed at least every
six months, the employee compensation plans to eliminate any
features of these plans that would encourage the manipulation of
reported earnings of KeyCorp to enhance the compensation of any
employee.
Compensation and Organization Committee
Board of Directors
KeyCorp
Edward P. Campbell (Chair)
Joseph A. Carrabba
Carol A. Cartwright
Alexander M. Cutler
EQUITY
COMPENSATION PLAN INFORMATION
Equity Compensation Plans. KeyCorp currently
maintains the KeyCorp 2010 Equity Compensation Plan (the
2010 Plan), the KeyCorp 2004 Equity Compensation
Plan (the 2004 Plan), the KeyCorp Amended and
Restated 1991 Equity Compensation Plan (Amended as of
March 13, 2003) (the 1991 Plan), the KeyCorp
1997 Stock Option Plan for Directors (as of March 14, 2001)
(the 1997 Director Plan), and the KeyCorp
Amended and Restated Discounted Stock Purchase Plan (the
DSPP), pursuant to which it has made equity
compensation available to eligible persons. Shareholders
approved the 2010 Plan at the 2010 Annual Shareholders Meeting.
The 2010 Plan replaced the 2004 Plan except with respect to
awards granted prior to its termination. The 1997 Director
Plan (discussed on page of this proxy
statement) terminated on May 22, 2003, except with respect
to awards granted prior to the date of termination.
Consequently, no shares remain available for future issuance
under the 1991 Plan and the 1997 Director Plan.
KeyCorp also maintains the KeyCorp Deferred Equity Allocation
Plan that provides for the allocation of Common Shares to
employees and directors under existing and future KeyCorp
deferred compensation arrangements. Additionally, KeyCorp
maintains the KeyCorp Directors Deferred Share Plan (which
replaced the 1997 Director Plan and which is described on
page of this proxy statement). Shareholders
approved both Plans at the 2003 Annual Shareholders Meeting.
Under both Plans, all or a portion of such deferrals and
deferred payments may be deemed invested in accounts based on
KeyCorp Common Shares, which are distributed in the
73
form of KeyCorp Common Shares. Some of the arrangements with
respect to the Deferred Equity Allocation Plan include an
employer-matching feature that rewards employees with additional
Common Shares at no additional cost. The table does not include
information about these plans because no options, warrants or
rights are available under these plans. As of December 31,
2010, 4,536,349 and 127,909 Common Shares have been allocated to
accounts of participants under the Deferred Equity Allocation
Plan and the Directors Deferred Share Plan, and 6,693,258
and 262,350 Common Shares, respectively, remain available for
future issuance.
The following table provides information about KeyCorps
equity compensation plans as of December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
Remaining Available for
|
|
|
|
|
Weighted-Average
|
|
Future Issuance Under
|
|
|
Number of Securities to
|
|
Exercise Price of
|
|
Equity Compensation
|
|
|
be Issued Upon Exercise
|
|
Outstanding
|
|
Plans (Excluding
|
|
|
of Outstanding Options,
|
|
Options, Warrants
|
|
Securities Reflected in
|
Plan Category
|
|
Warrants and Rights
|
|
and Rights
|
|
Column (a))
|
|
Equity compensation plans approved by security
holders(1)
|
|
|
32,834,269
|
|
|
$
|
22.97
|
|
|
|
36,067,375
|
(2)
|
Equity compensation plans not approved by security
holders(3)
|
|
|
126,000
|
|
|
$
|
24.91
|
|
|
|
0
|
|
Total
|
|
|
32,960,269
|
|
|
$
|
22.97
|
|
|
|
36,067,375
|
|
|
|
|
(1) |
|
The table does not include 7,704,498 unvested shares of
time-lapsed and performance-based restricted stock awarded under
the 2010 Plan, 2004 Plan and 1991 Plan. These unvested
restricted shares were issued when awarded and consequently are
included in KeyCorps Common Shares outstanding. |
|
(2) |
|
The Compensation and Organization Committee of the Board of
Directors of KeyCorp has determined that KeyCorp may not grant
options to purchase KeyCorp Common Shares, shares of restricted
stock, or other share grants under its long-term compensation
plans in an amount that exceeds six percent of KeyCorps
outstanding Common Shares in any rolling three-year period. |
|
(3) |
|
The table does not include outstanding options to purchase
22,654 Common Shares assumed in connection with an acquisition
from a prior year. At December 31, 2010, these assumed
options had a weighted average exercise price of $24.60 per
share. No additional options may be granted under the plan that
governs these options. |
SHARE
OWNERSHIP AND OTHER PHANTOM STOCK UNITS
Five Percent Beneficial Ownership. KeyCorp has
been advised that as of December 31, 2010, FMR LLC,
82 Devonshire Street, Boston, Massachusetts, and related
entities owned 47,282,490 KeyCorp Common Shares which is
approximately 5.4% of the outstanding KeyCorp Common Shares.
KeyCorp has also been advised that as of December 31, 2010,
Blackrock Inc., 40 East
52nd
Street, New York, New York, and related entities owned
65,519,573 KeyCorp Common Shares which is approximately
7.4% of the outstanding KeyCorp Common Shares.
Beneficial Ownership of Common Shares and Investment in Other
Phantom Stock Units. The following table lists
directors of and nominees for director of KeyCorp, the executive
officers included in the Summary Compensation Table, and all
directors, nominees, and executive officers of KeyCorp as a
group. The table sets forth
74
certain information with respect to (1) the amount and
nature of beneficial ownership of KeyCorp Common Shares
including certain phantom stock units, (2) the number of
other phantom stock units, if any, and (3) total beneficial
ownership of KeyCorp Common Shares and other phantom stock units
for such directors, nominees for director, and executive
officers. The information provided is as of January 1, 2011
unless otherwise indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
Other
|
|
Beneficial Ownership
|
|
|
Amount and Nature of
|
|
Percent of
|
|
Phantom
|
|
of Common Shares
|
|
|
Beneficial Ownership
|
|
Common Shares
|
|
Stock
|
|
and Other Phantom
|
Name(1)
|
|
of Common
Shares(3)(4)
|
|
Outstanding(5)
|
|
Units(6)
|
|
Stock Units
|
|
William G. Bares
|
|
|
89,010
|
|
|
|
|
|
|
|
7,648
|
|
|
|
96,658
|
|
Edward P. Campbell
|
|
|
30,837
|
|
|
|
|
|
|
|
64,973
|
|
|
|
95,810
|
|
Joseph A. Carrabba
|
|
|
6,667
|
|
|
|
|
|
|
|
0
|
|
|
|
6,667
|
|
Dr. Carol A. Cartwright
|
|
|
41,886
|
|
|
|
|
|
|
|
8,483
|
|
|
|
50,369
|
|
Alexander M. Cutler
|
|
|
41,793
|
|
|
|
|
|
|
|
40,883
|
|
|
|
82,676
|
|
H. James Dallas
|
|
|
33,586
|
|
|
|
|
|
|
|
10,047
|
|
|
|
43,633
|
|
Elizabeth R. Gile
|
|
|
5,467
|
|
|
|
|
|
|
|
0
|
|
|
|
5,467
|
|
Ruth Ann M. Gillis
|
|
|
6,667
|
|
|
|
|
|
|
|
0
|
|
|
|
6,667
|
|
Christopher M.
Gorman(2)
|
|
|
599,874
|
|
|
|
|
|
|
|
50,852
|
|
|
|
650,726
|
|
Kristen L. Manos
|
|
|
20,525
|
|
|
|
|
|
|
|
17,401
|
|
|
|
37,926
|
|
Eduardo R. Menascé
|
|
|
24,090
|
|
|
|
|
|
|
|
0
|
|
|
|
24,090
|
|
Henry L. Meyer
III(2)
|
|
|
3,624,064
|
|
|
|
|
|
|
|
311,814
|
|
|
|
3,935,878
|
|
Beth E.
Mooney(2)
|
|
|
682,568
|
|
|
|
|
|
|
|
154,854
|
|
|
|
837,422
|
|
Bill R. Sanford
|
|
|
52,914
|
|
|
|
|
|
|
|
0
|
|
|
|
52,914
|
|
Barbara R. Snyder
|
|
|
4,167
|
|
|
|
|
|
|
|
0
|
|
|
|
4,167
|
|
Edward W. Stack
|
|
|
14,167
|
|
|
|
|
|
|
|
0
|
|
|
|
14,167
|
|
Thomas C.
Stevens(2)
|
|
|
1,185,034
|
|
|
|
|
|
|
|
126,018
|
|
|
|
1,311,052
|
|
Jeffrey B.
Weeden(2)
|
|
|
1,029,386
|
|
|
|
|
|
|
|
23,258
|
|
|
|
1,052,644
|
|
All directors, nominees and executive officers as a group (22)
|
|
|
7,492,702
|
|
|
|
|
|
|
|
816,231
|
|
|
|
8,308,933
|
|
|
|
|
(1) |
|
KeyCorps Corporate Governance Guidelines state that each
outside director should, by the fifth anniversary of such
directors initial election, own KeyCorp Common Shares with
a value at least equal to four times KeyCorps outside
director annual retainer, of which 1,000 shares should be
directly owned and be in the form of actual shares. |
|
(2) |
|
With respect to KeyCorp Common Shares beneficially held by these
individuals or other executive officers under the KeyCorp 401(k)
Savings Plan, the shares included are as of December 31,
2010. |
|
(3) |
|
Beneficially owned shares include options exercisable as of
March 1, 2011. The directors, nominees, and executive
officers listed above hold vested options as follows:
Mr. Bares 18,000; Mr. Campbell 18,000;
Mr. Carrabba 0; Dr. Cartwright 18,000; Mr. Cutler
18,000; Mr. Dallas 0; Ms. Gile 0; Ms. Gillis 0;
Mr. Gorman 261,807; Ms. Manos 0; Mr. Menascé
0; Mr. Meyer 2,639,334; Ms. Mooney 346,667;
Mr. Sanford 18,000; Ms. Snyder 0; Mr. Stack 0;
Mr. Stevens 863,667; Mr. Weeden 576,667; all
directors, nominees, and executive officers as a group 5,426,640. |
75
|
|
|
|
|
Beneficially owned shares include some phantom shares payable in
Common Shares under the KeyCorp Directors Deferred Share
Plan. The amounts of shares are as follows: Mr. Bares
13,793; Mr. Campbell 10,525; Mr. Carrabba 4,167;
Dr. Cartwright 13,793; Mr. Cutler 10,525;
Mr. Dallas 10,525; Ms. Gile 4,167; Ms. Gillis
4,167; Ms. Manos 10,525; Mr. Menascé 13,793;
Mr. Sanford 13,793; Ms. Snyder 4,167; Mr. Stack
4,167; all directors as a group 118,107. The phantom shares are
granted each year and are payable in three years, one-half in
cash and one-half in Common Shares. The phantom shares payable
in cash are not included in this table. If the directors
directorship ends, the phantom shares are immediately payable
even if the three-year period has not ended. Some directors have
elected to defer payment of the phantom shares at the end of the
three-year period. Shares that are being deferred are not
included under this column but are included under the column
Other Phantom Stock Units in this table. See
footnote 6 for a further description of the mechanics of the
Directors Deferred Share Plan distribution process. |
|
(4) |
|
One executive officer has pledged to an entity unaffiliated with
KeyCorp 20,760 shares of KeyCorp stock. |
|
(5) |
|
No director or executive officer beneficially owns more than 1%
of the total of outstanding KeyCorp Common Shares plus options
vested as of March 1, 2011. |
|
(6) |
|
Investments in phantom stock units by directors are made
pursuant to the KeyCorp Second Director Deferred Compensation
Plan and the Directors Deferred Share Plan. |
During 2010, investments in phantom stock units by KeyCorp
executive officers were made pursuant to the KeyCorp Deferred
Savings Plan as well as pursuant to Restricted Stock Unit awards
under the KeyCorp 2004 Equity Compensation Plan and KeyCorp 2010
Equity Compensation Plan. Under all of these plans and awards,
contributions to a participants phantom stock account were
treated as if they were invested in KeyCorp Common Shares. At
the time of distribution, an actual Common Share is issued for
each phantom stock unit that is in the account.
No Common Shares were issued in connection with any of the plans
or awards described in this footnote until the time of
distribution from the account (i.e., these are unfunded plans
with phantom stock units); accordingly, directors
and executive officers participating in these plans or receiving
these awards do not have any voting rights or investment power
with respect to or on account of the phantom stock units until
the time of distribution from the account, whereupon actual
Common Shares are issued. Under the Directors Deferred
Share Plan, one-half of the distribution is in Common Shares and
one-half of the distribution is in cash. As previously stated,
only the portion of the distribution payable in Common Shares is
included in this table.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
KeyCorps directors and certain officers are required to
report their ownership and changes in ownership of KeyCorp
Common Shares to the Securities and Exchange Commission. The
Commission has established certain due dates for these reports.
KeyCorp knows of no person who failed to timely file any such
report during 2010.
AUDIT
MATTERS
AUDIT
FEES
Ernst & Young billed KeyCorp in the aggregate
$5,711,000 for fees for professional services in connection with
the integrated audit of KeyCorps annual financial
statements for the year ended December 31, 2010, reviews
76
of financial statements included in KeyCorps
Forms 10-Q
for 2010, and 2010 audits of KeyCorp subsidiaries.
Ernst & Young billed KeyCorp in the aggregate
$5,901,000 for fees for professional services in connection with
the integrated audit of KeyCorps annual financial
statements for the year ended December 31, 2009, reviews of
financial statements included in KeyCorps
Forms 10-Q
for 2009, and 2009 audits of KeyCorp subsidiaries.
AUDIT-RELATED
FEES
Ernst & Young billed KeyCorp in 2010 in the aggregate
$762,000 for fees for assurance and related services that are
reasonably related to the performance of the audit or review of
KeyCorps financial statements and are not reported in the
previous paragraph. These services consisted of attestation and
compliance reports. Ernst & Young billed KeyCorp in
2009 in the aggregate $864,000 for fees for assurance and
related services that are reasonably related to the performance
of the audit and review of KeyCorps financial statements
and are not reported in the previous paragraph. These services
consisted of attestation and compliance reports.
TAX
FEES
Ernst & Young billed KeyCorp in 2010 in the aggregate
$1,287,000 for fees for tax services. These services consisted
of tax compliance services provided to certain investment funds
managed by KeyCorp, tax advisory services related to the impact
of ownership changes and tax compliance services provided to
certain domestic and foreign subsidiaries of KeyCorp.
Ernst & Young billed KeyCorp in 2009 in the aggregate
$1,361,000 for tax services. These services consisted of tax
compliance services provided to certain investment funds managed
by KeyCorp, tax advisory services related to the impact of
ownership changes and tax compliance services provided to
certain domestic and foreign subsidiaries of KeyCorp.
ALL OTHER
FEES
Ernst & Young billed KeyCorp in 2010 in the aggregate
$35,000 for fees for products and services other than those
described in the last three paragraphs. These products and
services consisted of a survey provided to a KeyCorp domestic
subsidiary. Ernst & Young billed KeyCorp in 2009 in
the aggregate $110,000 for fees for products and services other
than those described in the last three paragraphs. These
products and services consisted of a survey provided to a
KeyCorp domestic subsidiary and documenting regulatory
requirements for certain KeyCorp foreign subsidiaries.
PRE-APPROVAL
POLICIES AND PROCEDURES
The Audit Committees pre-approval policies and procedures
are attached hereto as Appendix D.
AUDIT
COMMITTEE INDEPENDENCE
The members of KeyCorps Audit Committee are independent
(as independence is defined by the provisions of the New York
Stock Exchange listing standards).
77
AUDIT
COMMITTEE FINANCIAL EXPERTS
The KeyCorp Board of Directors has determined that Audit
Committee members Gillis and Menascé are financial
experts as defined by the applicable Securities and
Exchange Commission rules and regulations.
COMMUNICATIONS
WITH THE AUDIT COMMITTEE
Interested parties wishing to communicate with the Audit
Committee regarding accounting, internal accounting controls, or
auditing matters, may directly contact the Audit Committee by
mailing a statement of their comments and views to KeyCorp at
its corporate headquarters in Cleveland, Ohio. Such
correspondence should be addressed to the Chair, Audit
Committee, KeyCorp Board of Directors, care of the Secretary of
KeyCorp, and be marked Confidential.
AUDIT
COMMITTEE REPORT
The Audit Committee of the KeyCorp Board of Directors is
composed of five outside directors and operates under a written
charter adopted by the Board of Directors. The Committee
annually selects KeyCorps independent auditors, subject to
shareholder ratification.
Management is responsible for KeyCorps internal controls
and financial reporting process. Ernst & Young,
KeyCorps independent auditors, is responsible for
performing an independent audit of KeyCorps consolidated
financial statements in accordance with generally accepted
auditing standards and to issue a report thereon. The
Committees responsibility is to provide oversight to these
processes.
In fulfilling its oversight responsibility, the Committee relies
on the accuracy of financial and other information, opinions,
reports, and statements provided to the Committee. Accordingly,
the Committees oversight does not provide an independent
basis to determine that management has maintained appropriate
accounting and financial reporting principles or appropriate
internal controls and procedures designed to assure compliance
with accounting standards and applicable laws and regulations.
Nor does the Committees oversight assure that the audit of
KeyCorps financial statements has been carried out in
accordance with generally accepted auditing standards or that
the audited financial statements are presented in accordance
with generally accepted accounting principles.
The Committee has reviewed and discussed the audited financial
statements of KeyCorp for the year ended December 31, 2010
(Audited Financial Statements) with KeyCorps
management. In addition, the Committee has discussed with
Ernst & Young the matters required by Statement on
Auditing Standards No. 61, as amended.
The Committee has received the written disclosures and the
letter from Ernst & Young required by applicable
requirements of the Public Company Accounting Oversight Board
regarding Ernst & Youngs communications with the
Committee concerning independence, and the Committee has
discussed with Ernst & Young its independence from
KeyCorp. The Committee has considered whether Ernst &
Youngs provision of non-audit services to KeyCorp is
compatible with maintaining Ernst & Youngs
independence.
Based on the foregoing review and discussions and relying
thereon, the Committee recommended to KeyCorps Board of
Directors the inclusion of the Audited Financial Statements in
KeyCorps Annual Report for the year ended
December 31, 2010 on
Form 10-K
that was filed with the Securities and Exchange Commission.
78
Audit Committee
Board of Directors
KeyCorp
William G. Bares (Chair)
Ruth Ann M. Gillis
Kristen L. Manos
Eduardo R. Menascé
Edward W. Stack
GOVERNANCE
DOCUMENT INFORMATION
The KeyCorp Board of Directors Committee Charters,
KeyCorps Corporate Governance Guidelines, KeyCorps
Code of Ethics, KeyCorps Standards for Determining
Independence of Directors, and KeyCorps Policy for Review
of Transactions between KeyCorp and its Directors, Executive
Officers, and Other Related Persons are posted on KeyCorps
website: www.key.com/ir. Copies of these documents will
be delivered, free of charge, to any shareholder who contacts
KeyCorps Investor Relations Department at
216-689-4221.
SHAREHOLDER
PROPOSALS FOR THE YEAR 2012
The deadline for shareholders to submit proposals to be
considered for inclusion in the Proxy Statement for the 2012
Annual Meeting of Shareholders is December ,
2011. This deadline applies to proposals submitted for inclusion
in KeyCorps proxy statement for the 2012 Annual Meeting
under the provisions of
Rule 14a-8
of the Exchange Act.
Proposals of shareholders submitted outside the process of
Rule 14a-8
under the Exchange Act in connection with the 2012 Annual
Meeting must be received by the Secretary of KeyCorp no fewer
than 60 and no more than 90 days before the annual meeting.
KeyCorps Regulations require, among other things, that the
shareholder set forth the text of the proposal to be presented
and a brief written statement of the reasons why the shareholder
favors the proposal. The proposal must also set forth the
shareholders name, record address, the number and class of
all shares of each class of KeyCorp stock beneficially owned by
such shareholder and any material interest of such shareholder
in the proposal.
The KeyCorp proxy relating to the 2012 Annual Meeting of KeyCorp
will give discretionary authority to the proxy holders to vote
with respect to all proposals submitted outside the process of
Rule 14a-8
that are not presented in accordance with the KeyCorp
Regulations.
HOUSEHOLDING
INFORMATION
Only one Annual Report and Proxy Statement is being delivered to
multiple shareholders sharing an address unless KeyCorp received
contrary instructions from one or more of the shareholders.
79
If a shareholder at a shared address to which a single copy of
the Annual Report and Proxy Statement was delivered wishes to
receive a separate copy of the Annual Report or Proxy Statement,
he or she should contact KeyCorps transfer agent,
Computershare Investor Services LLC (Computershare),
by telephoning
800-539-7216
or by writing to Computershare at P.O. Box 43078,
Providence, Rhode Island
02940-3078.
The shareholder will be delivered, without charge, a separate
copy of the Annual Report or Proxy Statement promptly upon
request.
If shareholders at a shared address currently receiving multiple
copies of the Annual Report and Proxy Statement wish to receive
only a single copy of these documents, they should contact
Computershare in the manner provided above.
GENERAL
The Board of Directors knows of no other matters which will be
presented at the meeting. However, if other matters properly
come before the meeting or any adjournment, the person or
persons voting your shares pursuant to instructions by proxy
card, internet, or telephone will vote your shares in accordance
with their best judgment on such matters.
If a shareholder desires to bring a proposal before the Annual
Meeting of Shareholders that has not been included in
KeyCorps proxy statement, the shareholder must notify
KeyCorp not less than 60 nor more than 90 days prior to the
meeting of any business the shareholder proposes to bring before
the meeting for a shareholder vote.
Shareholders may only nominate a person for election as a
director of KeyCorp at a meeting of shareholders if the
nominating shareholder has strictly complied with the applicable
notice and procedural requirements set forth in KeyCorps
Regulations, including, without limitation, timely providing to
the Secretary of KeyCorp the requisite notice (not less than 60
nor more than 90 days prior to the meeting) of the proposed
nominee(s) containing all the information specified by the
Regulations. KeyCorp will provide to any shareholder, without
charge, a copy of the applicable procedures governing nomination
of directors set forth in KeyCorps Regulations upon
request to the Secretary of KeyCorp.
KeyCorp will bear the expense of preparing, printing, and
mailing this Proxy Statement. Officers and other employees of
KeyCorp and its subsidiaries may solicit the return of proxies.
KeyCorp has engaged the services of Georgeson &
Company Inc. to assist in the solicitation of proxies at an
anticipated cost of $15,000 plus expenses. KeyCorp will request
brokers, banks, and other custodians, nominees, and fiduciaries
to send proxy materials to beneficial owners and will, upon
request, reimburse them for their expense in so doing.
Solicitations may be made by mail, telephone, or other means.
Holders of KeyCorp Common Shares are urged to vote their shares
promptly by telephone, the internet, or by mailing their signed
proxy cards in the enclosed envelopes in order to make certain
their shares are voted at the meeting. KeyCorp Common Shares
represented by properly executed proxy cards, internet
instructions, or telephone instructions will be voted in
accordance with any specification made. If no specification is
made on a properly executed proxy card or by the internet, the
proxies will vote for the election as directors of the nominees
named herein (Issue One of this Proxy Statement), for the
KeyCorp 2011 Annual Performance Plan (Issue Two of the Proxy
Statement), for the amendment to KeyCorps Regulations
concerning shareholder voting power requirements (Issue Three of
this Proxy Statement), for the amendment to KeyCorps
Articles and Regulations to revise the voting power of the
Series B Preferred Stock (Issue Four of this Proxy
Statement), in favor of ratifying
80
the appointment of Ernst & Young as independent
auditors for the fiscal year ending December 31, 2010
(Issue Five of this Proxy Statement), for advisory approval of
KeyCorps executive compensation program (Issue Six of this
Proxy Statement), and in favor of voting every year on the
advisory approval of KeyCorps executive compensation
program (Issue Seven of this Proxy Statement). Abstentions and,
unless a brokers authority to vote on a particular matter
is limited, broker non-votes are counted in determining the
votes present at the meeting. A brokers authority to vote
on Issues One, Two, Six, and Seven is limited but is not limited
as to Issues Three, Four and Five. As to Issues Three, Four and
Five, a broker non-vote has the same effect as a vote against
the proposal and as to Issues One, Two, Six, and Seven, a broker
non-vote is treated as not being present. As to Issues Two,
Three, Four, Five, and Six, an abstention has the same effect as
a vote against the proposal. Until the vote on a particular
matter is actually taken at the meeting, a shareholder may
revoke a vote previously submitted (whether by proxy card,
internet or telephone) by submitting a subsequently dated vote
(whether by proxy card, internet or telephone) or by giving
notice to KeyCorp or in open meeting; provided such subsequent
vote must in all cases be received prior to the vote on the
particular matter being taken at the meeting. A shareholder may
of course vote at the meeting but a shareholders mere
presence at the meeting will not operate to revoke the
shareholders proxy card or any prior vote by the internet
or telephone.
Holders of Series A Preferred Stock and Series B
Preferred Stock are only entitled to vote on Issue Four
regarding the revision of the voting power of the Series B
Preferred Stock. If no specification is made on a properly
executed proxy card, shares of Series A Preferred Stock and
Series B Preferred Stock will be voted in favor of Issue
Four. Until the vote is actually taken at the meeting, holders
of Series A Preferred Stock and Series B Preferred
Stock may revoke a vote previously submitted by submitting a
subsequently dated proxy card or by giving notice to KeyCorp or
in open meeting, provided such subsequent vote must in all cases
be received prior to the vote on Issue Four. Such preferred
stockholders may of course vote at the meeting but their mere
presence at the meeting will not operate to revoke their proxy
cards.
81
APPENDIX A
KEYCORP
2011 ANNUAL PERFORMANCE PLAN
1. Purpose. The purpose of the KeyCorp
2011 Annual Performance Plan (the Plan), in
conjunction with the KeyCorp Annual Incentive Plan
(AIP), is to advance the interests of KeyCorp and
its shareholders and assist KeyCorp in attracting and retaining
key employees by providing annual incentives that are intended
to be deductible to the maximum extent possible as
performance-based compensation within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, as
amended (the Code). This Plan is subject to
shareholder approval with respect to amounts that may become
payable for fiscal year 2011 and thereafter and shall be null
and void and of no further effect if such shareholder approval
is not obtained.
2. Administration. The Compensation and
Organization Committee (the Committee) will approve
the goals, participation, target bonus awards, actual bonus
awards, timing of payment and other actions necessary to the
administration of the Plan, based on the recommendations of
senior management. It is the responsibility of senior management
of KeyCorp to execute the provisions of the Plan in accordance
with the Committees directions. All decisions of the
Committee shall be final and binding upon all parties including
KeyCorp, its shareholders, and the participants. The provisions
of this Plan are intended to ensure that all awards granted
hereunder qualify for the exemption from the limitation on
deductibility imposed by Section 162(m) of the Code that is
set forth in Section 162(m)(4)(C) of the Code, and this
Plan shall be interpreted and operated consistent with that
intention.
3. Participation. The participant group
will consist of the Chief Executive Officer and certain officers
of KeyCorp reporting directly to the Chief Executive Officer and
selected by the Committee who either are, or are determined by
the Committee to be likely to become, a covered
employee within the meaning of Section 162(m) of the
Code.
4. Establishment of Incentive Opportunities.
(a) On or before March 30 of each year, the Committee shall
select objective performance goals (the Corporate
Performance Goals) to be used in determining an aggregate
amount to be distributed under the Plan (the Aggregate
Incentive Opportunity). The Aggregate Incentive
Opportunity will be a dollar amount calculated by reference to
specified levels of, growth in, or ratios involving, the
Corporate Performance Goals, which may include any one or more
of the following:
(i) Earnings per share
(ii) Total revenue
(iii) Net interest income
(iv) Noninterest income
(v) Net income
(vi) Net income before tax
(vii) Noninterest expense
(viii) Efficiency ratio
A-1
(ix) Return on equity
(x) Return on assets
(xi) Economic profit added
(xii) Loans
(xiii) Deposits
(xiv) Tangible Equity
(xv) Assets
(xvi) Net Charge-Offs
(xvii) Nonperforming assets
(xviii) Return on Risk Weighted Assets
(xix) Total Shareholder Return
(xx) Stock price
(xxi) Pre-provision Net Revenue
The Corporate Performance Goals may be described in terms of
Company-wide objectives or objectives that are related to the
performance of any subsidiary, division, department, or region
of, or function with, KeyCorp. The Corporate Performance Goals
may be made relative to the performance of other corporations.
(b) On or before March 30 of each year, the Committee will
assign a percentage share of the Aggregate Incentive Opportunity
to each participant (the Individual Incentive
Opportunity). The sum of all Individual Incentive
Opportunities will not exceed 100% of the Aggregate Incentive
Opportunity. No participant will be assigned an Individual
Incentive Opportunity for any one fiscal year of greater than
$7,500,000.
(c) A participants Individual Incentive Opportunity
in any year is the maximum amount that a participant can receive
under this Plan in that year. Whether or not a participant will
receive all or any portion of his or her Individual Incentive
Opportunity will be based on the achievement of corporate and
business unit financial and strategic objectives established for
the year (which may be based on the Corporate Performance Goals
selected for the year or any other measure) and on the
achievement of individual goals (collectively, the
Individual Performance Goals). The Committee will
establish the Individual Performance Goals, including the
relative allocations to corporate, business unit and individual
performance annually for each participant.
5. Award Determination.
(a) At the end of each year, the Committee will certify in
writing the Aggregate Incentive Opportunity based on the results
of the Corporate Performance Goals, along with the Individual
Incentive Opportunity with respect to each participant.
A-2
(b) At the end of each year, the Committee will assess each
participants performance against the Individual
Performance Goals and will make a determination as to whether,
and to what extent, the goals have been achieved. Based on this
assessment, the Committee will determine whether the participant
is entitled to all (but not more than all) of his or her
Individual Incentive Opportunity or whether a lesser amount (or
none at all) has been earned. In no event shall a reduction of
the Individual Incentive Opportunity of a participant result in
an increase of the Individual Incentive Opportunity for another
participant.
6. Bonus Payments. Awards that are earned
under the Plan by a participant with respect to a fiscal year
will be paid in cash within 70 days following the end of
that year, provided that the participant remains employed by
KeyCorp or an affiliate through the date of payment.
Notwithstanding the preceding sentence, awards shall be subject
to the same mandatory deferral provisions applicable to
discretionary incentives under the AIP in accordance
with the terms, and subject to the conditions, of
Section 4.1 of the AIP.
7. Additional Committee Discretion/Clawback.
(a) Notwithstanding anything contained herein to the
contrary, in the event that extraordinary events, the later
determination of unprofitable
and/or
detrimental business or business relationships, or market
related events or circumstances, result in an unanticipated,
unintentional, or erroneous incentive payment(s) to be made
under the Plan, or if the incentive amount generated under the
Plan fails to conform with the intent of the Plan or otherwise
is found to be contrary to KeyCorps risk policies and
guidelines, the Committee retains the right at all times to
decrease or terminate any incentive payment(s) to be paid under
the Plan, as well as terminate the Plan with regard to any or
all Plan participants. Such modifications also may be made on a
retroactive basis if the Committee determines that the
modifications are necessary to properly reflect the intended
compensation structure of the Plan including applicable risk
requirements.
(b) KeyCorp shall comply with the requirements of the
(i) Emergency Economic Stabilization Act, as amended,
(ii) the banking regulatory agencies Guidance on
Sound Incentive Compensation Policies, and (iii) the
Dodd-Frank Wall Street Reform and Consumer Protection Act and
will ensure that the Plan conforms with KeyCorps
Enterprise Risk Management risk requirements and policies.
Accordingly, notwithstanding anything contained herein to the
contrary, any and all incentive awards either already paid or to
be payable under the Plan will be subject to reduction,
forfeiture or clawback to the extent that the Committee
determines that such reduction, forfeiture, or clawback is
necessary or advisable in order to comply with the obligations
hereunder. Without limiting the foregoing, it is expressly
understood that such clawback is mandated for incentive
compensation paid to a participant during the three-year period
preceding the date on which KeyCorp is required to prepare an
accounting restatement as a result of material non-compliance
with the securities laws if the incentive compensation is
determined to have been based on erroneous data regardless of
the participants employment status with KeyCorp at the
time of clawback.
8. Miscellaneous Provisions. The
provisions of Sections 3.9, 3.10, 3.12, 3.13, 3.15, 3.16,
3.17, 3.18, 3.19, 3.20, 3.21, 3.22, 3.26 and 3.27 of the AIP
shall be incorporated by reference into this Plan, without
regard to any subsequent amendments to the AIP. Except as
explicitly set forth in Section 6 of the Plan or this
Section 8, no other provision of the AIP shall apply to
this Plan. To the extent that a provision of the AIP causes an
award under this Plan to fail to qualify as
performance-based compensation within the meaning of
Section 162(m) of the Code, that provision shall be null
and void and have no effect on awards granted under this Plan.
A-3
APPENDIX B
PROPOSED
AMENDMENT TO THE CODE OF REGULATIONS TO REDUCE ALL SHAREHOLDER
PERCENTAGE VOTING
POWER REQUIREMENTS TO THE STATUTORY NORM
The proposed amendment to the Code of Regulations to reduce all
shareholder voting power requirements to the statutory norm
would revise Article I, Section 3(iv),
Article II, Sections 1 and 11(b), and Article X
to read as follows:
ARTICLE I
SHAREHOLDERS
* * *
Section 3. Special Meetings. Subject to
the rights of the holders of any class or series of preferred
stock of the Corporation, special meetings of the shareholders
for any purpose or purposes may be called only by (i) the
Chairperson of the Board, (ii) the President, or, in the
case of the Presidents absence, death, or disability, the
vice president authorized to exercise the authority of the
President, (iii) the Board of Directors by action at a
meeting or a majority of the Board of Directors acting without a
meeting, or (iv) persons holding 25% of all shares
outstanding and entitled to vote at the special meeting.
Upon request in writing delivered either in person or by
registered mail to the Chairperson of the Board, the President,
or the Secretary by any persons entitled to call a meeting of
shareholders, such officer shall forthwith cause to be given to
the shareholders entitled thereto notice of a meeting to be held
on a date not less than ten nor more than 60 days after the
receipt of such request, as such officer may fix. If such notice
is not given within 30 days after the delivery or mailing
of such request, the persons calling the meeting may fix the
time of the meeting and give notice thereof in the manner
provided by law or as provided in these Regulations, or cause
such notice to be given by any designated representative.
* * *
ARTICLE II
BOARD OF DIRECTORS
Section 1. Number and Terms of Office. As
of the conclusion of the 2008 annual meeting of shareholders of
the Corporation, the Board of Directors shall consist of 12
members. At the 2009 annual meeting of shareholders of the
Corporation, the successors of the directors whose terms expire
at that meeting shall be elected for a term expiring at the 2010
annual meeting of shareholders (which number of directors shall
be approximately one-third of the total number of directors of
the Corporation); at the 2010 annual meeting of shareholders,
the successors of the directors whose terms expire at that
meeting shall be elected for a term expiring at the 2011 annual
meeting (which number of directors shall be approximately
two-thirds of the total number of directors of the Corporation);
and at each annual meeting of shareholders thereafter all
directors shall be elected for terms expiring at the next annual
meeting of shareholders. In each instance directors shall hold
office until their successors are chosen and qualified, or until
the earlier death, retirement, resignation, or removal of any
such director as provided in Section 11 of this
Article II. The Board of Directors or the shareholders may
from time to time fix or change the size of the Board of
B-1
Directors to a total number of no fewer than 12 and no more than
16 directors (the size of the Board as from time to time so
established being herein referred to as the entire
authorized Board). The Board of Directors may, subject to
the limitation contained in the immediately preceding sentence
regarding the number of directors, fix or change the number of
directors by the affirmative vote of a majority of the entire
authorized Board. The shareholders may, subject to the
limitation contained in the fourth sentence of this paragraph
regarding the number of directors, fix or change the number of
directors at a meeting of the shareholders called for the
purpose of electing directors at which a quorum is present, by
the affirmative vote of the majority of the shares that are
represented at the meeting and entitled to vote on the proposal.
No reduction in the number of directors shall of itself have the
effect of shortening the term of any incumbent director. In the
event that the Board of Directors increases the number of
directors, it may fill the vacancy or vacancies created by the
increase in the number of directors for the respective unexpired
terms in accordance with the provisions of Section 12 of
this Article II. In the event the shareholders increase the
number of directors and fail to fill the vacancy or vacancies
created thereby, the Board of Directors may fill such vacancy or
vacancies for the respective unexpired terms in accordance with
the provisions of Section 12 of this Article II.
The number of directors may not be fixed or changed by the
shareholders or directors, except (i) by amending these
regulations in accordance with provisions of Article X of
these Regulations, (ii) pursuant to an agreement of merger
or consolidation approved by two-thirds of the members of the
entire authorized Board of Directors and adopted by the
shareholders at a meeting held for such purpose by the
affirmative vote of the holders of shares entitling them to
exercise a majority of the voting power of the Corporation on
such proposal, or (iii) as provided in the immediately
preceeding paragraph of this Section 1 or in the next
following paragraph.
The foregoing provisions of this Section 1 are subject to
the automatic increase by two in the authorized number of
directors and the right of the holders of any class or series of
preferred stock of the Corporation to elect two directors of the
Corporation during any time when dividends payable on such
shares are in arrears, all as set forth in the Articles of
Incorporation
and/or the
express terms of the preferred stock of the Corporation.
* * *
Section 11. Removal of Directors.
* * *
(b) All the directors, or all the directors of a particular
class if the Corporation has a classified Board of Directors at
that time, or any individual director, may be only removed from
office by the affirmative vote of the holders of shares
entitling them to exercise a majority of the voting power of the
Corporation entitled to elect directors in place of those to be
removed. In case of any such removal, a new director nominated
in accordance with Section 2 of this Article II may be
elected at the same meeting for the unexpired term of each
director removed. Failure to elect a director to fill the
unexpired term of any director removed shall be deemed to create
a vacancy on the Board.
* * *
ARTICLE X
AMENDMENTS
These Regulations may only be amended, repealed, or altered or
new regulations may only be adopted (i) at a meeting of
shareholders, by the affirmative vote of the holders of shares
entitling them to exercise a majority of the voting power of the
Corporation on such proposal, or (ii) without a meeting, by
the written consent of the holders of shares entitling them to
exercise 100% of the voting power of the Corporation on such
proposal.
B-2
APPENDIX C
New or
amended language is indicated by underlining and deleted
language is indicated by strike-outs.
PROPOSED
AMENDMENT TO ARTICLE IV, PART A, SECTION 2(A)
AND
ARTICLE IV, PART E OF THE AMENDED AND RESTATED
ARTICLES OF INCORPORATION, AS AMENDED, OF KEYCORP
AND
PROPOSED AMENDMENT TO ARTICLE II, SECTIONS 11 AND
12 OF
THE AMENDED AND RESTATED CODE OF REGULATIONS
OF KEYCORP, PURSUANT TO ISSUE THREE
1. The proposed amendments to the Articles will amend
Article IV, Part A, Section 2(A) of the Articles
to read as follows:
Section 2. Voting Rights.
(a) The holders of Preferred Stock shall not be entitled to
vote upon matters presented to the shareholders, except as
provided in this Section 2 or as required by law or as
otherwise provided by the Board of Directors in order to comply
with the terms required for shares of Preferred Stock issued in
connection with any capital purchase program(s) authorized by
the Emergency Economic Stabilization Act of 2008
(EESA) and implemented by the United States
Department of the Treasury.
* * * * * * * *
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2. The proposed amendment to the Articles will amend and
restate Article IV, Part E of KeyCorps Articles
to read as follows:
ATTACHMENT
TO CERTIFICATE OF AMENDMENT
TO THE AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF KEYCORP
RESOLVED, that Part E of Article IV of the
Corporations Amended and Restated Articles of
Incorporation be, and the same hereby is, deleted in its
entirety and there is substituted therefor the following:
PART E
EXPRESS TERMS OF FIXED RATE
CUMULATIVE PERPETUAL PREFERRED STOCK, SERIES B
Part 1. Designation and Number of
Shares. There is hereby created out of the
authorized and unissued shares of preferred stock of the
Corporation a series of preferred stock designated as the
Fixed Rate Cumulative Perpetual Preferred Stock,
Series B (the Designated Preferred
Stock). The authorized number of shares of Designated
Preferred Stock shall be 25,000.
Part 2. Standard
Provisions. The Standard Provisions contained
in Annex A attached hereto are incorporated herein by
reference in their entirety and shall be deemed to be a part
hereof to the same extent as if such provisions had been set
forth in full herein.
Part 3. Definitions. The
following terms are used in this Part E (including the
Standard Provisions in Annex A hereto) as defined below:
(a) Common Stock means the common
stock, par value $1.00 per share, of the Corporation.
(b) Dividend Payment Date means
February 15, May 15, August 15 and November 15 of each
year.
(c) Junior Stock means the Common
Stock and any other class or series of stock of the Corporation,
the terms of which expressly provide that it ranks junior to
Designated Preferred Stock as to dividend rights
and/or as to
rights on liquidation, dissolution or winding up of the
Corporation.
(d) Liquidation Amount means
$100,000 per share of Designated Preferred Stock.
(e) Minimum Amount means
$625,000,000.
(f) Parity Stock means any class
or series of stock of the Corporation (other than Designated
Preferred Stock) the terms of which do not expressly provide
that such class or series will rank senior or junior to
Designated Preferred Stock as to dividend rights
and/or as to
rights on liquidation, dissolution or winding up of the
Corporation (in each case without regard to whether dividends
accrue cumulatively or non-cumulatively). Without limiting the
foregoing, Parity Stock shall include the Corporations
7.750% Non-Cumulative Perpetual Convertible Preferred Stock,
Series A.
(g) Signing Date means the
Original Issue Date.
Part 4. Certain Voting
Matters. Holders of shares of Designated
Preferred Stock will be entitled to one vote for each such share
on any matter on which holders of Designated Preferred Stock are
entitled to vote, including any action by written consent.
[Remainder
of Page Intentionally Left Blank]
C-2
ANNEX A
STANDARD
PROVISIONS
Section 1. General Matters.
Each share of Designated Preferred Stock shall be identical in
all respects to every other share of Designated Preferred Stock.
The Designated Preferred Stock shall be perpetual, subject to
the provisions of Section 5 of these Standard Provisions
that form a part of the Certificate of Designations. The
Designated Preferred Stock shall rank equally with Parity Stock
and shall rank senior to Junior Stock with respect to the
payment of dividends and the distribution of assets in the event
of any dissolution, liquidation or winding up of the Corporation.
Section 2. Standard Definitions.
As used herein with respect to Designated Preferred Stock:
(a) Applicable Dividend Rate
means (i) during the period from the Original Issue
Date to, but excluding, the first day of the first Dividend
Period commencing on or after the fifth anniversary of the
Original Issue Date, 5% per annum and (ii) from and after
the first day of the first Dividend Period commencing on or
after the fifth anniversary of the Original Issue Date, 9% per
annum.
(b) Appropriate Federal Banking
Agency means the appropriate Federal banking
agency with respect to the Corporation as defined in
Section 3(q) of the Federal Deposit Insurance Act
(12 U.S.C. Section 1813(q)), or any successor
provision.
(c) Business Combination means a
merger, consolidation, statutory share exchange or similar
transaction that requires the approval of the Corporations
stockholders.
(d) Business Day means any day
except Saturday, Sunday and any day on which banking
institutions in the State of New York generally are authorized
or required by law or other governmental actions to close.
(e) Certificate of Designations
means the Certificate of Designations or comparable
instrument relating to the Designated Preferred Stock, of which
these Standard Provisions form a part, as it may be amended from
time to time.
(f) Charter means the
Corporations certificate or articles of incorporation,
articles of association, or similar organizational document.
(g) Dividend Period has the
meaning set forth in Section 3(a).
(h) Dividend Record Date has the
meaning set forth in Section 3(a).
(i) Liquidation Preference has
the meaning set forth in Section 4(a).
(j) Original Issue Date means the
date on which shares of Designated Preferred Stock are first
issued.
(k) Preferred Director has the
meaning set forth in Section 7(b).
(l) Preferred Stock means any and
all series of preferred stock of the Corporation, including the
Designated Preferred Stock.
(m) Qualified Equity Offering
means the sale and issuance for cash by the Corporation to
persons other than the Corporation or any of its subsidiaries
after the Original Issue Date of shares of Perpetual Preferred
Stock, Common Stock or any combination of such stock, that, in
each case, qualify as and may be
C-3
included in Tier 1 capital of the Corporation at the time
of issuance under the applicable risk-based capital guidelines
of the Corporations Appropriate Federal Banking Agency
(other than any such sales and issuances made pursuant to
agreements or arrangements entered into, or pursuant to
financing plans which were publicly announced, on or prior to
October 13, 2008).
(n) Regulations means the amended
and restated regulations of the Corporation, as they may be
amended from time to time.
(o) Share Dilution Amount has the
meaning set forth in Section 3(b).
(p) Standard Provisions means
these Standard Provisions that form a part of the Certificate of
Designations relating to the Designated Preferred Stock.
(q) Successor Preferred Stock has
the meaning set forth in Section 5(a).
(r) Voting Parity Stock
means, with regard to any matter as to which the holders of
Designated Preferred Stock are entitled to vote as specified in
Sections 7(a) and 7(b) of these Standard Provisions that
form a part of the Certificate of Designations, any and all
series of Parity Stock upon which like voting rights have been
conferred and are exercisable with respect to such matter.
Section 3. Dividends.
(a) Rate. Holders of Designated
Preferred Stock shall be entitled to receive, on each share of
Designated Preferred Stock if, as and when declared by the Board
of Directors or any duly authorized committee of the Board of
Directors, but only out of assets legally available therefor,
cumulative cash dividends with respect to each Dividend Period
(as defined below) at a rate per annum equal to the Applicable
Dividend Rate on (i) the Liquidation Amount per share of
Designated Preferred Stock and (ii) the amount of accrued
and unpaid dividends for any prior Dividend Period on such share
of Designated Preferred Stock, if any. Such dividends shall
begin to accrue and be cumulative from the Original Issue Date,
shall compound on each subsequent Dividend Payment Date
(i.e., no dividends shall accrue on other dividends
unless and until the first Dividend Payment Date for such other
dividends has passed without such other dividends having been
paid on such date) and shall be payable quarterly in arrears on
each Dividend Payment Date, commencing with the first such
Dividend Payment Date to occur at least 20 calendar days after
the Original Issue Date. In the event that any Dividend Payment
Date would otherwise fall on a day that is not a Business Day,
the dividend payment due on that date will be postponed to the
next day that is a Business Day and no additional dividends will
accrue as a result of that postponement. The period from and
including any Dividend Payment Date to, but excluding, the next
Dividend Payment Date is a Dividend
Period, provided that the initial Dividend Period
shall be the period from and including the Original Issue Date
to, but excluding, the next Dividend Payment Date.
Dividends that are payable on Designated Preferred Stock in
respect of any Dividend Period shall be computed on the basis of
a 360-day
year consisting of twelve
30-day
months. The amount of dividends payable on Designated Preferred
Stock on any date prior to the end of a Dividend Period, and for
the initial Dividend Period, shall be computed on the basis of a
360-day year
consisting of twelve
30-day
months, and actual days elapsed over a
30-day month.
Dividends that are payable on Designated Preferred Stock on any
Dividend Payment Date will be payable to holders of record of
Designated Preferred Stock as they appear on the stock register
of the Corporation on the applicable record date, which shall be
the 15th calendar day immediately preceding such Dividend
Payment Date or such other record date fixed by the Board of
Directors or any duly authorized committee of the Board of
Directors
C-4
that is not more than 60 nor less than 10 days prior to
such Dividend Payment Date (each, a Dividend Record
Date). Any such day that is a Dividend Record Date
shall be a Dividend Record Date whether or not such day is a
Business Day.
Holders of Designated Preferred Stock shall not be entitled to
any dividends, whether payable in cash, securities or other
property, other than dividends (if any) declared and payable on
Designated Preferred Stock as specified in this Section 3
(subject to the other provisions of the Certificate of
Designations).
(b) Priority of Dividends. So long
as any share of Designated Preferred Stock remains outstanding,
no dividend or distribution shall be declared or paid on the
Common Stock or any other shares of Junior Stock (other than
dividends payable solely in shares of Common Stock) or Parity
Stock, subject to the immediately following paragraph in the
case of Parity Stock, and no Common Stock, Junior Stock or
Parity Stock shall be, directly or indirectly, purchased,
redeemed or otherwise acquired for consideration by the
Corporation or any of its subsidiaries unless all accrued and
unpaid dividends for all past Dividend Periods, including the
latest completed Dividend Period (including, if applicable as
provided in Section 3(a) above, dividends on such amount),
on all outstanding shares of Designated Preferred Stock have
been or are contemporaneously declared and paid in full (or have
been declared and a sum sufficient for the payment thereof has
been set aside for the benefit of the holders of shares of
Designated Preferred Stock on the applicable record date). The
foregoing limitation shall not apply to (i) redemptions,
purchases or other acquisitions of shares of Common Stock or
other Junior Stock in connection with the administration of any
employee benefit plan in the ordinary course of business
(including purchases to offset the Share Dilution Amount (as
defined below) pursuant to a publicly announced repurchase plan)
and consistent with past practice, provided that any
purchases to offset the Share Dilution Amount shall in no event
exceed the Share Dilution Amount; (ii) purchases or other
acquisitions by a broker-dealer subsidiary of the Corporation
solely for the purpose of market-making, stabilization or
customer facilitation transactions in Junior Stock or Parity
Stock in the ordinary course of its business;
(iii) purchases by a broker-dealer subsidiary of the
Corporation of capital stock of the Corporation for resale
pursuant to an offering by the Corporation of such capital stock
underwritten by such broker-dealer subsidiary; (iv) any
dividends or distributions of rights or Junior Stock in
connection with a stockholders rights plan or any
redemption or repurchase of rights pursuant to any
stockholders rights plan; (v) the acquisition by the
Corporation or any of its subsidiaries of record ownership in
Junior Stock or Parity Stock for the beneficial ownership of any
other persons (other than the Corporation or any of its
subsidiaries), including as trustees or custodians; and
(vi) the exchange or conversion of Junior Stock for or into
other Junior Stock or of Parity Stock for or into other Parity
Stock (with the same or lesser aggregate liquidation amount) or
Junior Stock, in each case, solely to the extent required
pursuant to binding contractual agreements entered into prior to
the Signing Date or any subsequent agreement for the accelerated
exercise, settlement or exchange thereof for Common Stock.
Share Dilution Amount means the increase in
the number of diluted shares outstanding (determined in
accordance with generally accepted accounting principles in the
United States, and as measured from the date of the
Corporations consolidated financial statements most
recently filed with the Securities and Exchange Commission prior
to the Original Issue Date) resulting from the grant, vesting or
exercise of equity-based compensation to employees and equitably
adjusted for any stock split, stock dividend, reverse stock
split, reclassification or similar transaction.
When dividends are not paid (or declared and a sum sufficient
for payment thereof set aside for the benefit of the holders
thereof on the applicable record date) on any Dividend Payment
Date (or, in the case of Parity Stock having dividend payment
dates different from the Dividend Payment Dates, on a dividend
payment date falling within a Dividend Period related to such
Dividend Payment Date) in full upon Designated Preferred Stock
and any
C-5
shares of Parity Stock, all dividends declared on Designated
Preferred Stock and all such Parity Stock and payable on such
Dividend Payment Date (or, in the case of Parity Stock having
dividend payment dates different from the Dividend Payment
Dates, on a dividend payment date falling within the Dividend
Period related to such Dividend Payment Date) shall be declared
pro rata so that the respective amounts of such dividends
declared shall bear the same ratio to each other as all accrued
and unpaid dividends per share on the shares of Designated
Preferred Stock (including, if applicable as provided in
Section 3(a) above, dividends on such amount) and all
Parity Stock payable on such Dividend Payment Date (or, in the
case of Parity Stock having dividend payment dates different
from the Dividend Payment Dates, on a dividend payment date
falling within the Dividend Period related to such Dividend
Payment Date) (subject to their having been declared by the
Board of Directors or a duly authorized committee of the Board
of Directors out of legally available funds and including, in
the case of Parity Stock that bears cumulative dividends, all
accrued but unpaid dividends) bear to each other. If the Board
of Directors or a duly authorized committee of the Board of
Directors determines not to pay any dividend or a full dividend
on a Dividend Payment Date, the Corporation will provide written
notice to the holders of Designated Preferred Stock prior to
such Dividend Payment Date.
Subject to the foregoing, and not otherwise, such dividends
(payable in cash, securities or other property) as may be
determined by the Board of Directors or any duly authorized
committee of the Board of Directors may be declared and paid on
any securities, including Common Stock and other Junior Stock,
from time to time out of any funds legally available for such
payment, and holders of Designated Preferred Stock shall not be
entitled to participate in any such dividends.
Section 4. Liquidation Rights.
(a) Voluntary or Involuntary
Liquidation. In the event of any liquidation,
dissolution or winding up of the affairs of the Corporation,
whether voluntary or involuntary, holders of Designated
Preferred Stock shall be entitled to receive for each share of
Designated Preferred Stock, out of the assets of the Corporation
or proceeds thereof (whether capital or surplus) available for
distribution to stockholders of the Corporation, subject to the
rights of any creditors of the Corporation, before any
distribution of such assets or proceeds is made to or set aside
for the holders of Common Stock and any other stock of the
Corporation ranking junior to Designated Preferred Stock as to
such distribution, payment in full in an amount equal to the sum
of (i) the Liquidation Amount per share and (ii) the
amount of any accrued and unpaid dividends (including, if
applicable as provided in Section 3(a) above, dividends on
such amount), whether or not declared, to the date of payment
(such amounts collectively, the Liquidation
Preference).
(b) Partial Payment. If in any
distribution described in Section 4(a) above the assets of
the Corporation or proceeds thereof are not sufficient to pay in
full the amounts payable with respect to all outstanding shares
of Designated Preferred Stock and the corresponding amounts
payable with respect of any other stock of the Corporation
ranking equally with Designated Preferred Stock as to such
distribution, holders of Designated Preferred Stock and the
holders of such other stock shall share ratably in any such
distribution in proportion to the full respective distributions
to which they are entitled.
(c) Residual Distributions. If the
Liquidation Preference has been paid in full to all holders of
Designated Preferred Stock and the corresponding amounts payable
with respect of any other stock of the Corporation ranking
equally with Designated Preferred Stock as to such distribution
has been paid in full, the holders of other stock of the
Corporation shall be entitled to receive all remaining assets of
the Corporation (or proceeds thereof) according to their
respective rights and preferences.
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(d) Merger, Consolidation and Sale of Assets Not
Liquidation. For purposes of this
Section 4, the merger or consolidation of the Corporation
with any other corporation or other entity, including a merger
or consolidation in which the holders of Designated Preferred
Stock receive cash, securities or other property for their
shares, or the sale, lease or exchange (for cash, securities or
other property) of all or substantially all of the assets of the
Corporation, shall not constitute a liquidation, dissolution or
winding up of the Corporation.
Section 5. Redemption.
(a) Optional Redemption. Except as
provided below, the Designated Preferred Stock may not be
redeemed prior to the first Dividend Payment Date falling on or
after the third anniversary of the Original Issue Date. On or
after the first Dividend Payment Date falling on or after the
third anniversary of the Original Issue Date, the Corporation,
at its option, subject to the approval of the Appropriate
Federal Banking Agency, may redeem, in whole or in part, at any
time and from time to time, out of funds legally available
therefor, the shares of Designated Preferred Stock at the time
outstanding, upon notice given as provided in Section 5(c)
below, at a redemption price equal to the sum of (i) the
Liquidation Amount per share and (ii) except as otherwise
provided below, any accrued and unpaid dividends (including, if
applicable as provided in Section 3(a) above, dividends on
such amount) (regardless of whether any dividends are actually
declared) to, but excluding, the date fixed for redemption.
Notwithstanding the foregoing, prior to the first Dividend
Payment Date falling on or after the third anniversary of the
Original Issue Date, the Corporation, at its option, subject to
the approval of the Appropriate Federal Banking Agency, may
redeem, in whole or in part, at any time and from time to time,
the shares of Designated Preferred Stock at the time
outstanding, upon notice given as provided in Section 5(c)
below, at a redemption price equal to the sum of (i) the
Liquidation Amount per share and (ii) except as otherwise
provided below, any accrued and unpaid dividends (including, if
applicable as provided in Section 3(a) above, dividends on
such amount) (regardless of whether any dividends are actually
declared) to, but excluding, the date fixed for redemption;
provided that (x) the Corporation (or any successor
by Business Combination) has received aggregate gross proceeds
of not less than the Minimum Amount (plus the Minimum
Amount as defined in the relevant certificate of
designations for each other outstanding series of preferred
stock of such successor that was originally issued to the United
States Department of the Treasury (the Successor
Preferred Stock) in connection with the Troubled Asset
Relief Program Capital Purchase Program) from one or more
Qualified Equity Offerings (including Qualified Equity Offerings
of such successor), and (y) the aggregate redemption price
of the Designated Preferred Stock (and any Successor Preferred
Stock) redeemed pursuant to this paragraph may not exceed the
aggregate net cash proceeds received by the Corporation (or any
successor by Business Combination) from such Qualified Equity
Offerings (including Qualified Equity Offerings of such
successor).
The redemption price for any shares of Designated Preferred
Stock shall be payable on the redemption date to the holder of
such shares against surrender of the certificate(s) evidencing
such shares to the Corporation or its agent. Any declared but
unpaid dividends payable on a redemption date that occurs
subsequent to the Dividend Record Date for a Dividend Period
shall not be paid to the holder entitled to receive the
redemption price on the redemption date, but rather shall be
paid to the holder of record of the redeemed shares on such
Dividend Record Date relating to the Dividend Payment Date as
provided in Section 3 above.
(b) No Sinking Fund. The
Designated Preferred Stock will not be subject to any mandatory
redemption, sinking fund or other similar provisions. Holders of
Designated Preferred Stock will have no right to require
redemption or repurchase of any shares of Designated Preferred
Stock.
C-7
(c) Notice of Redemption. Notice
of every redemption of shares of Designated Preferred Stock
shall be given by first class mail, postage prepaid, addressed
to the holders of record of the shares to be redeemed at their
respective last addresses appearing on the books of the
Corporation. Such mailing shall be at least 30 days and not
more than 60 days before the date fixed for redemption. Any
notice mailed as provided in this Subsection shall be
conclusively presumed to have been duly given, whether or not
the holder receives such notice, but failure duly to give such
notice by mail, or any defect in such notice or in the mailing
thereof, to any holder of shares of Designated Preferred Stock
designated for redemption shall not affect the validity of the
proceedings for the redemption of any other shares of Designated
Preferred Stock. Notwithstanding the foregoing, if shares of
Designated Preferred Stock are issued in book-entry form through
The Depository Trust Corporation or any other similar
facility, notice of redemption may be given to the holders of
Designated Preferred Stock at such time and in any manner
permitted by such facility. Each notice of redemption given to a
holder shall state: (1) the redemption date; (2) the
number of shares of Designated Preferred Stock to be redeemed
and, if less than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such
holder; (3) the redemption price; and (4) the place or
places where certificates for such shares are to be surrendered
for payment of the redemption price.
(d) Partial Redemption. In case of
any redemption of part of the shares of Designated Preferred
Stock at the time outstanding, the shares to be redeemed shall
be selected either pro rata or in such other manner as
the Board of Directors or a duly authorized committee thereof
may determine to be fair and equitable. Subject to the
provisions hereof, the Board of Directors or a duly authorized
committee thereof shall have full power and authority to
prescribe the terms and conditions upon which shares of
Designated Preferred Stock shall be redeemed from time to time.
If fewer than all the shares represented by any certificate are
redeemed, a new certificate shall be issued representing the
unredeemed shares without charge to the holder thereof.
(e) Effectiveness of
Redemption. If notice of redemption has been
duly given and if on or before the redemption date specified in
the notice all funds necessary for the redemption have been
deposited by the Corporation, in trust for the pro rata
benefit of the holders of the shares called for redemption,
with a bank or trust company doing business in the Borough of
Manhattan, The City of New York, and having a capital and
surplus of at least $500 million and selected by the Board
of Directors, so as to be and continue to be available solely
therefor, then, notwithstanding that any certificate for any
share so called for redemption has not been surrendered for
cancellation, on and after the redemption date dividends shall
cease to accrue on all shares so called for redemption, all
shares so called for redemption shall no longer be deemed
outstanding and all rights with respect to such shares shall
forthwith on such redemption date cease and terminate, except
only the right of the holders thereof to receive the amount
payable on such redemption from such bank or trust company,
without interest. Any funds unclaimed at the end of three years
from the redemption date shall, to the extent permitted by law,
be released to the Corporation, after which time the holders of
the shares so called for redemption shall look only to the
Corporation for payment of the redemption price of such shares.
(f) Status of Redeemed
Shares. Shares of Designated Preferred Stock
that are redeemed, repurchased or otherwise acquired by the
Corporation shall revert to authorized but unissued shares of
Preferred Stock (provided that any such cancelled shares
of Designated Preferred Stock may be reissued only as shares of
any series of Preferred Stock other than Designated Preferred
Stock).
Section 6. Conversion.
Holders of Designated Preferred Stock shares shall have no right
to exchange or convert such shares into any other securities.
C-8
Section 7. Voting Rights.
(a) General. The holders of
Designated Preferred Stock shall not have any voting rights
except as set forth below or as otherwise from time to time
required by law.
(b) Preferred Stock
Directors. Whenever, at any time or times,
dividends payable on the shares of Designated Preferred Stock
have not been paid for an aggregate of six quarterly Dividend
Periods or more, whether or not consecutive, the authorized
number of directors of the Corporation shall automatically be
increased by two and the holders of the Designated Preferred
Stock shall have the right, with holders of shares of any one or
more other classes or series of Voting Parity Stock outstanding
at the time, voting together as a class, to elect two directors
(hereinafter the Preferred Directors and each a
Preferred Director) to fill such newly created
directorships at the Corporations next annual meeting of
stockholders (or at a special meeting called for that purpose
prior to such next annual meeting) and at each subsequent annual
meeting of stockholders until all accrued and unpaid dividends
for all past Dividend Periods, including the latest completed
Dividend Period (including, if applicable as provided in
Section 3(a) above, dividends on such amount), on all
outstanding shares of Designated Preferred Stock have been
declared and paid in full at which time such right shall
terminate with respect to the Designated Preferred Stock, except
as herein or by law expressly provided, subject to revesting in
the event of each and every subsequent default of the character
above mentioned; provided that it shall be a
qualification for election for any Preferred Director that the
election of such Preferred Director shall not cause the
Corporation to violate any corporate governance requirements of
any securities exchange or other trading facility on which
securities of the Corporation may then be listed or traded that
listed or traded companies must have a majority of independent
directors. Upon any termination of the right of the holders of
shares of Designated Preferred Stock and Voting Parity Stock as
a class to vote for directors as provided above, the Preferred
Directors shall cease to be qualified as directors, the term of
office of all Preferred Directors then in office shall terminate
immediately and the authorized number of directors shall be
reduced by the number of Preferred Directors elected pursuant
hereto. Any Preferred Director may be removed at any time, with
or without cause, and any vacancy created thereby may be filled,
only by the affirmative vote of the holders a majority of the
shares of Designated Preferred Stock at the time outstanding
voting separately as a class together with the holders of shares
of Voting Parity Stock, to the extent the voting rights of such
holders described above are then exercisable. If the office of
any Preferred Director becomes vacant for any reason other than
removal from office as aforesaid, the remaining Preferred
Director may choose a successor who shall hold office for the
unexpired term in respect of which such vacancy occurred.
(c) Class Voting Rights as to Particular
Matters. So long as any shares of Designated
Preferred Stock are outstanding, in addition to any other vote
or consent of stockholders required by law or by the Charter,
the vote or consent of the holders of at least
662/3%
of the shares of Designated Preferred Stock at the time
outstanding, voting as a separate class, given in person
or by proxy, either in writing without a meeting or by vote at
any meeting called for the purpose, shall be necessary for
effecting or validating:
(i) Authorization of Senior Stock. Any
amendment or alteration of the Certificate of Designations for
the Designated Preferred Stock or the Charter to authorize or
create or increase the authorized amount of, or any issuance of,
any shares of, or any securities convertible into or
exchangeable or exercisable for shares of, any class or series
of capital stock of the Corporation ranking senior to Designated
Preferred Stock with respect to either or both the payment of
dividends
and/or the
distribution of assets on any liquidation, dissolution or
winding up of the Corporation;
C-9
(ii) Amendment of Designated Preferred
Stock. Any amendment, alteration or repeal of any
provision of the Certificate of Designations for the Designated
Preferred Stock or the Charter (including, unless no vote on
such merger or consolidation is required by Section 7(c)(iii)
below, any amendment, alteration or repeal by means of a merger,
consolidation or otherwise) so as to adversely affect the
rights, preferences, privileges or voting powers of the
Designated Preferred Stock; or
(iii) Share Exchanges, Reclassifications, Mergers and
Consolidations. Any consummation of a binding
share exchange or reclassification involving the Designated
Preferred Stock, or of a merger or consolidation of the
Corporation with another corporation or other entity, unless in
each case (x) the shares of Designated Preferred Stock
remain outstanding or, in the case of any such merger or
consolidation with respect to which the Corporation is not the
surviving or resulting entity, are converted into or exchanged
for preference securities of the surviving or resulting entity
or its ultimate parent, and (y) such shares remaining
outstanding or such preference securities, as the case may be,
have such rights, preferences, privileges and voting powers, and
limitations and restrictions thereof, taken as a whole, as are
not materially less favorable to the holders thereof than the
rights, preferences, privileges and voting powers, and
limitations and restrictions thereof, of Designated Preferred
Stock immediately prior to such consummation, taken as a whole;
provided, however, that for all purposes of
this Section 7(c), any increase in the amount of the
authorized Preferred Stock, including any increase in the
authorized amount of Designated Preferred Stock necessary to
satisfy preemptive or similar rights granted by the Corporation
to other persons prior to the Signing Date, or the creation and
issuance, or an increase in the authorized or issued amount,
whether pursuant to preemptive or similar rights or otherwise,
of any other series of Preferred Stock, or any securities
convertible into or exchangeable or exercisable for any other
series of Preferred Stock, ranking equally with
and/or
junior to Designated Preferred Stock with respect to the payment
of dividends (whether such dividends are cumulative or
non-cumulative) and the distribution of assets upon liquidation,
dissolution or winding up of the Corporation will not be deemed
to adversely affect the rights, preferences, privileges or
voting powers, and shall not require the affirmative vote or
consent of, the holders of outstanding shares of the Designated
Preferred Stock.
(d) Changes after Provision for
Redemption. No vote or consent of the holders of
Designated Preferred Stock shall be required pursuant to
Section 7(c) above if, at or prior to the time when any
such vote or consent would otherwise be required pursuant to
such Section, all outstanding shares of the Designated Preferred
Stock shall have been redeemed, or shall have been called for
redemption upon proper notice and sufficient funds shall have
been deposited in trust for such redemption, in each case
pursuant to Section 5 above.
(e) Procedures for Voting and
Consents. The rules and procedures for calling
and conducting any meeting of the holders of Designated
Preferred Stock (including, without limitation, the fixing of a
record date in connection therewith), the solicitation
and use of proxies at such a meeting, the obtaining of written
consents and any other aspect or matter with regard to such a
meeting or such consents shall be governed by any rules of the
Board of Directors or any duly authorized committee of the Board
of Directors, in its discretion, may adopt from time to time,
which rules and procedures shall conform to the requirements of
the Charter, the Bylaws, and applicable law and the rules of any
national securities exchange or other trading facility on which
Designated Preferred Stock is listed or traded at the time.
Section 8. Record Holders.
To the fullest extent permitted by applicable law, the
Corporation and the transfer agent for Designated Preferred
Stock may deem and treat the record holder of any share of
Designated Preferred Stock as the true and
C-10
lawful owner thereof for all purposes, and neither the
Corporation nor such transfer agent shall be affected by any
notice to the contrary.
Section 9. Notices.
All notices or communications in respect of Designated Preferred
Stock shall be sufficiently given if given in writing and
delivered in person or by first class mail, postage prepaid, or
if given in such other manner as may be permitted in this
Certificate of Designations, in the Charter or Regulations or by
applicable law. Notwithstanding the foregoing, if shares of
Designated Preferred Stock are issued in book-entry form through
The Depository Trust Corporation or any similar facility,
such notices may be given to the holders of Designated Preferred
Stock in any manner permitted by such facility.
Section 10. No Preemptive Rights.
No share of Designated Preferred Stock shall have any rights of
preemption whatsoever as to any securities of the Corporation,
or any warrants, rights or options issued or granted with
respect thereto, regardless of how such securities, or such
warrants, rights or options, may be designated, issued or
granted.
Section 11. Replacement
Certificates.
The Corporation shall replace any mutilated certificate at the
holders expense upon surrender of that certificate to the
Corporation. The Corporation shall replace certificates that
become destroyed, stolen or lost at the holders expense
upon delivery to the Corporation of reasonably satisfactory
evidence that the certificate has been destroyed, stolen or
lost, together with any indemnity that may be reasonably
required by the Corporation.
Section 12. Other Rights.
The shares of Designated Preferred Stock shall not have any
rights, preferences, privileges or voting powers or relative,
participating, optional or other special rights, or
qualifications, limitations or restrictions thereof, other than
as set forth herein or in the Charter or as provided by
applicable law.
[* * * * *]
3. The proposed amendment will amend Article II,
Sections 11(b) and 12 of KeyCorps Regulations to read
as follows:
Section 11. Removal of Directors.
(b) Except as otherwise provided by the Articles of
Incorporation of the Corporation, all the directors, or all
of the directors of a particular class if the Corporation has a
classified Board of Directors, or any individual director, may
be only removed from office by the affirmative vote of the
holders of shares entitling them to exercise three-quarters of
the voting power of the Corporation entitled to elect directors
in place of those to be removed. Except as otherwise provided
by the Articles of Incorporation of the Corporation, in case
of any such removal, a new director nominated in accordance with
Section 2 of this Article II may be elected at the
same meeting for the unexpired term of each director removed.
Failure to elect a director to fill the unexpired term of any
director removed shall be deemed to create a vacancy on the
Board.
Section 12. Vacancies.
Except as otherwise provided by the Articles of Incorporation
of the Corporation, any vacancies on the Board of Directors
resulting from death, resignation, removal, or other cause may
be filled by the affirmative vote of a majority of the directors
then in office, even though less than a quorum of the Board of
Directors, or by a sole
C-11
remaining director. Newly created directorships resulting from
any increase in the number of directors by action of the Board
of Directors may be filled by the affirmative vote of a majority
of the directors then in office, or if not so filled, by the
shareholders at the next annual meeting thereof or at a special
meeting called for that purpose in accordance with
Section 3 of Article I of these Regulations. In the
event the shareholders increase the authorized number of
directors in accordance with these Regulations but fail at the
meeting at which such increase is authorized, or an adjournment
of that meeting, to elect the additional directors provided for,
or if the shareholders fail at any meeting to elect the whole
authorized number of directors, such vacancies may be filled by
the affirmative vote of a majority of the directors then in
office. Any director elected in accordance with the three
preceding sentences of this Section 12 shall hold office
for the remainder of the full term for which the new
directorship was created or the vacancy occurred and until such
directors successor shall have been elected and qualified.
The provisions of this Section 12 shall not restrict the
rights of holders of any class or series of preferred stock of
the Corporation to fill vacancies in directors elected by such
holders as provided by the express terms of the preferred stock.
C-12
APPENDIX D
KEYCORP
AUDIT COMMITTEE
POLICY
STATEMENT ON INDEPENDENT AUDITING FIRMS
SERVICES AND RELATED FEES
The Audit Committee is responsible for the annual engagement of
an independent auditing firm for audit and audit-related
services and for pre-approval of any tax or other services to be
provided by such firm, and for approval of all fees paid to the
independent auditing firm.
Audit services encompass audits of subsidiary companies and
include not only those services necessary to perform an audit or
review in accordance with generally accepted auditing standards,
but also those services that only the independent auditing firm
can reasonably provide such as comfort letters, statutory
audits, consents and assistance with and review of Securities
and Exchange Commission filings, and consultation concerning
financial accounting and reporting standards.
Audit-related services include those services performed in the
issuance of attestation and compliance reports; issuance of
internal control reports; and due diligence related to mergers
and acquisitions. The nature of audit-related services is such
that they do not compromise the audit firms independence
and it is impractical and cost inefficient to engage firms other
than that of the independent auditors for such services.
Any audit-related, tax or other services not incorporated in the
scope of services preapproved at the time of the approval of the
annual audit engagement, and that are proposed subsequent to
that approval, require the pre-approval of the Audit Committee
which may be delegated to the Committee Chair, whose action on
the request shall be reported at the next meeting of the full
Committee. Audit-related, tax and other services incorporated in
the scope of services pre-approved at the time of the approval
of the annual audit engagement, and which are recurring in
nature, do not require recurring pre-approvals.
Even though pre-approved, all audit-related, tax and other
services performed during each calendar quarter by
KeyCorps independent audit firm, and related fees, shall
be reported to the Audit Committee no later than its first
meeting following commencement of the services.
The foregoing procedures apply to retention of the independent
auditing firm for KeyCorp and all consolidated affiliates. All
services of any nature provided by KeyCorps independent
auditing firm to entities affiliated with but unconsolidated by
KeyCorp, and related fees, shall be reported to the Audit
Committee no later than its first meeting following commencement
of the services.
This policy statement is based on four guiding principles:
KeyCorps independent auditing firm should not
(1) audit its own work; (2) serve as a part of
management; (3) act as an advocate of KeyCorp; (4) be
a promoter of KeyCorps stock or other financial interests.
Accordingly, the following is an illustrative but not
necessarily exhaustive list of prohibited services.
Examples of services that may not be provided to KeyCorp by its
independent auditing firm:
Bookkeeping or other services related to the accounting records
or financial statements;
Financial information systems design and development;
Appraisal or valuation services, fairness opinions, or
contribution-in-kind
reports;
D-1
Actuarial services;
Internal audit outsourcing services;
Management functions including human resources searches;
Broker-dealer, investment advisor or investment banking services;
Legal services;
Expert services unrelated to the audit;
Executive tax return preparation, including such work for
expatriates; and
Any other service that the Public Company Accountability
Oversight Board determines, by regulation, is impermissible.
D-2
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IMPORTANT
ANNUAL MEETING INFORMATION
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Electronic Voting Instructions
You can vote by Internet or telephone! Available 24 hours a day, 7 days a week!
Instead of mailing your proxy, you may choose
one of the two voting methods outlined below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW
IN THE TITLE BAR. |
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Proxies submitted by the Internet or telephone must be received by
12:00 a.m., Central Time, on May 19, 2011. |
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Vote by
Internet
Log on to the
Internet and go
to www.envisionreports.com/key
Follow the steps outlined on the
secured website. |
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Vote by
telephone Call toll
free 1-800-652-VOTE (8683) within the
USA, US territories
& Canada any time on a touch tone telephone. There
is NO CHARGE to you for the call. |
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Using a black
ink pen, mark your votes with an X as shown in this
example. Please do not write outside the designated areas. |
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x |
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Follow the instructions provided by the recorded message. |
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Annual Meeting Proxy Card |
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IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE,
FOLD ALONG THE PERFORATION, DETACH AND RETURN
THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
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Proposals The Board of Directors recommends a vote FOR all the nominees listed and FOR
Proposals 2, 3, 4, 5 and 6 and
FOR EVERY YEAR on Issue 7.
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1. |
Election of Directors: |
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Withhold |
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Withhold |
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Withhold |
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01 - Edward P. Campbell
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02 - Joseph A. Carrabba
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03 - Carol A. Cartwright
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04 - Alexander M. Cutler
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05 - H. James Dallas
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06 - Elizabeth R. Gile
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07 - Ruth Ann M. Gillis
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08 - Kristen L. Manos
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09 - Beth E. Mooney
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10 - Bill R. Sanford
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11 - Barbara R. Snyder
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12 - Edward W. Stack
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13 - Thomas C. Stevens
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2. |
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Approval of 2011 Annual Performance Plan.
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3. |
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Amendment to Regulations to reduce shareholder voting
percentages to statutory norms.
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4. |
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Amendment to Articles and Regulations to revise the voting
rights of the Series B Preferred Stock.
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Ratification of the appointment of independent auditors.
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Advisory approval of Executive Compensation Program.
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B |
Authorized
Signatures
This section must be completed for your vote to be counted.
Date and Sign Below
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Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator,
corporate officer, trustee, guardian, or custodian, please give full title.
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Date (mm/dd/yyyy) Please print date below.
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Signature 1 Please keep signature within the box.
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Signature 2 Please keep signature within the box. |
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01ABEC
IF YOU HAVE NOT VOTED VIA THE INTERNET OR
TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
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Proxy Solicited on Behalf of the Board of Directors of KeyCorp for the Annual Meeting on
May 19, 2011
The undersigned hereby constitutes and appoints Beth E. Mooney, Paul N. Harris, and
Thomas C. Stevens, and each of them, his/her true and lawful agents and proxies with full
power of substitution in each to represent the undersigned at the Annual Meeting of
Shareholders of KeyCorp to be held on May 19, 2011, and at any adjournments or postponements
thereof, on all matters properly coming before said meeting.
1. |
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Election of Directors: the nominees of the Board of Directors to the class whose term of
office will expire in 2012 are:
Edward P. Campbell, Joseph A. Carrabba, Carol A. Cartwright, Alexander M. Cutler, H.
James Dallas, Elizabeth R. Gile, Ruth Ann M. Gillis, Kristen L. Manos, Beth E.
Mooney, Bill R. Sanford, Barbara R. Snyder, Edward W. Stack, and Thomas C. Stevens. |
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Approval of 2011 Annual Performance Plan. |
3. |
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Amendment to Regulations to reduce shareholder voting percentages to statutory norms. |
4. |
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Amendment to Articles and Regulations to revise the voting rights of the Series B Preferred
Stock. |
5. |
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Proposal to ratify the appointment of Ernst & Young LLP as independent auditors for the
fiscal year ending on December 31, 2011. |
6. |
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Advisory approval of Executive Compensation Program. |
7. |
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Advisory vote on the frequency of shareholder vote on Executive Compensation
Program. |
This proxy when properly executed will be voted in the manner directed herein by the
undersigned shareholder. If no direction is made, this proxy will be voted FOR the election
of the listed nominees and FOR Issues 2, 3, 4, 5 and 6 and FOR EVERY YEAR on Issue 7.
In accordance with their judgment, the proxies are authorized to vote upon any other matters
that may properly come before the meeting. The signer hereby transfers all power given by
the signer to vote at the said meeting or any adjournment thereof.
You are encouraged to specify your choices by marking the appropriate boxes, SEE REVERSE
SIDE, but you need not mark any boxes if you wish to vote in accordance with the Board of
Directors recommendation.
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C Non-Voting Items
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SEE REVERSE SIDE |
Change of Address Please print new address below.
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Comments Please print your comments below. |