def14a
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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Registrant þ
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Registrant o
Check the appropriate box:
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o 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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þ Definitive
Proxy Statement
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o Definitive
Additional Materials
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o Soliciting
Material Pursuant to Section 240.14a-12
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KeyCorp
(Name of Registrant as Specified In
Its Charter)
(Name of Person(s) Filing Proxy
Statement)
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No fee required.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11.
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
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(set forth the amount on which the filing fee is calculated and
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the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
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127
PUBLIC SQUARE
CLEVELAND,
OHIO 44114
April 2,
2010
DEAR SHAREHOLDER:
You are cordially invited to attend the 2010 Annual Meeting of
Shareholders of KeyCorp which will be held at One Cleveland
Center, 1375 East Ninth Street, Cleveland, Ohio, on Thursday,
May 20, 2010, 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 23, 2010 are entitled to vote
at the 2010 Annual Meeting.
As described in the accompanying Notice and Proxy Statement,
holders of KeyCorp Common Shares will be asked to elect eleven
directors for one-year terms expiring in 2011, to consider a
proposal to approve the KeyCorp 2010 Equity Compensation Plan,
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 2010, and to provide
advisory approval of KeyCorps 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 Report for the year ended
December 31, 2009 is 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,
Henry L. Meyer III
Chairman of the Board
127
PUBLIC SQUARE
CLEVELAND,
OHIO 44114
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR THE
KEYCORP SHAREHOLDER MEETING TO BE HELD ON MAY 20, 2010 AND
The 2010 Annual Meeting of Shareholders of KeyCorp will be held
at One Cleveland Center, 1375 East Ninth Street, Cleveland,
Ohio, on Thursday, May 20, 2010, at 8:30 a.m., local
time, for the following purposes:
1. To elect eleven directors to serve for one-year terms
expiring in 2011;
2. To approve the KeyCorp 2010 Equity Compensation Plan;
3. 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;
4. 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, 2010;
5. To provide advisory approval of KeyCorps executive
compensation program; and
6. 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 23, 2010
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 Three.
By Order of the Board of Directors
Paul N. Harris
Secretary
April 2, 2010
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 AND ANNUAL REPORT TO SHAREHOLDERS FOR THE
YEAR ENDED DECEMBER 31, 2009 ARE AVAILABLE AT
WWW.ENVISIONREPORTS.COM/KEY.
TABLE OF
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127
PUBLIC SQUARE
CLEVELAND,
OHIO 44114
PROXY
STATEMENT
This Proxy Statement is furnished commencing on or about
April 2, 2010 in connection with the solicitation on behalf
of the Board of Directors of KeyCorp of proxies to be voted at
the 2010 Annual Meeting of Shareholders on May 20, 2010,
and at all postponements and adjournments thereof. All holders
of record of KeyCorp Common Shares at the close of business on
March 23, 2010 are entitled to vote. On that date there
were 878,960,282 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 23, 2010 are entitled to
vote on Issue Three 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 23, 2010, there were 2,904,839 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 Three.
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 2010 Annual Meeting
at 15 members. Under the amendment to KeyCorps Regulations
adopted by the shareholders at the 2008 Annual Meeting, the
annual election of directors became effective as of the 2009
Annual Meeting of Shareholders and is phased in over a
three-year period. Accordingly, at this Annual Meeting eleven of
the Directors terms expire and they will be elected for
one-year terms expiring in 2011 (or until their respective
successors are elected and qualified, whichever is later). At
the 2011 Annual Meeting, the phase-in will be complete and all
KeyCorp Directors will be eligible for one-year terms.
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
1
Board of Directors will consider the resignation and will submit
its 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 nominees for director and
directors whose terms of office will continue after the 2010
Annual Meeting, the principal occupation or employment, age, the
year in which each first became a director of KeyCorp,
directorships since 2005 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, 2010 unless otherwise indicated. Except as
otherwise indicated, each nominee or continuing director has had
the same principal occupation or employment during the past five
years.
NOMINEES
FOR TERMS EXPIRING IN 2011
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WILLIAM G. BARES
William G. Bares has served as a KeyCorp Director since
1987. Mr. Bares is currently the Chair of the Audit Committee.
He also serves on KeyCorps Nominating and Corporate
Governance Committee and has previously served as its Chair. Mr.
Bares has also served as Chairman of the Risk Management
Committee and of the KeyCorp Compensation and Organization
Committee.
Mr. Bares retired at the beginning of 2005 after a long career
with The Lubrizol Corporation, for which he served as its
chairman and chief executive officer for eight years. During his
tenure, The Lubrizol Corporation made acquisitions that nearly
doubled the companys size, which required Mr. Bares to
directly oversee financing activities, including raising
required debt and issuing stock. The Lubrizol Corporation is an
innovative specialty chemical company with more than
6,700 employees and laboratories and production facilities
in 27 countries, with current revenues of more than
$4.6 billion. Mr. Bares began his career with Lubrizol in
1963 and attained positions with greater responsibility,
ultimately becoming chief executive officer and chairman in
1996.
Mr. Bares (age 68) serves on the board of Applied Industrial
Technologies, Inc. (since 1987) and has had leadership roles in
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 2009 revenues of $2.34 billion and 5,404 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 57) 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 last year.
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 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 68) 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 civic or 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
31 years with the company and its predecessors.
Mr. Cutler (age 58) 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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ELIZABETH R. GILE
Elizabeth R. Gile was elected as a KeyCorp Director in March
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 54) 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 and serves on
the Audit Committee. She has been designated as a
financial expert as that term is defined by the
Securities and Exchange Commission (SEC).
Since 2008, Ms. Gillis has been an Executive Vice President of
the Exelon Corporation. 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, real estate and facilities, 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 55) 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 50) 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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EDUARDO R. MENASCÉ
Eduardo R. Menascé joined the KeyCorp Board of
Directors in 2002. He presently serves on the Audit Committee
and has previously served on the Compensation and Organization
Committee and the Nominating and Corporate Governance Committee.
He has been designated as a financial expert as that
term is defined by the SEC.
Mr. Menascé is the retired president of the Enterprise
Solutions Group of Verizon Communications. Verizon
Communications is one of the worlds largest
telecommunications companies with approximately
222,900 employees. Mr. Menascés
responsibilities at Verizon included oversight of sales,
marketing, and service delivery for Verizons largest
business and government customers. Prior to his employment with
Verizon, Mr. Menascé served as chief financial officer and
chief operating officer of CANTV, the sole provider of
comprehensive communications products and services in Venezuela.
In these positions, Mr. Menascé led debt
restructurings and initial public offerings. Prior to his
employment with CANTV, Mr. Manescé held a variety of
engineering and managerial positions, including chief financial
officer, with GTE Corporation. Mr. Menascé was chief
executive officer and chairman of CTI Movil a US
mobile provider in Argentina and has experience in
debt renegotiations and high yield debt sales.
Mr. Menascé (age 64) serves on the boards of Hill-Rom
Holdings, Inc. (since 2008) where he is a member of the audit
committee, Hillenbrand, Inc. (since 2008) where he is the chair
of the audit committee, John Wiley & Sons, Inc. (since
2006) , and Pitney Bowes Inc. (since 2001). Mr. Menascé
served on the board of Hillenbrand Industries, Inc. from 2004
until 2008 when it split into Hill-Rom Holdings, Inc. and
Hillenbrand, Inc. Mr. Menascé is also a member of the
board of the New York Chapter of the National Association of
Corporate Directors.
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HENRY L. MEYER III
Henry L. Meyer III is the Chairman of the Board and
Chief Executive Officer of KeyCorp. He has served on the Board
of Directors since 1996.
Mr. Meyer has spent his entire professional life in the
financial services industry, joining the former Society National
Bank (now KeyBank National Association) in 1972, and attaining
positions of increasing responsibility throughout his career.
He became Chairman and Chief Executive Officer of KeyCorp in
2001.
Mr. Meyer (age 60) is a past member of the boards of the Federal
Reserve Bank of Cleveland and the Financial Services Roundtable
and currently serves on the Federal Advisory Council of the
Federal Reserve System.
Mr. Meyer also serves as a director of Continental Airlines,
Inc. (since 2003) and is its Lead Director, served on the board
of Lincoln Electric Company from 1994 to 2003, and serves in
leadership roles in a number of civic and community
organizations.
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EDWARD W. STACK
Mr. Stack was elected as a KeyCorp Director in March
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 419
Dicks stores in 40 states and 91 Golf Galaxy stores
in 31 states. During this time, he has also guided
Dicks through a successful IPO and strategic business
acquisitions, and has overseen the development of a successful
e-commerce
business and an international sourcing office in Hong Kong.
Mr. Stack (age 55) 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 60) is a member of the Financial Services
Roundtable, the Council of Institutional Investors, and the New
York Bankers Association as well as other professional, civic,
and community organizations.
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EDWARD P. CAMPBELL
Edward P. Campbell has served as a KeyCorp Director since
1999. Mr. Campbell now 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 January of this year, Mr. Campbell retired as Chief Executive
Officer and President of Nordson Corporation. Mr. Campbell
continued to serve as Chairman of Nordson until February of this
year. 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 60) serves on the board of The Lubrizol
Corporation (since 2009) and served on the board of Nordson from
1994 to 2010 and 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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H. JAMES DALLAS
Mr. Dallas joined the KeyCorp Board of Directors in 2005.
Mr. Dallas serves on the Risk Management Committee and 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.
Mr. Dallas (age 51) serves on the boards of civic and community
organizations.
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LAURALEE E. MARTIN
Ms. Martin has been a KeyCorp Director since 2003. She
serves as the Chair of the Risk Management Committee and has
served on the Audit Committee (including service as its Chair)
and the Nominating and Corporate Governance Committee. Ms.
Martin has been designated a financial expert as
that term is defined by the SEC.
Ms. Martin is the Chief Operating and Financial Officer of Jones
Lang LaSalle, Inc., which provides comprehensive integrated real
estate and investment management expertise on a local, regional
and global level to owner, occupier and investor clients and
also provides property and corporate facility management
services. Jones Lang LaSalle has 180 corporate offices worldwide
and operations in more than 750 locations in 60 countries and
has approximately 36,600 employees. Ms. Martin is also the
C-Suite sponsor for the firms environmental sustainability
commitments.
Prior to joining Jones Lang LaSalle, Ms. Martin worked in
commercial lending at both General Electric Capital and Heller
Financial with particular emphasis on real estate. From 1986
through 2001, she was employed by Heller Financial, a subsidiary
of Fuji Bank Ltd., a bank holding company regulated by the
Federal Reserve. While at Heller, Ms Martin periodically met
with representatives of both the Federal Reserve Board and the
rating agencies in her role as Chief Financial Officer. As the
Chief Financial Officer of Heller, she was involved in both the
companys initial public offering and the successful sale
of the company to General Electric Capital. In this role, she
held overall responsibility for financial reporting, tax,
treasury, asset distribution and investor relations. She was a
member of several committees, whose responsibilities included
strategic direction and decision, cost control, enterprise risk
management including financial risk management and credit
policy, and information investment technology. As Senior Group
President at Heller, she was involved in matters of real estate,
commercial and vendor equipment finance, small business
administration, securitizations, mezzanine finance, and product
development. Prior to joining Heller, Ms. Martin held a variety
of managerial roles at General Electric Capital in construction
lending, residential mortgage, venture real estate
sale-leasebacks and real estate finance.
Ms. Martin (age 59) serves on the boards of HCP, Inc. (since
2008) and Jones Lang LaSalle (since 2005) and maintains
leadership roles in a number of civic and community
organizations. Ms. Martin served on the board of Gables
Residential Trust from 1994 to 2005.
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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 65) 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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14
THE BOARD
OF DIRECTORS AND ITS COMMITTEES
Board of Directors. During the year ended
December 31, 2009, there were ten 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 2009.
KeyCorp Board members are expected to attend KeyCorps
Annual Meetings of Shareholders. All Board members attended the
2009 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. Ms. Gillis,
Ms. Manos and Messrs. Bares (Chair), Menascé,
Stack, and Ten Eyck (who is retiring at the 2010 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 24 of this proxy statement under the heading
Board Oversight of Risk. KeyCorps Audit
Committee met twelve times in 2009.
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
management,
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3.
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determining participants and awards under executive incentive
compensation plans and supplemental compensation plans,
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4.
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approving employee and officer retirement, compensation and
benefit plans or amendments thereto,
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5.
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reviewing organization structure and staffing, KeyCorps
management depth, management development and succession
plans, and
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6.
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reviewing the Compensation Discussion and Analysis for the proxy
statement.
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KeyCorps Compensation and Organization Committee met eight
times in 2009. The Committee may delegate its authority to a
subcommittee of its members.
Following the aforementioned six reviews, 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
15
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.
In conjunction with 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), on
a semi-annual basis, the Committee also discusses, evaluates and
reviews with KeyCorps senior risk officers (i) the
CEO and Named Executive Officers (Key Officers) compensation
programs to ensure that these compensation programs do not
encourage Key Officers to take unnecessary and excessive risks
that threaten the value of KeyCorp, as well as
(ii) KeyCorps various employee compensation programs
in light of the risks posed to KeyCorp by such programs and how
to limit those risks as well as to ensure that these programs do
not encourage the manipulation of KeyCorps reported
earnings to enhance the compensation of any KeyCorp employees.
Since September 21, 2009, the Committee has employed
Compensation Advisory Partners LLC (Compensation
Advisory) to assist the Committee in its evaluation of
KeyCorps various executive compensation programs.
Compensation Advisory serves as an independent consultant to the
Committee and it is expressly prohibited from performing any
services to KeyCorp without first obtaining permission from the
Chair of the Committee. A representative of Compensation
Advisory attends all Committee meetings and frequently meets
with the Committee without the presence of KeyCorp management.
Compensation Advisorys services to the Committee include:
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1.
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assisting in setting base salary and short-term and long-term
incentive compensation performance targets,
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2.
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assisting in determining an appropriate peer group for executive
compensation comparisons,
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3.
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assisting in determining progress against incentive compensation
performance goals, and
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4.
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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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Prior to September 21, 2009, Mercer, Inc. served as an
independent consultant to the Committee. The services provided
by Mercer, Inc. were similar in scope to those provided by
Compensation Advisory. For 2009, Compensation Advisorys
fee was $23,120 and Mercer, Inc.s fee was $271,628 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 52 of this
proxy statement.
Executive Committee. Dr. Cartwright, and
Messrs. Bares, Manos, Menascé, Meyer (Chair), Sanford,
Stevens, and Ten Eyck 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 2009.
Nominating and Corporate Governance
Committee. Messrs. Bares, Campbell, Cutler
(Chair), and Dallas 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 also oversees the annual board self-assessment
process, including the individual
16
director self-assessments. 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 seven
times in 2009.
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 2009 except that, effective January 1, 2010,
the Committee reduced to $15,000 the annual fees paid to the
Chairs of the Audit and Compensation and Organization Committees
and increased to the same amount (that is, $15,000) the annual
fee paid to the Chair of the Risk Management Committee.
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 (one of which is described in the
preceding paragraph), 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 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
Nominating and Corporate Governance 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
Nominating and Corporate Governance Committee deems appropriate.
The Committee considers its search for a nominee successful if a
nominee is found based on these considerations.
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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 Nominating and Corporate Governance
Committee after discussion with and approval by the Nominating
and Corporate Governance Committee. Upon acceptance of the
invitation by the proposed candidate, the recommendation of the
candidate by the Nominating and Corporate Governance Committee
will be made to the full Board for final approval.
The Nominating and Corporate Governance 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 Nominating
and Corporate Governance 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
Martin (Chair) and Messrs. Dallas and Sanford are the
current members of KeyCorps Risk Management Committee. The
functions of the Risk Management Committee generally include
matters such as oversight review of risk management matters
relating to credit risk, market risk, liquidity risk, strategic
risk, and reputational 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, 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
also 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 24 of this proxy
statement under the heading Board Oversight of Risk.
The Risk Management Committee met nine times in 2009.
18
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.
I. DIRECTOR RESPONSIBILITY
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.
II. BOARD OF DIRECTORS SELF ASSESSMENT
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.
IV. BOARD COMPOSITION
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.
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V. DIRECTOR INDEPENDENCE
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 25 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.
VI. MAJORITY VOTING
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.
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.
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IX. DIRECTOR RECRUITMENT
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.
X. DIRECTOR COMPENSATION
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.
XI. DIRECTOR STOCK OWNERSHIP GUIDELINES
KeyCorp has adopted stock ownership guidelines for
KeyCorps outside directors which specify that each outside
director should, by the fourth anniversary of such
directors initial election, own at least 7,500 KeyCorp
Common Shares, of which at least 1,000 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 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 directors should not serve as a director
of more than three other public companies (for a total of four
including KeyCorp), except that a
21
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).
XV. REPRICING OR BACK-DATING OPTIONS
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.
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. EXTENSIONS OF CREDIT COLLATERALIZED BY KEYCORP STOCK
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 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
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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.
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.
Our Board is comprised of fourteen independent directors, and
two members of management. Of our fourteen independent
directors, six 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. Our Chairman
and Chief Executive Officer has 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 believe the 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 is the optimal Board leadership structure
for our Company and our shareholders at this time.
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,
liquidity risk, strategic risk, and reputational 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 Mr. Meyer, the
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Chief Executive Officer, and his direct reports which include
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 88 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.
DIRECTOR
INDEPENDENCE
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);
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(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 collectibility, or (d) is
characterized as criticized or classified by the KeyCorp
subsidiary (non-independent borrower).
Messrs. Meyer and Stevens are not independent because they
are employees of KeyCorp. As an employee of KeyCorp,
Mr. Meyer and members of his immediate family received in
2009 a standard employee discount on trust services provided by
KeyCorp totaling approximately $8,940. The Board of Directors
has determined that all other members of the Board of Directors
(i.e., Dr. Cartwright, Mss. Gile, Gillis, Manos, and
Martin, and Messrs. Bares, Campbell, Carrabba, Cutler,
Dallas, Menascé, Sanford, Stack, and Ten Eyck) are
independent and that Ralph Alvarez was independent prior to his
retirement on May 21, 2009. 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 and Messrs. Bares, Campbell, Carrabba,
Cutler, Sanford, and Ten Eyck were customers of one or more of
KeyCorps subsidiary banks or other subsidiaries during
2009 and had transactions with such banks or other subsidiaries
in the ordinary course of business. In addition,
Dr. Cartwright and Messrs. Bares, Campbell, Carrabba,
Cutler, Gillis, Sanford, and Ten Eyck are officers of, or have a
relationship with, corporations or are members of partnerships
that were customers of such banks or other subsidiaries during
2009 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, and did not
involve more than normal risks of collectibility or present
other unfavorable features. Similar transactions continue to be
effected during 2010. In 2009, KeyCorp entered into a
transaction with Eaton Corporation for the purchase of goods and
services. Mr. Cutler is the Chairman and Chief Executive
Officer of Eaton Corporation. The transaction involved the
purchase and installation of electrical equipment through a
competitive bidding process in which Eaton Corporation was
determined to be the best and also the lowest bidder. The amount
of the transaction is approximately $255,000
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which is .002% of Eatons 2009 revenues. In 2009, KeyCorp
entered into four unrelated transactions with Jones Lang
LaSalle, Inc. Ms. Martin is the Chief Operating and
Financial Officer of Jones Lang LaSalle, Inc. The first
transaction involved continued services by a real estate broker
who had previously worked with KeyCorp and whose company had
merged into Jones Lang LaSalle. The amount of the transaction is
approximately $83,000 which is .003% of Jones Lang
LaSalles 2009 revenues. The second transaction involved
the hiring of Jones Lang LaSalle as a receiver and property
manager for distressed property in which KeyCorp has an
interest. Jones Lang LaSalle received approximately $288,000 in
2009 for this work and was paid out of the cash flow of the
property in question. This amount is approximately .01% of Jones
Lang LaSalles 2009 revenues. The third transaction was for
the oversight of lease negotiations and renewal, buyout, and
disposition negotiations for certain KeyCorp properties. This
work was competitively bid and Jones Lang LaSalle was the best
and also the lowest bidder. The amount of the transaction is
approximately $2,950,000 which is .1% of Jones Lang
LaSalles 2009 revenues. The fourth transaction involved
work identifying sites in the Denver, Colorado area for new
automated teller machines. The amount of the transaction is
approximately $216,000 which is .009% of Jones Lang
LaSalles 2009 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.
APPROVAL
OF KEYCORP
2010 EQUITY COMPENSATION PLAN
Issue Two
General
On March 11, 2010, KeyCorps Board of Directors
approved the 2010 Equity Compensation Plan (the Equity
Plan), subject to shareholder approval at the 2010 Annual
Meeting. The Equity Plan permits KeyCorp to provide equity-based
compensation to key employees in the form of stock options,
stock appreciation rights, restricted stock, restricted stock
units, performance shares, performance units and other awards.
The Board of Directors believes that the Equity Plan will
provide KeyCorp with the ability to offer a variety of
compensatory awards designed to advance the interests and
long-term success of KeyCorp by encouraging stock ownership
among key employees and, correspondingly, increasing their
personal involvement with the future of KeyCorp.
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KeyCorp has historically provided equity-based awards under
various plans, including most recently under the 2004 Equity
Compensation Plan (the 2004 Plan), the Deferred
Equity Allocation Plan (the Equity Allocation Plan)
and the Directors Deferred Share Plan (the Deferred
Share Plan).
If approved by shareholders, the Equity Plan will become
effective. If the Equity Plan becomes effective, no further
awards will be made under the 2004 Plan and the Equity
Allocation Plan will be amended so that only
7,000,000 shares will remain available for future awards
under that plan.
Equity
Plan Highlights
The Equity Plan authorizes KeyCorps Compensation and
Organization Committee (the Committee) to provide
equity-based compensation in the form of stock options, stock
appreciation rights (SARs), restricted stock,
restricted stock units (RSUs), performance shares,
performance units and other awards for the purpose of providing
KeyCorps officers and employees incentives for effective
service and high levels of performance. Some of the key features
of the Equity Plan that reflect KeyCorps commitment to
effective management of incentive compensation are set forth
below and are described more fully under the heading
Summary of the Plan and in the Equity Plan, which is
attached to this proxy statement as Appendix A.
Plan Limits. The total number of KeyCorp
Common Shares that may be issued or transferred in connection
with awards under the Equity Plan is limited to 38,000,000
Common Shares, plus any shares relating to awards that expire or
are forfeited or cancelled or for which the benefit provided by
the award is settled in cash. For each award granted under the
Equity Plan that is not a stock option or a SAR, 2.05 Common
Shares will be subtracted from the maximum number of Common
Shares available under the Equity Plan for every Common Share
issued or transferred under the award. For awards of stock
options and SARs, one Common Share will be subtracted from the
maximum number of Common Shares available under the Equity Plan
for every Common Share issued or transferred under the award.
The Equity Plan also includes the following additional limits:
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no participant will be granted stock options or SARs for more
than an aggregate of 1,000,000 Common Shares during any one
calendar year;
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no participant will be granted awards intended to qualify as
qualified performance-based compensation under
Section 162(m) of the Internal Revenue Code of restricted
stock, RSUs, performance shares or other stock-based awards for
more than 7,500,000 Common Shares during any one calendar year;
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no participant will be granted awards intended to qualify as
qualified performance-based compensation under
Section 162(m) of the Internal Revenue Code in the form of
other awards payable in cash with an aggregate maximum value in
excess of $7,500,000 during any one calendar year;
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no participant will be granted performance units intended to
qualify as qualified performance-based compensation
under Section 162(m) of the Internal Revenue Code with an
aggregate maximum value in excess of $7,500,000 during any one
calendar year; and
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no more than an aggregate of 5,000,000 Common Shares may be
issued or transferred under the Equity Plan upon the exercise of
incentive stock options.
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No Liberal Recycling Provisions. The Equity
Plan provides that only Common Shares relating to awards that
expire or are forfeited or cancelled, or Common Shares relating
to awards the benefit of which is paid in cash instead of Common
Shares, will again be available for issuance under the Equity
Plan. The following Common Shares will not be added back to the
aggregate plan limit:
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Common Shares tendered in payment of an option exercise price;
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Common Shares withheld by KeyCorp to satisfy tax withholding
obligations; and
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Common Shares that are repurchased by KeyCorp with stock option
proceeds.
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In addition, all Common Shares relating to a SAR, to the extent
that it is exercised and settled in Common Shares, and whether
or not Common Shares are actually issued to the participant upon
exercise of the right, will be considered issued or transferred
pursuant to the Equity Plan when the SAR is exercised.
Minimum Vesting Periods. The Equity Plan
provides that, except for awards covering up to an aggregate of
5% of the total number of Common Shares available for awards
under the Equity Plan:
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restrictions on restricted stock and RSUs that lapse by the
passage of time may not lapse sooner than one-third per year (on
a ratable basis) over three years except in connection with the
retirement, death or disability of a participant or a change of
control;
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restricted stock and RSUs that vest upon the achievement of
performance goals may not vest sooner than one year from the
date of grant, subject to earlier lapse or modification in
connection with the retirement, death or disability of a
participant or a change of control;
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the performance period relating to awards of performance shares
and performance units will be no less than one year, subject to
earlier lapse or modification in connection with the retirement,
death or disability of a participant or a change of control;
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restrictions on other awards that lapse by the passage of time
may not lapse sooner than one-third per year (on a ratable
basis) over three years except in connection with the
retirement, death or disability of a participant or a change of
control; and
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other awards that vest upon the achievement of performance goals
may not vest sooner than one year from the date of grant,
subject to earlier lapse or modification in connection with the
retirement, death or disability of a participant or a change of
control.
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No Repricing of Stock Options or
SARs. Repricing of stock options and SARs without
shareholder approval is prohibited under the Equity Plan, except
for adjustments made in connection with certain corporate
transactions.
Double-Trigger Acceleration upon a Change of
Control. The Equity Plan includes a
double-trigger feature with respect to the
acceleration of unvested or unearned awards in connection with a
change of control. If a change of control occurs, unless
otherwise specified in the award agreement, a participants
unvested or unearned awards will not automatically vest unless
KeyCorp terminates the participants employment without
cause or the participant terminates his or her employment for
good reason, within a two-year period following the change of
control.
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Other Features. The Equity Plan also provides
that no stock options or SARs will be granted with an exercise
or base price less than the fair market value of KeyCorps
Common Shares on the date of grant. No stock options or SARs
will expire any later than the tenth anniversary of the date of
grant. The Equity Plan is designed to allow awards made under
the Equity Plan to qualify as qualified performance-based
compensation under Section 162(m) of the Internal
Revenue Code.
KeyCorp had an aggregate of 878,960,282 Common Shares
outstanding as of March 23, 2010, which was the record
date. As of March 23, 2010, KeyCorp had 43,167,995 Common
Shares reserved for issuance and available for future grants
under its equity plans, including 32,124,586 Common Shares under
the 2004 Plan, 10,777,556 Common Shares under the Equity
Allocation Plan and 265,853 Common Shares under the Deferred
Share Plan. As of March 23, 2010, there are 10,905,399
full-value awards issued and outstanding and 32,578,653 options
outstanding under KeyCorps equity plans, with a weighted
average exercise price of the outstanding options of $24.60 and
a weighted average remaining term for the outstanding options of
5.5 years. If the Equity Plan becomes effective, no further
awards will be made under the 2004 Plan and the Equity
Allocation Plan will be amended so that only
7,000,000 shares will remain available for future awards
under that plan.
Summary
of the Plan
The following summary describes the material terms and
provisions of the Equity Plan. The description of the Equity
Plan is qualified by reference to the full text of the Equity
Plan, which is included as Appendix A to this Proxy Statement.
Administration. The Equity Plan will be
administered by the Committee, which will:
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determine the employees who are eligible to participate in the
Equity Plan, the type, size, and terms of awards, the time or
times at which awards will be exercisable or at which
restrictions, conditions, and contingencies will lapse, and the
terms and provisions of the instruments by which awards will be
evidenced;
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establish any other restrictions, conditions, and contingencies
on awards in addition to those prescribed by the Equity Plan;
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interpret the Equity Plan; and
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make all determinations necessary for the administration of the
Equity Plan.
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In addition, the Committee may delegate to one or more of its
members or to one or more officers of KeyCorp, or to one or more
agents or advisors, such administrative duties or powers as it
may deem advisable. The Committee, or any person to whom duties
or powers have been delegated, may employ one or more persons to
render advice with respect to any responsibility the Committee
or such person may have under the Equity Plan. The Committee may
authorize one or more officers of KeyCorp to do one or both of
the following on the same basis as the Committee: designate
employees to be recipients of awards under the Equity Plan and
determine the size of any such awards. The Committee may not,
however, delegate such responsibilities to any such officer for
awards granted to an employee who is an officer, director, or
more than 10% beneficial owner subject to Section 16 of the
Securities Exchange Act of 1934 (the Exchange Act),
as determined by the Committee in accordance with
Section 16 of the Exchange Act. In addition, the resolution
providing for such authorization must set forth the total number
of Common Shares a delegate officer may grant and the officer
must report periodically to the Committee regarding the nature
and scope of the awards granted pursuant to the delegated
authority.
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Shares Available Under the Equity
Plan. Subject to adjustment as provided in the
Equity Plan, the number of Common Shares of KeyCorp that may be
issued or transferred
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upon the exercise of stock options or SARs,
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in payment of restricted stock and released from a substantial
risk of forfeiture,
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in payment of RSUs,
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in payment of performance shares or performance units that have
been earned,
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in payment of dividend equivalents paid with respect to awards
made under the Equity Plan,
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as or in payment of other awards, or
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in payment of any other award pursuant to the Equity Plan,
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may not exceed in the aggregate 38,000,000 Common Shares, plus
any shares relating to awards that expire or are forfeited or
cancelled. Any Common Shares issued under plans assumed by
KeyCorp in corporate transactions or issued in substitution for
awards held by employees of another company who become employees
of KeyCorp or a subsidiary as a result of corporate transactions
will not count against this plan limit. Common Shares may be
shares of original issuance, treasury shares or Common Shares
acquired on the open market specifically for distribution under
the Equity Plan. For each award granted under the Equity Plan
that is not a stock option or a SAR, 2.05 Common Shares will be
subtracted from the maximum number of Common Shares available
under the Equity Plan for every Common Share issued or
transferred under the award. For awards of stock options and
SARs, one Common Share will be subtracted from the maximum
number of Common Shares available under the Equity Plan for
every Common Share issued or transferred under the award. The
Equity Plan also includes the following additional limits:
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no participant will be granted stock options or SARs for more
than an aggregate of 1,000,000 Common Shares during any one
calendar year;
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no participant will be granted awards intended to qualify as
qualified performance-based compensation under
Section 162(m) of the Internal Revenue Code of restricted
stock, RSUs, performance shares or other stock-based awards for
more than 7,500,000 Common Shares during any one calendar year;
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no participant will be granted awards intended to qualify as
qualified performance-based compensation under
Section 162(m) of the Internal Revenue Code of other awards
payable in cash with an aggregate maximum value in excess of
$7,500,000 during any one calendar year;
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no participant will be granted performance units intended to
qualify as qualified performance-based compensation
under Section 162(m) of the Internal Revenue Code with an
aggregate maximum value in excess of $7,500,000 during any one
calendar year; and
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no more than an aggregate of 5,000,000 Common Shares may be
issued or transferred under the Equity Plan upon the exercise of
incentive stock options.
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The Equity Plan provides that only Common Shares relating to
awards that expire or are forfeited or cancelled, or Common
Shares relating to awards the benefit of which is paid in cash
instead of Common Shares, will again be available for issuance
under the Equity Plan. The following Common Shares will not be
added back to the aggregate plan limit:
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Common Shares tendered in payment of an option exercise price;
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Common Shares withheld by KeyCorp to satisfy tax withholding
obligations; and
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Common Shares that are repurchased by KeyCorp with stock option
proceeds.
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In addition, all Common Shares relating to a SAR, to the extent
that it is exercised and settled in Common Shares, and whether
or not Common Shares are actually issued to the participant upon
exercise of the right, will be considered issued or transferred
pursuant to the Equity Plan when the SAR is exercised.
Adjustments Upon Changes in Common Shares. In
the event of any stock dividend, stock split, a share
combination of the Common Shares, any reclassification,
recapitalization, merger, consolidation, other form of business
combination, liquidation, or dissolution involving KeyCorp or
any spin-off or other distribution to shareholders of KeyCorp
(other than normal cash dividends), appropriate adjustments will
be made to
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the maximum number of Common Shares that may be issued under the
Equity Plan,
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the maximum number of Common Shares that may be issued under the
Equity Plan pursuant to incentive stock options,
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the maximum number of Common Shares with respect to which any
participant may receive awards during any calendar year or
calendar years, and
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the number and kind of shares subject to, the price per share
under and the terms and conditions of each then-outstanding
award, to the extent necessary and in such manner that the
benefits of participants under all then-outstanding awards will
be maintained substantially as before the occurrence of such
event.
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In addition, for each stock option or SAR with an option
exercise price or base price greater than the consideration
offered in connection with any such transaction or event or
change of control, the Committee may in its sole discretion
elect to cancel such stock option or SAR without any payment. In
general, adjustments will be made in compliance with
Section 409A of the Internal Revenue Code.
Eligibility. Awards under the Equity Plan may
be granted only to employees of KeyCorp and its subsidiaries,
the number of which is presently estimated to be 16,500 persons.
The Committee, or its delegate, determines which persons will
receive awards and the number of shares subject to such awards.
Stock Options. Stock options may be granted
under the Equity Plan and provide the right to purchase Common
Shares at a price not less than the fair market value of the
Common Shares subject to the options on the date of grant
(generally the closing price of a Common Share on the New York
Stock Exchange on the date of grant). The closing market price
of KeyCorp Common Shares as reported on the New York Stock
Exchange on March 23, 2010 was $7.69 per share.
Stock options granted under the Equity Plan may be either
incentive stock options (ISOs) or non-qualified
stock options. As required by the Internal Revenue Code, the
aggregate fair market value of KeyCorps Common Shares
(determined as of the date of grant) for which ISOs may first be
exercisable by any individual during any
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calendar year under the Equity Plan, together with that of
Common Shares subject to ISOs under any other plan of KeyCorp,
will not exceed $100,000. ISOs may only be granted to
participants who satisfy the definition of employee
under Section 3401(c) of the Internal Revenue Code.
The exercise price of a stock option may be paid in cash or such
other form of consideration as the Committee determines,
including securities or other property, or, to the extent
permitted by law, by delivery of irrevocable instructions to a
broker to promptly deliver to KeyCorp the amount of sale or loan
proceeds from the Common Shares subject to the stock option to
pay the exercise price. The Committee may also allow a
participant to transfer Common Shares acquired upon the exercise
of a part of a stock option in payment of the exercise price
payable upon immediate exercise of a further part of the stock
option.
Stock options will become exercisable in one or more
installments at the time or times provided in the award
agreement evidencing the stock option. The stock option
agreement may provide that specified performance goals must be
achieved as a condition to the exercise of the stock option. A
stock option will expire at the time set forth in the stock
option agreement, which expiration will be not later than ten
years after the grant date. No dividends or dividend equivalents
will be paid on stock options under the Equity Plan. Stock
options also may become exercisable on an accelerated basis in
connection with certain events such as a termination of
employment by reason of death, disability, normal or early
retirement, or a change of control.
Stock Appreciation Rights. Tandem and
free-standing SARs (Tandem SARs and
Free-Standing SARs) may be granted under the Equity
Plan. Tandem SARs are granted in connection with stock options
and provide the holders of stock options with an alternative
method of realizing the benefits of those stock options.
Free-Standing SARs are not granted in tandem with an stock
option and entitle the holder of the Free-Standing SAR to
receive from KeyCorp, upon exercise of the Free-Standing SAR or
any portion thereof, an amount equal to 100% or such lesser
percentage as the Committee may determine, of the excess, if
any, of the fair market value of the Common Shares underlying
the Free-Standing SARs being exercised over the aggregate base
price of the Common Shares underlying the Free-Standing SARs
being exercised. Amounts payable upon exercise of a Tandem SAR
or Free-Standing SAR are payable by KeyCorp at the time of
exercise in cash, in Common Shares, or in any combination of
cash and Common Shares as determined by the Committee.
Tandem SARs and Free-Standing SARs may be exercised only:
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on a date when the SAR is in the money;
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with respect to Tandem SARs, at a time and to the same extent as
the related stock option is exercisable and by surrender,
unexercised, of the related stock option or any applicable
portion of the related stock option; and
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in compliance with all applicable restrictions specified in the
applicable award agreement.
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The award agreement may specify that the amount payable on
exercise of a SAR may not exceed a maximum amount, waiting
periods for and restrictions on permissible exercise periods in
connection with grants of SARs, and performance goals that must
be achieved as a condition of the exercise of SARs. SARs also
may become exercisable on an accelerated basis in connection
with certain events such as a termination of employment by
reason of death, disability, normal or early retirement, or a
change of control. Award agreements for Free-Standing SARs must
specify a base price for the Free-Standing SAR that is equal to
or greater than the fair market value of the Common
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Shares subject to the Free-Standing SAR on the date of grant. No
SAR may be exercised more than ten years from the grant date,
and no dividends or dividend equivalents will be paid on grants
of SARs under the Equity Plan.
Restricted Stock. The Committee may grant
participants restricted stock, which is an award of Common
Shares subject to such restrictions as the Committee may provide
in the award agreement evidencing the restricted stock. Any
restricted stock granted under the Equity Plan will be subject
to the restriction that the participant not sell, transfer,
otherwise dispose of, or pledge or otherwise hypothecate the
restricted stock during a restriction period specified by the
Committee and such other restrictions and conditions as the
Committee may impose. The award agreement relating to the
restricted stock may also provide that the restricted period
will terminate or terminate early upon the achievement of
specified performance goals. Restrictions relating to restricted
stock that vests upon the achievement of performance goals may
not terminate sooner than one year from the date that the
restricted stock is granted. If the elimination of restrictions
is based only on the passage of time, rather than the
achievement of performance goals, the period of time will be no
shorter than three years, except that the restrictions may be
removed ratably during the three-year period, on an annual
basis, as determined by the Committee on the date the restricted
stock is granted. The Committee may grant some awards, including
restricted stock, that are not subject to these minimum vesting
requirements, so long as the aggregate number of such awards
does not exceed 5% of the total number of Common Shares
available under the Equity Plan. Restricted stock also may vest
on an accelerated basis in connection with certain events such
as a termination of employment by reason of death, disability,
normal or early retirement, or a change of control.
Upon payment of any acquisition price for the restricted stock,
a participant will have full voting and dividend rights with
respect to that restricted stock, subject only to the
restrictions noted above. The Committee may specify in the award
agreement that any or all dividends or other distributions paid
on the restricted stock during the restriction period be
automatically deferred and reinvested in additional shares of
restricted stock, which may be subject to the same restrictions
as the underlying award of restricted stock, except that
dividends or other distributions on restricted stock with
restrictions that lapse as a result of the achievement of
performance goals will be deferred until and paid contingent
upon the achievement of the applicable performance goals.
RSUs. The Committee may grant to participants
RSUs, which constitute an agreement to issue Common Shares or
pay cash to the participant in consideration of the performance
of services, but subject to the fulfillment of such conditions
as the Committee may specify. Restrictions relating to RSUs that
vest upon the achievement of performance goals may not terminate
sooner than one year from the date that the RSUs are granted. If
the elimination of restrictions is based only on the passage of
time rather than the achievement of performance goals, the
period of time will be no shorter than three years, except that
the restrictions may be removed no sooner than ratably on an
annual basis during the three-year period as determined by the
Committee on the date the RSUs are granted. The Committee may
grant some awards, including RSUs, that are not subject to these
minimum vesting requirements, so long as the aggregate number of
such awards does not exceed 5% of the total number of Common
Shares available under the Equity Plan. RSUs also may vest on an
accelerated basis in connection with certain events such as a
termination of employment by reason of death, disability, normal
or early retirement, or a change of control.
A participant holding RSUs will have no right to transfer any
rights under his or her award and no right to vote shares
deliverable upon payment of the RSUs. The Committee may
authorize the payment of dividend equivalents on the Common
Shares underlying the RSUs on either a current or deferred or
contingent basis, either in cash or in additional Common Shares,
except that dividends or other distributions on Common Shares
underlying RSUs with restrictions that lapse as a result of the
achievement of performance goals will be deferred until and paid
contingent upon the achievement of the applicable performance
goals.
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Performance Shares and Performance Units. The
Committee may grant to participants awards consisting of
performance shares
and/or
performance units. An award of performance shares is an award
denominated in Common Shares and contingent upon attainment of
one or more performance goals by the participant, KeyCorp or any
subsidiary or any sub-unit of KeyCorp or of any subsidiary over
one or more periods selected by the Committee. An award of
performance units is a bookkeeping entry that records a unit
equal to $1.00 and is contingent upon attainment of one or more
performance goals by the participant, KeyCorp or any subsidiary
or any sub-unit of KeyCorp or of any subsidiary over one or more
periods selected by the Committee. The Committee will have full
discretion to specify the performance goals with respect to each
grant of performance shares and performance units, subject to
the considerations discussed below under Compliance with
Section 162(m) of the Code. Unless otherwise provided
in an award agreement, a participant must be employed throughout
a performance period to be entitled to any payment with respect
to performance shares or performance units that may be earned
during that period. The Committee may establish one or more
formulas to determine whether all, some portion but less than
all, or none of the performance shares or performance units
granted with respect to any performance period will be treated
as earned during that performance period.
KeyCorp may pay a participant for performance shares and
performance units earned during any performance period in cash,
Common Shares, or any combination of cash and Common Shares, as
the Committee may determine. Any dividend equivalents paid on
grants of performance shares will be deferred and contingent on
the participants earning of the underlying performance
shares. The performance period for grants of performance shares
or performance units will be no less than one year. The
Committee may grant some awards, including performance shares or
performance units, that are not subject to this minimum vesting
requirement, so long as the aggregate number of such awards does
exceed 5% of the total number of Common Shares available under
the Equity Plan. Performance shares and performance units also
may be earned or vest on an accelerated basis in connection with
certain events such as a termination of employment by reason of
death, disability, normal or early retirement, or a change of
control.
Other Awards. The Committee may grant to
participants other awards that may be denominated or payable in,
valued in whole or in part by reference to, or otherwise based
on, or related to, Common Shares or factors that may influence
the value of such shares, including, without limitation:
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convertible or exchangeable debt securities;
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other rights convertible or exchangeable into Common Shares;
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purchase rights for Common Shares;
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awards with value and payment contingent upon performance of
KeyCorp or specified subsidiaries, affiliates or other business
units or any other factors designated by the Committee; and
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awards valued by reference to the book value of Common Shares or
the value of securities of, or the performance of specified
subsidiaries or affiliates or other business units of KeyCorp.
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The Committee will determine the terms and conditions of such
other awards. Common Shares delivered pursuant to another award
in the nature of a purchase right will be purchased for such
consideration, paid for at such time, by such methods, and in
such forms, including, without limitation, cash, Common Shares,
other awards, notes or other property, as the Committee
determines. Cash awards, as an element of or supplement to any
other award granted under the Equity Plan, may also be granted
under the Equity Plan. Common Shares may be granted as a
35
bonus or in lieu of obligations of KeyCorp or any of its
subsidiaries to pay cash or deliver other property under the
Equity Plan or under other plans or compensatory arrangements,
subject to such terms as determined by the Committee in
compliance with Section 409A of the Internal Revenue Code.
If the earning or vesting of, or elimination of restrictions
applicable to, other awards is based only on the passage of time
rather than the achievement of management objectives, the period
of time will be no shorter than three years, except that the
restrictions may be removed no sooner than ratably on an annual
basis during the three-year period as determined by the
Committee at the date of grant. If the earning or vesting of, or
elimination of restrictions applicable to, other awards is based
on the achievement of performance goals, the earning, vesting or
restriction period may not terminate sooner than one year from
the date of grant. The Committee may grant some awards,
including other awards, that are not subject to these minimum
vesting requirements, so long as the aggregate number of such
awards does not exceed 5% of the total number of Common Shares
available under the Equity Plan. Other awards also may be earned
or vest on an accelerated basis in connection with certain
events such as a termination of employment by reason of death,
disability, normal or early retirement, or a change of control.
Treatment
of Awards Upon Termination of Employment.
Termination of Employment Other than Upon Death,
Disability, Retirement or After a Change of
Control. In general, a stock option and SARs
may be exercised only while the participant is employed.
Following a participants termination of employment for any
reason other than the participants retirement, disability,
or death or within two years after a change of control, he or
she may:
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exercise an incentive stock option and any related Tandem SARs
during the three-month period following such termination or, if
earlier, until its expiration date,
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exercise a nonqualified stock option and any related Tandem SARs
during the six-month period following such termination or, if
earlier, until its expiration date, and
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exercise a Free-Standing SAR during the six-month period
following such termination or, if earlier, until its expiration
date.
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Unless the applicable award agreement provides otherwise, shares
of restricted stock, RSUs, performance shares, performance units
and other awards with respect to which conditions or
restrictions have not lapsed will be forfeited as of the date of
termination of employment.
Retirement of the Participant. If a
participants employment is terminated due to retirement,
he or she may exercise any outstanding and exercisable stock
options, whether incentive or nonqualified stock options,
related Tandem SARs and Free-Standing SARs during the three
year-period following his or her termination of employment, or,
if earlier, until the awards expiration date. However, an
ISO that is exercised more than one year after termination of
employment will cause the stock option to be treated as a
nonqualified stock option.
The relevant award agreement may provide that the participant
or, with respect to nonqualified stock options, any transferee
will have the right to exercise, until no later than the
expiration of the relevant award, nonqualified stock options,
ISOs and SARs to the extent such stock options and SARs become
exercisable by their terms prior to the expiration of the
relevant award (or such earlier date as specified in the
relevant award agreement), notwithstanding the fact that such
stock options and SARs were not exercisable in whole or in part
(whether because a condition to exercise had not yet occurred or
a specified time period had not yet elapsed or otherwise) on the
date of the termination of the participants employment.
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Unless otherwise provided in the relevant award agreement, upon
retirement, the participant will forfeit each share of
restricted stock, RSU, performance share, performance unit and
other award with respect to which, as of that date, any
restrictions, conditions, or contingencies have not lapsed.
Disability of the Participant. If a
participants employment is terminated due to disability,
he or she, or his or her attorney in fact or legal guardian, may
exercise any outstanding and exercisable stock options, whether
incentive or nonqualified stock options, related Tandem SARs and
Free-Standing SARs during the three year-period following his or
her termination of employment, or, if earlier, until the
awards expiration date. However, an ISO that is exercised
more than one year after termination of employment will cause
the stock option to be treated as a nonqualified stock option.
Unless otherwise provided in the relevant award agreement, upon
a termination of employment due to disability, the participant
will forfeit each share of restricted stock, RSU, performance
share, performance unit and other award with respect to which,
as of that date, any restrictions, conditions, or contingencies
have not lapsed.
Death of the Participant. If a holder
of an incentive or nonqualified stock option or a SAR dies
during employment or during the period following termination of
employment when that stock option or SAR may be exercised, the
participants executor or administrator or a permitted
transferee of the stock option may exercise the stock option or
SAR during the three-year period immediately following the
participants death or, if earlier, until the awards
expiration date. If the holder of a nonqualified stock option
dies less than one year before the scheduled expiration date of
the option, the expiration date of the stock option will be
extended to the first anniversary of the holders death,
but the stock option expiration date will not be extended beyond
ten years from the date of grant of the stock option.
Unless otherwise provided in the relevant award agreement, upon
a termination of employment due to the participants death,
the participant will forfeit each share of restricted stock,
RSU, performance share, performance unit and other award with
respect to which, as of that date, any restrictions, conditions,
or contingencies have not lapsed.
Termination Following a Change of
Control.
Unless otherwise specified in the relevant award agreement, if,
within two years following the date of a change of control, a
participants employment with KeyCorp terminates for any
reason other than a voluntary resignation or a termination for
cause (as both such terms are defined in the Equity Plan), then
each award granted to such participant under the Equity Plan
prior to the change of control that then remains outstanding
will be automatically treated as follows:
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outstanding stock options will become immediately exercisable in
full;
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tandem SARs related to any such stock options will also become
immediately exercisable in full;
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outstanding free-standing SARs will become exercisable in full;
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the restriction periods with respect to all outstanding awards
of restricted stock will immediately terminate;
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the restrictions, conditions or contingencies on any RSUs or
other awards will immediately terminate; and
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the restrictions, conditions, or contingencies on any
performance shares and performance units will be modified in
such manner as the Committee may specify to give the participant
the benefit of those performance shares or performance units
through the date of termination.
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Additionally, the participant, or with respect to nonqualified
stock options any transferee, will have the right, during the
two-year period following the termination of employment or until
the stock options or SARs expire under their original terms, to
exercise any stock options and related SARs that were
outstanding on the date of termination if and to the same extent
as those stock options and SARs were exercisable by the
participant or transferee (as the case may be) on the date of
termination. In the case of ISOs, exercise of those stock
options more than three months after the date of termination may
cause the stock option to fail to qualify for incentive stock
option treatment under the Internal Revenue Code.
The Committee has the authority to modify in the award agreement
the periods specified above during which options are exercisable
following the participants retirement, disability, death
or termination of employment following a change of control.
Change of Control. In general, a change of
control will be deemed to have occurred under the Equity Plan
if: (1) KeyCorp is merged with or into, is consolidated
with or becomes a subsidiary of another corporation such that
KeyCorps shareholders own less than 45% of the surviving
entity or KeyCorps directors serve as less than half of
the directors of the surviving entity; (2) a person or
group buys 35% or more of KeyCorps outstanding voting
stock; (3) KeyCorps shareholders approve a plan of
its dissolution; (4) KeyCorp closes a sale or similar
disposal of all or substantially all of its assets; or
(5) without approval of the Board of Directors, a person or
group announces that it intends to effect any of the triggers
described above, to solicit proxies for a proposal not approved
by the Board of Directors or engage in an election contest, and,
within two years, KeyCorp experiences a turn-over (not approved
by KeyCorp) of more than half of its directors.
Harmful Activity. If a participant engages in
Harmful Activity (as defined in the Equity Plan)
during his or her employment or within six months after
termination of employment, then, subject to exception in certain
circumstances, certain adverse consequences are provided for in
the Equity Plan, including KeyCorps recapture (or
clawback) of Common Shares underlying certain vested awards,
profits realized upon the exercise of certain stock options or
SARs and profits realized upon the sale of Common Shares
underlying certain vested awards.
No Repricing. Except in connection with
certain corporate transactions or events, the terms of
outstanding awards may not be amended to reduce the exercise
price of outstanding stock options or the base price of
outstanding stock appreciation rights, and no outstanding stock
options or stock appreciation rights may be cancelled in
exchange for other awards, or cancelled in exchange for stock
options or stock appreciation rights with an exercise price or a
base price that is less than the exercise price of the original
stock options or the base price of the original stock
appreciation rights, as applicable, or cancelled in exchange for
cash, without approval by the shareholders of KeyCorp. These
restrictions are intended to prohibit the repricing of
underwater stock options and stock appreciation
rights and will not be construed to prohibit the adjustments
related to the corporate transactions discussed above. The
Equity Plan may not be amended with respect to this prohibition
on repricing without approval by the shareholders of KeyCorp.
Amendment. The Board of Directors, or a duly
authorized committee thereof, may alter or amend the Equity Plan
from time to time prior to its termination in any manner the
Board of Directors, or such duly authorized committee, may deem
to be in the best interests of KeyCorp and its shareholders.
However, if an amendment to the Equity Plan
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would materially increase the benefits accruing to participants
under the Equity Plan;
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would materially increase the number of securities that may be
issued under the Equity Plan;
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would materially modify the requirements for participation in
the Equity Plan; or
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must otherwise be approved by the shareholders of KeyCorp in
order to comply with applicable law or the rules of the New York
Stock Exchange or, if the Common Shares are not traded on the
New York Stock Exchange, the principal national securities
exchange upon which the Common Shares are traded or quoted,
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then such amendment will be subject to shareholder approval and
will not be effective unless and until such approval has been
obtained. Presentation of the Equity Plan or any amendment
thereof for shareholder approval will not be construed to limit
KeyCorps authority to offer similar or dissimilar benefits
in plans that do not require shareholder approval.
The Committee will have the authority to amend the terms and
conditions applicable to outstanding awards
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in any case where expressly permitted by the terms of the Equity
Plan or of the relevant award agreement; or
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in any other case with the consent of the participant to whom
the award was granted.
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Except as expressly provided in the Equity Plan or in the award
agreement evidencing the award, the Committee may not, without
the consent of the holder of an award granted under the Equity
Plan, amend the terms and conditions applicable to that award in
a manner adverse to the interests of the participant.
Assignment and Transfer. Nonqualified stock
options may not be assigned or transferred (other than by will
or by the laws of descent and distribution) unless the
Committee, in its sole discretion, determines to allow such
assignment or transfer and, if the Committee determines to allow
any such assignment or transfer, the transferee will have the
power to exercise such nonqualified stock option in accordance
with the terms of the award and the provisions of the Equity
Plan. No ISO, SAR, restricted stock during its applicable
restriction period, RSU, performance share or unvested other
award may be transferred other than by will or by the laws of
descent and distribution. In no event may any award granted
under the Equity Plan be transferred for value. During a
participants lifetime, only the participant (or in the
case of incapacity of a participant, the participants
attorney in fact or legal guardian) may exercise any ISO or SAR.
Withholding. KeyCorp will withhold from any
payments of cash made pursuant to the Equity Plan such amount as
is necessary to satisfy all applicable federal, state, and local
withholding tax obligations. Except as otherwise determined by
the Committee, a participant (or other person exercising stock
options with respect to withholding taxes upon exercise of such
stock options) may elect, or the Committee may require such
participant or other person, to satisfy, in whole or in part,
any withholding tax obligation that may arise in connection with
the grant of an award, the lapse of any restrictions with
respect to an award, the acquisition of Common Shares pursuant
to any award, or the disposition of any Common Shares received
pursuant to any award by having KeyCorp hold back some portion
of the Common Shares that would otherwise be delivered pursuant
to the award or by delivering to KeyCorp an amount equal to the
withholding tax obligation arising with respect to such grant,
lapse, acquisition, or disposition in (1) cash,
(2) Common Shares, or (3) such combination of cash and
Common Shares as the Committee may determine. The fair market
value of the Common Shares to be so held back by KeyCorp or
delivered by the participant will be determined as of the date
on which the obligation to withhold first arose.
Awards in Substitution for Awards Granted by Other
Companies. Awards, whether ISOs, nonqualified
stock options, SARs, restricted stock, RSUs, performance shares,
performance units or other awards, may be granted
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under the Equity Plan in substitution for awards held by
employees of a company who become employees of KeyCorp or a
subsidiary as a result of the merger or consolidation of the
employer company with KeyCorp or a subsidiary, or the
acquisition by KeyCorp or a subsidiary of the assets of the
employer company, or the acquisition by KeyCorp or a subsidiary
of stock of the employer company as a result of which it becomes
a subsidiary. The terms, provisions, and benefits of the
substitute awards so granted may vary from the terms, provisions
and benefits set forth in or authorized by the Equity Plan to
such extent as the Committee at the time of the grant may deem
appropriate to conform, in whole or in part, to the terms,
provisions, and benefits of the awards in substitution for which
they are granted.
Duration and Termination of the Equity
Plan. Subject to shareholder approval, the Equity
Plan will become effective and will be deemed to have been
adopted on March 11, 2010, which was the date the Equity
Plan was approved and adopted by the Board of Directors.
However, that if the Equity Plan is not approved by the
affirmative vote of the holders of the requisite number of
outstanding Common Shares on or prior to December 31, 2010,
the Equity Plan will be void and of no further effect. The
Equity Plan will remain in effect until March 11, 2020,
which is the date that is 10 years from March 11,
2010. All grants made on or prior to such date of termination
will continue in effect thereafter, subject to their respective
terms and the terms of the Equity Plan.
Conditions. The Committee may condition the
grant of any award or combination of awards authorized under the
Equity Plan on the surrender or deferral by the participant of
his or her right to receive a cash bonus or other compensation
otherwise payable to the participant by KeyCorp or a subsidiary,
subject to such terms as will be determined by the Committee in
a manner that complies with Section 409A of the Internal
Revenue Code.
Acceleration. If permitted by
Section 409A of the Internal Revenue Code, in the event of
a termination of employment by reason of death, disability,
normal or early retirement, or a change of control, of a
participant who holds a stock option or a SAR not immediately
exercisable in full, or any restricted stock as to which the
substantial risk of forfeiture or the prohibition or restriction
on transfer has not lapsed, or any RSU as to which any period of
deferral has not been completed, or any performance share,
performance units or other awards that have not been fully
earned, or who holds Common Shares subject to any transfer
restriction imposed under the Equity Plan, the Committee may, in
its sole discretion, accelerate the time at which such stock
option or SAR may be exercised or the time at which such
substantial risk of forfeiture or prohibition or restriction on
transfer will lapse or the time when such period of deferral
will end or the time at which such performance shares,
performance units or other awards will be deemed to have been
fully earned or the time when such transfer restriction will
terminate or may waive any other limitation or requirement under
any such award. However, in the case of an award intended to
qualify as qualified performance-based compensation
under Section 162(m) of the Internal Revenue Code,
acceleration is not permitted in the event of normal or early
retirement.
Special Vesting Provisions. In addition to the
provisions in the Equity Plan regarding acceleration of awards,
up to 5% of the maximum number of Common Shares that may be
issued or transferred under the Equity Plan, as may be adjusted,
may be used for restricted stock, RSUs, performance shares,
performance units and other awards granted under the Equity Plan
that do not comply with the applicable three-year vesting
requirements with respect to time-vest awards or the applicable
one-year vesting requirements with respect to awards subject to
the achievement of performance goals.
Deferral. To the extent permitted by
Section 409A of the Internal Revenue Code, the Committee
may permit participants to elect to defer the issuance of Common
Shares or the settlement of awards in cash under the Equity
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Plan pursuant to such rules, procedures or programs as it may
establish for purposes of the Equity Plan. The Committee also
may provide that deferred issuances and settlements include the
payment or crediting of dividend equivalents or interest on the
deferral amounts, to the extent permitted by Section 409A
of the Internal Revenue Code.
Compliance with Section 162(m) of the Internal Revenue
Code. Section 162(m) of the Internal Revenue
Code generally disallows a tax deduction to public companies for
compensation over $1 million paid or otherwise taxable to
certain executive officers employed by KeyCorp at the end of the
applicable year. Qualifying performance-based compensation is
not subject to the deduction limit if certain requirements are
met. In the case of stock options, performance shares,
performance units, restricted stock, RSUs and other awards with
performance-based vesting, the applicable plan must provide a
maximum number of shares or maximum value with respect to which
such awards may be granted during a specified period. The Equity
Plan provides that no participant will be granted stock options
or SARs for more than 1,000,000 Common Shares, or awarded more
than $7,500,000 worth (determined at the time of grant) of
performance units or other awards or awarded restricted stock,
RSUs, performance shares or other awards with performance goals
for more than 7,500,000 Common Shares (if such awards are
intended to qualify under Section 162(m)), in any calendar
year. In addition, the applicable plan and the performance goals
must be approved by shareholders at least every five years. As
used in the Equity Plan, the term performance goal
means the measurable performance goal or goals specified by the
Committee in connection with the grant of performance shares or
performance units, or when so determined by the Committee, stock
options, SARs, restricted stock, RSUs, other awards or dividend
credits. Performance goals may be described in terms of
KeyCorp-wide objectives or objectives that are related to the
performance of the individual participant or of the subsidiary,
division, department, region or function within KeyCorp or a
subsidiary in which the participant is employed. The performance
goals may be made relative to the performance of one or more
other companies or subsidiaries, divisions, departments, regions
or functions within such other companies, and may be made
relative to an index or one or more of the performance goals
themselves. The Committee may grant awards with performance
goals that are either intended to be qualified
performance-based compensation within the meaning of
Section 162(m) of the Internal Revenue Code or awards that are
not intended to so qualify. The performance goals applicable to
any award that is intended to be qualified
performance-based compensation within the meaning of
Section 162(m) of the Internal Revenue Code to a covered
employee within the meaning of Section 162(m) of the
Internal Revenue Code will be based on one or more of, a
combination of, or ratios involving the following criteria:
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earnings per share;
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total revenue;
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net interest income;
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noninterest income;
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net income;
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net income before tax;
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noninterest expense;
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efficiency ratio;
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return on equity;
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return on assets;
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economic profit added;
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loans;
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deposits;
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tangible equity;
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assets;
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net charge-offs; and
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nonperforming assets.
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If the Committee determines that a change in the business,
operations, corporate structure or capital structure of KeyCorp,
or the manner in which it conducts its business, or other events
or circumstances render the performance goals unsuitable, the
Committee may in its discretion modify such performance goals or
the related minimum acceptable level of achievement, in whole or
in part, as the Committee deems appropriate and equitable,
including, without limitation, to exclude the effects of
extraordinary items, unusual or non-recurring events, cumulative
effects of tax or accounting changes, discontinued operations,
acquisitions, divestitures and material restructuring or asset
impairment charges, except in the case of an award intended to
be qualified performance-based compensation within
the meaning of Section 162(m) of the Internal Revenue Code
(other than in connection with a change of control) where such
action would result in the loss of the otherwise available
exemption of the award under Section 162(m) of the Internal
Revenue Code. In such case, the Committee will not make any
modification of the performance goals or minimum acceptable
level of achievement with respect to such covered employee.
U.S.
Federal Income Tax Consequences
The following discussion of some of the U.S. Federal income
tax consequences of certain transactions under the Equity Plan
is based on an analysis of the Internal Revenue Code as
currently in effect, existing laws, judicial decisions and
administrative rulings and regulations, all of which are subject
to change.
Tax
Consequences to Participants
Non-Qualified Stock Options. In general:
(1) at the time a non-qualified stock option is granted, no
income will be recognized by a participant; (2) at the time
of exercise of a non-qualified option, ordinary income will be
recognized by the participant in an amount equal to the
difference between the exercise price paid for the shares and
the fair market value of the shares if they are non-restricted
on the date of exercise; and (3) at the time of sale of
shares acquired pursuant to the exercise of a non-qualified
stock option, any appreciation (or depreciation) in the value of
the shares after the date of exercise will be treated as a
capital gain (or loss).
ISOs. No income generally will be recognized
by a participant upon the grant or exercise of an ISO. The
exercise of an ISO, however, may result in alternative minimum
tax liability. If Common Shares are issued to a participant
pursuant to the exercise of an ISO and no disqualifying
disposition of the shares is made by the participant within two
years after the date of grant or within one year after the
transfer of the shares to the
42
participant, then upon the sale of the shares any amount
realized in excess of the exercise price will be taxed to the
participant as a capital gain and any loss sustained will be a
capital loss.
If Common Shares acquired upon the exercise of an ISO are
disposed of prior to the expiration of either holding period
described above, the participant generally will recognize
ordinary income in the year of disposition in an amount equal to
any excess of the fair market value of the shares at the time of
exercise (or, if less, the amount realized on the disposition of
the shares in the sale or exchange) over the exercise price paid
for the shares. Any further gain (or loss) realized by the
participant generally will be taxed as a capital gain (or loss).
Appreciation Rights. No income will be
recognized by a participant in connection with the grant of a
SAR. When the SAR is exercised, the participant normally will be
required to include as taxable ordinary income in the year of
exercise an amount equal to the amount of any cash, and the fair
market value of any unrestricted Common Shares, received
pursuant to the exercise.
Restricted Stock. A participant receiving
restricted stock generally will be subject to tax at ordinary
income rates on the fair market value of the restricted stock
reduced by any amount paid by the participant at such time as
the shares are no longer subject to a risk of forfeiture or
restrictions on transfer for purposes of Section 83 of the
Internal Revenue Code. However, a participant who elects under
Section 83(b) of the Internal Revenue Code within
30 days of the date of award of the restricted stock will
have taxable ordinary income on the date of award of the Common
Shares equal to the excess of the fair market value of the
Common Shares (determined without regard to the risk of the
forfeiture or restrictions on transfer) over any purchase price
paid for the Common Shares. If a Section 83(b) election has
not been made, any dividends received with respect to restricted
stock that are subject at that time to a risk of forfeiture and
restrictions on transfer generally will be treated as additional
compensation income and not as dividend income.
Restricted Stock Units. No income generally
will be recognized upon the award of RSUs. A participant
receiving RSUs generally will be subject to tax at ordinary
income rates on the fair market value of unrestricted Common
Shares on the date that such shares are transferred to the
participant under the award (reduced by any amount paid by the
participant for such RSUs), and the capital gains/loss holding
period for such shares will also commence on such date.
Performance Shares and Performance Units. No
income generally will be recognized upon the grant of
performance shares or performance units. Upon payment in respect
of the earn-out of performance shares or performance units, the
participant generally will be required to include as taxable
ordinary income in the year of receipt an amount equal to the
amount of cash received and the fair market value of any
nonrestricted Common Shares received.
Other Awards. No income generally will be
recognized upon the grant of other awards. Upon payment of other
awards, the participant generally will be required to include as
taxable ordinary income in the year of receipt an amount equal
to the amount of cash received and the fair market value of any
unrestricted Common Shares received.
Tax
Consequences to KeyCorp
To the extent that a participant recognizes ordinary income in
the circumstances described above, KeyCorp or the subsidiary for
which the participant performs services will be entitled to a
corresponding deduction provided
43
that, among other things, the income meets the test of
reasonableness, is an ordinary and necessary business expense,
is not an excess parachute payment within the
meaning of Section 280G of the Internal Revenue Code, and
is not disallowed by the $1 million limitation on certain
executive compensation contained in Section 162(m) of the
Internal Revenue Code. As long as KeyCorp is a TARP recipient,
the $1 million limitation is reduced to $500,000.
Registration
with the SEC
KeyCorp intends to file a Registration Statement on
Form S-8
relating to the issuance of Common Shares under the Equity Plan
with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended, as soon as is practicable
after approval of the Equity Plan by the shareholders.
New Plan
Benefits
Because awards to be granted in the future under the Equity Plan
are at the discretion of the Committee, it is not possible to
determine the benefits or the amounts to be received under the
Equity Plan by KeyCorps employees.
For grants made during fiscal year 2009 to KeyCorps named
executive officers, please see the 2009 Grants of Plan-Based
Awards Table on page 70 of 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 of KeyCorp unanimously recommends that
the shareholders vote FOR approval of the KeyCorp
2010 Equity Compensation Plan.
Issue
Three
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 B 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
Emergency Economic Stabilization Act of 2008 (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.
44
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 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 failed to approve the proposed
amendments to the Articles and Regulations at the 2009 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 (1) to 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) to 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.
45
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
46
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 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
47
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.
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 Three, 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 B 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.
48
Issue
Four
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 2010. 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.
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
Five
APPROVAL
OF KEYCORPS EXECUTIVE COMPENSATION
Under Section 111(e)(1) of the EESA, any reporting company
that has received financial assistance under TARP must permit a
separate shareholder vote to approve the reporting
companys executive compensation, as disclosed in the
reporting companys Compensation Discussion and Analysis,
related compensation tables, and other related material under
the compensation disclosure rules of the SEC, in any proxy or
consent or authorization for an annual or other meeting of its
shareholders during the period in which any obligation arising
from financial assistance provided under TARP remains
outstanding.
KeyCorps Board of Directors is providing shareholders with
the opportunity to cast an advisory vote on its compensation
program at the 2010 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 will take into account the outcome of the
vote when considering future executive compensation
arrangements. 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 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 Meting.
The Board of Directors unanimously recommends that the
shareholders vote FOR this proposal.
49
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, 2010 (unless otherwise notes),
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 (49)
Mr. Gorman was elected as a KeyCorp Senior Executive Vice
President and head of Key National Banking on March 11, 2010. He
became an executive officer of KeyCorp on that date. Before
assuming his new position, Mr. Gorman was an Executive Vice
President of KeyCorp (since 2002) and served as President of
KeyBank Capital Markets (since 2003).
PAUL N.
HARRIS (51)
Mr. Harris has been an Executive Vice President, General
Counsel, and Secretary of KeyCorp since 2003. He became an
executive officer of KeyCorp in 2004.
CHARLES
S. HYLE (58)
Mr. Hyle has been an Executive Vice President and Chief
Risk Officer of KeyCorp since 2004. He also has been an
executive officer since 2004.
HENRY L.
MEYER III (60)
Mr. Meyer has been Chairman, President, and Chief Executive
Officer of KeyCorp since 2001. He has been an executive officer
at KeyCorp since 1987.
BETH E.
MOONEY (54)
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 (57)
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.
50
THOMAS C.
STEVENS (60)
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 (53)
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.
51
COMPENSATION
DISCUSSION AND ANALYSIS
Executive
Summary
KeyCorp remains committed to its
pay-for-performance
philosophy. As a participant in the Department of the
Treasurys Troubled Asset Relief Program (TARP) we continue
to be guided by this philosophy but acknowledge that our ability
to motivate and retain our executives through our executive
compensation program is limited. The named executive
officers1,
were still accountable for achieving the performance objectives
established under our annual and long-term incentive
compensation plans but they were not eligible to receive
incentive awards in 2009. In fact, no annual incentive
compensation awards were paid for 2008 or 2009. In addition, all
stock options awarded prior to 2009 had exercise prices well
above the range of Keys current share price and
performance shares awarded for the
2006-2008
and
2007-2009
long-term performance cycles failed to vest as our financial
results fell below the threshold performance levels. Total
compensation for the named executive officers was reduced,
evidence that the
pay-for-performance
philosophy embedded in our compensation plans worked as intended.
This Compensation Discussion and Analysis presents
KeyCorps executive compensation policies and practices
during 2009. It also addresses the changes to KeyCorps
executive compensation and benefits programs for 2009 and how
these changes enable us to measure performance in a volatile
environment, recognize individual contributions, and comply with
the executive compensation standards applicable to TARP
participants.
Because Key is a TARP participant, the Compensation and
Organization Committee of KeyCorps Board of Directors (the
Compensation Committee) is required to conduct a review, at
least every six months with KeyCorps senior risk officers
of our compensation program for senior executives, as well as
our employee incentive plan designs and performance metrics.
During 2009, the Compensation Committee met with KeyCorps
Chief Risk Officer and Chief Auditor in January and July to
identify and assess the risks posed by these plans and ensure
that these risks are being effectively monitored and managed.
The Compensation Committee also reviewed KeyCorps
governance processes to ensure they were aligned with our risk
tolerance framework. The results of this review are reported in
the Compensation and Organization Committee Report (Including
Discussion of Compensation Policies and Practices as They Relate
to Risk Management) on page 88 of this proxy statement.
Impact
of Tarp
On November 14, 2008, KeyCorp sold $2.5 billion of its
preferred stock and warrants to purchase its common stock to the
United States Department of the Treasury pursuant to the TARP
and the Capital Purchase Program (CPP) established under the
Emergency Economic Stabilization Act of 2008 (EESA). As a TARP
participant, and while the Treasury Departments CPP
investment in KeyCorp remains outstanding, KeyCorp is required
to conform to specific executive compensation and corporate
governance requirements. In February 2009, EESA was amended by
the American Recovery and Reinvestment Act of 2009 (ARRA) to
expand and bolster these executive compensation and corporate
governance requirements.
(1) Messrs. Meyer,
Stevens, Weeden, Hancock and Ms. Mooney. Mr. Hancock
resigned effective February 12, 2010.
52
Consequently, KeyCorp is subject to and in compliance with the
following requirements:
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The Compensation Committee must semi-annually review our
incentive compensation plans with KeyCorps Chief Risk
Officers and the risks that these plans pose to KeyCorp, as well
as identify and limit any features in these plans that could
lead the named executive officers to take unnecessary and
excessive risks that may threaten the value of KeyCorp;
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We may not pay or accrue any bonus, retention award or incentive
compensation to any of the named executive officers or the next
top 20 most highly compensated employees, except that bonuses
may be paid:
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pursuant to a written employment agreement that was entered into
before February 11, 2009; and
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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 annual compensation.
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We must maintain a policy enabling us to recover
(clawback) any bonus, retention award or incentive
compensation paid based on statements that are later proven to
be materially inaccurate;
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We must not provide any golden parachute payments in
the event of involuntary termination of employment; and
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We must not take any compensation expense deduction for
U.S. federal corporate income tax purposes for amounts in
excess of $500,000 per year paid to the named executive officers.
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In addition, KeyCorp amended its incentive compensation plans in
2008 to provide for a clawback and modified the change of
control agreements of the named executive officers to eliminate
any golden parachute payments.
KeyCorp
Compensation Philosophy and Objectives
The overall objective of KeyCorps executive compensation
and benefits program is to align the compensation interests of
our executives with the investment interests of our
shareholders. This program is designed to support this objective
in three ways:
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KeyCorp strives to attract, retain and motivate a talented team
of executives who are capable of leading the company.
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KeyCorp strives to reinforce short- and long-term financial and
risk management goals and objectives and link pay to sustainable
performance relative to goals.
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KeyCorp strives to ensure that its compensation plans do not
encourage employees to take unnecessary or excessive risks that
would threaten the value of KeyCorp or manipulate earnings.
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We seek to achieve this objective by aligning compensation to
how KeyCorp performs relative to its strategic goals and as
compared to its peers.
53
Elements
of Total Compensation
Consistent with this philosophy, the Compensation Committee
continues to believe that the best way to motivate
KeyCorps executives to enhance shareholder return is to
link a relatively large portion of their compensation directly
to performance by making this compensation contingent upon the
achievement of pre-established performance goals. Historically,
the incentive portion of our executives total compensation
has been delivered through both annual cash and long-term equity
award opportunities structured and weighted to balance
short-term earnings with the need to make investments in the
long-term viability of the business, as further described below.
Base
Salary
Historically, base salary has represented the fixed portion of
each named executive officers total compensation.
Generally, this compensation component has been paid in cash and
factored into the calculation of certain employee benefits, such
as the benefits under KeyCorps retirement plans.
As a TARP participant, however, we have begun to pay a portion
of several named executive officers base salaries in the
form of shares of KeyCorp common stock. Consequently, the value
of this compensation component now fluctuates with changes in
the market price of KeyCorp common stock. Further, this
stock salary is not counted in the calculation of
employee benefits.
The key features of the 2009 stock salary awards for the named
executive officers are summarized in the narrative to the 2009
Option Exercises and Stock Vested Table on page 75 of this
proxy statement.
Annual
Incentive Compensation
Historically, payouts under KeyCorps Annual Incentive Plan
(the Incentive Plan) have been based on the level of achievement
against one or more pre-established performance metrics. At the
beginning of each year, the Compensation Committee would select
the performance metrics and set the targets for the awards made
to our CEO, the other named executive officers, and employees in
our finance, operations, technology, compliance, risk management
and human resources departments who participate in the Incentive
Plan. After the end of the year, award payouts are determined
based on the Compensation Committees evaluation of the
level of achievement of each performance goal.
Because KeyCorp is a TARP participant, however, the named
executives and the next 20 most highly compensated employees
were not eligible to receive awards under the Incentive Plan for
2009.
The key features of the Incentive Plan for 2009 are summarized
in the narrative to the 2009 Grants of Plan-Based Awards Table
on page 70 of this proxy statement.
Long-Term
Incentive Compensation
Historically, we have used long-term incentive compensation in
the form of equity-based awards to increase employees
share ownership and align their long-term financial interests
with those of shareholders. KeyCorps Long-Term Incentive
Compensation Plan (the Long-Term Plan) is designed to foster a
long-term perspective that generally corresponds with our
three-year strategic planning cycle. A new long-term incentive
compensation
54
performance cycle begins each year on January 1.
Accordingly, during 2009, there were three long-term incentive
compensation performance cycles in effect (commencing 2007,
2008, and 2009, respectively).
Each named executive officers long-term incentive award
opportunity is determined by the Compensation Committee with
reference to the median total long-term incentive award
opportunity for comparable positions within KeyCorps peer
group. Typically, long-term incentive awards have been delivered
half in stock options (in the form of both non-qualified stock
options and incentive stock options) and half as
performance-based restricted stock to provide a balanced focus
on the market price of KeyCorps common stock with
attention to the achievement of the specific long-term
objectives that satisfy KeyCorps strategic plan.
Long-Term Incentive Plan awards are communicated to participants
as a dollar value. Historically, KeyCorp has established a
compensation value at which options are granted. Unlike the
accounting (grant date fair market) value of a stock option, the
compensation value does not vary with daily movements in the
stock price. Up until 2008 the compensation value was
established for three-year periods. KeyCorps stock price,
similar to other financial services companies, began its decline
in July of 2007. By April 2008, due to sustained and unusual
levels of stock price volatility, the compensation value was
revisited and set at $5.00. By May of 2009 the market had
changed dramatically again and the compensation value was
lowered to $3.00. The grant date fair market value of the stock
options for accounting purposes granted to the CEO and named
executives officers was $1.69 in 2008 and $2.38 in 2009.
Therefore, fewer options were delivered for a given dollar value
than would have been if KeyCorp had used the grant date fair
market value required for accounting and disclosure purposes.
For example, the number of options delivered for a $100,000
award would be:
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Compensation Value
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Accounting Value
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Per Option
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# of Options
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Per Option
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# of Options
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2008
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$
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5.00
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20,000
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$
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1.69
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59,172
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2009
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$
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3.00
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33,333
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$
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2.38
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42,017
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In 2009, as a result of the decline in the market price of our
common stock, the Compensation Committee elected to deliver 33%
of the equity awards granted to the plan participants as stock
options, 33% as performance-based restricted stock and 34% as
deferred cash. Because KeyCorp is a TARP participant, the named
executive officers and the next 20 most highly compensated
employees were prohibited from receiving equity awards under the
Long-Term Plan. However, we were permitted to award some portion
of the long-term incentive opportunity in restricted stock and
prior to June 15, 2009, stock options, with specific
vesting terms and conditions.
The key features of the Long-Term Plan and the stock options and
restricted stock awarded to the CEO and named executive officers
are summarized in the narrative to the 2009 Grants of Plan-Based
Awards Table on page 70 of this proxy statement.
Total
Compensation Pay Mix
Under KeyCorps compensation philosophy, the mix of base
salary, annual incentive, and long-term incentive varies with an
executives responsibilities and position. The Compensation
Committee continues to believe that the total compensation of
executives who set the overall strategy for the business and
have the greatest ability to execute
55
that strategy should be predominantly performance-based and
weighted toward long-term objectives. In January 2009, the
Compensation Committee established the following pay mixes for
the named executive officers:
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Base
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Annual Incentive
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Long-term Incentive
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Salary
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Target
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Target
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Meyer (CEO)
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14
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%
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30
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%
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%
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Stevens (CAO)
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20
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%
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24
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%
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56
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%
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Weeden (CFO)
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20
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%
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24
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%
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56
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%
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Mooney (Community Banking)
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20
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%
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35
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%
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45
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%
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Hancock (National Banking)
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14
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%
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40
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%
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%
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Because KeyCorp is a TARP participant, these pay mixes were
subsequently modified to comply with the applicable limitations
on bonuses and incentive compensation. Since
Mr. Hancocks compensation was payable pursuant to an
employment agreement that was entered into before
February 11, 2009, his pay mix remained the same. The pay
mixes of Messrs. Meyer, Stevens, Weeden and Ms. Mooney
were modified to provide 67% base salary, 33% long-term
compensation, and no annual incentive compensation.
Compensation
Decision-Making Process and Timing
Selecting appropriate performance metrics is critical to
KeyCorps
pay-for-performance
philosophy. From 2004 through 2008, the performance metrics used
for both annual and long-term incentive compensation were
consistent from
year-to-year,
and consisted of earnings per share (EPS), return on equity
(ROE) and economic profit-added (EPA).
For 2009, the Compensation Committee, with the assistance of
Compensation Advisory Partners (formerly Mercer), its external
executive compensation consultant, set the performance targets
required to earn incentive compensation payouts during a series
of meetings between October 2008 and January 2009. As a result
of the then-unfolding financial crisis and the uncertainty about
the compliance obligations to be imposed for TARP participants,
the Compensation Committee decided to take a different approach
in setting performance goals under the Incentive Plan, including
the performance goals for our CEO and his direct
reports.2(
In light of the anticipated economic turmoil during 2009, the
Compensation Committee selected the following performance
metrics:
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Minimum thresholds of tangible capital and Tier 1 capital
ratios of 6.0% and 7.5% respectively for any incentive payment
to be made;
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Liquidity measured as improvement in loan to deposit ratio from
130%;
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Profitability measures, such as a return on risk-weighted assets
above (1.9)%, pre-provision operating income, Economic Profit
Added and Earnings Per Share targeted at $1.633 billion,
$(1.222) billion and $(.33), respectively;
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Credit quality measures, such as net charge off and
non-performing assets ratios targeted at 1.65% and 2.17%,
respectively; and
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Leadership in executing corporate initiatives.
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2 The
CEOs direct reports are the named executive officers and
the Chief Risk Officer.
56
When evaluating the performance of our CEO and his direct
reports or determining any incentive pool funding for 2009 under
the Incentive Plan, the Compensation Committee assessed
KeyCorps performance against these goals as well as
results relative to peers.
In the case of the Long-Term Plan, the economic environment made
it difficult for the Compensation Committee to establish
long-term goals. Therefore, the Compensation Committee
established a two-year (rather than a new three-year)
performance cycle and set cumulative goals using the same
metrics as it had set for the Incentive Plan.
During this time period, Compensation Advisory Partners
evaluated KeyCorps annual and long-term financial and
non-financial performance objectives in the context of the
market and current and forecasted peer group performance to
assist the Compensation Committee in setting financial targets
that would be expected to drive above median performance. The
Compensation Committee established broad ranges of performance
(with no specified weighting or mathematical calculation) and
determined to use its judgment in setting performance targets
and evaluating managements performance.
After these initial decisions were made, management reported
KeyCorps performance relative to the goals, as well as
Earnings Per Share growth, Return On Equity and total
shareholder return as compared to the median performance
achieved by the companies in the peer group. This information
was provided to the Compensation Committee on a quarterly basis
to assist the Compensation Committee in its evaluation of
performance.
Peer
Group Compensation and Performance Comparisons
Each year, the Compensation Committee directs its external
executive compensation consultant, presently Compensation
Advisory Partners, to analyze survey data from KeyCorps
peers to assess financial and market performance, as well as the
total compensation and benefits that these companies provide for
their executive officers. Since 2002, the Compensation Committee
has determined that the appropriate peer group for compensation
and performance comparisons is the group of large super-regional
banks as defined by the Standard and Poors Regional Bank
Index and Diversified Bank Index. In January 2009, the
Compensation Committees executive compensation consultant
determined that these indices continued to be appropriate for
KeyCorp to benchmark executive pay and company performance for
2009 for three reasons:
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The indices consist of financial services firms with diversified
business mixes;
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KeyCorp competes with these firms for customers and executive
talent; and
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These firms (as well as KeyCorp) are selected by Standard and
Poors for inclusion in published indices.
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Standard and Poors modifies the members in each index from
time-to-time
based on criteria such as total asset or sales size and merger
and acquisition activity. For 2009, the peer companies (as
reflected in these indices) 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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57
The Compensation Committee determined that after its acquisition
of Wachovia, Wells Fargo would not be a member of KeyCorps
peer group for 2009 even though Standard and Poors has
maintained it in the Diversified Bank Index.
Historically, the Compensation Committee reviewed available
compensation information obtained in the surveys discussed above
at its regularly scheduled November meetings and approved
compensation targets for the named executive officers and
approximately 32 additional senior executive
positions3(
at its January meetings. With the upheaval caused by the
financial crisis and uncertain effect of TARP, many financial
services firms did not participate in these surveys.
Consequently, for many positions, the data were not available or
inconsistent; as a result, the Compensation Committee relied
less on position-specific data, instead using the information as
a market reference to obtain a general understanding of emerging
compensation practices.
2009
Total Compensation Decisions and Actions
The compensation decisions and actions for the named executive
officers described below are presented chronologically to better
explain how these decisions and timing of these actions were
determined or affected by KeyCorps status as a TARP
participant.
Initial
2009 Base Salary Adjustments and 2009 Long-Term Incentive
Awards
In February 2009, the Compensation Committee reviewed each
executive officers base salary. Given the economic
challenges facing KeyCorp, the Compensation Committee determined
that there would be no base salary increases for 2009.
In its regularly scheduled February meetings, the Compensation
Committee typically approves long-term incentive compensation
awards for executives in positions to drive KeyCorp to achieve
its strategic plan. Given uncertainty at that time as to
KeyCorps ability as a TARP participant to make long-term
incentive compensation awards, the Compensation Committee
approved the dollar value of long-term incentive awards intended
to deliver market levels of pay with the type and timing of the
awards for our CEO and other named executive officers contingent
on managements determination that the awards would comply
with the rules applicable to TARP participants.
In March 2009, the Compensation Committee determined that its
inability to make long-term incentive compensation awards to our
CEO and other named executives while waiting for Treasury
guidance on the relevant TARP standards created significant
retention risks for KeyCorp. Consequently, the Compensation
Committee determined to make long-term incentive awards to our
CEO and other named executive officers equal to one-third of
their total compensation in time-lapsed restricted stock based
on the anticipated award limit. These March awards (shown in the
table below) made to our CEO and other named executive officers
were less than 40% of the dollar value of the long-term
incentive awards approved by the Compensation Committee in
February 2009 but not actually awarded.
Subsequent
2009 Long-Term Incentive Awards
In June 2009, Treasury published rules outlining the application
of the AARA executive compensation standards to TARP
participants. These rules provided that bonuses paid or accrued
before June 15, 2009 were not
( 3 Executives
who head a line of business or major functional area, and whose
compensation is overseen by the Compensation Committee.
58
subject to the prohibition on incentive compensation. In
addition, Treasury defined the term incentive
compensation to include equity awards, such as stock
options. The Compensation Committee determined that
KeyCorps inability to deliver the full dollar value of the
long-term incentive awards approved in February to our CEO and
the other named executive officers could put us at risk of
losing these executives. Consequently, the Compensation
Committee granted 900,000 stock options to our CEO and 350,000
stock options to each of the other named executive officers
prior to June 15, 2009, which at a compensated value of
$3.00 per share would deliver $2,700,000 and $1,050,000 in
compensation respectively. The grant fair market value actually
delivered for accounting and disclosure purposes at $2.38 is
shown below:
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March 2009 Award
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Delivered
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Total 2009 LTIC
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per Award Limit
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June 2009 Stock Option Award
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Delivered
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Meyer
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$
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1,247,483
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$
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2,142,000
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$
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3,389,483
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Stevens
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$
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664,190
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$
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833,000
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$
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1,497,190
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Mooney
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$
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607,897
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$
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833,000
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$
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1,440,897
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Weeden
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$
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707,867
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$
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833,000
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$
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1,540,867
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The total fair market value of the 2009 LTIC awards actually
delivered two-thirds of the amount intended for the CEO and less
than 90% of the amounts approved for each of the named executive
officers in February 2009 as determined by a market-based
compensation analysis.
In May and July 2009, the Compensation Committee examined the
public disclosures of the peer group to better understand market
pay practices and performance levels. Due to the difficult
performance environment in 2008 and financial and shareholder
results across the financial services sector, there was very
little incentive compensation paid for 2008 performance. For
example, no peer CEOs were paid an annual incentive in 2009 in
relation to the 2008 performance of their respective companies.
While KeyCorp did not make 2008 incentive awards to any of the
named executive officers, several peers made payments to some
named executive officers. The Compensation Committees
executive compensation consultant reported that KeyCorps
total pay was at the median and that performance in important
capital adequacy metrics was above median and stable and below
median with regard to Return On Equity and Operating Income
metrics.
Subsequent
Base Salary Adjustments
In September 2009, the Compensation Committee reviewed total
compensation opportunities for our CEO and the other named
executive officers in the context of the actions of the peer
group and KeyCorps progress toward achieving the
performance objectives for the year. As a result, the
Compensation Committee determined that the total compensation
targeted for our CEO and the named executive officers should be
reduced to about 70% of their pre-TARP levels. However, due to
TARP prohibitions on paying incentive compensation and
limitations on paying long-term awards, the mix of compensation
would need to be significantly different from periods before
TARP. To achieve this result, the base salaries of the named
executive officers were increased, with 100% of our CEOs
increase and 90% of the other named executive officers
increases paid in shares of KeyCorp common stock that
59
may not be sold or transferred until such time as KeyCorp has
repaid its TARP funds. As a result, effective October 2,
2009:
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Our CEOs base salary was increased on an annualized basis
by $2,313,000. For 2009, he was paid a base salary of
$1.02 million in cash, and $600,000 in shares of common
stock, resulting in a total compensation package for 2009 that
was approximately 70% of his pre-TARP total compensation
opportunity.
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Similarly, the total compensation delivered to
Messrs. Stevens and Weeden and Ms. Mooney in 2009 was
approximately 70% of their pre-TARP total compensation
opportunities.
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Neither our CEO nor the other named executives will be paid any
incentive compensation or bonus awards for 2009 performance.
Mr. Hancock will receive one-half of the incentive award
guaranteed in his employment letter dated November 25, 2008.
Internal
Revenue Code Section 162(m)
As noted above, KeyCorp may not take a compensation deduction
for U.S. federal corporate 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 $2.1 million.
However, because KeyCorp had a tax loss for 2009, these
compensation payments acted to reduce the amount of the tax loss.
Performance
Assessment Against 2009 Goals
KeyCorps 2009 capital ratios were strong and both
liquidity and funding ratios were strengthened throughout the
year. Performance fell below or in the lower end of established
performance ranges on credit quality and profitability measures.
Progress was made on leadership goals and the execution of
corporate initiatives in improved efficiency and investments in
the branch network was on track to achieve agreed upon goals.
The Compensation Committee determined that the actions taken in
2009 to strengthen capital, reserves and liquidity; address
asset quality; and invest and reshape KeyCorps businesses
have set the stage for KeyCorp to emerge from this extraordinary
period as a strong, competitive company. Recognizing that many
of the participants in the Incentive Plan are professionals in
finance, operations, technology, compliance, risk management and
human resources who made significant contributions in 2009, the
Compensation Committee used its discretion to fund a pool of 50%
of target incentive pay for Incentive Plan participants,
excluding our CEO and the named executive officers.
While KeyCorp was prohibited from linking our CEOs pay
directly to performance, we have provided the supplemental
tables below to provide a clearer view of our CEOs
compensation than that provided by the Summary Compensation
Table found on page 67 of this proxy statement. The Summary
Compensation Table displays the actual pay realized in 2009, and
indicates the accounting expense for long-term equity grants and
actuarial increases in retirement and deferred compensation
earnings. The supplemental tables below provide information
regarding
60
actual level of compensation realized in 2009 (first table), and
the long-term awards granted in 2009 that must be earned over
future years (second table).
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|
|
|
|
|
|
|
|
|
|
|
|
CEO Actual Pay Received in
2009
|
|
|
|
|
|
|
|
|
Performance Results Over
|
|
|
Period
|
|
Total
|
|
Annualized
|
|
Performance Period That Produced
|
Form of Compensation
|
|
Covered
|
|
Received ($)
|
|
Amount ($)
|
|
the Compensation
|
|
Salary
|
|
2009
|
|
|
1,642,731
|
|
|
|
1,642,731
|
|
|
Not tied to performance criteria.
|
Annual Incentive
|
|
2009
|
|
|
0
|
|
|
|
0
|
|
|
Mr. Meyer was prohibited from receiving an Annual Incentive due
to the ARRA. As discussed above, the Compensation Committee
still assessed his performance against the goals established for
the Annual Incentive Plan.
|
Long-Term Incentive Payout
|
|
2007-2009
|
|
|
0
|
|
|
|
0
|
|
|
The targets set in the first quarter of 2007 for the 2007-2009
performance cycle were as follows: Cumulative EPS of $9.11;
cumulative EPA of $1,055 million; and average ROE of 16.41%.
KeyCorps performance fell short of the threshold at the
end of the 2007-2009 long-term performance cycle and no
performance shares vested for the cycle.
|
Equity Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option Exercises
|
|
2009
|
|
|
N/A
|
|
|
|
N/A
|
|
|
N/A
|
Restricted Stock Vesting
|
|
2003-2009
|
|
|
152,223
|
|
|
|
25,371
|
|
|
Vested based on passage of time.
|
Total Annual Compensation Earned in 2009
|
|
2009
|
|
|
1,794,954
|
|
|
|
1,668,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 Future Potential
Pay
|
|
|
|
|
|
|
|
|
Financial
|
|
|
|
|
|
|
Performance
|
|
|
|
Accounting
|
|
|
|
|
Type of Long-Term
|
|
Period/Vesting
|
|
Performance
|
|
Expense
|
|
Linkage to the Creation of
|
Year of Award
|
|
Incentive Award
|
|
Period
|
|
Criteria
|
|
Estimate
|
|
Shareholder Value
|
|
2009
|
|
Performance Shares
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
2009
|
|
Restricted Stock
|
|
N/A
|
|
N/A
|
|
Total grant date fair value = $1,247,483
|
|
Shares vest after the later of 3 years or repayment of TARP.
|
2009
|
|
Stock Options
|
|
N/A
|
|
N/A
|
|
Total grant date fair value = $2,142,000
|
|
Vested upon grant, however require a holding period until the
later of one-third per year for 3 years or the repayment of
TARP.
|
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). The Compensation
Committee monitors peer practices to determine if any changes to
the guidelines are warranted. For 2009, the guidelines continued
to be stated as a dollar value but, to be more consistent with
peer group practices, the
61
Compensation Committee reduced the percentage of base salary
from 6X to 5X for our CEO and from 4X to 3X for the other named
executive officers. The new guidelines are as follows:
|
|
|
|
|
Our CEO must own Common Shares with a value equal to at least
five times his annual base salary payable in cash, including a
minimum of 10,000 beneficially owned shares.
|
|
|
|
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.
|
|
|
|
Newly-hired or promoted senior executives are expected to meet
or exceed their required ownership levels within three years of
the date they become subject to the requirements and are
required to comply within five years.
|
|
|
|
The value of the stock owned is determined quarterly, using the
average of the previous twelve-month-end closing market price of
the Common Shares.
|
|
|
|
Beneficially owned shares and unvested restricted shares and
units, as well as phantom shares owned by the senior executives
under KeyCorps 401(k) Savings Plan and deferred
compensation plans, count toward the ownership requirements.
Performance shares delivered in cash and unexercised stock
options do not count toward the ownership requirements.
|
|
|
|
Our CEO and all Section 16
officers4
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) for at least one year following the
exercise date or, if later, until the executive officer meets
the ownership requirements.
|
Assessing
Stock Ownership
The Compensation Committee reviews the stock ownership of the
senior executive team to monitor compliance with the Executive
Stock Ownership Guidelines and reviews ownership status with our
CEO at each Compensation Committee meeting. As of
September 30, 2009, our CEO and each of the other named
executive officers met the beneficial ownership guidelines and
all but Mr. Hancock had met the multiple of salary
requirement. Prior to his resignation on February 12, 2010,
Mr. Hancock would have had three years from his date of
hire (December 2008) to comply.
Other
Alignment and Retention Tools
There are several other ways that KeyCorps equity-based
awards help align the compensation interests of employees with
the investment interests of shareholders and promote executive
retention:
Conditional awards. All restricted stock and
special retention options are awarded on the condition that the
recipient executes an agreement that:
|
|
|
|
|
restricts his or her post-employment use of confidential
information; and
|
|
|
|
prohibits him or her from soliciting KeyCorp clients or hiring
KeyCorp employees for a period of one year following termination
of employment.
|
(4) Identified
on page 50 of this proxy statement.
62
Clawback provisions. If an employee engages in
harmful activity while working for KeyCorp or within
six months after termination of employment, then:
|
|
|
|
|
any profits he or she realized upon exercising any covered
option within one year of his or her termination of employment
must be returned to KeyCorp; and
|
|
|
|
he or she must forfeit all unexercised covered options.
|
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.
Market value strike price. 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 and KeyCorp has
not and will not back-date options.
Award grant date. 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.
The Board has determined that performance-based shares should be
granted when the Compensation Committee establishes the related
performance goals, which is in the first quarter of each year.
Therefore, total long-term incentive awards are approved, and
restricted stock and performance shares are awarded, at the
February meeting of the Compensation Committee. Stock options
are granted at the July meeting of the Compensation Committee to
correspond with KeyCorps annual strategic plan review
process. As described above, in the event of unusual
circumstances, the Compensation Committee, in its discretion,
may grant equity-based awards on a different date.
In addition, there are several ways that KeyCorp aligns the
annual incentive compensation interests of employees with the
investment interests of shareholders and promotes retention:
|
|
|
|
|
KeyCorps incentive plans provide for a clawback of any
incentive compensation or bonus paid to a senior executive if it
is later found that the payments were based on inaccurate
financial statements; and
|
|
|
|
any annual incentive award with a value greater than $100,000 is
paid in a combination of cash and Common Shares, with the shares
subject to a three-year graded vesting schedule.
|
Executive
Benefits
The Compensation Committee annually reviews the benefits that we
provide to our named executive officers. In 2009, these benefits
included reimbursement for tax preparation and financial
planning services, club dues, an executive health program
(consisting of a mandatory physical examination at the Cleveland
Clinic), individual disability insurance policies and a home
security system for our CEO. In the past, reimbursement of club
dues and financial planning have been common in the financial
services industry and total expenditures for our named executive
officers for these services were minimal and modest compared to
the levels reported by our peers in their proxy statements.
63
The Compensation Committee decided in July 2009 that
reimbursement for tax preparation and financial planning
services, club dues, and all tax reimbursements would be
discontinued effective January 1, 2010. Additionally, tax
reimbursements that had been provided for club dues, the
security system and the executive health program for the named
executive officers were discontinued as of June 2009. The
Compensation Committee decided to continue to pay for the named
executive officers executive health program and our
CEOs home security system.
KeyCorp does not permit its executive officers to use our
corporate aircraft for personal reasons.
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
similar age and years of service.
To supplement coverage under KeyCorps Long-Term Disability
(LTD) Plan and ensure that there are no gaps in income
replacement, KeyCorp maintains individual disability insurance
policies for our CEO and a limited number of executives,
including Messrs. Stevens and Weeden. These policies were
purchased in 2004, when a significant income replacement gap was
identified that placed executives at risk and KeyCorp in a low
competitive position compared to peers.
Change
of Control
KeyCorp uses change of control agreements to help retain
executive talent, minimize the possibility of financial loss to
the affected company and provide a financial bridge for
executives in the event of job loss. The Board of Directors
believes 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 situations. In addition, the Compensation
Committee believes that providing a
change-of-control
benefit to selected executives aids KeyCorps executive
recruitment efforts.
In 2005, the Compensation Committee, working with its executive
compensation consultant, re-evaluated these arrangements and,
after reviewing peer company practices and market trends,
established a second tier of benefits with a reduced severance
amount. The CEOs direct reports and six other executives
maintain Tier 1 agreements and 16 executives have
Tier 2 agreements. Our CEO has a separate employment
agreement that contains Tier 1 level change of control
benefits.
Effective September 1, 2009, KeyCorp amended its change of
control agreements and our CEOs employment agreement to:
|
|
|
|
|
Revise the definition of compensation to eliminate
the inclusion of long-term incentive compensation; and
|
|
|
|
eliminate any tax reimbursements by KeyCorp in the event of a
change in control.
|
These actions were taken to simplify the agreements and bring
the benefits in line with emerging best practices. In addition,
during the period that KeyCorp 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 executives.
The terms of our CEOs employment agreement as well as the
change of control agreements are described in detail in the
narrative to the Employment and Severance Arrangements Table on
page 81 of this proxy statement.
64
Employee
Benefits
Retirement
Plans
As is common practice in our industry, KeyCorp maintains
retirement benefit plans. KeyCorps retirement plans
consist of a voluntary 401(k) Savings Plan and, through 2009, a
company-funded Cash Balance Pension Plan. KeyCorp also has an
Excess Cash Balance Pension Plan and a voluntary Deferred
Savings Plan that provide senior managers with similar levels of
benefit on plan-eligible compensation over the Internal Revenue
Service Compensation Limit of $245,000. In combination, these
plans have provided a competitive benefit that balances employer
and employee contribution and risk.
In addition, KeyCorp maintains the Second Supplemental
Retirement Plan (SSRP), which was frozen to new participants in
1995. As a long-tenured (36 years) executive, our CEO is
one of the two remaining participants in this plan (the other
participant is not a named executive officer). In general,
pension plans that calculate a benefit based on final average
pay are more generous than the current norm, particularly for
very long tenured employees. However, since final average
pension plans were common when KeyCorps plan was in
effect, and the participants each have a long tenure with
KeyCorp and reasonably relied on the benefit, the Compensation
Committee has determined that it was appropriate for KeyCorp to
honor its SSRP commitment. All executives hired since 1995
participate in the same plans as all other employees of similar
age, tenure, and level.
Over the past two years, many financial services companies have
frozen their defined benefits plans
and/or
modified their defined contribution plans resulting in
KeyCorps retirement plans exceeding competitive
requirements. Therefore, effective January 1, 2010, the
Cash Balance Pension Plan and Excess/Second Excess Cash Balance
Pension Plans and SSRP were frozen. Also, 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 amount will be determined
annually and on a discretionary basis. This is not a matching
contribution, and eligible employees do not need to contribute
their own dollars to receive this contribution
The terms of our retirement plans are described in detail in the
narrative to the Pension Benefits Table on page 76 of this
proxy statement.
Separation
Pay Plan
In order to assist employees at the time of a job loss through
such events as company reorganizations or downsizings, KeyCorp
and its peers have maintained separation pay benefits.
KeyCorps Separation Pay Plan covers all employees,
including our CEOs direct reports. The CEO does not
participate in the Separation Pay Plan. 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 separation
pay benefit ranges from two weeks of base salary to
52 weeks of base salary, depending on years of service and
job level. The separation pay benefit for senior managers is
52 weeks of base salary to reflect the longer time period
required for these individuals to find comparable employment. In
the event a named executive officer is terminated following a
change of control, the executive will not be paid under the
Separation Pay Plan, but rather under his or her change of
control agreement described above.
65
For all employees, separation pay is paid through salary
continuation installments. Employees are eligible to continue
medical and dental benefits under COBRA on a pre-tax basis at
the KeyCorp employee rate during the salary continuation period.
This counts as part of the
18-month
COBRA period for the continuation of health coverage.
Participation in all other benefits cease when the salary
continuation period begins.
66
COMPENSATION
OF EXECUTIVE OFFICERS AND DIRECTORS
2009
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid by KeyCorp
to the CEO, CFO, and each of the three highest paid executive
officers for 2009 other than the CEO and CFO for the years ended
December 31, 2009, 2008 and 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
Deferred
|
|
All other
|
|
|
|
|
|
|
|
|
|
|
awards
|
|
awards
|
|
Compensation
|
|
Compensation
|
|
compensation ($)
|
|
|
Name and principal position
|
|
Year
|
|
Salary
($)(1)
|
|
Bonus ($)
|
|
($)(2)
|
|
($)(2)
|
|
($)(3)
|
|
Earnings
($)(4)
|
|
(see chart below)
|
|
Total ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Henry L. Meyer Chairman of the Board &
CEO(5)
|
|
|
2009
|
|
|
|
1,642,731
|
|
|
|
|
|
|
|
1,247,483
|
|
|
|
2,142,000
|
|
|
|
|
|
|
|
3,036,920
|
|
|
|
83,252
|
|
|
|
8,152,386
|
|
|
|
|
2008
|
|
|
|
1,019,538
|
|
|
|
|
|
|
|
2,499,999
|
|
|
|
845,000
|
|
|
|
|
|
|
|
2,273,408
|
|
|
|
89,604
|
|
|
|
6,727,549
|
|
|
|
|
2007
|
|
|
|
1,000,000
|
|
|
|
|
|
|
|
1,999,982
|
|
|
|
2,039,180
|
|
|
|
412,000
|
|
|
|
3,419,632
|
|
|
|
313,464
|
|
|
|
9,184,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey B. Weeden Chief Financial
Officer(6)
|
|
|
2009
|
|
|
|
725,000
|
|
|
|
|
|
|
|
707,867
|
|
|
|
833,000
|
|
|
|
|
|
|
|
54,642
|
|
|
|
39,175
|
|
|
|
2,359,684
|
|
|
|
|
2008
|
|
|
|
545,192
|
|
|
|
|
|
|
|
2,375,020
|
|
|
|
295,750
|
|
|
|
|
|
|
|
66,850
|
|
|
|
55,094
|
|
|
|
3,337,906
|
|
|
|
|
2007
|
|
|
|
525,000
|
|
|
|
|
|
|
|
699,998
|
|
|
|
713,000
|
|
|
|
250,000
|
|
|
|
85,421
|
|
|
|
104,233
|
|
|
|
2,377,652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter D. Hancock Former Vice
Chair(7)
|
|
|
2009
|
|
|
|
525,000
|
|
|
|
1,500,000
|
(8)
|
|
|
750,007
|
|
|
|
597,500
|
|
|
|
|
|
|
|
37,271
|
|
|
|
23,016
|
|
|
|
1,932,794
|
|
|
|
|
2008
|
|
|
|
30,288
|
|
|
|
1,250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,280,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas C. Stevens Vice Chair & Chief
Administrative
Officer(9)
|
|
|
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
|
|
|
|
|
2007
|
|
|
|
625,000
|
|
|
|
|
|
|
|
699,998
|
|
|
|
713,000
|
|
|
|
250,000
|
|
|
|
137,433
|
|
|
|
113,999
|
|
|
|
2,539,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beth E. Mooney Vice
Chair(10)
|
|
|
2009
|
|
|
|
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
|
|
|
|
|
2007
|
|
|
|
550,000
|
|
|
|
|
|
|
|
599,987
|
|
|
|
748,650
|
|
|
|
525,000
|
|
|
|
18,754
|
|
|
|
193,983
|
|
|
|
2,636,374
|
|
|
|
|
(1) |
|
Amounts reported in Salary include cash base pay and salary
stock. Salary stock was awarded October 2, 2009 and each
bi-weekly pay period thereafter in 2009. Salary stock fully
vests each pay period and may not be sold, transferred or
otherwise disposed of, pledged or otherwise hypothecated until
the earlier of the full repayment by KeyCorp of its TARP
repayment or termination of employment due to death or
disability. |
|
(2) |
|
Amounts reported in the Stock Awards and Option Awards columns
for 2009, 2008 and 2007 represent the aggregate grant date fair
value of equity awards granted during the respective year
computed in accordance with Financial Accounting Standards Board
ASC Topic 718. This compares to prior years, during which
amounts in these columns have represented the expensed
accounting value of such awards. The amounts for 2008 and 2007
have been recomputed (along with amounts in the Total column for
such years) using the aggregate grant date fair value of equity
awards granted during both of those years. Additional accounting
assumptions for option awards are described on page 70 of
this proxy statement in footnote (1) to the Grants of
Plan-Based Awards Table. |
|
(3) |
|
Non-equity incentive plan compensation refers to annual
incentive compensation that, due to ARRA regulations, was
prohibited from being paid for 2008 and 2009, as further
discussed in the Compensation Discussion and Analysis above.
However, as noted in footnote 8 below, Mr. Hancock was
entitled to receive his guaranteed annual incentive compensation
for 2009, which amount is presented in the Bonus column. |
|
(4) |
|
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 2009 Pension Benefits Table below. No above |
67
|
|
|
|
|
market or preferential earnings were paid in 2009 on deferred
compensation. For more information about KeyCorps
retirement plans and non-qualified deferred compensation plans,
please see the 2009 Pension Benefits Table and the 2009
Nonqualified Deferred Compensation Table and their respective
narratives below. |
|
(5) |
|
The amount reported for Mr. Meyer for 2009 in the Salary
column includes $1,020,000 paid in cash and $622,731 paid in
salary stock. The annualized salary for Mr. Meyer for 2009
consisted of 31% cash (or $1,020,000) and 69% equity (or
$2,313,000), although this full amount of equity was not
actually received by Mr. Meyer. The amount reported for
Mr. Meyer for 2009 in the Salary column, also includes
employee deferrals of $14,700 into the 401(k) Savings Plan and
$46,500 into the Deferred Savings Plan and the amount reported
for 2009 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: $76,821 (Cash Balance Pension Plan); and
$2,960,099 (Supplemental Retirement Plan). |
|
(6) |
|
The amount reported for Mr. Weeden for 2009 in the Salary
column includes $567,500 paid in cash and $157,500 paid in
salary stock. The annualized salary for Mr. Weeden for 2009
consisted of 51% cash (or $615,000) and 49% equity (or
$585,000), although this full amount of equity was not actually
received by Mr. Weeden. The amount reported for
Mr. Weeden for 2009 in the Salary column also includes
employee deferrals of $14,700 into the 401(k) Savings Plan and
$19,350 into the Deferred Savings Plan and the amount reported
for 2009 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: $19,246 (Cash Balance Pension Plan); and
$35,395 (Second Excess Cash Balance Pension Plan). |
|
(7) |
|
As previously noted, Mr. Hancock resigned effective
February 12, 2010. |
|
|
|
The amount reported for Mr. Hancock for 2009 in the Salary
column was paid 100% in cash. The amount reported for
Mr. Hancock for 2009 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: $13,098 (Cash Balance Pension
Plan); and $24,173 (Second Excess Cash Balance Pension Plan).
Mr. Hancock forfeited both of his pension plan balances
because he did not have enough service before his resignation. |
|
(8) |
|
Under the terms of Mr. Hancocks November 25,
2008 employment agreement, which was grandfathered under the
ARRA restrictions, Mr. Hancock would have received a
guaranteed $1,500,000 annual incentive compensation payment,
which amount is reflected in the Bonus column. Mr. Hancock
would have received this annual incentive compensation payment
in two installments, the first of which ($750,000) was paid on
December 11, 2009 and the second of which ($750,000) would
have been paid on March 5, 2010. $142,500 of the first
installment was paid in the form of restricted stock that would
have vested in equal 1/3 increments over a three-year period but
was forfeited because of Mr. Hancocks resignation.
Under his employment agreement, Mr. Hancock would have
received a guaranteed $1,500,000 long-term incentive award paid
25% as time-lapsed restricted stock, 25% as cash performance
shares and 50% as options, but the award was forfeited due to
his resignation. |
|
(9) |
|
The amount reported for Mr. Stevens for 2009 in the Salary
column includes $664,808 paid in cash and $133,269 paid in
salary stock. The annualized salary for Mr. Stevens for
2009 consisted of 59% cash (or $705,000) and 41% equity (or
$495,000), although this full amount of equity was not actually
received by Mr. Stevens. The amount reported for
Mr. Stevens for 2009 in the Salary column also includes
employee deferrals of $14,700 into the 401(k) Savings Plan and
$37,783 into the Deferred Savings Plan and the amount |
68
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|
|
|
|
reported for 2009 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: $26,507 (Cash Balance Pension
Plan); $18,107 (Excess Cash Balance Pension Plan); and $47,994
(Second Excess Cash Balance Pension Plan). |
|
(10) |
|
The amount reported for Ms. Mooney for 2009 in the Salary
column includes $606,923 paid in cash and $242,308 paid in
salary stock. The annualized salary for Ms. Mooney for 2009
consisted of 44% cash (or $680,000) and 56% equity (or
$900,000), although this full amount of equity was not actually
received by Ms. Mooney. The amount reported for
Ms. Mooney for 2009 in the Salary column also includes
employee deferrals of $14,700 into the 401(k) Savings Plan and
$21,715 into the Deferred Savings Plan and the amount reported
for 2009 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: $14,623 (Cash Balance Pension Plan) and
$24,103 (Second Excess Cash Balance Pension Plan). |
ALL OTHER
COMPENSATION
The following chart sets forth detail about the amounts reported
in the All Other Compensation column of the 2009
Summary Compensation Table above. KeyCorps 2009 executive
benefits included: club dues; disability insurance; financial
planning payments; security system payments; tax reimbursements;
and executive health program benefits. In mid 2009, KeyCorp
discontinued tax reimbursements on perquisites for all named
executive officers. Effective January 2010, KeyCorp eliminated
the payment or provision of club dues, tax preparation and
financial planning benefits as well as tax reimbursements for
all executive benefits as described in the Compensation
Discussion and Analysis above. KeyCorp will continue to provide
the executive health program, disability insurance and security
system payments, however, as KeyCorp believes that continued
provision of these particular benefits is necessary to assist
the Board with succession planning.
|
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|
|
|
|
|
|
|
KeyCorp
|
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|
|
|
Personal
|
|
|
|
|
|
Contributions to
|
|
|
|
|
Use of
|
|
Executive
|
|
Tax
|
|
Defined
|
|
Total All Other
|
Name and principal position
|
|
Aircraft ($)
|
|
Benefits ($)
|
|
Reimbursements ($)
|
|
Contribution Plans ($)
|
|
Compensation ($)
|
|
Henry L.
Meyer(1)
|
|
|
|
|
|
|
20,298
|
|
|
|
1,754
|
|
|
|
61,200
|
|
|
|
83,252
|
|
Jeffrey B.
Weeden(2)
|
|
|
|
|
|
|
5,125
|
|
|
|
|
|
|
|
34,050
|
|
|
|
39,175
|
|
Peter D.
Hancock(3)
|
|
|
|
|
|
|
4,925
|
|
|
|
484
|
|
|
|
21,375
|
|
|
|
26,784
|
|
Thomas C.
Stevens(4)
|
|
|
|
|
|
|
10,542
|
|
|
|
1,754
|
|
|
|
39,888
|
|
|
|
52,184
|
|
Beth E.
Mooney(5)
|
|
|
|
|
|
|
10,503
|
|
|
|
1,754
|
|
|
|
36,415
|
|
|
|
48,672
|
|
|
|
|
(1) |
|
The amounts reported for Mr. Meyer for 2009 as executive
benefits and tax reimbursements include the following: $3,537
(club dues); $2,961 (disability insurance); $1,300 (security
system payments); $12,500 (financial planning payments); and
$1,754 (tax reimbursement on club dues). The amount reported for
Mr. Meyer for 2009 in defined contribution plan company
contributions includes $14,700 under the KeyCorp 401(k) Savings
Plan and $46,500 under the KeyCorp Deferred Savings Plan. |
|
(2) |
|
The amounts reported for Mr. Weeden for 2009 as executive
benefits include the following: $2,182 (disability insurance)
and $2,943 (executive health program). The amount reported for
Mr. Weeden for 2009 in defined |
69
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|
|
|
|
contribution plan company contributions includes $14,700 under
the KeyCorp 401(k) Savings Plan and $19,350 under the KeyCorp
Deferred Savings Plan. |
|
(3) |
|
The amounts reported for Mr. Hancock for 2009 as executive
benefits and tax reimbursements include the following: $1,157
(club dues); $3,768 (personal transportation costs) and $484
(tax reimbursement on club dues). The amount reported for
Mr. Hancock for 2009 in defined contribution plan company
contributions includes a $21,375 company match related to annual
incentive paid in restricted stock, which was forfeited upon
Mr. Hancocks resignation. |
|
(4) |
|
The amounts reported for Mr. Stevens for 2009 as executive
benefits and tax reimbursements include the following: $3,537
(club dues); $2,961 (disability insurance); $1,250 (financial
planning payments); $2,794 (executive health program); and
$1,754 (tax reimbursement on club dues). The amount reported for
Mr. Stevens for 2009 in defined contribution plan company
contributions includes $14,700 under the KeyCorp 401(k) Savings
Plan and $25,188 under the KeyCorp Deferred Savings Plan. |
|
(5) |
|
The amounts reported for Ms. Mooney for 2009 as executive
benefits and tax reimbursements include the following: $3,537
(club dues); $5,000 (financial planning payments); $1,966
(executive health program); and $1,754 (tax reimbursement on
club dues). The amount reported for Ms. Mooney in defined
contribution plan company contributions includes $14,700 under
the KeyCorp 401(k) Savings Plan and $21,715 under the KeyCorp
Deferred Savings Plan. |
2009
GRANTS OF PLAN-BASED AWARDS TABLE
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Awards:
|
|
Exercise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Number of
|
|
or Base
|
|
Grant Date
|
|
|
|
|
Estimated Possible Payouts Under
|
|
Estimated Future Payouts
|
|
Number of
|
|
Securities
|
|
Price of
|
|
Fair Value of
|
|
|
|
|
Non-Equity Incentive Plan
|
|
Under Equity Incentive Plan
|
|
Shares of
|
|
Underlying
|
|
Option
|
|
Stock and
|
|
|
Grant
|
|
Awards ($)
|
|
Awards (#)
|
|
Stock or
|
|
Options
|
|
Awards
|
|
Option
|
Name
|
|
Date
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Units (#)
|
|
(#)
|
|
($/Sh)
|
|
Awards
($)(1)
|
|
Henry L. Meyer
|
|
|
3/12/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
156,719
|
|
|
|
|
|
|
|
|
|
|
|
1,247,483
|
|
|
|
|
6/12/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
900,000
|
|
|
|
6.12
|
|
|
|
2,142,000
|
|
Jeffrey B. Weeden
|
|
|
3/12/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88,928
|
|
|
|
|
|
|
|
|
|
|
|
707,867
|
|
|
|
|
6/12/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
350,000
|
|
|
|
6.12
|
|
|
|
833,000
|
|
Peter D. Hancock
|
|
|
3/12/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,555
|
|
|
|
47,111
|
|
|
|
70,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
375,003
|
|
|
|
|
3/12/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,111
|
|
|
|
|
|
|
|
|
|
|
|
375,003
|
|
|
|
|
7/27/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250,000
|
|
|
|
5.55
|
|
|
|
597,500
|
|
Thomas C. Stevens
|
|
|
3/12/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83,441
|
|
|
|
|
|
|
|
|
|
|
|
664,190
|
|
|
|
|
6/12/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
350,000
|
|
|
|
6.12
|
|
|
|
833,000
|
|
Beth E. Mooney
|
|
|
3/12/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,369
|
|
|
|
|
|
|
|
|
|
|
|
607,897
|
|
|
|
|
6/12/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
350,000
|
|
|
|
6.12
|
|
|
|
833,000
|
|
|
|
|
(1) |
|
The grant date fair value of the option awards disclosed in this
table was determined based on a study done by an independent
consulting group, AON, which used the following assumptions
related to KeyCorp stock: volatility 58.8%, dividend yield of
0.65%, risk-free interest rate of 1.90%, 3 year-term and
Black-Scholes value of $2.38. The resulting grant date fair
value for options with a grant date of June 12, 2009 is
based on a value of $2.38 per share and for options with a grant
date of July 27, 2009 is based on a value of $2.39 per
share. 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 March 12, 2009, which was $7.96
per share. |
70
Due to the prohibitions described in the Compensation Discussion
and Analysis above because KeyCorp is a TARP recipient bank,
KeyCorps named executive officers, with the exception of
Mr. Hancock, were not eligible to receive annual incentive
awards under the Incentive Plan for 2009. The 2009 annual
incentive metrics that were established for the named executive
officers are displayed in the Compensation Discussion and
Analysis in tabular format on pg. 52 of this proxy statement;
however, KeyCorps named executive officers were not
eligible to be paid under the Incentive Plan for 2009. See
footnote 8 to the 2009 Summary Compensation Table above for more
information about the guaranteed nature of
Mr. Hancocks annual incentive compensation for 2009.
All awards disclosed in the 2009 Grants of Plan-Based Awards
Table above are long-term awards.
As described above in Compensation Discussion and Analysis, the
three-year long-term incentive compensation performance cycle
for
2007-2009
ended in 2009. Under this
2007-2009
performance cycle, 50% of the long-term compensation opportunity
had been awarded in the form of time-lapsed stock options and
the remaining 50% of the long-term compensation opportunity had
been awarded in the form of cash performance shares that were to
vest on the third anniversary of the grant date to the extent
KeyCorp achieved its defined performance goals. None of the
performance goals for this three-year cycle were achieved, and
as a result none of the cash performance shares vested. These
cash performance shares were not a material part of the named
executive officers 2009 compensation.
2009 Awards:
As described above in the Compensation Discussion and Analysis,
EESA and ARRA prohibited KeyCorp from granting long-term
incentive awards to Messrs. Meyer, Weeden and Stevens and
Ms. Mooney for 2009. Mr. Hancock, on the other hand,
was entitled to receive a long-term incentive award under the
terms of his 2008 employment agreement with KeyCorp. As a
result, during 2009, Mr. Hancock received the equity
incentive award disclosed above in the 2009 Grants of Plan-Based
Awards Table, and each of the other named executive officers
received the two grants disclosed above in the 2009 Grants of
Plan-Based Awards Table that occurred outside of the standard
KeyCorp long-term incentive program, and the two grants were in
compliance with the new rules and regulations under ARRA. The
following is a description of the two grants of restricted stock
and stock options received by each of the named executive
officers other than Mr. Hancock:
|
|
|
|
|
Long-term time-lapsed restricted stock award: This award
of time-lapsed restricted stock described above in the
Compensation Discussion and Analysis was limited to one third of
each named executive officers total direct compensation
and was granted on March 12, 2009. The restricted stock
will vest on the later of the third anniversary of the grant
date or the conclusion of the period during which any obligation
arising from financial assistance provided to KeyCorp under TARP
remains outstanding.
|
|
|
|
Long-term time-lapsed stock option award: This
award of time-lapsed stock options described above in the
Compensation Discussion and Analysis was granted on
June 12, 2009 and was fully vested on the date of the
grant. However, the stock options are subject to a holding
period during which the options must be retained by the
executive and may not be exercised, transferred or otherwise
disposed of until such time as any KeyCorp obligation under TARP
is no longer outstanding.
|
71
Mr. Hancock was permitted to be granted a long-term
incentive award prior to February 11, 2009 under the terms
of his November 25, 2008 employment agreement. The
following is a description of Mr. Hancocks long-term
award for 2009 each of which was forfeited upon his resignation:
|
|
|
|
|
Long-term time-lapsed restricted stock
award: This award of time-lapsed restricted stock
represents 25% of Mr. Hancocks long-term award and
was granted on March 12, 2009. The restricted stock would
have vested in full on the third anniversary of the grant date.
|
|
|
|
Long-term time-lapsed stock option award: This
award of time-lapsed stock options represents 50% of
Mr. Hancocks long-term award and was granted on
July 27, 2009. The stock options would have vested in three
equal amounts over a three-year period.
|
|
|
|
Cash performance shares award: This award of
cash performance shares represents 25% of
Mr. Hancocks long-term award and is
performance-based. The cash performance shares would have
vested, if at all, to the extent KeyCorp achieves performance
criteria described above in the Compensation Discussion and
Analysis during the
2009-2010
performance period.
|
Impact of Change of
Control. Mr. Meyers employment
agreement and the other named executive officers change of
control agreements are discussed on page 81 of this proxy
statement.
2009
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
The following table provides information regarding outstanding
equity awards held at December 31, 2009 by each of the
named executive officers.
|
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|
Stock Awards
|
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|
|
Equity
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
|
Incentive
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Plan
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Market or
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
Market
|
|
Unearned
|
|
Payout Value of
|
|
|
|
|
Number of
|
|
Number of
|
|
Number of
|
|
|
|
|
|
Number of
|
|
Value
|
|
Shares,
|
|
Unearned
|
|
|
|
|
Securities
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Shares or
|
|
of Shares
|
|
Units or
|
|
Shares, Units or
|
|
|
|
|
Underlying
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Units of
|
|
or Units of
|
|
Other
|
|
Other Rights
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
Option
|
|
Stock That
|
|
Stock That
|
|
Rights That
|
|
That Have not
|
|
|
|
|
Options (#)
|
|
Options (#)
|
|
Unearned
|
|
Exercise
|
|
Expiration
|
|
Have not
|
|
Have not
|
|
Have not
|
|
Vested
|
Name
|
|
Grant Date
|
|
Exercisable
|
|
Unexercisable
|
|
Options (#)
|
|
Price ($)
|
|
Date
|
|
Vested ($)
|
|
Vested ($)
|
|
Vested (#)
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Henry L. Meyer
|
|
|
1/18/2000
|
|
|
|
47,300
|
|
|
|
|
|
|
|
|
|
|
|
21.2500
|
|
|
|
1/18/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/15/2000
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
22.9375
|
|
|
|
11/15/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
190,667
|
|
|
|
95,333
|
|
|
|
|
|
|
|
36.2000
|
|
|
|
7/20/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/25/2008
|
|
|
|
166,667
|
|
|
|
333,333
|
|
|
|
|
|
|
|
11.1600
|
|
|
|
7/25/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/12/2009
|
|
|
|
|
|
|
|
900,000
|
|
|
|
|
|
|
|
6.1200
|
|
|
|
6/12/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
|
Incentive
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Plan
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Market or
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
Market
|
|
Unearned
|
|
Payout Value of
|
|
|
|
|
Number of
|
|
Number of
|
|
Number of
|
|
|
|
|
|
Number of
|
|
Value
|
|
Shares,
|
|
Unearned
|
|
|
|
|
Securities
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Shares or
|
|
of Shares
|
|
Units or
|
|
Shares, Units or
|
|
|
|
|
Underlying
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Units of
|
|
or Units of
|
|
Other
|
|
Other Rights
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
Option
|
|
Stock That
|
|
Stock That
|
|
Rights That
|
|
That Have not
|
|
|
|
|
Options (#)
|
|
Options (#)
|
|
Unearned
|
|
Exercise
|
|
Expiration
|
|
Have not
|
|
Have not
|
|
Have not
|
|
Vested
|
Name
|
|
Grant Date
|
|
Exercisable
|
|
Unexercisable
|
|
Options (#)
|
|
Price ($)
|
|
Date
|
|
Vested ($)
|
|
Vested ($)
|
|
Vested (#)
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate non-option
awards(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
210,996
|
|
|
|
1,171,028
|
|
|
|
104,591
|
|
|
|
580,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
66,667
|
|
|
|
33,333
|
|
|
|
|
|
|
|
36.2000
|
|
|
|
7/20/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/25/2008
|
|
|
|
58,334
|
|
|
|
116,666
|
|
|
|
|
|
|
|
11.1600
|
|
|
|
7/25/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/12/2009
|
|
|
|
|
|
|
|
350,000
|
|
|
|
|
|
|
|
6.1200
|
|
|
|
6/12/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate non-option
awards(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
186,863
|
|
|
|
1,037,090
|
|
|
|
36,607
|
|
|
|
203,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter D. Hancock
|
|
|
7/27/2009
|
|
|
|
|
|
|
|
250,000
|
|
|
|
|
|
|
|
5.5500
|
|
|
|
7/27/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate non-option
awards(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74,108
|
|
|
|
411,299
|
|
|
|
47,111
|
|
|
|
261,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
66,667
|
|
|
|
33,333
|
|
|
|
|
|
|
|
36.2000
|
|
|
|
7/20/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/25/2008
|
|
|
|
58,334
|
|
|
|
116,666
|
|
|
|
|
|
|
|
11.1600
|
|
|
|
7/25/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/12/2009
|
|
|
|
|
|
|
|
350,000
|
|
|
|
|
|
|
|
6.1200
|
|
|
|
6/12/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate non-option
awards(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
141,519
|
|
|
|
785,430
|
|
|
|
36,607
|
|
|
|
203,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beth E. Mooney
|
|
|
5/1/2006
|
|
|
|
125,000
|
|
|
|
|
|
|
|
|
|
|
|
37.5900
|
|
|
|
5/1/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/20/2007
|
|
|
|
70,000
|
|
|
|
35,000
|
|
|
|
|
|
|
|
36.2000
|
|
|
|
7/20/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/25/2008
|
|
|
|
58,334
|
|
|
|
116,666
|
|
|
|
|
|
|
|
11.1600
|
|
|
|
7/25/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/12/2009
|
|
|
|
|
|
|
|
350,000
|
|
|
|
|
|
|
|
6.1200
|
|
|
|
6/12/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate non-option
awards(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
212,462
|
|
|
|
1,179,164
|
|
|
|
34,091
|
|
|
|
189,205
|
|
|
|
|
Option Awards:
|
|
Option awards generally vest in three equal amounts over a
three-year period, except that 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, 2009 was
$5.55 per share, which means that as of December 31, 2009,
all stock option awards granted prior to 2009 were underwater.
|
|
|
In terms of vesting dates for the remaining unvested stock
options:
|
|
|
July 20, 2007 grant: the unvested options will
vest in full on July 20, 2010.
|
|
|
July 25, 2008 grant: one-half of the unvested
options will vest on July 25, 2010 and
one-half of
the unvested options will vest on July 25, 2011.
|
73
|
|
|
|
|
July 27, 2009 grant for Mr. Hancock:
pursuant to his November 25, 2008 employment agreement,
these 250,000 options would have vested in three equal amounts
over a three-year period.
|
Stock Awards:
|
|
As described above in Compensation Discussion and Analysis, the
three-year long-term incentive compensation performance cycle
for
2008-2010
will end in 2010. Under this
2008-2010
performance cycle, 25% of the long-term compensation opportunity
had been awarded in the form of restricted stock which 100%
vests in three years and 25% in the form of cash performance
shares that were to vest on the third anniversary of the grant
date to the extent KeyCorp achieved its defined performance
goals. None of the performance goals for this three-year cycle
are on track to be achieved, and as a result these cash
performance shares may not vest.
|
|
|
The named executive officers 2009 grants of time-lapsed
restricted stock (except for Mr. Hancocks grant) will
vest on the later of the third anniversary of the grant date or
the conclusion of the period during which any obligation arising
from financial assistance provided to KeyCorp under TARP remains
outstanding. Vesting will also continue upon a named executive
officers retirement (age 55 and 5 years of
service). Mr. Hancocks restricted stock award would
have vested in full on the third anniversary of the grant date
but was forfeited because he resigned.
|
|
|
At the time of the award, the 2007 stock grant to the named
executive officers was valued at $39.75 per share, the 2008
stock grant was valued at $23.03 per share and the 2009 stock
grant was valued at $7.96 per share.
|
|
|
Mr. Hancocks 2009 award of cash performance shares
would have vested, if at all, to the extent KeyCorp achieves
performance criteria described above in the Compensation
Discussion and Analysis during the
2009-2010
performance period but was forfeited because he resigned.
|
In 2009, ARRA prohibited KeyCorp from paying or accruing any
bonus, retention award or incentive compensation to
KeyCorps CEO and other named executive officers. Listed
below is additional information about other outstanding
time-lapsed and performance-based awards for each named
executive officer as of December 31, 2009:
(1) For Mr. Meyer 50,314 cash performance
shares vested on February 20, 2010; 54,277 time-lapsed
restricted shares and 54,277 cash performance shares will vest
on February 21, 2011; and 156,719 time-lapsed restricted
shares will vest on the later of March 12, 2012 or the full
repayment by KeyCorp of its TARP obligations.
(2) For Mr. Weeden 17,610 cash performance
shares vested on February 20, 2010; 18,997 time-lapsed
restricted shares and 18,997 cash performance shares will vest
on February 21, 2011; 1,173 time-lapsed restricted shares,
one-half of unvested shares will vest
3/7/2010,
one-half of
unvested shares will vest
3/7/2011;
39,857 time-lapsed restricted shares will vest on May 15,
2011; 37,908 time-lapsed restricted shares will vest on
September 18, 2011; and 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.
(3) For Mr. Hancock 47,111 time-lapsed
restricted shares would have vested on March 12, 2012 and
47,111 cash performance shares would have vested on
March 12, 2011; 26,997 time-
74
lapsed restricted shares, one-third of unvested shares would
have vested on
12/11/2010,
one-third of
unvested shares would have vested on
12/11/2011,
and
one-third of
unvested shares would have vested on
12/11/2012.
All awards were forfeited because Mr. Hancock resigned.
(4) For Stevens 17,610 cash performance shares
vested on February 20, 2010; 18,997 time-lapsed restricted
shares and 18,997 cash performance shares will vest on
February 21, 2011; 1,173 time-lapsed restricted shares,
one-half of
unvested shares will vest
3/7/2010,
one-half of unvested shares will vest
3/7/2011;
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.
(5) For Mooney 15,094 cash performance shares
vested on February 20, 2010; 18,997 time-lapsed restricted
shares and 18,997 cash performance shares will vest on
February 21, 2011; 3,373 time-lapsed restricted shares,
one-half of
unvested shares will vest
3/7/2010,
one-half of
unvested shares will vest on
3/7/2011;
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.
2009
OPTION EXERCISES AND STOCK VESTED TABLE
The following table provides information regarding the vesting
of restricted stock during the year ended December 31, 2009
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 2009).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
Number of Shares
|
|
Value
|
|
Number of Shares
|
|
Value
|
|
|
|
|
Acquired on
|
|
Realized on
|
|
Acquired on
|
|
Realized on
|
Name
|
|
|
|
Exercise (#)(1)
|
|
Exercise ($)
|
|
Vesting (#)
|
|
Vesting ($)
|
|
Henry L. Meyer
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
106,698
|
|
|
|
622,705
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
26,990
|
|
|
|
152,223
|
|
Jeffrey B. Weeden
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
585
|
|
|
|
3,135
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
26,984
|
|
|
|
157,482
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
5,382
|
|
|
|
30,354
|
|
Thomas C. Stevens
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
585
|
|
|
|
3,135
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
22,832
|
|
|
|
133,250
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
10,180
|
|
|
|
57,415
|
|
Beth E. Mooney
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
1,681
|
|
|
|
9,010
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
41,515
|
|
|
|
242,287
|
|
|
|
|
(1) |
|
On September 17, 2009, the Compensation and Organization
Committee of KeyCorps Board of Directors approved annual
base salary increases for the CEO and the other named executive
officers except Mr. Hancock beginning with the
October 2, 2009 pay period, as further described above in
the Compensation Discussion and Analysis. The increased amount
was paid in common stock to each executive with respect to a
bi-weekly KeyCorp pay period. This common stock fully vests when
issued, but may not be sold, transferred or otherwise |
75
|
|
|
|
|
disposed of, pledged or otherwise hypothecated 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. We refer to this common stock as salary stock.
The number of KeyCorp Common Shares to be paid to each executive
with respect to a bi-weekly pay period is determined by dividing
the amount of the base salary payable in Common Shares with
respect to that pay period by the reported closing price on the
New York Stock Exchange for a share of KeyCorp common stock on
the pay date for such period. The salary stock is not considered
under KeyCorp benefit plan formulas. |
|
(2) |
|
On January 16, 2003, Mr. Meyer received a grant of
phantom stock which was payable in cash on December 31,
2009. Mr. Meyer is not deferring any amount from this
award. Mr. Weeden and Mr. Stevens received a
restricted stock grant on January 16, 2003 which was
payable in shares on December 31, 2009. |
|
(3) |
|
Mr. Weeden, Ms. Mooney and Mr. Stevens each had a
March 7, 2008 grant of Annual Incentive Restricted Stock
one-third of which vested on March 7, 2009. |
The 2007 cash-performance restricted stock grants were forfeited
based on KeyCorps inability to meet performance goals.
2009
PENSION BENEFITS TABLE
The following table presents information about the named
executive officers participation in KeyCorps defined
benefit pension plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number Of Years
|
|
Present value of
|
|
|
|
|
Credited
|
|
accumulated
|
Name
|
|
Plan Name
|
|
Service (#)
|
|
benefits ($)(1)
|
|
Henry L. Meyer
|
|
Cash Balance Pension Plan
|
|
|
37
|
|
|
|
1,074,390
|
|
|
|
Second Supplemental Retirement Plan
|
|
|
37
|
|
|
|
20,343,608
|
|
Jeffrey B. Weeden
|
|
Cash Balance Pension Plan
|
|
|
7
|
|
|
|
97,357
|
|
|
|
Second Excess Cash Balance Plan
|
|
|
7
|
|
|
|
317,707
|
|
Peter D. Hancock
|
|
Cash Balance Pension Plan
|
|
|
1
|
|
|
|
13,098
|
|
|
|
Second Excess Cash Balance Plan
|
|
|
1
|
|
|
|
24,173
|
|
Thomas C. Stevens
|
|
Cash Balance Pension Plan
|
|
|
13
|
|
|
|
214,798
|
|
|
|
Excess Cash Balance Plan
|
|
|
13
|
|
|
|
417,377
|
|
|
|
Second Excess Cash Balance Plan
|
|
|
13
|
|
|
|
372,589
|
|
Beth E. Mooney
|
|
Cash Balance Pension Plan
|
|
|
3
|
|
|
|
40,150
|
|
|
|
Second Excess Cash Balance Plan
|
|
|
3
|
|
|
|
77,114
|
|
|
|
|
(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 5.25% in
accordance with Statement of Financial Accounting Standard
No. 87 as explained in KeyCorps 2009 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, 2009. |
76
KeyCorp Cash Balance Pension
Plan Effective January 1, 2010, KeyCorp
froze the Cash Balance Pension Plan. This means that KeyCorp no
longer contributes pay credits to Cash Balance accounts. The
pension benefit earned through the end of 2009 will continue to
grow with interest until the participants are eligible to elect
to begin to receive a distribution. The interest crediting rate
is established annually based on the rate for
30-year
U.S. Treasury securities as determined by KeyCorp each
October, and the 2010 interest crediting rate is 3.91%.
Distributions are available upon retirement, termination of
employment or death. After one year of employment, all employees
who were at least 21 years old and had provided at least
1,000 hours of service, including as full and part-time
employees of KeyCorp and its participating subsidiaries,
participated in the Cash Balance Pension Plan. The Cash Balance
Pension Plan is a defined benefit plan that provided a quarterly
benefit accrual for each plan participant based on the
participants years of vesting service and
compensation. For purposes of the Cash Balance
Pension Plan, eligible compensation generally meant the entire
amount of compensation paid to participants by reason of their
employment as employees of KeyCorp, as reported for federal
income tax purposes, including elective deferral under the
KeyCorp 401(k) Savings Plan and KeyCorp Flexible Benefits Plan.
Base salary paid in the form of equity was not considered under
the plans benefit formula. Furthermore, amounts
attributable, for example, to exercise of stock appreciation
rights
and/or stock
options, non-cash remuneration, moving expenses, relocation
bonuses, fringe benefits, deferred compensation, lump sum
severance payments, signing bonuses or any funds paid following
termination or retirement from KeyCorp were excluded from the
plans definition of compensation. KeyCorp has established
a bookkeeping account in each participants name which was
credited with KeyCorps contributions on a quarterly basis
for each quarter in which the participant remained employed by
KeyCorp and worked a minimum of 250 hours during that
quarter. Participants plan accounts are also credited with
interest credits on a quarterly basis and will continue to
accrue interest until the employees begin to receive a
distribution. The Cash Balance Pension Plan requires
3 years of service for vesting.
KeyCorp Excess Cash Balance and Second Excess Cash Balance
Pension Plans Effective January 1, 2010,
KeyCorp froze the Excess Cash Balance and Second Excess Cash
Balance Pension Plans. This means that similar to the Cash
Balance Pension Plan, KeyCorp will no longer contribute pay
credits to the Excess Cash Balance Pension Plan and Second
Excess Cash Balance Pension Plan accounts. The excess benefits
earned through the end of 2009 will continue to grow with
interest until the participants are eligible to elect to begin
to receive a distribution. The interest crediting rate is
established annually based on the rate for
30-year
U.S. Treasury securities as determined by KeyCorp each
October, and the 2010 interest crediting rate is 3.91%.
Distributions are available upon retirement, termination of
employment or death. The Excess Cash Balance and Second Excess
Cash Balance Pension Plans were provided for all participants
with a salary grade of 86 (or its equivalent) and above, and
generally provided the pension plan benefit that would have been
accrued under the Cash Balance Pension Plan but for the
compensation limits of Section 401(a)(17) and the benefit
accrual limits of Section 415 of the Internal Revenue Code.
Base salary paid in the form of equity was not considered under
the plans benefit formula but it was required to be
included in calculating the Internal Revenue Code
Section 401(a)(17) compensation limit. Ms. Mooney, and
Messrs. Stevens and Weeden currently participate (and
Mr. Hancock did participate) in either the Excess Cash
Balance or the Second Excess Cash Pension Plan. To be eligible
for an early retirement benefit under the excess plans, a
participant must be age 55 or older and have provided a
minimum of five years of vesting service (as defined
in the plan) or must be involuntarily terminated from his or her
employment for reasons other than the participants
discharge for cause with a minimum of 25 years of service,
provided the participant executes a non-compete and
non-solicitation agreement in favor of KeyCorp.
77
KeyCorp Second Supplemental Retirement
Plan Effective January 1, 2010, KeyCorp
froze the Second Supplemental Retirement Plan. This means that
KeyCorp will freeze the present value of benefits payable to
participants reaching age 65 as of December 31, 2009.
The benefit formula under the Supplemental Retirement Plans is
substantially different than those under KeyCorps other
pension plans, so a different methodology was used for freezing
this plan. The KeyCorp Second Supplemental Retirement Plan
provided a grandfathered group of KeyCorp officers with
supplemental retirement benefits that were in addition to the
benefit that those participants were otherwise eligible to
receive under the Cash Balance Pension Plan. The supplemental
retirement plans were frozen to new participants in 1995 and the
plan currently maintains just two active participants, one of
whom is Mr. Meyer. Participants in the Second Supplemental
Retirement Plan are not eligible to participant in the excess
plans. The Second Supplemental Retirement Plan provided
participants with a plan benefit equal to a percentage of the
participants final average compensation based
on years of service and is combined with the participants
pension plan benefit and age 65 social security benefits.
Eligible compensation generally consists of base salary and
incentive compensation (short and long-term) paid to employees
by reason of their employment with KeyCorp, as reported for
federal income tax purposes, or the money which would have been
paid but for the employees pre-tax deferrals to the
KeyCorp 401(k) Savings Plan and benefit elections under the
KeyCorp Flexible Benefits Plan and amounts deferred under the
various KeyCorp-sponsored deferred compensation plans. Base
salary paid in the form of equity was not considered under the
plans benefit formula or definition of final average
compensation. Furthermore, amounts attributable, for example, to
exercise of stock options, noncash remuneration, moving
expenses, relocation bonuses, signing bonuses, fringe benefits,
lump sum severance payments, or any funds paid following
termination or retirement from KeyCorp are excluded from the
plans definition of compensation. For purposes of the
Second Supplemental Retirement Plan, the term final
average compensation means the annual average of the
participants highest aggregate compensation
(as defined in the plan) for salary for any period of five
consecutive years during the
10-year
period preceding the participants termination date (and
for incentive compensation, the highest five years during the
10-year
period preceding the participants termination date). For
Mr. Meyer, the term final average compensation
includes long-term incentive awards comprised of up to 50% of
vested restricted stock and deferred cash valued at the grant
price. Mr. Meyer meets the plans vesting requirements.
78
2009
NONQUALIFIED DEFERRED COMPENSATION TABLE
The following table shows the nonqualified deferred compensation
activity for the named executive officers for 2009. All
nonqualified executive contributions and KeyCorp contributions
to each plan are also included in current-year compensation
presented in the 2009 Summary Compensation Table above.
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Amount of
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Aggregate
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Balance at
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Last FYE
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Also Reported
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KeyCorp
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Aggregate
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Aggregate
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in Prior Years
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Executive
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Contributions
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Earnings
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Aggregate
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Balance
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Summary
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Plan
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Contributions in
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in Last
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in Last
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Withdrawals/
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at Last
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Compensation
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Entry
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Name
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Plan Name
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Last FY ($)
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FY ($)(1)
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FY ($)(2)
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Distributions ($)
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FYE ($)(3)
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Tables ($)(4)
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Date (5)
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Henry L. Meyer
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Deferred Savings Plan
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46,500
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46,500
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(575,772
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)
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3,775,465
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4,258,237
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1987
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Automatic Deferral Plan
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(38,193
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)
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163,206
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50,724
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252,123
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1999
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Jeffrey B. Weeden
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Deferred Savings Plan
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19,350
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19,350
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(2,283
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)
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329,647
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293,230
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2002
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Automatic Deferral Plan
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(8,322
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)
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35,314
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11,087
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54,723
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2002
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Peter D. Hancock
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Deferred Savings Plan
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Thomas C. Stevens
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Deferred Savings Plan
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37,783
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25,188
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17,359
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2,022,165
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1,941,835
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1996
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Automatic Deferral Plan
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(8,075
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)
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34,751
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10,688
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53,514
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1999
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Beth E. Mooney(6)
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Deferred Savings Plan
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163,058
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21,715
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65,072
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629,036
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379,191
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2006
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Automatic Deferral Plan
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(10,179
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)
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23,185
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16,431
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49,795
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2006
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Deferred Bonus Plan
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(64,521
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)
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147,539
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212,060
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2006
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(1) |
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KeyCorp contributions in the last fiscal year are reflected in
the 2009 Summary Compensation Table above under the All
Other Compensation column. |
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(2) |
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Aggregate earnings in the last fiscal year are not reflected in
the 2009 Summary Compensation Table above because the earnings
were neither preferential nor above-market. For most of the
named executive officers, declining stock market returns and a
decline in KeyCorps stock price resulted in negative
earnings for 2009. |
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(3) |
|
The aggregate balances at the last fiscal year-end represent the
total ending account balance (employee and company balances) at
December 31, 2009 for each named executive officer. The
named executive officers 2008 year-end balances, plus
all 2009 contributions, earnings and withdrawals/distributions,
equal the amounts reported as the aggregate balances at
December 31, 2009. The Automatic Deferral Plan was
discontinued and replaced by the Annual Incentive Paid in
Restricted Stock Award in 2008. |
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(4) |
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The amounts reported as the amount of aggregate balance at last
fiscal year-end and also reported in prior years Summary
Compensation Tables represent December 31, 2008 aggregate
balances reported in the 2008 Nonqualified Deferred Compensation
Table. Deferred Savings Plan balances incorporate aggregate
balances from the Second Excess 401(k) and Second Deferred
Compensation Plans which were merged into the Deferred Savings
Plan effective December 31, 2006. |
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(5) |
|
Years reported as plan entry dates represents 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. |
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(6) |
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For Ms. Mooney, the amount reported as her executive
contribution for 2009 includes the contribution of her vested
Deferred Bonus Plan balance ($141,343) into the Deferred Savings
Plan in May 2009. |
79
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 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. 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 vests after
three years of service. Employee balances 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 employer match is
invested on a bookkeeping basis in the KeyCorp Common Stock
Fund. Vested balances are distributed upon retirement or
termination as follows:
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If a participants vested plan account balance equals or
exceeds $50,000, it will be distributed based on an election for
a five, 10-or
15-year
installment payment. If no election is made, a default
10-year
installment payment scheme applies.
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If a participants vested plan account balance as of
termination or retirement is under $50,000, it will be
distributed as an automatic cash-out as a single lump sum cash
or share payment.
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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.
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Automatic Deferral Plan The Annual
Incentive Paid in Restricted Stock Awards (referenced in the
2009 Grants of Plan-Based Awards Table above) replaced the
Automatic Deferral Plan in 2007. Distributions will continue
under the Automatic Deferral Plan through 2010, however, at
which point account balances will be depleted.
Deferred Bonus Plan The KeyCorp
Deferred Bonus Plan has been designed to provide selected
candidates with a mandatory deferral vehicle for signing bonus
awards that are subject to a vesting requirement. While deferred
under the plan, the deferred bonus award is invested on a
bookkeeping basis in the KeyCorp Phantom Common Stock Account,
and is able to grow in value as KeyCorps stock grows in
value. Participants are fully vested in their deferred bonus
awards upon completion of three years of vesting service. Upon
vesting, participants receive an automatic lump sum payment of
their vested bonus awards in KeyCorp Common Shares, less
applicable taxes, unless they have elected to have their
deferred bonus awards transferred to the KeyCorp Deferred
Savings Plan. If the balance is transferred into the Deferred
Savings Plan, then FICA taxes are applied to the balance and the
net balance is transferred into the Deferred Savings Plan in
shares of KeyCorp stock.
80
EMPLOYMENT
AND SEVERANCE ARRANGEMENTS
Benefits
Payable Under Individual Agreements
During 2009, KeyCorp was a party to an employment agreement with
Mr. Meyer and change of control agreements with the other
named executive
officers(1).(
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, due to KeyCorps participation
in the Trouble Assets Relief Program, or TARP, KeyCorp modified
these agreements in 2008 as a condition to its participation in
the federal governments Capital Purchase Program under
TARP. Effective November 18, 2008, the original agreements
were modified to ensure that KeyCorp will not provide a
golden parachute in the event of a named executive
officers involuntary termination. Under this prohibition,
KeyCorp was required to limit termination payments to named
executive officers and was not permitted to deduct any executive
compensation in excess of $500,000 for each named executive
officer under the modified agreements. In 2009, KeyCorp
determined that, due to its review and analysis of the Emergency
Stabilization Act of 2008, or EESA, as modified by the American
Recovery and Reinvestment Act of 2009, or ARRA, 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.
Effective September 1, 2009, to help simplify the
agreements and bring the benefits payable under the agreements
in line with emerging best practices, KeyCorp further modified
the employment and change of control agreements. The modified
employment and change of control agreements continue to be
subject to EESA and ARRA, which means that despite the terms and
provisions of the agreements, KeyCorp is still prohibited by
federal law and regulations from making severance payments to
Mr. Meyer and the other named executive officers, plus the
next five most highly compensated KeyCorp employees, while the
financial assistance provided to KeyCorp under TARP remains
outstanding.
Prior to September 2, 2009, the agreements provided for 50%
of each named executive officers (other than
Ms. Mooney and Mr. Hancock) average long-term
incentive compensation to be included in severance calculations
under the agreements (Ms. Mooney and
Mr. Hancocks agreements did not provide for any
payment with respect to long-term incentive compensation). As
discussed above in the Compensation Discussion and Analysis,
under the September 2009 modifications of the employment and
change of control agreements, long-term incentive compensation
will no longer be included in the calculation of severance
payments for any named executive officer, and benefits to be
provided under the agreements. In addition, in the event that
payments or distributions to be made by KeyCorp to or for the
benefit of a named executive officer constitute parachute
payments within the meaning of Section 280G of the
Internal Revenue Code and would be subject to the excise tax
imposed by Section 4999 of the Code, then the payment to
the named executive officer will be either delivered in full or
delivered after reducing the payment $1 below the safe harbor
limit as described in Section 280G of the Code, which would
result in no portion of the payment being subject to the excise
tax.
(1) Mr. Hancock who resigned on February 12,
2010, had an employment agreement which is no longer in effect
and which is described in footnote (8) to the Summary
Compensation Table on page 67 of this proxy statement.
81
KeyCorp is restricted in its ability to provide payments and
benefits to the named executive officers under the employment
and change of control agreements while it is a TARP participant.
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 for its named
executive officers. As a result, the following discussion first
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, 2009.
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 constantly renewing three-year
term at a base salary of not less that $1,000,000 per annum,
plus full participation in all incentive and other compensatory
plan available generally to KeyCorps executive officers.
In addition, the employment agreement provides Mr. Meyer,
upon his termination (provided his termination is not the result
of a termination for cause, a non-approved
retirement/resignation, or by reason of his death or
disability), with continued vesting in long-term stock awards
granted to him after January 1, 2008.
Severance Payable upon Involuntary
Termination. Mr. Meyers employment
agreement provides that if he is terminated by KeyCorp without
cause at any time, he is generally entitled to the following:
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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 Code;
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continuing participation in KeyCorps retirement and
savings plans and continuing health and welfare benefits for
three years;
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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;
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all stock options (other than so-called performance
options, which are options that vest or become exercisable
only in certain stock price
and/or
financial performance tests are achieved) become fully
exercisable;
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restricted stock vests (if Mr. Meyer is involuntarily
terminated within two years after a change of control); and
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specified other benefits (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.
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Severance Upon Constructive
Termination. Mr. Meyer will also receive
the amounts and benefits described above if he is constructively
terminated, which generally means that his base salary is
reduced other than in connection with an
across-the-board
salary reduction, he is excluded from full participation in any
executive incentive or other compensatory plan, he is demoted or
removed from office, KeyCorp requests his resignation or
retirement without grounds to terminate his employment for
cause, or his principal place of employment is relocated outside
of the Cleveland metropolitan area.
82
Severance Upon Constructive Termination After a Change of
Control. Mr. Meyer will also receive the
amounts and benefits described above if he is constructively
terminated after a change of control. Constructive termination
in this context would mean:
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his base salary is reduced or he is 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;
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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 is less than
his average annual incentive compensation or the equity
compensation opportunities provided to him before the change of
control;
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his position, duties, and responsibilities are materially
reduced;
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he is unable to continue to carry out his responsibilities and
duties as Chairman of the Board and Chief Executive
Officer; or
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the headquarters of the surviving entity is outside of the
Cleveland metropolitan area.
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Definition of Cause. Under the
Employment Agreement, KeyCorp will have cause to
terminate Mr. Meyers employment before a change of
control if he commits a felony, acts dishonestly in a way that
is materially inimical to the best interest of KeyCorp, competes
with KeyCorp, abandons and consistently fails to attempt to
perform his duties, or if a bank regulatory agency issues a
final order requiring KeyCorp to terminate or suspend his
employment. KeyCorp will have cause to terminate
Mr. Meyers employment after a change of control if he
is convicted of a felony, acts dishonestly and feloniously in a
way that is materially inimical to the best interests of
KeyCorp, competes with KeyCorp or if a bank regulatory agency
issues a final order requiring KeyCorp to terminate or suspend
his employment.
Definition of Change of Control. A
change of control will be deemed to have occurred under
Mr. Meyers employment agreement if:
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any other corporation owns, directly or indirectly, 50% or more
of the total combined outstanding voting power of all classes of
stock of KeyCorp;
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if KeyCorp is merged with another corporation and less than 65%
of the outstanding shares of the new corporation were issued in
exchange for KeyCorp stock;
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if any person becomes the beneficial owner of 35% or more of the
outstanding voting stock of KeyCorp;
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if KeyCorps incumbent directors no longer constitute at
least 51% of any surviving corporation; or
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if substantially all of KeyCorps assets are sold, leased,
exchanged or transferred in one or a series of transactions.
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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 stock, warrants
to purchase common stock or to purchase 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.
83
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.
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 agreements provide that, in most cases, if at any time
within two years following a change of control, the
officers employment is terminated by KeyCorp (except for
cause, as described in the agreement), or the officer is
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 will apply. Severance benefits
consist of:
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three times the sum of base salary plus average annual incentive
in a lump sum in accordance with Section 409A of the Code;
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continuing participation in KeyCorps retirement and
savings plans for three years;
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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;
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|
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);
|
|
|
|
all stock options (other than performance options) become fully
exercisable; and
|
|
|
|
restricted stock vests (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, commencing 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
that 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 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.
Statutory
Limitations
Although KeyCorp is restricted in its ability to provide
payments and benefits to the named executive officers under the
employment and change of control agreements while it is a TARP
participant, the named executive
84
officers would be entitled to payments and benefits under these
agreements if KeyCorp ceases to be a TARP participant. Due to
KeyCorps participation in TARP as of December 31,
2009 and the compensation decisions that KeyCorp made during
2009, KeyCorp has not calculated the potential amount of
possible payments and benefits as of December 31, 2009
absent TARP restrictions. If and when KeyCorp ceases to be a
TARP participant, KeyCorp expects to provide updated information
about amounts and benefits payable under the employment and
change of control agreements.
Benefits
Payable Upon Retirement, Death and Disability
Equity
Incentive Plans
KeyCorps equity incentive plans treat all participants as
follows in determining benefits payable upon retirement, death
or disability.
Performance-Based Restricted Stock and Stock Performance
Shares. Employees who retire at age 55
plus five years of service or greater or who die or become
disabled could receive a prorated award as follows:
|
|
|
|
|
shares will be vested on a prorated basis if the retirement
occurs within the performance period;
|
|
|
|
the employee could 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
|
|
|
|
all employees who terminated voluntarily or involuntarily will
forfeit all rights to any unvested long-term incentive
compensation awards.
|
Time-Lapsed Restricted Stock. Employees
who retire at age 55 plus 5 years of service or
greater or who die or become disabled could receive a prorated
award as follows:
|
|
|
|
|
time-lapsed shares will be vested on a prorated basis; and
|
|
|
|
all employees who terminate voluntarily or involuntarily will
forfeit all rights to any unvested long-term incentive
compensation awards.
|
Stock Options. Employees who retire at
age 55 plus 5 years of service or greater or who die
or become disabled could receive a prorated award as follows:
|
|
|
|
|
stock options will vest on a prorated basis;
|
|
|
|
all employees who terminate voluntarily or involuntarily will
forfeit all rights to any unvested stock option awards; and
|
|
|
|
all employees who terminate voluntarily, involuntarily, or
retire will be able to exercise any vested stock option awards
after the termination date.
|
85
2009
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 2009. Directors who are
employees are not compensated for their services as directors.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or Paid
|
|
Stock Awards
|
|
All Other
|
|
|
Name
|
|
in Cash ($)
|
|
($)(1)
|
|
Compensation
($)(2)
|
|
Total ($)
|
|
Ralph Alvarez
|
|
|
31,083
|
|
|
|
|
|
|
|
|
|
|
|
31,083
|
|
William G. Bares
|
|
|
95,250
|
|
|
|
70,000
|
|
|
|
15,993
|
|
|
|
181,243
|
|
Edward P. Campbell
|
|
|
87,000
|
|
|
|
70,000
|
|
|
|
3,259
|
|
|
|
160,259
|
|
Joseph A. Carrabba
|
|
|
11,750
|
|
|
|
|
|
|
|
|
|
|
|
11,750
|
|
Dr. Carol A. Cartwright
|
|
|
57,000
|
|
|
|
70,000
|
|
|
|
12,177
|
|
|
|
139,177
|
|
Alexander M. Cutler
|
|
|
71,000
|
|
|
|
70,000
|
|
|
|
2,152
|
|
|
|
143,152
|
|
H. James Dallas
|
|
|
74,000
|
|
|
|
70,000
|
|
|
|
242
|
|
|
|
144,242
|
|
Ruth Ann M. Gillis
|
|
|
13,250
|
|
|
|
|
|
|
|
|
|
|
|
13,250
|
|
Kristen L. Manos
|
|
|
41,833
|
|
|
|
70,000
|
|
|
|
50
|
|
|
|
111,883
|
|
Lauralee E. Martin
|
|
|
82,750
|
|
|
|
70,000
|
|
|
|
5,188
|
|
|
|
157,938
|
|
Eduardo R. Menascé
|
|
|
71,000
|
|
|
|
70,000
|
|
|
|
|
|
|
|
141,000
|
|
Bill R. Sanford
|
|
|
78,500
|
|
|
|
70,000
|
|
|
|
|
|
|
|
148,500
|
|
Peter G. Ten Eyck, II
|
|
|
66,500
|
|
|
|
70,000
|
|
|
|
|
|
|
|
136,500
|
|
|
|
|
(1) |
|
Amounts reported in the Stock Awards column represent the
aggregate grant date fair value of stock awards granted during
the year computed in accordance with Financial Accounting
Standards Board ASC Topic 718. This compares to prior years,
during which amounts in this column have represented the
expensed accounting value of such awards. On July 27, 2009,
Dr. Cartwright, Ms. Martin, Ms. Manos and
Messrs. Bares, Campbell, Cutler, Dallas, Menacé,
Sanford, and Ten Eyck II received 12,612 shares at a
fair market value of $70,000. One-half of this award is payable
in shares and one-half of this award is payable in cash. |
|
(2) |
|
Amounts reported in the All Other Compensation
column consists of 2009 earnings (dividends and interest) in the
Directors Deferred Compensation Plans. |
86
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
In-the-Money
|
|
|
|
|
Securities
|
|
Amount
|
|
|
|
|
Underlying
|
|
of Unexercised
|
|
Number of Shares or
|
|
|
Unexercised
|
|
Options ($)
|
|
Units of Stock Held
|
|
|
Options (#)
|
|
Exercisable/
|
|
that Have not
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
Vested (#)
|
|
Ralph Alvarez
|
|
|
|
|
|
|
|
|
|
|
|
|
William G. Bares
|
|
|
30,000
|
|
|
|
|
|
|
|
21,283
|
|
Edward P. Campbell
|
|
|
30,000
|
|
|
|
|
|
|
|
21,283
|
|
Joseph A. Carrabba
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Carol A. Cartwright
|
|
|
29,500
|
|
|
|
|
|
|
|
21,283
|
|
Alexander M. Cutler
|
|
|
30,000
|
|
|
|
|
|
|
|
21,283
|
|
H. James Dallas
|
|
|
|
|
|
|
|
|
|
|
21,283
|
|
Ruth Ann M. Gillis
|
|
|
|
|
|
|
|
|
|
|
|
|
Kristen L. Manos
|
|
|
|
|
|
|
|
|
|
|
12,653
|
|
Lauralee E. Martin
|
|
|
|
|
|
|
|
|
|
|
21,283
|
|
Eduardo R. Menacé
|
|
|
|
|
|
|
|
|
|
|
21,283
|
|
Bill R. Sanford
|
|
|
30,000
|
|
|
|
|
|
|
|
21,283
|
|
Peter G. Ten Eyck, II
|
|
|
30,000
|
|
|
|
|
|
|
|
21,283
|
|
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, 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. The Audit Committee and
the Compensation and Organization Committee chairpersons receive
additional compensation of $5,000 per quarter, and outside
directors who serve as chairpersons of the other committees
receive additional compensation of $2,500 per quarter. In 2010,
chairpersons of the Audit, Risk Management and Compensation and
Organization Committees will receive additional compensation of
$3,750 per quarter (which is a reduction from $5,000 per quarter
for the chairpersons of the Audit and Compensation and
Organization Committees) and outside directors who serve as
chairperson of other committees will continue to 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
87
shareholders. In May 2003, the shareholders of KeyCorp approved
the Directors Deferred Share Plan as a 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 2009, Directors Dr. Cartwright,
Ms. Martin and Ms. Manos and Messrs. Bares,
Campbell, Cutler, Dallas, Menace, Sanford, and Ten Eyck II
were each granted 12,612 deferred shares. Messrs. Meyer and
Stevens are not eligible to participate in the Directors
Deferred Share Plan during 2009 because they are employees of
KeyCorp. Mr. Alvarez was not eligible for the award because
he retired before the grant date. In 2009, KeyCorp added three
members to the Board: Joseph Carrabba, Ruth Ann M. Gillis and
Kristen L. Manos; Ms. Gillis and Mr. Carrabba joined
the Board after the grant date for deferred shares in 2009.
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 in either an interest-bearing account (with an
interest rate of 120% of the Monthly Long-Term Applicable
Federal Rate) or a KeyCorp Common Shares account (in which the
directors deferred compensation is invested on a
bookkeeping basis in phantom KeyCorp Common Shares
upon which dividends are accrued quarterly but which cannot be
voted or transferred during the deferral period). Deferred
payments of deferred shares are invested solely in the Common
Shares account. Distributions to the directors under the Second
Deferred Compensation Plan in respect to 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)
In January 2009, the Compensation and Organization Committee
reviewed KeyCorps senior executive officers
incentive plan designs and performance metrics with
KeyCorps Chief Risk Officer and Chief Auditor and took the
following actions to ensure that KeyCorps compensation
arrangements did not encourage senior executive officers to take
unnecessary or excessive risks that could threaten the value of
KeyCorp:
|
|
|
|
|
Established a process for their ongoing oversight of the
relationship between KeyCorps risk management policies and
practices and the senior executive officers incentive
compensation arrangements.
|
|
|
|
Modified the performance metrics for KeyCorps 2009 Annual
and Long-Term Compensation Plans to include minimum thresholds
of capital for any incentive payment to be made, specific
liquidity measures,
|
88
|
|
|
|
|
risk-weighted profitability measures (e.g. such as economic
profit added), credit quality measures (e.g. net charge off and
non-performing assets), and leadership goals as more fully
discussed in the Compensation Discussion and Analysis on
page 52 in this proxy statement.
|
In addition to the foregoing, in accordance with the
requirements of the Section 111 of EESA, as amended, the
Committee reviewed with KeyCorps Chief Risk Officer and
Chief Auditor KeyCorps compensation governance processes
and its senior executive officer and employee compensation plans
to ensure that the plans did not encourage senior executives or
employees to take short-term or long-term risks that could
threaten the value of the company, to identify the risks posed
by these plans, and ensure that any plan risks were limited.
This review encompassed a review of both plan design and related
plan performance metrics. Each plan was individually examined to
ensure that the plan satisfied KeyCorps established risk
criteria. Particular focus was placed on (i) line of
business commission plans, to ensure that plan commissions were
earned on profit-based measures, (ii) line of business
incentive pool funding to ensure that plan funding was based on
risk-adjusted earnings, and (iii) ensuring that all
compensation plans did not focus on short-term results over
long-term value creation.
In conjunction with this
plan-by-plan
review, the performance metrics for several line of business
incentive compensation plans were modified to incorporate
additional economic profit requirements and to reflect
KeyCorps established risk tolerances. In addition to
changes made in several plans performance metrics, there
were also several changes made to plans deferral and
holdback provisions where appropriate. The Committee concluded
that the individual plan review and modification provided a
reasonable assurance that KeyCorps compensation plans did
not encourage KeyCorps senior executive officers or its
employees to take unnecessary or excessive risks that could
threaten the value of KeyCorp.
Thereafter, in January 2010, the Committee met with
KeyCorps Chief Risk Officer and Chief Auditor and again
reviewed KeyCorps 2010 compensation plans (i) to
ensure that the plans do not encourage senior executives or
employees to take short-term or long-term risks that could
threaten the value of the company, (ii) to identify the
risks posed by these plans and to ensure that any plan risks
were limited, and (iii) to ensure that these compensation
plans do not encourage the manipulation of KeyCorps
reported earnings to enhance the compensation of any KeyCorp
employees.
Using KeyCorps updated risk analysis tools, a risk
assessment was again conducted on each of KeyCorps
compensation plans to identify the highest risk lines of
business, functions and roles in terms of magnitude and
probability for the following areas:
|
|
|
|
|
Financial risk: Potential for material loss or
earnings manipulation through controllable actions or decisions.
|
|
|
|
Role risk: Job responsibilities and authority
to create risk for KeyCorp and accountability for delivering
short- and long-term financial and risk management goals.
|
|
|
|
Reputational risk: Potential for material loss
or erosion of KeyCorps integrity.
|
This January review of KeyCorps compensation plans did not
identify any plan that was reasonably likely to have a material
adverse impact on KeyCorp.
The Committee also reviewed with KeyCorps Chief Risk
Officer and Chief Auditor the most significant short and
long-term risks to KeyCorp and the steps taken to identify and
address those risks. The Committee concluded that KeyCorps
compensation plans do not incent excessive risk taking because
each plan requires (i) that funding
89
be based on risk-adjusted metrics, (ii) that risk
tolerances are embedded into each plans objectives, and
the payment of any incentive is conditioned on attaining the
requisite level performance for each metric and (iii) that
the operation of KeyCorps plans are continuously monitored
to ensure the intended risk tolerances are achieved.
Additionally, all compensation plan documents specifically
authorize KeyCorp 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.
Committee
Certification
The Compensation and Organization Committee of the Board of
Directors of KeyCorp hereby certifies that, during the period
beginning on the later of September 14, 2009 or ninety days
after the closing date of the agreement between KeyCorp and
Treasury and ending with the last day of KeyCorps fiscal
year containing that date, that in conjunction with its review
of KeyCorps compensation plans, (i) it has discussed,
evaluated, and reviewed with KeyCorps senior risk
officers, at least every six months, KeyCorps senior
executive officers compensation plans and it has made all
reasonable efforts to ensure that these plans do not encourage
senior executive officers to take any unnecessary risks that
threaten the value of KeyCorp, (ii) it has discussed,
evaluated, and reviewed with KeyCorps senior risk
officers, at least every six months, KeyCorps employee
compensation plans and has made all reasonable efforts to limit
any unnecessary risk these plans pose to KeyCorp, and
(iii) it has discussed, evaluated and reviewed at least
every six months, KeyCorps 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.
The Compensation and Organization Committee has reviewed and
discussed with management the Compensation Discussion and
Analysis set forth on page 52 of this proxy statement and
based on this review, has recommended to the KeyCorp Board of
Directors the inclusion of the Compensation Discussion and
Analysis in this proxy statement.
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 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 2004 Plan at the 2004 Annual Shareholders Meeting.
The 2004 Plan replaced the 1991 Plan except with respect to
awards
90
granted prior to its termination. The 1997 Director Plan
(discussed on page 88 of this proxy statement) terminated
on May 22, 2003, except with respect to awards granted
prior to the dates 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 88 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 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, 2009, 3,049,834 and 102,099
Common Shares have been allocated to accounts of participants
under the Deferred Equity Allocation Plan and the
Directors Deferred Share Plan, and 12,116,888 and 321,694
Common Shares, respectively, remain available for future
issuance.
The following table provides information about KeyCorps
equity compensation plans as of December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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)(2)
|
|
|
33,789,823
|
|
|
$
|
24.33
|
|
|
|
36,035,211
|
(3)
|
Equity compensation plans not approved by security
holders(4)
|
|
|
209,500
|
|
|
$
|
22.43
|
|
|
|
0
|
|
Total
|
|
|
33,999,323
|
|
|
$
|
24.32
|
|
|
|
36,035,211
|
|
|
|
|
(1) |
|
The table does not include 7,655,530 unvested shares of
time-lapsed and performance-based restricted stock awarded under
the 2004 Plan and 1991 Plan. These unvested restricted shares
were issued when awarded and consequently are included in
KeyCorps Common Shares outstanding. |
|
(2) |
|
The table does not include a maximum 2,812,495 unvested
performance shares payable in stock awarded upon the attainment
of greater than target performance under KeyCorps
long-term incentive program. Based upon the impact the
Companys 2009 performance had on the program, none of
these shares are expected to vest or be issued. |
|
(3) |
|
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. |
91
|
|
|
(4) |
|
The table does not include outstanding options to purchase
23,623 Common Shares assumed in connection with an acquisition
from a prior year. At December 31, 2009, these assumed
options had a weighted average exercise price of $24.59 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, 2009, FMR LLC, 82
Devonshire Street, Boston, Massachusetts, and related entities
owned 78,115,088 KeyCorp Common Shares which is approximately
8.9% of the outstanding KeyCorp Common Shares. KeyCorp has also
been advised that as of December 31, 2009, T. Rowe Price
Associates, Inc., 100 East Pratt Street, Baltimore, Maryland,
owned 77,786,098 KeyCorp Common Shares which is approximately
8.8% 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 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, 2010 unless otherwise indicated.
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Total
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Other
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Beneficial Ownership
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Amount and Nature of
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Percent of
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Phantom
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of Common Shares
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Beneficial Ownership
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Common Shares
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Stock
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and Other Phantom
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Name(1)
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of Common
Shares(4)(5)
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Outstanding(6)
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Units(7)
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Stock Units
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William G. Bares
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96,792
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7,616
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104,408
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Edward P. Campbell
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41,611
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51,487
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93,098
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Joseph A. Carrabba
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2,500
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0
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2,500
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Dr. Carol A. Cartwright
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48,736
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9,089
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57,825
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Alexander M. Cutler
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49,533
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32,711
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82,244
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H. James Dallas
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32,594
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6,837
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39,431
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Elizabeth R.
Gile(2)
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1,300
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0
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1,300
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Ruth Ann M.
Gillis(2)
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2,500
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0
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2,500
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Peter D. Hancock
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98,508
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0
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98,508
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Kristen L. Manos
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16,326
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6,483
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22,809
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Lauralee E. Martin
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24,033
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7,728
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31,761
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Eduardo R. Menascé
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19,872
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0
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19,872
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Henry L. Meyer
III(3)
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3,150,932
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303,392
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3,454,324
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Beth E.
Mooney(3)
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410,495
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153,165
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563,660
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Bill R. Sanford
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60,696
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0
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60,696
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Edward W.
Stack(2)
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10,000
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0
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10,000
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Thomas C.
Stevens(3)
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970,898
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122,072
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1,092,970
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Peter G. Ten Eyck, II
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57,101
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0
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57,101
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Jeffrey B.
Weeden(3)
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807,875
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21,484
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829,359
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All directors, nominees and executive officers as a group (22)
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5,902,302
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722,064
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6,624,366
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92
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(1) |
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KeyCorps Corporate Governance Guidelines state that each
outside director should, by the fourth anniversary of such
directors initial election, own at least 7,500 KeyCorp
Common Shares (including phantom stock units) of which at least
1,000 shares must be beneficially owned Common Shares. |
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(2) |
|
Ms. Gile who joined the KeyCorp Board on March 11,
2010 purchased 1,300 KeyCorp Common Shares on March 19,
2010; Ms. Gillis who joined the KeyCorp Board on
November 19, 2009 purchased 2,500 KeyCorp Common Shares on
January 26, 2010; and Mr. Stack who joined the KeyCorp
Board on March 11, 2010 purchased 10,000 KeyCorp Common
Shares on March 12, 2010. |
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(3) |
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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,
2009. |
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(4) |
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Beneficially owned shares include options exercisable as of
March 2, 2010. The directors, nominees, and executive
officers listed above hold vested options as follows:
Mr. Bares 30,000; Mr. Campbell 30,000;
Mr. Carrabba 0; Dr. Cartwright 29,500; Mr. Cutler
30,000; Mr. Dallas 0; Ms. Gile 0; Ms. Gillis 0:
Mr. Hancock 0; Ms. Manos 0; Ms. Martin 0;
Mr. Menascé 0; Mr. Meyer 2,524,634;
Ms. Mooney 253,334; Mr. Sanford 30,000; Mr. Stack
0; Mr. Stevens 772,001; Mr. Ten Eyck 30,000;
Mr. Weeden 485,001; all directors, nominees, and executive
officers as a group 4,636,249. |
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Beneficially owned shares include phantom shares held in the
KeyCorp Automatic Deferral Plan by Messrs. Meyer
(9,139 shares), Stevens (1,926 shares), and two other
executive officers (1,797 shares). These phantom shares are
payable over a three-year period in Common Shares but because
Messrs. Meyer, Stevens, and the other executive officers
are at least age 55 and have at least 5 years of
service with KeyCorp, the phantom shares are immediately payable
upon termination of employment. Other executive officers hold
shares in the Automatic Deferral Plan but because they are not
at least age 55 with 5 years of service, the shares
are not immediately payable if the executive officers
employment terminates. Phantom shares held by these other
executive officers are included under the column Other
Phantom Stock Units. See footnote 7 for a further
description of the mechanics of the Automatic Deferral Plan
distribution process. |
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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
10,641; Mr. Campbell 10,641; Mr. Carrabba 0;
Dr. Cartwright 10,641; Mr. Cutler 10,641;
Mr. Dallas 10,641; Ms. Gile 0; Ms. Gillis 0;
Ms. Manos 6,326; Ms. Martin 10,641;
Mr. Menascé 10,641; Mr. Sanford 10,641;
Mr. Stack 0; Mr. Ten Eyck 10,641; all directors as a
group 102,100. 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 7 for a
further description of the mechanics of the Directors
Deferred Share Plan distribution process. |
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(5) |
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One executive officer has pledged to an entity unaffiliated with
KeyCorp 17,054 shares of KeyCorp stock. |
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(6) |
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No director or executive officer beneficially owns more than 1%
of the total of outstanding KeyCorp Common Shares plus options
vested as of March 2, 2010. |
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(7) |
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Investments in phantom stock units by directors are made
pursuant to the KeyCorp Second Director Deferred Compensation
Plan and the Directors Deferred Share Plan. |
93
|
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During 2009, investments in phantom stock units by KeyCorp
executive officers were made pursuant to the KeyCorp Automatic
Deferral Plan, KeyCorp Deferred Bonus Plan, and KeyCorp Deferred
Savings Plan as well as pursuant to Restricted Stock Unit awards
under the KeyCorp 2004 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. |
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|
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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 2009.
AUDIT
MATTERS
AUDIT FEES
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.
Ernst & Young billed KeyCorp in the aggregate
$5,140,000 for fees for professional services in connection with
the integrated audit of KeyCorps annual financial
statements for the year ended December 31, 2008, reviews of
financial statements included in KeyCorps
Forms 10-Q
for 2008, and 2008 audits of KeyCorp subsidiaries.
AUDIT-RELATED
FEES
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 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
2008 in the aggregate $984,000 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.
94
TAX
FEES
Ernst & Young billed KeyCorp in 2009 in the aggregate
$1,361,000 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 2008 in the aggregate
$1,661,000 for tax services. These services consisted of tax
compliance services provided to certain investment funds managed
by KeyCorp, and certain domestic and foreign subsidiaries of
KeyCorp.
ALL OTHER
FEES
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
foreign subsidiaries. Ernst & Young billed KeyCorp in
2008 in the aggregate $285,000 for fees for products and
services other than those described in the last three
paragraphs. These products and services consisted of documenting
regulatory requirements for certain KeyCorp foreign subsidiaries.
PRE-APPROVAL
POLICIES AND PROCEDURES
The Committees pre-approval policies and procedures are
attached hereto as Appendix C.
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).
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.
95
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, 2009
(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, 2009 on
Form 10-K
that was filed with the Securities and Exchange Commission.
Audit
Committee1
Board of Directors
KeyCorp
William G. Bares (Chair)
Ruth Ann M. Gillis
Kristen L. Manos
Eduardo R. Menascé
Peter G. Ten Eyck, II
1 Mr. Stack
joined the Audit Committee after the report was issued.
96
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 2011
The deadline for shareholders to submit proposals to be
considered for inclusion in the Proxy Statement for the 2011
Annual Meeting of Shareholders is December 3, 2010. This
deadline applies to proposals submitted for inclusion in
KeyCorps proxy statement for the 2011 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 2011 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 2011 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.
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.
97
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 regular 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 2010
KeyCorp Equity Compensation Plan (Issue Two of the Proxy
Statement), for the amendment to KeyCorps Articles and
Regulations to revise the voting power of the Series B
Preferred Stock (Issue Three of this Proxy Statement), in favor
of ratifying the appointment of Ernst & Young as
independent auditors for the fiscal year ending
December 31, 2010 (Issue Four of this Proxy Statement), and
for advisory approval of KeyCorps executive compensation
program (Issue Five 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 and Three, is limited but is not limited as
to Issues Four and Five. As to Issues Four and Five, a broker
non-vote has the same effect as a vote against the proposal and
as to Issues One, Two and Three, a broker non-vote is treated as
not being present. As to Issues Two, Three, Four, and Five, 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
98
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 Three
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
Three. 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 Three. 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.
99
APPENDIX A
KEYCORP
2010 EQUITY COMPENSATION PLAN
1. Purpose. The KeyCorp 2010 Equity
Compensation Plan is intended to promote the interests of the
Corporation and its shareholders by providing equity-based
incentives for effective service and high levels of performance
to Employees selected by the Committee. To achieve these
purposes, the Corporation may grant Awards to selected Employees
in accordance with the terms and conditions hereinafter set
forth.
2. Definitions.
2.1 1934 Act. The term
1934 Act shall mean the Securities Exchange Act
of 1934, as amended.
2.2 Acquisition Price. The term
Acquisition Price with respect to Restricted Stock
and Restricted Stock Units shall mean such amount, if any,
required by applicable law or as may be otherwise specified by
the Committee in the Award Instrument with respect to the
Restricted Stock or Restricted Stock Units as the consideration
to be paid by the Employee for the Restricted Stock or
Restricted Stock Units.
2.3 Award. The term Award
shall mean an award granted under the Plan of Options, Stock
Appreciation Rights, Restricted Stock, Restricted Stock Units,
Performance Shares, Performance Units or Other Awards.
2.4 Award Instrument. The term
Award Instrument shall mean a writing evidencing an
Award in such form and with such provisions as the Committee may
prescribe, including, without limitation, an agreement to be
executed by the Employee and the Corporation, a certificate
issued by the Corporation, or a letter executed by the Committee
or its designee. An Award Instrument may be in an electronic
medium, may be limited to notation on the books and records of
the Corporation and, unless otherwise determined by the
Committee, need not be signed by a representative of the
Corporation or the Employee. Acceptance of the Award Instrument
by an Employee constitutes agreement to the terms of the Award
evidenced thereby.
2.5 Base Price. The term Base
Price with respect to a Free-Standing SAR shall mean the
price specified in an Award of the Free-Standing SAR to be used
as the basis for determining the amount to which a holder of the
Free-Standing SAR is entitled upon the exercise of the
Free-Standing SAR.
2.6 Change of Control. A Change of
Control shall be deemed to occur if and when there occurs
any of the circumstances set forth in any of clauses (a)
through (e) of this Section 2.6. For these purposes,
the Corporation will be deemed to have become a subsidiary of
another corporation if any other corporation (which term shall,
for all purposes of this Section 2.6, include, in addition
to a corporation, a limited liability company, partnership,
trust, or other organization) owns, directly or indirectly, 50%
or more of the total combined outstanding voting power of all
classes of stock of the Corporation or any successor to the
Corporation:
(a) The Corporation is merged with or into, is consolidated
with, or becomes the subsidiary of another corporation and,
immediately after giving effect to that transaction, either:
(i) less than 45% of the then outstanding voting securities
of the surviving or resulting corporation or (if the Corporation
becomes a subsidiary in the transaction) of the ultimate parent
of the Corporation represent or were issued in exchange for
voting securities of the Corporation outstanding immediately
prior to the transaction; or
A-1
(ii) individuals who were directors of the Corporation on
the day before the first public announcement of (A) the
pendency of the transaction or (B) the intention of any
Person to cause the transaction to occur, cease for any reason
to constitute at least 50% of the directors of the surviving or
resulting corporation or (if the Corporation becomes a
subsidiary in the transaction) of the ultimate parent of the
Corporation.
(b) Any Person becomes the beneficial owner of 35% or more
of the outstanding voting stock of the Corporation or files a
report on Schedule 13D or
Schedule TO-T,
each as adopted under the 1934 Act (or any successor
schedule, form, or report), disclosing the acquisition of 35% or
more of the outstanding voting stock of the Corporation in a
transaction or series of transactions.
(c) The shareholders of the Corporation approve a plan
providing for the dissolution of the Corporation.
(d) The consummation of a transaction providing for the
sale, lease, exchange, or other disposal of (in one transaction
or a series of related transactions) all or substantially all of
the assets of the Corporation and its subsidiaries, taken as a
whole.
(e) Without the prior approval, solicitation, invitation,
or recommendation of the Board of Directors of the Corporation,
any Person makes a public announcement of a bona fide intention
(i) to engage in a transaction with the Corporation that,
if consummated, would result in a Change of Control under any of
subclauses (a) through (d) above, (ii) to
solicit (as defined in
Rule 14a-1
under the 1934 Act) proxies in connection with a proposal
that is not approved or recommended by the Board of Directors of
the Corporation, or (iii) to engage in an election contest
relating to the election of directors of the Corporation
(pursuant to Regulation 14A under the 1934 Act), and,
at any time within the 24 month period immediately
following the date of the announcement of that intention,
individuals who, on the day before that announcement,
constituted the directors of the Corporation (the
Incumbent Directors) cease for any reason to
constitute at least 50% thereof unless both (x) the
election, or the nomination for election by the
Corporations shareholders, of each new director was
approved by a vote of at least two-thirds of the Incumbent
Directors in office at the time of the election or nomination
for election of such new director, and (y) prior to the
time that the Incumbent Directors no longer constitute at least
50% of the Board of Directors of the Corporation, the Incumbent
Directors then in office, by a vote of at least 75% of their
number, reasonably determine in good faith that the change in
Board of Directors of the Corporation membership that has
occurred before the date of that determination and that is
anticipated to thereafter occur within the balance of the
24 month period to cause the Incumbent Directors to no
longer be at least 50% of the Board of Directors of the
Corporation was not caused by or attributable to, in whole or in
any significant part, directly or indirectly, proximately or
remotely, any event under items (i), (ii), or (iii) of this
subclause (e).
2.7 Code. The term Code shall
mean the Internal Revenue Code of 1986, as amended from time to
time.
2.8 Committee. The term
Committee shall mean the Compensation and
Organization Committee of the Board of Directors of the
Corporation or such other committee or subcommittee as may be
designated by the Board of Directors of the Corporation from
time to time to administer the Plan. The Committee shall consist
solely of at least three directors each of whom qualify as a
Non-Employee Director and outside director within
the meaning of Section 162(m) of the Code, and satisfies
any applicable standards of independence under the federal
securities and tax laws and the listing standards of the New
York Stock Exchange (NYSE) or any other national
securities exchange on which the Common Shares are listed as in
effect from time to time.
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2.9 Common Shares. The term Common
Shares shall mean common shares of the Corporation, with a
par value of $1.00 each.
2.10 Corporation. The term
Corporation shall mean KeyCorp and its successors,
including the surviving or resulting corporation of any merger
of KeyCorp with or into, or any consolidation of KeyCorp with,
any other corporation or corporations.
2.11 Covered Employee. The term
Covered Employee shall mean an Employee who is, or
is determined by the Committee to be likely to become, a
covered employee within the meaning of
Section 162(m) of the Code (or any successor provision).
2.12 Disability. The term
Disability with respect to an Employee shall mean
physical or mental impairment which entitles the Employee to
receive disability payments under any long-term disability plan
maintained by the Corporation or any Subsidiary.
2.13 Effective Date. The term
Effective Date shall mean, subject to shareholder
approval, March 11, 2010, which was the date the Plan was
approved and adopted by the Board of Directors of the
Corporation.
2.14 Employee. The term
Employee shall mean any individual employed by the
Corporation or by any Subsidiary and shall include officers as
well as all other employees of the Corporation or of any
Subsidiary (including employees who are members of the Board of
Directors of the Corporation or any Subsidiary).
2.15 Employment Termination Date. Except
as otherwise determined by the Committee, the term
Employment Termination Date with respect to an
Employee shall mean the first date on which the Employee is no
longer employed by the Corporation or any Subsidiary.
2.16 Exercise Price. The term
Exercise Price with respect to an Option shall mean
the price specified in the Option at which the Common Shares
subject to the Option may be purchased by the holder of the
Option.
2.17 Fair Market Value. Except as
otherwise determined by the Committee at the time of the grant
of an Award in accordance with Section 409A of the Code,
the term Fair Market Value with respect to Common
Shares shall mean:
(a) if the Common Shares are traded on a national
securities exchange, the closing price per Common Share on that
national exchange on the date for which the determination of
fair market value is made or, if there are no sales of Common
Shares on that date, then on the next preceding date on which
there were any sales of Common Shares; or
(b) if the Common Shares are not traded on a national
securities exchange, the fair market value of the Common Shares
as determined in good faith by the Committee. The Committee is
authorized to adopt another fair market value pricing method,
provided such method is stated in the Award Instrument, and is
in compliance with the fair market value pricing rules set forth
in Section 409A of the Code.
2.18 Free-Standing Stock Appreciation
Right. The term Free-Standing Stock
Appreciation Right or Free-Standing SAR shall
mean an SAR granted to an Employee that is not granted in tandem
with an Option that entitles the holder thereof to receive from
the Corporation, upon exercise of the Free-Standing SAR or any
portion of the Free-Standing SAR, an amount equal to 100%, or
such lesser percentage as the Committee may
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determine at the time of grant of the Free-Standing SAR, of the
excess, if any, measured at the time of the exercise of the
Free-Standing SAR, of
(a) the aggregate Fair Market Value of the Common Shares
underlying the Free-Standing SARs being exercised over
(b) the aggregate Base Price of those Common Shares
underlying the Free-Standing SARs being exercised.
2.19 Good Reason. The Employee shall be
deemed to have Good Reason to terminate the
Employees employment with the Corporation or a Subsidiary
under this Plan if, within two years after the occurrence of a
Change of Control, either or both of the events listed in
clauses (a) and (b) of this Section 2.19 occurs
without the written consent of the Employee:
(a) following notice by the Employee to the Corporation and
an opportunity by the Corporation to cure, the Employee
determines in good faith that the Employees position,
responsibilities, duties, or status with the Corporation are at
any time materially less than or reduced from those in effect
before the Change of Control or that the Employees
reporting relationships with superior Employee officers have
been materially changed from those in effect before the Change
of Control; or
(b) The Corporations headquarters is relocated
outside of the greater Cleveland metropolitan area (but this
clause (b) shall apply only if the Corporations
headquarters was the Employees principal place of
employment before the Change of Control).
For purposes of clause (a), the Corporation will be deemed to
have had an opportunity to cure and to have failed to effect a
cure if the circumstance otherwise constituting Good Reason
persists (as determined in good faith by the Employee, whose
determination shall be conclusive) for more than seven calendar
days after the Employee has given notice to the Corporation of
the existence of that circumstance.
2.20 Incentive Stock Option. The term
Incentive Stock Option shall mean an Option intended
by the Committee to qualify as an incentive stock
option within the meaning of Section 422 of the Code
(or any successor provision).
2.21 Non-Employee Director. The term
Non-Employee Director shall mean a director who is a
Non-Employee Director of the Corporation within the
meaning of
Rule 16b-3.
2.22 Nonqualified Option. The term
Nonqualified Option shall mean an Option intended by
the Committee not to qualify as an incentive stock
option under Section 422 of the Code (or any
successor provision) or an Option intended by the Committee to
qualify as an incentive stock option under
Section 422 of the Code but that fails to so qualify.
2.23 Option. The term Option
shall mean an Award entitling the holder thereof to purchase a
specified number of Common Shares at a specified price during a
specified period of time.
2.24 Option Expiration Date. The term
Option Expiration Date with respect to any Option
shall mean the date selected by the Committee after which,
except as provided in Section 12.4 of the Plan, in the case
of the death of the Employee to whom the Option was granted, the
Option may not be exercised.
2.25 Other Award. The term Other
Award shall mean an Award granted pursuant to
Section 11 of the Plan.
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2.26 Performance Goal. The term
Performance Goal shall mean the measurable
performance goal or goals specified by the Committee in
connection with the grant of Performance Shares or Performance
Units, or when so determined by the Committee, Options, SARs,
Restricted Stock, Restricted Stock Units, Other Awards or
dividend credits, pursuant to the Plan. Performance Goals may be
described in terms of Corporation-wide objectives or objectives
that are related to the performance of the individual Employee
or of the Subsidiary, division, department, region or function
within the Corporation or Subsidiary in which the Employee is
employed. The Performance Goals may be made relative to the
performance of one or more other companies or subsidiaries,
divisions, departments, regions or functions within such other
companies, and may be made relative to an index or one or more
of the performance goals themselves. The Committee may grant
Awards with Performance Goals that are either Qualified
Performance-Based Awards or not Qualified Performance-Based
Awards. The Performance Goals applicable to any Qualified
Performance-Based Award to a Covered Employee will be based on
one or more of, a combination of, or ratios involving the
following criteria:
(a) earnings per share;
(b) total revenue;
(c) net interest income;
(d) noninterest income;
(e) net income;
(f) net income before tax;
(g) noninterest expense;
(h) efficiency ratio;
(i) return on equity;
(j) return on assets;
(k) economic profit added;
(l) loans;
(m) deposits;
(n) tangible equity;
(o) assets;
(p) net charge-offs; and
(q) nonperforming assets.
If the Committee determines that a change in the business,
operations, corporate structure or capital structure of the
Corporation, or the manner in which it conducts its business, or
other events or circumstances render the Performance Goals
unsuitable, the Committee may in its discretion modify such
Performance Goals or the related minimum acceptable level of
achievement, in whole or in part, as the Committee deems
appropriate and equitable, including, without limitation, to
exclude the effects of extraordinary items, unusual or
non-recurring events,
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cumulative effects of tax or accounting changes, discontinued
operations, acquisitions, divestitures and material
restructuring or asset impairment charges, except in the case of
a Qualified Performance-Based Award (other than in connection
with a Change of Control) where such action would result in the
loss of the otherwise available exemption of the Award under
Section 162(m) of the Code. In such case, the Committee
will not make any modification of the Performance Goals or
minimum acceptable level of achievement with respect to such
Covered Employee.
2.27 Performance Period. The term
Performance Period shall mean such one or more
periods of time, which may be of varying and overlapping
durations, as the Committee may select, within which the
Performance Goals relating to one or more Awards of Performance
Shares or Performance Units are to be achieved.
2.28 Performance Shares. The term
Performance Shares shall mean an Award denominated
in Common Shares and contingent upon attainment of one or more
Performance Goals over a Performance Period.
2.29 Performance Units. The term
Performance Units shall mean a bookkeeping entry
that records a unit equal to $1.00 awarded pursuant to
Section 10 of the Plan, which are contingent upon
attainment of one or more Performance Goals over a Performance
Period.
2.30 Person. The term Person
shall mean a person as used in Section 13(d)
and Section 14(d)(2) of the 1934 Act.
2.31 Plan. The term Plan
shall mean this KeyCorp 2010 Equity Compensation Plan as from
time to time hereafter amended in accordance with
Section 22.1 of the Plan.
2.32 Qualified Performance-Based
Award. The term Qualified Performance-Based
Award shall mean any Award of Performance Shares,
Performance Units, Restricted Stock, Restricted Stock Units or
Other Awards, or portion of such Award, to a Covered Employee
that is intended to satisfy the requirements for qualified
performance-based compensation under Section 162(m)
of the Code.
2.33 Restricted Stock. The term
Restricted Stock shall mean Common Shares delivered
to an Employee pursuant to an Award subject to such
restrictions, conditions and contingencies as the Committee may
provide in the relevant Award Instrument, including
(a) the restriction that the Employee not sell, transfer,
otherwise dispose of, or pledge or otherwise hypothecate the
Restricted Stock during the applicable Restriction Period,
(b) the requirement that the Restriction Period will
terminate or terminate early upon achievement of specified
Performance Goals, and
(c) such other restrictions, conditions, and contingencies,
if any, as the Committee may provide in the Award Instrument
with respect to the Restricted Stock.
2.34 Restricted Stock Units. The term
Restricted Stock Units shall mean an Award pursuant
to Section 9 of the Plan whereby an Employee receives the
right to receive Common Shares or the cash equivalent thereof at
a specified time in the future in consideration of the
performance of services, but subject to such restrictions,
conditions and contingencies as the Committee may provide in the
relevant Award Instrument.
2.35 Restriction Period. The term
Restriction Period with respect to an Award of
Restricted Stock shall mean the period selected by the Committee
and specified in the Award Instrument with respect to that
Restricted
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Stock during which the Employee may not sell, transfer,
otherwise dispose of, or pledge or otherwise hypothecate that
Restricted Stock.
2.36 Rule 16b-3. The
term
Rule 16b-3
shall mean
Rule 16b-3
(or any successor rule substantially to the same effect)
promulgated under the 1934 Act, as in effect from time to
time.
2.37 Stock Appreciation Right. The term
Stock Appreciation Right or SAR shall
mean a right granted pursuant to Section 7 of the Plan and
will include Tandem Stock Appreciation Rights and Free-Standing
Stock Appreciation Rights.
2.38 Subsidiary. The term
Subsidiary shall mean any corporation, partnership,
joint venture, or other business entity in which the Corporation
owns, directly or indirectly, 50% or more of the total combined
voting power of all classes of stock (in the case of a
corporation) or other ownership interest (in the case of any
entity other than a corporation).
2.39 Tandem Stock Appreciation Right. The
term Tandem Stock Appreciation Right or Tandem
SAR shall mean an Award granted to an Employee with
respect to all or any part of any Option that entitles the
holder thereof to receive from the Corporation, upon exercise of
the Tandem SAR and surrender of the related Option, or any
portion of the Tandem SAR and the related Option, an amount
equal to 100%, or such lesser percentage as the Committee may
determine at the time of the grant of the Tandem SAR, of the
excess, if any, measured at the time of the exercise of the
Tandem SAR, of (a) the aggregate Fair Market Value of the
Common Shares subject to the Option with respect to which the
Tandem SAR is exercised over (b) the aggregate Exercise
Price of those Common Shares under the Option.
2.40 Termination for Cause. The
termination of the employment of an Employee of the Corporation
or any of its Subsidiaries shall be deemed a Termination
for Cause if, prior to the termination of employment, any
of the following has occurred:
(a) the Employee shall have been convicted of a felony;
(b) the Employee commits an act or series of acts of
dishonesty in the course of the Employees employment which
are materially inimical to the best interests of the Corporation
or a Subsidiary and that constitutes the commission of a felony;
(c) the Corporation or any Subsidiary has been ordered or
directed by any federal or state regulatory agency with
jurisdiction to terminate or suspend the Employees
employment and such order or directive has not been vacated or
reversed upon appeal; or
(d) after being notified in writing by the Corporation to
cease any particular Harmful Activity (as defined in
Section 18), the Employee shall intentionally continue to
engage in such Harmful Activity while the Employee remains in
the employ of the Corporation or a Subsidiary.
If (x) the Corporation or any Subsidiary terminates the
employment of the Employee when it has cause
therefor under clause (c) above, (y) the order or
directive is subsequently vacated or reversed on appeal and the
vacation or reversal becomes final and no longer subject to
further appeal, and (z) the Corporation or the Subsidiary
fails to offer to reinstate the Employee to employment within
ten days of the date on which the vacation or reversal becomes
final and no longer subject to further appeal, the termination
of the employment of the Employee will not be deemed to be a
Termination for Cause.