<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 18, 1994
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
MELLON BANK CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
PENNSYLVANIA 6712 25-1233834
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification Identification No.)
Code Number)
</TABLE>
ONE MELLON BANK CENTER
500 GRANT STREET
PITTSBURGH, PENNSYLVANIA 15258
412-234-5000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JAMES M. GOCKLEY, ESQ.
ASSISTANT GENERAL COUNSEL AND SECRETARY
MELLON BANK CORPORATION
ONE MELLON BANK CENTER
500 GRANT STREET
PITTSBURGH, PENNSYLVANIA 15258
412-234-5222
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
COPIES TO:
<TABLE>
<S> <C>
ROBERT K. MORRIS, ESQ. JOHN A. HEALY, ESQ.
REED SMITH SHAW & MCCLAY STEVEN A. HOBBS, ESQ.
435 SIXTH AVENUE ROGERS & WELLS
PITTSBURGH, PA 15230 200 PARK AVENUE
NEW YORK, NY 10166
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE AND ALL OTHER
CONDITIONS TO THE MERGER (THE "MERGER") OF AN INDIRECT WHOLLY OWNED SUBSIDIARY
OF THE REGISTRANT WITH AND INTO THE DREYFUS CORPORATION PURSUANT TO THE MERGER
AGREEMENT DESCRIBED IN THE ENCLOSED PROSPECTUS/ JOINT PROXY STATEMENT HAVE BEEN
SATISFIED OR WAIVED.
---------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
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- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) FEE(3)
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Common Stock
($0.50 par value)(4).......................... 32,750,000 $55.657629 $1,822,787,350 $628,547
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<FN>
(1) The number of shares to be registered is based upon the number of shares of
common stock, par value $.10 per share, ("Dreyfus Common Stock") of The
Dreyfus Corporation ("Dreyfus") presently outstanding and subject to
outstanding vested stock options multiplied by the exchange ratio of 0.88017
shares of the Registrant's Common Stock for each share of Dreyfus Common
Stock.
(2) The registration fee was computed pursuant to Rule 457(f) and Rule 457(c)
under the Securities Act of 1933, as amended, based on the average of the
high and low sales prices of Dreyfus Common Stock, as reported by the New
York Stock Exchange on July 14, 1994.
(3) In accordance with Rule 457(b), the total registration fee of $628,547 has
been reduced by $361,913.00 which was paid on April 25, 1994, at the time of
the filing under the Securities Exchange Act of 1934, as amended, of
preliminary copies of the Registrant's and Dreyfus' proxy materials included
herein. Therefore, the registration fee payable upon filing of this
Registration Statement is $266,634.
(4) Includes preferred stock purchase rights. Prior to the occurrence of certain
events, these rights will not be exercisable or evidenced separately from
the Common Stock.
---------------------
</TABLE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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- --------------------------------------------------------------------------------
<PAGE> 2
MELLON BANK CORPORATION
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM CAPTION OR LOCATION
NO. FORM S-4 CAPTION IN PROSPECTUS
- ------------------------------------------------ ------------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus..... Outside front cover page of
Prospectus/Joint
Proxy Statement
2. Inside Front and Outside Back Cover Pages
of Prospectus.............................. Inside front cover page of
Prospectus/Joint
Proxy Statement; Available Information;
Incorporation of Certain Documents by
Reference; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information.............. Summary; Selected Financial Data; Mellon
Bank Corporation and Subsidiaries Consolidated
Selected Historical Financial Data; The
Dreyfus Corporation and Subsidiaries
Consolidated Selected Historical Financial
Data; Mellon Bank Corporation and
Subsidiaries and The Dreyfus Corporation
and Subsidiaries Pro Forma Combined
Selected Financial Data (Unaudited);
Unaudited Comparative Per Share Book
Value, Market Value, Cash Dividend and
Earnings Data; Comparative Per Common
Share Data (Unaudited); Selected Financial
Ratios (Unaudited)
4. Terms of the Transaction................... Summary; Background of and Reasons for the
Merger; The Merger; Comparison of
Shareholders' Rights
5. Pro Forma Financial Information............ Summary; Selected Financial Data;
Unaudited Comparative Per Share Book Value,
Market Value, Cash Dividend and Earnings Data;
Comparative Per Common Share Data
(Unaudited); Selected Financial Ratios
(Unaudited); Unaudited Pro Forma
Condensed Combined Financial Statements;
Notes to Unaudited Pro Forma Condensed
Combined Financial Statements
6. Material Contacts with the Company Being
Acquired................................... Summary; Background of and Reasons for
the Merger
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters......................... Not Applicable
8. Interests of Named Experts and Counsel..... Legal Opinions
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Not Applicable
10. Information with Respect to S-3
Registrants................................ Available Information; Incorporation of Certain
Documents by Reference; The Companies--
Mellon; Certain Regulatory Considerations
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ITEM CAPTION OR LOCATION
NO. FORM S-4 CAPTION IN PROSPECTUS
- ------------------------------------------------ ------------------------------------------
<C> <S> <C>
11. Incorporation of Certain Information by
Reference................................. Incorporation of Certain Documents by
Reference
12. Information with Respect to S-2 or S-3
Registrants............................... Not Applicable
13. Incorporation of Certain Information by
Reference................................. Not Applicable
14. Information with Respect to Registrants
Other than S-2 or S-3 Registrants......... Not Applicable
15. Information with Respect to S-3
Companies................................. Available Information; Incorporation of
Certain Documents by Reference; The
Companies--Dreyfus
16. Information with Respect to S-2 or S-3
Companies................................. Not Applicable
17. Information with Respect to Companies
Other than S-2 or S-3 Companies........... Not Applicable
18. Information if Proxies, Consents, or
Authorizations are to be Solicited........ Incorporation of Certain Documents by
Reference; Summary; The Dreyfus Meeting;
The Mellon Meeting; The Merger; Dissenters'
Rights; Proxy Solicitation Expenses
19. Information if Proxies, Consents or
Authorizations are not to be Solicited,
or in an Exchange Offer................... Not Applicable
</TABLE>
<PAGE> 4
(LOGO) Mellon Bank Corporation
One Mellon Bank Corporation
MELLON BANK CORPORATION Pittsburgh, PA 15258-0001
July 19, 1994
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Meeting") of
Shareholders of Mellon Bank Corporation ("Mellon") on Tuesday, August 23, 1994,
at 11:00 a.m., local time, to be held in the 10th Floor Auditorium of the Union
Trust Building, 501 Grant Street, Pittsburgh, Pennsylvania.
At the Meeting, Mellon shareholders will be asked to approve an Amended and
Restated Agreement and Plan of Merger dated as of December 5, 1993 (the "Merger
Agreement") pursuant to which a wholly owned subsidiary of Mellon Bank, N.A.
("Mellon Bank") will be merged with and into The Dreyfus Corporation
("Dreyfus"), and Dreyfus will become a wholly owned subsidiary of Mellon Bank
and an indirect wholly owned subsidiary of Mellon. Under the Merger Agreement,
each outstanding share of Dreyfus common stock will be converted into 0.88017
shares of Mellon common stock. Details concerning the proposed merger (the
"Merger") are set forth in the accompanying Prospectus/Joint Proxy Statement,
which you should read carefully.
This partnership with one of the great names in mutual funds continues
Mellon's evolution into a full-service financial services company with a bank as
its core. The Merger represents a significant enhancement of Mellon's
proprietary and administrative mutual fund business, strengthens Mellon's
balance between lending and nonlending businesses, and greatly enhances growth
prospects going forward. The Merger is a meaningful step in Mellon's ongoing
effort to build the financial institution of the future.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO APPROVE THE
MERGER AGREEMENT, WHICH WILL CONSTITUTE APPROVAL OF THE ISSUANCE OF MELLON
COMMON STOCK PURSUANT TO THE MERGER AGREEMENT.
All shareholders are invited to attend the Meeting in person. The
affirmative vote of a majority of the votes cast by holders of shares of Mellon
common stock and Series D Junior Preferred Stock, voting together as one class,
will be necessary to approve the Merger Agreement, which will constitute
approval of the issuance of Mellon common stock in the Merger.
It is important that your shares be represented at the Meeting. Whether or
not you plan to attend, we hope that you will complete, sign, date and return
your Proxy promptly in the enclosed envelope. This will not limit your right to
vote in person or to attend the Meeting. If no specification is made on the
Proxy, the Proxy will be voted in favor of approval of the Merger Agreement.
We have authorized Mellon's proxy solicitor, D. F. King & Co., Inc., to
answer questions and provide assistance for Mellon shareholders. Please feel
free to call D. F. King & Co., Inc. at 1-800-769-7666.
Sincerely,
Frank V. Cahouet
Chairman, President
and Chief Executive Officer
<PAGE> 5
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
RESERVATION FORM FOR MELLON BANK CORPORATION SPECIAL MEETING OF SHAREHOLDERS
Admission cards will be forwarded to shareholders whose reservation forms are
received by August 9, 1994. All other admission cards will be provided at the
check-in desk at the meeting.
I expect to attend the Special Meeting at 11:00 A.M., on August 23, 1994 in
Pittsburgh, PA.
Name
........................................
(Please Print)
Address
........................................
(Please Print)
........................................
(PLEASE COMPLETE AND RETURN IN THE ENCLOSED ENVELOPE IF YOU PLAN
TO ATTEND THE SPECIAL MEETING)
<PAGE> 6
MELLON BANK CORPORATION
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders:
A Special Meeting of Shareholders of Mellon Bank Corporation (including any
adjournments or postponements thereof, (the "Meeting")) will be held on Tuesday,
August 23, 1994 at 11:00 a.m., local time, in the 10th Floor Auditorium of the
Union Trust Building, 501 Grant Street, Pittsburgh, Pennsylvania, for the
purpose of: (1) voting on a proposal to approve an Amended and Restated
Agreement and Plan of Merger dated as of December 5, 1993 (the "Merger
Agreement"), by and among The Dreyfus Corporation ("Dreyfus"), Mellon Bank
Corporation ("Mellon"), Mellon Bank, N.A. ("Mellon Bank"), and XYZ Sub
Corporation, a wholly owned subsidiary of Mellon Bank ("Merger Subsidiary"),
pursuant to which Merger Subsidiary would be merged with and into Dreyfus, and
Dreyfus would become a wholly owned subsidiary of Mellon Bank and an indirect
wholly owned subsidiary of Mellon (the "Merger"); and (2) transacting such other
business as may properly come before the Meeting. Approval of the Merger
Agreement will constitute approval of the issuance of shares of Mellon common
stock pursuant to the Merger Agreement.
The Board of Directors has fixed the close of business on Tuesday, July 19,
1994 as the record date for the determination of shareholders entitled to notice
of and to vote at the Meeting.
The accompanying Prospectus/Joint Proxy Statement contains more detailed
information with respect to the matters to be considered at the Meeting,
including, attached as Appendix I, the Merger Agreement.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN
THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED AS SOON AS POSSIBLE.
By Order of the Board of
Directors,
James M. Gockley
Secretary
July 19, 1994
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE
AND PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE.
<PAGE> 7
(LOGO)
THE DREYFUS
CORPORATION
JULY 19, 1994
HOWARD STEIN 200 Park Avenue
Chairman of the Board and New York, New York 10166
Chief Executive Officer Phone: (212) 922-6000
Dear Fellow Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
The Dreyfus Corporation ("Dreyfus") to be held at the New York Marriott Marquis,
1535 Broadway (between 45th and 46th Streets), Westside South Center, 5th Floor,
New York, New York on Tuesday, August 23, 1994. The Meeting will begin at 11:00
a.m., local time. At the Meeting, you will be asked to adopt the Amended and
Restated Agreement and Plan of Merger dated as of December 5, 1993 (the "Merger
Agreement") by and among Mellon Bank Corporation, Mellon Bank, N.A., XYZ Sub
Corporation, a wholly owned subsidiary of Mellon Bank, N.A., and Dreyfus. By
virtue of the merger, each outstanding share of Dreyfus common stock will be
converted into 0.88017 shares of Mellon Bank Corporation common stock.
This merger is an important step toward your company's long-term strategic
goal of becoming a more comprehensive, innovative and effective provider of
financial products and services, and thereby a more profitable and valuable
company. Upon completion of the merger, Dreyfus will become a wholly owned
subsidiary of Mellon Bank, N.A., which is a wholly owned subsidiary of Mellon
Bank Corporation.
The special combination of banking and financial services which this merger
represents establishes a significant milestone for investors and savers and the
facility and breadth with which their respective financial needs can be more
promptly and effectively satisfied. More particularly,
- The combined company will build upon Dreyfus' long standing reputation as
a leader in mutual funds.
- The merger is intended to provide opportunities for the combined company
to offer a greater variety of financial products and services to a more
extensive and diversified client base, encouraging the combined company's
clients to participate in the many investment opportunities presented now
and in the future, thereby strengthening the market position and
long-term stockholder value of the combined company.
- We expect that the combined company's support, administrative and
processing systems will enhance efficiency and promote flexibility,
achieving both cost savings and greater latitude in the creation of new
products.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY ADOPTED AND APPROVED THE MERGER
AGREEMENT AND DETERMINED THAT THE MERGER IS FAIR TO AND IN THE BEST INTERESTS OF
DREYFUS AND THE DREYFUS STOCKHOLDERS AND RECOMMENDS A VOTE FOR THE PROPOSAL TO
ADOPT THE MERGER AGREEMENT.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE
AND PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE.
Further details regarding the merger are set forth in the accompanying
materials. For the merger to become effective, the proposal must have the
support of two-thirds of the issued and outstanding shares of Dreyfus common
stock, and your vote is important no matter how many shares you hold. An
abstention or failure to vote will have the same effect as a vote against the
merger.
We have authorized Dreyfus' proxy solicitor, D. F. King & Co., Inc., to
answer questions and provide assistance for Dreyfus stockholders. Please feel
free to call D. F. King & Co., Inc. at 1-800-769-7666.
Thank you.
Sincerely,
Howard Stein
<PAGE> 8
THE DREYFUS CORPORATION
------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
AUGUST 23, 1994
------------------
TO THE STOCKHOLDERS OF
THE DREYFUS CORPORATION:
A Special Meeting of Stockholders of The Dreyfus Corporation ("Dreyfus")
will be held at the New York Marriott Marquis, 1535 Broadway (between 45th and
46th Streets), Westside South Center, 5th Floor, New York, New York, on Tuesday,
August 23, 1994 at 11:00 a.m., local time, for the following purposes:
1. The voting on the adoption of the Amended and Restated Agreement and
Plan of Merger dated as of December 5, 1993 (the "Merger Agreement") by and
among Mellon Bank Corporation, Mellon Bank, N.A., XYZ Sub Corporation, a wholly
owned subsidiary of Mellon Bank, N.A. ("Merger Subsidiary"), and Dreyfus,
providing for the merger of Merger Subsidiary with and into Dreyfus, as
described in the accompanying Prospectus/Joint Proxy Statement; and
2. The transaction of such other business as may properly come before the
meeting, or any adjournment(s) or postponement(s) thereof.
Only stockholders of record at the close of business on Tuesday, July 19,
1994 will be entitled to receive notice of and to vote at the meeting.
The accompanying document constitutes the Prospectus/Joint Proxy Statement
of Dreyfus and Mellon Bank Corporation for their respective special meetings of
stockholders. A copy of the Merger Agreement is attached as Appendix I to the
Prospectus/Joint Proxy Statement.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO COMPLETE,
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED AS SOON
AS POSSIBLE. AN ABSTENTION OR FAILURE TO VOTE WILL HAVE THE SAME EFFECT AS A
VOTE AGAINST THE MERGER.
By Order of the Board of
Directors,
Mark N. Jacobs
Secretary
New York, New York
July 19, 1994
<PAGE> 9
JOINT PROXY STATEMENT
MELLON BANK CORPORATION AND THE DREYFUS CORPORATION
SPECIAL MEETINGS OF SHAREHOLDERS
TO BE HELD ON AUGUST 23, 1994
PROSPECTUS
MELLON BANK CORPORATION
UP TO 32,750,000 SHARES
COMMON STOCK
(PAR VALUE $.50 PER SHARE)
This Prospectus/Joint Proxy Statement is being furnished to holders of
common stock, par value $.10 per share ("Dreyfus Common Stock"), of The Dreyfus
Corporation, a New York corporation ("Dreyfus"), in connection with the
solicitation of proxies by the Board of Directors of Dreyfus (the "Dreyfus
Board") for use at a Special Meeting of Stockholders of Dreyfus to be held at
11:00 a.m. on Tuesday, August 23, 1994 at the New York Marriott Marquis, 1535
Broadway (between 45th and 46th Streets), Westside South Center, 5th Floor, New
York, New York, and at any adjournments or postponements thereof (the "Dreyfus
Meeting"). This Prospectus/Joint Proxy Statement is also being furnished to
holders of common stock, par value $0.50 per share ("Mellon Common Stock"), and
Series D Junior Preferred Stock, par value $1.00 per share ("Series D Stock"),
of Mellon Bank Corporation, a Pennsylvania corporation ("Mellon"), in connection
with the solicitation of proxies by the Board of Directors of Mellon (the
"Mellon Board") for use at a Special Meeting of Shareholders of Mellon to be
held at 11:00 a.m. on Tuesday, August 23, 1994 in the 10th Floor Auditorium of
the Union Trust Building, 501 Grant Street, Pittsburgh, Pennsylvania, and at any
adjournments or postponements thereof (the "Mellon Meeting"). At the Dreyfus
Meeting, the holders of Dreyfus Common Stock will consider and vote upon a
proposal to adopt an Amended and Restated Agreement and Plan of Merger dated as
of December 5, 1993 (the "Merger Agreement") by and among Dreyfus, Mellon,
Mellon Bank, N.A. ("Mellon Bank") and XYZ Sub Corporation, a wholly owned
subsidiary of Mellon Bank ("Merger Subsidiary"), pursuant to which Merger
Subsidiary will merge with and into Dreyfus and Dreyfus will become a wholly
owned subsidiary of Mellon Bank (the "Merger"). Mellon Bank is a wholly owned
subsidiary of Mellon. As a result of the Merger, each share of Dreyfus Common
Stock issued and outstanding immediately prior to the effective time of the
Merger (the "Effective Time") will be converted into the right to receive
0.88017 shares of Mellon Common Stock (the "Exchange Ratio"). At the Mellon
Meeting, the holders of Mellon Common Stock and Series D Stock will consider and
vote upon a proposal to approve the Merger Agreement; such approval of the
Merger Agreement will constitute approval of the issuance of the shares of
Mellon Common Stock (the "Merger Shares") to be issued pursuant to the Merger
Agreement.
This Prospectus/Joint Proxy Statement also constitutes a prospectus of
Mellon with respect to the Merger Shares.
The outstanding shares of Mellon Common Stock are, and the Merger Shares
offered hereby will be, listed on the New York Stock Exchange (the "NYSE"). The
last reported sale price of Mellon Common Stock reported on the NYSE on July 19,
1994 was $ per share.
This Prospectus/Joint Proxy Statement and the accompanying proxy cards are
first being mailed to shareholders of Dreyfus and Mellon on or about July 21,
1994.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS/JOINT PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS, OR OTHER
OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
------------------
The date of this Prospectus/Joint Proxy Statement is July 19, 1994.
<PAGE> 10
AVAILABLE INFORMATION
Each of Dreyfus and Mellon is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "SEC"). Mellon has filed with the
SEC a Registration Statement on Form S-4 (the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"), covering the
Merger Shares. The Registration Statement and the exhibits thereto, as well as
the reports, proxy statements and other information filed with the SEC by each
of Dreyfus and Mellon under the Exchange Act, may be inspected and copied at
prescribed rates at the public reference facilities maintained by the SEC at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549, and at
the regional offices of the SEC located at 7 World Trade Center, Thirteenth
Floor, New York, New York 10048, and CitiCorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60621. Copies of such materials may also be
obtained at prescribed rates from the Public Reference Section of the SEC at 450
Fifth Street, N.W., Washington, DC 20549. The Mellon Common Stock is listed on
the NYSE and all materials filed by Mellon will be available for inspection at
the office of the NYSE, 20 Broad Street, New York, New York 10005. The Dreyfus
Common Stock is listed on the NYSE and The Pacific Stock Exchange Incorporated
(the "Pacific Stock Exchange"), and such reports and other information
concerning Dreyfus also can be inspected at the offices of the NYSE noted above
or at the offices of the Pacific Stock Exchange, 301 Pine Street, San Francisco,
California 94104.
Statements contained herein or in any document incorporated herein by
reference as to the contents of any contract or other document referred to
herein or therein are not necessarily complete and, in each instance, reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement or such other document incorporated herein by
reference. Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, all of which were previously filed with the SEC by
Dreyfus pursuant to the Exchange Act, are hereby incorporated by reference in
this Prospectus/Joint Proxy Statement:
(1) Dreyfus' Annual Report on Form 10-K for the year ended December
31, 1993; and
(2) Dreyfus' Quarterly Report on Form 10-Q for the quarter ended March
31, 1994.
The following documents, all of which were previously filed with the SEC by
Mellon pursuant to the Exchange Act, are hereby incorporated by reference in
this Prospectus/Joint Proxy Statement:
(1) Mellon's Annual Report on Form 10-K, as amended, for the year
ended December 31, 1993;
(2) Mellon's Quarterly Report on Form 10-Q for the quarter ended March
31, 1994;
(3) Mellon's Current Reports on Form 8-K dated January 5, 1994,
January 13, 1994, April 19, 1994 and July 15, 1994, Amendment No. 2 on
Form 8, dated February 24, 1993, to Current Report on Form 8-K dated
September 14, 1992 and Current Report on Form 8-K/A dated as
of September 14, 1992 and filed May 17, 1993;
(4) The description of Mellon Common Stock set forth in Mellon's
Registration Statement on Form 8-A dated June 10, 1981, including all
reports updating such description; and
(5) The description of the rights set forth in Mellon's Registration
Statement on Form 8-A dated August 15, 1989, including all reports updating
such description.
The information relating to Dreyfus and Mellon contained in this
Prospectus/Joint Proxy Statement does not purport to be comprehensive and should
be read together with the information in the documents incorporated by reference
herein.
All documents filed by Dreyfus and Mellon, respectively, under Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus/Joint Proxy Statement and prior to the date of the Dreyfus
2
<PAGE> 11
Meeting and the Mellon Meeting shall be deemed to be incorporated by reference
in this Prospectus/Joint Proxy Statement and to be a part hereof from the date
of filing such documents. Any statement contained herein or in a document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus/Joint Proxy Statement to the extent that a
statement contained herein or in any other subsequently filed document which is
also incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus/Joint Proxy
Statement.
THIS PROSPECTUS/JOINT PROXY STATEMENT INCORPORATES CERTAIN DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS
(WITHOUT EXHIBITS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE IN THIS PROSPECTUS/JOINT PROXY STATEMENT) ARE AVAILABLE WITHOUT CHARGE
TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS
PROSPECTUS/JOINT PROXY STATEMENT IS DELIVERED, UPON WRITTEN OR ORAL REQUEST.
REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED, IN THE CASE OF DREYFUS
DOCUMENTS, TO THE DREYFUS CORPORATION, 200 PARK AVENUE, NEW YORK, NEW YORK
10166, ATTENTION: SECRETARY, TELEPHONE: (212) 922-6000, AND, IN THE CASE OF
MELLON DOCUMENTS, TO MELLON BANK CORPORATION, ROOM 1820, ONE MELLON BANK CENTER,
500 GRANT STREET, PITTSBURGH, PENNSYLVANIA 15258, ATTENTION: SECRETARY,
TELEPHONE: (412) 234-5000. TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY
REQUEST SHOULD BE MADE BY FIVE BUSINESS DAYS BEFORE THE DATE OF THE MELLON
MEETING OR DREYFUS MEETING, RESPECTIVELY.
No person is authorized to give any information or to make any
representation not contained in the Prospectus/Joint Proxy Statement, and, if
given or made, such information or representation should not be relied upon as
having been authorized by Dreyfus or Mellon. This Prospectus/Joint Proxy
Statement does not constitute an offer to sell, or a solicitation of an offer to
purchase, the securities offered by this Prospectus/Joint Proxy Statement, or
the solicitation of a proxy, in any jurisdiction in which it is unlawful to make
such an offer, solicitation of an offer, or proxy solicitation. Neither the
delivery of this Prospectus/Joint Proxy Statement nor any distribution of the
securities offered pursuant to this Prospectus/Joint Proxy Statement shall,
under any circumstances, create any implication that there has been no change in
the information set forth herein or in the affairs of Dreyfus or Mellon or any
of their respective subsidiaries since the date of this Prospectus/Joint Proxy
Statement or that the information herein is correct as of any time subsequent to
the date hereof.
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TABLE OF CONTENTS
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SUMMARY.............................................................................. 8
Introduction....................................................................... 8
The Companies...................................................................... 8
Dreyfus......................................................................... 8
Mellon.......................................................................... 8
Reasons for the Merger............................................................. 9
Recommendations of the Boards of Directors......................................... 9
Dreyfus......................................................................... 9
Mellon.......................................................................... 10
Opinions of Financial Advisers..................................................... 10
Interests of Certain Persons in the Merger......................................... 10
Terms of the Merger................................................................ 11
General......................................................................... 11
Conversion of Dreyfus Common Stock.............................................. 11
Conditions to the Merger........................................................ 11
No Solicitations................................................................ 12
Right of the Dreyfus Board to Withdraw Recommendation........................... 12
Termination..................................................................... 12
Waiver and Amendment; Revisions to Transaction.................................. 13
Divestitures....................................................................... 13
Certain Federal Income Tax Consequences of the Merger.............................. 13
Accounting Treatment of the Merger................................................. 13
NYSE Listing....................................................................... 14
Dissenters' Rights................................................................. 14
Securities Issued in the Merger.................................................... 14
The Dreyfus Meeting and the Mellon Meeting......................................... 15
Dates, Times and Places......................................................... 15
Purposes of Meetings............................................................ 15
Shares Outstanding and Entitled to Vote; Record Dates........................... 15
Votes Required.................................................................. 15
Market Prices of Mellon Common Stock and Dreyfus Common Stock; Cash Dividends........ 17
Selected Financial Data.............................................................. 18
Mellon Bank Corporation and Subsidiaries Consolidated Selected Historical Financial
Data............................................................................... 19
The Dreyfus Corporation and Subsidiaries Consolidated Selected Historical Financial
Data............................................................................... 22
Mellon Bank Corporation and Subsidiaries and The Dreyfus Corporation and Subsidiaries
Pro Forma Combined Selected Financial Data (Unaudited)............................. 23
Unaudited Comparative Per Share Book Value, Market Value, Cash Dividend and
Earnings Data...................................................................... 24
Comparative Per Common Share Data (Unaudited)........................................ 25
Selected Financial Ratios (Unaudited)................................................ 26
Mellon Bank Corporation and Subsidiaries, The Boston Company, Inc. and Subsidiaries
and
The Dreyfus Corporation and Subsidiaries Pro Forma Combined Selected Financial Data
(Unaudited)........................................................................ 27
INTRODUCTION......................................................................... 28
THE COMPANIES........................................................................ 28
Dreyfus............................................................................ 28
Mellon............................................................................. 28
THE DREYFUS MEETING.................................................................. 29
Date, Time and Place............................................................... 29
Purpose of Meeting................................................................. 29
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Shares Outstanding and Entitled to Vote; Record Date............................... 29
Vote Required...................................................................... 29
Voting; Solicitation and Revocation of Proxies..................................... 29
Independent Public Accountants..................................................... 30
THE MELLON MEETING................................................................... 30
Date, Time and Place............................................................... 30
Purpose of Meeting................................................................. 30
Shares Outstanding and Entitled to Vote; Record Date............................... 30
Vote Required...................................................................... 30
Voting; Solicitation and Revocation of Proxies..................................... 31
Independent Public Accountants..................................................... 31
BACKGROUND OF AND REASONS FOR THE MERGER............................................. 31
Background of the Merger........................................................... 31
Reasons for the Merger--General.................................................... 34
Reasons for the Merger--Dreyfus; Recommendation of Dreyfus Board................... 35
Opinions of Dreyfus Financial Advisers............................................. 36
Lazard Opinions................................................................. 36
Salomon Brothers Opinions....................................................... 40
Reasons for the Merger--Mellon; Recommendation of Mellon Board..................... 45
Opinions of Mellon Financial Adviser............................................... 45
THE MERGER........................................................................... 49
General............................................................................ 49
Conversion of Dreyfus Common Stock; Effect on Mellon Shareholders.................. 50
Conversion of Dreyfus Common Stock.............................................. 50
Effect on Mellon Shareholders................................................... 50
No Fractional Shares of Mellon Common Stock to be Issued........................ 50
Dissenters' Rights.............................................................. 50
Procedure for Exchange of Certificates............................................. 50
Manner of Exchange.............................................................. 50
Rights of Holders of Dreyfus Stock Certificates Prior to Surrender.............. 51
Lost, Stolen or Destroyed Certificates.......................................... 51
Conduct of Business Pending the Merger............................................. 51
Dreyfus......................................................................... 51
Mellon.......................................................................... 53
No Solicitations................................................................... 53
Best Efforts to Consummate the Merger.............................................. 54
Conditions to the Merger........................................................... 54
Regulatory Requirements............................................................ 57
Interests of Certain Persons in the Merger......................................... 60
Indemnification................................................................. 60
Officers' and Directors' Liability Insurance.................................... 60
Voting Agreements............................................................... 60
Employee Benefits............................................................... 60
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Certain Agreements Relating to Conduct of Business After the Merger................ 61
Effects of the Merger on Dreyfus Employee Benefits................................. 61
Benefits--In General............................................................ 61
Dreyfus Pension Plan............................................................ 62
Dreyfus Profit-Sharing Plan..................................................... 62
Dreyfus Deferred Compensation Plan.............................................. 62
Salaries; Severance............................................................. 63
Certain Bonus, Incentive and Performance Plans.................................. 63
Dreyfus 1982 ISO, Dreyfus 1989 Option Plan, Dreyfus Optional Incentive Payment
Plan........................................................................... 63
Supplemental Retirement Benefits................................................ 64
Retention Program............................................................... 64
Dreyfus Contingent Benefit Plan................................................. 65
Right of the Dreyfus Board to Withdraw its Recommendation.......................... 66
Termination of the Merger Agreement; Fee........................................... 66
Termination..................................................................... 66
Fee............................................................................. 67
Waiver and Amendment; Revisions to Transaction..................................... 68
Effective Time..................................................................... 69
NYSE Listing of Mellon Common Stock................................................ 69
Delisting and Deregistration of Dreyfus Common Stock............................... 69
Certain Federal Income Tax Consequences of the Merger.............................. 69
Cash Received in Lieu of Fractional Shares...................................... 69
Cash Received by Stockholders Who Exercise Dissenters' Rights................... 70
Accounting Treatment of the Merger................................................. 70
Resales by Affiliates of Mellon Common Stock Received in the Merger................ 70
DISSENTERS' RIGHTS................................................................... 71
Dreyfus Stockholders............................................................... 71
Mellon Shareholders................................................................ 73
COMPARISON OF SHAREHOLDERS' RIGHTS................................................... 73
Charter Amendments................................................................. 74
Directors.......................................................................... 74
Removal of Directors............................................................... 75
Newly Created Directorships and Vacancies.......................................... 75
Cumulative Voting.................................................................. 76
Limitation on Directors' Liability................................................. 76
Indemnification.................................................................... 76
Shareholder Vote Required for Certain Transactions................................. 77
Special Meeting of Shareholders; Shareholder Action by Written Consent............. 77
Business Combinations Following a Change in Control................................ 78
Director Considerations............................................................ 79
Dissenters' Rights................................................................. 79
Dividends.......................................................................... 80
Stock Repurchases.................................................................. 80
Conversion of Shares in a Merger................................................... 80
Interested Transactions............................................................ 80
Corporate Records, Shareholder Inspection.......................................... 81
Warrants or Options................................................................ 81
Preemptive Rights.................................................................. 82
Mellon Shareholder Protection Rights Plan.......................................... 82
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS.......................... 83
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS................. 92
CERTAIN REGULATORY CONSIDERATIONS.................................................... 93
FDICIA............................................................................. 94
Capital............................................................................ 95
FDIC Insurance Assessments......................................................... 96
CERTAIN LEGAL PROCEEDINGS............................................................ 96
Class Actions...................................................................... 96
Application Filed with SEC......................................................... 97
LEGAL OPINIONS....................................................................... 98
EXPERTS.............................................................................. 98
PROXY SOLICITATION EXPENSES.......................................................... 98
SHAREHOLDER PROPOSALS................................................................ 99
APPENDICES
I. Amended and Restated Agreement and Plan of Merger............................. I-1
II. Opinion of Lazard Freres & Co................................................. II-1
III. Opinion of Salomon Brothers Inc............................................... III-1
IV. Opinion of Goldman, Sachs & Co................................................ IV-1
V. New York Dissenters' Rights Statute........................................... V-1
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SUMMARY
The following discussion is intended to summarize certain information
contained elsewhere in this Prospectus/Joint Proxy Statement. This summary is
not intended to be complete and is qualified in its entirety by reference to the
more detailed information contained elsewhere in this Prospectus/Joint Proxy
Statement, the appendices hereto and the documents referred to and incorporated
herein.
INTRODUCTION
The Dreyfus Board and Mellon Board have each unanimously adopted and
approved the Merger Agreement, pursuant to which Merger Subsidiary will be
merged with and into Dreyfus if the shareholders of both Dreyfus and Mellon
adopt and approve the Merger Agreement by the requisite shareholder votes,
certain regulatory approvals are received and certain other conditions are
satisfied. Dreyfus will be the surviving corporation in the Merger and will be a
wholly owned subsidiary of Mellon Bank, which is a wholly owned subsidiary of
Mellon. As a result of the Merger, each share of Dreyfus Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares as to
which dissenters' rights are properly exercised) will be converted into the
right to receive 0.88017 shares of Mellon Common Stock, with holders receiving
cash in lieu of fractional shares of Mellon Common Stock. Approval of the Merger
Agreement by the shareholders of Mellon will also constitute approval of the
issuance of shares of Mellon Common Stock pursuant to the Merger Agreement.
Based upon the closing sales price for Mellon Common Stock on the New York Stock
Exchange on December 3, 1993 (the last business day before the first public
announcement of the Merger on December 6, 1993), the value of the Mellon Common
Stock to be received for each outstanding share of Dreyfus Common Stock in the
Merger is $50.50. Based upon the closing sales price for Mellon Common Stock on
the New York Stock Exchange on July 19, 1994, the value of Mellon Common Stock
to be received for each outstanding share of Dreyfus Common Stock in the Merger
is $ .
THE COMPANIES
Dreyfus. Dreyfus is one of the nation's oldest and largest mutual fund
management companies. Based upon assets under management at December 31, 1993,
Dreyfus is the sixth largest mutual fund organization in the United States, the
second largest manager of tax-exempt bond funds, the third largest manager of
tax-exempt money market funds and the third largest manager of taxable money
market funds. As of December 31, 1993, Dreyfus managed, advised or administered
assets totaling approximately $77.6 billion. As of December 31, 1993, Dreyfus
managed, administered or advised 136 different mutual fund portfolios, including
money market funds (taxable and tax-exempt), tax-exempt bond funds, equity funds
and taxable fixed income funds, with approximately 1.9 million shareholder
accounts. Dreyfus also owns a Federal savings bank and a New York trust company.
The mailing address and telephone number of Dreyfus' principal executive offices
are 200 Park Avenue, New York, New York 10166, (212) 922-6000. See "The
Companies-- Dreyfus."
Mellon. Mellon is a multibank holding company incorporated under the laws
of Pennsylvania and registered under the Federal Bank Holding Company Act of
1956, as amended. At December 31, 1993, it was the 23rd largest bank holding
company in the United States in terms of assets. Through its subsidiaries,
Mellon provides a broad array of financial products and services to individuals
and small businesses in the Central Atlantic states of Pennsylvania, Delaware
and Maryland; to mid-sized companies throughout the Central Atlantic region; and
to large corporate and institutional customers throughout the United States and
in select international markets. As of December 31, 1993, Mellon on a
consolidated basis had total assets of approximately $36.1 billion, loans net of
the reserve for credit losses of approximately $23.9 billion and total
shareholders' equity of approximately $3.3 billion. The mailing address and
telephone number of Mellon's principal executive offices are One Mellon Bank
Center, 500 Grant Street, Pittsburgh, Pennsylvania 15258, (412) 234-5000. See
"The Companies--Mellon."
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REASONS FOR THE MERGER
The merger of Mellon and Dreyfus will create one of the nation's largest
financial services companies, capable of delivering a wide range of financial
products and services. The combined company will become the nation's second
largest investment advisory firm with over $210 billion of assets under
management and over $825 billion of assets under custody or administration.
Through the combination of the existing products and services, delivery
systems, customer bases, technological expertise and investment management
skills of each organization, the combined Mellon/Dreyfus entity will be uniquely
positioned among its competitors in the financial services industry with the
financial, marketing and investment management capabilities to further develop
and expand long-term customer relationships. The Merger should permit each
company to diversify beyond its current markets and current strengths in the
financial products and services it now offers by expanding the marketing of such
products and services into the customer bases currently served by the other.
Based upon the actual results of operations for the first quarter of 1994 and
the March 31, 1994 balance sheets of Mellon and Dreyfus, Dreyfus would have
contributed approximately 2% of the initial combined assets, approximately 20%
of the initial combined total shareholders' equity, approximately 12% of the
combined net interest and noninterest revenues and approximately 16% of the
combined net income on a pro forma basis giving effect to the Merger. Based on
the Exchange Ratio and the number of shares of Dreyfus Common Stock and Mellon
Common Stock outstanding on December 3, 1993, Dreyfus stockholders would receive
approximately 33% ownership of the combined company after the Merger. See
"Unaudited Pro Forma Condensed Combined Financial Statements."
Mellon and Dreyfus believe that going forward the synergies created by
their respective businesses will provide the combined entity with opportunities
to achieve expense savings, cost reductions and operating efficiencies as well
as greater latitude in the creation, development, marketing and delivery of
current and future products and services. Mellon currently anticipates that the
pre-tax benefit of these savings, cost reductions and operating efficiencies
will be approximately $30 million in the first four full fiscal quarters
following the Merger and approximately $60 million per year thereafter when
compared with the 1993 level of annual combined expenses of Mellon and Dreyfus.
These anticipated benefits are expected by Mellon to be partially offset by
normal expense growth that will occur in support of anticipated revenue growth.
The above benefits are expected to be realized by the realization of economies
of scale and the elimination of duplicative support services and functions from
both organizations, the consolidation of certain back-office and data processing
operations and in other ways. The savings described above are expected by Mellon
to include a certain amount of expense savings resulting from volume discounts
realized from the combined buying power of the larger combined organization.
While management of the combined entity will be continually evaluating the
merged operations and identifying areas for consolidation and expense savings,
there can be no guarantee that these efforts will be successful or will be
completed within the periods currently anticipated. See "Background of and
Reasons for the Merger--Reasons for the Merger--General" for additional details
regarding expected expense savings.
Finally, the Merger is also expected to diversify Mellon's revenue base by
bringing fee-based revenues to approximately one-half of Mellon's total revenue
stream, thereby strengthening the long-term shareholder value of the combined
company. A balanced source of revenues and sustainable high quality earnings are
key elements of Mellon's strategic plan to strengthen long-term shareholder
value.
See "Background of and Reasons for the Merger--Reasons for the
Merger--General."
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
DREYFUS. THE DREYFUS BOARD HAS UNANIMOUSLY ADOPTED AND APPROVED THE MERGER
AGREEMENT AND DETERMINED THAT THE MERGER IS FAIR TO AND IN THE BEST INTERESTS OF
DREYFUS AND THE DREYFUS STOCKHOLDERS AND RECOMMENDS A VOTE FOR THE PROPOSAL TO
ADOPT THE MERGER AGREEMENT. For a discussion of the factors considered by the
Dreyfus Board in reaching its decision, see "Reasons for the Merger--Dreyfus;
Recommendation of Dreyfus Board."
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Mellon. THE MELLON BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
THE ISSUANCE OF SHARES OF MELLON COMMON STOCK PURSUANT THERETO AND DETERMINED
THAT THE MERGER IS FAIR TO AND IN THE BEST INTERESTS OF MELLON AND THE MELLON
SHAREHOLDERS AND RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE THE MERGER
AGREEMENT AND THE ISSUANCE OF THE MERGER SHARES PURSUANT THERETO. For a
discussion of the factors considered by the Mellon Board in reaching its
decision, see "Reasons for the Merger--Mellon; Recommendation of Mellon Board."
OPINIONS OF FINANCIAL ADVISERS
Lazard Freres & Co. ("Lazard") and Salomon Brothers Inc ("Salomon
Brothers") have each delivered their written opinions to the Dreyfus Board to
the effect that, as of the date of the Merger Agreement and as of the date of
this Prospectus/Joint Proxy Statement, the Exchange Ratio is fair, from a
financial point of view, to the holders of Dreyfus Common Stock. COPIES OF THE
OPINIONS OF LAZARD AND SALOMON BROTHERS DATED AS OF THE DATE OF THIS
PROSPECTUS/JOINT PROXY STATEMENT ARE ATTACHED HERETO AS APPENDICES II AND III,
RESPECTIVELY. THE OPINIONS SHOULD BE READ IN THEIR ENTIRETY FOR A DESCRIPTION OF
THE PROCEDURES FOLLOWED, ASSUMPTIONS AND QUALIFICATIONS MADE, MATTERS
CONSIDERED, AND QUALIFICATIONS AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY
LAZARD AND SALOMON BROTHERS, RESPECTIVELY.
Goldman, Sachs & Co. ("Goldman Sachs") has delivered its written opinions
to the Mellon Board to the effect that, as of the date of the Merger Agreement
and as of the date of this Prospectus/Joint Proxy Statement, the Exchange Ratio
is fair to Mellon. A COPY OF THE OPINION OF GOLDMAN SACHS AS OF THE DATE OF THIS
PROSPECTUS/JOINT PROXY STATEMENT IS ATTACHED HERETO AS APPENDIX IV. THE OPINION
SHOULD BE READ IN ITS ENTIRETY FOR A DESCRIPTION OF THE PROCEDURES FOLLOWED,
ASSUMPTIONS AND QUALIFICATIONS MADE, MATTERS CONSIDERED, AND QUALIFICATIONS AND
LIMITATIONS ON THE REVIEW UNDERTAKEN BY GOLDMAN SACHS.
See also "Background Of And Reasons For The Merger--Opinions of Dreyfus
Financial Advisers;-- Opinions of Mellon Financial Adviser."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Merger Agreement provides that, during the two-year period after the
Effective Time, Howard Stein (currently the Chairman and Chief Executive Officer
of Dreyfus) will be the Chief Executive Officer of Dreyfus and Joseph S.
DiMartino (currently the President and Chief Operating Officer of Dreyfus) will
be the President of Dreyfus. The Merger Agreement also provides that an
Executive Committee of the Dreyfus Board shall be established as of the
Effective Time and, during such two-year period, unless otherwise determined by
the Executive Committee, the Executive Committee will consist of four members,
who will be Messrs. Stein, DiMartino, Frank V. Cahouet, Chairman, President and
Chief Executive Officer of Mellon, and W. Keith Smith, Vice Chairman of Mellon.
Persons who are members of the Dreyfus Board immediately prior to the Effective
Time will continue to serve in such capacities throughout the two-year period
following the Effective Time, together with any additional persons appointed by
Mellon to the Dreyfus Board. The size of the Mellon Board shall be increased as
of the Effective Time by three members and Messrs. Stein, DiMartino and Edward
J. McAniff (a partner of the law firm of O'Melveny & Myers) shall be appointed
as such three additional members. In addition, the size of the Mellon Executive
Committee will be increased by one member and Mr. Stein shall be appointed to
fill the vacancy created by such increase.
Pursuant to the Merger Agreement, Mellon and Mellon Bank have agreed, upon
consummation of the Merger, to provide for indemnification of Dreyfus' directors
and officers and to maintain for six years Dreyfus' directors' and officers'
liability insurance coverage.
In connection with the Merger Agreement, Messrs. Stein and DiMartino have
agreed with Mellon in their individual capacities as stockholders of Dreyfus
that they will vote all of the shares of Dreyfus Common Stock held by each of
them in favor of adoption of the Merger Agreement at the Dreyfus Meeting.
Messrs. Stein and DiMartino have also agreed that, in the event the Merger
Agreement is terminated, they will not, for a period of one year after such
termination, vote their shares in favor of any Acquisition Proposal (as defined
in the Merger Agreement) other than the Merger.
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Certain of the directors and executive officers of Dreyfus have a financial
interest in the completion of the Merger because of their rights under various
Dreyfus employee benefits plans, agreements and programs. Some of these plans,
agreements and programs contain provisions that are activated upon a "change of
control" of Dreyfus, which would occur if the Merger is completed. The Merger
Agreement also creates additional employee benefits programs, not previously in
effect for Dreyfus employees, and provides for certain changes in pre-existing
Dreyfus employee benefits plans, agreements and programs. The interests of
certain of the Dreyfus directors and executive officers under these existing and
future plans, agreements and programs include the following: (i) the Merger
Agreement provides that the interests of participants in the Dreyfus Deferred
Compensation Plan will be fully vested as of the Effective Time; as of June 30,
1994, the aggregate unvested interest of Dreyfus directors and executive
officers as a group in that plan was $246,455; (ii) pursuant to a January 16,
1990 agreement with Dreyfus, Mr. Julian M. Smerling is entitled to receive
supplemental retirement benefits of $500,000 per year for ten years upon
retirement; as a result of the Merger, Mr. Smerling will be entitled under the
1990 agreement to a lump sum payment of the entire remaining amount of such
retirement benefit without regard to his retirement; (iii) the Merger Agreement
provides that Dreyfus and Mellon will establish a retention plan, which will
provide for the payment of retention bonus awards (expected to be approximately
$2,500,000 in the aggregate) to certain employees of Dreyfus; one or more of
Dreyfus' executive officers will participate in that plan; (iv) pursuant to a
separate agreement between Mellon and Dreyfus, additional retention payments and
severance payments (estimated to be up to $2,500,000) may be made; one or more
of Dreyfus' executive officers may receive such payments; and (v) Dreyfus
maintains a Contingent Benefit Plan pursuant to which, under certain
circumstances after a change of control of Dreyfus (which would include the
Merger) (A) payments are to be made to certain key employees in respect of units
held by them under that plan and (B) various stock options which would not then
otherwise be exercisable may become exercisable. If the Effective Time had
occurred on June 30, 1994, and the book value at that time were immediately
available, the aggregate value of the units held by all directors and executive
officers of Dreyfus under the plan would have been $30,481,376 and 406,250
options under the Dreyfus 1989 Option Plan that were not otherwise exercisable
could become exercisable.
See "The Merger--Interests of Certain Persons in the Merger" and "--Effects
of the Merger on Dreyfus Employee Benefits."
TERMS OF THE MERGER
GENERAL. Pursuant to the Merger Agreement, at the Effective Time, Merger
Subsidiary, a wholly owned subsidiary of Mellon Bank, will be merged with and
into Dreyfus, and Dreyfus will become a wholly owned subsidiary of Mellon Bank,
which is a wholly owned subsidiary of Mellon. Pursuant to the Merger Agreement,
throughout a two-year period following the Effective Time, Dreyfus, as a direct
or indirect subsidiary of Mellon, will continue to be headquartered in the New
York City metropolitan area, and will continue to be known under Dreyfus'
current corporate name. See "The Merger--General."
CONVERSION OF DREYFUS COMMON STOCK. At the Effective Time, each issued and
outstanding share of Dreyfus Common Stock, other than shares as to which
dissenters' rights are properly exercised, will be converted into the right to
receive 0.88017 shares of Mellon Common Stock, with holders receiving cash in
lieu of fractional shares of Mellon Common Stock. Each share of Mellon Common
Stock issued and outstanding at the Effective Time will continue as one share of
Mellon Common Stock. See "The Merger-- Conversion of Dreyfus Common Stock;
Effect on Mellon Shareholders," "Dissenters' Rights" and "Comparison of
Shareholders' Rights."
CONDITIONS TO THE MERGER. Consummation of the Merger is conditioned upon
the satisfaction or waiver of certain conditions specified in the Merger
Agreement, including, among others, (i) adoption and approval of the Merger
Agreement by the requisite votes of holders of shares of Dreyfus Common Stock
and Mellon Common Stock; (ii) certain approvals of various mutual funds managed,
advised or administered by Dreyfus by the requisite votes of the boards of
directors and/or shareholders of such mutual funds; (iii) receipt of all
necessary approvals for the Merger by governmental regulatory agencies,
including the Office of the Comptroller of the Currency (the "OCC"), the Board
of Governors of the Federal Reserve System (the "Federal Reserve Board"), the
Office of Thrift Supervision, the New York State Banking Department (the
11
<PAGE> 20
"N.Y. Banking Department") and various state securities commissions; (iv) the
expiration or termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"); (v) receipt by each of Mellon and Dreyfus of a favorable tax opinion from
its legal counsel; (vi) receipt by Dreyfus and Mellon of letters from Ernst &
Young, Dreyfus' independent auditors, and from KPMG Peat Marwick, Mellon's
independent auditors, in each case to the effect that the Merger qualifies for
pooling of interests accounting treatment; (vii) the continuing accuracy of the
representations and warranties of Mellon and Dreyfus; and (viii) performance of
specified obligations by Mellon and Dreyfus. Dreyfus and Mellon filed
notifications pursuant to the HSR Act and, on February 3, 1994, received
notification from the Federal Trade Commission that early termination of the
waiting period under the HSR Act had been granted. The Merger was approved by
the OCC on May 4, 1994. The Federal Reserve Board, the Office of Thrift
Supervision and the New York Banking Department approved Mellon's acquisition of
various subsidiaries of Dreyfus under their respective supervision on June 22,
1994, June 20, 1994 and June 2, 1994, respectively. Applications have been filed
and are currently pending with several state securities commissions. All of the
boards of directors of the various mutual funds managed, advised or administered
by Dreyfus have approved the matters required to be approved by them for the
Merger, except for the board of one mutual fund administered by Dreyfus which is
currently expected to meet for that purpose on July 20, 1994. The solicitation
of approvals by the shareholders of the mutual funds is expected to occur
concurrently with the solicitation of the stockholders of Mellon and Dreyfus in
respect of the Merger. While Mellon and Dreyfus believe that they will receive
the requisite regulatory and mutual fund approvals for the Merger, there can be
no assurance as to whether such approvals will be obtained prior to the Dreyfus
Meeting and the Mellon Meeting or on satisfactory terms or otherwise. See "The
Merger--Conditions to the Merger" and "--Regulatory Requirements."
No Solicitations. Under the Merger Agreement, except in certain
circumstances, including if the Dreyfus Board determines on the basis of written
advice from outside counsel that certain actions are necessary in order for the
Dreyfus Board to act in a manner consistent with its fiduciary obligation under
applicable law, neither Dreyfus, nor any of its officers, directors, employees,
agents or representatives may initiate, solicit or encourage, directly or
indirectly, any inquiries or the making of any proposal or offer with respect to
a merger, consolidation or similar transaction involving, or any purchase of any
substantial portion of the equity securities of, Dreyfus, or any subsidiary of
Dreyfus, or the assignment of any substantial portion of any investment
advisory, subadvisory, administrative or distribution agreement by Dreyfus or
any subsidiary of Dreyfus or the entering into by any Dreyfus mutual fund of an
investment advisory, subadvisory, administrative or distribution agreement with
any company other than Dreyfus or a subsidiary of Dreyfus. See "The Merger--No
Solicitations."
Right of the Dreyfus Board to Withdraw Recommendation. The Dreyfus Board
is permitted under the Merger Agreement to modify, withdraw or amend its
recommendation to the Dreyfus stockholders that they adopt the Merger Agreement
if an alternative acquisition proposal from a third party has been received by
Dreyfus or the fairness opinions of Dreyfus' financial advisers (see "Opinions
of Dreyfus Financial Advisers") have been withdrawn, in each case to the extent
that the Dreyfus Board reasonably determines, upon the basis of written advice
of outside counsel, that such action is necessary in order for the Dreyfus Board
to act in a manner which is consistent with its fiduciary obligation under
applicable law. See "The Merger--Right of the Dreyfus Board to Withdraw its
Recommendation."
Termination. The Merger Agreement may be terminated, and the Merger
abandoned, prior to the Effective Time, whether before or after its adoption and
approval by the shareholders of Dreyfus and Mellon (a) by the mutual consent of
the Dreyfus Board and Mellon Board, or (b) by either Dreyfus or Mellon under
certain specified circumstances, including by either party if the Merger has not
been consummated by December 31, 1994 and by Dreyfus if the Dreyfus Board has
approved an alternative acquisition proposal after determining, upon the basis
of written advice of outside counsel, that such approval is necessary in the
exercise of its fiduciary obligation under applicable law. Pursuant to the
Merger Agreement, under certain circumstances, Dreyfus is required to pay Mellon
a fee of $50,000,000 upon another party's acquisition of 25% or more of the
outstanding Dreyfus Common Stock or the entering into by Dreyfus or any of its
material subsidiaries of certain types of agreements with other parties relating
to business combinations or the
12
<PAGE> 21
acquisition of all or substantially all of its assets or 25% or more of its
outstanding Common Stock. See "The Merger--Termination of the Merger Agreement;
Fee."
WAIVER AND AMENDMENT; REVISIONS TO TRANSACTION. Any provision of the
Merger Agreement may be waived by the party benefitted by the provision. The
Merger Agreement provides that, in the event that either Dreyfus or Mellon
determines that a change in the method of effecting the transactions
contemplated by the Merger Agreement would facilitate the consummation of those
transactions, Dreyfus and Mellon will discuss the proposed change and cooperate
in good faith to determine whether the proposed change is in the best interests
of the parties to the Merger Agreement, provided that the proposed change may
neither alter or change the amount or kind of consideration to be issued to
Dreyfus stockholders under the Merger Agreement, nor adversely affect the tax
treatment to Dreyfus stockholders as a result of receiving such consideration.
In addition, the Merger Agreement provides that it may be amended by mutual
consent of the parties thereto.
DIVESTITURES
Due to certain bank regulatory requirements, Mellon and Dreyfus have
determined that several subsidiaries of Dreyfus should be divested either prior
to or following the Merger. In addition, certain bank regulatory agencies have
conditioned their approval of the Merger on the divestiture of certain other
subsidiaries of Dreyfus either prior to or following the Merger. The aggregate
income before taxes for the three months ended March 31, 1994 of the
subsidiaries Mellon and Dreyfus have determined should be divested and those
additional subsidiaries which are required to be divested, was $66,000 which
represented less than 0.2% of Dreyfus' income before taxes for such period. The
aggregate assets of those subsidiaries at March 31, 1994 was $17 million, which
represented less than 2% of Dreyfus' total assets at that date. These
divestitures are not expected to have any meaningful effect on the ability of
Dreyfus to continue to conduct its core investment advisory business following
the Merger. Also for bank regulatory reasons, following the Merger certain
activities currently conducted by Dreyfus Service Corporation, a Dreyfus
subsidiary, in connection with the distribution of shares in the mutual funds
managed, administered or advised by Dreyfus will instead be performed by a
broker-dealer not affiliated with Mellon or Dreyfus. Dreyfus estimates that the
annual pre-tax net incremental cost to Dreyfus of using the independent
broker-dealer to provide such distribution and related services to the Dreyfus
funds will be approximately $3.6 million. See "The Merger--Regulatory
Requirements."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Consummation of the Merger is conditioned upon receipt by Dreyfus and
Mellon of opinions from their respective legal counsel to the effect that the
Merger will constitute a tax-free reorganization under the Internal Revenue Code
of 1986, as amended (the "Internal Revenue Code"). Because the Merger will be a
tax-free reorganization, no income, gain or loss will be recognized by a
stockholder of Dreyfus upon the exchange of shares of Dreyfus Common Stock for
Mellon Common Stock pursuant to the Merger, except that income, gain or loss
will be recognized by a holder of Dreyfus Common Stock upon the exercise of
dissenters' rights or upon receipt of cash in lieu of a fractional share of
Mellon Common Stock. The adjusted tax basis of a share of Mellon Common Stock
received by a stockholder of Dreyfus pursuant to the Merger will be the same as
the adjusted tax basis of the shares of Dreyfus Common Stock (reduced only by
amounts allocable to a fractional share interest for which cash is to be
received) surrendered in exchange therefor. A Dreyfus stockholder's holding
period for the Mellon Common Stock will include the period of time that the
stockholder held Dreyfus Common Stock prior to the Merger. There will be no tax
consequences to a holder of Mellon Common Stock or Series D Stock as a result of
the Merger. See "The Merger--Certain Federal Income Tax Consequences of the
Merger."
ACCOUNTING TREATMENT OF THE MERGER
Consummation of the Merger is conditioned upon receipt by Dreyfus and
Mellon of letters from Ernst & Young, independent auditors for Dreyfus, and KPMG
Peat Marwick, independent auditors for Mellon, to the effect that the Merger
will qualify for pooling of interests accounting treatment. If a sufficient
number of
13
<PAGE> 22
Dreyfus stockholders perfect dissenters' rights, the ability of the Merger to
qualify as a pooling of interests could be impaired. See "The Merger--Accounting
Treatment of the Merger" and "Dissenters' Rights."
NYSE LISTING
Under the Merger Agreement, it is a condition precedent to the Merger that
the shares of Mellon Common Stock issued in the Merger be approved for listing
on the NYSE upon notice of issuance. Mellon intends to file an application with
the NYSE for approval of such listing.
DISSENTERS' RIGHTS
Holders of Dreyfus Common Stock are entitled to relief as dissenting
stockholders under Section 910 of the New York Business Corporation Law (the
"NYBCL"), and may, by complying with Section 623 of the NYBCL, exercise such
dissenters' rights. Failure on the part of a holder of Dreyfus Common Stock to
comply precisely with the requirements of Section 623 of the NYBCL, a copy of
which is attached hereto as Appendix V, will result in the loss of such holder's
dissenters' rights. Holders of Mellon Common Stock and Series D Stock are not
entitled to dissenters' rights. See "Dissenters' Rights."
BECAUSE A PROXY CARD WHICH DOES NOT CONTAIN VOTING INSTRUCTIONS WILL,
UNLESS REVOKED, BE VOTED FOR ADOPTION OF THE MERGER AGREEMENT, A DREYFUS
STOCKHOLDER WHO WISHES TO EXERCISE HIS DISSENTERS' RIGHTS MUST EITHER REFRAIN
FROM SIGNING AND RETURNING HIS PROXY CARD OR, IF HE SIGNS AND RETURNS HIS PROXY
CARD, VOTE AGAINST OR ABSTAIN FROM VOTING ON THE ADOPTION OF THE MERGER
AGREEMENT.
A DREYFUS STOCKHOLDER WHO WISHES TO PERFECT HIS RIGHTS AS A DISSENTING
STOCKHOLDER IN THE EVENT THE MERGER AGREEMENT IS ADOPTED MUST FILE WITH DREYFUS,
BEFORE THE TAKING OF THE VOTE ON THE MERGER AGREEMENT AT THE DREYFUS MEETING, A
WRITTEN OBJECTION TO THE MERGER. IN ADDITION, A DREYFUS STOCKHOLDER WHO WISHES
TO PERFECT SUCH RIGHTS MUST SUBMIT THE CERTIFICATES REPRESENTING HIS SHARES TO
DREYFUS OR DREYFUS' TRANSFER AGENT FOR NOTATION THEREON THAT A NOTICE OF
ELECTION TO DISSENT HAD BEEN FILED; SUCH CERTIFICATES TO BE THEREUPON RETURNED
TO THE STOCKHOLDER. FAILURE TO SUBMIT SUCH CERTIFICATES FOR SUCH NOTATION WITHIN
ONE MONTH AFTER THE FILING OF THE NOTICE OF ELECTION TO DISSENT MAY CAUSE THE
HOLDER TO LOSE HIS DISSENTERS' RIGHTS.
SECURITIES ISSUED IN THE MERGER
The securities issued by Mellon in the Merger are not savings accounts,
deposits or other obligations of a bank or savings association and are not
insured by the Federal Deposit Insurance Corporation or any other governmental
agency.
14
<PAGE> 23
THE DREYFUS MEETING AND THE MELLON MEETING
<TABLE>
<S> <C>
Dates, Times and Places....... The Dreyfus Meeting will be held on August 23, 1994,
commencing at 11:00 a.m., local time, at the New York
Marriott Marquis, 1535 Broadway (between 45th and 46th
Streets), Westside South Center, 5th Floor, New York, New
York. The Mellon Meeting will be held on August 23, 1994,
commencing at 11:00 a.m., local time, in the 10th Floor
Auditorium of the Union Trust Building, 501 Grant Street,
Pittsburgh, Pennsylvania. See "The Dreyfus Meeting--Date,
Time and Place" and "The Mellon Meeting--Date, Time and
Place."
Purposes of Meetings.......... The purpose of the Dreyfus Meeting is to vote on a proposal
to adopt the Merger Agreement, pursuant to which Dreyfus
will become a wholly owned subsidiary of Mellon Bank and an
indirect wholly owned subsidiary of Mellon, and each share
of Dreyfus Common Stock issued and outstanding immediately
prior to the Effective Time will be converted into the right
to receive 0.88017 shares of Mellon Common Stock. The
purpose of the Mellon Meeting is to vote on a proposal to
approve the Merger Agreement; such approval of the Merger
Agreement by the shareholders of Mellon will also constitute
approval of the issuance of the Merger Shares. See "The
Dreyfus Meeting--Purpose of Meeting" and "The Mellon
Meeting--Purpose of Meeting."
Shares Outstanding and
Entitled to Vote;
Record Dates....... Shares of Dreyfus Common Stock are the only shares entitled
to notice of and to vote at the Dreyfus Meeting. Shares of
Mellon Common Stock and Series D Stock are the only shares
entitled to notice of and to vote at the Mellon Meeting.
July 19, 1994 is the record date for the Dreyfus Meeting and
the Mellon Meeting (the "Record Date"); on that date there
were 36,559,078 shares of Dreyfus Common Stock outstanding,
shares of Mellon Common Stock outstanding and
2,236,226 shares of Series D Stock outstanding. See "The
Dreyfus Meeting--Shares Outstanding and Entitled to Vote;
Record Date" and "The Mellon Meeting--Shares Outstanding and
Entitled to Vote; Record Date."
Votes Required................ The affirmative vote of two-thirds of the shares of Dreyfus
Common Stock outstanding on the Record Date is required to
adopt the Merger Agreement at the Dreyfus Meeting. The
affirmative vote of a majority of the shares of Mellon
Common Stock and Series D Stock, considered as one class,
voting on the proposal to approve the Merger Agreement
(provided that a majority of such shares outstanding on the
Record Date are voted) is required to approve the Merger
Agreement at the Mellon Meeting.
As of the Record Date, Dreyfus' directors, executive
officers and their affiliates owned and were entitled to
vote an aggregate of 2,181,409 shares of Dreyfus Common
Stock at the Dreyfus Meeting, representing 8.95% of the
number of Dreyfus stockholder votes necessary to adopt the
Merger Agreement. The preceding figure of 2,181,409 includes
those shares held in the Dreyfus Profit-Sharing Plan for the
benefit of executive officers and directors of Dreyfus who
are vested under the Dreyfus Profit-Sharing Plan. There were no
nonvested shares held in the Dreyfus Profit-Sharing Plan on the
Record Date for the benefit of executive officers and directors
of Dreyfus. The total number of shares held in the Dreyfus
Profit-Sharing Plan for the benefit of all
</TABLE>
15
<PAGE> 24
<TABLE>
<S> <C>
participants, including executive officers and directors
of Dreyfus, aggregated 4.06% of the outstanding Dreyfus Common
Stock on the Record Date. Howard Stein, Chairman and Chief
Executive Officer of Dreyfus, and Joseph S. DiMartino,
President and Chief Operating Officer of Dreyfus, have
agreed with Mellon in their individual capacities as
stockholders of Dreyfus to vote all shares of Dreyfus Common
Stock owned by them (1,173,024 shares or 3.21% of the
outstanding Dreyfus Common Stock on the Record Date) in
favor of adoption of the Merger Agreement at the Dreyfus
Meeting.
As of the Record Date, Mellon's directors, executive
officers and their affiliates owned and were entitled to
vote an aggregate of 1,715,604 shares at the Mellon Meeting,
representing % of the number of Mellon shareholders
votes represented by shares of Mellon Common Stock and
Series D Stock outstanding on the Record Date. Pursuant to
an agreement with Mellon, holders of all shares of Series D
Stock (2,236,226 shares outstanding on the Record Date) are
required to vote such shares in a manner that is no less
favorable to the position recommended by the Mellon Board
than the allocation of the votes cast by all other
shareholders of Mellon voting on the proposal to approve the
Merger Agreement. An aggregate of 8,297,083 shares of Mellon
Common Stock outstanding on the Record Date are subject to
the same agreement. See "The Dreyfus Meeting--Vote
Required," "The Mellon Meeting--Vote Required" and "The
Merger--Interests of Certain Persons in the Merger."
</TABLE>
16
<PAGE> 25
MARKET PRICES OF MELLON COMMON STOCK
AND DREYFUS COMMON STOCK; CASH DIVIDENDS
Dreyfus Common Stock and Mellon Common Stock are listed and traded on the
NYSE. Dreyfus Common Stock is also listed and traded on the Pacific Stock
Exchange. The table below sets forth, for the quarters indicated, the high and
low closing sales prices per share of Mellon Common Stock and Dreyfus Common
Stock, as reported on the NYSE Composite Transactions Tape, and the common stock
cash dividends declared for such quarters.
<TABLE>
<CAPTION>
MELLON COMMON STOCK DREYFUS COMMON STOCK
-------------------------------- --------------------------------
CASH DIVIDENDS CASH DIVIDENDS
HIGH LOW PER SHARE HIGH LOW PER SHARE
----- ----- -------------- ----- ----- --------------
<S> <C> <C> <C> <C> <C> <C>
1992 First Quarter........... $42 1/4 $33 3/4 $ .35 $48 $37 3/8 $ .13
Second Quarter......... 43 35 1/2 .35 40 3/4 33 1/2 .17
Third Quarter.......... 45 39 3/8 .35 38 1/4 33 3/4 .17
Fourth Quarter......... 55 1/2 42 3/8 .35 40 3/4 34 5/8 .17
1993 First Quarter........... $62 $51 1/2 $ .38 $44 3/8 $36 1/2 $ .17
Second Quarter......... 67 3/8 51 1/4 .38 41 3/8 35 3/4 .19
Third Quarter.......... 60 1/4 53 1/4 .38 43 7/8 39 3/8 .19
Fourth Quarter......... 59 1/8 51 3/4 .38 47 1/2 38 1/2 .19
1994 First Quarter........... $59 1/4 $52 1/2 $ .56 $50 $44 5/8 $ .19
Second Quarter......... 60 1/2 54 1/4 .56 52 1/4 46 1/8 .19
Third Quarter
(through July 19).... .56 .19
</TABLE>
On December 3, 1993, the last business day before the first public
announcement of the Merger on December 6, 1993, the closing sales prices of
Mellon Common Stock and Dreyfus Common Stock, as reported on the NYSE Composite
Transactions Tape, were $57 3/8 per share and $44 1/2 per share, respectively.
Based on that closing price for Mellon Common Stock, the value of the Mellon
Common Stock to be received for each outstanding share of Dreyfus Common Stock
in the Merger is $50.50.
On July 19, 1994, the closing sales prices of Mellon Common Stock and
Dreyfus Common Stock as reported on the NYSE Composite Transactions Tape were
$ per share and $ per share, respectively. Based on that closing price
for Mellon Common Stock, the value of the Mellon Common Stock to be received for
each share of Dreyfus Common Stock in the Merger is $ . No assurance can be
given as to the market price of Mellon Common Stock if and at the time the
Merger is consummated.
On July 19, 1994, there were holders of record of Mellon Common
Stock, 21 holders of record of Series D Stock, and 1,829 holders of record of
Dreyfus Common Stock.
17
<PAGE> 26
SELECTED FINANCIAL DATA
The following tables captioned "Mellon Bank Corporation and
Subsidiaries--Consolidated Selected Historical Financial Data" and "The Dreyfus
Corporation and Subsidiaries--Consolidated Selected Historical Financial Data"
set forth selected historical financial data for Mellon and Dreyfus for each of
the five years in the period ended December 31, 1993 and for the three-month
periods ended March 31, 1994 and 1993. Such data have been derived from, and
should be read in conjunction with, the audited consolidated financial
statements and the unaudited consolidated interim financial statements of Mellon
and Dreyfus, including the notes thereto, incorporated by reference in this
Prospectus/Joint Proxy Statement. See "Incorporation Of Certain Documents By
Reference." Selected unaudited financial information for the three-month periods
ended March 31, 1994 and 1993 for Mellon and Dreyfus includes all adjustments,
consisting only of normal recurring adjustments, that in the opinion of the
management of Mellon (in the case of the Mellon financial information) and
Dreyfus (in the case of the Dreyfus financial information) were considered
necessary for a fair presentation of the consolidated operating results and
financial position of Mellon and Dreyfus, respectively, for and at the end of
such interim periods. Results for the interim periods are not necessarily
indicative of results expected for the year as a whole. See "Available
Information."
The following table captioned "Mellon Bank Corporation and Subsidiaries
and The Dreyfus Corporation and Subsidiaries--Pro Forma Combined Selected
Financial Data" sets forth pro forma combined selected financial data for each
of the three years in the period ended December 31, 1993, and for the
three-month periods ended March 31, 1994 and 1993, giving effect to the Merger
on the basis described in the notes to the unaudited pro forma condensed
combined financial statements included elsewhere herein. Certain pro forma
combined selected financial data are derived from the unaudited pro forma
condensed combined financial statements included elsewhere in this
Prospectus/Joint Proxy Statement and should be read in conjunction with those
statements. See "Unaudited Pro Forma Condensed Combined Financial Statements."
Pro forma per share amounts are presented based on the Exchange Ratio of 0.88017
shares of Mellon Common Stock for each outstanding share of Dreyfus Common
Stock. The pro forma data set forth in the following tables do not reflect the
merger expenses anticipated to be incurred by Mellon and Dreyfus or the cost
savings anticipated to result from the Merger. The pro forma data may not be
indicative of the results that actually would have occurred if the Merger had
been in effect during the periods presented or which may be attained in the
future. See "Notes To Unaudited Pro Forma Condensed Combined Financial
Statements."
18
<PAGE> 27
MELLON BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED SELECTED HISTORICAL FINANCIAL DATA
This summary is qualified in its entirety by the detailed information and
financial statements included in the documents incorporated herein by reference.
See "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
(DOLLAR AMOUNTS IN MILLIONS, ------------------ ----------------------------------------------------------
EXCEPT PER SHARE AMOUNTS) 1994 1993 1993 1992 1991 1990 1989
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT
DATA:
Net interest revenue.......... $ 362 $ 317 $ 1,307 $ 1,154 $ 974 $ 867 $ 819
Provision for credit losses... 20 35 125 185 250 315 297
Net interest revenue after
provision for credit
losses...................... 342 282 1,182 969 724 552 522
Fee revenue................... 343 232 1,189 844 757 670 664
Gains on sale of securities... -- 87 87 121 78 8 2
Gain on sale of consumer
finance subsidiary.......... -- -- -- -- -- 74 --
Other noninterest revenue..... -- -- -- 7 13 70 119
Net expense (revenue) of
acquired property........... (8) 25 59 95 37 18 11
Merger and restructuring
expenses.................... -- 175 175 36 -- -- --
Other operating expense....... 479 333 1,624 1,318 1,227 1,163 1,092
Provision for income taxes.... 83 34 239 55(G) 28(G) 19(G) 23(G)
Income before extraordinary
gains....................... 131 34 361 437 280 174 181
Extraordinary gains on early
retirement of debt.......... -- -- -- -- -- -- 29
Net income.................... 131 34 361 437 280 174 210
Net income applicable to
common stock................ 116 19 298 386 231 124 157
CONSOLIDATED PER COMMON SHARE
DATA:
Primary income before
extraordinary gains......... $ 1.77 $ .31 $ 4.63 $ 6.96(G) $ 4.66(G) $ 2.83(G)(H) $ 3.33(G)
Fully diluted income before
extraordinary gains......... 1.77 .31 4.63 6.84 4.61 2.83(H) 3.33
Primary net income............ 1.77 .31 4.63 6.96 4.66 2.83(H) 4.01
Fully diluted net income...... 1.77 .31 4.63 6.84 4.61 2.83(H) 3.98
Dividends..................... .56 .38 1.52 1.40 1.40 1.40 1.40
Book value at period end
(A)......................... 42.76 38.03 41.75 36.96 31.29 28.51 27.42
CONSOLIDATED BALANCE SHEET
DATA--AVERAGE BALANCES (B):
Money market investments...... $ 1,884 $ 2,997 $ 3,521 $ 1,663 $ 1,344 $ 2,752 $ 6,204
Securities available for
sale........................ 2,096 2,496 2,292 1,194 -- -- --
Investment securities......... 2,321 2,158 2,134 4,858 5,333 4,722 3,298
Loans......................... 24,627 19,900 21,755 18,227 18,509 18,840 17,958
Total interest-earning
assets...................... 31,432 27,844 29,971 26,250 25,495 26,592 27,693
Total assets.................. 37,186 32,133 34,736 29,889 29,050 30,216 30,555
Deposits...................... 27,764 24,893 26,511 22,641 21,384 22,029 21,240
Notes and debentures.......... 1,965 1,765 1,991 1,365 1,448 1,722 1,762
Redeemable preferred stock.... -- -- -- -- 51 94 94
Common shareholders' equity... 2,760 2,336 2,531 1,842 1,479 1,336 1,114
Total shareholders' equity.... 3,352 2,945 3,172 2,351 1,904 1,732 1,442
FOOTNOTES ON PAGE 21.
</TABLE>
19
<PAGE> 28
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
(DOLLAR AMOUNTS IN MILLIONS, ----------------- ----------------------------------------------------------
EXCEPT PER SHARE AMOUNTS) 1994 1993 1993 1992 1991 1990 1989
------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED PERCENTAGES:
Return on common shareholders'
equity (B)(C)................ 17.25% 3.39% 11.93% 21.12%(G) 15.80%(G) 9.56%(G)(H) 12.97%(G)(I)
Return on assets (B)(C)........ 1.43 .42 1.04 1.46 (G) .96 (G) .58 (G)(H) .59 (G)(I)
Net interest margin (B)(C)(D):
Taxable equivalent basis..... 4.70 4.65 4.39 4.44 3.93 3.38 3.10
Without taxable equivalent
increments................. 4.67 4.61 4.36 4.39 3.82 3.26 2.96
Dividends per common share as a
percentage of fully diluted
income per common share
before extraordinary gains... 31.69 121.34 33.06 20.61 30.37 49.47 (H) 42.04
CAPITAL RATIOS:
Common shareholders' equity to
assets (E)................... 7.63% 7.65% 7.53% 6.62% 5.61% 4.50% 3.88%
Average common shareholders'
equity to average assets..... 7.42 7.27 7.29 6.16 5.09 4.42 3.65
Tier I capital ratio (E)....... 7.62 9.49 7.39 7.62 6.56 5.10 4.59
Total (Tier I plus Tier II)
capital ratio (E)............ 11.17 13.18 10.97 11.30 10.73 9.01 8.77
Leverage capital ratio (E)..... 6.90 8.13 6.88 7.10 6.28 4.79 4.32
ASSET QUALITY RATIOS (F):
Reserve for credit losses as a
percentage of:
Total loans (E)............ 2.46% 2.53% 2.45% 2.54% 3.12% 2.80% 3.15%
Nonperforming loans (E).... 308 162 297 152 113 100 124
Net credit losses as a
percentage of average loans
(C).......................... .27 1.00 .64 1.52 1.24 2.15 3.33
Total nonperforming assets as a
percentage of total loans and
net acquired property (E).... 1.27 2.70 1.39 2.94 4.78 4.11 3.55 (J)
</TABLE>
- ---------
FOOTNOTES ON FOLLOWING PAGE.
20
<PAGE> 29
- ---------
Note: THE COMPARABILITY OF THE MELLON INFORMATION SET FORTH ON THE PRIOR PAGES
HAS BEEN AFFECTED BY MELLON'S DECEMBER 21, 1993 ACQUISITION OF AFCO CREDIT
CORPORATION; THE MAY 21, 1993 ACQUISITION OF THE BOSTON COMPANY; THE
RETURN TO A FULLY TAXABLE STATUS IN 1993 AS ALL REMAINING TAX BENEFIT
CARRYFORWARDS WERE EXHAUSTED IN LATE 1992; THE DECEMBER 11, 1992
ACQUISITION OF CERTAIN ASSETS AND DEPOSIT LIABILITIES OF MERITOR SAVINGS
BANK; THE DECEMBER 31, 1991 ACQUISITION OF UNITED PENN BANK; THE JUNE 1990
SALE OF MELLON'S CHICAGO-BASED CONSUMER FINANCE SUBSIDIARY AT A $74
MILLION GAIN; THE ACQUISITION OF 54 BRANCH OFFICES OF PHILADELPHIA SAVINGS
FUND SOCIETY IN MAY 1990; AND A CAPITAL FINANCING AND ASSET RESTRUCTURING
PROGRAM COMPLETED IN JUNE 1989. SEE MELLON'S ANNUAL REPORT ON FORM 10-K,
AS AMENDED, FOR THE YEAR ENDED DECEMBER 31, 1993.
(A) The book value per common share assumes full conversion of the Series D
Stock to Mellon Common Stock and, accordingly, includes the additional
paid-in capital on the Series D Stock because the Series D Stock is, in
almost all respects, a direct substitute for Mellon Common Stock and its
additional paid-in capital has no liquidation preference over the Mellon
Common Stock.
(B) Computed on a daily average basis.
(C) Percentages for the three months ended March 31, 1994 and 1993 are
annualized.
(D) Loan fees, nonaccrual loans and the related income effect have been included
in the calculation of the net interest margin. The net interest margin on a
taxable equivalent basis is calculated at tax rates approximating 35% in
1994 and 1993 and 34% in 1992 through 1989.
(E) Period end ratio. See "Certain Regulatory Considerations--Capital" for a
description of the capital ratios.
(F) Segregated assets acquired in the 1992 Meritor Savings Bank branch
acquisition are reported in other assets rather than in loans and acquired
property and, therefore, are not included in nonperforming loans and
nonperforming assets for the 1992-1994 periods. The reserve for segregated
assets is not included in the reserve for credit losses. At March 31, 1994
and December 31, 1993 and 1992, segregated assets totaled $176 million, $187
million and $259 million, respectively; the amount of the FDIC loss
sharing-- which represents 80% of the first $60 million of net credit losses
and 95% of the remaining balance of segregated assets--related to these
balances were $167 million, $178 million and $237 million, respectively; and
the reserve for segregated assets was $4 million, $4 million and $18
million, respectively.
(G) Mellon returned to a fully taxable status in 1993 as all remaining tax
benefit carryforwards from losses in 1987 and 1988 were exhausted in late
1992. Pro forma fully taxed primary income per common share was $4.63 in
1992, $2.89 in 1991, $1.63 in 1990 and $2.07 before extraordinary gains in
1989. Pro forma fully taxed return on common shareholders' equity was 13.58%
in 1992, 8.72% in 1991, 4.56% in 1990 and 6.19% in 1989. Pro forma fully
taxed return on assets was 1.03% in 1992, .66% in 1991, .40% in 1990 and
.41% in 1989.
(H) Includes the effect of the $74 million gain on the sale of a Chicago-based
consumer finance subsidiary. Excluding this gain, both primary and fully
diluted net income per common share would have been $1.20, return on common
shareholders' equity would have been 4.06%, return on assets would have been
.33%, and dividends per common share as a percentage of fully diluted income
per common share would have been 116.67%.
(I) Excludes the effect of $29 million of extraordinary gains on the early
retirement of debt. Including these extraordinary gains, 1989 return on
common shareholders' equity was 15.59% and return on assets was .69%.
(J) Includes the effect of Mellon's investment in Grant Street National Bank
senior preferred stock, which was on nonperforming status at December 31,
1989.
21
<PAGE> 30
THE DREYFUS CORPORATION AND SUBSIDIARIES
CONSOLIDATED SELECTED HISTORICAL FINANCIAL DATA
This summary is qualified in its entirety by the detailed information and
financial statements included in the documents incorporated herein by reference.
See "Incorporation of Certain Documents By Reference."
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
(DOLLAR AMOUNTS IN MILLIONS, --------------- -----------------------------------------
EXCEPT PER SHARE AMOUNTS) 1994 1993 1993 1992 1991 1990 1989
---- ---- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA:
Management, investment advisory and
administrative fees (net)(A).... $ 72 $ 74 $ 297 $ 273 $ 220 $ 176 $ 180
Other revenues (net)(A)............ 29 19 89 69 62 85 92
Total revenues..................... 101 93 386 342 282 261 272
Gain on sale of MasterCard
accounts, net of direct
expenses........................ -- -- -- -- -- -- 119
Total expenses..................... 60 53 228 202 180 178 168
Provision for income taxes......... 16 15 59 49 34 21 75
Net income......................... 25 25 99 91 68 62 148(C)
CONSOLIDATED PER COMMON SHARE DATA:
Net income (B)..................... $.70 $.68 $2.70 $2.40 $1.77 $1.56 $3.63(C)
Dividends.......................... .19 .17 .74 .64 .52 .52 .52
CONSOLIDATED BALANCE SHEET
DATA--PERIOD END BALANCES:
Cash and cash
equivalents--primarily shares of
sponsored money market
investment companies............ $116 $329 $ 301 $ 216 $ 228 $ 215 $ 146
Investments in marketable
securities...................... 537 389 332 498 432 421 510
Total assets....................... 930 915 915 873 847 793 924
Total liabilities.................. 88 130 90 93 105 116 207
Total stockholders' equity......... 842 785 825 780 742 677 717
</TABLE>
- ---------
(A) Years prior to 1993 have been reclassified to conform to the presentation
for 1994 and 1993.
(B) Net income per common share presented in Dreyfus' financial statements
excludes the effect of certain common stock equivalents since the effect of
the dilution is less than 3%.
(C) Includes the after-tax gain of $65 million ($1.61 per share) from the sale
of MasterCard accounts (net of direct and related expenses).
22
<PAGE> 31
MELLON BANK CORPORATION AND SUBSIDIARIES AND
THE DREYFUS CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED SELECTED FINANCIAL DATA (UNAUDITED) (A)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
(DOLLAR AMOUNTS IN MILLIONS, ------------------ -----------------------------
EXCEPT PER SHARE AMOUNTS) 1994 1993(C) 1993(C) 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA:
Interest revenue.............................. $ 522 $ 486 $ 1,985 $ 2,030 $ 2,344
Interest expense.............................. 155 163 655 848 1,332
Net interest revenue.......................... 367 323 1,330 1,182 1,012
Provision for credit losses................... 20 35 125 185 250
Net interest revenue after provision
for credit losses........................... 347 288 1,205 997 762
Noninterest revenue........................... 438 405 1,637 1,283 1,088
Operating expense............................. 530 585 2,084 1,648 1,440
Income before income taxes.................... 255 108 758 632 410
Provision for income taxes.................... 99 49 298 104 62
Net income.................................... 156 59 460 528 348
Net income applicable to Mellon
Common Stock................................ 141 44 397 477 299
CONSOLIDATED PER SHARE DATA APPLICABLE
TO MELLON COMMON STOCK:
Primary net income............................ $ 1.44 $ .47 $ 4.09 $ 5.34 $ 3.58
Fully diluted net income...................... 1.44 .47 4.09 5.30 3.55
Cash dividends declared....................... .56 .38 1.52 1.40 1.40
Book value at period end...................... 37.28 33.22 36.42 32.05 27.66
CONSOLIDATED BALANCE SHEET DATA--PERIOD END
BALANCES:
Money market investments...................... $ 1,599 $ 3,309 $ 1,766 $ 1,698 $ 1,410
Securities available for sale (B)............. 2,994 2,257 2,916 3,613 --
Investment securities (B)..................... 2,855 2,457 2,425 2,619 6,176
Loans, net of unearned income................. 24,537 19,439 24,484 19,961 19,109
Reserve for credit losses..................... (603) (492) (600) (506) (596)
Total assets.................................. 37,546 31,814 37,054 32,447 30,202
Deposits...................................... 26,787 23,029 27,564 25,165 22,501
Notes and debentures.......................... 1,924 1,922 1,990 1,587 1,501
Common shareholders' equity................... 3,636 3,148 3,546 2,870 2,390
Total shareholders' equity.................... 4,228 3,809 4,138 3,337 2,815
</TABLE>
- ---------
(A) The selected financial data presented in this table excludes the effect of
the anticipated $85 million after-tax merger expenses expected to be
recorded in the first reporting period of the combined entity. Had this been
included, the March 31, 1994 pro forma book value would have been $36.41 per
common share, common shareholders' equity would have been $3,551 million,
and total shareholders' equity would have been $4,143 million.
(B) Mellon and Dreyfus each adopted FAS 115, "Accounting for Certain Investments
in Debt and Equity Securities," on a prospective basis in the first quarter
of 1994, as discussed in their respective Quarterly Reports on Form 10-Q for
March 31, 1994, incorporated herein by reference. This decreased Mellon's
common shareholders' equity by $15 million and decreased Dreyfus' common
shareholders' equity by $1 million at March 31, 1994. The above March 31,
1994 balances of investment securities and securities available for sale
represent the sum of the respective reported balances. The interest rate and
credit risk characteristics of the combined securities portfolio of the
merged entity will be evaluated, and securities may be reclassified as
either available for sale or held-to-maturity, following the Merger.
For the purpose of these pro forma disclosures, the entire Dreyfus
securities portfolio for the 1991-1993 periods is classified as investment
securities. Accordingly, the amounts shown as securities available for sale
are the amounts reported in Mellon's financial statements.
(C) See page 27 for 1993 pro forma combined selected financial data of Mellon,
Dreyfus and The Boston Company, acquired by Mellon on May 21, 1993.
See "Notes To Unaudited Pro Forma Condensed Combined Financial Statements."
23
<PAGE> 32
UNAUDITED COMPARATIVE PER SHARE BOOK VALUE,
MARKET VALUE, CASH DIVIDEND AND EARNINGS DATA
Based upon the Exchange Ratio of 0.88017 shares of Mellon Common Stock for
each share of Dreyfus Common Stock outstanding immediately prior to the Merger,
the following table sets forth unaudited comparative per common share book
value, market value, cash dividends declared and net income data of: (a) Mellon,
(b) Mellon Pro Forma adjusted to give effect to the Merger as if the Merger had
occurred at January 1, 1991, (c) Dreyfus and (d) the pro forma equivalent of one
share of Dreyfus Common Stock. Also set forth is a table of certain selected
financial ratios of: (a) Mellon, (b) Dreyfus and (c) Mellon Pro Forma adjusted
to give effect to the Merger as if the Merger had occurred at January 1, 1991.
The following information should be read in conjunction with the historical
financial statements of Dreyfus and Mellon incorporated by reference in this
Prospectus/Joint Proxy Statement and the unaudited pro forma condensed combined
financial statements giving effect to the Merger appearing elsewhere herein. See
"Available Information," "Incorporation of Certain Documents by Reference" and
"Unaudited Pro Forma Condensed Combined Financial Statements." The following
data is not necessarily indicative of the results that actually would have
occurred if the Merger had been in effect during the periods presented or which
may be attained in the future.
24
<PAGE> 33
COMPARATIVE PER COMMON SHARE DATA (UNAUDITED) (A)
<TABLE>
<CAPTION>
DREYFUS
MELLON ----------------------------
----------------------- EQUIVALENT
HISTORICAL PRO FORMA HISTORICAL PRO FORMA (C)
---------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
BOOK VALUE:
March 31, 1994...................... $42.76 $37.28 $23.02 $32.81
1993...................... 38.03 33.22 21.17 29.24
December 31, 1993...................... 41.75 36.42 22.56 32.06
1992...................... 36.96 32.05 20.79 28.21
1991...................... 31.29 27.66 19.36 24.35
MARKET VALUE (B):
March 31, 1994...................... $56.13 $56.13 $46.88 $49.40
1993...................... 60.75 60.75 38.63 53.47
December 31, 1993...................... 53.00 53.00 45.00 46.65
1992...................... 53.00 53.00 40.50 46.65
1991...................... 34.88 34.88 49.25 30.70
CASH DIVIDENDS DECLARED (B):
Three months ended:
March 31, 1994...................... $ .56 $ .56 $ .19 $ .49
1993...................... .38 .38 .17 .33
Year ended:
December 31, 1993...................... 1.52 1.52 .74 1.34
1992...................... 1.40 1.40 .64 1.23
1991...................... 1.40 1.40 .52 1.23
PRIMARY NET INCOME:
Three months ended:
March 31, 1994...................... $ 1.77 $ 1.44 $ .70(D) $ 1.27
1993...................... .31 .47(E) .68(D) .41(E)
Year ended:
December 31, 1993...................... 4.63 4.09(E) 2.70(D) 3.60(E)
1992...................... 6.96 5.34 2.40(D) 4.70
1991...................... 4.66 3.58 1.77(D) 3.15
</TABLE>
- ---------
(A) The comparative per common share data in this table excludes the effect of
the anticipated $85 million after-tax merger expenses expected to be
recorded in the first reporting period of the combined entity. Had this been
included in the March 31, 1994 pro forma and equivalent pro forma book value
calculations, these amounts would have been $36.41 per share and $32.04 per
share, respectively.
(B) The Mellon pro forma market value and cash dividends declared represent
historical market value and cash dividends declared. No assurance can be
given that equivalent dividends will be paid in the future. The amount of
future dividends payable by Mellon will depend upon the earnings and
financial condition of Mellon and other factors, including, without
limitation, applicable governmental regulations and policies.
(C) The equivalent pro forma per share amounts for Dreyfus Common Stock
represent, in the cases of book value and net income, the pro forma amounts
for Mellon Common Stock multiplied by 0.88017 (the Exchange Ratio) and, in
the cases of market value and cash dividends declared, the historical data
for Mellon Common Stock multiplied by 0.88017.
(D) Net income per common share presented in Dreyfus' financial statements
exclude the effect of certain common stock equivalents since the effect of
the dilution is less than 3%.
(E) See page 27 for 1993 pro forma combined selected financial data of Mellon,
Dreyfus and The Boston Company, acquired by Mellon on May 21, 1993.
25
<PAGE> 34
SELECTED FINANCIAL RATIOS (UNAUDITED) (A)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
---------------- ----------------------------
1994 1993 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PERFORMANCE RATIOS:
Return on Assets(B)(C):
Mellon................................... 1.43% .42% 1.04% 1.46% .96%
Dreyfus.................................. 11.10 11.53 11.07 10.49 8.20
Mellon Pro Forma......................... 1.67 .72(E) 1.29(E) 1.72 1.16
Return on Common Shareholders' Equity(B)(C):
Mellon................................... 17.25% 3.39% 11.93% 21.12% 15.80%
Dreyfus.................................. 12.36 13.06 12.54 11.98 9.56
Mellon Pro Forma......................... 16.12 5.82(E) 12.07(E) 18.45 13.78
Common Shareholders' Equity to Total Assets
(period end):
Mellon................................... 7.63% 7.65% 7.53% 6.62% 5.61%
Dreyfus.................................. 90.52 85.84 90.16 89.33 87.59
Mellon Pro Forma......................... 9.68 9.90 9.57 8.85 7.91
RISK-BASED CAPITAL RATIOS (based on final
guidelines
effective 12/31/92)(D):
Tier I Capital:
Mellon................................... 7.62% 9.49% 7.39% 7.62% 6.56%
Dreyfus.................................. NM NM NM NM NM
Mellon Pro Forma......................... 10.00 12.06 9.70 10.20 9.05
Total (Tier I plus Tier II) Capital:
Mellon................................... 11.17% 13.18% 10.97% 11.30% 10.73%
Dreyfus.................................. NM NM NM NM NM
Mellon Pro Forma......................... 13.50 15.69 13.22 13.83 13.16
Leverage Capital (C):
Mellon................................... 6.90% 8.13% 6.88% 7.10% 6.28%
Dreyfus.................................. NM NM NM NM NM
Mellon Pro Forma......................... 8.99 10.30 9.00 9.45 8.62
</TABLE>
- ---------
(A) The selected financial ratios in this table exclude the effect of the
anticipated $85 million after-tax merger expenses expected to be recorded in
the first reporting period of the combined entity. Had this been included,
the March 31, 1994 pro forma common shareholders' equity to total assets
ratio would have been 9.46%, Tier I Capital would have been 9.75%, Total
(Tier I plus Tier II) Capital would have been 13.25%, and the Leverage
Capital would have been 8.76%. See "Certain Regulatory Considerations" for a
description of the capital ratios.
(B) Ratios for the three months ended March 31, 1994 and 1993 are annualized.
(C) Dreyfus has not previously compiled daily averages for balance sheet
categories. Accordingly, for the purposes of these ratios, Dreyfus' balance
sheet averages were estimated using the monthly ending balances within the
periods.
(D) The minimum requirements for Tier I Capital, Total Capital and Leverage
Capital ratios for banks and bank holding companies are 4.0%, 8.0% and 3.0%,
respectively. The minimum required ratios for banks to be classified as a
"well capitalized" institution are 6.0%, 10.0% and 5.0%, respectively. For a
description of the federal regulators' "well capitalized" guidelines, see
"Certain Regulatory Considerations."
(E) See page 27 for 1993 pro forma combined selected financial data of Mellon,
Dreyfus and The Boston Company, acquired by Mellon on May 21, 1993.
NM: Not meaningful.
26
<PAGE> 35
MELLON BANK CORPORATION AND SUBSIDIARIES,
THE BOSTON COMPANY, INC. AND SUBSIDIARIES AND
THE DREYFUS CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED SELECTED FINANCIAL DATA (UNAUDITED)
These pro forma combined selected financial data are presented as if the
Merger of Mellon and Dreyfus and Mellon's acquisition of The Boston Company
("TBC") had been effective January 1, 1993. The pro forma combined income
statements relating to Mellon's acquisition of TBC for the three months ended
March 31, 1993 and the year ended December 31, 1993 are shown in further detail
in Mellon's Current Report on Form 8-K/A dated as of September 14, 1992 and
filed May 17, 1993 and Current Report on Form 8-K dated July 15, 1994,
respectively, which are incorporated herein by reference. The data presented
below for the three months ended March 31, 1993 combine TBC's, Mellon's and
Dreyfus' historical results of operations. The data presented below for the year
ended December 31, 1993 combine TBC's results of operations for the period
January 1, 1993 through May 20, 1993; Mellon's results of operations for 1993,
which included TBC's results of operations from May 21, 1993 (the date of
Mellon's acquisition of TBC) to December 31, 1993; and Dreyfus' results of
operations for 1993. In addition to the assumptions contained herein relating to
the Merger of Mellon and Dreyfus, these pro forma combined selected financial
data also reflect a number of assumptions relating to the Mellon acquisition of
TBC, including funding of the purchase price, the issuance of Mellon Common
Stock and warrants, the amortization of goodwill, the elimination of $175
million of nonrecurring merger expenses recorded by Mellon and other
adjustments, as further explained in Mellon's Current Reports cited above. The
elimination of such nonrecurring merger expenses and certain other adjustments
are not reflected in the pro forma combined financial information of Mellon and
Dreyfus presented under the captions "Mellon Bank Corporation and Subsidiaries
and The Dreyfus Corporation and Subsidiaries--Pro Forma Combined Selected
Financial Data (Unaudited)" and "Unaudited Pro Forma Condensed Combined
Financial Statements" and in the immediately preceding "Comparative Per Common
Share Data (Unaudited)" and "Selected Financial Ratios (Unaudited)" tables.
Accordingly, the pro forma combined financial information presented under such
captions and in such tables are not directly comparable to the information
contained in the table below. These pro forma combined selected financial data
are presented for informational purposes only and are not indicative of the
results of operations that actually would have occurred if the Merger and
Mellon's acquisition of TBC had been completed on January 1, 1993.
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) MARCH 31, 1993 DECEMBER 31, 1993
------------------ ------------------
<S> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA:
Interest revenue....................................... $ 585 $2,146
Interest expense....................................... 226 755
Net interest revenue................................... 359 1,391
Provision for credit losses............................ 37 128
Net interest revenue after provision for credit
losses............................................... 322 1,263
Noninterest revenue.................................... 499 1,790
Operating expense...................................... 512 2,087
Income before income taxes............................. 309 966
Provision for income taxes............................. 126 378
Net income............................................. 183 588
Net income applicable to Mellon Common Stock........... 167 524
CONSOLIDATED PER SHARE DATA APPLICABLE TO
MELLON COMMON STOCK:
Primary net income..................................... $ 1.70 $ 5.32
Fully diluted net income............................... 1.69 5.31
Dreyfus Common Stock equivalent pro forma (A).......... 1.50 4.68
PERFORMANCE RATIOS:
Return on assets (B)................................... 1.84%(C) 1.52%
Return on common shareholders' equity (B).............. 20.39 (C) 15.52
</TABLE>
- ---------
(A) The equivalent pro forma per share amount for Dreyfus Common Stock
represents the pro forma primary net income for Mellon Common Stock
multiplied by 0.88017 (the Exchange Ratio).
(B) Dreyfus has not previously compiled daily averages for balance sheet
categories. Accordingly, for the purposes of these ratios, Dreyfus' balance
sheet averages were estimated using the monthly ending balances within the
periods.
(C) Ratios for the three months ended March 31, 1993 are annualized.
27
<PAGE> 36
INTRODUCTION
This Prospectus/Joint Proxy Statement is being furnished in connection with
the solicitation of proxies by the Dreyfus Board for use at the Dreyfus Meeting
to be held on August 23, 1994, and in connection with the solicitation of
proxies by the Mellon Board for use at the Mellon Meeting to be held on August
23, 1994. This Prospectus/Joint Proxy Statement also serves as a prospectus of
Mellon for the Merger Shares.
THE COMPANIES
DREYFUS
Dreyfus is one of the nation's oldest and largest mutual fund management
companies. Based upon assets under management at December 31, 1993, Dreyfus is
the sixth largest mutual fund organization in the United States, the second
largest manager of tax-exempt bond funds, the third largest manager of
tax-exempt money market funds, and the third largest manager of taxable money
market funds. As of December 31, 1993, Dreyfus managed, advised or administered
assets totaling approximately $77.6 billion. As of December 31, 1993 Dreyfus
managed, advised or administered 136 different mutual fund portfolios, including
money market funds (taxable and tax-exempt), tax-exempt bond funds, equity funds
and taxable fixed income funds, with approximately 1.9 million shareholder
accounts.
Dreyfus serves primarily as a manager of mutual funds, providing both
investment advisory and administrative services. Dreyfus provides investment
advisory services to the Dreyfus family of funds pursuant to agreements with
each of those funds, in accordance with which Dreyfus manages each fund's
portfolio of investments, by making investment decisions and formulating and
executing the fund's investment strategy, subject to supervision by the fund's
board of directors and in accordance with the fund's fundamental investment
objectives and policies. Administrative services generally consist of internal
accounting and legal services, including preparing and distributing
communications to shareholders, preparing government filings and tax returns,
certain bookkeeping and accounting functions and other related services.
Dreyfus' wholly owned subsidiary, Dreyfus Service Corporation, markets, sells
and distributes shares of the Dreyfus family of funds. Dreyfus Service
Corporation is a registered broker-dealer under the Exchange Act and is a member
of the National Association of Securities Dealers, Inc. Another wholly owned
subsidiary, Dreyfus Management, Inc., provides investment advisory and
administrative services to various pension plans, institutions and individuals.
Dreyfus and Dreyfus Management, Inc. are each registered under the Investment
Advisers Act of 1940. Dreyfus also owns a Federal savings bank and a New York
trust company.
Dreyfus' principal executive offices are located at 200 Park Avenue, New
York, New York 10166 (telephone (212) 922-6000).
MELLON
Mellon is a multibank holding company incorporated under the laws of
Pennsylvania and registered under the Federal Bank Holding Company Act of 1956,
as amended. At December 31, 1993, it was the 23rd largest bank holding company
in the United States in terms of assets. Its principal wholly owned subsidiaries
are Mellon Bank, Mellon Bank (DE) National Association, Mellon Bank (MD), a
number of companies known as the Mellon Financial Services Corporations, AFCO
Credit Corporation and The Boston Company. As of December 31, 1993, Mellon on a
consolidated basis had total assets of approximately $36.1 billion, loans net of
the reserve for credit losses of approximately $23.9 billion and total
shareholders' equity of approximately $3.3 billion.
Mellon's bank subsidiaries engage in domestic retail banking, worldwide
commercial banking, trust banking and investment management and other financial
services, as well as various securities-related activities. Through the Mellon
Financial Services Corporations and their subsidiaries, Mellon provides a broad
range of banking-related services including commercial financial services,
equipment leasing, stock transfer services, cash management, mortgage servicing
and numerous trust and investment management services and originates consumer
real estate and commercial loans. The Boston Company, through Boston Safe
Deposit
28
<PAGE> 37
and Trust Company and other subsidiaries, engages in the businesses of mutual
fund administration, institutional trust and custody, institutional asset
management and private banking.
Mellon's principal executive offices are located at One Mellon Bank Center,
500 Grant Street, Pittsburgh, Pennsylvania 15258 (telephone (412) 234-5000).
THE DREYFUS MEETING
DATE, TIME AND PLACE
The Dreyfus Meeting will be held on August 23, 1994, commencing at 11:00
a.m., local time, at the New York Marriott Marquis, 1535 Broadway (between 45th
and 46th Streets), Westside South Center, 5th Floor, New York, New York.
PURPOSE OF MEETING
The purpose of the Dreyfus Meeting is to consider and vote upon a proposal
to adopt the Merger Agreement.
SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE
The close of business on July 19, 1994 has been fixed by the Dreyfus Board
as the Record Date for the determination of holders of shares of Dreyfus Common
Stock entitled to notice of and to vote at the Dreyfus Meeting. At the close of
business on the Record Date, there were 36,559,078 shares of Dreyfus Common
Stock issued and outstanding held by 1,829 holders of record. Holders of record
of Dreyfus Common Stock on the Record Date are entitled to one vote per share
and are entitled to exercise dissenters' rights. See "Dissenters'
Rights--Dreyfus Stockholders."
VOTE REQUIRED
The affirmative vote of two-thirds of all shares of Dreyfus Common Stock
outstanding on the Record Date is required to adopt the Merger Agreement.
As of the Record Date, Dreyfus' directors, executive officers and their
affiliates owned and were entitled to vote an aggregate of 2,181,409 shares at
the Dreyfus Meeting, representing 8.95% of the total number of Dreyfus
stockholder votes necessary to adopt the Merger Agreement. The preceding figure
of 2,181,409 includes those shares held in the Dreyfus Profit-Sharing Plan for
the benefit of executive officers and directors of Dreyfus who are vested under
the Dreyfus Profit-Sharing Plan. There were no nonvested shares held in the
Dreyfus Profit-Sharing Plan on the Record Date for the benefit of executive
officers and directors of Dreyfus. The total number of shares held in the
Dreyfus Profit-Sharing Plan for the benefit of all participants, including
executive officers and directors of Dreyfus, aggregated 4.06% of the outstanding
Dreyfus Common Stock on the Record Date. Howard Stein, Chairman and Chief
Executive Officer of Dreyfus, and Joseph S. DiMartino, President and Chief
Operating Officer of Dreyfus, have agreed with Mellon in their individual
capacities as stockholders of Dreyfus to vote all shares of Dreyfus Common Stock
owned by them (1,173,024 shares or 3.21% of the outstanding Dreyfus Common Stock
on the Record Date) in favor of adoption of the Merger Agreement at the Dreyfus
Meeting. See "The Merger--Interests of Certain Persons in the Merger."
VOTING; SOLICITATION AND REVOCATION OF PROXIES
Proxy cards for use at the Dreyfus Meeting accompany this Prospectus/Joint
Proxy Statement delivered to record holders of Dreyfus Common Stock. Proxies may
be solicited by using the mails and by means of personal interview, telephone
and wire. Dreyfus has retained D. F. King & Co., Inc. to assist in the
solicitation of proxies. Proxies also may be solicited by officers and other
employees of Dreyfus. Officers and other employees of Dreyfus will not be
specifically compensated for the solicitation of proxies. A holder of Dreyfus
Common Stock may use his proxy if he does not attend the Dreyfus Meeting in
person or wishes to have his shares voted by proxy even if he does attend the
Dreyfus Meeting. The proxy may be revoked in writing by the
29
<PAGE> 38
person giving it at any time before it is exercised by notice of such revocation
to the Secretary of Dreyfus, or by submitting a proxy having a later date, or by
such person appearing at the Dreyfus Meeting and electing to vote in person. All
proxies validly submitted and not revoked will be voted in the manner specified
therein. IF NO SPECIFICATION IS MADE, THE PROXIES WILL BE VOTED IN FAVOR OF THE
PROPOSAL TO ADOPT THE MERGER AGREEMENT.
Under the NYBCL, the presence, in person or by proxy, of a majority of the
outstanding shares of Dreyfus Common Stock is necessary to constitute a quorum
of stockholders to take action at the Dreyfus Meeting. For these purposes,
shares which are present, or represented by proxy, at the Dreyfus Meeting will
be counted for quorum purposes regardless of whether the holder of the shares or
proxy fails to vote on the Merger Agreement ("abstentions") or whether a broker
with discretionary authority fails to exercise its discretionary authority to
vote shares with respect to the Merger Agreement ("broker non-votes"). For
voting purposes, only shares voted for the adoption of the Merger Agreement, and
neither abstentions nor broker non-votes, will be counted as voting for adoption
in determining whether the Merger Agreement is adopted by the holders of Dreyfus
Common Stock. As a consequence, abstentions and broker non-votes will have the
same effect as votes against adoption of the Merger Agreement.
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of Ernst & Young, independent public accountants for
Dreyfus, will attend the Dreyfus Meeting and will have the opportunity to make a
statement if they desire to do so.
THE MELLON MEETING
DATE, TIME AND PLACE
The Mellon Meeting will be held on August 23, 1994, commencing at 11:00
a.m., local time, in the 10th Floor Auditorium of the Union Trust Building, 501
Grant Street, Pittsburgh, Pennsylvania.
PURPOSE OF MEETING
The purpose of the Mellon Meeting is to consider and vote upon a proposal
to approve the Merger Agreement; such approval of the Merger Agreement will also
constitute approval of the issuance of the Merger Shares pursuant to the Merger
Agreement.
SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE
The close of business on July 19, 1994 has been fixed by the Mellon Board
as the Record Date for the determination of holders of shares of Mellon Common
Stock and Series D Stock entitled to notice of and to vote at the Mellon
Meeting. At the close of business on the Record Date, there were
shares of Mellon Common Stock issued and outstanding held by holders of
record and 2,236,226 shares of Series D Stock issued and outstanding held by 21
holders of record. At the Mellon Meeting, holders of Mellon Common Stock and
Series D Stock will be entitled to one vote per share and are not entitled to
exercise dissenters' rights. See "Dissenters' Rights--Mellon Shareholders."
VOTE REQUIRED
The affirmative vote of a majority of the shares (considered as one class)
of Mellon Common Stock and the Series D Stock voting (provided a majority of
such shares outstanding on the Record Date is voted) is required to approve the
Merger Agreement.
As of the Record Date, Mellon's directors, executive officers and their
affiliates owned and were entitled to vote an aggregate of 1,355,244 shares of
Mellon Common Stock and 360,360 shares of Series D Stock at the Mellon Meeting,
representing % of the total number of Mellon shareholder votes outstanding
on the Record Date.
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VOTING; SOLICITATION AND REVOCATION OF PROXIES
Proxy cards for use at the Mellon Meeting accompany this Prospectus/Joint
Proxy Statement delivered to holders of record of Mellon Common Stock and Series
D Stock. Proxies may be solicited by using the mails and by means of personal
interview, telephone and wire. Mellon has retained D. F. King & Co., Inc. to
assist in the solicitation of proxies. Proxies also may be solicited by officers
and other employees of Mellon. Officers and other employees of Mellon will not
be specifically compensated for the solicitation of proxies. A Mellon
shareholder may use his proxy if he is unable to attend the Mellon Meeting in
person or wishes to have his shares voted by proxy even if he does attend the
Mellon Meeting. The proxy may be revoked in writing by the person giving it at
any time before it is exercised by notice of such revocation to the Secretary of
Mellon, or by submitting a proxy having a later date, or by such person
appearing at the Mellon Meeting and electing to vote in person. All proxies
validly submitted and not revoked will be voted in the manner specified therein.
IF NO SPECIFICATION IS MADE, THE PROXIES WILL BE VOTED IN FAVOR OF THE PROPOSAL
TO APPROVE THE MERGER AGREEMENT.
Under the Pennsylvania Business Corporation Law (the "PBCL") and Mellon's
By-Laws, the presence, in person or by proxy, of a majority of the outstanding
shares of Mellon Common Stock and Series D Stock is necessary to constitute a
quorum of shareholders to take action at the Mellon Meeting. For these purposes,
shares which are present, or represented by a proxy, at the Mellon Meeting will
be counted for quorum purposes regardless of whether the holder of the shares or
proxy fails to vote on the Merger Agreement ("abstentions") or whether a broker
with discretionary authority fails to exercise its discretionary authority to
vote shares with respect to the Merger Agreement ("broker non-votes"). However,
if a broker or nominee limits on the proxy card the number of shares voted on
the proposal or indicates that the shares represented by a proxy card are not
voted on the proposal, such "non-votes" will not be voted on the proposal and
will not be counted in determining the number of affirmative votes required for
approval. The proxy card also provides that the persons authorized thereunder
may, in the absence of instructions to the contrary, vote or act in accordance
with their judgment on any other matter properly presented for action at the
Mellon Meeting. Pursuant to the terms of the agreements under which the Series D
Stock was issued and pursuant to which certain shares of Series D Stock were
exchanged for Mellon Common Stock, all shares of Series D Stock (2,236,226
shares on the Record Date) and those shares of Mellon Common Stock held by the
holders of Series D Stock (8,297,083 shares on the Record Date) will be voted in
a manner that is no less favorable to the position recommended by the Mellon
Board than the allocation of the votes cast by all other shareholders of Mellon
voting on the proposal to approve the Merger Agreement. The Mellon Board has
recommended approval of the Merger Agreement.
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of KPMG Peat Marwick, independent public accountants for
Mellon, will attend the Mellon Meeting and will have the opportunity to make a
statement if they desire to do so.
BACKGROUND OF AND REASONS FOR THE MERGER
BACKGROUND OF THE MERGER
On June 3, 1993, Dreyfus engaged Lazard as its financial adviser in
connection with an evaluation of Dreyfus' strategic alternatives both on a
transactional basis as well as from a long-term perspective. Prior to Lazard's
engagement in June 1993 and during the period from June through September 1993,
Lazard provided financial advice to Dreyfus on a variety of financial matters
unrelated to any proposed business combination with Mellon.
On September 1, 1993, Mellon also engaged Lazard as its financial adviser
for a variety of matters including assistance with the development and
implementation of certain aspects of Mellon's strategic plan and evaluation of
Mellon's strategic alternatives. In early September 1993, senior executives of
Mellon met with representatives of Lazard to discuss Mellon's interest in
expanding in the mutual fund area, including its interest in a possible business
combination with Dreyfus. At Mellon's request, Lazard communicated to Dreyfus'
management Mellon's interest in a possible business combination with Dreyfus.
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Beginning in mid-October 1993, senior executives of both companies met to
explore on a preliminary basis a possible business combination, to discuss each
company's business lines and issues of strategic direction and to engage in due
diligence reviews.
On October 20, 1993, Mellon and Dreyfus signed confidentiality agreements
pursuant to which each party agreed, among other things, to keep confidential
information furnished to such party by the other for the purpose of evaluating a
possible business combination. On or about October 20, 1993, Lazard resigned as
financial adviser to Mellon in order to act solely as financial adviser to
Dreyfus in connection with a possible business combination between Mellon and
Dreyfus and to avoid any potential conflict of interest. No procedures relating
to any potential conflict of interest were implemented during the period Lazard
was acting as a financial adviser to both companies and prior to the execution
of confidentiality agreements by Mellon and Dreyfus. On October 25, 1993, Mellon
engaged Goldman Sachs to act as Mellon's financial adviser to provide Mellon
with assistance in connection with the possible business combination with
Dreyfus, including assistance in planning and negotiating the financial aspects
of such a transaction. Goldman Sachs provided advice to Mellon with respect to
these matters, but did not directly participate in negotiating the financial
aspects of the transaction with Dreyfus. Goldman Sachs did not determine the
consideration to be paid in the Merger.
At a meeting held on November 3, 1993, the Dreyfus Board authorized
Dreyfus' management to engage in preliminary discussions with Mellon's
management with a view to presenting a report to the Dreyfus Board as to whether
it would be desirable to proceed with a possible business combination with
Mellon. The Dreyfus Board emphasized in its deliberations that it was very
important that the discussions with Mellon should be kept strictly confidential
because the Dreyfus Board felt that any public perception of uncertainty
regarding the future of Dreyfus could be very damaging to Dreyfus' relationships
with the mutual funds managed, advised or administered by Dreyfus, the investors
in those mutual funds, and Dreyfus' other clients and employees.
On November 4, 1993, the possible business combination of Dreyfus and
Mellon was described to and discussed by the Mellon Executive Committee. An
initial draft of a merger agreement was furnished by Mellon to Dreyfus on
November 6, 1993. On November 8, 1993, the Dreyfus Board met to receive a report
from management on the status of the discussions with Mellon. The Dreyfus Board
was advised that no definitive proposal had been received from Mellon and that a
number of points remained unresolved, but that Mellon's representatives had
indicated that any proposal would be for a stock-for-stock merger in which
Dreyfus' stockholders would receive Mellon Common Stock. Also on November 8,
Dreyfus engaged Salomon Brothers as a second financial adviser to Dreyfus solely
in connection with the delivery of a fairness opinion to the Dreyfus Board on
the possible business combination.
On November 10, 1993, Messrs. Cahouet, Stein and DiMartino met to review
the status of ongoing discussions and due diligence activities. On November 11,
Messrs. Cahouet and Stein mutually agreed to terminate discussions. A number of
unresolved issues contributed to this decision, including how to build upon the
strengths of the two organizations in the possible merger while at the same time
preserving the autonomy of Dreyfus for a period of time after the combination
(in order to maintain Dreyfus' relationships with its mutual funds, other
clients and employees) as well as an approach to governance for the combined
entity. Also on November 11, Dreyfus publicly announced the termination of
discussions with a financial institution about a possible business combination,
without identifying Mellon as the other party.
At a meeting on November 12, 1993, the Dreyfus Board approved and ratified
the termination of the discussions by management of Dreyfus with Mellon
regarding the possible business combination. At that meeting, the Dreyfus Board
directed that Dreyfus should continue to avoid any public perception that
Dreyfus' future was uncertain and, accordingly, determined that while the
Dreyfus Board would carefully consider any definitive proposal for a business
combination which might be presented by a qualified third party, Dreyfus and its
advisers should not solicit or invite any such proposal.
Following Dreyfus' announcement of the termination of discussions, Dreyfus
and its financial advisers received a number of telephone calls, several of
which were from substantial financial institutions, in which the callers
indicated possible interest in a business combination with Dreyfus. Pursuant to
the instructions
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received from the Dreyfus Board at the November 12 meeting, such parties were
advised that Dreyfus was not seeking to enter into a business combination at
that time. None of these parties made a specific proposal, discussed possible
ranges of value or requested financial or other information about Dreyfus.
On December 1, 1993, in a meeting requested by Mr. Cahouet, Messrs. Cahouet
and Stein renewed their discussions regarding a possible merger of Dreyfus and
Mellon and reached a resolution in principle of the way in which Dreyfus and
Mellon could operate together following a merger. On December 3, 1993, Mr.
Cahouet also met with Mr. DiMartino to discuss these issues further.
At a special meeting held on December 3, 1993, the Dreyfus Board considered
the results of the discussions by Messrs. Stein and DiMartino with Mr. Cahouet
and Mellon's proposal for a merger of Mellon and Dreyfus and authorized Dreyfus'
management to pursue negotiations of a merger agreement with Mellon.
At special meetings held on December 4, 1993 and December 5, 1993, the
Dreyfus Board consulted with and considered presentations by Dreyfus' management
and financial, accounting and legal advisers regarding the possible business
combination with Mellon. The Dreyfus Board was advised that Mellon had proposed
a merger in which Dreyfus' stockholders would receive, based on the last
reported sale price of Mellon Common Stock on the NYSE on December 3, 1993,
Mellon Common Stock worth $50.50 for each outstanding share of Dreyfus Common
Stock. The proposal considered and ultimately approved by the Dreyfus Board at
its meetings on December 4 and December 5, 1993 included provisions which
addressed the concerns which had led to the termination of the prior discussions
on November 11. The Dreyfus Board's most significant concern had been the need
to protect the value of Dreyfus' franchise by preserving its relationships with
its mutual funds, other clients and employees. That concern was addressed by
Mellon's agreement to terms which in effect created a two-year contractual
period in which Messrs. Stein and DiMartino would continue to have an important
role in managing Dreyfus (through their positions as executive officers of
Dreyfus and their proposed positions on the Mellon Board and on Dreyfus'
proposed new four-person Executive Committee), and during which time Dreyfus
would continue to operate under the same name and in the New York City
metropolitan area. Mellon's proposal did not contain any offer to enter into
employment agreements with Messrs. Stein and DiMartino, nor have any such
employment agreements been entered into with Mellon or Dreyfus. The Dreyfus
Board concluded that these undertakings by Mellon should serve to reassure the
directors and shareholders of Dreyfus' mutual funds, as well as Dreyfus' other
clients and employees, that Dreyfus' operations would not be unduly disrupted by
the combination with Mellon. This reassurance could help prevent defections
which could harm Dreyfus and subsequently the combined businesses of Dreyfus and
Mellon.
During the meetings of December 4, 1993 and December 5, 1993, the Dreyfus
Board also considered the detailed terms of the proposed merger agreement and
gave instructions to Dreyfus' management and its financial and legal advisers
regarding those terms which the Dreyfus Board concluded should be negotiated
further with Mellon. At the December 4 meeting, the Dreyfus Board accepted a
proposal by Mellon to delete a provision contained in the draft merger agreement
which favored Mellon in exchange for deleting another provision which favored
Dreyfus. The provision in favor of Mellon would have enabled Mellon to refuse to
consummate the Merger if a specified reduction in the market value of all assets
under management by Dreyfus occurred after the signing of the Merger Agreement;
the provision in favor of Dreyfus would have enabled Dreyfus to refuse to
consummate the Merger if, after the signing of the Merger Agreement, the market
price per share of Mellon Common Stock decreased by more than a specified amount
(in absolute terms and, in addition, relative to the weighted average stock
price of a peer group of companies).
At the December 4 meeting, the Dreyfus Board also rejected a proposal by
Mellon that it be granted a stock option to purchase a number of shares of
Dreyfus Common Stock equal to 19.9% of the outstanding Dreyfus Common Stock upon
the occurrence of certain triggering events, which could have significantly
discouraged third parties from making a proposal to Dreyfus for an alternative
business combination. Instead, the Dreyfus Board authorized its representatives
to negotiate with Mellon for a termination fee which would be payable in cash if
such triggering events occurred. During negotiations the amount of the
termination fee was subject to a number of proposals and counterproposals. As a
result of such negotiations, Mellon indicated that it would be prepared to
accept a termination fee of $50 million but required, as a condition to its
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acceptance, that Messrs. Stein and DiMartino agree in their individual
capacities as stockholders of Dreyfus to vote their shares of Dreyfus Common
Stock in favor of the Merger and to refrain from voting in favor of a business
combination with a third party for a period of one year after termination of the
Merger Agreement. The Dreyfus Board subsequently approved the $50 million
termination fee at its December 5 meeting.
At the December 4 meeting, Messrs. Cahouet and Smith made presentations to
the Dreyfus Board regarding the proposed Merger and Mellon's strategic plan to
obtain a more balanced source of revenues by increasing revenues from investment
services and responded to questions raised by various members of the Dreyfus
Board. At the December 5 meeting, the non-management members of the Dreyfus
Board considered the disclosures by the management members of the Dreyfus Board
of their financial interest in the Merger (see "The Merger--Interests of Certain
Persons in the Merger") and unanimously determined the terms of the Merger to be
fair and reasonable and approved the Merger (without Messrs. DiMartino, Julian
M. Smerling, Vice Chairman of Dreyfus and Stein in attendance). Thereafter, the
Dreyfus Board unanimously adopted and approved the Merger Agreement and
determined that the Merger was fair to and in the best interests of Dreyfus and
its stockholders and recommended that Dreyfus stockholders vote for adoption of
the Merger Agreement (with Messrs. DiMartino, Smerling and Stein in attendance).
See "Reasons for the Merger--Dreyfus; Recommendation of Dreyfus Board" for a
description of the factors considered by the Dreyfus Board in reaching its
decision to adopt and approve the Merger Agreement on December 5, 1993.
At a special meeting held on December 5, 1993, the Mellon Board considered
presentations by Mellon's management and financial and legal advisers concerning
the Merger and unanimously approved the Merger Agreement, determined that the
Merger was fair to and in the best interests of Mellon and its shareholders, and
resolved to recommend that Mellon shareholders approve the Merger Agreement and
the issuance of the Merger Shares in connection with the Merger. See "Reasons
for the Merger--Mellon; Recommendation of Mellon Board" for a description of the
factors considered by the Mellon Board in reaching its decision to approve the
Merger Agreement and the issuance of the Merger Shares.
REASONS FOR THE MERGER--GENERAL
The Merger of Mellon and Dreyfus will create one of the nation's largest
financial services companies, capable of delivering a wide range of financial
products and services. The combined company will become the nation's second
largest investment advisory firm with over $210 billion of assets under
management and over $825 billion of assets under custody or administration.
Through the combination of the existing products and services, delivery
systems, customer bases, technological expertise and investment management
skills of each organization, the combined Mellon/ Dreyfus entity will be
uniquely positioned among its competitors in the financial services industry
with the financial, marketing and investment management capabilities to further
develop and expand long-term customer relationships.
The Merger should permit each company to diversify beyond its current
markets and current strengths in the financial products and services it now
offers by expanding the marketing of such products and services into the
customer bases currently served by the other. For example, Mellon with its 125
year history of building lasting banking and trust relationships will seek to
offer a full array of financial products and services to the more than 900,000
households currently investing in Dreyfus mutual funds. Similarly, more than 1
million Mellon customers, currently served through 432 branch offices, will gain
more effective access to the approximately 136 mutual fund portfolios managed,
advised or administered by Dreyfus, with its 40 year reputation of making
available to the general public the benefits of conservative and prudent
investment management.
Mellon and Dreyfus believe that going forward the synergies created by
their respective businesses will provide the combined entity with opportunities
to achieve expense savings, cost reductions and operating efficiencies as well
as greater latitude in the creation, development, marketing and delivery of
current and future products and services. Mellon currently anticipates that the
pre-tax benefits of these savings, cost reductions and operating efficiencies of
the combined entity will be approximately $30 million in the first four full
fiscal quarters following the Merger and approximately $60 million per year
thereafter when compared
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with the 1993 level of annual combined expenses of Mellon and Dreyfus. These
anticipated benefits are expected by Mellon to be partially offset by normal
expense growth that will occur in support of anticipated revenue growth. The
above benefits are expected by Mellon to be realized by the realization of
economies of scale and the elimination of duplicative support services and
functions from both organizations, the consolidation of certain back-office and
data processing operations and in other ways. The realization of economies of
scale and the elimination of duplicative support services and functions from
both organizations are expected by Mellon to result in annual savings of
approximately $35 million per year in the second full year following the Merger.
Back-office support savings consist of various duplicative processing and
recordkeeping functions with savings anticipated by Mellon of approximately $15
million per year in the second full year following the Merger. Data processing
operations savings consist of expenses related to the automated information
systems functions with savings anticipated by Mellon of approximately $10
million per year in the second full year following the Merger. The savings
described above are expected by Mellon to include a certain amount of expense
savings from volume discounts realized from the combined buying power of the
larger combined organization.
While management of the combined entity will be continually evaluating the
merged operations and identifying areas for consolidation and cost savings,
there can be no guarantee that these efforts will be successful or will be
completed within the periods currently anticipated.
Finally, the Merger is also expected to diversify Mellon's revenue base by
bringing fee-based revenues to approximately one-half of Mellon's total revenue
stream. A balanced source of revenues and sustainable high quality earnings are
key elements of Mellon's strategic plan. Upon completion of the Merger, Mellon
expects that its revenues will be about equally divided between those of its
businesses which serve individuals and those which serve corporate and
institutional customers. Similarly, its revenues are expected to be well
balanced between those businesses that provide banking services and those which
provide investment services. Mellon believes that such a balanced diversity of
earnings, with a focus on both the stable and growing segments of the financial
services industry, will further strengthen the long-term value of the franchise
for Mellon's shareholders.
REASONS FOR THE MERGER--DREYFUS; RECOMMENDATION OF DREYFUS BOARD
In reaching its decision to adopt and approve the Merger Agreement on
December 5, 1993, the Dreyfus Board consulted with Dreyfus' management and
financial and legal advisers and considered many factors, including, but not
limited to, the following (the Dreyfus Board did not assign any specific or
relative weight to the following factors in the course of its consideration):
(a) the presentations made by each of Lazard and Salomon Brothers and
the opinions of each of Lazard and Salomon Brothers that the Exchange Ratio
is fair, as of the time of delivery of such opinions, from a financial
point of view, to holders of Dreyfus Common Stock (see "Opinions of Dreyfus
Financial Advisers");
(b) the Dreyfus Board's review with its legal and financial advisers
of the provisions of the Merger Agreement, including provisions which would
not prevent Dreyfus from considering or the Dreyfus Board from approving an
alternative business combination proposal from a third party (see "No
Solicitations" and "Right of the Dreyfus Board to Withdraw its
Recommendation");
(c) historical financial information regarding Mellon and
presentations by Dreyfus' counsel as to its due diligence review of pending
litigation to which Mellon was a party and by Dreyfus' accountants as to
their due diligence review of Mellon's financial statements and data
processing capabilities and systems;
(d) the presentation by Messrs. Cahouet and Smith regarding the
proposed Merger and Mellon's strategic plan to obtain a balanced source of
revenues by increasing revenues from investment services;
(e) the potential operating efficiencies and other synergies which
could result from combining Mellon and Dreyfus, including the combined
company's ability to market a more diverse array of financial products and
services to a broader range of participants and to provide enhanced systems
support for administration and processing of such products and services;
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(f) the fact that Dreyfus will be operated as a separate subsidiary of
Mellon Bank for at least two years following the Merger;
(g) the expectation that the Merger will be tax-free for federal
income tax purposes to Dreyfus and its stockholders (other than in respect
of cash paid in lieu of fractional shares or to dissenting stockholders)
and would be accounted for under the pooling of interests method of
accounting;
(h) the effect of the Merger on Dreyfus' relationships with its mutual
funds (including investors in mutual funds managed, advised or administered
by Dreyfus), other clients and employees; and
(i) the expectation that the necessary regulatory approvals for the
Merger would be obtained.
THE DREYFUS BOARD HAS UNANIMOUSLY ADOPTED AND APPROVED THE MERGER AGREEMENT
AND DETERMINED THAT THE MERGER IS FAIR TO AND IN THE BEST INTERESTS OF DREYFUS
AND THE DREYFUS STOCKHOLDERS AND RECOMMENDS THAT DREYFUS STOCKHOLDERS VOTE FOR
THE ADOPTION OF THE MERGER AGREEMENT. Dreyfus has the right, under certain
circumstances, to withdraw, modify or amend the foregoing recommendation of the
Dreyfus Board. See "The Merger--Right of the Dreyfus Board to Withdraw its
Recommendation."
OPINIONS OF DREYFUS FINANCIAL ADVISERS
LAZARD OPINIONS
GENERAL. Dreyfus retained Lazard in June 1993 to render financial advisory
and investment banking services to Dreyfus in connection with an evaluation of
its strategic alternatives from both a transactional basis as well as a
long-term perspective.
Lazard is a nationally recognized investment banking firm and, as part of
its investment banking business, is continually engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
underwritings, distributions of securities and similar activities. Lazard was
selected on the basis of its experience and expertise. Lazard has acted
exclusively for the Dreyfus Board in rendering its fairness opinion and will
receive a fee from Dreyfus for its services, substantially all of which is
contingent upon consummation of the Merger. See "Fees Payable to Lazard" below.
Lazard acted as financial adviser to Dreyfus in connection with, and
participated in certain of the negotiations leading to, the Merger Agreement.
During the course of such negotiations, Lazard was not asked to, and did not,
propose the specific Merger consideration. In the course of its activities,
Lazard has in the past provided certain investment banking services to Mellon
for which it received customary compensation.
Lazard rendered written opinions to the Dreyfus Board that, as of the date
of the Merger Agreement and as of the date of this Prospectus/Joint Proxy
Statement, respectively, the Exchange Ratio was fair, from a financial point of
view, to the holders of the Dreyfus Common Stock. The full text of Lazard's
opinion, dated the date of this Prospectus/Joint Proxy Statement, is attached as
Appendix II hereto. The description of the written opinion set forth herein is
qualified in its entirety by reference to the full text of the opinion attached
hereto as Appendix II. Dreyfus stockholders are urged to read the opinion in its
entirety for a description of the procedures followed, assumptions made, matters
considered, and qualifications and limitations on the review undertaken, by
Lazard in connection therewith. Pursuant to instructions from the Dreyfus Board,
which had determined that Dreyfus and its advisers should not solicit or invite
any proposal for a business combination following the November 11, 1993 press
announcement that Dreyfus had terminated discussions regarding a possible
business combination with a financial institution, Lazard did not solicit other
merger proposals and Lazard advised the companies that contacted Lazard (or were
referred to Lazard by Dreyfus) to express an interest in a merger or acquisition
transaction with Dreyfus prior to the date of the Merger Agreement that Dreyfus
was not seeking to enter into a business combination at that time. None of the
parties that contacted Lazard made a specific proposal, discussed possible
ranges of value or requested financial or other information about Dreyfus. Since
the execution of the Merger Agreement, Lazard has not received any proposals
from third parties relating to a merger or acquisition transaction with Dreyfus.
See "Background of and Reasons for the Merger--Background of the Merger."
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Lazard's opinions are directed only to the fairness of the Exchange Ratio
and do not constitute a recommendation to any Dreyfus stockholder as to how such
stockholder should vote at the Dreyfus Meeting.
MATERIALS AND INFORMATION CONSIDERED WITH RESPECT TO THE MERGER. In
connection with its opinions, Lazard reviewed, among other things: (i) the
Merger Agreement; (ii) Annual Reports to Stockholders and Annual Reports on Form
10-K for the each of the five years in the period ended December 31, 1992 of
Dreyfus and Mellon; (iii) certain interim reports to stockholders and Quarterly
Reports on Form 10-Q of Dreyfus and Mellon and certain other communications from
Dreyfus and Mellon to their respective stockholders; and (iv) certain internal
financial analyses for Dreyfus and Mellon prepared by their respective
managements. In addition, in connection with rendering its opinion dated the
date of this Prospectus/Joint Proxy Statement, Lazard reviewed the Registration
Statement (including this Prospectus/Joint Proxy Statement), the Annual Reports
on Form 10-K of Dreyfus and Mellon for the year ended December 31, 1993 and the
Quarterly Reports on Form 10-Q of Dreyfus and Mellon for the quarter ended March
31, 1994. Lazard held discussions with the senior managements of Dreyfus and
Mellon concerning their past and current business operations and financial
condition, regulatory relationships and the future prospects of their respective
companies. In addition, Lazard held discussions with the independent auditors
for each of Dreyfus and Mellon regarding their respective financial and
accounting matters. Lazard did not consider the relative merits of the Merger
and alternative strategies for Dreyfus.
In conducting its review and arriving at its opinions, Lazard relied,
without independent verification, upon the accuracy and completeness of all of
the financial and other information provided to it or publicly available. Lazard
also assumed, without independent verification, that the reserve for credit
losses for Mellon is in the aggregate adequate to cover such losses. Lazard did
not make or obtain any independent evaluation or appraisals of the assets and
liabilities of Dreyfus or Mellon or any of their subsidiaries, nor did Lazard
examine any individual credit files.
Lazard considered such financial and other factors as it deemed appropriate
under the circumstances, including, among others, the following: (i) the
reported price and trading activity for Dreyfus Common Stock and Mellon Common
Stock; (ii) certain publicly available financial and stock market information
with respect to other publicly traded companies; and (iii) the financial terms
of certain recent business combinations in the investment management industry
specifically and in other industries generally. Lazard's opinions noted that
they were based upon economic, market and other conditions as they existed and
could be evaluated on the dates of such opinions and the information made
available to Lazard through the dates of such opinions. In the course of its
analysis, Lazard prepared estimates of future financial performance of Dreyfus
and Mellon which were based in part upon discussions with the managements of the
two companies. Estimates of future financial performance are based on numerous
variables and assumptions which are inherently uncertain, including, without
limitation, factors related to general economic and competitive conditions.
Accordingly, actual results could vary significantly from such estimates.
Set forth below is a brief summary setting forth the material analyses
presented by Lazard to the Dreyfus Board in connection with its written opinion
as to the fairness, from a financial point of view, of the Exchange Ratio on the
date the Dreyfus Board approved the Merger Agreement. Unless otherwise
specified, all ratios and other financial information described below are based
on financial data as of or for the twelve months ended September 30, 1993. The
procedures followed, assumptions made, matters considered, and qualifications
and limitations on the review undertaken contained in the opinion dated the date
of the Merger Agreement are substantially the same as, and not materially
different from, those contained in the opinion dated the date of this
Prospectus/Joint Proxy Statement and attached hereto.
HISTORICAL FINANCIAL DATA. Lazard reviewed certain historical financial
information for Dreyfus and Mellon and calculated the imputed value of the
Merger to holders of Dreyfus Common Stock. This analysis showed a value of
$50.50 per share of Dreyfus Common Stock based upon the Exchange Ratio and the
closing price of the Mellon Common Stock on December 3, 1993 of $57.375 per
share. Lazard also calculated the multiple which the Exchange Ratio represents,
based on the $50.50 per share purchase price, when compared to Dreyfus' Common
Stock closing market price on November 4, 1993 (five trading days prior to the
Dreyfus press release relating to merger discussions) and December 3, 1993 (the
last trading day prior to the public
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announcement of the Merger Agreement). Lazard calculated the premium to be 30.3%
and 13.5% based on market value on November 4, 1993 and December 3, 1993,
respectively, and 57.1% and 22.8% based on the value of the firm excluding
Dreyfus' net cash on such dates. Based on the Exchange Ratio, the multiple of
market value to last twelve months ended September 30, 1993 ("LTM") earnings was
20.5 times and the multiple of firm value to LTM earnings before interest,
taxes, depreciation and amortization ("EBITDA") was 10.6 times.
CONTRIBUTION ANALYSIS. Lazard analyzed the relative contribution of each
of Dreyfus and Mellon to certain balance sheet and income statement items,
including assets, common equity, tangible common equity and 1993 and 1994
estimated earnings (as compiled by the Institutional Brokers' Estimate System,
"IBES"). Lazard then compared the ownership percentages of the combined company
implied by the relative contributions of such balance sheet and income statement
items, to the ownership percentage for Dreyfus stockholders of approximately
34.4% (32.8% on a fully diluted basis), at the Exchange Ratio. The contribution
analysis showed that Dreyfus would contribute approximately 2.5% of the combined
assets, 23.1% of the combined common equity, 31.0% of tangible common equity and
20.6% and 18.8%, respectively, of the estimated 1993 and 1994 earnings of the
combined companies.
COMPARISON TO OTHER COMPANIES AND TRANSACTIONS. Lazard compared the
financial performance of Dreyfus based on various financial measures of assets
under management, earnings performance and trading price multiples, to that of a
peer group of publicly traded investment management companies with assets under
management ranging from approximately $13.8 billion to $99.9 billion, including
The Colonial Group, Inc., Duff & Phelps Corporation, Eaton Vance Corporation,
Franklin Resources, Inc., The Pioneer Group, Inc., T. Rowe Price Associates,
Inc., The John Nuveen Company and United Asset Management Corporation. This
analysis showed that Dreyfus had a compounded annual growth rate of assets under
management from December 31, 1991 to September 30, 1993 of 1.7% compared to an
average growth rate of 21.5% for its peer group, growth in operating income from
1991 to 1992 of 73.8% compared to an average growth rate of 31.5% for its peer
group, a multiple of market value to LTM earnings of 17.7 times compared to an
average multiple of 17.5 times for its peer group, and a multiple of the value
of the firm to LTM operating income of 9.0 times compared to an average of 9.9
times for its peer group.
Lazard also compared the financial performance of Mellon based on various
financial measures of performance such as price-to-tangible book value
multiples, price-to-earnings multiples, dividend yields and recurring fee
revenues as a percentage of recurring revenues to that of three groups of bank
holding companies, a group of selected "top tier banks" that included Banc One
Corporation, Norwest Corporation, SunTrust Banks, Inc. and Wachovia Corporation;
a group of "regional competitors" that included CoreStates Financial
Corporation, First Fidelity Bancorporation, National City Corporation, PNC Bank
Corporation and Society Corporation; and a group of "trust banks" that included
Northern Trust Corporation and State Street Boston Corporation. This analysis
showed that Mellon had a price-to-tangible book value multiple of 2.0 times
compared to an average of 2.1 times for the group of top tier banks, 1.7 times
for the regional competitors and 2.7 times for the trust banks; Mellon had a
price-to-earnings multiple (based on 1994 IBES estimates) of 8.9 times compared
to an average of 8.5 times for the regional competitors, 10.2 times for the top
tier banks and 13.6 times for the trust banks; Mellon had a dividend yield of
3.9% compared to an average of 3.2% for the top tier banks, 4.2% for the
regional competitors and 1.8% for the trust banks; and Mellon had recurring fee
revenues as a percentage of recurring revenues of 47.2% compared to an average
of 31.2% for the top tier banks, 29.3% for the regional competitors and 60.1%
for the trust banks.
Lazard examined the history of trading prices for both Dreyfus Common Stock
and Mellon Common Stock for the period from December 1991 to December 1993.
Lazard also examined the relationship between movements of Dreyfus Common Stock
and Mellon Common Stock market prices and movements in the composites of their
respective peer groups and, in the case of Mellon, the S&P Regional Bank Index.
This analysis showed that the market price of Dreyfus Common Stock
underperformed its peer group and the market price of Mellon Common Stock
outperformed its peer group during this period.
Lazard reviewed certain financial data relating to 10 selected merger
transactions involving investment management companies which occurred since
January 1991. The transactions included (acquiror/acquiree):
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First Union Corporation/Leiber & Co.; Alliance Capital Management L.P./Shields
Asset Management Inc.; Reich & Tang L.P./New England Investment Companies, Inc.;
Clayton, Dubilier & Rice, Inc./Van Kampen Merritt Companies, Inc.; Franklin
Resources, Inc./Templeton, Galbraith & Hansberger Ltd.; U.S. Trust
Corporation/Delafield, Harvey, Tabell Inc.; United Asset Management
Corporation/Spectrum Asset Management, Inc.; Management/Chancellor Capital
Management, Inc.; United Asset Management Corporation/ First Pacific Advisors
Inc.; and Union Bank of Switzerland/Chase Investors Management Corp. To the
extent data were available, Lazard calculated the acquisition price as a
multiple of earnings, EBITDA, revenues, and assets under management at the time
such acquisitions were first announced. In the selected transactions, the
calculations yielded a range of: (i) price to earnings multiples of 8.8 times to
27.2 times with a median multiple of 14.9 times, compared with a multiple of
20.5 times associated with the Exchange Ratio; (ii) firm value to EBITDA
multiples of 5.1 times to 12.1 times with a median multiple of 7.3 times,
compared with a multiple of 10.6 times associated with the Exchange Ratio; (iii)
firm value to revenues multiples of 1.7 times to 5.2 times with a median
multiple of 3.3 times, compared with a multiple of 3.8 times associated with the
Exchange Ratio; and (iv) firm value to assets under management of 0.5% to 4.3%
with a median multiple of 1.5%, compared to 1.5% associated with the Exchange
Ratio, in each case at the time the Merger Agreement was signed.
No company or transaction used in the above analysis as a comparison is
identical to Dreyfus, Mellon or the contemplated Merger. Accordingly, an
analysis of the results of the foregoing is not mathematical; rather, it
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the companies and other factors that
could affect the public trading value of the companies to which they are being
compared.
OTHER CONSIDERATIONS AND ANALYSES WITH RESPECT TO THE MERGER. Lazard
analyzed the accretion in earnings per share, book value per share, tangible
book value per share and dividends per share on a pro forma combined basis
compared to Dreyfus on a stand-alone basis. Lazard also estimated the present
value of the future streams of after-tax cash flows that Dreyfus could produce
on a stand-alone basis through 1998. The analysis was based on several
assumptions, including a 25% dividend payout ratio and an earnings per share
annual compounded growth rate of 14%. A terminal value was calculated for 1998
by multiplying Dreyfus' projected 1998 earnings by a price/earnings multiple of
15 or 17 times. This terminal valuation analysis and the annual dividend
payments were discounted at rates ranging from 12.0% to 18.0%, producing
potential values per share of Dreyfus on a stand-alone basis ranging from $34.78
to $50.29.
Lazard compared these values to the potential value provided to Dreyfus
stockholders in the Merger. This analysis was based upon varying assumptions
concerning earnings growth rates, dividend rates and exit multiples, as well as
the achievement of certain specified synergies, which assumptions are themselves
based upon many factors and assumptions many of which are beyond the control of
Dreyfus and Mellon. As indicated below, this analysis is not necessarily
indicative of actual values or actual future results and does not purport to
reflect the prices at which any security may trade at the present time or any
time in the future. Applying price/earnings multiples of 10 or 12 times to
calculate a pro forma combined terminal value and discounting the terminal value
and annual dividend payments at rates ranging from 12.0% to 18.0% produced
potential values ranging from $45.88 to $68.58 per Dreyfus share on a pro forma
combined basis.
Lazard illustrated the earnings dilution that would be incurred by Mellon
based upon the proposed Exchange Ratio. The analysis showed a 10% dilution in
earnings per share based upon 1994 estimated earnings of the combined company
following the Merger assuming certain specified synergies and a 16% dilution in
earnings per share assuming no synergies were realized.
WRITTEN OPINION FOR PROXY STATEMENT. In connection with its written
opinion dated as of the date of this Prospectus/Joint Proxy Statement, Lazard
confirmed the appropriateness of its reliance on the analyses used to render its
December 5, 1993 opinion by performing procedures to update certain of such
analyses and by reviewing the assumptions on which such analyses were based and
the factors considered in connection therewith.
LIMITATION ON OPINIONS. The information above summarizes the material
analyses prepared by Lazard in connection with its opinions. This summary does
not purport to be a complete description of the analyses
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performed by Lazard in connection with the rendering of its fairness opinions.
The preparation of a fairness opinion is not necessarily susceptible to partial
analysis or summary description. Lazard believes that its analyses and the
summary set forth above must be considered as a whole and that selecting
portions of its analyses, without considering all analyses, or selecting part or
all of the above summary, without considering all factors and analyses, would
create an incomplete view of the process underlying the analyses set forth in
the Lazard presentations and opinions. The range in calculations resulting from
any particular analyses described above should not be taken to be Lazard's view
of the actual value of Dreyfus or Mellon. The fact that any specific analysis
has been referred to in the summary above is not meant to indicate that such
analysis was given more weight than any other analyses.
In performing its analyses, Lazard made numerous assumptions with respect
to industry performance, general business and economic conditions and other
matters, many of which are beyond the control of Dreyfus or Mellon. Such
analyses were prepared solely as part of Lazard's analysis of the fairness of
the Exchange Ratio, from a financial point of view, to Dreyfus' stockholders and
were provided to the Dreyfus Board in connection with the delivery of Lazard's
opinions. Because any estimates contained in the analyses performed by Lazard
are inherently subject to uncertainty, none of the Dreyfus Board, Lazard or any
other person assumes responsibility for the accuracy of such estimates. The
analyses do not purport to be appraisals or to reflect the prices at which a
company might actually be sold or the prices at which any securities may be
traded in the future. In addition, as described above, Lazard's opinion and
presentation to the Dreyfus Board is just one of the many factors taken into
consideration by the Dreyfus Board.
FEES PAYABLE TO LAZARD. Dreyfus' engagement of Lazard provides for a cash
retainer of $50,000 per calendar quarter (which retainer shall be credited
against the transaction fee described below), and a cash fee which is contingent
upon consummation of the Merger equal to (i) .40% of the aggregate consideration
paid on a fully diluted basis less (ii) $750,000. Based upon a market price of
$56.25 for the Mellon Common Stock at June 30, 1994, Lazard's fee payable upon
consummation of the Merger would be approximately $6.8 million, less any amounts
paid pursuant to the retainer. Dreyfus has also agreed to reimburse Lazard for
its reasonable out-of-pocket expenses and to indemnify Lazard against certain
liabilities, including liabilities under the federal securities laws.
SALOMON BROTHERS OPINIONS
Dreyfus retained Salomon Brothers solely in connection with the delivery of
an opinion to the Dreyfus Board relating to the fairness, from a financial point
of view, to Dreyfus' stockholders of the Exchange Ratio in the possible business
combination with Mellon.
Salomon Brothers has delivered to the Dreyfus Board its written opinions,
respectively dated December 5, 1993 and the date of this Prospectus/Joint Proxy
Statement, that as of those dates the Exchange Ratio was fair, from a financial
point of view, to the holders of Dreyfus Common Stock.
THE FULL TEXT OF THE OPINION DATED THE DATE OF THIS PROSPECTUS/JOINT PROXY
STATEMENT IS ATTACHED AS APPENDIX III TO THIS PROSPECTUS/JOINT PROXY STATEMENT.
DREYFUS STOCKHOLDERS ARE URGED TO READ THE OPINION IN ITS ENTIRETY FOR A
COMPLETE DESCRIPTION OF THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS OF
THE REVIEW UNDERTAKEN. THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS OF
THE REVIEW UNDERTAKEN CONTAINED IN THE OPINION DATED DECEMBER 5, 1993 ARE
SUBSTANTIALLY THE SAME AS THOSE CONTAINED IN THE OPINION DATED THE DATE OF THIS
PROSPECTUS/JOINT PROXY STATEMENT AND ATTACHED HERETO AS APPENDIX III. THE
SALOMON BROTHERS OPINION, WHICH WAS DELIVERED FOR USE AND CONSIDERATION BY THE
DREYFUS BOARD, IS DIRECTED ONLY TO THE FAIRNESS OF THE EXCHANGE RATIO, DOES NOT
ADDRESS DREYFUS' UNDERLYING BUSINESS DECISION TO PARTICIPATE IN THE MERGER AND
DOES NOT CONSTITUTE A RECOMMENDATION TO ANY DREYFUS STOCKHOLDER AS TO HOW SUCH
STOCKHOLDER SHOULD VOTE WITH RESPECT TO THE MERGER.
Although Salomon Brothers evaluated the financial terms of the Merger, it
was not asked to and did not participate in discussions or negotiations
concerning the consideration to be paid to holders of Dreyfus Common Stock. In
arriving at its opinions, Salomon Brothers reviewed, analyzed and relied upon
material bearing upon the financial and operating condition and prospects of
Dreyfus and Mellon and material prepared in connection with the Merger, and
considered such financial and other factors as it deemed appropriate under
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the circumstances, including, among other things, the following: (i) the Merger
Agreement; (ii) the Annual Reports on Form 10-K of Dreyfus and Mellon for each
of the five years in the period ended December 31, 1992 and the Quarterly
Reports on Form 10-Q of Dreyfus and Mellon for the quarters ended March 31,
1993, June 30, 1993, and September 30, 1993; (iii) certain other publicly
available financial and other information concerning Dreyfus and Mellon; (iv)
certain publicly available information concerning the trading of, and the
trading markets for, Dreyfus Common Stock and Mellon Common Stock; (v) certain
other internal information, including certain financial forecasts for Dreyfus
and Mellon for the current year prepared by the respective managements of such
companies and certain pro forma combined financial forecasts for 1994 and 1995
prepared by management of Dreyfus and Mellon and furnished to Salomon Brothers
for the purpose of its analysis; (vi) the nature and terms of certain recent
transactions which Salomon Brothers believed to be reasonably comparable to the
Merger or otherwise relevant to its inquiry; and (vii) certain publicly
available information regarding certain other companies that Salomon Brothers
believed to be comparable to Dreyfus or Mellon and the trading markets for
certain of such other companies' securities. Salomon Brothers also met with
certain officers and representatives of Dreyfus and Mellon to discuss the
foregoing as well as other matters it believed relevant to its inquiry. In
addition, in connection with rendering its opinion dated the date of this
Prospectus/Joint Proxy Statement, Salomon Brothers reviewed the Registration
Statement (including this Prospectus/Joint Proxy Statement), the Annual Reports
on Form 10-K of Dreyfus and Mellon for the year ended December 31, 1993 and the
Quarterly Reports on Form 10-Q of Dreyfus and Mellon for the quarter ended March
31, 1994. Salomon Brothers also took into account its assessment of general
economic, market and financial conditions and its experience in similar
transactions, as well as its experience in securities valuation and its
knowledge of the financial services industry generally. Salomon Brothers did not
consider the relative merits of the Merger and alternative strategies for
Dreyfus.
As set forth in its opinions, Salomon Brothers relied upon and assumed the
accuracy and completeness of the financial and other information provided to it
or publicly available and did not attempt independently to verify the same. With
respect to financial forecasts, Salomon Brothers assumed that such forecasts
were reasonably prepared on a basis reflecting the best currently available
estimates and judgments of the respective managements of Dreyfus and Mellon.
Salomon Brothers did not make or obtain any evaluations or appraisals of the
properties, assets, liabilities or reserves of Dreyfus or Mellon. Salomon
Brothers noted that it was not requested to and did not approach any other
parties with respect to a business combination involving Dreyfus. Salomon
Brothers did not solicit other merger proposals nor did Salomon Brothers enter
into discussions with any of the companies that contacted Dreyfus or Salomon
Brothers to express an interest in a merger or acquisition transaction with
Dreyfus following the November 11, 1993 press announcement that Dreyfus had
terminated discussions regarding a possible business combination with a
financial institution. See "Background of and Reasons for the Merger--Background
of the Merger." Salomon Brothers also noted that its opinion necessarily was
based upon conditions as they existed and could be evaluated as of the date
thereof. Salomon Brothers assumed that in the course of obtaining necessary
regulatory approvals for the Merger no restrictions would be imposed that would
have a material adverse affect on the contemplated benefits of the Merger to
Dreyfus following the Merger, and that the Merger will qualify as a tax-free
reorganization under the Internal Revenue Code and will be accounted for as a
pooling of interests.
In connection with its opinion dated December 5, 1993, Salomon Brothers
performed certain financial analyses, which it discussed with the Dreyfus Board
on December 5, 1993. Salomon Brothers confirmed the appropriateness of its
reliance on such analyses in connection with its opinion dated the date of this
Prospectus/Joint Proxy Statement by performing procedures to update certain of
such analyses and reviewing the assumptions on which such analyses were based
and the factors considered in connection therewith. The material portions of the
analyses performed by Salomon Brothers in connection with the rendering of its
opinion dated December 5, 1993 are summarized below.
TRANSACTION SUMMARY. Based upon the Exchange Ratio and the closing market
price per share of Mellon Common Stock on December 3, 1993, Salomon Brothers'
analysis of the Merger calculated the implied purchase price per share of
Dreyfus Common Stock and the premium to the market value of Dreyfus Common Stock
on December 3, 1993 (the last trading day prior to the public announcement of
the Merger Agreement) and November 3, 1993 (thirty days earlier). The analysis
also calculated such implied purchase
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price as a multiple of certain financial statement items, including 1993
projected earnings per share (as estimated by the IBES), 1993 projected
operating earnings per share (as estimated by Salomon Brothers), and book value.
This analysis showed that the Exchange Ratio represented an implied purchase
price of $50.50 per share of Dreyfus Common Stock, and a premium over Dreyfus'
closing market value on December 3, 1993 and November 3, 1993 of 13.5% and
29.5%, respectively. The analysis also showed that the implied purchase price
represented a multiple of 18.6 times 1993 projected earnings per Dreyfus share,
23.5 times 1993 projected operating earnings per Dreyfus share, and a multiple
of 2.37 times book value per Dreyfus share. Additionally, Salomon Brothers noted
various financial statistics based on Dreyfus' aggregate market value less what
Salomon Brothers determined to be excess cash and marketable securities.
HISTORICAL FINANCIAL DATA. Salomon Brothers analyzed the historical income
statement and balance sheet data for Dreyfus for the period from 1988 through
1993 (using Salomon Brothers' estimates for the fourth quarter of 1993). As part
of this analysis, Salomon Brothers examined the actual reported earnings of
Dreyfus as well as earnings exclusive of realized gains and other non-recurring
items. In addition, Salomon Brothers also analyzed the growth in core earnings
per share excluding both realized gains and the earnings and dividend income
attributable to Dreyfus' investment portfolio. Salomon Brothers also noted the
growth in management fees as well as the trend in fees waived and fund expenses
reimbursed. Salomon Brothers also derived a series of key profitability and
capitalization measures for Dreyfus over this time period.
DREYFUS COMPARABLE COMPANY ANALYSIS. Salomon Brothers reviewed and
compared the financial, operating and market performance of a selected peer
group of publicly traded asset management companies (the "Group") with that of
Dreyfus. Salomon Brothers selected such Group on the basis of various factors,
including business characteristics, size and capitalization. The Group included
The Colonial Group, Inc., Duff & Phelps Corp., Eaton Vance Corp., Franklin
Resources, Inc., The John Nuveen Company, The Pioneer Group, Inc., T. Rowe Price
Associates, Inc., and United Asset Management Corp. Salomon Brothers also
examined certain market and financial data for a group of investment management
companies organized as master limited partnerships. As part of this analysis,
Salomon Brothers compared various financial measures of the Group to those of
Dreyfus, including aggregate market value, dividend yield and current trading
values as a multiple of earnings before interest, amortization and taxes,
pre-tax and net income, assets under management and book value as of or for the
twelve months ended September 30, 1993. Salomon Brothers also examined the mix
of assets under management for each of the companies in the Group as of December
31, 1992. This analysis showed that Dreyfus, based on its closing market share
price on December 3, 1993, was valued at price to 1993 IBES estimated earnings,
pre-tax income, and book value multiples, and as a percentage of assets under
management, of 16.4x, 10.5x, 2.02x, and 2.1%, respectively, as compared to
median measures for the Group of 16.8x, 10.0x, 3.82x, and 2.0%, respectively.
Salomon Brothers also analyzed certain operating and productivity statistics as
well as the growth in earnings, revenues and assets under management for the
Group and compared those statistics to those of Dreyfus at the end of or for the
same period. This analysis showed that Dreyfus experienced compound growth rates
in assets under management, total revenue and net income for the five-year
period ended December 31, 1992 of 17.5%, 7.3% and 1.6%, respectively, as
compared to the median measures for the Group of 17.8%, 21.9%, and 21.8%,
respectively.
COMPARABLE TRANSACTIONS ANALYSIS. Salomon Brothers also reviewed certain
terms of eight recent merger transactions involving asset management companies.
Salomon Brothers considered the value of each of these transactions and the
implied multiple of earnings and revenues for the preceding twelve months as
well as the price as a percentage of assets under management. The selected
transactions included (acquiror/acquiree): First Union Corp./Leiber & Co.;
Franklin Resources/Templeton, Galbraith & Hansberger; TA Associates/AIM
Management Group; Keystone Group Inc./Keystone Colonial Funds; Alliance Capital
Management L.P./Shields Asset Management Inc.; New England Mutual Life/Reich &
Tang, Inc.; Alliance Capital Management L.P./Equitable Capital Management; and
CDV Acquisition Corp./Van Kampen Merritt Companies. Analysis of these selected
transactions produced median implied multiples based on earnings and revenues of
11.4x and 3.5x, respectively, and a median price to assets under management
percentage of 2.2%. These median valuation measures compared with implied
multiples of price to 1993 estimated earnings and operating revenues of 18.6x
and 5.4x, respectively, and a price to assets under management percentage of
2.4% for the Merger.
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DISCOUNTED CASH FLOW ANALYSIS. Using a discounted cash flow analysis,
Salomon Brothers estimated the present value of the future cash flows that
Dreyfus could produce over a projected five-year period from 1994 through 1998
if Dreyfus were to perform on a stand-alone basis (i.e., without giving effect
to any operating or other efficiencies pursuant to the Merger). These estimates
were made using assumed rates of growth of "core" earnings ranging from 10% to
15% per year, and a dividend payout ratio of 41.3% applied to core earnings
(core earnings were assumed to be earnings excluding securities gains, interest
and dividend income and certain other items deemed to be non-recurring). Salomon
Brothers derived certain potential equity market value reference ranges for
Dreyfus Common Stock based upon the sum of the present value (using discount
rates ranging from 12% to 16%) of the future cash flows derived from the
five-year core earnings of Dreyfus and the discounted value of the final year's
core earnings multiplied by numbers representing price-earnings multiples
ranging from 12x to 18x. These values were then adjusted to reflect the amount
of cash and marketable securities outstanding (net of an estimate of capital
required to support Dreyfus' business). This analysis produced potential equity
market values per share of Dreyfus Common Stock ranging from $36.46 to $54.56.
ANALYSIS OF HISTORICAL STOCK PRICE PERFORMANCE. Salomon Brothers examined
the history of the trading prices and volume of both Dreyfus and Mellon Common
Stock over a ten-year period and the annualized total rates of return for each
of the securities over a number of different holding periods. Salomon Brothers
also analyzed the recent price performance of both Mellon and Dreyfus Common
Stock as compared to the S&P Composite Average and a peer group index
specifically developed for each company. This analysis showed that, for the
five-year period ended December 3, 1993, Dreyfus Common Stock had appreciated
79.4%, versus 300.1% and 71.0% for its peer group (the Group, as defined above)
and the market, respectively, while Mellon Common Stock had appreciated 127.2%,
versus 64.8% and 71.0% for its peer group (the Salomon Brothers Superregional
Bank Index, as defined below) and the market, respectively.
CONTRIBUTION ANALYSIS. Salomon Brothers analyzed the contribution of each
of Dreyfus and Mellon to book value, tangible book value (book value less
goodwill) and earnings, as compared to the respective ownership percentages that
former Dreyfus and Mellon shareholders would have after giving effect to the
Merger. Based on the Exchange Ratio and the closing market price of Mellon
Common Stock on December 3, 1993, Dreyfus stockholders would receive
approximately 32.3% ownership of the combined company after the Merger, as
compared to Dreyfus' percentage contribution to pro forma common equity,
tangible book value, and 1994 IBES median estimated earnings of 23.7%, 31.0%,
and 19.5%, respectively.
MELLON COMPARABLE COMPANY ANALYSIS. Salomon Brothers compared current
market data and several credit and operating statistics of Mellon for the twelve
months ended September 30, 1993, with those of a group of nineteen bank holding
companies comprising the Salomon Brothers Superregional Bank Index excluding
Mellon (the "Bank Index"), and as such being deemed comparable on the basis of
size and business lines. The measures compared included, among other factors,
return on assets, return on equity, net interest margin, noninterest income as a
percentage of revenue, noninterest income as a percentage of assets, overhead
ratio, equity to assets ratio, Tier I capital ratio and Total risk based capital
ratio. Salomon Brothers also analyzed certain credit quality ratios of Mellon's
loan portfolio, such as the ratio of nonperforming assets to total loans, the
ratio of reserve for credit losses to loans and the ratio of nonperforming
assets to tangible common equity, as compared to the Bank Index peer group.
These analyses showed, among other things, that Mellon's market valuation
measures of 8.6x 1994 earnings (as estimated by the management of Mellon), 1.40x
book value, and a dividend yield of 3.90% were comparable with its Bank Index
peer group median multiples of 8.7x, 1.56x, and 3.50%, respectively. The
analysis further showed that Mellon's return on average assets, return on
average common equity, and common equity to assets ratios of 1.45%, 17.93%, and
7.66%, respectively, were higher than the median measures for the Bank Index
peer group of 1.21%, 16.01%, and 7.39%, respectively. Mellon also outperformed
the Bank Index peer group medians on several other measures, including
noninterest expense to revenue and total equity to assets. On certain measures,
including net interest margin, tangible common equity to tangible assets, Tier I
and total capital ratios, and nonperforming assets to loans, Mellon was below
the Bank Index peer group medians. The institutions included in the Bank Index
are Fleet Financial Group, Inc., Bank of Boston Corporation, First Fidelity
Bancorporation, CoreStates Financial Corporation, PNC Bank Corporation, Banc One
Corporation, Comerica Inc., National City Corporation,
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NBD Bancorp, Inc., First Bank System, Inc., Key Banks, Inc. (pro forma for the
merger with Society Corporation), Norwest Corporation, NationsBank Corporation,
First Union Corporation, SunTrust Banks, Inc., Wachovia Corporation, BankAmerica
Corporation, First Interstate Bancorp and Wells, Fargo & Company.
PRO FORMA MERGER CONSEQUENCES ANALYSIS. Salomon Brothers analyzed certain
pro forma effects on the combined company resulting from the Merger for the
projected five-year period from 1994 through 1998. This analysis was based upon
certain assumptions prepared by the management of Mellon which reflected
estimated cost savings and revenue enhancements by combining the two companies.
Salomon Brothers examined the pro forma earnings, dividends per share, fully
diluted book value per share, return on assets, return on common equity and Tier
I capital ratio of the pro forma combined entity. Salomon Brothers then
estimated the present value (using discount rates ranging from 12% to 16%) of
the future cash flows per Dreyfus share based on the discounted value of the
expected dividend stream and the discounted value of the final year's net
earnings multiplied by numbers representing terminal price-earnings multiples
ranging from 8.6x to 15.0x. This pro forma analysis produced an overall range of
potential values per Dreyfus common share of $44.40 to $84.62. Salomon Brothers
also conducted the analysis using a narrower terminal price-earnings multiple
range of 9.6x to 11.0x, which produced a range of potential values per Dreyfus
share of $48.41 to $64.32. Salomon Brothers compared these potential values to
those produced by the stand-alone basis discounted cash flow analysis. Salomon
Brothers also conducted certain other pro forma analyses, including a comparison
of operating and capitalization measures of the combined company with selected
trust banks, and an analysis of the increases in estimated 1994 earnings,
dividends, and book value per share that Dreyfus shareholders would receive.
These percentage increases were 84.3%, 159.2%, and 86.0%, respectively.
While the summary set forth above does not purport to be a complete
description of the analyses Salomon Brothers performed in connection with the
rendering of its opinion, it does address all of the material matters relevant
to such analyses. Salomon Brothers believes that its analyses and the summary
set forth above must be considered as a whole and that selecting portions of its
analyses could create an incomplete view of the process underlying the analyses
it performed in preparing its opinion and presentation to the Dreyfus Board. In
performing its analyses, Salomon Brothers made numerous assumptions with respect
to industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Dreyfus
and Mellon. Because any estimates contained in the analyses performed by Salomon
Brothers are inherently subject to uncertainty, none of the Dreyfus Board,
Salomon Brothers or any other person assumes responsibility for the accuracy of
such estimates.
Additionally, no company or transaction used in the comparable company or
comparable transaction analyses summarized above is identical to Dreyfus, Mellon
or the Merger. Accordingly, any such analyses of the value of the Merger involve
complex considerations and judgments concerning differences in the potential
financial and operating characteristics of the comparable companies and other
factors in relation to the trading and transaction values of the comparable
companies and comparable transactions.
SALOMON BROTHERS GENERALLY. Salomon Brothers is an investment banking firm
engaged, among other things, in the valuation of businesses and securities in
connection with mergers and acquisitions and other purposes. Salomon Brothers
was selected based upon its expertise. Except for rendering its opinion as to
the fairness, from a financial point of view, of the Exchange Ratio, Salomon
Brothers has not otherwise acted as financial adviser to Dreyfus or the Dreyfus
Board in connection with the Merger, and, as noted in its opinion, did not
participate in the discussions or negotiations with respect to the Merger.
In the ordinary course of its business, Salomon Brothers actively trades
the debt and equity securities of Dreyfus and Mellon for its own account and for
the accounts of its customers, and it therefore may from time to time hold a
long or short position in such securities.
FEES PAID TO SALOMON BROTHERS. Pursuant to its engagement of Salomon
Brothers, Dreyfus has paid Salomon Brothers a fee of $900,000 for its services
in connection with its opinion, and has agreed to pay Salomon Brothers an
additional fee of $200,000, payable upon publication of its opinion in this
Prospectus/ Joint Proxy Statement. Dreyfus has agreed to reimburse Salomon
Brothers for all reasonable out-of-pocket expenses, including reasonable fees
and disbursements of counsel. Dreyfus has also agreed to indemnify and
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hold harmless Salomon Brothers against certain liabilities and expenses,
including certain liabilities arising under the federal securities laws, related
to or arising out of its engagement.
REASONS FOR THE MERGER--MELLON; RECOMMENDATION OF MELLON BOARD
At its meeting on December 5, 1993, the Mellon Board determined that the
Merger is fair to, and in the best interests of, Mellon and its shareholders. In
reaching its determination, the Mellon Board consulted with Mellon management,
as well as its financial and legal advisers, and considered a number of factors,
including the following:
(a) the effectiveness of the Merger in meeting Mellon's strategic goal
of continuing its evolution into a full-service financial services company
with a bank as its core;
(b) the presentation by Mellon's management regarding its due
diligence review of the business, operations, earnings and financial
condition of Dreyfus on a historical, prospective and pro forma basis,
management's description of the enhanced opportunities for growth made
possible by the Merger, and management's assessment of the opportunities
for cost savings afforded by the Merger;
(c) the description by legal counsel of the terms of the Merger
Agreement, including the provisions for the payment of a $50,000,000 fee by
Dreyfus to Mellon under certain circumstances (see "The Merger-Termination
of the Merger Agreement; Fee");
(d) the opinion of Goldman Sachs to the effect that as of December 5,
1993 the Exchange Ratio was fair to Mellon (see "Opinions of Mellon
Financial Adviser");
(e) the expectation that the Merger would be tax-free to Mellon and
its shareholders and would be accounted for under the pooling of interests
method of accounting; and
(f) the advice of legal counsel that it could be reasonably expected
that the necessary regulatory approvals for the Merger would be obtained.
The Mellon Board did not assign any specific or relative weight to the
foregoing factors in the course of its consideration.
THE MELLON BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
ISSUANCE OF SHARES OF MELLON COMMON STOCK PURSUANT THERETO AND DETERMINED THAT
THE MERGER IS FAIR TO AND IN THE BEST INTERESTS OF MELLON AND THE MELLON
SHAREHOLDERS AND RECOMMENDS THAT MELLON SHAREHOLDERS VOTE FOR APPROVAL OF THE
MERGER AGREEMENT AND THE ISSUANCE OF THE MERGER SHARES PURSUANT THERETO.
OPINIONS OF MELLON FINANCIAL ADVISER
Goldman Sachs was retained by Mellon to act as its financial adviser in
connection with a possible business combination with Dreyfus and to provide
Mellon with financial advice and assistance in connection with a possible
transaction, including assistance in planning and negotiating its financial
aspects. At the meeting of the Mellon Board held on December 5, 1993, Goldman
Sachs delivered to the Mellon Board its oral opinion (which was confirmed in
writing that day) to the effect that, as of the date of such opinion, based on
the matters set forth therein, the Exchange Ratio was fair to Mellon. The full
text of Goldman Sachs' written opinion, dated the date of this Prospectus/Joint
Proxy Statement, which sets forth the assumptions made, procedures followed,
matters considered and limits on the review undertaken, is attached as Appendix
IV to this Prospectus/Joint Proxy Statement and is hereby incorporated herein by
reference. Shareholders of Mellon are urged to read the opinion in its entirety.
Goldman Sachs is a nationally recognized investment banking firm and was
selected by Mellon based on the firm's reputation and experience in investment
banking in general and its recognized expertise in the valuation of investment
management businesses. Goldman Sachs, as part of its investment banking
business, is continually engaged in the valuation of businesses and their
securities in connection with mergers and
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acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes.
In connection with rendering its opinions, Goldman Sachs, among other
things, (a) reviewed the Merger Agreement; (b) reviewed Annual Reports to
Shareholders and Annual Reports on Form 10-K of Mellon and Dreyfus for the each
of the five years in the period ended December 31, 1992, as well as certain
interim reports to shareholders and Quarterly Reports on Form 10-Q of Mellon and
Dreyfus, and certain other communications from Mellon and Dreyfus to their
respective shareholders; (c) reviewed certain internal financial analyses for
Mellon and Dreyfus prepared by their respective managements and certain
forecasts prepared by management of Mellon; (d) discussed past and current
business operations, regulatory relationships, financial condition and future
prospects of Mellon and Dreyfus with members of their respective senior
managements; (e) reviewed with members of the senior management of Mellon the
results of Mellon's due diligence examination of Dreyfus and the strategic
benefits expected to be derived from the Merger for the business and capital
position of Mellon; (f) reviewed the reported price and trading activity for
Mellon Common Stock and Dreyfus Common Stock; (g) compared certain financial and
stock market information for Mellon and Dreyfus with similar information from
certain other companies, the securities of which are publicly traded; (h)
reviewed the financial terms of certain recent business combinations in the
investment management industry specifically and in other industries generally;
and (i) performed such other analyses as it deemed appropriate. In addition, in
connection with rendering its opinion attached as Appendix IV, Goldman Sachs
reviewed the Registration Statement (including this Prospectus/Joint Proxy
Statement), the Annual Reports on Form 10-K of Mellon and Dreyfus for the year
ended December 31, 1993 and the Quarterly Reports on Form 10-Q of Mellon and
Dreyfus for the quarter ended March 31, 1994.
As set forth more fully therein, in connection with rendering its opinion,
Goldman Sachs relied without independent verification upon the accuracy and
completeness of all the financial and other information reviewed by it for
purposes of rendering its opinion. With Mellon's consent, Goldman Sachs has
assumed that the financial forecasts referred to in the preceding paragraph
(including, without limitation, projected cost savings and operating synergies
resulting from the Merger) were reasonably prepared on a basis reflecting the
best currently available judgments and estimate of Mellon that such forecasts
would be realized in the amounts and at the times contemplated thereby, and that
the transaction would be accounted for as a pooling of interests under generally
accepted accounting principles. In addition, Mellon has advised Goldman Sachs
that it expects the strategic benefits to be derived from the Merger for the
business and capital position of Mellon to outweigh the impact of the reduction
in earnings per share that is expected to result for a period of time. Goldman
Sachs did not make, nor was it furnished with, an independent evaluation or
appraisal of the assets and liabilities of Mellon or of Dreyfus or of any of
their respective subsidiaries.
The following is a summary of the material financial analyses discussed by
Goldman Sachs with the Mellon Board in connection with providing its written
opinion to the Mellon Board on December 5, 1993 and does not purport to be a
complete description of the analyses performed by Goldman Sachs.
COMPARISON WITH SELECTED PUBLIC INVESTMENT MANAGEMENT COMPANIES. Goldman
Sachs reviewed and compared certain (past and present) financial, operating and
market statistics of publicly traded investment managers, including six mutual
fund managers (the "MF Managers"). The MF Managers were: Franklin Resources; T.
Rowe Price; John Nuveen Companies; The Colonial Group; Eaton Vance and The
Pioneer Group. Among other things, the analysis indicated that:
(i) the median annual growth rate of assets under management for the
five year period 1988 through 1992 was 16.0% for the MF Managers, with a
range of 4.5% to 41.2%, as compared with 19.8% for Dreyfus;
(ii) the growth rate of assets under management for the latest fiscal
year ranged from 6.3% to 23.9%, with a median of 18.6%, for the MF
Managers, as compared with a growth of 2.9% in assets under management for
the latest full fiscal year for Dreyfus;
(iii) the December 3, 1993 share price as a multiple of the median
IBES earnings estimates for 1993 and for 1994 ranged, for 1993, from 11.3x
to 19.3x for the MF Managers, with a median of 16.6x, and, for
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1994, from 11.1x to 16.8x for the MF Managers, with a median of 14.9x, as
compared with estimates of 16.4x for 1993 and 15.6x for 1994 for Dreyfus;
(iv) the dividend yields, based on the December 3, 1993 share price,
ranged from 0.6% to 2.1% for the MF Managers, with a median of 1.7%, as
compared with 1.7% for Dreyfus;
(v) the adjusted equity market capitalization (defined as equity
capital market capitalization plus the principal amount of outstanding debt
less net current assets), based on the December 3, 1993 share price, as a
multiple of both operating revenues and earnings before interest, taxes,
depreciation and amortization ("EBITDA") for the MF Managers ranged from
2.0x to 7.5x, with a median of 2.8x, and from 3.9x to 15.5x, with a median
of 8.5x, respectively, as compared with 2.8x and 7.7x for Dreyfus;
(vi) the adjusted equity market capitalization, based on the December
3, 1993 share price, as a percentage of assets under management for the MF
Managers ranged from 1.0% to 4.2%, with a median of 2.4%, as compared with
1.2% for Dreyfus;
(vii) the operating revenues as a percentage of assets under
management for the MF Managers ranged from 0.36% to 1.30%, with a median of
0.64%, as compared with 0.42% for Dreyfus;
(viii) the operating expenses as a percentage of operating revenues
for the MF Managers ranged from 31.3% to 75.9%, with a median of 61.8%, as
compared with 63.8% for Dreyfus; and
(ix) the EBITDA as a percentage of operating revenues for the MF
Managers ranged from 24.1% to 68.7%, with a median of 38.2%, as compared
with 36.2% for Dreyfus.
COMPARISON WITH RECENT ACQUISITIONS OF INVESTMENT MANAGEMENT COMPANIES.
The analysis also included a summary review of prices paid in acquisitions of
four investment management companies in 1992 and 1993. The transactions were
(acquiror/acquiree): First Union/Lieber & Co.; Clayton, Dubilier & Rice/Van
Kampen Merritt; Mellon Bank Corporation/The Boston Company; and Franklin
Resources/Templeton Galbraith & Hansberger Ltd. Of the four acquisitions
analyzed, the purchase price as a multiple of the latest twelve months net
income ranged from 12.6x to 15.4x, as a multiple of revenue ranged from 2.5x to
7.3x, as a percentage of assets under management ranged from 2.2% to 4.5%, and
as a multiple of the latest twelve months EBITDA ranged from 11.8x to 13.9x. The
comparable multiples for the Merger, as well as the multiples considered by
Goldman Sachs in its analysis, are presented in the next paragraph.
ANALYSIS OF MULTIPLES AT TRANSACTION PRICE. Valuing the Mellon common
shares to be issued in the Merger at their closing market price on December 3,
1993, the last trading day before the Merger Agreement was executed, the
aggregate consideration to be issued in the Merger is: 19.1 times stand-alone
earnings of Dreyfus for the twelve months ended September 30, 1993, 18.6 times
the 1993 IBES median earnings estimate, and 17.7 times the 1994 IBES median
earnings estimate for Dreyfus without taking into account incremental earnings
from expected synergies; 5.8 times operating revenues (year to date through
September 30, 1993, annualized); and a 1.39% premium (excess of purchase price
over book value at September 30, 1993,) as a percentage of assets under
management. Adjusted to exclude Dreyfus' excess capital at September 30, 1993,
the aggregate consideration in the Merger is: 16.0 times the stand-alone
earnings of Dreyfus for the twelve months ended September 30, 1993, 15.4 times
the 1993 IBES median earnings estimate, and 14.4 times the 1994 IBES median
earnings estimate; 3.7 times operating revenues (year to date through September
30, 1993, annualized); 10.2 times EBITDA for the year to date through September
30, 1993, annualized, and a 1.39% premium (excess of purchase price over book
value at September 30, 1993) as a percentage of assets under management.
BLENDED MULTIPLE ANALYSIS. This analysis reviewed the possible effect of
the Merger on the stock price of Mellon, based upon two different assumptions
(that the market applies to the estimated 1995 earnings contribution of Dreyfus
the same multiple that had previously applied to Mellon's 1995 estimated
earnings; and that the market applies to Dreyfus' estimated contribution to
earnings the same multiple the market currently (based on Dreyfus' share price
on November 10, 1993) applies to Dreyfus' earnings). Under this analysis, while
there would be a 6.4% decline in the per share market valuation of Mellon if the
market were to apply to Dreyfus' estimated contribution to Mellon's 1995
earnings, the multiple currently accorded to
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Mellon's earnings, an increase of 17.7% in the per share market valuation of
Mellon would result if the market were to apply to Dreyfus' estimated
contribution to Mellon's earnings in 1995 the multiple currently accorded by the
market to Dreyfus' estimated 1995 earnings.
Goldman Sachs updated and reviewed substantially the same types of
financial analyses in preparing its written opinion dated as of the date of this
Prospectus/Joint Proxy Statement as it reviewed in providing its December 5,
1993 written opinion. The following is a summary of certain financial analyses
reviewed by Goldman Sachs in preparing its opinion dated as of the date of this
Prospectus/Joint Proxy Statement.
COMPARISON WITH SELECTED PUBLIC INVESTMENT MANAGEMENT COMPANIES. Goldman
Sachs reviewed and compared certain (past and present) financial, operating and
market statistics of the MF Managers. Among other things the analyses indicated
that:
(i) the growth rate of assets under management for the latest fiscal
year ranged from 20% to 42% with a median of 29% for the MF Managers as
compared to a decline of 2% in assets under management for Dreyfus and for
the latest fiscal quarter ranged from 3% to a decline of 6% with a median
of a decline of 4% for the MF Managers as compared to a decline of 5% in
assets under management for Dreyfus;
(ii) the June 17, 1994 share price as a multiple of the median IBES
earnings estimates for 1994 ranged from 8.1x to 15.9x with a median of
13.4x for the MF Managers;
(iii) the adjusted equity market capitalization (as defined above),
based on the June 17, 1994 share price, as a multiple of both operating
revenues and EBITDA for the MF Managers ranged from 1.6x to 4.9x with a
median of 2.2x and from 4.4x to 10.8x with a median of 6.3x, respectively;
and
(iv) the adjusted equity market capitalization, based on the June 17,
1994 share price, as a percentage of assets under management for the MF
Managers ranged from 1.4% to 3.0% with a median of 1.9%.
In analyzing the information summarized in clauses (ii), (iii) and (iv),
Goldman Sachs did not consider current comparable information for Dreyfus since
the current trading price for Dreyfus reflects an anticipation of the
consummation of the Merger and thus does not present a pre-Merger comparison of
Dreyfus with the MF Managers.
ANALYSIS OF MULTIPLES AT TRANSACTION PRICE. Valuing the Mellon common
shares to be issued in the Merger at their closing market price on June 17,
1994, the aggregate consideration to be issued in the Merger is: 18.4x the
stand-alone earnings for Dreyfus for the three months ended March 31, 1994
annualized; 6.0x operating revenues for the three months ended March 31, 1994
annualized; and a 1.52% premium (excess of purchase price over book value at
March 31, 1994) as a percentage of assets under management at March 31, 1994.
Adjusted to exclude Dreyfus' excess capital at March 31, 1994, the aggregate
consideration to be issued in the Merger is: 15.8x the stand-alone earnings of
Dreyfus for the three months ended March 31, 1994 annualized; 3.9x operating
revenues for the three months ended March 31, 1994 annualized; 13.1x EBITDA for
the three months ended March 31, 1994 annualized; and a 1.52% premium (excess of
purchase price over book value at March 31, 1994) as a percentage of assets
under management at March 31, 1994.
NET INCOME PER SHARE IMPACT. Goldman Sachs noted that the pro forma impact
of the Merger on Mellon's primary net income per share for the three months
ended March 31, 1994 would be a reduction from $1.77 to $1.44 before
consideration of any synergies and without giving effect to restructuring
charges. Goldman Sachs was advised by the management of Mellon that the Merger
was expected to result in a reduction in earnings per share for a period of
time, but that management believed the strategic benefits of the Merger for the
business and capital position of Mellon significantly outweighed the effect of
such reduction.
The summaries set forth above describe the material analyses that Goldman
Sachs presented to the Mellon Board on December 5, 1993 or considered in its
analyses in preparation of its written opinion dated as of the date of this
Prospectus/Joint Proxy Statement, and do not purport to be a complete
description of such analyses. The preparation of a fairness opinion is a complex
process and not necessarily susceptible to partial analysis or a summary
description.
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Goldman Sachs believes that its analyses must be considered as a whole and
that selecting portions of its analyses without considering all factors and
analyses would create an incomplete view of the analyses and processes
underlying their opinion. In its analyses, Goldman Sachs relied upon numerous
assumptions made by Mellon with respect to industry performance, general
business and economic conditions, and other matters, many of which are beyond
the control of Mellon. Any estimates contained therein are not necessarily
indicative of actual values, which may be significantly more or less favorable
than as set forth therein. No company or transaction used as a comparison in the
analyses is identical to Mellon or Dreyfus or to the Merger. Additionally,
estimates of the value of businesses do not purport to be appraisals or
necessarily reflective of the prices at which businesses actually may be sold.
Because such estimates are inherently subject to uncertainty, none of the Mellon
Executive Committee, the Mellon Board, Goldman Sachs, or any other person
assumes responsibility for the accuracy of such estimates.
For the services of Goldman Sachs as financial adviser to Mellon in
connection with the Merger, Mellon paid Goldman Sachs $1,000,000 upon delivery
of its December 5, 1993 opinion. In addition, in the event that the Merger is
consummated, or if at least 50% of the outstanding common stock of Dreyfus or at
least 50% of the assets (based on the book value thereof) of Dreyfus is acquired
by Mellon in one or more transactions, Mellon has agreed to pay Goldman Sachs a
transaction fee of $4,000,000, less such $1,000,000. Mellon has also agreed to
pay Goldman Sachs its reasonable out-of-pocket expenses, including the fees and
disbursements of its counsel, and to indemnify Goldman Sachs against certain
liabilities, including certain liabilities arising under the Federal securities
laws. Goldman Sachs has provided certain investment banking services to Mellon
from time to time, including having acted as lead managing underwriter for
Mellon's common equity offerings in May 1991 and January 1993, having acted as
co-manager in various other recent public offerings of preferred stock and debt
for Mellon, and having acted as financial adviser to Mellon for the past several
years, including having acted as financial adviser in connection with, and
having participated in certain negotiations leading to, the Merger Agreement.
Goldman Sachs has advised Mellon that, in the ordinary course of its
business as a full-service securities firm, Goldman Sachs may, subject to
certain restrictions, actively trade the equity and/or debt securities of Mellon
and/or of Dreyfus for its own account or for the accounts of its customers and,
accordingly, may at any time hold a long or short position in such securities.
THE MERGER
This portion of the Prospectus/Joint Proxy Statement describes various
aspects of the Merger, including all aspects deemed material by Mellon and
Dreyfus. The following description does not purport to be complete and is
qualified in its entirety by reference to the Merger Agreement attached hereto
as Appendix I and incorporated herein by reference. All shareholders of Dreyfus
and Mellon are urged to read the Merger Agreement in its entirety.
GENERAL
The Merger Agreement provides that, subject to the satisfaction of certain
conditions (including, among other things, adoption and approval of the Merger
Agreement by the shareholders of Dreyfus and Mellon and receipt of certain
regulatory approvals), or, in certain cases, waiver of certain conditions,
Merger Subsidiary, a wholly owned subsidiary of Mellon Bank, will be merged into
and with Dreyfus. Upon consummation of the Merger, Dreyfus will become a wholly
owned subsidiary of Mellon Bank, which is a wholly owned subsidiary of Mellon,
and the stockholders of Dreyfus will become shareholders of Mellon. Pursuant to
the Merger Agreement, throughout a two-year period following the Effective Time,
Dreyfus, as a direct or indirect subsidiary of Mellon, will be headquartered in
the New York City metropolitan area and will be known under Dreyfus' current
corporate name. See "The Merger--Effective Time" and "Certain Agreements
Relating to Conduct of Business After the Merger."
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CONVERSION OF DREYFUS COMMON STOCK; EFFECT ON MELLON SHAREHOLDERS
CONVERSION OF DREYFUS COMMON STOCK. The Merger Agreement provides that, at
the Effective Time, each share of Dreyfus Common Stock then issued and
outstanding (other than shares held by Dreyfus or any of its subsidiaries or by
Mellon or any of its subsidiaries, provided that such shares are not held in a
fiduciary capacity or as a result of debts previously contracted) will cease to
be outstanding and will be converted into the right to receive 0.88017 shares of
Mellon Common Stock. Shares of Dreyfus Common Stock held by Dreyfus or any of
its subsidiaries or by Mellon or any of its subsidiaries (other than in a
fiduciary capacity or as a result of debts previously contracted) will be
cancelled. Shares of Dreyfus Common Stock held by holders who perfect
dissenters' rights will not be so converted and no fractional shares of Mellon
Common Stock will be issued.
EFFECT ON MELLON SHAREHOLDERS. At the Effective Time, each share of Mellon
Common Stock then issued and outstanding will continue as one share of Mellon
Common Stock. The Merger, which will be recorded under the pooling of interests
accounting method, will result in an initial decline in book value per share of
Mellon Common Stock as a result of the Exchange Ratio and the merger expenses to
be incurred in connection with the Merger. As indicated in "Unaudited
Comparative Per Share Book Value, Market Value, Cash Dividend and Earnings
Data," had the Merger been completed at March 31, 1994 and the $85 million
after-tax merger expenses been recorded, the historical book value per share of
Mellon Common Stock would have decreased from $42.76 to a pro forma book value
per share of $36.41.
NO FRACTIONAL SHARES OF MELLON COMMON STOCK TO BE ISSUED. No fractional
shares of Mellon Common Stock will be issued in the Merger. Holders of Dreyfus
Common Stock who otherwise would receive fractional shares instead will receive
cash through the procedure described below. Promptly following the Effective
Time, Mellon Bank, as exchange agent (the "Exchange Agent"), will determine the
excess of the number of full shares of Mellon Common Stock into which the
aggregate outstanding shares of Dreyfus Common Stock would be converted if all
such shares were held by one holder, over the number of full shares of Mellon
Common Stock to be distributed to holders of Dreyfus Common Stock (the "Excess
Shares"). Promptly following the Effective Time, the Exchange Agent, as agent
for the holders of the Dreyfus Common Stock, will sell the Excess Shares at the
then prevailing prices on the NYSE and will hold the proceeds in trust for the
holders of Dreyfus Common Stock. Mellon will pay all commissions, transfer taxes
and other out-of-pocket costs associated with this sale, including the expenses
and compensation of the Exchange Agent.
The Exchange Agent will distribute to each holder of Dreyfus Common Stock
his proportionate share of the proceeds of the sale of Excess Shares, calculated
as the proportion which the fractional share interest of such holder bears to
the aggregate fractional share interests of all such holders.
If the parties to the Merger Agreement agree in writing prior to the
Effective Time, then in lieu of the sale of the Excess Shares and the
distribution of the proceeds thereof, Mellon will pay to each holder of Dreyfus
Common Stock an amount in cash equal to the product obtained by multiplying the
fraction of a share of Mellon Common Stock to which such holder would otherwise
be entitled by the closing price for a share of Mellon Common Stock on the NYSE
immediately preceding the Effective Time.
See "The Merger--Certain Federal Income Tax Consequences of the Merger."
DISSENTERS' RIGHTS. No conversion of Dreyfus Common Stock into Mellon
Common Stock will be made with respect to any share of Dreyfus Common Stock as
to which a stockholder of Dreyfus has properly elected to exercise any rights to
dissent and obtain payment of the fair value of his shares under the NYBCL. See
"Dissenters' Rights--Dreyfus Stockholders."
PROCEDURE FOR EXCHANGE OF CERTIFICATES
MANNER OF EXCHANGE. The Exchange Agent will effect the exchange of
certificates representing shares of Dreyfus Common Stock in connection with the
Merger. Promptly after the Effective Time, the Exchange Agent will mail to each
holder of record of certificates which immediately prior to the Effective Time
represented outstanding shares of Dreyfus Common Stock, a notice advising the
holder of the effectiveness of the Merger accompanied by a transmittal form (the
"Transmittal Form"). The Transmittal Form will contain
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instructions with respect to the surrender of certificates representing Dreyfus
Common Stock to be exchanged for shares of Mellon Common Stock (together with
cash in lieu of any fractional share) and will specify that delivery will be
effected, and risk of loss and title to such certificates will pass, only upon
delivery of the certificates to the Exchange Agent. Upon surrender, in
accordance with the instructions contained in the Transmittal Form, to the
Exchange Agent of certificates representing shares of Dreyfus Common Stock, the
holder thereof will be entitled to receive in exchange therefor a certificate(s)
representing the appropriate number of shares of Mellon Common Stock to which
such holder is entitled and cash in lieu of any fractional share of Mellon
Common Stock.
DREYFUS STOCK CERTIFICATES SHOULD NOT BE FORWARDED TO THE EXCHANGE AGENT
UNTIL A DREYFUS STOCKHOLDER HAS RECEIVED A TRANSMITTAL FORM AND SHOULD NOT BE
RETURNED WITH THE ENCLOSED PROXY. NO ACTION IS REQUIRED OF ANY HOLDER OF MELLON
COMMON STOCK.
RIGHTS OF HOLDERS OF DREYFUS STOCK CERTIFICATES PRIOR TO SURRENDER. Prior
to the time certificates representing shares of Dreyfus Common Stock are
surrendered, dividends and other distributions declared or payable to holders of
record of Mellon Common Stock as of any time subsequent to the Effective Time
will be paid to the holder of any unsurrendered certificate representing Dreyfus
Common Stock and such holder's other rights as a shareholder of Mellon
(including, if applicable, the right to vote on any matter submitted to Mellon
shareholders for their approval) will continue. However, beginning 90 days after
the Effective Time, in the event a holder fails to physically surrender his
certificates representing Dreyfus Common Stock for exchange, no dividend or
other distribution payable to holders of record on any date that is 90 days
after the Effective Time will be paid to such holder until such holder
physically surrenders for exchange his certificates representing shares of
Dreyfus Common Stock (or an indemnity satisfactory to Mellon and the Exchange
Agent, in their sole judgment, if any of such certificates are lost, stolen or
destroyed). Upon surrender by any such shareholder of his certificates
representing Dreyfus Common Stock to the Exchange Agent (or the delivery of such
indemnity), the former Dreyfus stockholder will receive certificates
representing the shares of Mellon Common Stock into which the holder's shares of
Dreyfus Common Stock were converted and cash in lieu of fractional shares
(without interest) and the dividends or other distributions (without interest)
that are payable with respect to such shares of Mellon Common Stock since the
Effective Time (and have not previously been paid to such holder).
Certificates of Dreyfus Common Stock surrendered for exchange by a person
who is an "affiliate" of Dreyfus for purposes of Rule 145 under the Securities
Act will not be exchanged for certificates representing Mellon Common Stock
until Mellon has received an agreement from such person in the form specified in
the Merger Agreement. See "Resales by Affiliates of Mellon Common Stock Received
in the Merger."
LOST, STOLEN OR DESTROYED CERTIFICATES. Any Dreyfus stockholder whose
certificate for any of his shares of Dreyfus Common Stock has been lost, stolen
or destroyed should immediately call The Bank of New York, Dreyfus' Transfer
Agent, at 1-800-524-4458 for information regarding the procedures to be followed
for replacing the certificate. Until a replacement certificate is obtained, the
Dreyfus stockholder will be unable to properly submit the Transmittal Form.
CONDUCT OF BUSINESS PENDING THE MERGER
DREYFUS. The Merger Agreement contains certain restrictions on the conduct
of the business of Dreyfus and its subsidiaries pending consummation of the
Merger. In particular, Dreyfus has agreed that it and each of its subsidiaries
will operate its business only in the usual, regular and ordinary course and
substantially in accordance with past practices, and will use its best efforts
to preserve intact its business organization and assets and maintain its rights,
franchises and business and customer relations necessary to run its business as
currently run in all material respects.
The Merger Agreement also prohibits Dreyfus from engaging in certain
activities prior to the Effective Time without the prior written consent of
Mellon. Specifically, without such consent, Dreyfus may not:
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(a) declare, set aside, make or pay any dividend or other distribution
in respect of its capital stock or other equity interests or otherwise
purchase or redeem, directly or indirectly, any shares of its capital stock
or other equity interests, except regular quarterly dividends on the
Dreyfus Common Stock at a rate per quarter not in excess of $0.19 per
share;
(b) issue or sell any shares of its capital stock or securities giving
the holder the right to acquire shares of its capital stock, except for
issuances of shares of Dreyfus Common Stock pursuant to employee stock
options granted prior to the date of the Merger Agreement;
(c) incur any indebtedness for borrowed money, except in the ordinary
course of business consistent with past practice, or issue or sell any debt
securities;
(d) except in the ordinary course of business, mortgage, pledge or
otherwise subject to any material lien, charge or encumbrance any of its
properties or assets;
(e) except where required in the exercise of its fiduciary
obligations, in the case of Investment Companies (as defined in the Merger
Agreement, which definition includes substantially all of the Dreyfus
family of mutual funds) referred to in the Merger Agreement (the "Funds")
for which Dreyfus provides investment advisory, administrative and/or
distribution services, request that the Board of Directors of any Fund take
any actions, other than routine actions that would not be reasonably
expected to have a material adverse effect on the business, operations,
assets, condition (financial or otherwise) or results of operations of
Dreyfus and its subsidiaries, taken as a whole, or Dreyfus' ability to
consummate the transactions contemplated by the Merger Agreement (a
"Dreyfus Material Adverse Effect");
(f) pay any bonus to any officer, director, employee, sales
representative, agent or consultant, or grant to any of the foregoing any
other increase in compensation in any form except in accordance with past
practice;
(g) except as required by law or as otherwise specifically provided in
the Merger Agreement, adopt, or amend in any material respect, any
employment, bonus, profit-sharing, compensation, stock option, pension,
retirement, deferred compensation or other plan, agreement, trust, fund or
arrangement for the benefit of officers, directors, employees, sales
representatives, agents or consultants;
(h) amend its certificate of incorporation or materially amend its
by-laws or any other organizational documents, except as required by law;
(i) change in any material respect its accounting practices or
principles, except as required by law or generally accepted accounting
principles;
(j) enter into or recommend that any Fund enter into any type of
business materially different from that conducted by Dreyfus and its
subsidiaries or a Fund as of the date of the Merger Agreement or enter into
or participate in any joint venture or partnership, except for new Funds
created in the ordinary course of business;
(k) other than in the ordinary course of business, acquire direct or
indirect control over any corporation or other organization or make any
acquisition of all or a substantial part of a business or operations having
in either case total assets of over $5,000,000, or dispose of any business
or operations having assets of over $5,000,000; or
(l) agree or commit to do any of the foregoing.
In addition, to the extent that Mellon Bank is or, following the Effective
Time, Dreyfus would be, prohibited by law or regulation from owning the Dreyfus
Consumer Life Insurance Company, The Dreyfus Security Savings Bank, F.S.B. or
The Trotwood Corporation (the "Designated Entities"), Dreyfus agreed in the
Merger Agreement that, at the request of Mellon, it will dispose of such
Designated Entities in an orderly manner prior to the Effective Time; provided
that, at the request of Mellon, no such disposition need be effected until after
adoption of the Merger Agreement by the stockholders of Dreyfus and the
determination by Dreyfus that there is a substantial probability that the Merger
will occur. Contemporaneously with the Merger, certain subsidiaries of Dreyfus
will become subsidiaries of either Mellon or Mellon Bank (DE)
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National Association, respectively. For a discussion of the regulatory approvals
for the Merger and Mellon's applications to acquire certain of these
subsidiaries, see "--Regulatory Requirements."
As of May 31, 1994, Dreyfus sold Dreyfus Consumer Life Insurance Company to
a third party for total consideration equalling approximately $10.2 million.
Dreyfus has also agreed that, prior to the Effective Time, it will
cooperate with Mellon Bank to make arrangements so that, after the Effective
Time, Dreyfus Service Corporation will cease to act as an underwriter or
distributor of securities to the extent necessary to obtain the approval of the
Merger by the OCC (which approval has been obtained) and, if required, the
Federal Reserve Board (which approval has been obtained), insofar as such
approvals are required with reference to the mutual fund activities currently
conducted by Dreyfus and its subsidiaries (the "Bank Regulatory Approvals"). See
"--Regulatory Requirements."
MELLON. The Merger Agreement prohibits Mellon from engaging in certain
activities prior to the Effective Time without the prior written consent of
Dreyfus. Specifically, without such consent, Mellon may not declare, set aside,
make or pay any dividend or other distribution in respect of its capital stock
or other equity interests or otherwise purchase or redeem, directly or
indirectly, any shares of its capital stock or other equity interests (other
than purchases or redemptions which would not cause the Merger to fail to
qualify as a pooling of interests for accounting purposes), except regular
quarterly dividends on the Mellon Common Stock.
In addition, Mellon and Mellon Bank have agreed not to, and have agreed to
cause each subsidiary of Mellon not to, do any of the following without the
prior written consent of Dreyfus:
(a) issue or sell any shares of its capital stock or any rights to
acquire shares of its capital stock, except for issuances of shares of
common stock pursuant to employee stock options under existing plans,
conversion or exercise rights with respect to outstanding securities of
Mellon, and except for shares issued for fair value;
(b) take any action that would materially delay or adversely affect
the ability of Mellon or Mellon Bank to obtain the approvals of any
governmental entities required to permit consummation of the Merger; and
(c) acquire (including, without limitation, by merger, consolidation,
or acquisition of stock or assets) any corporation, partnership, other
business organization or any division thereof or any assets, where such
acquisitions would have a material adverse effect on the business,
operations, assets, condition (financial or otherwise), results of
operations, or prospects of Mellon and its subsidiaries, taken as a whole,
or Mellon's ability to consummate the transactions contemplated by the
Merger Agreement (a "Mellon Material Adverse Effect").
NO SOLICITATIONS
Dreyfus has agreed in the Merger Agreement that, except as described below,
neither Dreyfus nor any of its officers, directors, employees, agents or
representatives (including, without limitation, any investment banker, attorney
or accountant retained by any of them) may initiate, solicit or encourage,
directly or indirectly, any inquiries or the making of any proposal or offer
with respect to a merger, consolidation or similar transaction involving, or any
purchase of any substantial portion of the equity securities of, Dreyfus or any
subsidiary of Dreyfus, or the assignment of any substantial portion of any
investment advisory, subadvisory, administrative or distribution agreement by
Dreyfus or any subsidiary of Dreyfus or the entering into by any Fund of an
investment advisory, subadvisory, administrative or distribution agreement with
any company other than Dreyfus or a subsidiary of Dreyfus (an "Acquisition
Proposal"). For these purposes, an Acquisition Proposal includes any proposal or
arrangement whether oral or in writing providing for, requiring, or having the
effect of requiring Dreyfus to, or contemplating that Dreyfus would, abandon,
terminate or fail to consummate the Merger or any of the other transactions
contemplated by the Merger Agreement.
To the extent that the Dreyfus Board determines on the basis of written
advice from outside counsel that the following actions are necessary in order
for the Dreyfus Board to act in a manner consistent with its
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fiduciary obligation under applicable law, (i) Dreyfus may furnish or cause to
be furnished information concerning Dreyfus and its business, properties or
assets to a third party, (ii) Dreyfus may engage in discussions or negotiations
with a third party and (iii) following receipt of an Acquisition Proposal or the
withdrawal of the fairness opinions of Dreyfus' financial advisers (See
"Background of and Reasons for the Merger--Opinions of Dreyfus Financial
Advisers"), the Dreyfus Board may withdraw or modify its recommendation to
Dreyfus' stockholders that they adopt the Merger Agreement. Also, following
receipt of an Acquisition Proposal, the Dreyfus Board may take and disclose to
its stockholders a position contemplated by Rule 14e-2 or Rule 14d-9 under the
Exchange Act or otherwise make a disclosure to Dreyfus' stockholders.
If Dreyfus receives an Acquisition Proposal or furnishes information to or
engages in discussions or negotiations with a third party, Dreyfus must promptly
inform Mellon of the material details of the Acquisition Proposal and/or its
actions in response thereto or its furnishing of information or engaging in
discussions or negotiations with the third party and thereafter must keep Mellon
reasonably and promptly informed of all material facts and circumstances
relating to the Acquisition Proposal and Dreyfus' actions relating thereto. For
these purposes, Dreyfus' actions include the actions of its advisers, agents and
representatives.
BEST EFFORTS TO CONSUMMATE THE MERGER
Each of Dreyfus, Mellon and Mellon Bank has agreed to use its best efforts
to do all things necessary, proper or advisable to consummate the transactions
contemplated by the Merger Agreement as promptly as practicable. In particular,
to the extent that the rights of Dreyfus or any of its subsidiaries under any
agreement may not be assigned without the consent or approval of another party
thereto, Dreyfus is required to use its best efforts to obtain such consent.
Subject to its fiduciary obligations, Dreyfus has agreed to use its best efforts
to prepare or cause to be prepared, file or cause to be filed with the SEC and
all other necessary governmental and regulatory agencies, and cause to be
cleared, all proxy solicitation materials required to be distributed to Fund
shareholders in connection with the transactions contemplated by the Merger
Agreement and to mail such proxy solicitation materials to such shareholders
promptly after receipt of the Bank Regulatory Approvals and to hold meetings of
the shareholders of the Funds promptly thereafter. See "--Conditions to the
Merger" for a description of such Fund shareholder approvals.
CONDITIONS TO THE MERGER
The respective obligations of Dreyfus and Mellon to effect the Merger are
subject to the satisfaction or waiver prior to the Effective Time of certain
conditions, including, but not limited to, the following significant conditions:
(a) the transactions contemplated by the Merger Agreement shall have
been approved by each governmental regulatory authority or self-regulatory
body whose approval is required to permit consummation of such
transactions, including the OCC and, if required, the Federal Reserve
Board, without the imposition of any condition, requirement or commitment
which, in the case of the obligations of Mellon or its subsidiaries, is
reasonably likely to have a Dreyfus Material Adverse Effect or a Mellon
Material Adverse Effect, and, in the case of the obligations of Dreyfus, is
reasonably likely to have a Mellon Material Adverse Effect; and all waiting
periods arising under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, or any other applicable law shall have duly lapsed or
been terminated. See "--Regulatory Requirements;"
(b) none of Mellon, Mellon Bank, Dreyfus or any Fund shall be subject
to any order, decree or injunction of a court or agency of competent
jurisdiction which either enjoins or prohibits the consummation of any of
the transactions contemplated by the Merger Agreement;
(c) the representations and warranties of the other party set forth or
referred to in the Merger Agreement shall be true and correct both
individually and in the aggregate in all material respects as of the date
of the Merger Agreement and as of the Effective Time, except for any
representations and warranties made as of a specified date, which shall be
true and correct in all material respects as of such date, and except as
otherwise expressly contemplated or permitted by the Merger Agreement. For
these
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purposes, a representation or warranty will be deemed to be correct in all
material respects unless a breach, if any, thereof (excluding for these
purposes any materiality limitations therein), has a Dreyfus Material
Adverse Effect or a Mellon Material Adverse Effect (as the case may be).
The representations and warranties will be deemed in the aggregate to be
true and correct in all material respects unless the breaches of all the
representations and warranties, if any (excluding, for these purposes, any
materiality limitations therein) have, as a whole, a Dreyfus Material
Adverse Effect or a Mellon Material Adverse Effect (as the case may be). In
addition, for these purposes, in determining whether any Dreyfus Material
Adverse Effect has occurred, no consideration will be given to any decline
in assets managed, administered or advised by Dreyfus or its subsidiaries
due to the termination or reduction by any competitors of Mellon or its
subsidiaries of any agreements, arrangements or other investment
relationships between Dreyfus and its subsidiaries or the Funds and such
competitors (see discussion below for a description of assets managed,
administered or advised by Dreyfus);
(d) the agreements of the other party to be performed and complied
with pursuant to the Merger Agreement prior to the Effective Time shall
have been duly performed and complied with by it in all material respects;
(e) the shareholders of Dreyfus and Mellon shall have adopted and
approved the Merger Agreement, as and to the extent required by law and by
the provisions of any governing instruments. In addition, the holders of
the requisite percentage of shares of Dreyfus Common Stock and Mellon
Common Stock sufficient, either alone or in combination with other factors,
to preclude accounting for the Merger as a pooling of interests or to
obtain tax free treatment for the Merger shall not have perfected
dissenters' rights under applicable law with respect to the adoption of the
Merger Agreement. The Merger Agreement does not provide as a condition of
closing that holders of no more than a specified number or percentage of
shares of Dreyfus Common Stock may perfect dissenters' rights. If the
number of shares for which dissenters' rights are perfected (expressed in
terms of equivalent Mellon shares based upon the Exchange Ratio), when
added to (i) the number of shares of Dreyfus Common Stock purchased by
Dreyfus during the two year period prior to December 5, 1993 and not
reissued by Dreyfus prior to the Effective Time (expressed in terms of
equivalent Mellon shares based upon the Exchange Ratio), (ii) the number of
shares of Mellon Common Stock purchased by Mellon during the two year
period prior to December 5, 1993 and not reissued by Mellon prior to the
Effective Time, and (iii) the fractional shares of Mellon Common Stock in
lieu of which cash is paid in the Merger, exceeds 10% of the number of
shares of Mellon Common Stock issued in the Merger, the qualification of
the Merger for pooling of interests accounting treatment may be adversely
affected. See "Certain Federal Income Tax Consequences of the Merger,"
"Accounting Treatment of the Merger" and "Dissenters' Rights;"
(f) Mellon and Dreyfus shall have each received a letter, dated as of
the Effective Time, from KPMG Peat Marwick and Ernst & Young to the effect
that the Merger will qualify for pooling of interests accounting treatment.
See "Accounting Treatment of the Merger;"
(g) each party shall have received a tax opinion addressed to it from
its outside counsel to the effect that subject to customary representations
and assumptions referred to therein, the Merger will constitute a tax-free
reorganization, within the meaning of Section 368(a)(1)(B) of the Internal
Revenue Code, the exchange in the Merger of Mellon Common Stock for Dreyfus
Common Stock will not give rise to income, gain, or loss to Dreyfus,
Mellon, or the stockholders of Dreyfus with respect to such exchange, the
adjusted tax basis of the Mellon Common Stock received by Dreyfus
stockholders who exchange all of their Dreyfus Common Stock in the Merger
will be the same as the adjusted tax basis of the shares of the Dreyfus
Common Stock surrendered in exchange therefor, and the holding period of
the shares of the Mellon Common Stock received in the Merger will include
the period during which the shares of Dreyfus Common Stock surrendered in
exchange therefor were held, provided such shares of Dreyfus Common Stock
were held as capital assets at the Effective Time. See "Certain Federal
Income Tax Consequences of the Merger;"
(h) the Registration Statement shall be effective under the Securities
Act and no stop orders suspending the effectiveness of the Registration
Statement shall be in effect and no proceedings for such
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purpose shall be pending before or threatened by the SEC. The shares of
Mellon Common Stock issuable in the Merger shall have been approved for
listing on the NYSE upon notice of issuance; and
(i) Dreyfus shall have obtained the consents or approvals to the
assignment by Dreyfus or any subsidiary, or the continuation in effect
after the Effective Time, of all contracts pursuant to which Dreyfus or a
subsidiary provides investment management, investment advisory or
administrative services, by the Fund Boards and Fund shareholders of
Measurement Funds (as described below) holding not less than 90% of the
aggregate net assets as of the close of business on December 3, 1993 for
all the Measurement Funds, each in form and substance reasonably
satisfactory to Mellon. For these purposes, "Measurement Funds" means all
Funds managed, administered or advised by Dreyfus, except for those Funds
managed, administered or advised by Dreyfus for First National Bank of
Chicago, First Interstate Bank and First Nationwide. (See discussion below
for an explanation of these approvals).
FUND SHAREHOLDER APPROVALS. As required by the Investment Company Act of
1940 (the "1940 Act"), the management contracts of each of the mutual funds
managed, administered or advised by Dreyfus provide that those contracts are
subject to annual approval by (i) the Board of Directors of the fund or (ii)
vote of a majority of the outstanding voting securities of the fund, provided
that in either event the continuance is also approved by a majority of the
directors who are not "interested persons" (as defined in the 1940 Act) of the
fund or the manager, by vote cast in person at a meeting called for the purpose
of voting such approval. These statutory requirements are also applicable to the
sub-investment advisory contracts of Dreyfus. The contracts are subject to
termination by the Funds without penalty on not more than 60 days' notice. They
are also automatically terminated in the event of any assignment of the
contracts. "Assignment" is defined in the 1940 Act as including any direct or
indirect transfer of a controlling block of voting stock. The ownership of more
than 25% of the voting stock of a company creates a presumption of control.
Control is also defined as the power to exercise a controlling influence over
the management or policies of a company. Some of the same requirements are
applicable to the distribution agreements between Dreyfus Service Corporation,
as principal underwriter, and the various Funds. The Merger would constitute an
"assignment" for these purposes, and for that reason the conditions to the
Merger include the approvals of the Fund Boards of Directors and shareholders of
the Funds managed, advised or administered by Dreyfus as described above.
Certain administrative contracts of Dreyfus will also terminate in the event of
such "assignment" by Dreyfus and, therefore, the approvals of certain Fund
Boards of Directors also will be required. Following the Merger, Dreyfus Service
Corporation will not be permitted to participate in the "distribution" of
securities within the meaning of the Banking Act of 1933. Accordingly, at the
Effective Time, it is contemplated that the Funds will enter into new
distribution agreements with an unaffiliated third-party distributor, the terms
of which will be required to be approved by the Funds' Boards of Directors under
the 1940 Act. See "--Regulatory Requirements."
All of the Fund Boards of Directors have approved the matters required to
be approved by them for the Merger, except for the board of one fund
administered by Dreyfus which is currently expected to meet for that purpose on
July 20, 1994. The solicitation of approvals by the shareholders of the Funds is
expected to occur concurrently with the solicitation of the shareholders of
Mellon and Dreyfus in respect of the Merger. WHILE MELLON AND DREYFUS BELIEVE
THAT THEY WILL RECEIVE THE REQUISITE MUTUAL FUND APPROVALS FOR THE MERGER, THERE
CAN BE NO ASSURANCE AS TO WHETHER SUCH APPROVALS WILL BE OBTAINED PRIOR TO THE
DREYFUS MEETING AND THE MELLON MEETING ON SATISFACTORY TERMS OR OTHERWISE.
ASSETS MANAGED, ADMINISTERED OR ADVISED BY DREYFUS. As set forth in
paragraph (i) under "Conditions to the Merger", the Measurement Funds do not
include those Funds managed, administered or advised by Dreyfus for certain
banks. This exclusion was based on the possibility that competitors might reduce
or discontinue their business relationships with Dreyfus after Dreyfus became a
subsidiary of Mellon Bank. As explained below, based upon information presently
available to them, Dreyfus and Mellon are unable to determine or predict the
extent to which this already may have occurred or could occur in the future. The
increase or decrease from time to time of net assets managed, administered or
advised by Dreyfus is primarily dependent on economic conditions, which
constantly change and affect both the market values of portfolio securities held
by mutual funds and investors' preferences for certain types of mutual funds
over others, and competition, which is based upon investment performance in
terms of attaining the stated objectives of
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particular funds, advertising and sales and promotional efforts, available
distribution channels, the type and quality of service offered to investors and
expense levels incurred by the funds. Because of the complexity of these various
factors, based upon information presently available to them, Dreyfus and Mellon
are unable to determine to what extent, if any, net assets managed, administered
or advised by Dreyfus which are directly or indirectly attributable to
competitors of Mellon and its subsidiaries may be reduced in the future due to
such competitors' desire to change their relationships with Dreyfus because of
the Merger. Although such reductions may occur, Mellon and Dreyfus do not
believe that such reductions will have a material adverse effect on the results
of operations of the combined company.
At June 30, 1994, the total net assets managed, administered or advised by
Dreyfus were $70.8 billion. During the period from December 1, 1993 (which date
preceded the public announcement of the Merger) to June 30, 1994, the total net
assets managed, administered or advised by Dreyfus declined by approximately
$9.0 billion or 11%. As noted above, based upon information presently available,
Mellon and Dreyfus are unable to determine the extent to which this decrease was
due to such competitors' decision to change their relationships with Dreyfus due
to the Merger or other, unrelated reasons, including changes in economic
conditions.
REGULATORY REQUIREMENTS
GENERAL. Consummation of the Merger is conditioned on the receipt by Mellon
and Dreyfus of all necessary approvals by governmental regulatory agencies. The
regulatory approvals include approvals of the OCC, the Federal Reserve Board,
the Office of Thrift Supervision, the N.Y. Banking Department and various state
securities commissions. Consummation of the Merger is also conditioned on the
expiration or termination of the applicable waiting period under the HSR Act. In
addition, certain other regulatory requirements are also applicable to the
Merger as set forth below.
OCC. Mellon Bank and Mellon Bank (DE) National Association ("Mellon Bank
(DE)"), subsidiaries of Mellon, filed a notice (the "Notice") with the OCC in
December 1993 pursuant to regulations promulgated under the National Bank Act,
stating their intention to establish certain operating subsidiaries (i.e.,
Dreyfus and certain of its subsidiaries) pursuant to the Merger. The Notice
stated, and Mellon intends to take such actions as are necessary so that: (i)
Dreyfus and the following Dreyfus subsidiaries will become direct or indirect
subsidiaries of Mellon Bank contemporaneously with the Merger: The Dreyfus
Consumer Credit Corporation; Dreyfus-Lincoln, Inc.; Dreyfus Management, Inc.;
Dreyfus Personal Management, Inc.; Lion Management, Inc.; Dreyfus Precious
Metals, Inc.; Dreyfus Service Corporation; and Seven Six Seven Agency, Inc.;
(ii) Dreyfus Service Organization, Inc., a Dreyfus subsidiary, will become a
direct or indirect subsidiary of Mellon Bank (DE) contemporaneously with the
Merger; and (iii) the following Dreyfus subsidiaries (the "Non-Bank
Subsidiaries") will become direct or indirect subsidiaries of Mellon
contemporaneously with the Merger: The Dreyfus Security Savings Bank, F.S.B.;
The Dreyfus Trust Company; Dreyfus Acquisition Corporation; Major Trading
Corporation; Dreyfus Partnership Management, Inc.; Dreyfus Realty Advisors,
Inc.; The Trotwood Corporation; The Trotwood Hunters Site A Corporation; The
Trotwood Hunters Corporation; and The Truepenny Corporation. The Notice also
stated that Dreyfus Consumer Life Insurance Company and certain inactive or
immaterial subsidiaries of Dreyfus would be liquidated or divested in order to
facilitate the Merger. Pursuant to applicable regulations, the prior approval of
the OCC is required for the establishment of subsidiaries by Mellon Bank and
Mellon (DE) as set forth in the Notice.
On May 4, 1994, the OCC approved the Notice. In connection with the Notice,
Mellon committed to the OCC that certain distribution services currently
provided by Dreyfus Service Corporation would be provided after the Merger by an
independent broker-dealer. Such independent broker-dealer would enter into
distribution agreements with the Dreyfus mutual funds and would be named as
"distributor" in all fund prospectuses and sales literature. In addition, such
independent distributor would enter into various transactions with other
broker-dealers selling the Dreyfus mutual funds, including collecting and
transmitting certain sales commissions paid with respect to such funds. The
independent broker-dealer, or an affiliate of such broker-dealer, would also
provide personnel to serve as officers of Dreyfus mutual funds, because of the
requirement of federal banking laws (see "Other Regulatory Considerations"
below) that no officer, director or employee of Dreyfus serve as an officer,
director or employee of a Dreyfus mutual fund. Dreyfus estimates
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that the annual pre-tax net incremental cost to Dreyfus of using the independent
broker-dealer to provide such distribution and related services to the Dreyfus
mutual funds will be approximately $3.6 million.
Additionally, the OCC's approval of the Notice calls for Mellon and Dreyfus
to comply with Mellon's Policy Statement on Mutual Funds and to follow the
guidelines set forth in a Joint Interagency Statement issued by the federal bank
regulatory agencies on retail sales of mutual funds and other non-deposit
investment products by federally insured financial institutions. Also, Mellon
must submit an action plan, acceptable to the OCC, describing how the
post-Merger audit, compliance and management reporting structures will function,
and establishing information systems to monitor and measure the impact on Mellon
Bank of the transaction going forward. The managements of Dreyfus and Mellon
have carefully reviewed the items covered in the OCC's approval of the Notice
and have concluded that, based on the information presently available, the
conditions included in the approval of the Notice do not materially adversely
affect the ability of Mellon or Dreyfus to conduct their respective businesses
following the Merger in the manner presently contemplated.
FEDERAL RESERVE BOARD. Mellon filed in January and February 1994
applications with the Federal Reserve Board pursuant to Section 4 of the Bank
Holding Company Act of 1956, as amended, with respect to Mellon's acquisition of
the Non-Bank Subsidiaries as described above. On June 22, 1994, the Federal
Reserve Board issued an order approving Mellon's applications to acquire the
Non-Bank Subsidiaries subject to certain specified conditions as well as
compliance with all the commitments made by Mellon in connection with the
applications. Pursuant to the order, the Merger must be consummated within three
months after June 22, 1994 unless an extension is granted by the Federal Reserve
Board for good cause shown.
In particular, Mellon committed that The Dreyfus Security Savings Bank,
F.S.B. and The Dreyfus Trust Company will conform their direct and indirect
activities to those permissible for bank holding companies. With regard to
Dreyfus Partnership Management, Inc. ("DPM"), which presently serves as
non-managing general partner of two mutual funds organized as limited
partnerships and which are advised and managed by Dreyfus, Mellon committed that
by December 31, 1997 each of such mutual funds will be reorganized in corporate
or trust form and DPM will no longer serve as a non-managing general partner of,
or have an equity interest in, either fund. Mellon also committed to limiting
DPM's percentage ownership in other entities and to certain other restrictions
as to mutual funds organized as limited partnerships. Additionally, Mellon
committed to divest Dreyfus Realty Advisors, Inc. (including its subsidiaries)
and to dissolve Dreyfus Acquisition Corporation and Major Trading Corporation
within two years after consummation of the Merger.
The Federal Reserve Board also determined that The Truepenny Corporation
and its subsidiaries may continue to engage in community development advisory
activities; however, Mellon's ability to continue Dreyfus' involvement, through
The Trotwood Corporation, in a certain redevelopment project located in New York
City known as the "Queens West Development Project" (the "Project"), was limited
to the projected seven year completion of the first phase of the Project. If
within such seven year period the first phase of the Project is not completed,
Mellon must seek Federal Reserve System consent for continued involvement in the
Project's first phase. Moreover, during this period, Mellon may not increase its
investment or financial involvement in the Project without the consent of the
Federal Reserve System, and must consult with the Federal Reserve System in the
event that any material changes in the development plans are expected. The seven
year period should permit Mellon a reasonable opportunity to terminate or
conform its involvement in the Project to applicable regulatory requirements in
an orderly manner.
OFFICE OF THRIFT SUPERVISION. Mellon filed an application with the Office
of Thrift Supervision (the "OTS") in January 1994 pursuant to Section 10(e) of
the Home Owners' Loan Act with respect to its acquisition of The Dreyfus
Security Savings Bank, F.S.B. ("DSSB"), a Non-Bank Subsidiary as described
above. That application was approved by the OTS on June 20, 1994, subject to the
satisfaction of the following conditions before the Merger: (i) the Merger must
be consummated within 120 days after June 20, 1994, unless an extension is
granted by the OTS for good cause shown, (ii) certifications must be given to
the OTS prior to the Merger that there have been no material adverse events or
material adverse changes with respect to the financial condition or operations
of DSSB or MBC Investments Corporation ("MBCIC"), the Mellon subsidiary which
will acquire DSSB, and (iii) approvals of all other regulatory authorities must
have been
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received. In addition, the OTS approval included the following material
requirements which must be satisfied after the Merger: (i) Mellon and MBCIC must
file savings and loan holding company registration statements with the OTS and
(ii) Mellon and DSSB must obtain OTS approval for implementation of any tax
sharing agreement between Mellon and/or MBCIC and DSSB.
N.Y. BANKING DEPARTMENT. Mellon filed an application with the N.Y. Banking
Department in April 1994 pursuant to Section 142 of the New York State Banking
Law to acquire The Dreyfus Trust Company, a Non-Bank Subsidiary as described
above. That application was approved by the N.Y. Banking Department on June 2,
1994.
STATE SECURITIES COMMISSIONS. Under certain state securities laws, a merger
may be deemed to be a change of control requiring the prior approval of the
applicable state securities commissioner with respect to an entity which is
licensed in the state as a broker-dealer. Accordingly, applications for approval
of the Merger are required to be filed with respect to Dreyfus Service
Corporation, which is so licensed. Mellon and Dreyfus have filed all such
applications.
HSR ACT. Dreyfus and Mellon filed pre-merger notifications with the United
States Department of Justice and the Federal Trade Commission in January 1994
pursuant to the HSR Act. In February 1994, Mellon and Dreyfus received
notification from the Federal Trade Commission that the waiting period under the
HSR Act had been terminated.
OTHER REGULATORY CONSIDERATIONS. Following the Merger, Dreyfus as a
subsidiary of a bank will be subject to a range of regulatory requirements to
which it has not previously been subject, in addition to the regulation under
federal and state securities laws to which it currently is (and will continue to
be) subject. The effect of this regulation may be in certain instances to limit
the ability of Dreyfus to engage in activities which could be engaged in without
such restriction prior to the Merger. For example, federal banking laws will
prohibit any officer, director or employee of Dreyfus from serving as an
officer, director or employee of a mutual fund advised by Dreyfus after the
Merger. In addition, federal banking laws may restrict the ability of Mellon and
Dreyfus to purchase shares of mutual funds advised by Dreyfus after the Merger.
The managements of Dreyfus and Mellon have carefully reviewed these regulatory
considerations and have concluded that, based on the information presently
available, they do not materially adversely affect the ability of Dreyfus to
conduct its business following the Merger in the manner presently contemplated.
The managements of Dreyfus and Mellon have carefully reviewed the
conditions included in the approvals issued by the OCC, the Federal Reserve
Board and the OTS and have concluded that, based on the information presently
available, such conditions do not materially adversely affect the ability of
Mellon or Dreyfus to conduct their respective businesses following the Merger in
the manner presently contemplated.
The aggregate income before taxes for the three months ended March 31, 1994
of those subsidiaries Mellon and Dreyfus have determined should be divested to
comply with bank regulatory requirements and those additional subsidiaries which
may be required to be divested to comply with such requirements represented less
than 0.2% of Dreyfus' income before taxes for such period. The total assets of
such subsidiaries at March 31, 1994 represented less than 2% of Dreyfus' total
assets at such date.
In addition, Dreyfus Service Corporation currently acts as a distributor of
various variable insurance products issued by Transamerica Occidental Life
Insurance Company and First Transamerica Life Insurance Company (collectively,
"Transamerica"). Dreyfus Service Organization, Inc. ("DSO"), a Dreyfus
subsidiary which is licensed as an insurance agent by various states, currently
markets these products with Dreyfus Service Corporation and solicits
applications for the products. Following the Merger, for bank regulatory
reasons, Dreyfus Service Corporation will not be permitted to act as distributor
of such products. Dreyfus and Transamerica are currently discussing alternative
arrangements pursuant to which a third party broker-dealer which is not
affiliated with Dreyfus would act as the distributor of the insurance products.
Due to insurance regulatory requirements which may become applicable to DSO as a
result of the Merger, DSO may be required to cease marketing these products in
certain states. In such event, Dreyfus intends to discuss with Transamerica an
arrangement pursuant to which a third party insurance agent which is not
affiliated with Dreyfus would market the products in those states. For the
period from January 1, 1994 through May 31,
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1994, the revenues and estimated net income attributable to this program
represented less than 2% and 1%, respectively, of Dreyfus' total revenues and
total net income. Although Dreyfus and Mellon are unable to estimate the net
incremental cost attributable to this program if the arrangements described
above are implemented (or the cost of terminating the agreements with
Transamerica relating to the program in the event that such arrangements cannot
be implemented), Dreyfus and Mellon believe that such costs will not have a
material adverse effect on the results of operations of the combined company
following the Merger.
WHILE MELLON AND DREYFUS BELIEVE THAT THEY WILL RECEIVE THE REQUISITE
REGULATORY APPROVALS FOR THE MERGER, THERE CAN BE NO ASSURANCE AS TO WHETHER
SUCH APPROVALS WILL BE OBTAINED PRIOR TO THE DREYFUS MEETING AND THE MELLON
MEETING ON SATISFACTORY TERMS OR OTHERWISE.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
INDEMNIFICATION. Upon consummation of the Merger and for a period for six
years after the Effective Time, Mellon and Mellon Bank have agreed in the Merger
Agreement, among other things, to indemnify each person who is or was at any
time prior to the Effective Time a director, officer or employee of Dreyfus or
any Dreyfus subsidiary or who serves or has served at the request of Dreyfus or
any Dreyfus subsidiary in any capacity with any other person (collectively, the
"Indemnitees") against any and all claims, damages, liabilities, expenses and
other amounts paid in settlement, asserted against, incurred by or imposed upon
any Indemnitee, (i) in connection with any threatened, pending or completed
claim, action, suit or proceeding (whether civil, criminal, administrative or
investigative), including claims arising out of the Merger and any of the
transactions contemplated by the Merger Agreement, and (ii) in connection with,
arising out of or relating to the enforcement of the obligations of Mellon and
Mellon Bank with respect to their indemnification obligations in the Merger
Agreement, in each case to the fullest extent permitted by law, under any
indemnification agreement between Dreyfus and such Indemnitee, Dreyfus'
Certificate of Incorporation or its By-Laws (and shall also advance expenses as
incurred to the fullest extent permitted under any thereof). The Merger
Agreement also provides that, from and after the Effective Time, to the fullest
extent permitted by law, Mellon shall assume and honor any obligation of Dreyfus
immediately prior to the Effective Time with respect to the indemnification of
the Indemnitees arising out of Dreyfus' Certificate of Incorporation or By-Laws
or any indemnification agreement to which Dreyfus and any Indemnitee are parties
as of the date of the Merger Agreement as if such obligations were pursuant to a
contract or arrangement between Mellon and such Indemnitee.
OFFICERS' AND DIRECTORS' LIABILITY INSURANCE. The Merger Agreement
provides that for a period of six years after the Effective Time, Mellon shall
cause Dreyfus' current directors' and officers' liability insurance to be
continuously maintained in full force and effect without reduction of coverage
(provided that Mellon may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are not materially
less advantageous).
VOTING AGREEMENTS. Messrs. Stein and DiMartino have agreed with Mellon,
each pursuant to a letter dated December 5, 1993, that in their individual
capacities as stockholders of Dreyfus, they will vote, at any meeting of the
stockholders of Dreyfus called for the purpose of voting upon the Merger, all of
their respective shares of Dreyfus Common Stock held by each of them
individually, as of the record date for such meeting, in favor of the Merger.
Each of Messrs. Stein and DiMartino has also agreed that, in the event the
Merger Agreement is terminated, he will not, for a period of one year after such
termination, vote his shares in favor of any Acquisition Proposal (as defined in
the Merger Agreement), other than the Merger.
EMPLOYEE BENEFITS. Certain of the directors and executive officers of
Dreyfus have a financial interest in the completion of the Merger because of
their rights under various Dreyfus employee benefits plans, agreements and
programs. Some of these plans, agreements and programs contain provisions that
are activated upon a "change of control" of Dreyfus, which would occur if the
Merger is completed. The Merger Agreement creates a retention bonus program, not
previously in effect for Dreyfus employees, and provides for certain changes in
pre-existing Dreyfus employee benefits plans, agreements and programs. For a
description of these matters, see "The Merger--Effects of the Merger on Dreyfus
Employee Benefits."
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See also "Certain Agreements Relating to Conduct of Business After the
Merger" for a description of provisions in the Merger Agreement relating to the
composition of the Mellon Board and the Dreyfus Board, the Executive Committees
thereof and the positions of certain Dreyfus senior executive officers after the
Merger.
CERTAIN AGREEMENTS RELATING TO CONDUCT OF BUSINESS AFTER THE MERGER
The Merger Agreement provides that, following the Effective Time, Mellon
and Mellon Bank shall take or cause to be taken the following actions:
(a) throughout the two-year period following the Effective Time,
Dreyfus will operate its business as a direct or indirect subsidiary of
Mellon named The Dreyfus Corporation, to be headquartered in the New York
City metropolitan area;
(b) throughout the two-year period following the Effective Time, Mr.
Howard Stein will be the Chief Executive Officer of Dreyfus and Mr. Joseph
S. DiMartino will be the President of Dreyfus;
(c) as of the Effective Time, the Mellon Board will increase the size
of the Mellon Board by three members and will appoint Mr. Stein, Mr.
DiMartino and Mr. Edward J. McAniff to fill the vacancies created thereby
(information about Messrs. Stein and DiMartino is contained in Dreyfus'
Annual Report on Form 10-K for the year ended December 31, 1993, which is
incorporated herein by reference; Mr. McAniff has been a partner of the law
firm of O'Melveny & Myers since 1970; during the last fiscal year,
O'Melveny & Myers has provided, and in the future may continue to provide,
legal services to Mellon and/or certain of its subsidiaries);
(d) as of the Effective Time, the Mellon Board will increase the size
of the Mellon Executive Committee by one member and will appoint Mr. Stein
to fill the vacancy created thereby;
(e) the persons who are members of the Dreyfus Board immediately prior
to the Effective Time will continue to serve on the Dreyfus Board
throughout the two-year period following the Effective Time, together with
such additional persons as Mellon may appoint to such Board; and
(f) as of the Effective Time, an Executive Committee of the Dreyfus
Board will be appointed; during the two-year period following the Effective
Time, unless otherwise determined by the Dreyfus Executive Committee, the
Dreyfus Executive Committee will consist of: Howard Stein; Joseph S.
DiMartino; Frank V. Cahouet (Chairman, President and Chief Executive
Officer of Mellon) and W. Keith Smith (Vice Chairman of Mellon); the
Executive Committee will meet regularly, and in any event not less
frequently than monthly.
EFFECTS OF THE MERGER ON DREYFUS EMPLOYEE BENEFITS
BENEFITS--IN GENERAL. The Merger Agreement provides that on and after the
Effective Time Dreyfus will offer continued employment to all persons who were
common law employees of Dreyfus immediately before the Effective Time
("Continued Employees"), provided that such offers will not limit the ability of
Dreyfus to terminate the employment of Continued Employees at any time for any
reason. Generally, following the Merger and until the second anniversary of the
Effective Time (the "Benefit Changeover Date"), Continued Employees are to
continue to have the benefit of each current Dreyfus employee benefit plan and
program without adverse change. From and after the Benefit Changeover Date, the
Continued Employees will be eligible to participate in the pension, welfare and
fringe benefit plans which are generally available to employees of Mellon on the
same basis that such benefits otherwise are made available to similarly situated
employees of Mellon. In general, Continued Employees will be credited for their
length of service with Dreyfus for all purposes under Mellon's plans including
eligibility, accrual and vesting under all employee pension, welfare or fringe
benefit plans. Continued Employees also will be appropriately credited with
respect to provisions of Mellon's plans relating to waiting periods, deductibles
and co-payments (with coverage for pre-existing conditions).
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Among the plans and programs maintained by Dreyfus which are required to be
continued after the Effective Time, as described above, are: (i) The Dreyfus
Corporation Pension Plan (the "Dreyfus Pension Plan"), a defined benefit pension
plan intended to be qualified under Section 401(a) of the Internal Revenue Code,
(ii) The Dreyfus Corporation Retirement Profit-Sharing Plan (the "Dreyfus
Profit-Sharing Plan"), a defined contribution plan intended to be qualified
under the Internal Revenue Code, (iii) a Contingent Benefit Plan (the "Dreyfus
Contingent Benefit Plan"), (iv) a Deferred Compensation Plan (the "Dreyfus
Deferred Compensation Plan"), (v) the 1982 Incentive Stock Option Plan (the
"Dreyfus 1982 ISO"), (vi) the 1989 Nonqualified Stock Option Plan (the "Dreyfus
1989 Option Plan"), and (vii) an Optional Incentive Payment Plan (the "Dreyfus
Optional Incentive Payment Plan"). Certain directors and executive officers of
Dreyfus participate in these plans and programs. Certain of these plans and
programs are also described in Item 11 of Dreyfus' Annual Report on Form 10-K
for the year ended December 31, 1993, incorporated by reference herein.
DREYFUS PENSION PLAN. The Merger Agreement provides that, as of the
Benefit Changeover Date, either (i) Dreyfus will amend the Dreyfus Pension Plan
to provide Continued Employees with future benefits comparable to those provided
to similarly situated employees of Mellon under the Mellon Bank Retirement Plan
(the "Mellon Retirement Plan"), or (ii) Mellon will amend the Mellon Retirement
Plan to cover Continued Employees, or (iii) Mellon or Dreyfus will take any
other action as it determines to be necessary and appropriate to provide
benefits to Continued Employees participating in the Dreyfus Pension Plan which
are comparable to those then provided to similarly situated participants in the
Mellon Retirement Plan. Continued Employees will receive, under the then
applicable pension plan, accruals and credit for their service and earnings for
all periods of employment with Dreyfus to the same extent and for the same
purposes as would have been recognized under the Dreyfus Pension Plan. To the
extent that these employees subsequently receive benefits from the Mellon
Retirement plan, those benefits may be offset by benefits paid or payable from
the Dreyfus Pension Plan.
DREYFUS PROFIT-SHARING PLAN. The Merger Agreement provides that Continued
Employees will receive the same level of contributions by Dreyfus to the Dreyfus
Profit-Sharing Plan, as a percentage of compensation, for all plan years ending
on or before the Benefit Changeover Date as were provided for the 1992 plan
year. The Merger Agreement also provides that, as of the Benefit Changeover
Date, either (i) Dreyfus will amend the Dreyfus Profit-Sharing Plan to provide
Continued Employees with future contributions comparable to those provided to
similarly situated employees of Mellon under the Mellon Bank Corporation
Retirement Savings Plan (the "Mellon Retirement Savings Plan"), or (ii) Mellon
will amend the Mellon Retirement Savings Plan to cover Continued Employees, or
(iii) Mellon or Dreyfus will take any other action as it determines to be
necessary and appropriate to provide contributions to Continued Employees
participating in the Dreyfus Profit-Sharing Plan which are comparable to those
then provided to similarly situated participants in the Mellon Retirement
Savings Plan. All amounts held under the Dreyfus Profit-Sharing Plan as of the
Benefit Changeover Date are to continue to be maintained on and after the
Benefit Changeover Date under a tax-qualified plan that provides for
participant-directed investments (with an employer securities option to the
extent of any investment option in employer securities as of the Effective
Time), unless the participant directs otherwise or the amounts are required to
be distributed under the Code.
DREYFUS DEFERRED COMPENSATION PLAN. The Dreyfus Deferred Compensation Plan
is intended to provide certain employees with additional benefits which are not
available under the Dreyfus Profit-Sharing Plan due to tax law limitations on
contributions which may be made to such plan on behalf of such employees.
Pursuant to the Dreyfus Deferred Compensation Plan, an amount in excess of the
amounts contributed by Dreyfus to the Dreyfus Profit-Sharing Plan, up to an
aggregate maximum of 25% of an eligible individual's compensation (as defined),
is set aside as deferred compensation for the individual until termination of
employment, retirement, or such earlier time as Dreyfus may decide. Participants
vest 10% per year beginning with the completion of their third year of service
under the Dreyfus Profit-Sharing Plan, with full vesting after 12 years of
service. Participants also become fully vested upon their attainment of age 65,
with additional favorable vesting rules being potentially applicable upon
attainment of age 60. Under the Merger Agreement, the Dreyfus Deferred
Compensation Plan will be continued as an active plan through the Benefit
Changeover Date and each participant's interest under the Dreyfus Deferred
Compensation Plan will be fully vested as of
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the Effective Time. The vested and unvested interests of Dreyfus directors and
executive officers as a group (23 persons), as of June 30, 1994, were, in the
aggregate, $1,836,999 and $246,455, respectively.
SALARIES; SEVERANCE. Under the Merger Agreement, prior to the Effective
Time, Dreyfus will determine the salaries of Continued Employees (including
executive officers) after the Effective Time. Such salary determinations will be
subject to approval by Dreyfus' Executive Committee and ratification by the
Mellon Board. The Merger Agreement also provides that, after the Merger,
Continued Employees will be entitled to the greater of the benefits provided
under Mellon's severance program (the Mellon Displacement Policy) or the Dreyfus
severance program in effect immediately prior to the Merger. It has been
determined that, after the Merger, Continued Employees will be entitled to
benefits under the Mellon Displacement Policy. The Mellon Displacement Policy
generally provides that an employee who is involuntarily terminated will be
entitled to receive (i) continued salary for a period equal to two weeks for
each year of service (which, for Continued Employees, would include service both
before and after the Effective Time) or, at the employee's election, an
equivalent lump-sum payment, (ii) depending upon the classification and salary
of the employee, as much as 12 weeks of extended severance under certain
circumstances (the "Extended Severance Benefit"), and (iii) continued health
(and certain other) benefits while the employee is receiving continued salary.
However, in no event may an employee receive more than 52 weeks of severance.
Pursuant to a separate agreement between Mellon and Dreyfus, Mellon has
agreed to a special retention program (the "Special Retention Program") that
will apply to selected Continued Employees (the "Special Retention Employees").
Under the Special Retention Program, a Special Retention Employee, if employed
by Dreyfus (or an affiliate) at the expiration of the one-year period to follow
the Effective Time, will receive at the end of such period an amount equal to
one week of pay (but not less than 13 weeks nor more than 26 weeks) for each
year of service both before and after the Effective Time. Further, under the
Special Retention Program, the basic severance period deemed to be applicable
under the Mellon Displacement Policy to a Special Retention Employee who is
involuntarily terminated within one year after the Effective Time will be the
sum of the greater of (A) the period otherwise applicable under the Mellon
Displacement Policy or (B) 26 weeks. Special Retention Employees who are
involuntarily terminated within such period will also be eligible to receive 12
weeks of extended severance benefits under the Mellon Displacement Policy
without regard to their job classification or salary. One or more executive
officers of Dreyfus will be eligible to receive benefits under the Special
Retention Program. It is estimated that up to $2,500,000 could be paid out under
the Special Retention Program.
CERTAIN BONUS, INCENTIVE AND PERFORMANCE PLANS. The Merger Agreement
provides that all bonus, incentive, performance and similar plans maintained by
Dreyfus which provide for payments relating to a defined period will be deemed
to relate only to the period ending at the Effective Time. Accordingly, the
conditions required for payment of any benefits under such plans and the amount
of any benefits thereby payable will be prorated to reflect the shortened
period. For example, a bonus which would customarily be paid based upon a twelve
month performance period would be paid based upon the number of months in the
performance period prior to the Effective Time.
DREYFUS 1982 ISO, DREYFUS 1989 OPTION PLAN, DREYFUS OPTIONAL INCENTIVE
PAYMENT PLAN. Dreyfus has outstanding stock options granted to key employees
under the Dreyfus 1989 Option Plan and the Dreyfus 1982 ISO. Options granted
under the Dreyfus 1989 Option Plan become fully exercisable upon certain changes
of control which, for this purpose, would not include the Merger. Under the
Dreyfus Optional Incentive Payment Plan, individuals who had previously
exercised certain options under the Dreyfus 1982 ISO may sell the shares related
to such options back to Dreyfus pursuant to the provisions of the options and in
turn receive an equal number of units. Pursuant to the terms of the Dreyfus
Optional Incentive Payment Plan, quarterly payments are made to the holders of
units in amounts equal to the quarterly after-tax earnings per share of Dreyfus
on a one unit-per-share basis. Under the Merger Agreement, options to purchase
Dreyfus Common Stock under the Dreyfus 1989 Option Plan will be converted, at
the Effective Time, at the Exchange Ratio into otherwise identical options to
purchase Mellon Common Stock, with an appropriate adjustment in the option
exercise price per share. In the Merger Agreement, Dreyfus has agreed to use its
best efforts to cause holders of outstanding options under the Dreyfus 1982 ISO
and "book value" shares (as described below) acquired upon the exercise of
options under the Dreyfus 1982 ISO to consent to the conversion of such options
and "book
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value" shares, at the Effective Time, into Mellon Common Stock having a fair
market value equal to the value of such options or "book value" shares, as the
case may be, as agreed upon by Mellon and Dreyfus. In this regard, Mellon and
Dreyfus subsequently have agreed that the value of each "book value" share is
$24.43 and the value of each option is $24.43 less the exercise price of the
option and, in the case of an unvested option, less a five per cent per annum
discount for the period from September 1, 1994 through the date of vesting.
Mellon and Dreyfus have also agreed that these values will be paid in Mellon
Common Stock at the Effective Time to holders of "book value" shares and such
options based upon the average closing sales price for a share of Mellon Common
Stock on the NYSE on the five trading days immediately preceding the Effective
Time.
As of June 30, 1994, the aggregate number of shares of Dreyfus Common Stock
subject to outstanding options under the Dreyfus 1982 ISO, all of which are
"book value" shares, and held by directors and executive officers (23 persons)
of Dreyfus, was 18,975. All of such options, each of which was issued with an
exercise price equal to the book value at the quarter end coincident with or
immediately preceding the respective grant date, are exercisable at exercise
prices which range from $6.1833 to $10.84 per share. "Book value" shares are not
transferable except that they may be sold to Dreyfus at any time after
acquisition by the employee, and must be sold to Dreyfus within certain
specified time limitations after termination of employment with Dreyfus, at a
repurchase price equal to the "book value" per share (common stockholders'
equity divided by the number of shares of Dreyfus Common Stock outstanding) as
of the last day of the fiscal quarter coincident with or next preceding the date
of such repurchase. As of June 30, 1994, the aggregate number of shares of
Dreyfus Common Stock subject to outstanding options under the Dreyfus 1989
Option Plan and held by directors and executive officers of Dreyfus, was
1,070,000, at exercise prices which ranged from $24.063 to $39.875 per share,
and of which options to purchase an aggregate of 522,500 shares were vested and
options to purchase 547,500 shares were unvested. As of June 30, 1994, the
number of units under the Optional Incentive Payment Plan held by directors and
executive officers of Dreyfus was 1,714,728.
SUPPLEMENTAL RETIREMENT BENEFITS. Pursuant to a January 16, 1990 agreement
with Dreyfus, Mr. Smerling is entitled to receive supplemental retirement
benefits of $500,000 per year for ten years commencing upon retirement. The
agreement provides for a lump-sum payment of the entire remaining amount
(without reduction for acceleration) of such retirement benefit (without regard
to Mr. Smerling's retirement) in the event of a change of control of Dreyfus.
The Merger will constitute such a change of control and, accordingly, Mr.
Smerling will be entitled to receive the lump sum payment.
RETENTION PROGRAM. The Merger Agreement provides that Mellon and Dreyfus
will establish the Retention Plan. Only those certain employees of Dreyfus
("Retention Plan Employees") determined to be essential to the operation of
Dreyfus and designated by mutual agreement of Mellon and Dreyfus prior to the
Effective Time will be eligible to participate in the Retention Plan. The
Retention Plan will provide for a fixed dollar pool (the "Retention Pool") of
potentially available retention bonus awards (as mutually agreed to by Dreyfus
and Mellon) and Dreyfus and Mellon will mutually agree to make individual awards
of a share or interest in the Retention Pool to each eligible employee. Unless
earlier forfeited, each Retention Plan Employee who becomes a Continued Employee
at the Effective Time will be entitled to an initial cash payment in an amount
equal to one-half of his interest in the Retention Plan, payable six months
following the Effective Time. Unless earlier forfeited, an amount equal to each
Retention Plan Employees' remaining interest in the Retention Pool will be paid
to the employee on the earlier of (i) 18 months following the Effective Time,
and (ii) the date, if ever, of the employee's involuntary termination of
employment with Dreyfus. Any Retention Plan Employee who voluntarily terminates
his or her employment with Dreyfus or whose employment is terminated by Dreyfus
for cause will forfeit any right to receive any amounts that are not yet payable
as of the time of such termination. The Retention Plan will provide that a
voluntary termination will not include a termination which occurs after: (A) the
sum of a Retention Plan Employee's base compensation plus cash bonus, exclusive
of pension, welfare and fringe benefits, is reduced below an amount equal to 80%
of such compensation package as of the day before the Effective Time; (B) a
Retention Plan Employee is relocated to an office or facility beyond 30 miles
from his or her previous workplace; (C) a Retention Plan Employee retires on or
after the normal retirement age established under the retirement plans which are
generally available to employees of Dreyfus; or (D) the occurrence of such other
events which Mellon and Dreyfus may mutually agree upon. Amounts payable under
the Retention Plan will be in addition
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to any amounts payable under any severance benefits program. The Retention Pool
is expected to be approximately $2,500,000, although the Retention Plan will
contemplate discretionary increases in the size of the pool (as well as
discretionary reallocations of forfeitures). One or more of Dreyfus' executive
officers will participate in the Retention Plan.
DREYFUS CONTINGENT BENEFIT PLAN. Dreyfus maintains the Dreyfus Contingent
Benefit Plan in order to provide for specified benefit payments ("Contingent
Benefits") to designated key employees of Dreyfus in the event of termination of
their employment after a change of control of Dreyfus. The Merger would
constitute a change of control for these purposes. Under the Dreyfus Contingent
Benefit Plan, the Dreyfus Board may grant to key employees, as reflected in
agreements under the Dreyfus Contingent Benefit Plan (the "Contingent Benefit
Agreements"), a maximum aggregate of 1,500,000 units. Each unit represents, in
general, the difference between the book value of one share of Dreyfus Common
Stock and its market price. In the case of the Merger, these values would be
determined as follows: (i) book value would be the book value per share of
Dreyfus Common Stock determined in accordance with Dreyfus' usual practices, at
the end of the last fiscal quarter prior to the Effective Time, or if the
Effective Time is prior to the determination of such book value, at the end of
the next preceding fiscal quarter; and (ii) market price will be the average of
the closing price of a share of Dreyfus Common Stock on the New York Stock
Exchange for the ten trading days immediately prior to the Effective Time.
Each unit represents the obligation of Dreyfus to pay its value, in cash,
in the event of termination of employment of the employee within a period of two
years following the change of control, including voluntary termination but
excluding termination for cause (defined as (i) any willful and wrongful act
having the effect of violating any Federal securities law, (ii) willful and
prolonged absence from work other than for reasons of illness, (iii) fraud
against Dreyfus, or (iv) conviction of a felony). Under any other circumstances,
the units have no value. As of June 30, 1994, an aggregate of 1,326,000 units
have been granted, including grants to all directors and executive officers of
Dreyfus (23 persons) which, at such date, totaled 1,172,000 units. If the
Effective Time had occurred on June 30, 1994, and the book value at that time
were immediately available, the value of a unit would have been $26.008, and the
aggregate value of the units held by all directors and executive officers of
Dreyfus would have been $30,481,376.
The Dreyfus Contingent Benefit Plan contains a provision (the "Deduction
Limitation") providing that benefit payments will be limited to amounts which,
at the date of a change of control, could in the opinion of tax accountants or
tax counsel to Dreyfus qualify under the then existing Federal tax laws as
tax-deductible items, tax credits or other tax benefits in calculating Federal
income taxes for a corporation regardless of whether such benefits would be
available in a particular taxable period, and regardless of the amount of income
of such corporation during any such period. For purposes of computing the
payment limit, credits or other tax benefits are to be increased to reflect the
equivalent of tax deductible items. Among the tax-law limitations that possibly
could cause the Deduction Limitation to restrict the payment of Contingent
Benefits are the so-called "golden parachute" tax-deduction limitations
contained in Section 280G of the Internal Revenue Code. In general, if
"parachute payments" (which are certain compensatory payments that are
contingent on the changes in control described in Section 280G) to an officer,
shareholder or highly compensated individual would equal or exceed three times
the individual's annualized includible compensation over the most recent five
years (the "base amount"), the portion of the "parachute payments" that are in
excess of one times the "base amount" may become nondeductible to the payor. If
the Contingent Payments are deemed to be "parachute payments" governed by
Section 280G (which, because of certain technical rules applicable for purposes
of Section 280G, is not free from doubt), the Deduction Limitation could
restrict the payment of Contingent Benefits that would be deemed to be excess
"parachute payments."
The Dreyfus Contingent Benefit Plan also provides that, if a beneficiary
under the Dreyfus Contingent Benefit Plan (a "Plan Beneficiary") becomes
entitled to the Contingent Benefits, all stock options held by the Plan
Beneficiary and which were not previously exercisable shall then become
exercisable. As of June 30, 1994, directors and executive officers of Dreyfus in
the Dreyfus Contingent Benefit Plan held 406,250 unvested stock options that
could become subject to accelerated exercisability. The Dreyfus Contingent
Benefit Plan also provides that, in the event of a change of control, all
deferred compensation due to Plan Beneficiaries shall then become payable and
shall be paid promptly by Dreyfus.
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The Merger Agreement provides that, as of the Effective Time, Dreyfus will
amend the Dreyfus Contingent Benefit Plan with respect to each Dreyfus employee
who both is a Plan Beneficiary with an outstanding Contingent Benefit Agreement
and who agrees to such amendments to provide that (i) the transactions
contemplated by the Merger Agreement will not be a change of control for
purposes of the Dreyfus Contingent Benefit Plan (other than those provisions
described in the preceding paragraph with respect to stock options); (ii) all
Plan Beneficiaries who continue to be Dreyfus employees at the Effective Time
will be paid an amount equal to one-half of the value of their units (determined
and paid effective as of the Effective Time); (iii) an amount equal to the
remaining one-half of the value of their units (as so determined) will be paid
effective as of the earlier of (x) the last day of the 18-month period following
the Effective Time and (y) the date, if any, that the Plan Beneficiary ceases to
be employed by Dreyfus. The amendment also will provide that (A) the payments
described in the preceding sentence will be unconditional (including, without
regard to the Deduction Limitation); (B) no other payments or benefits will be
made under the Dreyfus Contingent Benefit Plan as a result of the transactions
contemplated by the Merger Agreement (other than those provisions described in
the preceding paragraph with respect to stock options); and (C) no Plan
Beneficiary receiving the payments described in the preceding sentence will be
entitled to any other Contingent Benefits as a result of a change of control
occurring after the Effective Time. Finally, the amendment will provide that the
Dreyfus Contingent Benefit Plan shall contain a restriction (the "Contractual
Parachute Restriction") to the effect that no amount shall be payable under the
Dreyfus Contingent Benefit Plan that, together with any other "parachute
payments" (as defined in Section 280G of the Internal Revenue Code), would be in
excess of 2.99 times a Plan Beneficiary's "base amount" (as defined in Section
280G of the Internal Revenue Code), as determined in good faith by Dreyfus prior
to the Effective Time. The Merger Agreement also provides that Mellon Bank, as
sole stockholder of Dreyfus after the Merger, will approve these amendments to
the Dreyfus Contingent Benefit Plan.
RIGHT OF THE DREYFUS BOARD TO WITHDRAW ITS RECOMMENDATION
In the Merger Agreement, Dreyfus agreed that the Dreyfus Board would
recommend to the Dreyfus stockholders that they adopt the Merger Agreement.
However, the Dreyfus Board may withdraw, modify or amend such recommendation,
after Dreyfus has received an Acquisition Proposal (see "--No Solicitations"),
or if the opinions of Dreyfus' financial advisers have been withdrawn (see
"Background of and Reasons for the Merger--Opinions of Dreyfus Financial
Advisers"), in either case to the extent the Dreyfus Board reasonably
determines, upon the basis of written advice of outside counsel, that such
action is necessary in order for the Dreyfus Board to act in a manner which is
consistent with its fiduciary obligations under applicable law.
TERMINATION OF THE MERGER AGREEMENT; FEE
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time, as follows:
(a) by the mutual consent of the Dreyfus Board and the Mellon Board;
(b) by either Dreyfus or Mellon, at any time after December 31, 1994
by action of the Dreyfus Board or the Mellon Board, respectively, (or a
duly constituted committee of either Board), if the Effective Time has not
occurred;
(c) by either Dreyfus or Mellon in the event of the breach by the
other party of representations, warranties or agreements contained in the
Merger Agreement that would create a Dreyfus Material Adverse Effect or
Mellon Material Adverse Effect (as the case may be) and which cannot be or
has not been cured within 30 days after written notice to the party
committing such breach;
(d) by Mellon, if shareholders of one or more Measurement Funds
representing more than 10% of the aggregate net assets as of the close of
business on December 3, 1993 for all of the Measurement Funds, have met and
failed to approve the assignment by Dreyfus or any Dreyfus subsidiary, or
the continuation in effect after the Effective Time, of contracts pursuant
to which Dreyfus or a subsidiary provides investment management, investment
advisory or administrative services (see "--Conditions to the Merger" for
an explanation of Measurement Funds and these approvals);
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(e) by either Dreyfus or Mellon, if any permanent injunction or action
by any court or other governmental agency or body of competent jurisdiction
enjoining, denying approval of, or otherwise prohibiting the consummation
of the Merger has become final and nonappealable;
(f) by either Dreyfus or Mellon, if the Merger Agreement fails to
receive the requisite vote for adoption and approval by the shareholders of
Dreyfus or Mellon at the Dreyfus Meeting or the Mellon Meeting,
respectively; or
(g) by Dreyfus if the Dreyfus Board has approved an Acquisition
Proposal after determining, upon the basis of written advice of outside
counsel, that such approval is necessary in the exercise of its fiduciary
obligation under applicable law.
None of the foregoing will permit a party in material breach of any
provision of the Merger Agreement to terminate the Merger Agreement.
FEE. Under the Merger Agreement, Mellon is entitled to payment of a fee of
$50,000,000 by Dreyfus (the "Fee"), following the occurrence of a Purchase Event
(as described below), subject to certain terms and conditions. The right to
receive the Fee shall terminate if any of the following (a "Fee Termination
Event") occurs prior to a Purchase Event: (i) the Effective Time of the Merger,
(ii) termination of the Merger Agreement in accordance with the provisions
thereof if such termination occurs prior to the occurrence of a Preliminary
Purchase Event (as described below), except a termination by Mellon by virtue of
the breach by Dreyfus of its representations, warranties or agreements contained
in the Merger Agreement (unless the breach by Dreyfus was non-volitional), or
(iii) the passage of twelve months after termination of the Merger Agreement if
such termination follows the occurrence of a Preliminary Purchase Event or a
termination by Mellon by virtue of the breach by Dreyfus of its representations,
warranties or agreements contained in the Merger Agreement (unless the breach by
Dreyfus is non-volitional) (provided that if a Preliminary Purchase Event
continues or occurs beyond such termination, the Fee Termination Event shall be
twelve months from the expiration of the Last Preliminary Purchase Event but in
no event more than 18 months after such termination). The "Last Preliminary
Purchase Event" is the last Preliminary Purchase Event to expire.
For these purposes, the term "Preliminary Purchase Event" means any of the
following events or transactions occurring after December 5, 1993:
(i) Dreyfus or any of its subsidiaries without having received
Mellon's prior written consent, shall have entered into an agreement to
engage in an Acquisition Transaction (as described below) with any person
other than Mellon or any of its subsidiaries or the Dreyfus Board shall
have approved or recommended that the stockholders of Dreyfus approve or
accept any Acquisition Transaction with any person other than Mellon or any
of its subsidiaries. For these purposes, "Acquisition Transaction" means
(A) a merger or consolidation, or any similar transaction, involving
Dreyfus or any material subsidiary of Dreyfus, (B) a purchase, lease or
other acquisition of all or substantially all of the assets of Dreyfus or
any material subsidiary of Dreyfus, (C) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
securities representing 10% or more of the voting power of Dreyfus or a
material subsidiary of Dreyfus; however, an Acquisition Transaction does
not include a divestiture described in "--Conduct of Business Pending The
Merger--Dreyfus;"
(ii) any person (other than Mellon or a Mellon subsidiary) shall have
acquired beneficial ownership or the right to acquire beneficial ownership
of 10% or more of the outstanding shares of Dreyfus Common Stock, or any
group, other than a group of which Mellon or a Mellon subsidiary is a
member, shall have been formed that beneficially owns 10% or more of the
Dreyfus Common Stock then outstanding;
(iii) any person other than Mellon or a Mellon subsidiary shall have
made a bona fide proposal to Dreyfus or its stockholders, by public
announcement or written communication that is or becomes the subject of
public disclosure, to engage in an Acquisition Transaction (including,
without limitation, any situation in which any person other than Mellon or
a Mellon subsidiary shall have commenced or shall have filed a registration
statement under the Securities Act with respect to, a tender offer or
exchange offer to purchase any shares of Dreyfus Common Stock such that,
upon consummation of such offer, such
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person would own or control 25% or more of the then outstanding shares of
Dreyfus Common Stock (such an offer being referred to as a "Tender Offer"
or an "Exchange Offer", respectively));
(iv) after a proposal is made by a third party to Dreyfus or its
stockholders to engage in an Acquisition Transaction, Dreyfus shall have
breached any covenant or obligation contained in the Merger Agreement and
such breach would entitle Mellon to terminate the Merger Agreement and such
breach shall not have been cured within 30 days after written notice
thereof from Mellon;
(v) any person other than Mellon or a Mellon subsidiary, other than in
connection with a transaction to which Mellon has given its prior written
consent, shall have filed an application or notice with a governmental body
for approval to engage in an Acquisition Transaction; or
(vi) the holders of Dreyfus Common Stock shall not have adopted the
Merger Agreement at the Dreyfus Meeting, the Dreyfus Meeting shall not have
been held or shall have been canceled prior to termination of the Merger
Agreement or the Dreyfus Board shall have withdrawn or modified in a manner
adverse to Mellon the recommendation of the Dreyfus Board with respect to
the Merger Agreement, in each case after it shall have been publicly
announced that any person (other than Mellon or a Mellon subsidiary) shall
have made, or disclosed an intention to make, a proposal to engage in an
Acquisition Transaction or commenced a Tender Offer or filed a registration
statement under the Securities Act with respect to an Exchange Offer.
For these purposes, the term "Purchase Event" means either of the following
events or transactions occurring after December 5, 1993:
(i) the acquisition by any person, other than Mellon or a Mellon
subsidiary, alone or together with such person's affiliates and associates,
or any group, of beneficial ownership of 25% or more of the then
outstanding Dreyfus Common Stock; or
(ii) Dreyfus or any of its subsidiaries, without having received
Mellon's prior written consent, shall have entered into an agreement to
engage in a Transaction (as described below) with any person other than
Mellon or any of its subsidiaries, or the Dreyfus Board shall have approved
or recommended that the stockholders of Dreyfus approve or accept any
Transaction with any person other than Mellon or any of its subsidiaries.
For these purposes, "Transaction" means (A) a merger or consolidation, or
any similar transaction, involving Dreyfus or any material subsidiary of
Dreyfus, (B) a purchase, lease or other acquisition of all or substantially
all of the assets of Dreyfus or any material subsidiary of Dreyfus, (C) a
purchase or other acquisition (including by way of merger, consolidation,
share exchange or otherwise) of securities representing 25% or more of the
voting power of Dreyfus or a material subsidiary of Dreyfus; however, a
Transaction does not include a divestiture described in "--Conduct of
Business Pending the Merger; Dreyfus."
Except for the payment of the Fee in the circumstances described above, and
except as otherwise specifically provided in the Merger Agreement, in the event
of termination of the Merger Agreement no party will have any liability or
further obligation to any other party to the Merger Agreement, except for
liability for any breach of the Merger Agreement.
WAIVER AND AMENDMENT; REVISIONS TO TRANSACTION.
Any provision of the Merger Agreement may be waived by the party benefitted
by the provision. The Merger Agreement provides that, in the event that either
Dreyfus or Mellon determines that a change in the method of effecting the
transactions contemplated by the Merger Agreement would facilitate the
consummation of those transactions, Dreyfus and Mellon will discuss the proposed
change, and cooperate in good faith to determine whether the proposed change is
in the best interests of the parties to the Merger Agreement, provided that the
proposed change may neither alter or change the amount or kind of consideration
to be issued to Dreyfus stockholders under the Merger Agreement, nor adversely
affect the tax treatment to Dreyfus stockholders as a result of receiving such
consideration. In addition, the Merger Agreement provides that it may be amended
by mutual consent of the parties thereto.
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EFFECTIVE TIME
The Merger will become effective when Dreyfus and Merger Subsidiary file an
appropriate certificate with the Department of State of the State of New York.
Upon the Merger becoming effective, Dreyfus will be the surviving corporation
and the separate existence of Merger Subsidiary will cease. Dreyfus will
thereupon become a wholly owned subsidiary of Mellon Bank, which is a wholly
owned subsidiary of Mellon. For a description of circumstances under which
Dreyfus or Mellon may terminate the Merger Agreement, see "--Termination of the
Merger Agreement; Fee." If not so terminated, the Effective Time will occur not
more than ten days after the date upon which all of the conditions to the Merger
are satisfied or waived. Dreyfus and Mellon currently anticipate that the Merger
will be completed as soon as practicable following the Dreyfus Meeting and the
Mellon Meeting.
NYSE LISTING OF MELLON COMMON STOCK
Under the Merger Agreement, it is a condition precedent that the shares of
Mellon Common Stock to be issued in the Merger be approved for listing on the
NYSE upon notice of issuance. Mellon intends to file an application with the
NYSE for approval of such listing.
DELISTING AND DEREGISTRATION OF DREYFUS COMMON STOCK
After the Effective Time, no shares of Dreyfus Common Stock will be
outstanding and public trading of Dreyfus Common Stock will cease. Accordingly,
Dreyfus Common Stock will, at such time, be delisted from the NYSE and the
Pacific Stock Exchange and will be deregistered under and cease to be subject to
the reporting requirements of the Exchange Act.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Mellon has received an opinion of its counsel, Reed Smith Shaw & McClay,
and Dreyfus has received an opinion of its counsel, Rogers & Wells, to the
effect that the material federal income tax consequences of the Merger will be
as follows:
(a) the Merger will constitute a tax-free reorganization under Section
368(a)(1)(B) of the Internal Revenue Code, and Dreyfus and Mellon will each
be a party to the reorganization;
(b) no income, gain, or loss will be recognized by either Dreyfus or
Mellon as a result of the consummation of the Merger;
(c) no income, gain, or loss will be recognized by a stockholder of
Dreyfus upon the exchange of shares of Dreyfus Common Stock for Mellon
Common Stock pursuant to the Merger, except as discussed below with respect
to cash received in lieu of a fractional share interest in Mellon Common
Stock;
(d) the adjusted tax basis of the Mellon Common Stock received by a
stockholder of Dreyfus pursuant to the Merger will be the same as the
adjusted tax basis of the shares of Dreyfus Common Stock (reduced only by
amounts allocable to a fractional share interest for which cash is to be
received) surrendered in exchange therefor; and
(e) the holding period of the Mellon Common Stock received by a
stockholder of Dreyfus in the Merger will include the period during which
the shares of Dreyfus Common Stock surrendered in exchange therefor were
held, provided that such Dreyfus Common Stock is held as a capital asset by
the Dreyfus stockholder at the Effective Time.
The above tax opinions are based upon certain customary representations and
assumptions referred to in the opinion letters. It is a condition to the
consummation of the Merger that Mellon and Dreyfus also receive the above tax
opinions as of the Effective Time.
CASH RECEIVED IN LIEU OF FRACTIONAL SHARES. A Dreyfus stockholder who
received cash in the Merger in lieu of a fractional share interest in Mellon
Common Stock will be treated for federal income tax purposes as
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having received cash in redemption of such fractional share interest. The
stockholder will recognize gain or loss as of the Effective Time equal to the
difference between the amount of cash received and the portion of the
stockholder's adjusted tax basis in the shares of Dreyfus Common Stock allocable
to the fractional share interest. Any gain or loss will be capital gain or loss
if the stockholder holds the Dreyfus Common Stock as a capital asset at the
Effective Time and will be long-term capital gain or loss if the holding period
(determined as described above) for the fractional share interest deemed to be
received and then redeemed is more than one year.
CASH RECEIVED BY STOCKHOLDERS WHO EXERCISE DISSENTERS' RIGHTS. A holder of
Dreyfus Common Stock who exercises dissenters' rights and who receives cash in
exchange for such holder's shares will be treated as having received such
payment in redemption of the shares. In general, if the shares are held as a
capital asset at the Effective Time, the holder will recognize capital gain or
loss measured by the difference between the amount of cash received and the
holder's adjusted tax basis for the shares. If, however, the holder owns, either
actually or constructively under the constructive ownership rules of Section 318
of the Internal Revenue Code, any Dreyfus Common Stock that is exchanged in the
Merger for Mellon Common Stock, the payment made to such holder could, in
certain circumstances, be treated as dividend income. In general, under the
constructive ownership rules of the Internal Revenue Code, a holder may be
considered to own stock that is owned, and in some cases constructively owned,
by certain related individuals or entities, as well as stock that the holder (or
related individuals or entities) has the right to acquire by exercising an
option or converting a convertible security. Each holder who contemplates
exercising dissenters' rights should consult such holder's own tax adviser as to
the possibility that any payment to such holder will be treated as dividend
income.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS BASED UPON CURRENT
LAW. SUCH DISCUSSION MAY NOT BE APPLICABLE TO A DREYFUS STOCKHOLDER WHO ACQUIRED
SHARES OF DREYFUS COMMON STOCK PURSUANT TO THE EXERCISE OF AN EMPLOYEE STOCK
OPTION OR OTHERWISE AS COMPENSATION. BECAUSE EACH STOCKHOLDER'S TAX
CIRCUMSTANCES MAY DIFFER, EACH STOCKHOLDER IS URGED TO CONSULT HIS OWN TAX
ADVISER CONCERNING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH
STOCKHOLDER, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND OTHER
TAX LAWS AND ANY PROPOSED CHANGES IN SUCH TAX LAWS.
ACCOUNTING TREATMENT OF THE MERGER
The Merger, if consummated as proposed, will qualify as a pooling of
interests for accounting and financial reporting purposes. Accordingly, under
generally accepted accounting principles, the assets and liabilities of Dreyfus
will be combined with those of Mellon and carried forward at book values. In
addition, the statements of operations of Dreyfus will be combined with the
statements of operations of Mellon on a retroactive basis. The obligations of
Dreyfus and Mellon to consummate the Merger are conditioned, among other
matters, upon the receipt by them of letters from Ernst & Young and KPMG Peat
Marwick, the respective independent auditors of Dreyfus and Mellon, to the
effect that the Merger will qualify for pooling of interests accounting
treatment under generally accepted accounting principles. See "Unaudited Pro
Forma Condensed Combined Financial Statements."
RESALES BY AFFILIATES OF MELLON COMMON STOCK RECEIVED IN THE MERGER
All shares of Mellon Common Stock received by Dreyfus stockholders in the
Merger will be freely transferable, except that shares of Mellon Common Stock
received by persons who are "affiliates" (as such term is defined under the
Securities Act) of Dreyfus prior to the Merger may be resold by them only in
transactions permitted by the resale provisions of Rule 145 promulgated under
the Securities Act (or Rule 144 in the case of such persons who become
affiliates of Mellon) or as otherwise permitted under the Securities Act.
Persons who may be deemed to be affiliates of Dreyfus or Mellon generally
include individuals or entities that control, are controlled by, or are under
common control with, such party and may include certain officers and directors
of such party as well as principal shareholders of such party. In order that the
Merger may qualify for pooling of interests accounting treatment, an affiliate
of either Mellon or Dreyfus may not sell
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(subject to certain de minimis exceptions), or in any other way reduce such
affiliate's relative risk with respect to, the shares of Mellon Common Stock
owned by him until after such time as Mellon publishes results covering at least
30 days of combined operations of Mellon and Dreyfus. See "--Accounting
Treatment of the Merger."
The Merger Agreement requires Dreyfus to use its best efforts to cause each
of its affiliates to enter into an agreement to the effect that such person will
comply with the above-described transferability restrictions.
DISSENTERS' RIGHTS
DREYFUS STOCKHOLDERS
Holders of shares of Dreyfus Common Stock who so desire are entitled to
relief as dissenting stockholders under Section 910 of the NYBCL. However, a
holder of shares of Dreyfus Common Stock will only be entitled to those rights
if he complies with Section 623 of the NYBCL. The following summary does not
purport to be a complete statement of the method of compliance with Section 623
of the NYBCL and is qualified in its entirety by reference to the text of that
Section which is attached to this Prospectus/Joint Proxy Statement as Appendix
V.
A DREYFUS STOCKHOLDER WHO WISHES TO PERFECT HIS RIGHTS AS A DISSENTING
STOCKHOLDER IN THE EVENT THE MERGER AGREEMENT IS ADOPTED MUST:
(A) NOT VOTE FOR NOR CONSENT IN WRITING TO THE ADOPTION OF THE MERGER
AGREEMENT; AND
(B) FILE WITH DREYFUS, BEFORE THE TAKING OF THE VOTE ON THE MERGER
AGREEMENT AT THE DREYFUS MEETING, A WRITTEN OBJECTION TO THE MERGER. SUCH
WRITTEN OBJECTION MUST INCLUDE A NOTICE OF HIS ELECTION TO DISSENT, HIS
NAME AND RESIDENCE ADDRESS, THE NUMBER AND CLASSES OF SHARES AS TO WHICH HE
DISSENTS, AND A DEMAND FOR PAYMENT OF THE FAIR VALUE OF HIS SHARES IF THE
MERGER AGREEMENT IS APPROVED.
Any written demand for payment pursuant to clause (b) of the immediately
preceding paragraph should be mailed or delivered to The Dreyfus Corporation,
200 Park Avenue, New York, New York, 10166, Attention: Secretary. Because the
written demand must be delivered before the stockholder vote on the Merger
Agreement, it is recommended, although not required, that a stockholder using
the mails should use certified or registered mail, return receipt requested, to
confirm that he has made a timely delivery.
Within 10 days after the Dreyfus Meeting, Dreyfus will, by registered mail,
give notice that the Merger Agreement was adopted to each of the stockholders
who has delivered a written objection and who did not vote for or consent in
writing to the Merger. The notice will be sent by registered mail, return
receipt requested, addressed to the stockholder at his address as it appears on
the records of Dreyfus.
A Dreyfus stockholder may not dissent as to less than all of his shares as
to which he has a right to dissent, held by him of record, that he owns
beneficially. A nominee or fiduciary may not dissent on behalf of any beneficial
owner as to less than all of the shares of such owner, as to which such nominee
or fiduciary has a right to dissent, held of record by such nominee or
fiduciary. Upon consummation of the Merger, dissenting stockholders will cease
to have any of the rights of a stockholder of Dreyfus except the right to be
paid the fair value for their shares and any other rights under Section 623 of
the NYBCL.
A notice of election to dissent may be withdrawn by the stockholder at any
time prior to his acceptance in writing of an offer made by Dreyfus in
accordance with Section 623 of the NYBCL, but in no case later than 60 days from
the date of the consummation of the Merger, except that if Dreyfus fails to make
a timely offer, the time for withdrawal of a notice of election shall be
extended until 60 days from the date an offer is made. Thereafter, withdrawal of
a notice of election requires the written consent of Dreyfus. In order to be
effective, any withdrawal of a notice of election must be accompanied by the
return to Dreyfus of any advance payment made to the stockholder pursuant to
Section 623 of the NYBCL. If a notice of election is withdrawn, or if the Merger
is rescinded, or if a court determines that the stockholder is not entitled to
receive payment for his shares, or if the stockholder otherwise loses his
dissenters' rights, the stockholder will not have the right to
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receive payment for his shares, but he will be reinstated to all his rights as a
stockholder as of the consummation of the Merger.
At the time of filing the notice of election to dissent or within one month
thereafter, the holder of shares represented by certificates must submit the
certificates representing his shares to Dreyfus, or to Dreyfus' transfer agent,
who shall note conspicuously thereon that a notice of election to dissent has
been filed and shall return the certificates to the stockholder. ANY HOLDER OF
SHARES REPRESENTED BY CERTIFICATES WHO FAILS TO SUBMIT HIS CERTIFICATES FOR SUCH
NOTATION SHALL, AT THE OPTION OF DREYFUS EXERCISED BY WRITTEN NOTICE TO THE
STOCKHOLDER WITHIN 45 DAYS FROM THE DATE OF FILING OF SUCH NOTICE OF ELECTION TO
DISSENT, LOSE HIS DISSENTERS' RIGHTS UNLESS A COURT, FOR GOOD CAUSE SHOWN,
OTHERWISE DIRECTS.
Within 15 days after the expiration of the period within which stockholders
may file their notices of election to dissent, or within 15 days after the
consummation of the Merger, whichever is later (but in no case later than 90
days from the date of the Dreyfus Meeting), Dreyfus will make a written offer by
registered mail to each stockholder who had filed such notice of election to pay
for his shares at a specified price which Dreyfus considers to be their fair
value. Such offer shall be accompanied by a statement setting forth the
aggregate number of shares with respect to which notices of election to dissent
have been received and the aggregate number of holders of such shares. If the
Merger has been consummated, such offer shall be accompanied by (a) advance
payment to each such stockholder who has submitted the certificates representing
his shares to Dreyfus of an amount equal to 80 percent of the amount of such
offer or (b) as to each stockholder who had not yet submitted his certificates,
a statement that advance payment to him of an amount equal to 80 percent of the
amount of such offer will be made by Dreyfus promptly upon submission of his
certificates.
If Dreyfus fails to make such offer within the 15-day period, or if Dreyfus
makes the offer and any dissenting stockholder or stockholders fail to agree
with Dreyfus within the 30-day period thereafter upon the price to be paid for
their shares:
(a) Dreyfus shall, within 20 days after the expiration for whichever
is applicable of the two periods last mentioned, institute a special
proceeding in the supreme court in the judicial district in which Dreyfus'
office is located to determine the rights of dissenting stockholders, and
to fix the fair value of their shares.
(b) If Dreyfus fails to institute such proceeding within such 20-day
period, any dissenting stockholder may institute such proceeding for the
same purpose not later than 30 days after the expiration of the 20-day
period. If the proceeding is not instituted within such 30-day period, all
dissenters' rights will be lost unless the supreme court, for good cause
shown, otherwise decides.
(c) All dissenting stockholders, except those who have agreed with
Dreyfus upon the price to be paid for their shares, will be made parties to
the proceeding.
(d) The court will determine whether each dissenting stockholder, as
to whom Dreyfus requests the court to make such determination, is entitled
to receive payment for his shares. If Dreyfus does not request such
determination or if the court finds that a dissenting stockholder is
entitled to payment for his shares, the court will fix the fair value of
the shares, which, for such purposes, shall be the fair value as of the
close of business on the day prior to the Dreyfus Meeting. In fixing the
value of the shares, the court shall consider the nature of the transaction
giving rise to the stockholder's right to receive payment for his shares
and its effects on Dreyfus and its stockholders, the concepts and methods
then customary in the relevant securities and financial markets for
determining fair value of shares of a corporation engaging in a similar
transaction under comparable circumstances, and all other relevant factors.
The court may fix the value of the shares as higher or lower than the value
of the consideration offered in the Merger. The final order of the court
shall be entered against Dreyfus in favor of each dissenting stockholder
who is a party to the proceeding and is entitled to the value of his
shares. The final order shall include interest at a rate determined by the
court and payable from the date the Merger was consummated until the
payment date, unless the court finds that the refusal of any stockholder to
accept the offer of payment was arbitrary, vexatious, or otherwise not in
good faith.
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(e) Each party to the proceeding shall bear its own costs and
expenses, including the fees and expenses of its counsel and any experts
employed. The court may, however, in its discretion, apportion and assess
all or any part of the costs, expenses, and fees incurred by Dreyfus
against any or all of the dissenting stockholders who are parties to the
proceeding, including those who withdraw their notices of election to
dissent, if the court finds that the dissenting stockholders' refusal to
accept Dreyfus' offer is arbitrary, vexatious, or otherwise not in good
faith. Likewise, the court may apportion and assess all or any of the
costs, expenses, and fees incurred by any or all of the dissenting
stockholders who are parties to the proceeding against Dreyfus, if the
court finds (i) that the fair value of the shares, as determined,
materially exceeds the amount which Dreyfus offered to pay; (ii) that no
offer or required advance payment was made by Dreyfus; (iii) that Dreyfus
failed to institute the special proceeding within the required time period;
or (iv) that the action of Dreyfus in complying with its obligations under
the Section 623 of the NYBCL was arbitrary, vexatious, or otherwise not in
good faith.
(f) Within 60 days after final determination of the proceeding,
Dreyfus will pay to each dissenting stockholder the amount found to be due
him, upon surrender of the certificates for any such shares represented by
certificates.
The perfection by a sufficient number of Dreyfus stockholders of their
rights as dissenting stockholders could impair the ability of the Merger to
qualify as a pooling of interests for accounting and financial reporting
purposes and to qualify as a tax-free reorganization. If the number of shares
for which dissenters' rights are perfected (expressed in terms of equivalent
Mellon shares based upon the Exchange Ratio), when added to (i) the number of
shares of Dreyfus Common Stock purchased by Dreyfus during the two year period
prior to December 5, 1993 and not reissued by Dreyfus prior to the Effective
Time (expressed in terms of equivalent Mellon shares based upon the Exchange
Ratio), (ii) the number of shares of Mellon Common Stock purchased by Mellon
during the two year period prior to December 5, 1993, and not reissued by Mellon
prior to the Effective Time, and (iii) the fractional shares of Mellon Common
Stock in lieu of which cash is paid in the Merger, exceeds 10% of the number of
shares of Mellon Common Stock issued in the Merger, the qualification of the
Merger for pooling of interests accounting treatment may be adversely affected.
The qualification of the Merger for pooling of interests accounting and as a
tax-free reorganization are conditions of the respective obligations of Dreyfus
and Mellon to effect the Merger. See "The Merger--Conditions to the Merger",
"--Accounting Treatment of the Merger" and "--Certain Federal Income Tax
Consequences of the Merger." For a discussion of the tax consequences to a
holder of Dreyfus Common Stock exercising dissenters' rights, see "The
Merger--Certain Federal Income Tax Consequences of the Merger."
BECAUSE A PROXY CARD WHICH DOES NOT CONTAIN VOTING INSTRUCTIONS WILL,
UNLESS REVOKED, BE VOTED FOR ADOPTION OF THE MERGER AGREEMENT, A DREYFUS
STOCKHOLDER WHO WISHES TO EXERCISE HIS DISSENTERS' RIGHTS MUST EITHER NOT SIGN
AND RETURN HIS PROXY CARD OR, IF HE SIGNS AND RETURNS HIS PROXY CARD, VOTE
AGAINST OR ABSTAIN FROM VOTING ON THE ADOPTION OF THE MERGER AGREEMENT.
MELLON SHAREHOLDERS
Holders of shares of Mellon Common Stock and Series D Stock are not
entitled to dissenters' rights.
COMPARISON OF SHAREHOLDERS' RIGHTS
Upon consummation of the Merger, the stockholders of Dreyfus will become
shareholders of Mellon. The following summary compares the material differences
between the rights of holders of shares of Dreyfus Common Stock and the rights
of holders of shares of Mellon Common Stock. These differences arise from (i)
the distinctions between the laws of the jurisdictions in which Dreyfus and
Mellon are incorporated (the State of New York and Commonwealth of Pennsylvania,
respectively) and (ii) the distinctions between the Certificate of Incorporation
and By-Laws of Dreyfus and the Articles of Incorporation and By-Laws of Mellon.
The following summary includes all material aspects, but does not purport
to be a complete statement, of the rights of holders of shares of Dreyfus Common
Stock and shares of Mellon Common Stock under, and is
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qualified in its entirety by reference to, New York and Pennsylvania law, the
respective Certificate and Articles of Incorporation and the By-Laws of Dreyfus
and Mellon.
CHARTER AMENDMENTS
Under New York law, except for certain specified matters, an amendment or
change to a certificate of incorporation must be authorized by a vote of the
board of directors, followed by a vote of the holders of a majority of all
outstanding shares entitled to vote thereon at a meeting of shareholders. A
corporation's certificate of incorporation may contain provisions requiring
supermajority voting requirements. Dreyfus' Certificate of Incorporation does
not contain any such provisions.
Under New York law, by-laws may be adopted, amended or repealed by a
majority of the votes cast by the holders of shares at the time entitled to vote
in the election of directors. When provided in the certificate of incorporation
or a by-law adopted by the shareholders, the board of directors may also adopt,
amend or repeal by-laws. Any by-law adopted by the board of directors may be
amended or repealed by a majority of the votes cast by the holders of shares at
the time entitled to vote in the election of any directors. Dreyfus' By-Laws
provide that they may be adopted, amended or repealed by the Dreyfus Board by
vote of a majority of the directors present at the time of the vote if a quorum
is then present, except that a by-law adopted or amended by the stockholders, to
the extent it expressly so provides, may be amended or repealed only by the
stockholders.
Under Pennsylvania law, except for certain specified matters, an amendment
to the articles of incorporation must be adopted by a resolution of the board of
directors, followed by the affirmative vote of a majority of the votes cast by
all shareholders entitled to vote thereon, unless the articles of incorporation
require a greater vote. Mellon's Articles of Incorporation do not contain any
such requirements.
Under Pennsylvania law, shareholders of a corporation which has stock
entitled to vote in the election of directors registered under the Exchange Act
(a "Registered Corporation") are not entitled by statute to propose an amendment
to the articles of incorporation. A Registered Corporation may render this
section inapplicable to the corporation by inclusion of a contrary provision in
its articles of incorporation. Mellon, a Registered Corporation, has not adopted
such a provision.
Under Pennsylvania law, by-laws may be adopted, amended or repealed upon
the affirmative vote of a majority of the votes cast by all shareholders
entitled to vote thereon at a special or regular meeting. Except for certain
specified matters, the authority to adopt, amend or repeal by-laws may be
expressly vested by the by-laws in the board of directors, subject to the power
of the shareholders to change such action. Mellon's Articles of Incorporation
and By-Laws provide that its By-Laws may, subject to law, be altered, amended,
supplemented or repealed by a majority of the directors then in office or by
action of shareholders. However, in order to amend or repeal the provisions of
Mellon's By-Laws relating to the election, classification and removal of
directors, or adopt any new provisions inconsistent with such provisions, the
approval of seventy-five percent of the shares entitled to vote thereon is
required, unless such action has been approved by a majority vote of the full
Mellon Board.
Under Pennsylvania law, an amendment to, or other provision of, the
articles of incorporation approved by the shareholders, may, except in certain
instances, relax or be inconsistent with and supersede any provisions set forth
in the chapters of the PBCL relating to incorporation; corporate powers, duties
and safeguards; officers, directors and shareholders; or fundamental changes.
Mellon's Articles of Incorporation have no such provisions.
DIRECTORS
Under New York law, except in certain circumstances, a corporation's board
of directors must consist of at least three directors. Dreyfus' By-Laws provide
that the number of directors shall be eight. The number of directors of the
Dreyfus Board may be changed only by an amendment to the Dreyfus By-Laws. The
certificate of incorporation or by-laws adopted by shareholders may provide for
the board of directors to be divided into classes. The Dreyfus Board is not
classified and directors are elected at each annual meeting of
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stockholders. Pursuant to Dreyfus' By-Laws, the presence of four of the
directors in office constitutes a quorum for transacting business.
Under Pennsylvania law, a corporation's board of directors must consist of
one or more members, with the number fixed by, or in the manner provided in, the
articles of incorporation or the by-laws. If not so fixed, the number of
directors shall be the same as that stated in the articles of incorporation, or
three if no number is stated. Mellon's By-Laws provide that the number of
directors shall be as designated by a majority of the Mellon Board. The Mellon
Board has currently fixed the number of directors at eighteen. However, Mellon
has agreed in the Merger Agreement to enlarge the Mellon Board to twenty-one.
See "The Merger--Certain Agreements Relating to Conduct of Business after the
Merger." Mellon's By-Laws provide for the Mellon Board to be divided into three
approximately equal classes, with each class holding office for a term of three
years. Pursuant to Mellon's By-Laws, the presence of a majority of the directors
in office constitutes a quorum for transacting business. The fact that Mellon's
Board is divided into three classes could make it more difficult for a third
party to acquire control of Mellon than would be the case if Mellon's Board,
like Dreyfus' Board, were not so divided.
In the event that the equivalent of six quarterly dividends, whether or not
consecutive, payable on certain series of outstanding preferred stock of Mellon
are unpaid and payments are not declared and sums are not set aside for payment,
the number of directors of Mellon will be increased by two. The holders of the
series of preferred stock for which dividends are unpaid, voting as a single
class, will be entitled to elect the two additional directors to serve until all
dividends in arrears have been paid or waived.
REMOVAL OF DIRECTORS
Under New York law, any or all directors may be removed for cause by a vote
of shareholders. The certificate of incorporation or, except in certain
instances, a shareholder-adopted by-law provision may provide for such removal
by action of the board. A director may be removed without cause by shareholder
vote only if the certificate of incorporation or by-laws so provide. Dreyfus'
By-Laws provide for removal for cause of directors by the affirmative vote of a
majority of the directors or by the vote of a majority of the votes cast by all
stockholders entitled to vote thereon. Dreyfus' By-Laws also provide for removal
of directors by stockholders without cause by the vote of a majority of the
votes cast by all stockholders entitled to vote thereon.
Under Pennsylvania law, unless otherwise provided in a by-law adopted by
the shareholders, any or all directors may be removed, with or without cause, by
the affirmative vote of a majority of all shareholders entitled to vote thereon.
Unless otherwise provided in a by-law adopted by the shareholders, the board of
directors may declare vacant the office of a director who has been judicially
declared of unsound mind or convicted of an offense punishable by imprisonment
for a term of more than one year, or for any other proper cause (which the
by-laws may specify) or if, within 60 days or such other time as the by-laws may
specify after notice of selection as a director, such person does not accept the
office either in writing or by attending a meeting of the board of directors and
fulfill such other requirements of qualification as the by-laws may specify.
Mellon's By-Laws provide that a director may be removed without cause only upon
the vote of at least seventy-five percent of the votes which all shareholders
would be entitled to cast in an annual election of directors, or in the election
of a single class of directors, if applicable.
NEWLY CREATED DIRECTORSHIPS AND VACANCIES
Under New York law, newly created directorships resulting from an increase
in the number of directors and vacancies occurring for any reason, other than
the removal of a director without cause, may be filled by vote of the board of
directors. If the number of directors then in office is less than a quorum, any
vacancies may be filled by vote of a majority of the directors then in office.
Unless a provision of the certificate of incorporation or by-laws adopted by the
shareholders provides otherwise, vacancies occurring in the board of directors
through removal of directors without cause must be filled by a vote of
shareholders. Dreyfus' By-Laws do not modify this requirement.
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Under Pennsylvania law, except as otherwise provided in the by-laws,
vacancies in the board of directors, including vacancies resulting from an
increase in the number of directors, may be filled by a majority vote of the
remaining members of the board though less than a quorum, or by a sole remaining
director, and each person so selected shall be a director to serve for the
balance of the unexpired term unless otherwise restricted in the by-laws. An
incumbent director who resigns, prospectively, may vote on his replacement along
with the other directors then in power. In the case of removal of a director by
shareholder vote, a new director may be elected at the same meeting at which the
director was removed. Mellon's By-Laws state that vacancies in the Mellon Board,
whether or not caused by an increase in the number of directors, may be filled
by a majority of the remaining members of the Mellon Board though less than a
quorum, except that a vacancy resulting from removal from office by a vote of
shareholders may be filled by a vote of shareholders at the same meeting at
which such removal occurs. Each person so elected shall hold office for a term
expiring at the next annual meeting of shareholders at which the term of the
class of directors to which such director was elected expires.
CUMULATIVE VOTING
Under New York law, a certificate of incorporation may provide for
cumulative voting for the election of directors. Dreyfus' Certificate of
Incorporation contains no such provision.
Pennsylvania law provides that unless the articles of incorporation specify
otherwise, shareholders are entitled to cumulative voting in the election of
directors. Mellon's Articles of Incorporation expressly provide that
shareholders shall not have any such cumulative voting rights.
LIMITATION ON DIRECTORS' LIABILITY
Under New York law, a corporation's certificate of incorporation may
contain a provision limiting or eliminating the personal liability of directors
to the corporation or its shareholders for damages for breaches of duty in such
capacity. No such provision may eliminate or limit liability if a judgment or
other final adjudication establishes that the director's acts or omissions (i)
were in bad faith, (ii) involved intentional misconduct or a knowing violation
of law, (iii) involved financial profit or some other advantage to which the
director was not legally entitled, or (iv) resulted in a violation of the
statute prohibiting certain dividend declarations, certain purchases by the
corporation of its own shares, certain payments to shareholders after
dissolution, and particular types of loans. In addition, no such provision may
eliminate or limit the liability of a director for acts occurring prior to
adoption of the limitation of liability. Dreyfus' Certificate of Incorporation,
as of June 27, 1988, contains a provision limiting the personal liability of the
directors to the extent permitted under New York law.
Under Pennsylvania law, a by-law adopted by the shareholders of a
corporation may provide that a director shall not be personally liable, as such,
for monetary damages for any action taken unless: (i) the director has breached
or failed to perform the duties of his office under the PBCL; and (ii) the
breach or failure to perform constitutes self-dealing, willful misconduct or
recklessness. No such by-law shall apply to limit a director's responsibility or
liability under any criminal statute or for the payment of any taxes. Mellon's
By-Laws state that, to the fullest extent permitted by Pennsylvania law, a
director of Mellon shall not be personally liable for monetary damages for any
action taken, or any failure to take action after January 26, 1987.
INDEMNIFICATION
Under both New York and Pennsylvania law, statutory provisions for
indemnification are not exclusive of any other indemnification rights to which a
person may be entitled under by-laws, agreement, votes of shareholders or
disinterested directors, or otherwise.
However, New York law provides that no indemnification may be made to any
director or officer if a judgment or other adjudication adverse to the director
or officer establishes that his acts were committed in bad faith or were the
result of active and deliberate dishonesty and were material to the cause of
action so adjudicated, or that he personally gained in fact a financial profit
or other advantage to which he was not legally entitled. Pennsylvania law
provides that no indemnification may be made where the act or failure to act
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giving rise to the claim for indemnification is determined by a court to have
constituted willful misconduct or recklessness.
Both states' laws authorize corporate indemnification of directors and
officers and allow the corporation to procure insurance to cover such
indemnification. Pennsylvania law also authorizes indemnification of any
representative of the corporation, although Mellon's Articles of Incorporation
provide for indemnification only for persons, other than directors and officers,
designated by the Mellon Board. Both New York and Pennsylvania require
indemnification of a person who has been successful on the merits or otherwise,
in the defense of a civil, administrative, investigative, criminal or derivative
action. In lieu of success in the defense of an action or indemnification
ordered by a court, New York law requires either a determination made by the
board of directors by a majority vote of a quorum consisting of directors who
were not parties to the action or proceeding or by a majority of the
shareholders that the indemnification is proper in the circumstances because the
indemnified party has met the applicable standard of conduct necessary to
entitle the party to indemnification. If a quorum consisting of directors who
were not parties to the action or proceeding is not obtainable or, if obtainable
and a majority vote of a quorum of disinterested directors directs, the board
may direct independent legal counsel to opine in writing that indemnification of
the person in question is proper. New York law also provides that shareholders
must be given notice of the payment of indemnification made other than by court
order or action of the shareholders. New York and Pennsylvania law authorize the
corporation to advance litigation expenses prior to the final determination of
an action; New York law requires an undertaking from the recipient to repay such
advances to the extent indemnification is later determined to be unavailable.
The Dreyfus Certificate of Incorporation provides that Dreyfus may indemnify any
person to the full extent permitted by the NYBCL, including indemnification
provided pursuant to a resolution of stockholders, resolution of directors or an
agreement. The Dreyfus By-Laws provide indemnification to directors and officers
of Dreyfus if such director or officer acted, in good faith, for a purpose which
he or she reasonably believed to be in the best interests of the corporation
and, in criminal actions or proceedings, in addition, had no reasonable cause to
believe that his or her conduct was unlawful, except that in the case of an
action by or in the right of Dreyfus to procure a judgment in its favor, no
indemnification is provided in respect of any claim as to which such person has
been adjudged to be liable to Dreyfus or in respect of any threatened action or
pending action which is settled or otherwise disposed of, unless a court ordered
otherwise. The Dreyfus By-Laws provide for the advance of expenses incurred by a
director or officer in advance of the final disposition of an action or
proceeding upon receipt by the corporation of an undertaking by the director or
officer to repay the amount if he or she is ultimately found not to be entitled
to indemnification. The Mellon Articles of Incorporation provide indemnification
of directors, officers, and other representatives of Mellon designated by the
Mellon Board to the fullest extent permitted by Pennsylvania law.
SHAREHOLDER VOTE REQUIRED FOR CERTAIN TRANSACTIONS
Under New York law, a plan of merger, a sale, lease, exchange or other
disposition of all or substantially all the assets of a corporation not in the
regular course of business, or a share exchange, shall be authorized by the
corporation's board of directors, followed by (except in certain instances)
adoption at a meeting of shareholders by a vote of the holders of two-thirds of
all outstanding shares entitled to vote thereon. Voluntary dissolution of a
corporation may be authorized at a meeting of shareholders by the vote of two
thirds of all outstanding shares entitled to vote thereon.
Under Pennsylvania law, except in certain instances, a plan of merger or
consolidation, a sale, lease, exchange, division, conversion, voluntary
dissolution or other disposition of all or substantially all assets of a
corporation, or a share exchange, shall be authorized by a corporation's board
of directors, followed by adoption by the shareholders upon the affirmative vote
of a majority of votes cast by all shareholders entitled to vote thereon. As a
result, shareholder approval of a merger, disposition of all or substantially
all assets or similar transaction described above may be easier to obtain under
Pennsylvania law than New York law.
SPECIAL MEETING OF SHAREHOLDERS; SHAREHOLDER ACTION BY WRITTEN CONSENT
Dreyfus' By-Laws allow a majority of the Dreyfus Board or the President to
call a special meeting of stockholders. Furthermore, Dreyfus' By-Laws require
that, upon the written request of stockholders owning a
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majority of the shares of capital stock entitled to vote at a meeting or a
majority of the Dreyfus Board, the President or the Secretary shall call a
special meeting of stockholders. Under New York law, holders of at least ten
percent of a corporation's shares may demand a special meeting to elect
directors if there has been no meeting to elect directors or there is a failure
to elect a sufficient number of directors to conduct the business of the
corporation for a period of one month after the date fixed by or under the
by-laws for the annual meeting of shareholders, or if no date has been so fixed,
for a period of thirteen months since the last election of directors and certain
other criteria are satisfied. Notice of such a meeting must be given, personally
or by mail, not less than sixty nor more than ninety days after such demand.
Under New York law, shareholders may take any action which may be taken at
a meeting of shareholders without such a meeting by written, unanimous consent
of shareholders entitled to vote thereon or a lesser percentage specified by the
certificate of incorporation.
Pennsylvania law provides that shareholders of Registered Corporations are
not entitled by statute to call a special meeting of shareholders, except that
an interested shareholder (as defined in the PBCL) may call a meeting for the
purpose of approving a business combination. Written notice of such a meeting
must be given, personally, by mail or telegraph, at least five days prior to the
date of the meeting unless a greater period of notice is required by law in a
particular case.
Under Pennsylvania law, actions may be taken by shareholders of a
Registered Corporation without a meeting by less than unanimous written consent
only if permitted by its by-laws. Mellon's By-Laws contain no provisions
permitting such action.
BUSINESS COMBINATIONS FOLLOWING A CHANGE IN CONTROL
New York law regulates tender offers for the equity shares of New York
corporations having principal offices or significant business operations within
New York. The Security Takeover Disclosure Act (the "Takeover Act") applies to
certain offers with respect to which, after acquisition of the shares, the
offeror would be the owner of more than five percent of the target company's
equity securities. In such cases, no tender offer may be made unless the offeror
files with the New York Attorney General a registration statement containing
certain information required by the Takeover Act. The Takeover Act also
regulates tender offers not subject to the requirements of Section 14(d) of the
Exchange Act.
Under New York law, a resident domestic corporation shall not engage,
except in certain instances, in any business combination with any interested
shareholder (a beneficial owner of more than 20% of the outstanding voting
stock) of such resident domestic corporation for a period of five years
following such interested shareholder's stock acquisition date (the date the
interested shareholder attained such status), unless such business combination
is approved by the board of directors of such resident domestic corporation
prior to such interested shareholder's stock acquisition date. The statute does
not apply to a business combination with an interested shareholder (or an
affiliate of an interested shareholder) who was the beneficial owner, directly
or indirectly, of more than 5% of the outstanding voting stock of such resident
domestic corporation on October 13, 1985 and has remained so. The statute does
not apply to the Merger because Mellon and Merger Subsidiary are not deemed to
be interested shareholders.
Under Pennsylvania law, a Registered Corporation shall not at any time
engage, except in certain instances, in any business combination with any
interested shareholder (a beneficial owner of more than 20% of the outstanding
stock entitled to elect directors or an affiliate or associate of the
corporation who at any time within the previous five years was the beneficial
owner of more than 20% of the outstanding stock entitled to elect directors,
excluding, in each case, shares held continuously since January 1, 1983) of the
corporation other than (i) a business combination approved by the board of
directors of the corporation, (ii) by the affirmative vote of all of the holders
of the outstanding common stock of the corporation, (iii) if the consideration
payable to shareholders of the corporation in the business combination complies
with certain fair price conditions specified by Pennsylvania law, by holders of
a majority of the voting shares (excluding the shares held by the interested
shareholder or any associate or affiliate thereof) at a meeting called for such
purpose, no earlier than three months after the interested shareholder becomes
the beneficial owner of at least 80% of the corporation's voting shares, or (iv)
if the interested shareholder waits at least five years after its
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share acquisition date and (a) obtains a majority of the votes of the
shareholders entitled to vote (excluding the shares held by the interested
shareholder or any associate or affiliate thereof) or (b) the business
combination complies with certain fair price conditions specified by
Pennsylvania law and is approved by the shareholders. The statute does not apply
to business combinations with an interested shareholder who was the beneficial
owner of at least 15% of the voting stock of such corporation on March 23, 1988
and remains so to the share acquisition date of the interested shareholder. The
statute does not apply to the Merger because Dreyfus is not deemed to be an
interested shareholder.
The PBCL includes control share acquisition provisions, together with
disgorgement and severance compensation provisions which provide for the
recovery by a corporation of profits from the sale of the corporation's shares
and severance payments to terminated employees, in the event of certain control
share acquisitions (acquisitions of a corporation's stock by a holder of 20% or
more of stock entitled to vote in the election of directors). Mellon, pursuant
to its By-Laws, has opted out of these statutes as permitted thereunder. The
PBCL also includes a fair price provision which gives a corporation's
shareholders the ability, in certain instances, to require a person who has
become a 20% or more shareholder to buy the other shareholders' stock at a "fair
price," as determined by the PBCL. New York does not have similar control share
acquisition or fair price provisions in the NYBCL.
DIRECTOR CONSIDERATIONS
Pennsylvania law provides that a board of directors may, in considering the
best interests of the corporation, consider, to the extent they deem
appropriate, the impact of corporate action upon employees, suppliers, customers
and creditors of the corporation, communities in which offices or other
establishments of the corporation are located, the short and long term interests
of the corporation, the resources, intent and conduct of the person seeking to
acquire control of the corporation, and all other pertinent factors, in addition
to considering its shareholders' interests. New York law permits directors to
consider similar factors.
DISSENTERS' RIGHTS
Under New York law, dissenting shareholders who comply with prescribed
statutory procedures are entitled to appraisal rights in connection with certain
mergers or share exchanges, or sales of substantially all the assets of a
corporation, and in connection with certain reclassifications, certificate of
incorporation amendments and other transactions which may adversely affect the
rights or preferences of shareholders.
Under Pennsylvania law, dissenting shareholders who follow prescribed
statutory procedures are entitled to obtain payment of the fair value of such
shareholders' shares in connection with a plan of merger or consolidation, share
exchange, division, conversion or sale of substantially all of the assets of a
corporation and certain other transactions on which shareholders are entitled to
vote. However, such appraisal rights are not provided, except in limited
circumstances, to a shareholder under Pennsylvania law where shares of the class
held by the shareholder and entitling the shareholder to vote on the plan, are
held of record by more than 2,000 shareholders or are listed on a national
securities exchange, provided that, among other things, the shares are converted
solely into shares of another corporation and cash in lieu of fractional
interests. Furthermore, Pennsylvania law does not provide, except in limited
circumstances, appraisal rights to shareholders of a Registered Corporation in
connection with the sale, lease, exchange or other disposition of all or
substantially all of its properties and assets. Under Pennsylvania law, a
corporation may, within its articles of incorporation, by by-law or resolution
of the board of directors, grant appraisal rights to shareholders in situations
where such shareholders would not otherwise be entitled to appraisal rights
under Pennsylvania law. Mellon has not granted such additional appraisal rights
to its shareholders. Accordingly, Dreyfus stockholders who become Mellon
shareholders will not have the right to demand cash payment of the fair value of
their shares in the case of mergers, sales of substantially all assets or
similar transactions described above involving Mellon. Dreyfus stockholders
currently have such right, including in connection with the Merger. See
"Dissenters' Rights--Dreyfus Stockholders."
79
<PAGE> 88
DIVIDENDS
New York law provides that dividends may be paid only out of surplus
(defined as the excess of net assets over stated capital) and only when the
corporation is not insolvent and would not be made insolvent after the payment
of the dividend and as long as the dividend is not contrary to any restriction
contained in the certificate of incorporation.
Pennsylvania law allows dividends to be paid as long as (i) after payment
of the dividends the corporation could pay its debts when they become due in the
usual course of business and (ii) the total assets of the corporation would not
be less than the sum of total liabilities plus (unless provided in the articles
of incorporation) the amount needed to satisfy preferential rights upon
dissolution of the corporation. Pennsylvania law does not limit payment of
dividends to situations in which surplus or net profits exist.
STOCK REPURCHASES
Under New York law, a corporation may repurchase its own shares out of
surplus except when the corporation is currently or would thereby be made
insolvent. New York law allows repurchases of a corporation's redeemable shares
out of stated capital for any purpose except when the corporation is insolvent
or would thereby be made insolvent and except when such purchase would reduce
net assets below the stated capital remaining after giving effect to the
cancellation of such shares. New York law allows a corporation to repurchase its
shares out of stated capital except when the corporation is currently or would
thereby be made insolvent, regardless of whether the purchase would reduce net
assets below stated capital if the purchase is made for the purpose of: (i)
eliminating fractions of shares; (ii) collecting or compromising indebtedness to
the corporation; or (iii) paying shareholders entitled to receive payment for
their shares under the appraisal provisions of New York law. Under New York law,
a resident domestic corporation which is subject to the provisions of the New
York business combination law may not purchase or agree to purchase more than
10% of its stock from a shareholder for more than the market value thereof
unless (a) the purchase is approved by a majority of the board of directors
followed by approval by a majority of the outstanding shares entitled to vote
thereon (unless a greater shareholder vote is required in the certificate of
incorporation), (b) the corporation offers to purchase shares from all holders
of stock or (c) the stock to be purchased is stock of which the holder has been
the beneficial owner for more than two years.
Under Pennsylvania law, a corporation may repurchase its own shares so long
as after the repurchase, the corporation is able to pay its debts as they become
due, and the total assets of the corporation are not less than the sum of its
liabilities plus (unless otherwise provided in the articles of incorporation)
the amount needed to satisfy preferential rights upon dissolution of the
corporation. Pennsylvania law does not limit stock repurchases to situations in
which surplus or net profits exist.
CONVERSION OF SHARES IN A MERGER
Under Pennsylvania law, whenever any outstanding securities of a business
corporation are converted into new shares or other securities or property by any
merger, consolidation or otherwise, the plan or instrument effecting the
conversion may fix a period of not less than two years within which the
outstanding securities must be surrendered for exchange. If the shares are not
surrendered within the time period fixed in the plan, the plan may provide that
such shares shall be sold and the net proceeds held for the holders of the
unsurrendered securities, to be paid to them upon surrender of their securities.
After such sale, the sole right of the holder of the unsurrendered securities
shall be the right to collect the net sales proceeds for the holder's account.
New York law does not contain a similar provision.
INTERESTED TRANSACTIONS
New York and Pennsylvania law have substantially similar provisions
regarding transactions with directors. Under such laws, a contract or
transaction between a corporation and one or more of its directors or between a
corporation and another corporation in which one or more of its directors are
directors or officers or have a financial interest or, in the case of
Pennsylvania law, another interest is not voidable solely for that reason under
the following circumstances: (i) the material facts as to the relationship or
interest and as to the
80
<PAGE> 89
contract or transactions are disclosed or known by the board and the board
authorizes the contract or transaction by the affirmative vote of a majority of
the disinterested directors even though the disinterested directors are less
than a quorum (the unanimous vote of disinterested directors is required by New
York law if disinterested directors do not constitute a quorum); (ii) the
material facts are disclosed to the shareholders entitled to vote thereon and
the contract or transaction is specifically approved in good faith by vote of
those shareholders; or (iii) the contract or transaction is fair to the
corporation as of the time it is authorized, ratified or approved by the board
or the shareholders. In addition, under New York law, a corporation may make a
loan to a director only upon the vote of disinterested shareholders holding a
majority of the shares entitled to vote thereon.
Pennsylvania law requires, for Registered Corporations, approval of certain
extraordinary corporate transactions by a majority vote of all outstanding
shares other than those held by "interested shareholders," as defined in the
PBCL. Such transactions include mergers, consolidations, share exchanges or sale
of assets with interested shareholders, or corporate divisions, voluntary
dissolutions and reclassifications of corporate securities in which interested
shareholders receive treatment different from other shareholders. However, no
such shareholder approval will be required for certain transactions, including a
transaction (i) that has been approved by a majority vote of the board of
directors, excluding directors who were either nominated for election by the
interested shareholder and first elected as director within two years of the
date of the vote on the proposed transaction or who are directors or officers
of, or who have a material equity interest in the interested shareholder or (ii)
in which the consideration to be received by the shareholders for shares of any
class of which shares are owned by the interested shareholder is not less than
the highest amount paid by the interested shareholder in acquiring shares of the
same class.
CORPORATE RECORDS, SHAREHOLDER INSPECTION
Under New York law, a person must (i) hold, or be authorized by
shareholders holding, at least 5% of any class of a corporation's outstanding
shares, or (ii) have been a shareholder for at least six months immediately
preceding a request, to examine a corporation's minutes and records.
Under Pennsylvania law, every shareholder shall, upon written verified
demand stating the purpose thereof, have a right to examine for any proper
purpose the share register, books and records of account, and records of the
proceedings of the incorporators, shareholders and directors and to make copies
or extracts therefrom. If the corporation, or its agents or officers, refuses to
allow inspection or does not reply within five business days, the requesting
shareholder may apply to a court for an order to compel inspection.
WARRANTS OR OPTIONS
New York law requires the approval of the holders of a majority of the
outstanding shares entitled to vote for a plan to issue, or the issuance of, any
rights or options to directors, officers or employees as an incentive to service
or continued service with the corporation, a subsidiary or an affiliate. Such
approval is not required for the issuance of any rights or options of a
corporation in substitution for, or upon the assumption of, rights or options
issued by another corporation, in connection with such other corporation's
merger with, or the acquisition of its shares or all or part of its assets by,
the corporation or a subsidiary.
Pennsylvania law allows a corporation to create and issue option rights or
securities having conversion or option rights entitling the holders thereof to
purchase or acquire shares, option rights, securities having conversion or
option rights, or obligations, of any class or series, or assets of the
corporation, or to purchase or acquire from the corporation shares, option
rights, securities having conversion or option rights, or obligations, of any
class or series, owned by the corporation and issued by any other person.
In addition to the various statutory provisions applying to options and
warrants of a business corporation under Pennsylvania law, a Registered
Corporation may set forth in a plan such terms as are fixed by the board of
directors, including conditions that preclude or limit, any person(s) owning or
offering to acquire a specified number or percentage of shares, option rights or
obligations of a corporation or transferee(s) of the person(s) from exercising
or receiving the shares, option rights or obligations. A Registered Corporation
may render
81
<PAGE> 90
these provisions inapplicable to the corporation by a contrary provision of its
articles of incorporation. Mellon has not adopted such a provision.
PREEMPTIVE RIGHTS
Under New York law, unless a certificate of incorporation provides
otherwise, shareholders have certain preemptive rights. In general, these rights
allow shareholders whose unlimited dividend or voting rights would be adversely
affected by the issuance of new stock to purchase, on terms and conditions set
by the board of directors, that proportion of the new issue that would preserve
the relative dividend or voting rights of such shareholders. However, Dreyfus'
Certificate of Incorporation provides that its stockholders do not possess
preemptive rights.
Under Pennsylvania law, except as otherwise provided in the articles of
incorporation, a business corporation may issue shares, option rights or
securities having conversion or option rights, or obligations without first
offering them to shareholders of any class or classes. Authorized but unissued
shares subject to preemptive rights may be issued and sold pursuant to a plan
providing for the issuance of rights or options entitling the holders thereof to
purchase shares of the same class or series as the shares subject to such
preemptive rights upon the exercise of such rights or options if the plan is
approved by the affirmative vote of a majority of the votes cast by the
shareholders entitled to exercise such preemptive rights. Mellon's Articles of
Incorporation provide that its shareholders do not have preemptive rights.
MELLON SHAREHOLDER PROTECTION RIGHTS PLAN
Mellon has adopted a Shareholder Protection Rights Plan under which each
holder of shares of Mellon Common Stock or Series D Stock outstanding on August
23, 1989 or issued thereafter (including shares to be issued in the Merger)
receives one Right for each share of Mellon Common Stock or Series D Stock
(together, the "Voting Stock") held. The Rights are currently represented by the
certificates for, and trade only with, the Voting Stock. The Rights would
separate from the Voting Stock and become exercisable only if a person or group
acquires 20 percent or more of the voting power of the Voting Stock or ten days
after a person or group commences a tender offer that would result in ownership
of 20 percent or more of such voting power. At that time, each Right would
entitle the holder to purchase for $200 (the "Exercise Price") one one-hundredth
of a share of participating preferred stock. Each share of such preferred stock
would be entitled to cumulative dividends equal to 1% of the purchase price per
annum, plus the amount of dividends that would be payable on 100 shares of
Mellon Common Stock, and has a liquidation preference of the greater of 100
times the Exercise Price or the amount to be distributed in liquidation to a
holder of 100 shares of Mellon Common Stock. Should a person or group actually
acquire 20 percent or more of the voting power of the Voting Stock, each Right
held by the acquiring person or group (or their transferees) would become void,
and each Right held by Mellon's other shareholders would entitle those holders
to purchase for the Exercise Price a number of shares of Mellon Common Stock
having a market value of twice the Exercise Price. Should Mellon be involved in
a merger or similar transaction with a 20 percent owner or sell more than 50
percent of its assets or assets generating more than 50% of its operating income
or cash flow to any person or group, each outstanding Right would then entitle
its holder to purchase for the Exercise Price a number of shares of such other
company having a market value of twice the Exercise Price. In addition, if any
person or group acquires between 20 percent and 50 percent of the voting power
of the Voting Stock, Mellon may, at its option, exchange one share of Mellon
Common Stock for each outstanding Right. The Rights are not exercisable until
the above events occur and will expire on August 15, 1999 unless earlier
exchanged or redeemed by Mellon. Mellon may redeem the Rights for $.01 per Right
under certain circumstances. The Rights will not become exercisable by virtue of
the Merger because, based upon available public information as to beneficial
ownership of Dreyfus Common Stock and Mellon Common Stock, no person or group
will acquire in the Merger sufficient shares to give such person or group
beneficial ownership of 20% or more of the voting power of the Voting Stock.
The existence of the Shareholder Protection Rights Plan could make it more
difficult for a third party to acquire control of Mellon than would be the case
if Mellon, like Dreyfus, had no such plan.
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<PAGE> 91
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined balance sheet as of
March 31, 1994 and the unaudited pro forma condensed combined income statements
for the three-month periods ended March 31, 1994 and 1993, and for each of the
three years in the period ended December 31, 1993 captioned "Mellon Bank
Corporation and Subsidiaries and The Dreyfus Corporation and Subsidiaries" give
effect to the Merger accounted for as a pooling of interests. The pro forma
information is based on the historical consolidated financial statements of
Dreyfus and Mellon and their subsidiaries under the assumptions and adjustments
set forth in the accompanying notes to the pro forma condensed combined
financial statements.
The unaudited pro forma condensed combined financial statements have been
prepared by the managements of Dreyfus and Mellon based upon their respective
consolidated financial statements. Pro forma per share amounts are based on the
Exchange Ratio of 0.88017 shares of Mellon Common Stock for each share of
Dreyfus Common Stock. The unaudited pro forma condensed combined income
statements, which include results of operations as if the Merger had been
consummated on January 1, 1991, do not reflect the merger expenses anticipated
to be incurred or the cost savings anticipated to result from the Merger. As a
result, the unaudited pro forma condensed combined financial statements prior to
the Effective Time may not be indicative of the results that actually would have
occurred if the Merger had been in effect during the periods presented or which
may be attained in the future. The unaudited pro forma condensed combined
financial statements should be read in conjunction with the historical
consolidated financial statements and notes thereto of Dreyfus and Mellon
incorporated by reference herein, and the unaudited consolidated condensed
historical information, including the notes thereto, appearing elsewhere herein.
See "Selected Financial Data."
83
<PAGE> 92
MELLON BANK CORPORATION AND SUBSIDIARIES AND
THE DREYFUS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1994
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
(IN MILLIONS) MELLON DREYFUS ADJUSTMENTS COMBINED
------- ------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks.......................... $ 1,796 $ 8 $ -- $ 1,804
Money market investments......................... 1,491 108 -- 1,599
Trading account securities....................... 268 -- -- 268
Securities available for sale.................... 2,589 405 -- 2,994
Investment securities............................ 2,723 132 -- 2,855
Loans, net of unearned income.................... 24,532 5 -- 24,537
Reserve for credit losses........................ (603) -- -- (603)
------- ----- ----- -------
Net loans...................................... 23,929 5 -- 23,934
Premises and equipment........................... 451 70 -- 521
Acquired property, net of reserve................ 118 -- -- 118
Goodwill......................................... 810 1 -- 811
Other intangibles................................ 482 -- -- 482
Other assets..................................... 1,959 201 -- 2,160
------- ----- ----- -------
Total assets................................ $36,616 $ 930 $ -- $37,546
======= ===== ===== =======
LIABILITIES
Deposits:
Interest-bearing............................... $20,487 $ 25 $ -- $20,512
Noninterest-bearing............................ 6,274 1 -- 6,275
------- ----- ----- -------
Total deposits.............................. 26,761 26 -- 26,787
Short-term borrowings............................ 2,903 4 -- 2,907
Other liabilities................................ 1,643 58 84 1,785
Notes and debentures............................. 1,924 -- -- 1,924
------- ----- ----- -------
Total liabilities........................... 33,231 88 84 33,403
------- ----- ----- -------
SHAREHOLDERS' EQUITY
Preferred stock.................................. 592 -- -- 592
Common stock..................................... 32 5 11 48
Additional paid-in capital....................... 1,779 280 (198) 1,861
Retained earnings and other...................... 976 749 (88) 1,637
Warrants......................................... 37 -- -- 37
Net unrealized loss on assets available
for sale (net of tax).......................... (15) (1) -- (16)
Treasury stock, at cost.......................... (16) (191) 191 (16)
------- ----- ----- -------
Total common shareholders' equity.............. 2,793 842 (84) 3,551
------- ----- ----- -------
Total shareholders' equity..................... 3,385 842 (84) 4,143
------- ----- ----- -------
Total liabilities and shareholders' equity..... $36,616 $ 930 $ -- $37,546
======= ===== ===== =======
</TABLE>
See "Notes To Unaudited Pro Forma Condensed Combined Financial Statements."
84
<PAGE> 93
MELLON BANK CORPORATION AND SUBSIDIARIES AND
THE DREYFUS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
THREE MONTHS ENDED MARCH 31, 1994
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS; PRO FORMA
SHARES IN THOUSANDS) MELLON DREYFUS COMBINED
------- ------- ---------
<S> <C> <C> <C>
Interest revenue......................................... $ 517 $ 5 $ 522
Interest expense......................................... 155 -- 155
------- ------- --------
Net interest revenue..................................... 362 5 367
Provision for credit losses.............................. 20 -- 20
------- ------- --------
Net interest revenue after provision for credit losses... 342 5 347
Fee revenue.............................................. 343 78 421
Gains on sale of securities.............................. -- 2 2
Other noninterest revenue................................ -- 15 15
------- ------- --------
Total noninterest revenue................................ 343 95 438
Operating expense........................................ 471 59 530
------- ------- --------
Income before income taxes............................... 214 41 255
Provision for income taxes............................... 83 16 99
------- ------- --------
Net income............................................... $ 131 $ 25 $ 156
======= ======= ========
Net income applicable to common stock.................... $ 116 $ 25 $ 141
======= ======= ========
Weighted average common shares and common stock
equivalents:
Primary................................................ 66,287 37,198 99,027
Fully diluted.......................................... 66,471 37,218 99,229
Net income per common share:
Primary................................................ $ 1.77 $ .68 $ 1.44
Fully diluted.......................................... 1.77 .68 1.44
</TABLE>
See "Notes To Unaudited Pro Forma Condensed Combined Financial Statements."
85
<PAGE> 94
MELLON BANK CORPORATION AND SUBSIDIARIES AND
THE DREYFUS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
THREE MONTHS ENDED MARCH 31, 1993
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS; PRO FORMA
SHARES IN THOUSANDS) MELLON DREYFUS COMBINED
------- ------- ---------
<S> <C> <C> <C>
Interest revenue......................................... $ 480 $ 6 $ 486
Interest expense......................................... 163 -- 163
------- ------- --------
Net interest revenue..................................... 317 6 323
Provision for credit losses.............................. 35 -- 35
------- ------- --------
Net interest revenue after provision for credit losses... 282 6 288
Fee revenue.............................................. 232 80 312
Gains on sale of securities.............................. 87 4 91
Other noninterest revenue................................ -- 2 2
------- ------- --------
Total noninterest revenue................................ 319 86 405
Operating expense........................................ 533 52 585
------- ------- --------
Income before income taxes............................... 68 40 108
Provision for income taxes............................... 34 15 49
------- ------- --------
Net income............................................... $ 34 $ 25 $ 59
======= ======= ========
Net income applicable to common stock.................... $ 19 $ 25 $ 44
======= ======= ========
Weighted average common shares and common stock
equivalents:
Primary................................................ 60,627 37,864 93,954
Fully diluted.......................................... 60,764 37,866 94,187
Net income per common share:
Primary................................................ $ .31 $ .67 $ .47
Fully diluted.......................................... .31 .67 .47
</TABLE>
See "Notes To Unaudited Pro Forma Condensed Combined Financial Statements."
86
<PAGE> 95
MELLON BANK CORPORATION AND SUBSIDIARIES AND
THE DREYFUS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS; PRO FORMA
SHARES IN THOUSANDS) MELLON DREYFUS COMBINED
------- ------- ---------
<S> <C> <C> <C>
Interest revenue......................................... $ 1,961 $ 24 $ 1,985
Interest expense......................................... 654 1 655
------- ------- --------
Net interest revenue..................................... 1,307 23 1,330
Provision for credit losses.............................. 125 -- 125
------- ------- --------
Net interest revenue after provision for credit losses... 1,182 23 1,205
Fee revenue.............................................. 1,189 329 l,518
Gains on sale of securities.............................. 87 13 100
Other noninterest revenue................................ -- 19 19
------- ------- --------
Total noninterest revenue................................ 1,276 361 1,637
Operating expense........................................ 1,858 226 2,084
------- ------- --------
Income before income taxes............................... 600 158 758
Provision for income taxes............................... 239 59 298
------- ------- --------
Net income............................................... $ 361 $ 99 $ 460
======= ======= ========
Net income applicable to common stock.................... $ 298 $ 99 $ 397
======= ======= ========
Weighted average common shares and common stock
equivalents:
Primary................................................ 65,179 37,352 98,055
Fully diluted.......................................... 65,270 37,408 98,195
Net income per common share:
Primary................................................ $ 4.63 $ 2.67 $ 4.09
Fully diluted.......................................... 4.63 2.66 4.09
</TABLE>
See "Notes To Unaudited Pro Forma Condensed Combined Financial Statements."
87
<PAGE> 96
MELLON BANK CORPORATION AND SUBSIDIARIES AND
THE DREYFUS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1992
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS; PRO FORMA
SHARES IN THOUSANDS) MELLON DREYFUS COMBINED
------- ------- ---------
<S> <C> <C> <C>
Interest revenue......................................... $ 2,000 $ 30 $ 2,030
Interest expense......................................... 846 2 848
------- ------- --------
Net interest revenue..................................... 1,154 28 1,182
Provision for credit losses.............................. 185 -- 185
------- ------- --------
Net interest revenue after provision for credit losses... 969 28 997
Fee revenue.............................................. 844 297 1,141
Gains on sale of securities.............................. 121 8 129
Other noninterest revenue................................ 7 6 13
------- ------- --------
Total noninterest revenue................................ 972 311 1,283
Operating expense........................................ 1,449 199 1,648
------- ------- --------
Income before income taxes............................... 492 140 632
Provision for income taxes............................... 55 49 104
------- ------- --------
Net income............................................... $ 437 $ 91 $ 528
======= ======= ========
Net income applicable to common stock.................... $ 386 $ 91 $ 477
======= ======= ========
Weighted average common shares and common stock
equivalents:
Primary................................................ 55,912 38,621 89,905
Fully diluted.......................................... 57,559 38,629 91,559
Net income per common share:
Primary................................................ $ 6.96 $ 2.36 $ 5.34
Fully diluted.......................................... 6.84 2.36 5.30
</TABLE>
See "Notes To Unaudited Pro Forma Condensed Combined Financial Statements."
88
<PAGE> 97
MELLON BANK CORPORATION AND SUBSIDIARIES AND
THE DREYFUS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1991
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS; PRO FORMA
SHARES IN THOUSANDS) MELLON DREYFUS COMBINED
------- ------- ---------
<S> <C> <C> <C>
Interest revenue......................................... $ 2,303 $ 41 $ 2,344
Interest expense......................................... 1,329 3 1,332
------- ------- --------
Net interest revenue..................................... 974 38 1,012
Provision for credit losses.............................. 250 -- 250
------- ------- --------
Net interest revenue after provision for credit losses... 724 38 762
Fee revenue.............................................. 757 231 988
Gains on sale of securities.............................. 78 3 81
Other noninterest revenue................................ 13 6 19
------- ------- --------
Total noninterest revenue................................ 848 240 1,088
Operating expense........................................ 1,264 176 1,440
------- ------- --------
Income before income taxes............................... 308 102 410
Provision for income taxes............................... 28 34 62
------- ------- --------
Net income............................................... $ 280 $ 68 $ 348
======= ======= ========
Net income applicable to common stock.................... $ 231 $ 68 $ 299
======= ======= ========
Weighted average common shares and common stock
equivalents:
Primary................................................ 50,191 38,831 84,369
Fully diluted.......................................... 50,757 39,025 85,106
Net income per common share:
Primary................................................ $ 4.66 $ 1.75 $ 3.58
Fully diluted.......................................... 4.61 1.74 3.55
</TABLE>
See "Notes To Unaudited Pro Forma Condensed Combined Financial Statements."
89
<PAGE> 98
MELLON BANK CORPORATION AND SUBSIDIARIES,
THE BOSTON COMPANY, INC. AND SUBSIDIARIES AND
THE DREYFUS CORPORATION AND SUBSIDIARIES*
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
THREE MONTHS ENDED MARCH 31, 1993
<TABLE>
<CAPTION>
PRO FORMA
MELLON AND
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS; THE BOSTON PRO FORMA
SHARES IN THOUSANDS) COMPANY DREYFUS COMBINED
---------- ------- ---------
<S> <C> <C> <C>
Interest revenue........................................... $ 579 $ 6 $ 585
Interest expense........................................... 226 -- 226
--------- ------- --------
Net interest revenue....................................... 353 6 359
Provision for credit losses................................ 37 -- 37
--------- ------- --------
Net interest revenue after provision for credit losses..... 316 6 322
Fee revenue................................................ 326 80 406
Gains on sale of securities................................ 87 4 91
Other noninterest revenue.................................. -- 2 2
--------- ------- --------
Total noninterest revenue.................................. 413 86 499
Operating expense.......................................... 460 52 512
--------- ------- --------
Income before income taxes................................. 269 40 309
Provision for income taxes................................. 111 15 126
--------- ------- --------
Net income................................................. $ 158 $ 25 $ 183
========= ======= ========
Net income applicable to common stock...................... $ 142 $ 25 $ 167
========= ======= ========
Weighted average common shares and common stock
equivalents:
Primary.................................................. 65,125 37,864 98,451
Fully diluted............................................ 66,385 37,866 99,712
Net income per common share:
Primary.................................................. $ 2.20 $ .67 $ 1.70
Fully diluted............................................ 2.17 .67 1.69
</TABLE>
- ---------
*This pro forma condensed combined income statement is presented as if
Mellon's acquisition of TBC had been effective January 1, 1993 as shown in
further detail in Mellon's Current Report on Form 8-K/A dated as of September
14, 1992 and filed May 17, 1993, which is incorporated herein by reference.
The first column above combines TBC's and Mellon's historical results of
operations for the three months ended March 31, 1993. The first column also
reflects a number of assumptions relating to the funding of the purchase
price, the issuance of Mellon Common Stock and warrants, the amortization of
goodwill, the elimination of $175 million of nonrecurring merger expenses
recorded by Mellon and other adjustments, as further explained in Mellon's
Current Report on Form 8-K/A dated as of September 14, 1992 and filed May 17,
1993. The elimination of such nonrecurring merger expenses and certain other
adjustments are not reflected in the pro forma condensed combined income
statements of Mellon and Dreyfus presented under "Unaudited Pro Forma
Condensed Combined Financial Statements." Accordingly, the pro forma
information presented above is not directly comparable to the information
contained in such pro forma condensed combined income statements. The above
data are presented for informational purposes only and are not indicative of
the results of operations that actually would have occurred if the Merger and
Mellon's acquisition of TBC had been completed on January 1, 1993.
See "Notes To Unaudited Pro Forma Condensed Combined Financial Statements."
90
<PAGE> 99
MELLON BANK CORPORATION AND SUBSIDIARIES,
THE BOSTON COMPANY, INC. AND SUBSIDIARIES AND
THE DREYFUS CORPORATION AND SUBSIDIARIES*
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
PRO FORMA
MELLON AND
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS; THE BOSTON PRO FORMA
SHARES IN THOUSANDS) COMPANY DREYFUS COMBINED
---------- ------- ---------
<S> <C> <C> <C>
Interest revenue........................................... $ 2,122 $ 24 $ 2,146
Interest expense........................................... 754 1 755
--------- ------- --------
Net interest revenue....................................... 1,368 23 1,391
Provision for credit losses................................ 128 -- 128
--------- ------- --------
Net interest revenue after provision for credit losses..... 1,240 23 1,263
Fee revenue................................................ 1,342 329 1,671
Gains on sale of securities................................ 87 13 100
Other noninterest revenue.................................. -- 19 19
--------- ------- --------
Total noninterest revenue.................................. 1,429 361 1,790
Operating expense.......................................... 1,861 226 2,087
--------- ------- --------
Income before income taxes................................. 808 158 966
Provision for income taxes................................. 319 59 378
--------- ------- --------
Net income................................................. $ 489 $ 99 $ 588
========= ======= ========
Net income applicable to common stock...................... $ 425 $ 99 $ 524
========= ======= ========
Weighted average common shares and common stock
equivalents:
Primary.................................................. 66,475 37,352 99,351
Fully diluted............................................ 66,566 37,408 99,491
Net income per common share:
Primary.................................................. $ 6.48 $ 2.67 $ 5.32
Fully diluted............................................ 6.48 2.66 5.31
</TABLE>
---------
*This pro forma condensed combined income statement is presented as if
Mellon's acquisition of TBC had been effective January 1, 1993 as shown in
further detail in Mellon's Current Report on Form 8-K dated July 15, 1994,
which is incorporated herein by reference. The first column above combines
TBC's results of operations for the period January 1, 1993 through May 20,
1993 and Mellon's results of operations for the year ended December 31, 1993,
which included TBC's results of operations from May 21, 1993 (the date of
Mellon's acquisition of TBC) to December 31, 1993. The first column also
reflects a number of assumptions relating to the funding of the purchase
price, the issuance of Mellon Common Stock and warrants, the amortization of
goodwill, the elimination of $175 million of nonrecurring merger expenses
recorded by Mellon and other adjustments, as further explained in Mellon's
Current Report on Form 8-K dated July 15, 1994. The elimination of such
nonrecurring merger expenses and certain other adjustments are not reflected
in the pro forma condensed combined income statements of Mellon and Dreyfus
presented under "Unaudited Pro Forma Condensed Combined Financial Statements."
Accordingly, the pro forma information presented above is not directly
comparable to the information contained in such pro forma condensed combined
income statements. The above data are presented for informational purposes
only and are not indicative of the results of operations that actually would
have occurred if the Merger and Mellon's acquisition of TBC had been completed
on January 1, 1993.
See "Notes To Unaudited Pro Forma Condensed Combined Financial Statements."
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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(1) The Dreyfus historical income statement and balance sheet classifications
presented herein were reclassified to be consistent with the presentation
used by Mellon, except as discussed below.
(2) Pro forma adjustments to common stock, additional paid-in capital and
treasury stock at March 31, 1994 reflect the combination of Dreyfus and
Mellon, accounted for as a pooling of interests, through the assumed
exchange of 32,176,553 shares of Mellon Common Stock at March 31, 1994 for
all outstanding shares of Dreyfus Common Stock at an Exchange Ratio of
0.88017 shares of Mellon Common Stock for each share of Dreyfus Common Stock
and the retirement of Dreyfus Common Stock held in Dreyfus' treasury. Under
generally accepted accounting principles ("GAAP"), the book values of the
assets and liabilities of Dreyfus will be combined with those of Mellon. In
addition, the income statements of Dreyfus will be combined with the income
statements of Mellon on a retroactive basis.
(3) Pro forma weighted average shares and common stock equivalents for the
three-month periods ended March 31, 1994 and 1993, and each of the three
years in the period ended December 31, 1993 reflect the conversion of each
share of outstanding Dreyfus Common Stock and common stock equivalent that
is dilutive to net income per share computations to 0.88017 shares of Mellon
Common Stock.
(4) The pro forma condensed combined income statements do not reflect certain
merger expenses which are estimated to be approximately $85 million
after-tax and will be recorded in the first reporting period of the combined
entity. The effect of the anticipated $85 million after-tax merger expenses
has been reflected in the pro forma condensed combined balance sheet;
however, since the charge is nonrecurring, it has not been reflected in the
pro forma condensed combined income statements. Merger expenses consist
primarily of estimated required payouts due under pre-existing employee
benefit programs, retention programs, professional fees, proxy solicitation
expense and expense related to certain facilities and assets. Approximately
40% of the merger expenses relate to employee benefit and retention programs
which will generally be paid one half at the Effective Time and the
remainder following 18 months of continued employment, as discussed in "The
Merger--Effects of the Merger on Dreyfus Employee Benefits." Substantially
all of the professional fees and proxy solicitation expenses are for
services provided up to and including the date of the Merger. The pro forma
financial statements do not give effect to increased revenues expected from
the combined entity or to the expense savings expected following the Merger
from any consolidation of operations and improved efficiencies of Dreyfus
and Mellon.
The pro forma adjustments to the anticipated liabilities and equity of the
condensed combined balance sheet also reflects the anticipated issuance of
Mellon Common Stock to holders of options under the Dreyfus 1982 ISO, as
discussed under "The Merger--Effects of the Merger on Dreyfus Employee
Benefits." This anticipated issuance is expected to be recorded as a $4
million increase to common stock and additional paid-in capital for the
exercise proceeds, a reversal of the $1 million liability set up to reflect
book value appreciation expensed to date, and a $3 million charge to
retained earnings.
(5) Because of certain regulatory requirements applicable to the Merger, Mellon
and Dreyfus expect to divest certain Dreyfus subsidiaries. In addition,
divestiture of certain other Dreyfus subsidiaries is required by bank
regulatory agencies. The combined total assets and income before taxes of
these subsidiaries comprised 2% and 0.2%, respectively, of the Dreyfus
assets at March 31, 1994, and income before taxes for the three months then
ended. These divestitures are not expected to have a material impact on the
results of operations of the post-Merger entity; accordingly, no adjustments
have been made to the pro forma condensed combined financial statements. See
"The Merger--Regulatory Requirements."
(6) Mellon adopted Statement of Financial Accounting Standards No. 109 (FAS
109), "Accounting for Income Taxes," on a prospective basis beginning in
1993. Dreyfus adopted FAS 109 on a prospective basis beginning in 1992. No
adjustments were made to the pro forma condensed combined financial
statements to conform Dreyfus' financial statements to Mellon's for 1992.
The effect of adopting FAS 109 on both Mellon's 1993 and Dreyfus' 1992
financial statements was not material.
(7) Mellon and Dreyfus each adopted FAS 115, "Accounting for Certain Investments
in Debt and Equity Securities," on a prospective basis in the first quarter
of 1994, as discussed in their respective Quarterly
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Reports on Form 10-Q for March 31, 1994, incorporated herein by reference.
This decreased Mellon's common shareholders' equity by $15 million and
decreased Dreyfus' common shareholders' equity by $1 million at March 31,
1994. The interest rate and credit risk characteristics of the combined
securities portfolio of the merged entity will be evaluated, and securities
may be reclassified as either available for sale or held-to-maturity,
following the Merger.
(8) FAS 114, "Accounting by Creditors for Impairment of a Loan," was issued in
May 1993, and is required for fiscal years beginning after December 15,
1994, with earlier application permitted. FASB Interpretation No. 39,
"Offsetting of Amounts Related to Certain Contracts," was issued in March
1992, and is required for fiscal years beginning after December 15, 1993,
with earlier application permitted. Neither Dreyfus nor Mellon had adopted
FAS 114 through March 31, 1994. Both Dreyfus and Mellon adopted FASB
Interpretation No. 39 effective January 1, 1994.
CERTAIN REGULATORY CONSIDERATIONS
Mellon is a legal entity separate and distinct from its bank subsidiaries,
although the principal source of Mellon's cash revenues are payments of interest
and dividends from such subsidiaries. There are various legal and regulatory
limitations on the extent to which Mellon's bank subsidiaries, including Mellon
Bank, can finance or otherwise supply funds to Mellon and certain of its other
affiliates. After the Merger, Dreyfus will be a wholly owned subsidiary of
Mellon Bank.
The prior approval of the OCC is required if the total of all dividends
declared by a national bank subsidiary in any calendar year exceeds its net
profits (as defined by the OCC) for that year combined with its retained net
profits for the preceding two calendar years. Additionally, national bank
subsidiaries may not declare dividends in excess of net profits on hand (as
defined), after deducting the amount by which the principal amount of all loans
on which interest is past due for a period of six months or more exceeds the
reserve for credit losses. Under the first and currently more restrictive of the
foregoing dividend limitations, Mellon's national bank subsidiaries can, without
prior regulatory approval, declare dividends subsequent to March 31, 1994 of up
to approximately $546 million, less any dividends declared and plus or minus net
profits or losses, as defined, between April 1, 1994 and the date of any such
dividend declaration. The national bank subsidiaries declared dividends to
Mellon of $45 million in the first quarter of 1994, $158 million in 1993, $130
million in 1992, $129 million in 1991, $44 million in 1990 and $26 million in
1989. Dividends paid to Mellon by non-bank subsidiaries totaled $5 million in
the first quarter of 1994, $116 million in 1993 (including $62 million
attributable to The Boston Company), $26 million in 1992, $32 million in 1991,
$120 million in 1990 and $73 million in 1989. In addition, The Boston Company
returned $300 million of capital to Mellon in 1993.
The Federal Reserve Board and the OCC also have issued guidelines that
require bank holding companies and national banks to continuously evaluate the
level of cash dividends in relation to the organization's operating income,
capital needs, asset quality and overall financial condition. The OCC also has
authority under the Financial Institutions Supervisory Act to prohibit national
banks from engaging in what, in the OCC's opinion, constitutes an unsafe or
unsound practice. The payment of a dividend by a bank could, depending upon the
financial condition of such bank and other factors, be construed by the OCC to
be such an unsafe or unsound practice. The OCC has stated that a dividend by a
national bank should bear a direct correlation to the level of the bank's
current and expected earnings stream, the bank's need to maintain an adequate
capital base and the marketplace's perception of the bank and should not be
governed by the financing needs of the bank's parent corporation. As a result,
notwithstanding the level of dividends which could be declared without
regulatory approval by Mellon's national bank subsidiaries as set forth in the
preceding paragraph, the level of dividends from such bank subsidiaries to
Mellon in 1994 generally is not expected to exceed the earnings for those
subsidiaries. If the ability of such subsidiaries to pay dividends to Mellon
were to become restricted, Mellon would need to rely on alternative means of
raising funds to satisfy its dividend requirements, which might include, but
would not be restricted to, non-bank subsidiary dividends, asset sales or other
capital market transactions. At current dividend rates, annual dividend
requirements for
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Mellon's common and preferred stock, including the Merger Shares offered hereby,
are expected to be approximately $277 million.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
contains a "cross-guarantee" provision which could result in any insured
depository institution owned by Mellon (i.e., any bank subsidiary) being
assessed for losses incurred by the Federal Deposit Insurance Corporation in
connection with assistance provided to, or the failure of, any other depository
institution owned by Mellon. Under Federal Reserve Board policy, Mellon may be
expected to act as a source of financial strength to each of its bank
subsidiaries and to commit resources to support each such bank in circumstances
where such bank might not be in a financial position to do so.
See also "The Merger--Regulatory Requirements" for a discussion of certain
regulatory requirements which are applicable to Mellon and Dreyfus with respect
to the Merger.
FDICIA
In December 1991, the Federal Deposit Insurance Corporation Improvement Act
of 1991 ("FDICIA") was enacted, which substantially revised the bank regulatory
and funding provisions of the Federal Deposit Insurance Act and made revisions
to several other federal banking statutes.
Among other things, FDICIA requires the Federal banking agencies to take
"prompt corrective action" in respect of depository institutions that do not
meet minimum capital requirements. FDICIA establishes five capital tiers: "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized" and "critically undercapitalized".
Rules adopted by the Federal banking agencies under FDICIA provide that an
institution is deemed to be: "well capitalized" if the institution has a Total
(Tier I plus Tier II) risk-based capital ratio of 10.0% or greater, a Tier I
risk-based ratio of 6.0% or greater, and a leverage ratio of 5.0% or greater,
and the institution is not subject to an order, written agreement, capital
directive, or prompt corrective action directive to meet and maintain a specific
level for any capital measure; "adequately capitalized" if the institution has a
Total risk-based capital ratio of 8.0% or greater, a Tier I risk-based capital
ratio of 4.0% or greater, and a leverage ratio of 4.0% or greater (or a leverage
ratio of 3.0% or greater if the institution is rated composite 1 in its most
recent report of examination, subject to appropriate Federal banking agency
guidelines), and the institution does not meet the definition of a
well-capitalized institution; "undercapitalized" if the institution has a Total
risk-based capital ratio that is less than 8.0%, a Tier I risk-based capital
ratio that is less than 4.0% or a leverage ratio that is less than 4.0% (or a
leverage ratio that is less than 3.0% if the institution is rated composite 1 in
its most recent report of examination, subject to appropriate Federal banking
agency guidelines) and the institution does not meet the definition of a
significantly undercapitalized or critically undercapitalized institution;
"significantly undercapitalized" if the institution has a Total risk-based
capital ratio that is less than 6.0%, a Tier I risk-based capital ratio that is
less than 3.0%, or a leverage ratio that is less than 3.0% and the institution
does not meet the definition of a critically undercapitalized institution; and
"critically undercapitalized" if the institution has a ratio of tangible equity
to total assets that is equal to or less than 2.0%.
At March 31, 1994, Mellon and all of its bank subsidiaries qualified as
well capitalized based on the ratios and guidelines noted above. A bank's
capital category, however, is determined solely for the purpose of applying the
prompt corrective action rules and may not constitute an accurate representation
of that bank's overall financial condition or prospects.
The appropriate Federal banking agency may, under certain circumstances,
reclassify a well capitalized insured depository institution as adequately
capitalized. The appropriate agency is also permitted to require an adequately
capitalized or undercapitalized institution to comply with the supervisory
provisions as if the institution were in the next lower category (but not treat
a significantly undercapitalized institution as critically undercapitalized)
based on supervisory information other than the capital levels of the
institution.
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The statute provides that an institution may be reclassified if the
appropriate Federal banking agency determines (after notice and opportunity for
hearing) that the institution is in an unsafe or unsound condition or deems the
institution to be engaging in an unsafe or unsound practice.
FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to growth
limitations and are required to submit a capital restoration plan. The Federal
banking agencies may not accept a capital restoration plan without determining,
among other things, that the plan is based on realistic assumptions and is
likely to succeed in restoring the depository institution's capital. In
addition, for a capital restoration plan to be acceptable, the depository
institution's parent holding company must guarantee that the institution will
comply with such capital restoration plan. The aggregate liability of the parent
holding company is limited to the lesser of (i) an amount equal to 5% of the
depository institution's total assets at the time it became undercapitalized,
and (ii) the amount which is necessary (or would have been necessary) to bring
the institution into compliance with all capital standards applicable with
respect to such institution as of the time it fails to comply with the plan. If
a depository institution fails to submit an acceptable plan, it is treated as if
it is significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject to a
number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total
assets and cessation of receipt of deposits from correspondent banks. Critically
undercapitalized institutions are subject to the appointment of a receiver or
conservator.
FDICIA also contains a variety of other provisions that may affect the
operation of Mellon, including new reporting requirements, regulatory standards
for real estate lending, "truth in savings" provisions, and the requirement that
a depository institution give 90 days' prior notice to customers and regulatory
authorities before closing any branch.
CAPITAL
The risk-based capital guidelines for bank holding companies and banks
adopted by the Federal banking agencies were fully phased in at the end of 1992.
The minimum ratio of qualifying total capital to risk-weighted assets (including
certain off-balance sheet items, such as standby letters of credit) under the
fully phased-in guidelines is 8%. At least half of the total capital is to be
comprised of common stock, retained earnings, noncumulative perpetual preferred
stocks, minority interests and, for bank holding companies, a limited amount of
qualifying cumulative perpetual preferred stock, less goodwill and certain other
intangibles ("Tier I capital"). The remainder ("Tier II capital") may consist of
other preferred stock, certain other instruments, and limited amounts of
subordinated debt and the reserve for credit losses.
In addition, the Federal Reserve Board has established minimum leverage
ratio (Tier I capital to total average assets less goodwill and certain other
intangibles) guidelines for bank holding companies and banks. These guidelines
provide for a minimum leverage ratio of 3.0% for bank holding companies and
banks that meet certain specified criteria, including that they have the highest
regulatory rating. All other banking organizations are required to maintain a
leverage ratio of 3.0% plus an additional cushion of at least 100 to 200 basis
points. The guidelines also provide that banking organizations experiencing
internal growth or making acquisitions will be expected to maintain strong
capital positions substantially above the minimum supervisory levels, without
significant reliance on intangible assets. Furthermore, the guidelines indicate
that the Federal Reserve Board will continue to consider a "tangible Tier I
leverage ratio" in evaluating proposals for expansion or new activities. The
tangible Tier I leverage ratio is the ratio of Tier I capital, less intangibles
not deducted from Tier I capital, to total assets, less all intangibles. Neither
Mellon nor any of its bank subsidiaries has been advised of any specific minimum
leverage ratio applicable to it.
Federal banking agencies have proposed regulations that would modify
existing rules related to risk-based and leverage capital ratios to incorporate
interest rate risk. Mellon does not believe that the aggregate impact of these
modifications would have a significant impact on its capital position.
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Bank regulators continue to indicate their desire to raise capital
requirements applicable to banking organizations beyond their current levels.
However, Mellon is unable to predict whether and when higher capital
requirements would be imposed and, if so, at what level and on what schedule.
Certain consolidated capital and leverage ratios of Mellon are included
herein under "Selected Financial Data."
FDIC INSURANCE ASSESSMENTS
The FDIC has adopted a risk-based assessment system to replace the previous
flat-rate system. The risk-based system imposes insurance premiums based upon a
matrix that takes into account a bank's capital level and supervisory rating.
Under this risk-based system, the assessment rate imposed on banks ranges from
23 cents for each $100 of domestic deposits (for the healthiest institutions) to
31 cents (for the weakest institutions).
CERTAIN LEGAL PROCEEDINGS
CLASS ACTIONS
Six purported class action suits by six public stockholders of Dreyfus were
filed in December 1993 in the Supreme Court of the State of New York, County of
New York, naming Dreyfus, Mellon and the individual directors of Dreyfus as
defendants.
In these complaints, plaintiffs allege, among other things, that Dreyfus
and its directors breached their fiduciary duties to the public stockholders of
Dreyfus by agreeing to the sale of Dreyfus at a price which does not maximize
stockholder value; failing to include a collar, or another form of price
protection; placing the defendants' interests above those of Dreyfus'
stockholders; including in the Merger Agreement a $50 million termination fee;
and failing to create the conditions for an open and vigorous auction of
Dreyfus. The complaints seek injunctive relief as well as compensatory and
punitive damages.
Dreyfus and Mellon believe that these complaints lack merit and intend to
defend them vigorously.
On March 23, 1994, two stockholders of Dreyfus Liquid Assets, Inc.
("Dreyfus Liquid Assets") and Dreyfus Growth Opportunity Fund, Inc. ("Dreyfus
Growth") filed a complaint in the Supreme Court of the State of New York, County
of Queens, naming Dreyfus and Dreyfus Service Corporation as defendants, and
Dreyfus Liquid Assets and Dreyfus Growth, individually, and as representatives
of the management investment companies for which Dreyfus serves as investment
adviser under the 1940 Act, as nominal defendants. The complaint is brought
derivatively on behalf of Dreyfus Liquid Assets and Dreyfus Growth,
individually, and as representatives of the Dreyfus family of funds.
In the complaint, the plaintiffs allege, among other things, that Dreyfus
and Dreyfus Service Corporation violated their fiduciary duties by receiving
pecuniary benefits from the sale of their "trust offices" in connection with the
Merger. The plaintiffs allege that the Merger would not satisfy the requirements
of Section 15(f) of the 1940 Act so as to permit Dreyfus to derive a benefit
from the assignment of Dreyfus' management contracts with the funds because
allegedly (i) 75% of the various funds' boards are not "non-interested" persons
within the meaning of the 1940 Act and (ii) the Merger will impose an "unfair
burden" on the funds. Plaintiffs allege that many of the "non-interested"
directors serve on multiple boards of funds and thereby earn substantial sums of
money for limited work and have close business relationships with Dreyfus, and
therefore, are "interested" within the meaning of the 1940 Act. The plaintiffs
further allege that Dreyfus and Dreyfus Service Corporation breached their
respective fiduciary duties by charging the Dreyfus family of funds excessive
fees of at least $55 million, in order to maximize profits earned from the sale
of the "trust offices," and by acting solely to maximize their own profits
through the proposed sale of the "trust offices" to Mellon, in violation of
sec.15(f) of the 1940 Act. Consequently, the plaintiffs allege that the Merger
would impose an "unfair burden" on the Dreyfus family of funds.
The action seeks, among other things, to enjoin Dreyfus and Dreyfus Service
Corporation from selling the profits from the "trust offices" to Mellon, or, in
the event the Merger is consummated, a rescission or
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accounting of all profits earned by Dreyfus and Dreyfus Service Corporation as a
result of the sale of the "trust offices," unspecified compensatory damages,
costs and disbursements.
On April 12, 1994, the defendants removed this action to the United States
District Court for the Eastern District of New York. Dreyfus believes that the
complaint lacks merit and intends to defend the suit vigorously.
On June 20, 1994 the same two stockholders of Dreyfus Liquid Assets and
Dreyfus Growth filed another complaint in the United States District Court for
the Eastern District of New York, naming Dreyfus, Mr. Stein, Mr. DiMartino and
Dreyfus Liquid Assets and Dreyfus Growth, "individually and on behalf of the
Dreyfus Family of Funds, an unincorporated association, and its members," as
defendants. The complaint is brought as a class action on behalf of plaintiffs
and all other stockholders in the Dreyfus Family of Funds.
In their complaint, as amended, plaintiffs allege, among other things, that
the proxy statements which defendants disseminated to all stockholders of the
Dreyfus mutual funds, in order to obtain the necessary approvals for new
investment advisory contracts with Dreyfus as a wholly-owned subsidiary of
Mellon, violate sec. 20(a) of the 1940 Act because they contain material
omissions or misrepresentations concerning (1) the effect of the Merger on
regulatory oversight of each fund's investment adviser; and (2) the independence
of the boards of directors recommending the new investment advisory contracts
and being proposed for re-election to the various boards. In addition,
plaintiffs allege that through approving, permitting and acquiescing in these
alleged material omissions or misrepresentations, defendants Dreyfus, Stein and
DiMartino breached their fiduciary duties owed to the Dreyfus mutual funds and
their stockholders under sec. 36(a) and sec. 36(b) of the 1940 Act.
The complaint seeks to enjoin the meetings of stockholders of the Dreyfus
funds (currently scheduled for the first week of August 1994) at which votes are
to be held, among other things, to approve new investment advisory agreements
between the respective funds and Dreyfus. In the alternative, the complaint
seeks rescission or damages if the vote is completed and the Merger is
consummated.
Dreyfus believes that the complaint lacks merit and intends to defend the
suit vigorously.
APPLICATION FILED WITH SEC
On December 22, 1993, six stockholders of various funds of which Dreyfus is
the adviser filed an application with the SEC for a statutory determination that
the "independent" directors of the individual Dreyfus-managed mutual funds are
"interested" directors within the meaning of the 1940 Act, thereby prohibiting
them from voting on each of the fund's advisory contracts and other related
matters in connection with the Merger (the "Application"). On April 1, 1994, the
SEC rejected the Application. In the Application, the applicants alleged, among
other things, that (i) many of the "independent" directors serve on multiple
boards of funds within the Dreyfus-managed mutual funds, (ii) as a result of
such service, such directors earn material sums of money for very limited
services, (iii) such directors have material business or professional
relationships with the investment adviser, Dreyfus, and (iv) these directors,
therefore, are "interested." The Application further claimed that common service
on multiple boards with "interested" directors who are employees of Dreyfus
renders the "independent" directors "interested." The applicants also alleged
that since the "independent" directors of the Dreyfus-managed mutual funds are
"interested," the directors are not qualified to make decisions on behalf of the
funds.
Applicants further noted that as a result of the Merger, Dreyfus' existing
advisory contracts with various funds will terminate. Applicants contended that
truly independent directors might well be in a position to bargain for possibly
more advantageous terms in the investment advisory contracts from Mellon than
had been negotiated with Dreyfus. In the Application, applicants sought (i) a
hearing before the SEC to consider their Application, (ii) discovery from
Dreyfus and Mellon prior to such hearing, as such is permitted under the
Administrative Procedure Act, and (iii) an order to Dreyfus to cease and desist
any efforts to obtain approval by the stockholders or the Boards of Directors of
the Dreyfus-managed mutual funds of the proposed Merger pending the hearing and
a final ruling on the Application by the SEC. The SEC determined that the
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applicants did not have a right to initiate a hearing; rather, the discretion to
initiate such a hearing rests with the SEC, and the SEC determined not to hold a
hearing.
The "independent" directors opposed the Application on the grounds that (i)
the directors are not interested persons within Section 2(a)(19) of the 1940
Act, and (ii) the legislative history, court and SEC decisions, and industry
practice all recognize that service on multiple boards within a mutual fund
complex does not render a director "interested" within the meaning of the 1940
Act.
On April 25, 1994, applicants filed a "Petition for Modification of Order
of U.S. Securities and Exchange Commission" with the United States Court of
Appeals for the District of Columbia Circuit. The petition seeks "modification"
of the SEC's April 1, 1994 "Order" denying applicants' request for a hearing.
Applicants also filed a motion for an expedited appeal, which the SEC has
opposed. On June 10, 1994, the SEC filed a motion to dismiss the petition on the
ground that applicants have no right under the 1940 Act or otherwise to compel
the SEC to initiate a proceeding under Section 2(a)(19) of the 1940 Act, and
accordingly the SEC's determination is not subject to judicial review.
LEGAL OPINIONS
The validity of the Mellon Common Stock to be issued by Mellon under the
Merger Agreement will be passed upon by James M. Gockley, Assistant General
Counsel and Secretary of Mellon. As of June 30, 1994, Mr. Gockley owned
approximately 1,200 shares of Mellon Common Stock and options covering an
additional 5,758 shares of Mellon Common Stock. Certain tax matters relating to
the Merger will be passed upon by Mellon's counsel, Reed Smith Shaw & McClay,
435 Sixth Avenue, Pittsburgh, Pennsylvania 15219. Certain tax matters relating
to the Merger will be passed upon for Dreyfus by its counsel, Rogers & Wells,
200 Park Avenue, New York, New York 10166.
EXPERTS
The consolidated financial statements of Dreyfus included in Dreyfus'
Annual Report on Form 10-K for the year ended December 31, 1993, have been
audited by Ernst & Young, independent auditors, as set forth in their report
thereon included therein, and incorporated herein by reference. The consolidated
financial statements of Mellon incorporated by reference in Mellon's Annual
Report on Form 10-K, as amended, for the year ended December 31, 1993, have been
audited by KPMG Peat Marwick, independent auditors, as set forth in their report
thereon incorporated by reference therein, and incorporated herein by reference.
Such consolidated financial statements of Dreyfus and Mellon are incorporated
herein by reference in reliance upon the reports of Ernst & Young and KPMG Peat
Marwick, respectively, independent auditors, given upon the authority of such
firms as experts in accounting and auditing.
Representatives of Ernst & Young are expected to be present at the Dreyfus
Meeting. Representatives of KPMG Peat Marwick are expected to be present at the
Mellon Meeting. Such representatives will have the opportunity to make a
statement if they desire to do so and are expected to be available to respond to
appropriate questions.
PROXY SOLICITATION EXPENSES
Mellon and Dreyfus will equally share the cost of solicitation of proxies
from Dreyfus and Mellon stockholders. In addition to using the mails, proxies
may be solicited by personal interview, telephone and wire. Banks, brokerage
houses, other institutions, nominees and fiduciaries will be required to forward
the proxy soliciting material to their principals and obtain authorizations for
the execution of proxies. Officers and other employees of Dreyfus and Mellon
also may solicit proxies from Dreyfus and Mellon stockholders, respectively.
Mellon and Dreyfus have retained D.F. King & Co., Inc., 77 Water Street, New
York, New York 10005 to assist in such solicitation for a fee of $45,000, plus
reasonable out-of-pocket costs and expenses. Mellon and Dreyfus do not expect to
pay any other compensation for the solicitation of proxies, but will, upon
request, pay the standard charges and expenses of banks, brokerage houses, other
institutions, nominees and fiduciaries for forwarding proxy materials to and
obtaining proxies from their respective principals.
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SHAREHOLDER PROPOSALS
Proposals of shareholders of Mellon intended to be presented at Mellon's
annual meeting to be held in 1995 must be received by Mellon no later than
November 15, 1994 to be considered for inclusion in the Proxy Statement and form
of proxy related to the 1995 annual meeting.
If the Merger is not consummated, proposals of stockholders of Dreyfus
intended to be presented at Dreyfus' next annual meeting must be received by
Dreyfus a reasonable time before the solicitation by management of proxies with
respect to such meeting, to be considered for inclusion in the Proxy Statement
and form of proxy related to such meeting.
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APPENDIX I
CONFORMED COPY
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AMENDED AND RESTATED AGREEMENT
AND PLAN OF MERGER
DATED AS OF DECEMBER 5, 1993
BY AND AMONG
MELLON BANK CORPORATION
MELLON BANK, N.A.
XYZ SUB CORPORATION
AND
THE DREYFUS CORPORATION
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AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of the 5th day
of December 1993 (this "Agreement"), by and among Mellon Bank Corporation
("Mellon"), Mellon Bank, N.A. ("Mellon Bank"), XYZ Sub Corporation ("Merger
Subsidiary") and The Dreyfus Corporation ("Dreyfus").
RECITALS:
A. DREYFUS. Dreyfus is a corporation duly organized and existing in good
standing under the laws of the State of New York, with its principal executive
offices located in New York, New York. Dreyfus was originally formed under the
name "John G. Nesbett & Co., Inc." As of the date hereof, Dreyfus has 50,000,000
authorized shares of common stock, each of $0.10 par value ("Dreyfus Common
Stock"), of which, as of October 29, 1993, no more than 36,550,828 shares were
issued and outstanding (no other class of capital stock being authorized). Since
October 29, 1993 Dreyfus has not issued any shares of Dreyfus Common Stock
except pursuant to the exercise of options outstanding on such date under its
employee stock option plans. All the issued and outstanding shares of Dreyfus
Common Stock are duly and validly authorized and issued, are fully paid and have
not been issued in violation of any preemptive rights. Dreyfus and its
wholly-owned subsidiary, Dreyfus Management, Inc., are duly registered as
investment advisers under the Investment Advisers Act of 1940, as amended
(together with the rules and regulations thereunder, the "Investment Advisers
Act") and all applicable state investment advisory laws. Dreyfus Service Corp.,
a wholly-owned subsidiary of Dreyfus, is duly registered as a broker/dealer
under the Securities Exchange Act of 1934, as amended (together with the rules
and regulations thereunder, the "Exchange Act"), and all applicable state
broker/dealer laws and is in good standing with the National Association of
Securities Dealers, Inc. (the "NASD").
B. MELLON. Mellon is a corporation duly organized and existing in good
standing under the laws of the Commonwealth of Pennsylvania, with its principal
executive offices located in Pittsburgh, Pennsylvania. As of the date hereof,
Mellon has 200,000,000 authorized shares of Common Stock, each of $.50 par value
(together, with the Rights attached thereto, "Mellon Common Stock"), the
authorized shares of preferred stock ("Mellon Preferred Stock") listed in the
Mellon Disclosure Letter as hereinafter defined (no other class of capital stock
being authorized), of which no more than 63,843,202 shares of Mellon Common
Stock and the shares of Mellon Preferred Stock listed in the Mellon Disclosure
Letter as hereinafter defined, were issued and outstanding as of September 30,
1993. All the issued and outstanding shares of Mellon Common Stock and the
shares of Mellon Common Stock to be issued hereunder are and will be duly and
validly authorized and issued, are and will be fully paid and nonassessable and
have not been and will not be issued in violation of any preemptive rights.
Merger Subsidiary has 100 shares, $.01 par value per share, of authorized Common
Stock, of which 100 shares are issued and outstanding and held by Mellon Bank.
C. MELLON BANK. Mellon Bank is a national banking association duly
organized and existing under the laws of the United States of America. Mellon
Bank is a wholly owned subsidiary of Mellon.
D. MERGER SUBSIDIARY. Merger Subsidiary is a corporation duly organized and
existing in good standing under the laws of New York. Merger Subsidiary is a
wholly owned subsidiary of Mellon Bank.
E. THE FUNDS. As of the date hereof, Dreyfus and certain of the
subsidiaries of Dreyfus provide investment advisory, administrative and/or
distribution services to each of the Investment Companies (as hereinafter
defined) identified in the Dreyfus Disclosure Letter as hereinafter defined
(collectively, the "Funds" and each, individually, a "Fund").
F. INTENTION OF THE PARTIES. It is the intention of the parties that the
transactions contemplated hereby shall qualify as: (1) a "pooling of interests"
under generally accepted accounting principles; and (2) a tax free
reorganization under Section 368(a)(1)(B) of the Internal Revenue Code of 1986,
as amended (the "Code"), and that this Agreement constitute a "plan of
reorganization" within the meaning of Section 368 of the Code.
G. RIGHTS, ETC. Except as set forth in the Dreyfus Disclosure Letter as
hereinafter defined, there are no shares of Dreyfus Common Stock authorized and
reserved for issuance, and Dreyfus does not have any Rights (as defined below)
issued or outstanding, except pursuant to this Agreement. The term "Rights"
means
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securities or obligations convertible into or exchangeable for, or giving any
person any right to subscribe for or acquire, or any options, calls, obligations
or commitments relating to, shares of capital stock or Rights.
H. RIGHTS, ETC. Except as set forth in the Mellon Disclosure Letter as
hereinafter defined, there are no shares of Mellon Common Stock authorized and
reserved for issuance, and Mellon does not have any Rights (as defined below)
issued or outstanding, except pursuant to this Agreement.
I. APPROVALS. The Board of Directors of each of Dreyfus, Mellon, Mellon
Bank and Mellon Bank Subsidiary has approved and adopted, at meetings of each of
such Boards of Directors, this Agreement and has authorized the execution
hereof.
J. AMENDMENT. As of April 14, 1994, the parties hereto determined to amend
certain provisions of this Agreement and to amend and restate this Agreement in
accordance therewith.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, and intending to be legally bound hereby, the
parties hereby agree as follows:
ARTICLE I
THE MERGER
1.01. THE MERGER. At the Effective Time (as hereinafter defined):
(A) THE CONTINUING CORPORATION. Merger Subsidiary shall merge (the
"Merger") with and into Dreyfus, the separate existence of Merger
Subsidiary shall cease and Dreyfus (the "Continuing Corporation") shall be
the surviving corporation in the Merger.
(B) RIGHTS, ETC. The Continuing Corporation shall thereupon and
thereafter possess all of the rights, privileges, immunities and
franchises, of a public as well as of a private nature, of each of the
merging corporations; and all property, real, personal and mixed, and all
debts due on whatever account, and all other choses in action, and all and
every other interest, of or belonging to or due to each of the corporations
so merged, shall be deemed to be vested in the Continuing Corporation
without further act or deed; and the title to any real estate or any
interest therein, vested in any of such corporations, shall not revert or
be in any way impaired by reason of the Merger as provided by the laws of
the State of New York.
(C) LIABILITIES. The Continuing Corporation shall thenceforth be
responsible and liable for all the liabilities, obligations and penalties
of each of the corporations so merged.
(D) ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS; OFFICERS. The
Articles of Incorporation and Bylaws of the Continuing Corporation shall be
those of Dreyfus, as in effect immediately prior to the Merger becoming
effective. The directors and officers of Dreyfus in office immediately
prior to the Merger becoming effective shall be the directors and officers
of the Continuing Corporation, together with such additional directors and
officers as may thereafter be elected, who shall hold office until such
time as their successors are elected and qualified.
1.02. EFFECTIVE TIME; CLOSING. Subject to the conditions to the
obligations of the parties to effect the Merger as set forth in Article VI, the
closing of the Merger (the "Closing") shall occur on such date as Mellon shall
notify Dreyfus in writing not less than 5 days prior thereto, which date shall
not be more than 10 days after such conditions have been satisfied or waived.
Prior to the Closing, Merger Subsidiary and Dreyfus shall execute and deliver to
the New York Secretary of State, a Certificate of Merger in proper form for
filing under the New York Business Corporation Law on the day of the Closing.
The Merger shall become effective at such time on the day of the Closing as such
Certificate of Merger shall be filed with the New York Secretary of State, such
time being herein called the "Effective Time." The Closing shall take place at
the offices of Rogers & Wells, 200 Park Avenue, New York, New York 10166 at
10:00 a.m., New York time.
1.03. REVISIONS TO TRANSACTION. If and to the extent Dreyfus or Mellon
determines that a change in the method of effecting the transactions
contemplated hereby would facilitate consummation of such transactions,
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Dreyfus and Mellon agree to discuss such change and cooperate in good faith in
determining whether such change is in the best interests of the parties hereto,
and if so determined, to effect such change; provided, however, that no such
change shall (i) alter or change the amount or kind of consideration to be
issued to holders of Dreyfus Common Stock as provided for in this Agreement or
(ii) adversely affect the tax treatment to Dreyfus stockholders as a result of
receiving such consideration.
ARTICLE II
CONSIDERATION
2.01. CONSIDERATION. Subject to the provisions of this Agreement, at the
Effective Time:
(A) OUTSTANDING MERGER SUBSIDIARY COMMON STOCK. Each share of Merger
Subsidiary common stock, $0.01 par value, issued and outstanding
immediately prior to the Effective Time shall, on and after the Effective
Time, by virtue of the Merger automatically and without any action on the
part of the holder thereof, become and be converted into one share of
common stock, $0.01 par value, of the Continuing Corporation, all of which
shall be held by Mellon Bank.
(B) OUTSTANDING DREYFUS COMMON STOCK. Each share of Dreyfus Common
Stock issued and outstanding immediately prior to the Effective Time
(excluding Dissenters' Shares, as hereinafter defined, or shares held by
Dreyfus or any of its subsidiaries or by Mellon or any of its subsidiaries,
in each case other than in a fiduciary capacity or as a result of debts
previously contracted (collectively, the "Excluded Shares")) shall, by
virtue of the Merger, automatically and without any action on the part of
the holder thereof, become and be converted into the right to receive
0.88017 shares of Mellon Common Stock (the "Exchange Ratio").
2.02 STOCKHOLDER RIGHTS; STOCK TRANSFERS. At the Effective Time, holders
of Dreyfus Common Stock shall cease to be, and shall have no rights as,
stockholders of Dreyfus, other than to receive the consideration provided under
this Article II. After the Effective Time, there shall be no transfers on the
stock transfer books of Dreyfus or the Continuing Corporation of the shares of
Dreyfus Common Stock which were issued and outstanding immediately prior to the
Effective Time.
2.03. FRACTIONAL SHARES. (i) No certificates or scrip representing
fractional shares of Mellon Common Stock shall be issued in the Merger. As
promptly as practicable following the Effective Time, the Exchange Agent (as
hereinafter defined) shall determine the excess of (x) the number of full shares
of Mellon Common Stock into which the aggregate outstanding shares of Dreyfus
Common Stock would be converted if all such shares were held by one holder over
(y) the number of full shares of Mellon Common Stock to be distributed to
holders of Dreyfus Common Stock (such excess being herein called the "Excess
Shares"). As soon after the Effective Time as practicable, the Exchange Agent,
as agent for the holders of the Dreyfus Common Stock, shall sell the Excess
Shares at the then prevailing prices on the New York Stock Exchange, Inc. (the
"NYSE") in the manner provided in this section.
(ii) Until the net proceeds of such sale or sales have been distributed to
the holders of Dreyfus Common Stock, the Exchange Agent will hold such proceeds
in trust for the holders of Dreyfus Common Stock (the "Common Shares Trust").
Mellon shall pay all commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and compensation of the Exchange Agent
incurred in connection with such sale of the Excess Shares. The Exchange Agent
shall determine the portion of the Common Shares Trust to which each holder of
Dreyfus Common Stock shall be entitled, if any, by multiplying the amount of the
aggregate net proceeds comprising the Common Shares Trust by a fraction the
numerator of which is the amount of the fractional share interest to which such
holder of Dreyfus Common Stock is entitled (after taking into account all shares
of Dreyfus Common Stock then held by such holder) and the denominator of which
is the aggregate amount of fractional share interests to which all holders of
certificates for Dreyfus Common Stock are entitled.
(iii) Notwithstanding the provisions of clauses (i) and (ii) above, if the
parties shall so agree in writing prior to the Effective Time, then in lieu of
the sale of Excess Shares and the making of the payments contemplated in such
clauses, Mellon shall pay or cause to be paid to each holder of Dreyfus Common
Stock
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an amount in cash equal to the product obtained by multiplying the fractional
share interest to which such holder (after taking into account all shares of
Dreyfus Common Stock then held by such holder) would otherwise be entitled by
the closing price for a share of Mellon Common Stock on the NYSE Composite
Transactions Tape on the first business day immediately preceding the Effective
Time, and in such case, all references herein to the cash proceeds of the sale
of the Excess Shares and similar references shall be deemed to mean and refer to
the payments calculated as set forth in this clause (iii).
(iv) As soon as practical after the determination of the amount of cash, if
any, to be paid to holders of Dreyfus Common Stock with respect to any
fractional share interests, the Exchange Agent shall distribute such amounts to
the holders of Dreyfus Common Stock entitled thereto.
2.04. EXCHANGE PROCEDURES. As promptly as practicable after the Effective
Time, Mellon shall send or cause to be sent to each former stockholder of
Dreyfus of record immediately prior to the Effective Time transmittal materials
for use in exchanging such stockholder's certificates of Dreyfus Common Stock
for the consideration set forth in this Article II. The certificates
representing the shares of Mellon Common Stock into which shares of such
stockholder's Dreyfus Common Stock are converted at the Effective Time, any
fractional share checks which such stockholder shall be entitled to receive, and
any dividends paid on such shares of Mellon Common Stock for which the record
date for determination of stockholders entitled to such dividends is on or after
the 90th day after the Effective Time, will be delivered to such stockholder
only upon delivery to Mellon Bank (the "Exchange Agent"), of the certificates
representing all of such shares of Dreyfus Common stock (or indemnity
satisfactory to Mellon and the Exchange Agent, in their sole judgment, if any of
such certificates are lost, stolen or destroyed). Following the delivery of such
certificates representing all such shares of Dreyfus Common Stock by such former
shareholder of Dreyfus (or such indemnity), such shareholder shall be entitled
to receive any dividends paid on such shares of Mellon Common Stock for which
the record date for determination of shareholders entitled to receive such
dividends is on or after the Effective Time. No interest will be paid on any
such fractional share checks or dividends to which the holder of such shares
shall be entitled to receive upon such delivery. Certificates surrendered for
exchange by any person constituting an "affiliate" of Dreyfus for purposes of
Rule 145 of the Securities Act of 1933, as amended (the "Securities Act"), shall
not be exchanged for certificates representing Mellon Common Stock until Mellon
has received a written agreement from such person as specified in Section 5.04.
2.05. DISSENTING STOCKHOLDERS. Any holder of shares of Dreyfus Common
Stock who perfects his dissenters' rights of appraisal in accordance with and as
contemplated by Section 910 of the New York Business Corporation Law (the shares
held by such holder being referred to herein as "Dissenters' Shares") shall be
entitled to receive the value of such shares as determined pursuant to such
provision of law; provided, however, that no such payment shall be made to any
dissenting stockholder unless and until such dissenting stockholder has complied
with the applicable provisions of the New York Business Corporation Law and duly
surrendered the certificate or certificates representing the shares for which
payment is being made. In the event that a dissenting stockholder of Dreyfus
fails to perfect, or effectively withdraws or loses, his rights to appraisal and
of payment for his shares, after the Effective Time, Dreyfus shall issue and
deliver the consideration to which such holder of shares of Mellon Common Stock
is entitled under this Article II (without interest) upon surrender by such
holder of the certificate certificates representing shares of Dreyfus Common
Stock held by him.
2.06. ANTI-DILUTION PROVISIONS. In the event Mellon changes the number of
shares of Mellon Common Stock issued and outstanding prior to the Effective Time
as a result of a stock split, stock dividend, recapitalization or similar
transaction with respect to the outstanding Mellon Common Stock and the record
date therefor shall be prior to the Effective Time, the Exchange Ratio shall be
proportionately adjusted.
2.07. SHARES HELD BY DREYFUS OR MELLON. Each of the Excluded Shares shall
be canceled and retired by virtue of the Merger and no consideration shall be
issued in exchange therefor.
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ARTICLE III-A
REPRESENTATIONS AND WARRANTIES OF DREYFUS
Dreyfus hereby represents and warrants to Mellon that, except as set forth
in a letter from Dreyfus to Mellon delivered concurrently with this Agreement
(the "Dreyfus Disclosure Letter") (all disclosure in which Dreyfus Disclosure
Letter shall state with particularity the representation and warranty herein,
including section reference, to which such disclosure relates), (i) the
statements contained in the Recitals that relate to Dreyfus, the subsidiaries of
Dreyfus (the "Dreyfus Subsidiaries") and the Funds are true and correct and (ii)
as follows:
3.01. ORGANIZATION, STANDING, AND AUTHORITY. Dreyfus is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
New York, and is duly qualified to do business and in good standing in the
States of the United States and foreign jurisdictions where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified and in which the failure to be duly qualified would, either
individually or in the aggregate, have a material adverse effect on the
business, operations, assets, condition (financial or otherwise) or results of
operations of Dreyfus and the Dreyfus Subsidiaries, taken as a whole, or
Dreyfus's ability to consummate the transactions contemplated by this Agreement
(an "Dreyfus Material Adverse Effect"). Dreyfus has all necessary corporate
power and authority to carry on its business as now conducted, to own, lease,
and operate its assets, properties, and business, and to execute and deliver,
and to perform its obligations under, this Agreement, subject to approval by the
shareholders of Dreyfus. Dreyfus is duly registered as a savings bank holding
company under the Home Owners Loan Act. Dreyfus has in effect all federal,
state, local, and foreign governmental authorizations necessary for it to own or
lease its properties and assets and to carry on its business as it is now
conducted, the absence of which would, either individually or in the aggregate,
have a Dreyfus Material Adverse Effect.
3.02. DREYFUS SUBSIDIARIES. Dreyfus's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992, lists all of the Dreyfus Subsidiaries
required to be listed therein. No equity securities of any of the Dreyfus
Subsidiaries which constitutes a Significant Subsidiary of Dreyfus within the
meaning of Rule 1-02 of Regulation S-K of the Securities and Exchange Commission
(an "Dreyfus Material Subsidiary") are or may become required to be issued
(other than to Dreyfus) by reason of any Rights, and there are no contracts,
commitments, understandings, or arrangements by which any Dreyfus Material
Subsidiary is bound to issue or sell shares of its capital stock or Rights. All
of the shares of capital stock of each Dreyfus Material Subsidiary held by
Dreyfus or a Dreyfus Material Subsidiary are fully paid and non-assessable and
are owned by Dreyfus or a Dreyfus Subsidiary free and clear of any claim, lien,
or encumbrance. Each Dreyfus Material Subsidiary is duly organized and, to the
extent applicable, validly existing, and in good standing under the laws of the
jurisdiction in which it is incorporated or organized, and is duly qualified to
do business and in good standing in the jurisdictions where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified and in which the failure to be duly organized, in good standing or
duly qualified would, either individually or in the aggregate, have a Dreyfus
Material Adverse Effect. Each Dreyfus Material Subsidiary has the corporate
power and authority necessary for it to own or lease its properties and assets
and to carry on its business as it is now being conducted, and has all federal,
state, local, and foreign governmental authorizations necessary for it to own or
lease its properties and assets and to carry on its business as it is now being
conducted, the absence of which governmental authorizations would, either
individually or in the aggregate, have a Dreyfus Material Adverse Effect. The
Dreyfus Disclosure Letter lists all material non-marketable equity investments,
including partnership interests involving an amount of more than $ 5 million as
to each such investment, held by Dreyfus or any Dreyfus Subsidiary, other than
equity securities of Dreyfus or a Dreyfus Subsidiary.
3.03. AUTHORITY.
(a) The execution and delivery of this Agreement by Dreyfus, and the
consummation by Dreyfus of the transactions contemplated herein and therein,
have been duly and validly authorized by all necessary corporate action on the
part of Dreyfus, subject, with respect to this Agreement, to the approval of the
shareholders of Dreyfus to the extent required by applicable law. This
Agreement, subject to requisite shareholder approval hereof represents a valid
and legally binding obligation of Dreyfus, enforceable against Dreyfus in
accordance with its terms.
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(b) Neither the execution and delivery of this Agreement by Dreyfus, nor
the consummation by Dreyfus of the transactions contemplated herein, nor
compliance by Dreyfus with any of the provisions hereof, will (i) subject to the
necessity of obtaining shareholder approval of this Agreement, conflict with or
result in a breach of any provision of the certificate of incorporation or
by-laws of Dreyfus or any Dreyfus Subsidiary (in the case of Subsidiaries which
are not Dreyfus Material Subsidiaries, where such conflict or breach would not
have a Dreyfus Material Adverse Effect), or the organizational documents or
by-laws of any Fund, or (ii) constitute or result in the breach of any term,
condition, or provision of, or constitute a default or give rise to any
additional liability of Dreyfus or any Dreyfus Subsidiary (collectively, the
"Dreyfus Companies") under, or give rise to any right of termination,
cancellation, or acceleration with respect to, or result in the creation of any
lien, charge, or encumbrance ("Lien") upon any property or assets of any of the
Dreyfus Companies or the Funds pursuant to, any note, bond, mortgage, indenture,
license, agreement, lease, or other instrument or obligation to which any of
them is a party or by which any of them or any of their properties or assets may
be subject, and that would, either individually or in the aggregate, have a
Dreyfus Material Adverse Effect. The Dreyfus Disclosure Letter lists the
approvals, authorizations, filings, registrations, and notifications required to
be obtained or made by the Dreyfus Companies in connection with the consummation
of the transactions contemplated hereby, the failure to obtain or make which
would have a Dreyfus Material Adverse Effect. Except as stated in the Dreyfus
Disclosure Letter, consummation of the transactions contemplated hereby will not
violate any order, writ, injunction, decree, statute, rule, or regulation
applicable to any of the Dreyfus Companies or any Fund or any of their
properties or assets, except for such violations which would not have a Dreyfus
Material Adverse Effect.
(c) The Board of Directors of Dreyfus (at a meeting duly called and held)
has by requisite vote (i) adopted this Agreement and authorized and approved the
transactions contemplated hereby, (ii) directed that the Merger be submitted for
consideration to Dreyfus's shareholders at a special meeting of Dreyfus's
shareholders and (iii) authorized and approved the Merger in accordance with
Section 912 of the New York Business Corporation Law with the result that
Section 912 will not apply to the consummation of the Merger or any other
transaction to be carried out pursuant to this Agreement.
3.04. FINANCIAL STATEMENTS. Dreyfus has delivered to Mellon, prior to the
execution of this Agreement, the Dreyfus Financial Statements (as hereinafter
defined) in respect of periods ending on or prior to September 30, 1993, and
will promptly deliver when available copies of the Dreyfus Financial Statements
in respect of periods ending after September 30, 1993. The Dreyfus Financial
Statements (as of the dates thereof and for the periods covered thereby): (i)
are (and, in the case of Dreyfus Financial Statements in respect of periods
ending after September 30, 1993, will be) in accordance with the books and
records of the Dreyfus Companies, and have been (and in the case of Dreyfus
Financial Statements in respective periods ending after September 30, 1993 will
continue to be) prepared in accordance with generally accepted accounting
principles ("GAAP"), and (ii) present (and, in the case of Financial Statements
in respect of periods ending after September 30, 1993, will present) fairly, in
all material respects, the consolidated financial position and the consolidated
results of operations, changes in shareholders' equity, and cash flows of the
Dreyfus Companies as of the dates and for the periods indicated, in accordance
with GAAP applied, except as otherwise disclosed therein, on a basis consistent
with prior periods (subject in the case of interim financial statements to
normal recurring year-end adjustments normal in nature and amount). Dreyfus
Financial Statements shall mean (i) the consolidated balance sheets (including
related notes and schedules, if any) of Dreyfus as of September 30, 1993, and as
of December 31, 1992, 1991 and 1990, and the related consolidated statements of
income, of changes in shareholders' equity, and of cash flows (including related
notes and schedules, if any) for the nine months ended September 30, 1993, and
for each of the three years ended December 31, 1992, 1991, and 1990, as filed by
Dreyfus with the Securities and Exchange Commission ("SEC") and (ii) the
consolidated balance sheets of Dreyfus (including related notes and schedules,
if any) and related consolidated statements of income, of changes in
shareholders' equity, and of cash flows (including related notes and schedules,
if any), as filed with the SEC with respect to periods ended subsequent to
September 30, 1993.
3.05. ABSENCE OF UNDISCLOSED LIABILITIES. None of the Dreyfus Companies
has any obligation or liability (contingent or otherwise) that is material,
either individually or in the aggregate, to the financial condition or results
of operations of the Dreyfus Companies on a consolidated basis, except (i) as
reflected in the Dreyfus
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Financial Statements prior to the date of this Agreement and (ii) for
commitments and obligations made, or liabilities incurred, in the ordinary
course of its business consistent with past practices.
3.06. TAX MATTERS. (a) All federal, state, local, and foreign tax returns
required to be filed by or on behalf of any of Dreyfus and all other
corporations and other entities of which Dreyfus owns or controls 50% or more of
the outstanding equity securities have been timely filed or requests for
extensions have been timely filed, granted, and have not expired, except for
such returns the failure of which to timely file would not have a Dreyfus
Material Adverse Effect. All taxes shown on filed returns have been paid, except
for such failure to pay which would not have a Dreyfus Material Adverse Effect.
There is no audit examination, deficiency, refund litigation, or matter in
controversy with respect to which an adjustment to any tax item has been
asserted or proposed that might result in a determination that could, either
individually or in the aggregate, have a Dreyfus Material Adverse Effect, except
as reserved against in the Dreyfus Financial Statements. All taxes, interest,
additions, and penalties which are material in amount and which are due with
respect to completed and settled examinations or concluded litigation have been
paid or adequately reserved for, except for such failures to pay or reserve
which would not have a Dreyfus Material Adverse Effect.
(b) None of the Dreyfus Companies has executed an extension or waiver of
any statute of limitations on the assessment or collection of any tax due that
is currently in effect.
(c) Adequate provision for any federal, state, local, or foreign taxes due
or to become due for any of the Dreyfus Companies for any period or periods
through and including September 30, 1993, has been made and is reflected in the
September 30, 1993 financial statements included in the Dreyfus Financial
Statements, except for such failures to provide which would not have a Dreyfus
Material Adverse Effect.
(d) Deferred taxes of the Dreyfus Companies have been provided for in
accordance with GAAP, except for such failures to provide which would not have a
Dreyfus Material Adverse Effect.
3.07. COMPLIANCE WITH LAWS. Each of the Dreyfus Companies and each Fund:
(a) Is in compliance with all laws, regulations, reporting and licensing
requirements, and orders applicable to its business or to the employees
conducting its business, the breach or violation of which would, either
individually or in the aggregate, have a Dreyfus Material Adverse Effect; and
(b) Has received no notification or communication from any agency or
department of federal, state, or local government or the staff thereof or from
any self-regulatory body (i) asserting that, or commencing an investigation as
to whether, any of the Dreyfus Companies is not in compliance with any of the
statutes, regulations, or ordinances which such governmental authority or
self-regulatory body enforces, which, as a result of such noncompliance in any
such instance, could, either individually or in the aggregate, have a Dreyfus
Material Adverse Effect, (ii) threatening to revoke any license, franchise,
permit, or governmental authorization, which revocations, either individually or
in the aggregate, could have a Dreyfus Material Adverse Effect.
3.08. EMPLOYEE BENEFIT PLANS.
(a) Dreyfus has delivered or made available to Mellon, prior to the
execution of this Agreement, copies (or, with respect to unwritten plans,
written descriptions) of (i) each current material pension, retirement, deferred
compensation, stock option, stock purchase, savings, employee stock ownership,
restricted stock, phantom stock, stock ownership or other similar plan as in
effect on the date of this Agreement, including, without limitation, any
"employee pension benefit plan", as that term is defined in Section 3(2) of
ERISA, in respect of any of the present or former employees of, or dependents,
spouses, or other beneficiaries of any of such employees of, any of the Dreyfus
Companies (the "Dreyfus Pension Plans"), (ii) each current material employment
or consulting agreement, severance (including, without limitation, change of
control or golden parachute agreements or arrangements), bonus, profit-sharing,
incentive, deferred compensation, supplemental or excess retirement, life
insurance, health, or other plan, policy, contract, or arrangement as in effect
on the date of this Agreement, other than a Dreyfus Pension Plan or Dreyfus
Welfare Plan (as hereinafter defined) which provides benefits or perquisites to
or in respect of any of the present or former directors or officers, or
dependents, spouses, or other beneficiaries of any of such directors or officers
of, any of the Dreyfus Companies, and (iii) each current material severance,
bonus, profit-sharing, incentive, deferred compensation,
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supplemental or excess retirement, life insurance, health, vacation, tuition
assistance or reimbursement, legal services, salary continuation, travel or
accident insurance or benefits, disability insurance or benefits, or
unemployment benefits, plans, policies, contracts or arrangements, including,
without limitation, each "employee welfare benefit plan" within the meaning of
Section 3(1) of ERISA as in effect on the date of this Agreement which provides
benefits or perquisites to or in respect of present or former employees, or
dependents, spouses, or other beneficiaries of, any of such employees of, any of
the Dreyfus Companies (the "Dreyfus Welfare Plans") (all the foregoing being
collectively the "Dreyfus Benefit Plans"). All such Dreyfus Benefit Plans are
listed on the Dreyfus Disclosure Letter. No Dreyfus Company has participated in
or been a member of, and no Dreyfus Benefit Plan is or has been, a
"multiemployer plan" within the meaning of Section 3(37) of ERISA.
(b) Except as disclosed in the Dreyfus Disclosure Letter, all Dreyfus
Benefit Plans conform to, and their administration is in compliance in all
material respects with, the applicable provisions of ERISA and the Code, and any
other applicable laws, rules, and regulations the breach or violation of which
would have a Dreyfus Material Adverse Effect. With respect to the Dreyfus
Benefit Plans, no event has occurred and, to the best knowledge of Dreyfus's
management, there exists no condition or set of circumstances, in connection
with which any of the Dreyfus Companies would be subject to any liability, lien
or encumbrance or loss of tax deduction under ERISA or the Code, including,
without limitation, ERISA Sections 409, 502(i), Part 6 of Title I, 4062 or 4069
or Code Sections 4971, 4972, 4975, 4976, 4977, 4978, 4978B, 4979, 4980 or 4980B
that would have, either individually or in the aggregate, a Dreyfus Material
Adverse Effect (except liability for benefit claims and funding obligations
payable in the ordinary course). None of the Dreyfus Companies has provided, or
is required to provide, security to any Dreyfus Pension Plan which is subject to
Title IV of ERISA pursuant to Section 401(a)(29) of the Code. No liability
(other than annual premiums, all of which premiums due prior to the Effective
Time have or will be paid) to the Pension Benefit Guaranty Corporation has been
incurred with respect to any Dreyfus Pension Plan which is subject to Title IV
of ERISA which would have a Dreyfus Material Adverse Effect.
(c) No Dreyfus Pension Plan which is subject to Title IV of ERISA has any
"unfunded current liability," as that term is defined in Section 302(d)(8)(A) of
ERISA, and the present fair market value of the assets of each such plan exceeds
the plan's "benefit liabilities," as that term is defined in Section 4001(a)(16)
of ERISA, when determined under actuarial factors that would apply if the plan
terminated as of the date of this Agreement in accordance with all applicable
legal requirements, where there would be a Dreyfus Material Adverse Effect. Each
such Dreyfus Pension Plan which is intended to qualify under Section 401(a) of
the Code has received a favorable determination letter and nothing has occurred
since the date of such letter that would adversely affect such qualification
which would have a Dreyfus Material Adverse Effect.
(d) No Dreyfus Welfare Plan provides medical or death benefits (whether or
not insured) with respect to current or former employees beyond their date of
retirement or other termination of service (other than coverage provided in
connection with the satisfaction of Section 601 of ERISA, the cost of which is
fully paid by the former employee or his or her dependents).
(e) Except as disclosed in the Dreyfus Disclosure Letter, the consummation
of the transactions contemplated by this Agreement will not obligate any of the
Dreyfus Companies to provide any current or former officer, director, or
employee of any Dreyfus Company, including, but not limited to, Continued
Employees described in Section 9.01, with severance pay, unemployment
compensation or any similar payment.
3.09. MATERIAL CONTRACTS. None of the Dreyfus Companies, nor any of their
respective assets, businesses, or operations, as of the date of this Agreement,
is a party to, or is bound or affected by, or receives benefits under, any
contract or agreement or amendment thereto (other than this Agreement) that in
each case would be required to be filed as an exhibit to a Form 10-K filed by
Dreyfus as of the date of this Agreement that has not been filed as an exhibit
to or incorporated by reference in Dreyfus's Form 10-K filed for the fiscal year
ended December 31, 1992 or Dreyfus's Form 10-Q filed for the quarter ended
September 30, 1993.
3.10. MATERIAL CONTRACT DEFAULTS. None of the Dreyfus Companies or, to the
best knowledge of Dreyfus, any of the Funds is in default under any contract,
agreement, commitment, arrangement, lease, insurance policy, or other instrument
to which it is a party, by which its respective assets, business, or operations
may be
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bound or affected, or under which it or its respective assets, business, or
operations receives benefits, and which default is reasonably likely to have,
either individually or in the aggregate, a Dreyfus Material Adverse Effect, and
there has not occurred any event that, with the lapse of time or the giving of
notice or both, would constitute such a default.
3.11. LEGAL PROCEEDINGS. Except as disclosed in reports referred to in
Section 3.13, there are no legal, administrative or arbitration actions, suits,
or proceedings instituted or pending or, to the best knowledge of Dreyfus,
threatened (or unasserted but considered probable of assertion) against any of
the Dreyfus Companies, or, to the best knowledge of Dreyfus, any of the Funds,
or affecting any property, asset, interest, or right of any of them, that are
reasonably expected to have, either individually or in the aggregate, a Dreyfus
Material Adverse Effect.
3.12. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
Dreyfus's Form 10-Q for the quarter ended September 30, 1993, filed with the
SEC, since December 31, 1992, the Dreyfus Companies on a consolidated basis have
not suffered, either individually or in the aggregate, any change having a
Dreyfus Material Adverse Effect, or failed to operate their business consistent
with their past practices in all material respects.
3.13. REPORTS. Since January 1, 1990, Dreyfus and each Dreyfus Material
Subsidiary has filed all reports and statements, together with any amendments
required to be made with respect thereto, that it was required to file with (i)
the SEC, (ii) any other applicable federal or state securities, banking,
insurance, or other regulatory authorities (except filings (other than filings
with the SEC) which are not material), and (iii) the NYSE and any other
self-regulatory body (except filings which are not material). As of their
respective dates (and without giving effect to any amendments or modifications
filed after the date of this Agreement with respect to reports and documents
filed before the date of this Agreement), each of such reports filed with the
SEC and documents, including the financial statements, exhibits, and schedules
thereto, complied in all material respects with all of the statutes, rules, and
regulations enforced or promulgated by the authority with which they were filed
and did not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein in light of
the circumstances under which they were made not misleading.
3.14. STATEMENTS TRUE AND CORRECT. None of the information supplied or to
be supplied by Dreyfus in writing for inclusion in the registration statement
(the "Registration Statement") to be filed by Mellon with the SEC in connection
with the Mellon Common Stock to be issued in the Merger, the joint proxy
statement (the "Joint Proxy Statement") to be mailed to Dreyfus's and Mellon's
shareholders in connection with the shareholders meetings to vote on the Merger
(in the case of Dreyfus) and to vote on the issuance of the Mellon Common Stock
hereunder (in the case of Mellon) (the "Shareholders Meetings") or any other
documents to be filed with the SEC or any other regulatory authority in
connection with the transactions contemplated hereby, will, at the respective
times such documents are filed, or, in the case of the Registration Statement,
when it becomes effective and, with respect to the Joint Proxy Statement, when
first mailed to the shareholders of Dreyfus and Mellon, be false or misleading
with respect to any material fact, or omit to state any material fact necessary
in order to make the statements therein not misleading or, in the case of the
Joint Proxy Statement or any amendment thereof or supplement thereto, at the
time of the Shareholder Meetings, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to make the
statements therein in light of the circumstances under which they were made not
misleading. All documents that Dreyfus is responsible for filing with the SEC or
any other regulatory authority in connection with the transactions contemplated
hereby will comply in all material respects with the provisions of applicable
law including applicable provisions of the securities laws.
3.15. ENVIRONMENTAL MATTERS. (a) To the best knowledge of Dreyfus, each
Dreyfus Subsidiary, the Participation Facilities, and the Loan Properties (each
as defined below) are, and have been, in compliance with all applicable laws,
rules, regulations, and standards, and all requirements of the United States
Environmental Protection Agency ("EPA") and of state and local agencies with
jurisdiction over pollution or protection of health or the environment, except
for failures to comply which, individually or in the aggregate, do not or would
not result in a Dreyfus Material Adverse Effect.
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(b) To the best knowledge of Dreyfus, there is no suit, claim, action, or
proceeding, pending or threatened, before any court, governmental agency, board,
or other forum pursuant to which Dreyfus or any of the Dreyfus Subsidiaries or
any Fund or any Loan Property, Participation Facility, or Trust Property (or in
respect of such Loan Property, Participation Facility, or Trust Property) has
been or, with respect to threatened proceedings, may be named as a defendant (i)
for alleged noncompliance (including by any predecessor) with any environmental
law, rule, or regulation or (ii) relating to the release into the environment of
any Hazardous Material (as defined below) or oil, whether or not occurring at or
on any site owned (including as trustee), leased, or operated by it or any of
its subsidiaries or any Loan Property, Participation Facility, or Trust
Property, except where such noncompliance or release does not or would not,
individually or in the aggregate, result in a Dreyfus Material Adverse Effect.
(c) To the best knowledge of Dreyfus, there is no reasonable basis for any
suit, claim, action, or proceeding of a type described in Section 3.15(b),
except as would not, individually or in the aggregate, result in a Dreyfus
Material Adverse Effect.
(d) During the period of (i) Dreyfus's or any of the Dreyfus Subsidiaries'
ownership (including as trustee) or operation of any of their respective current
properties, (ii) Dreyfus or any of the Dreyfus Subsidiaries' participation in
the management of any Participation Facility, (iii) Dreyfus or any of the
Dreyfus Subsidiaries' holding of a security interest in a Loan Property, or (iv)
Dreyfus or any of the Dreyfus Subsidiaries acting as a trustee or fiduciary with
respect to a Trust Property, to the best knowledge of Dreyfus, there has been no
release of Hazardous Material or oil in, on, under, or affecting such property,
Participation Facility, Loan Property or Trust Property, except where such
release does not or would not, individually or in the aggregate, result in a
Dreyfus Material Adverse Effect. Prior to the period of (w) Dreyfus or any of
the Dreyfus Subsidiaries' ownership (including as trustee) or operation of any
of their respective current properties, (x) Dreyfus or any of the Dreyfus
Subsidiaries' participation in the management of any Participation Facility, (y)
Dreyfus or any of the Dreyfus Subsidiaries acting as trustee or other fiduciary
with respect to Trust Property, or (z) Dreyfus or any of the Dreyfus
Subsidiaries' holding of a security interest in a Loan Property, to the best
knowledge of Dreyfus, there was no release of Hazardous Material or oil in, on,
under, or affecting any such property, Participation Facility, or Loan Property,
except where such release does not or would not, individually or in the
aggregate, result in a Dreyfus Material Adverse Effect.
(e) The following definitions apply for purposes of this Section 3.15: (i)
"Loan Property" means any property in which Dreyfus (or a Dreyfus Subsidiary)
holds a security interest for an amount greater than $2,500,000, and, where
required by the context, includes the owner or operator of such property, but
only with respect to such property; (ii) " Participation Facility" means any
property in which Dreyfus (or a Dreyfus Subsidiary) participates in the
management of such property and, where required by the context, includes the
owner or operator of such property, but only with respect to such property;
(iii) "Trust Property" means any property with respect to which Dreyfus (or a
Dreyfus Subsidiary) acts or has acted as a trustee or other fiduciary (including
investment advisor), directly or indirectly, and includes any trust or similar
legal vehicle that owns or controls (or that owned or controlled) such property
and, where required by the context, includes the trustee or other fiduciary, but
only with respect to such property; and (iv) "Hazardous Material" means any
pollutant, contaminant, or hazardous substance within the meaning of the
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
Section 9601 et. seq., or any similar federal, state, or local law.
3.16. ANTITAKEOVER PROVISIONS INAPPLICABLE. No "Business combination",
"moratorium", "control share", or other state antitakeover statute or regulation
(x) prohibits or restricts Dreyfus's ability to perform its obligations under
this Agreement, or its ability to consummate the transactions contemplated
hereby, (y) would have the effect of invalidating or voiding this Agreement, or
any provisions hereof, or (z) would subject Mellon to any material impediment or
condition in connection with the exercise of any of its rights under this
Agreement.
3.17. FUND FINANCIAL STATEMENTS. The audited balance sheets of each Fund
as of December 31, 1992 and December 31, 1991 (or in the case of a Fund that
does not have fiscal years ending on December 31, the last day of such Fund's
most recent comparable fiscal year), and the related financial statements for
the years ended December 31, 1992, 1991 and 1990, as reported on by Ernst &
Young, Coopers & Lybrand and Price
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Waterhouse, as the case may be, and the unaudited balance sheet of each Fund as
of September 30, 1993 (the "Interim Balance Sheets") and the related unaudited
financial statements for the period then ended, and each of the balance sheets
of each Fund, and the related financial unaudited statements, as of a date or
for a period subsequent to September 30, 1993 have been or will be prepared in
accordance with GAAP, which have been consistently applied, except as otherwise
disclosed therein, and present or will present fairly, in all material respects,
the financial position and other financial results of each Fund at the dates,
and for the periods, stated therein.
3.18. BOOKS OF ACCOUNT. The books of account of each Dreyfus Company and
each Fund have been and will be maintained in compliance with all applicable
legal and accounting requirements in all material respects.
3.19. PROPERTIES AND INSURANCE. (a) Each Dreyfus Company has good title,
free and clear of any Liens, to all of the personal and real property reflected
in the Dreyfus Financial Statements as being owned by it, and to all personal
and real property acquired by it since the respective dates of the Dreyfus
Financial Statements, except such personal and real property as has been
disposed of in the ordinary course of the business consistent with past practice
and except for such Liens and imperfections of title as would not have a Dreyfus
Material Adverse Effect.
(b) The Dreyfus Companies and, to Dreyfus's knowledge, the Funds have the
right to use, and after consummation of the transactions contemplated hereby
will have the right to use, free and clear of any claims of others, all patents,
patent applications, trademarks, service marks (whether registered or
unregistered), trademark applications, service mark applications, trade names,
copyrights and other proprietary rights necessary to own and operate their
respective properties and to carry on their respective business as currently
conducted, except where such failure to have such rights or such claims of
others would not have, either individually or in the aggregate, a Dreyfus
Material Adverse Effect. Dreyfus owns the right to the Dreyfus name and licenses
that name to the Funds under license agreements that may be terminated at will.
(c) Each Dreyfus Company and, to Dreyfus's knowledge, each Fund owns or
licenses all computer software developed or currently used by them which is
material to the conduct of its business and have the right to use such software
without infringing upon the intellectual property rights (including trade
secrets rights) of a third party, except as would not have a Dreyfus Material
Adverse Effect.
3.20. CERTAIN PROCEEDINGS. Except as disclosed in reports referred to in
Section 3.13, there is no action, suit or proceeding pending or, to the
knowledge of Dreyfus, threatened that seeks to enjoin or censure a Dreyfus
Company or, to Dreyfus's knowledge, a Fund, or, to Dreyfus's knowledge, any
officers, directors or employees thereof, in connection with the conduct of its
business, which could have, either individually or in the aggregate, a Dreyfus
Material Adverse Effect.
3.21. SECTION 280G. As a result of compliance with this Agreement and the
matters referred to herein, neither any Dreyfus Company nor Mellon will be
obligated to make a payment to an individual that would be a "parachute payment"
to a "disqualified individual" as those terms are defined in Section 280G of the
Code without regard to whether such payment is to be performed in the future.
3.22. EMPLOYEE RELATIONSHIPS. There are no labor or collective bargaining
agreements, contracts or understandings with a labor union or labor organization
which are binding upon either any Dreyfus Company or, to Dreyfus's knowledge,
any Fund, nor, to Dreyfus's knowledge is there, as of the date hereof, any
activity involving any employees of any Dreyfus Company seeking to certify a
collective bargaining unit or engaging in any other union organizational
activity.
3.23. FILINGS, ETC. (a) Since December 31, 1990, each Dreyfus Company and
each Fund has had and now has all permits, licenses, certificates of authority,
orders and approvals of, and have made all filings, applications and
registrations with, federal, state, local or foreign governmental or regulatory
bodies, and self-regulatory bodies that are required (including by the rules of
any self-regulatory body) in order to permit each of them to carry on its
respective business as presently conducted, and such permits, licenses,
certificates of authority, registrations, orders and approvals are in full force
and effect, except where the failure to have or make or keep in full force and
effect any permit, license, certificate of authority, registration, order or
approval referred to above would not have a Dreyfus Material Adverse Effect. The
conduct of its respective business by
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each Dreyfus Company and each Fund has not, since December 31, 1990, and
currently does not, violate or infringe any applicable domestic (federal, state
or local) or foreign law, statue, ordinance, license, rule or regulation
including those of the self-regulatory bodies, which violation or infringement
could have a Dreyfus Material Adverse Effect.
(b) Without limiting the foregoing, each Dreyfus Company and each of its
officers, and employees which is or who are required to be registered as an
investment adviser, a broker-dealer, a registered representative or a sales
person with the SEC, the securities commission or any state or any
self-regulatory body is duly registered as such and such registration is in full
force and effect, except where the failure to be so registered or to have such
registration in full force and effect would, individually or in the aggregate,
not have a Dreyfus Material Adverse Effect.
(c) There are no proceedings pending (or, to the knowledge of Dreyfus,
threatened, nor to the knowledge of Dreyfus has any event occurred or does any
condition exist that is reasonably likely to form the basis for any proceeding)
that is reasonably likely to result in the revocation, cancellation or
suspension, or any adverse modification, of any permit, license, certificate of
authority, order or approval referred to in Section 3.23(a) having a Dreyfus
Material Adverse Effect, and the execution and delivery of this Agreement and
the consummation of any transactions contemplated hereby will not result in any
such revocation, cancellation, suspension or modification which could have a
Dreyfus Material Adverse Effect.
(d) None of any Dreyfus Company or, to Dreyfus's knowledge, any Funds, or
any officer, director or employee thereof, is a party or subject to any order,
judgment or decree (other than exemptive orders) relating to its business with
or by any federal, state, local or foreign regulatory authority, except where
such order, judgment or decree, individually or in the aggregate, would not have
a Dreyfus Material Adverse Effect.
3.24. ABSENCE OF CERTAIN CONDITIONS. There exists no "out of balance" or
similar condition with respect to any customer account maintained by a Dreyfus
Company or a Fund, except for such conditions, individually and in the
aggregate, as have not had and would be reasonably likely not to have a Material
Adverse Effect.
3.25. REPRESENTATIONS AND WARRANTIES REGARDING THE INVESTMENT ADVISORY
BUSINESS.
(a) DEFINITION OF INVESTMENT COMPANY. As used in this Agreement, the term,
"Investment Company" shall have the meaning provided in the Investment Company
Act, provided that for purposes of this Agreement the term Investment Company
shall include persons that would be an investment company, as defined in that
Act, but for the exemption contained in Section 3(c)(1), the final clause of
Section 3(c)(3) or Section 3(c)(11) of the Investment Company Act.
(b) INVESTMENT CONTRACTS. FUNDS AND CLIENTS. (i) On November 30, 1993, the
aggregate amount of assets managed, administered or advised by the Dreyfus
Companies was not less than $80 billion. To the knowledge of Dreyfus, and except
as would not have a Dreyfus Material Adverse Effect, (x) each Investment
Contract (as defined below) and any subsequent renewal thereof has been duly
authorized, executed and delivered by each party thereto and, to the extent
applicable, has been adopted in compliance with Section 15 of the Investment
Company Act and is a valid and binding agreement of each such party, enforceable
in accordance with its terms (subject to bankruptcy, insolvency, moratorium,
fraudulent transfer and similar laws affecting creditors' rights generally and
to general equity principles) and, (y) in the case of investment advisory
contracts with Investment Companies and Clients (as defined below), each of the
Dreyfus Companies, the Funds or Client party thereto is in compliance in all
material respects with the terms of each Investment Contract to which it is a
party, and no event has occurred or condition exists that constitutes or with
notice or the passage of time would constitute a default thereunder. Except as
set forth in the Dreyfus Disclosure Letter, none of the Investment Contracts, or
any other arrangements or understandings relating to rendering of investment
advisory or management services, including without limitation all subadvisory
services or administration services to any Fund, Client or other person,
contains any undertaking by a Dreyfus Company to cap fees or to reimburse any or
all fees thereunder, except as required by the applicable law of any
jurisdiction in which the shares of any Fund party thereto are qualified for
distribution, which is likely, either individually or in the aggregate, to have
a Dreyfus Material Adverse Effect. As used in this Section, (i) the term
"Client" means any client to which a Dreyfus Company provides investment
management, investment advisory, administration or distribution services on the
date hereof and (ii) the term "Investment Contract"
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means each contract or agreement in effect on the date hereof to which a Dreyfus
Company is a party pursuant to which Dreyfus Company provides to any Client
investment management, investment advisory, distribution or administrative
services.
(ii) Each Fund has been, is being and will be operated fully in compliance
with its respective objectives, policies and descriptions, including without
limitation any limitation set forth in the applicable Prospectus for a Fund or
governing instruments for a Client, except where lack of compliance would not
have a Dreyfus Material Adverse Effect.
(iii) The accounts of each Client that is subject to ERISA have been
managed by the Dreyfus Companies such that the Dreyfus Companies in the exercise
of such management are in compliance with the applicable requirements of ERISA,
and consummation of the transactions contemplated hereby will not result in a
violation of such ERISA requirements, except, in each case, where such lack of
compliance or violation would not have a Dreyfus Material Adverse Effect.
(iv) To Dreyfus's knowledge each Fund that is eligible to elect to be
treated as a "regulated investment company" under Subchapter M of Chapter 1 of
Subtitle A of the Code has so elected, and each Fund has, except for any taxable
year of such Fund that has been closed and for which the statute of limitations
for assessments has expired, qualified as a "regulated investment company" and
each Fund has complied with all applicable provisions of law necessary to
preserve and retain such Fund's election and status as a regulated investment
company, except for where the failure to elect regulated investment company
status or to comply with the requirements of such election would not have a
Dreyfus Material Adverse Effect. Except for any taxable year that has been
closed and for which the statute of limitations for assessment has expired, each
Fund identified in the Dreyfus Disclosure Letter as being a tax-exempt municipal
bond fund has satisfied the requirements of Section 852(b)(5) of the Code and is
qualified to pay exempt interest dividends as defined therein, except for where
the failure to so comply with the requirements of Section 852(b)(5) would not
have a Dreyfus Material Adverse Effect. Each Fund has timely filed all federal,
state, local and foreign income and other Tax returns and reports that such Fund
is required to file. Each Fund has timely paid, or reserved for, Taxes that such
Fund is required to pay, except where the failure to pay such taxes would not
have a Dreyfus Material Adverse Effect.
(c) REGULATORY COMPLIANCE. Except where the violation of any of the
representations and warranties contained in this Section 3.25(c) would not have
a Dreyfus Material Adverse Effect:
(i) (A) each Fund required by law to be so registered is duly registered as
an investment company under the Investment Company Act; (B) except as set forth
in the Dreyfus Disclosure Letter, the shares of each Fund are duly and validly
issued, fully paid and nonassessable and are qualified for sale, or an exemption
therefrom is in full force and effect, in each state and territory of the United
States and the District of Columbia to the extent required under applicable law;
(C) all outstanding shares of each Fund that were required to be registered
under the Securities Act have been sold pursuant to an effective registration
statement filed thereunder; (D) to the knowledge of Dreyfus in the case of
documents applicable to the Funds, no such registration statement contained, as
of its effective date, any untrue statement of a material fact or omitted to
state a material fact required to be stated therein in order to make the
statements therein not misleading or is subject to any stop order or similar
order restricting its use; and (E) each Fund has operated and is currently
operating in compliance in all material respects with all laws, rules,
regulations and orders applicable to it or its business, including but not
limited to the Securities Act and the Investment Company Act, and consummation
of the transactions contemplated hereby will not result in a violation of any
such laws, rules, regulations or orders.
(ii) Each Fund that is a juridical entity is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and has full power, right and authority to own its properties and
to carry on its business as it is now conducted, and is qualified to do business
in each jurisdiction where it is required to do so under applicable law.
(iii) Each Fund has duly adopted procedures pursuant to Rule 17e-1 under
the Investment Company Act, to the extent applicable; and each Fund has
complied, for a period of at least six years prior to the date
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hereof, currently complies and will comply with the requirements of Section
17(e) of the Investment Company Act and Rule 17e-1 thereunder, to the extent
applicable.
(iv) Dreyfus has adopted a formal code of ethics and a written policy
regarding insider trading. Such code and policy comply with Section 17(j) of the
Investment Company Act, Rule 17j-l thereunder and Section 204A of the Investment
Advisers Act, respectively. The policies of the Dreyfus Companies with respect
to avoiding conflicts of interest are as set forth in the most recent Form ADV
thereof (or incorporated by reference therein), as amended. To the knowledge of
Dreyfus, there have been no violations or allegations of violations of such
policies that have occurred or been made.
(v) Neither any Dreyfus Company nor, to Dreyfus's knowledge, any Fund, and,
to Dreyfus's knowledge, no person "associated" (as defined under the Investment
Advisers Act) with any Dreyfus Company or any Fund, has for a period not less
than five years prior to the date hereof been convicted of any crime or is or
has been subject to any disqualification that would be a basis for denial,
suspension or revocation of registration of an investment adviser under Section
203(e) of the Investment Advisers Act or Rule 206(4)-4(b) thereunder or of a
broker-dealer under Section 15 of the Exchange Act, or for disqualification as
an investment adviser for any Investment Company pursuant to Section 9(a) of the
Investment Company Act, and to Dreyfus's knowledge there is no basis for, or
proceeding or investigation that is reasonably likely to become the basis for,
any such disqualification, denial, suspension or revocation.
(vi) Each current prospectus (which term, as used in this Agreement, shall
include any related statement of additional information and any private
placement memorandum), as amended or supplemented, relating to each Fund, and
all current supplemental advertising and marketing material relating to each
Fund complies with the Securities Act and the Investment Company Act, applicable
state laws and, where applicable, the rules of the NASD. None of such
prospectuses, amendments, supplements or supplemental advertising and marketing
materials, as of their respective dates, includes, included or will include an
untrue statement of a material fact or omits, omitted or will omit to state a
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
(vii) All advertising or marketing materials relating to any Fund that are
required to be filed with the NASD has been or will be timely filed therewith.
3.26. BROKERS AND FINDERS. Except for Lazard, Freres & Co. and Salomon
Brothers, Inc. pursuant to agreements previously provided to Mellon, Dreyfus has
not employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finder's fees, and no broker or
finder has acted, directly or indirectly, for Dreyfus, in connection with this
Agreement or the transactions contemplated hereby.
3.27. APPROVAL OF MERGER. Approval of the Merger by the shareholders of
Dreyfus requires the affirmative vote of holders of two-thirds of the issued and
outstanding shares of Dreyfus Common Stock.
3.28. OPINION OF FINANCIAL ADVISOR. The Board of Directors of Dreyfus has
received the opinions of each of Lazard Freres & Co. and Salomon Brothers Inc,
dated the date hereof, to the effect that, as of the date hereof, the Exchange
Ratio is fair from a financial point of view to the stockholders of Dreyfus.
ARTICLE III-B
REPRESENTATIONS AND WARRANTIES OF MELLON
Mellon, Mellon Bank and Merger Subsidiary hereby represent and warrant to
Dreyfus that, except as set forth in a letter from Mellon to Dreyfus delivered
concurrently with this Agreement (the "Mellon Disclosure Letter") (all
disclosure on which Mellon Disclosure Letter shall state with particularity the
representation and warranty herein, including section reference, to which such
disclosure relates), (i) the statements in the Recitals that relate to it are
true and correct and (ii) as follows:
3.29. ORGANIZATION, STANDING, AND AUTHORITY. Mellon is a corporation duly
organized, validly existing, and in good standing under the laws of the
Commonwealth of Pennsylvania and is duly qualified to do business and in good
standing in the States of the United States and foreign jurisdictions where its
ownership or leasing
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of property or the conduct of its business requires it to be so qualified and in
which the failure to be duly qualified would, either individually or in the
aggregate, have a material adverse effect on the business, operations, assets,
condition (financial or otherwise), results of operations, or prospects of
Mellon and its subsidiaries (the "Mellon Subsidiaries"), taken as a whole, or
Mellon's ability to consummate the transactions contemplated by this Agreement
(an "Mellon Material Adverse Effect"). Mellon has all necessary corporate power
and authority to carry on its business as now conducted, to own, lease, and
operate its assets, properties, and business, and to execute and deliver, and to
perform its obligations under, this Agreement, subject to approval by the
shareholders of Mellon. Mellon has in effect all federal, state, local, and
foreign governmental authorizations necessary for it to own or lease its
properties and assets and to carry on its business as it is now conducted, the
absence of which would, either individually or in the aggregate, have a Mellon
Material Adverse Effect.
3.30. MELLON SUBSIDIARIES. Mellon's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992, lists all of the Mellon Subsidiaries
required to be listed therein. No equity securities of any of the Mellon
Subsidiaries which constitutes a Significant Subsidiary of Mellon within the
meaning of Rule 1-02 of Regulation S-K of the Securities and Exchange Commission
(a "Mellon Material Subsidiary") are or may become required to be issued (other
than to Mellon) by reason of any Rights, and there are no contracts,
commitments, understandings or arrangements by which any Mellon Material
Subsidiary is bound to issue or sell shares of its capital stock or Rights. All
of the shares of capital stock of each Mellon Material Subsidiary held by Mellon
or a Mellon Subsidiary are fully paid and nonassessable and are owned by Mellon
or a Mellon Subsidiary free and clear of any claim, lien or encumbrance. Each
Mellon Material Subsidiary is duly organized and, to the extent applicable,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated or organized, and is duly qualified to do business and
in good standing in the jurisdictions where its ownership or leasing or property
or the conduct of its business requires to it to be so qualified and in which
the failure to be duly organized, in good standing or qualified would, either
individually or in the aggregate, have a Mellon Material Adverse Effect. Each
Mellon Material Subsidiary has the corporate power and authority necessary for
it to own or lease its properties and assets and to carry on its business as it
is now being conducted, and has all federal, state, local and foreign
governmental authorizations necessary for it to own or lease its properties and
assets and to carry on its business as it is now being conducted, the absence of
which governmental authorizations would, either individually or in the
aggregate, have a Mellon Material Adverse Effect.
3.31. AUTHORITY.
(a) The execution and delivery of this Agreement by Mellon, and the
consummation by Mellon of the transactions contemplated herein, have been duly
and validly authorized by all necessary corporate action on the part of Mellon,
subject to the approval of the shareholders of Mellon to the extent required by
applicable law. This Agreement, subject to requisite shareholder approval
represents a valid and legally binding obligation of Mellon, enforceable against
Mellon in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by Mellon, nor the
consummation by Mellon of the transactions contemplated herein, nor compliance
by Mellon with any of the provisions hereof, will (i) subject to the necessity
of obtaining shareholder approval of this Agreement, conflict with or result in
a breach of any provision of the certificate of incorporation or by-laws of
Mellon or any Mellon Subsidiary (collectively, the "Mellon Companies") or (ii)
constitute or result in the breach of any term, condition, or provision of, or
constitute a default or give rise to any additional liability under, or give
rise to any right of termination, cancellation, or acceleration with respect to,
or result in the creation of any lien, charge, or encumbrance upon any property
or assets of any of the Mellon Companies pursuant to, any note, bond, mortgage,
indenture, license, agreement, lease, or other instrument or obligation to which
any of them is a party or by which any of them or any of their properties or
assets may be subject, and that would, either individually or in the aggregate,
have a Mellon Material Adverse Effect. The Mellon Disclosure Letter lists the
approvals, authorizations, filings, registrations and notifications required on
Mellon's behalf in connection with the consummation of the transactions
contemplated hereby, the failure to obtain which would have a Mellon Material
Adverse Effect. Except as stated in the Mellon Disclosure Letter, consummation
of the transactions contemplated hereby will not violate any order, writ,
injunction, decree, statute, rule, or regulation
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applicable to any of the Mellon Companies or any of their properties or assets,
except for such violations which would not have a Dreyfus Material Adverse
Effect.
(c) The Board of Directors of Mellon (at a meeting duly called and held)
has by requisite vote (i) determined that the Merger is in the best interests of
Mellon and its shareholders, (ii) authorized and approved this Agreement, and
the transactions contemplated hereby, and (iii) directed that the issuance of
the Mellon Common Stock hereunder be submitted for consideration to Mellon's
shareholders at a special meeting of Mellon's shareholders.
3.32. FINANCIAL STATEMENTS. Mellon has delivered to Dreyfus, prior to the
execution of this Agreement, the Mellon Financial Statements (as hereinafter
defined) in respect of periods ending on or prior to September 30, 1993, and
will promptly deliver when available copies of the Mellon Financial Statements
in respect of periods ending after September 30, 1993. The Mellon Financial
Statements (as of the dates thereof and for the periods covered thereby): (i)
are (and, in the case of Mellon Financial Statements in respect of periods
ending after September 30, 1993, will be) in accordance with the books and
records of the Mellon Companies, and have been (and, in the case of Mellon
Financial Statements in respect of periods ending after September 30, 1993 will
continue to be) prepared in accordance with GAAP and good business practices,
and (ii) present (and, in the case of Mellon Financial Statements in respect of
periods ending after September 30, 1993, will present) fairly, in all material
respects, the consolidated financial position and the consolidated results of
operations, changes in shareholders' equity, and cash flows of the Mellon
Companies as of the dates and for the periods indicated, in accordance with GAAP
applied, except as otherwise disclosed therein, on a basis consistent with prior
periods (subject in the case of interim financial statements to normal recurring
year-end adjustments normal in nature and amount). Mellon Financial Statements
shall mean (i) the consolidated balance sheets (including related notes and
schedules, if any) of Mellon as of September 30, 1993, and as of December 31,
1992, 1991 and 1990, and the related consolidated statements of income, of
changes in shareholders' equity, and of cash flows (including related notes and
schedules, if any) for the nine months ended September 30, 1993, and for each of
the three years ended December 31, 1992, 1991, and 1990, as filed by Mellon with
the SEC and (ii) the consolidated balance sheets of Mellon (including related
notes and schedules, if any) and related consolidated statements of income, of
changes in shareholders' equity, and of cash flows (including related notes and
schedules, if any) included in documents filed with the SEC with respect to
periods ended subsequent to September 30, 1993.
3.33. ABSENCE OF UNDISCLOSED LIABILITIES. None of the Mellon Companies has
any obligation or liability (contingent or otherwise) that is material, either
individually or in the aggregate, to the financial condition or results of
operations of the Mellon Companies on a consolidated basis except (i) as
reflected in the Mellon Financial Statements prior to the date of this Agreement
and (ii) for commitments and obligations made, or liabilities incurred, in the
ordinary course of its business consistent with past practices.
3.34. TAX MATTERS. (a) All federal, state, local, and foreign tax returns
required to be filed by or on behalf of any of Mellon and all other corporations
and other entities of which Mellon owns or controls 50% or more of the
outstanding equity securities have been timely filed or requests for extensions
have been timely filed, granted, and have not expired, except for such returns
the failure of which to timely file would not have a Mellon Material Adverse
Effect. All taxes shown on filed returns have been paid, except for such failure
to pay which would not have a Mellon Material Adverse Effect. There is no audit
examination, deficiency, refund litigation, or matter in controversy with
respect to which an adjustment to any tax item has been asserted or proposed
that might result in a determination that could, either individually or in the
aggregate, have a Mellon Material Adverse Effect, except as reserved against in
the Mellon Financial Statements. All taxes, interest, additions, and penalties
which are material in amount and which are due with respect to completed and
settled examinations or concluded litigation have been paid or adequately
reserved for, except for such failures to pay or reserve which would not have a
Mellon Material Adverse Effect.
(b) None of the Mellon Companies has executed an extension or waiver of any
statute of limitations on the assessment or collection of any tax due that is
currently in effect.
(c) Adequate provision for any federal, state, local, or foreign taxes due
or to become due for any of the Mellon Companies for any period or periods
through and including September 30, 1993, has been made and is
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reflected in the September 30, 1993 financial statements included in the Mellon
Financial Statements, except for such failures to provide which would not have a
Mellon Material Adverse Effect.
(d) Deferred taxes of the Mellon Companies have been provided for in
accordance with GAAP, except for such failures to provide which would not have a
Mellon Material Adverse Effect.
3.35. COMPLIANCE WITH LAWS. Each of the Mellon Companies:
(a) Is in compliance with all laws, regulations, reporting and licensing
requirements, and orders applicable to its business or to the employees
conducting its business, the breach or violation of which would, either
individually or in the aggregate, have a Mellon Material Adverse Effect; and
(b) Has received no notification or communication from any agency or
department of federal, state, or local government or the staff thereof (i)
asserting that, or commencing any investigation as to whether, any of the Mellon
Companies is not in compliance with any of the statutes, regulations, or
ordinances which such governmental authority enforces, which, as a result of
such noncompliance in any such instance, could, either individually or in the
aggregate, have a Mellon Material Adverse Effect, (ii) threatening to revoke any
license, franchise, permit, or governmental authorization, which revocation,
either individually or in the aggregate, could have a Mellon Material Adverse
Effect.
3.36. EMPLOYEE BENEFIT PLANS.
(a) "Mellon Pension Plans" shall mean each current material pension,
retirement, deferred compensation, stock option, stock purchase, savings,
employee stock ownership, restricted stock, phantom stock, stock ownership or
other similar plan as in effect on the date of this Agreement, including,
without limitation, any "employee pension benefit plan", as that term is defined
in Section 3(2) of ERISA, in respect of any of the present or former employees
of, or dependents, spouses, or other beneficiaries of any of such directors,
officers, employees of, any of the Mellon Companies. "Mellon Executive Programs"
shall mean each current material employment or consulting agreement, severance
(including, without limitation, change of control or golden parachute agreements
or arrangements), bonus, profit-sharing, incentive, deferred compensation,
supplemental or excess retirement, life insurance, health, or other plan,
policy, contract, or arrangement as in effect on the date of this Agreement,
other than a Mellon Pension Plan or Mellon Welfare Plan (as hereinafter
defined), which provides benefits or perquisites to or in respect of any of the
present or former directors or officers, or dependents, spouses, or other
beneficiaries of any of such directors or officers of, any of the Mellon
Companies. "Mellon Welfare Plans" shall mean each current material severance,
bonus, profit-sharing, incentive, deferred compensation, supplemental or excess
retirement, life insurance, health, vacation, tuition assistance or
reimbursement, legal services, salary continuation, travel or accident insurance
or benefits, disability insurance or benefits, unemployment benefits, or other
plans, policies, contracts or arrangements, including, without limitation, each
"employee welfare benefit plan" within the meaning of Section 3(1) of ERISA as
in effect on the date of this Agreement which provides benefits or perquisites
to or in respect of present or former employees of, or dependents, spouses, or
other beneficiaries of, any of such employees of, any of the Mellon Companies.
The Mellon Pension Plans, the Mellon Executive Programs and the Mellon Welfare
Plans are collectively referred to as the "Mellon Benefit Plans". No Mellon
Company has participated in or been a member of, and no Mellon Benefit Plan is
or has been, a multiemployer plan within the meaning of Section 3(37) of ERISA.
(b) All Mellon Benefit Plans conform to, and their administration is in
compliance in all material respects with, the applicable provisions of ERISA and
the Code, and any other applicable laws, rules, and regulations the breach or
violation of which would have a Mellon Material Adverse Effect. With respect to
the Mellon Benefit Plans, no event has occurred and, to the best knowledge of
Mellon's management, there exists no condition or set of circumstances, in
connection with which any of the Mellon Companies would be subject to any
liability, lien or encumbrance or loss of tax deduction under ERISA or the Code,
including, without limitation, ERISA Sections 409, 502(i), Part 6 of Title I,
4062 or 4069 or Code Sections 4971, 4972, 4975, 4976, 4977, 4978, 4978B, 4979,
4980 or 4980B that would have, either individually or in the aggregate, a Mellon
Material Adverse Effect (except liability for benefit claims and funding
obligations payable in the ordinary course). None of the Mellon Companies has
provided, or is required to provide, security to any Mellon Pension Plan which
is subject to Title IV of ERISA pursuant to Section 401(a)(29) of the Code. No
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liability (other than annual premiums, all of which premiums due prior to the
Effective Time have or will be paid) to the Pension Benefit Guaranty Corporation
has been incurred with respect to any Mellon Pension Plan which is subject to
Title IV of ERISA which would have a Mellon Material Adverse Effect.
(c) No Mellon Pension Plan which is subject to Title IV of ERISA has any
"unfunded current liability," as that term is defined in Section 302(d)(8)(A) of
ERISA, and the present fair market value of the assets of each such plan exceeds
the plan's "benefit liabilities," as that term is defined in Section 4001(a)(16)
of ERISA, when determined under actuarial factors that would apply if the plan
terminated as of the date of this Agreement in accordance with all applicable
legal requirements, where there would be a Mellon Material Adverse Effect. Each
such Mellon Pension Plan which is intended to qualify under Section 401(a) of
the Code has received a favorable determination letter and nothing has occurred
since the date of such letter that would adversely affect such qualification
which would have a Mellon Material Adverse Effect.
(d) Except as otherwise provided in the Mellon Disclosure Letter, no Mellon
Welfare Plan provides medical or death benefits (whether or not insured) with
respect to current or former employees beyond their date of retirement or other
termination of service (other than coverage provided in connection with the
satisfaction of Section 601 of ERISA, the cost of which is fully paid by the
former employee or his or her dependents).
3.37. MATERIAL CONTRACTS. None of the Mellon Companies, nor any of their
respective assets, businesses, or operations, as of the date of this Agreement,
is a party to, or is bound or affected by, or receives benefits under, any
contract or agreement or amendment thereto (other than this Agreement) that in
each case would be required to be filed as an exhibit to a Form 10-K filed by
Mellon as of the date of this Agreement that has not been filed as an exhibit to
or incorporated by reference in Mellon's Form 10-K filed for the fiscal year
ended December 31, 1992 or Mellon's Form 10-Q filed for the quarter ended
September 30, 1993.
3.38. MATERIAL CONTRACT DEFAULTS. None of the Mellon Companies is in
default under any contract, agreement, commitment, arrangement, lease, insurance
policy, or other instrument to which it is a party, by which its respective
assets, business, or operations may be bound or affected, or under which it or
its respective assets, business, or operations receives benefits, and which
default is reasonably likely to have, either individually or in the aggregate, a
Mellon Material Adverse Effect, and there has not occurred any event that, with
the lapse of time or the giving of notice or both, would constitute such a
default.
3.39. LEGAL PROCEEDINGS. Except as disclosed in reports referred to in
Section 3.41, there are no legal or administrative actions, suits, or
proceedings instituted or pending or, to the best knowledge of Mellon,
threatened (or unasserted but considered probable of assertion and which would
have at least a more than remote possibility of an unfavorable outcome) against
any of the Mellon Companies or affecting any property, asset, interest, or right
of any of them, that are reasonably expected to have, either individually or in
the aggregate, a Mellon Material Adverse Effect.
3.40. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
Mellon's Form 10-Q for the quarter ended September 30, 1993 filed with the SEC,
since December 31, 1992, the Mellon Companies on a consolidated basis have not
suffered, either individually or in the aggregate, any change having a Mellon
Material Adverse Effect or failed to operate their business consistent with
their past practices in all material respects.
3.41. REPORTS. Since January 1, 1990, each of the Mellon Companies has
filed all reports and statements, together with any amendments required to be
made with respect thereto, that it was required to file with (i) the SEC and
(ii) any other applicable federal or state banking, securities, or other
regulatory authorities (except filings (other than filings with federal or state
banking authorities or the SEC) which are not material). As of their respective
dates (and without giving effect to any amendments or modifications filed after
the date of this Agreement with respect to reports and documents filed before
the date of this Agreement), each of such reports and documents filed with any
federal or state banking authorities or the SEC, including the financial
statements, exhibits, and schedules thereto, complied in all material respects
with all of the statutes, rules, and regulations enforced or promulgated by the
authority with which they were filed and did not contain any untrue statement of
a material fact or omit to state any material fact necessary in
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order to make the statements made therein in light of the circumstances under
which they were made not misleading.
3.42. STATEMENTS TRUE AND CORRECT. None of the information supplied or to
be supplied by Mellon in writing for inclusion in the Registration Statement,
the Joint Proxy Statement, or any other documents to be filed with the SEC or
any other regulatory authority in connection with the transactions contemplated
hereby, will, at the respective times such documents are filed, or, in the case
of the Registration Statement, when it becomes effective or, with respect to the
Joint Proxy Statement, when first mailed to the shareholders of Mellon and
Dreyfus, be false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements therein not
misleading, or, in the case of the Joint Proxy Statement or any amendment
thereof or supplement thereto, at the time of the Shareholder Meetings, be false
or misleading with respect to any material fact, or omit to state any material
fact necessary to make the statements therein in light of the circumstances
under which they were made not misleading. All documents that Mellon is
responsible for filing with the SEC or any other regulatory authority in
connection with the transactions contemplated hereby will comply in all material
respects with the provisions of applicable law including applicable provisions
of the securities laws.
3.43. ENVIRONMENTAL MATTERS. (a) To the best knowledge of Mellon, each
Mellon Subsidiary, the Participation Facilities, and the Loan Properties (each
as defined below) are, and have been, in compliance with all applicable laws,
rules, regulations, and standards, and all requirements of the United States
Environmental Protection Agency ("EPA") and of state and local agencies with
jurisdiction over pollution or protection of health or the environment, except
for failures to comply which, individually or in the aggregate, do not or would
not result in a Mellon Material Adverse Effect.
(b) To the best knowledge of Mellon, there is no suit, claim, action, or
proceeding, pending or threatened, before any court, governmental agency, board,
or other forum pursuant to which Mellon or any of the Mellon Subsidiaries or any
Loan Property, Participation Facility, or Trust Property (or in respect of such
Loan Property, Participation Facility, or Trust Property) has been or, with
respect to threatened proceedings, may be named as a defendant (i) for alleged
noncompliance (including by any predecessor) with any environmental law, rule,
or regulation or (ii) relating to the release into the environment of any
Hazardous Material (as defined below) or oil, whether or not occurring at or on
any site owned (including as trustee), leased, or operated by it or any of its
subsidiaries or any Loan Property, Participation Facility, or Trust Property,
except where such noncompliance or release does not or would not, individually
or in the aggregate, result in a Mellon Material Adverse Effect.
(c) To the best knowledge of Mellon, there is no reasonable basis for any
suit, claim, action, or proceeding of a type described in Section 3.43(b),
except as would not, individually or in the aggregate, result in a Mellon
Material Adverse Effect.
(d) During the period of (i) Mellon's or any of the Mellon Subsidiaries'
ownership (including as trustee) or operation of any of their respective current
properties, (ii) Mellon or any of the Mellon Subsidiaries' participation in the
management of any Participation Facility, (iii) Mellon or any of the Mellon
Subsidiaries' holding of a security interest in a Loan Property, or (iv) Mellon
or any of the Mellon Subsidiaries' acting as a trustee or fiduciary with respect
to a Trust Property, to the best knowledge of Mellon, there has been no release
of Hazardous Material or oil in, on, under, or affecting such property,
Participation Facility, Loan Property or Trust Property, except where such
release does not or would not result, individually or in the aggregate, in a
Mellon Material Adverse Effect. Prior to the period of (w) Mellon or any of the
Mellon Subsidiaries' ownership (including as trustee) or operation of any of
their respective current properties, (x) Mellon or any of the Mellon
Subsidiaries' participation in the management of any Participation Facility, (y)
Mellon or any of the Mellon Subsidiaries acting as trustee or other fiduciary
with respect to Trust Property, or (z) Mellon or any of the Mellon Subsidiaries'
holding of a security interest in a Loan Property, to the best knowledge of
Mellon, there was no release of Hazardous Material or oil in, on, under, or
affecting any such property, Participation Facility, or Loan Property, except
where such release does not or would not result, individually or in the
aggregate, in a Mellon Material Adverse Effect.
(e) The following definitions apply for purposes of this Section 3.43: (i)
"Loan Property" means any property in which Mellon (or a Mellon Subsidiary)
holds a security interest for an amount greater than
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$2,500,000, and, where required by the context, includes the owner or operator
of such property, but only with respect to such property; (ii) "Participation
Facility" means any property in which Mellon (or a Mellon Subsidiary)
participates in the management of such property and, where required by the
context, includes the owner or operator of such property, but only with respect
to such property; (iii) "Trust Property" means any property with respect to
which Mellon (or a Mellon Subsidiary) acts or has acted as a trustee or other
fiduciary (including investment advisor), directly or indirectly, and includes
any trust or similar legal vehicle that owns or controls (or that owned or
controlled) such property and, where required by the context, includes the
trustee or other fiduciary, but only with respect to such property; and (iv)
"Hazardous Material" means any pollutant, contaminant, or hazardous substance
within the meaning of the Comprehensive Environmental Response, Compensation,
and Liability Act, 42 U.S.C. Section 9601 et. seq., or any similar federal,
state, or local law.
3.44. BOOKS OF ACCOUNT. The books of account of each Mellon Company have
been and will be maintained in compliance with all applicable legal and
accounting requirements in all material respects.
3.45. PROPERTIES. Except for such Liens and imperfections of title as
would not materially affect the value of personal or real property reflected in
the Mellon Financial Statements or acquired since the date of such statements
and which do not, individually or in the aggregate, materially interfere with or
impair the present and continued use of such property, each Mellon Company has
good title, free and clear of any Liens, to all of the personal and real
property reflected in the Mellon Financial Statements as being owned by it, and
to all personal and real property acquired by it since the respective dates of
the Mellon Financial Statements, except such personal and real property as has
been disposed of in the ordinary course of the business consistent with past
practice.
3.46. EMPLOYEE RELATIONSHIPS. There are no labor or collective bargaining
agreements, contracts or understandings with a labor union or labor organization
which are binding upon any Mellon Company, nor, to Mellon's knowledge is there,
as of the date hereof, any activity involving any employees of any Mellon
Company seeking to certify a collective bargaining unit or engaging in any other
union organizational activity.
3.47. FILINGS, ETC. (a) Since December 31, 1990, each Mellon Company has
had and now has all material permits, licenses, certificates of authority,
orders and approvals of, and has made all material filings, applications and
registrations with, federal, state, local or foreign governmental or regulatory
bodies, that are required in order to permit each of them to carry on its
respective business as presently conducted; and such permits, licenses,
certificates of authority, registrations, orders and approvals are in full force
and effect in all material respects. The conduct of its respective business by
each Mellon Company has not, since December 31, 1990, and currently does not,
violate or infringe any material applicable domestic (federal, state or local)
or foreign law, statue, ordinance, license, rule or regulation.
(b) There are no proceedings pending (or, to the knowledge of Mellon,
threatened, nor to the knowledge of Mellon has any event occurred or condition
exist that is reasonably likely to form the basis for any proceeding) that is
reasonably likely to result in the revocation, cancellation or suspension, or
any adverse modification, of any permit, license, certificate of authority,
order or approval referred to in Section 3.47(a), and the execution and delivery
of this Agreement and the consummation of any factions contemplated hereby will
not result in any such revocation, cancellation, suspension or modification.
(c) None of any Mellon Company, or any officer, director or employee
thereof, is a party or subject to any order, directive, decree, condition or
similar arrangement or action (other than exemptive orders) relating to its
business with or by any federal, state, local or foreign regulatory authority.
3.48. BROKERS AND FINDERS. Except for Goldman, Sachs & Co., Mellon has not
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finder's fees, and no broker or
finder has acted, directly or indirectly, for Mellon, in connection with this
Agreement or the transactions contemplated hereby.
3.49. ANTITAKEOVER PROVISIONS INAPPLICABLE. No "Business combination",
"moratorium", "control share", or other state antitakeover statute or regulation
(x) prohibits or restricts Mellon's ability to perform its obligations under
this Agreement, or its ability to consummate the transactions contemplated
hereby, (y) would have the effect of invalidating or voiding this Agreement, or
any provisions hereof, or (z) would subject
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Dreyfus to any material impediment or condition in connection with the exercise
of any of its rights under this Agreement.
3.50. APPROVAL OF MERGER. Approval of the Merger by the shareholders of
Mellon requires the affirmative vote of holders of in excess of 1/2 of the
issued and outstanding shares of Mellon Common Stock and Mellon Series D
Preferred Stock, voting as one class.
3.51. OWNERSHIP OF DREYFUS. No Mellon Company owns any shares of Dreyfus
Common Stock.
3.52. NON-COMPETITION AGREEMENTS. No Mellon Company is a party to any
contract containing covenants limiting the freedom of a Mellon Company to
compete either in any line of business or with any person or entity which would
have a Dreyfus Material Adverse Effect.
3.53. OPINION OF FINANCIAL ADVISOR. Mellon's Board of Directors has
received the opinion of Goldman, Sachs & Co., dated the date hereof, to the
effect that, as of the date hereof, the Exchange Ratio is fair from a financial
point of view to the stockholders of Mellon.
3.54. NO VIOLATION OF RIGHTS AGREEMENT. None of the execution or delivery
of this Agreement, the issuance of Mellon Common Stock to the holders of Dreyfus
Common Stock pursuant to this Agreement or any other transactions contemplated
by this Agreement will (x) cause a Separation Time (as defined in the
Shareholder Protection Rights Agreement dated as of August 15, 1989, the "Rights
Agreement") between Mellon and Mellon Bank as rights agent to occur or (y) cause
any person to be deemed an "Acquiring Person" within the meaning of the Rights
Agreement.
ARTICLE IV
CONDUCT OF BUSINESS PRIOR TO THE CLOSING
4.01. DREYFUS CONDUCT PRIOR TO CLOSING. Dreyfus hereby covenants and
agrees with Mellon that each Dreyfus Company shall operate its businesses only
in the usual, regular and ordinary course and substantially in accordance with
past practices, and shall use its best efforts to preserve intact its business
organization and assets and maintain its rights, franchises and business and
customer relations necessary to run the business as currently run in all
material respects. Without in any way limiting the foregoing, Dreyfus agrees not
to do any of the following without the prior written consent of Mellon:
(a) declare, set aside, make or pay any dividend or other distribution
in respect of its capital stock or other equity interests or otherwise
purchase or redeem, directly or indirectly, any shares of its capital stock
or other equity interests, except (i) regular quarterly cash dividends on
the Dreyfus Common Stock at a rate per quarter not in excess of $0.19 per
share;
(b) issue or sell any shares of its capital stock or any Rights,
except for issuances of shares of capital stock pursuant to employee stock
options heretofore granted under existing plans;
(c) incur any indebtedness for borrowed money, except in the ordinary
course of business consistent with past practice, or issue or sell any debt
securities;
(d) except in the ordinary course of business, mortgage, pledge or
otherwise subject to any material Lien, any of its properties or assets,
tangible or intangible;
(e) except where required in the exercise of its fiduciary
obligations, in the case of any Fund, request that any action be taken by
the Fund Board, other than routine actions that would not be reasonably
expected to have a Dreyfus Material Adverse Effect;
(f) pay any bonus to any officer, director, employee, sales
representative, agent or consultant, or grant to any officer, director,
employee, sales representative, agent or consultant any other increase in
compensation in any form except in accordance with past practice;
(g) except to the extent that Mellon has otherwise expressly agreed in
writing as of the date hereof, or as may be required by law, or as
otherwise specifically provided herein, adopt, or amend in any material
respect, any employment, bonus, profit-sharing, compensation, stock option,
pension, retirement, deferred
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compensation or other plan, agreement, trust, fund or arrangement for the
benefit of officers, directors, employees, sales representatives, agents or
consultants;
(h) amend its certificate of incorporation or materially amend its
by-laws or any other organizational documents, except as required by law;
(i) change in any material respect its accounting practices or
principles, except as required by law or GAAP;
(j) enter into or recommend that any Fund enter into any type of
business materially different from that conducted by a Dreyfus Company or a
Fund as of the date of this Agreement or enter into or participate in any
joint venture or partnership, except for new Funds created in the ordinary
course of business;
(k) other than in the ordinary course of business, acquire direct or
indirect control over any corporation or other organization or make any
acquisition of all or a substantial part of a business or operations having
in either case total assets of over $5,000,000, or dispose of any business
or operations having assets of over $5,000,000;
(l) agree or commit to do any of the foregoing; and
(m) to the extent that Mellon Bank is or, following the Closing,
Dreyfus will be, prohibited by law or regulation from owning the Dreyfus
Consumer Life Insurance Company, the Dreyfus Security Savings Bank, F.S.B.
or the Trotwood Corporation (the "Designated Entities") Dreyfus shall at
the request of Mellon dispose of such Designated Entities in an orderly
manner prior to the Closing; provided that no such disposition need be
effected until after the approval of the Merger by the shareholders of
Dreyfus and the determination by Dreyfus that there is a substantial
probability that the Merger shall occur. In addition, prior to the
Effective Time, Dreyfus shall cooperate with Mellon Bank to make
arrangements so that, after the Effective Time, Dreyfus Service Corp. shall
cease to act as an underwriter or distributor of securities to the extent
necessary to obtain the Bank Regulatory Approvals (as hereinafter defined).
4.02. MELLON CONDUCT PRIOR TO CLOSING. Mellon and Mellon Bank hereby agree
not to, and agree to cause each Mellon Subsidiary not to, do any of the
following without the prior written consent of Dreyfus:
(a) (as to Mellon only) declare, set aside, make or pay any dividend
or other distribution in respect of its capital stock or other equity
interests or otherwise purchase or redeem, directly or indirectly, any
shares of its capital stock or other equity interests (other than purchases
or redemptions which would not cause the Merger to fail to qualify as a
pooling of interests for accounting purposes), except regular quarterly
cash dividends on the Mellon Common Stock;
(b) issue or sell any shares of its capital stock or any Rights,
except for issuances of shares of common stock pursuant to employee stock
options under existing plans, conversion or exercise rights with respect to
outstanding securities of Mellon, and except for shares issued for fair
value;
(c) take any action that would materially delay or adversely affect
the ability of Mellon or Mellon Bank to obtain the approvals of any
governmental entities required to permit consummation of the Merger; and
(d) acquire (including, without limitation, by merger, consolidation,
or acquisition of stock or assets) any corporation, partnership, other
business organization or any division thereof or any assets, where such
acquisition would have a Mellon Material Adverse Effect.
In addition, prior to the Closing, Mellon will not take any action
requiring the approval of the shareholders of Mellon (other than the
transactions contemplated hereby) without first obtaining the consent of the
Chief Executive Officer of Dreyfus, which consent shall not be unreasonably
withheld.
4.03. CONSENTS AND APPROVALS. (a) Subject to the terms and conditions
herein provided, including, without limitation, Section 5.05, each of the
parties hereto agrees to cooperate with the other and use its best efforts to
take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable to consummate the transactions
contemplated by this Agreement as promptly as practicable,
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including, without limitation, under the Hart-Scott-Rodino Antitrust
Improvements Act (the "HSR Act") and all other applicable laws and regulations.
The parties hereto covenant and agree to take no action, (i) which would render
any of their representations and warranties contained herein untrue in any
material respect at and as of the Closing, (ii) which would materially and
adversely affect the ability of any of them to satisfy any of the conditions set
forth in Article VI, (iii) which would adversely affect the eligibility of the
transactions contemplated hereby for pooling-of-interests accounting treatment,
or (iv) which would cause such transactions to fail to be a tax free
reorganization within the meaning of Section 368(a)(1)(B) of the Code.
(b) To the extent that the rights of Dreyfus or any Dreyfus Subsidiary
under any agreement, including any Investment Contract, may not be assigned
without the consent or approval of another party thereto, Dreyfus shall use its
best efforts to obtain any such consent. Subject to Section 5.11, without
limiting the foregoing, Dreyfus as promptly as practicable, will (i) use its
best efforts to obtain, or cause to be obtained, all consents necessary to be
obtained in order to consummate the transactions contemplated hereby, (ii) use
its best efforts to prepare or cause to be prepared, file with or cause to be
filed with and cause to be cleared by the SEC and all other governmental and
regulatory agencies having jurisdiction thereover, as promptly as practicable
after the date hereof, all proxy solicitation materials required to be
distributed to Fund shareholders in connection with such consents, and (iii)
mail such proxy solicitation materials to such shareholders promptly and hold
meetings of shareholders of the Funds as promptly thereafter as practicable.
ARTICLE V
ADDITIONAL AGREEMENTS
5.01. CURRENT INFORMATION. During the period from the date of this
Agreement to the Closing, each party will cause one or more of their
representatives to confer on a regular and frequent basis with representatives
of the other party with respect to the status of its ongoing operations (and, in
the case of Dreyfus, the Funds). Each party will promptly notify the other party
of any material change in the normal course of its business (or, in the case of
Dreyfus, any Fund) or of any complaints from a governmental or regulatory
authority or a self-regulatory body, investigations or hearings (or
communications indicating that the same may be contemplated), or the institution
or the threat of any litigation that comes to their attention which would, in
any manner, challenge, prevent, alter or materially delay any of the
transactions contemplated hereby and each party will keep the other party
informed with respect to such events. Dreyfus and Mellon will notify each other
of the status of regulatory applications and third party consents related to the
transactions contemplated hereby.
5.02. ACCESS; INFORMATION. (a) Each party shall afford to the other
parties such access during normal business hours and without material business
interruption to its, its subsidiaries' books, records (including, without
limitation, Tax Returns and appropriate work papers of independent auditors
under normal professional courtesy), properties, and to such other information
as such party may reasonably request.
(b) All non-public records, books, contracts, instruments, computer data
and other data and information (collectively, the "Information") concerning the
other parties or the Funds furnished it pursuant to this Agreement shall be
subject to the confidentiality agreements between the parties previously entered
into. In the event of the termination of this Agreement, each party shall return
or destroy all Information furnished to such party and its representatives
hereunder and all analyses, compilations, data, studies other documents prepared
by such party or its representatives containing or based in whole or in part on
any such Information.
5.03. EFFECT OF INVESTIGATIONS. No investigation by the parties hereto
made heretofore or hereafter, or the provision of any documents, whether
pursuant to this Agreement or otherwise shall affect the representations and
warranties of the parties which are contained herein and each such
representation and warranty shall survive such investigation.
5.04. AGREEMENT OF AFFILIATES. Dreyfus shall deliver to Mellon, no later
than 30 days after the date of this Agreement, a letter identifying each person
whom it reasonably believes is an "affiliate" of Dreyfus for purposes of Rule
145 under the 1933 Act. Thereafter Dreyfus shall identify to Mellon each
additional person whom Dreyfus reasonably believes to have thereafter become an
"affiliate." Dreyfus shall use its best efforts to
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cause each person who is identified as an "affiliate" pursuant to the two
immediately preceding sentences to deliver to Mellon as promptly as practicable,
a written agreement, substantially in the form of Exhibit 5.04.
5.05. ACQUISITION PROPOSALS. Except as provided in Section 4.01(m),
Dreyfus agrees that neither it nor any of its officers, directors, employees,
agents or representatives (including, without limitation, any investment banker,
attorney or accountant retained by any of them) shall initiate, solicit or
encourage, directly or indirectly, any inquiries or the making of any proposal
or offer with respect to a merger, consolidation or similar transaction
involving, or any purchase of any substantial portion of the assets or any
substantial portion of the equity securities of Dreyfus or any Dreyfus
Subsidiary, or the assignment of any substantial portion of any investment
advisory, subadvisory, administrative or distribution agreement by any Dreyfus
Company or the entering into by any Fund of an investment advisory, subadvisory,
administrative or distribution agreement with any company other than a Dreyfus
Company (any such proposal or offer being hereinafter referred to as an
"Acquisition Proposal"); provided, however, that (i) Dreyfus may furnish or
cause to be furnished information concerning Dreyfus and its business,
properties or assets to a third party, (ii) Dreyfus may engage in discussions or
negotiations with a third party, (iii) following receipt of an Acquisition
Proposal, Dreyfus may take and disclose to its stockholders a position
contemplated by Rule 14e-2 or Rule 14d-9 under the Exchange Act or otherwise
make a disclosure to Dreyfus's stockholders and/or (iv) following receipt of an
Acquisition Proposal or withdrawal of (or failure to update at the time of
mailing of the Joint Proxy Statement) the opinions referred to in Section 3.28,
Dreyfus's Board of Directors may fail to make, withdraw or modify its
recommendation referred to in Section 5.11, but in each case referred to in the
foregoing clauses (i), (ii) and (iv), only to the extent that the Board of
Directors of Dreyfus shall determine on the basis of written advice from outside
counsel (who may be Dreyfus's regularly retained outside counsel) that such
action is necessary in order for the Board of Directors to act in a manner
consistent with its fiduciary obligations under applicable law. Dreyfus will
take the necessary steps to inform the appropriate individuals or entities
referred to in the first sentence hereof of the obligations undertaken in this
Section 5.05. For purposes of this Section 5.05, an Acquisition Proposal shall
include any proposal or arrangement whether oral or in writing, providing for,
requiring, or having the effect of requiring Dreyfus to, or contemplating that
Dreyfus would, abandon, terminate, or fail to consummate the Merger or any of
the other transactions contemplated under this Agreement. In the event that
Dreyfus shall receive an Acquisition Proposal or take any action described in
clause (i) or (ii) above, Dreyfus shall promptly inform Mellon of the material
details of such Acquisition Proposal and/or its actions in response thereto or
its actions described in clauses (i) and (ii) and shall thereafter keep Mellon
reasonably and promptly informed of all material facts and material
circumstances relating to said Acquisition Proposal and Dreyfus's actions
relating thereto (for purposes of this sentence, Dreyfus's actions shall include
the actions of its advisors, agents and representatives).
5.06. STOCK EXCHANGE LISTING. Mellon shall use its best efforts to list on
the NYSE, upon official notice of issuance, and Mellon shall reserve for
issuance, the Mellon Common Stock to be issued to the Dreyfus stockholders
hereunder.
5.07. NOTIFICATION OF CERTAIN MATTERS. Each party shall give prompt notice
to the other parties of: (i) any notice of, or other communication relating to,
a material default or event that, with notice or lapse of time or both, would
become a material default, under any material contract; (ii) any event, act or
omission which results or is likely to result in a Dreyfus Material Adverse
Effect or Mellon Material Adverse Effect (as the case may be) of which it has
knowledge; (iii) any failure to obtain any consent referred to in Section 4.03;
and (iv) any notice or other communication from any third party alleging that
the consent of such third party is or may be required in connection with any of
the transactions contemplated by this Agreement.
5.08. CUSTOMERS. After execution of this Agreement and prior to the
Closing, Dreyfus shall, after consultation with Mellon, notify the Fund Boards,
the Clients and any other customers of Dreyfus of the transactions contemplated
hereby.
5.09. QUALIFICATION OF THE FUNDS; FUND BOARDS. Subject to applicable
fiduciary duties to the Funds, Dreyfus will take no action (i) that would
prevent any Fund (other than a Fund which is a limited partnership) from
qualifying as a "regulated investment company" within the meaning of Section 851
of the Code, or (ii) that would be inconsistent with any Fund's prospectus and
other offering, advertising and marketing materials, where such action would in
either case have a Dreyfus Material Adverse Effect.
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5.10. PRESS RELEASES, ETC. Dreyfus and Mellon will consult with each other
as to the form, substance and timing of any press release or other public
disclosure of matters related to this Agreement, or any of the transactions
contemplated hereby and no such press release or other public disclosure shall
be made without the consent of the other party, which shall not be unreasonably
withheld or delayed; provided, however, that the parties may make such
disclosures as are required by law after making reasonable efforts in the
circumstances to consult in advance with the other parties.
5.11. REGISTRATION STATEMENT; SHAREHOLDER APPROVALS. As promptly as is
reasonably practical after the date of this Agreement, Mellon shall prepare and
file the Registration Statement with the SEC and Dreyfus and Mellon shall use
their best efforts to cause the Registration Statement to become effective under
the Securities Act. Mellon will take any action reasonably required to be taken
under the applicable state Blue Sky or securities laws in connection with the
issuance of the shares of its Common Stock upon consummation of the Merger. Each
party shall furnish all information concerning it and the holders of its capital
stock as the other party may reasonably request in connection with such action.
Dreyfus and Mellon shall each call its Shareholders Meeting to be held as soon
as reasonably practicable after the obtaining of the Bank Regulatory Approvals
(as defined below) for the purpose of voting upon the Merger (in the case of
Dreyfus) and the issuance of the Mellon Common Stock (in the case of Mellon)
(the "Relevant Matters"). In connection with the Shareholders Meetings, (i)
Dreyfus and Mellon shall prepare and file the Joint Proxy Statement with the SEC
and mail it to their respective shareholders; provided that the Joint Proxy
Statement shall not be required to be mailed prior to receipt of the approval of
the Office of the Comptroller of the Currency and, if required, the Board of
Governors of the Federal Reserve System, insofar as such approvals are required
with reference to the mutual fund activities currently conducted by the Dreyfus
Companies (the "Bank Regulatory Approvals") of the transactions contemplated
hereby, (ii) the parties shall furnish to each other all information concerning
them that the parties may reasonably request in connection with the Joint Proxy
Statement, (iii) the boards of directors of Dreyfus and Mellon shall recommend
to their respective shareholders the approval of the Relevant Matters, provided,
however, that such recommendation may not be made or may be withdrawn, modified,
or amended (A) after the receipt by Dreyfus of an Acquisition Proposal to the
extent the Board of Directors of Dreyfus reasonably determines, upon the written
advice of outside counsel (who may be Dreyfus's regularly retained outside
counsel) that such action is necessary in order for the Board of Directors of
Dreyfus to act in a manner which is consistent with its fiduciary obligations
under applicable law or (B) in the event the opinions referred to in Section
3.28 have been withdrawn (or shall fail to be updated at the time of mailing of
the Joint Proxy Statement), to the extent the Board of Directors of Dreyfus
reasonably determines, upon the written advice of outside counsel (who may be
Dreyfus's regularly retained outside counsel) that such action is necessary in
order for the Board of Directors of Dreyfus to act in a manner which is
consistent with its fiduciary obligations under applicable law, and (iv) except
as provided in the preceding clause (iii), Dreyfus and Mellon shall otherwise
use their best efforts to obtain such shareholders' approval. Dreyfus shall use
its best efforts to obtain the approvals referred to in Section 6.01(k) as soon
as reasonably practicable after the date of this Agreement; provided that no
mailing of proxy solicitation materials to Fund shareholders as referred to in
Section 4.03(b) need be made prior to receipt of the Bank Regulatory Approvals,
it being understood, however, that all filings and other actions will be taken
as soon as reasonably practicable so as to permit such mailings to be made as
soon as practicable after receipt of such Bank Regulatory Approvals. Any
information provided by Dreyfus to any Funds in connection with such approvals
will comply with all applicable legal requirements.
5.12. APPLICATIONS. Mellon shall prepare and file applications with the
appropriate governmental authorities seeking the approvals necessary for Mellon
to consummate the transactions contemplated by this Agreement.
5.13. SECTION 15(F). The parties each agree to use their respective best
efforts to assure compliance with the conditions of Section 15(f) of the
Investment Company Act as it applies to the transactions contemplated by this
Agreement. Mellon and Mellon Bank jointly and severally agree as follows:
(a) For a period of not less than three years after the Effective Time,
Mellon and Mellon Bank jointly and severally shall use their best efforts to
assure that no more than 25% of the members of the board of directors or
trustees of any Fund shall be "interested persons" (as defined in the Investment
Company Act) of the Dreyfus Companies or the Mellon Companies, or any entity
that succeeds the Dreyfus Companies or the
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Mellon Companies as investment advisor to each Fund or any person that before or
after the Effective Time was or is an affiliated person of any of the foregoing
within the meaning of the Investment Company Act. Without limiting the
generality of the foregoing, Mellon and Mellon Bank will not take, recommend or
endorse any action that would cause more than 25% of the number of any such
board to be "interested persons."
(b) Mellon and Mellon Bank each represent and warrant that there is no
express or implied understanding, arrangement or intention to impose an "unfair
burden" within the meaning of Section 15(f) of the Investment Company Act on any
of the Funds as a result of the transactions contemplated hereby, and that for a
period of not less than two years after the Effective Time neither of them will
take or recommend any act that would constitute an "unfair burden" on any Fund.
5.14. TAX INFORMATION. Dreyfus shall cooperate in obtaining from the
appropriate taxing authority for Mellon's review, Dreyfus's tax account
information for federal, state or local taxes, as requested by Mellon. Mellon
shall cooperate in obtaining from the appropriate taxing authority for Dreyfus's
review, Mellon's tax account information for federal, state or local taxes, as
requested by Dreyfus.
5.15. REORGANIZATION AND ACCOUNTING TREATMENT. The Mellon Companies will
take no action after the Effective Time which would cause the Merger to fail to
be characterized as a tax-free reorganization under Section 368 of the Code or
as a pooling of interests, for accounting purposes.
5.16. POST-MERGER OPERATIONS. Following the Effective Time, Mellon and
Mellon Bank shall take or cause to be taken the following actions:
(a) Throughout the two-year period following the Effective Time, the
Continuing Corporation will operate the business formerly operated by Dreyfus as
a direct or indirect subsidiary of Mellon to be headquartered in the New York
City Metropolitan Area and to be known under Dreyfus's current corporate name.
(b) Throughout the two-year period following the Effective Time, Howard
Stein shall be the Chief Executive Officer of the Continuing Corporation and
Joseph DiMartino shall be the President of the Continuing Corporation.
(c) As of the Effective Time, the Board of Directors of Mellon shall (i)
increase the size of the Mellon Board of Directors by three members and shall
appoint Mr. Stein, Mr. Joseph DiMartino and Mr. Edward J. McAniff to fill the
vacancies created thereby, and (ii) increase the size of the Executive Committee
of the Mellon Board of Directors by one member and appoint Mr. Stein to fill the
vacancy created thereby, to the extent that those persons are able and willing
to serve on the Mellon Board of Directors (and Mr. Stein is able and willing to
serve on the Executive Committee). In addition, persons who are members of
Dreyfus's Board of Directors immediately prior to the Effective Time shall
continue to serve on the Board of Directors of the Continuing Corporation
throughout the two-year period following the Effective Time, to the extent such
persons are able and willing to serve on the Board of Directors of the
Continuing Corporation, together with such additional persons as Mellon may
appoint to such Board.
(d) As of the Effective Time, an Executive Committee of the Dreyfus Board
of Directors shall be appointed. During that two-year period following the
Effective Time, unless otherwise determined by the Dreyfus Executive Committee,
the Dreyfus Executive Committee shall consist of four persons, of whom two shall
be Howard Stein and Joseph DiMartino, provided such persons are able and willing
to serve on the Dreyfus Executive Committee, and the other two shall be Frank V.
Cahouet and W. Keith Smith. The Executive Committee shall meet regularly (and in
any event not less than monthly).
ARTICLE VI
CONDITIONS
6.01. CONDITIONS TO EACH PARTY'S OBLIGATIONS TO CONSUMMATE. The respective
obligations of each party to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment or waiver at or prior to the
Closing of the following conditions:
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(a) REGULATORY REQUIREMENTS. The transactions contemplated by this
Agreement shall have been approved by any federal, state, foreign or local
governmental or regulatory authority or self-regulatory body the approval
of which is required to permit consummation thereof, including the Office
of the Comptroller of the Currency and, if required, the Board of Governors
of the Federal Reserve System, without the imposition of any condition,
requirement or commitment which, in the case of the obligations of the
Mellon Companies, is reasonably likely to have a Dreyfus Material Adverse
Effect or a Mellon Material Adverse Effect, and, in the case of the
obligations of Dreyfus, is reasonably likely to have a Mellon Material
Adverse Effect; and all waiting periods arising under the HSR Act or any
other applicable law shall have duly lapsed or been terminated.
(b) NO ORDERS. None of Mellon or Mellon Bank, Dreyfus or any Fund
shall be subject to any order, decree or injunction of a court or agency of
competent jurisdiction which either enjoins or prohibits the consummation
of any of the transactions contemplated by this Agreement.
(c) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the other party set forth or referred to in this Agreement
shall be true and correct both individually and in the aggregate in all
material respects as of the date of this Agreement and as of the Effective
Time with the same effect as though all such representations and warranties
had been made on and as of the Effective Time, except (i) for any such
representations and warranties made as of a specified date, which shall be
true and correct in all material respects as of such date, or (ii) as
expressly contemplated or permitted by this Agreement. For purposes hereof,
a representation or warranty shall be deemed to be correct in all material
respects unless a breach, if any, thereof (excluding for these purposes any
materiality limitations therein), has a Dreyfus Material Adverse Effect or
a Mellon Material Adverse Effect (as the case may be). The representations
and warranties shall be deemed in the aggregate to be true and correct in
all material respects unless the breaches of all the representations and
warranties, if any (excluding, for these purposes, any materiality
limitations therein) have, as a whole, a Dreyfus Material Adverse Effect or
a Mellon Material Adverse Effect (as the case may be). In addition, for
purposes hereof, in determining whether any Dreyfus Material Adverse Effect
has occurred, no consideration shall be given to any decline in assets
managed, administered or advised by the Dreyfus Companies due to the
termination or reduction by any competitors of the Mellon Companies of any
agreements, arrangements or other investment relationships between the
Dreyfus Companies or the Funds and such competitors.
(d) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
agreements and covenants of the other party to be performed and complied
with pursuant to this Agreement and the other agreements contemplated
hereby prior to the Effective Time shall have been duly performed and
complied with by it in all material respects.
(e) CERTIFICATES. Each of the parties shall have delivered to the
other a certificate, dated as of the Effective Time and signed on its
behalf by its chief executive officer and its chief financial officer, to
the effect that the conditions of its obligations set forth in Sections
6.01(c) and (d) of this Agreement with respect to it have been satisfied.
(f) SHAREHOLDER APPROVALS. The shareholders of Dreyfus and Mellon
shall have approved the Relevant Matters, as and to the extent required by
law and by the provisions of any governing instruments. In addition, the
holders of the requisite percentage of shares of Dreyfus Common Stock and
Mellon Common Stock sufficient, either alone or in combination with other
factors, to preclude accounting for the Merger as a pooling of interests or
to obtain tax free treatment for the Merger under Section 368(a)(1)(B) of
the Code shall not have perfected dissenters' rights under applicable law
with respect to the adoption of this Agreement.
(g) ACCOUNTANTS' LETTERS. Each of the parties shall have received
letters, dated as of the Effective Time, from KPMG Peat Marwick and Ernst &
Young to the effect that the Merger will qualify for pooling of interests
accounting treatment under Accounting Principles Board Opinion No. 16 if
closed and consummated in accordance with this Agreement.
(h) TAX MATTERS. Each party shall have received a tax opinion
addressed to it from its outside counsel to the effect that, subject to the
customary representations and assumptions referred to therein,
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(a) the Merger will constitute a tax-free reorganization within the meaning
of Section 368(a)(1)(B) of the Code, (b) the exchange in the Merger of the
Mellon Common Stock for Dreyfus Common Stock will not give rise to income,
gain, or loss to Dreyfus, Mellon, or the shareholders of Dreyfus with
respect to such exchange, (c) the adjusted tax basis of the Mellon Common
Stock received by Dreyfus shareholders who exchange all of their Dreyfus
Common Stock in the Merger will be the same as the adjusted tax basis of
the shares of the Dreyfus Common Stock surrendered in exchange therefor,
and (d) the holding period of the shares of the Mellon Common Stock
received in the Merger will include the period during which the shares of
Dreyfus Common Stock surrendered in exchange therefor were held, provided
such shares of Dreyfus Common Stock were held as capital assets at the
Effective Time.
(i) REGISTRATION STATEMENT; NEW YORK STOCK EXCHANGE. The Registration
Statement shall be effective under the Securities Act and no stop orders
suspending the effectiveness of the Registration Statement shall be in
effect and no proceedings for such purpose shall be pending before or
threatened by the SEC. The shares of Mellon Common Stock issuable in the
Merger shall have been approved for listing upon notice of issuance.
(j) LEGAL OPINIONS. Each party shall have received written opinions,
dated the Effective Time, from counsel for the other party in a form
reasonable and normal for the transactions contemplated hereby.
(k) CONSENTS. Dreyfus shall have obtained all the consents or
approvals to the proposal referred to in Section 4.03(b) of the Fund Boards
and Fund shareholders of Measurement Funds (as defined below) holding not
less than 90% of the aggregate net assets as of the close of business on
December 3, 1993 for all the Measurement Funds, each in form and substance
reasonably satisfactory to Mellon. For purposes of this Agreement,
"Measurement Funds" shall mean all Funds managed, administered or advised
by Dreyfus, except for those Funds managed, administered or advised by
Dreyfus for First of Chicago, First Interstate Bank, and First Nationwide.
ARTICLE VII
TERMINATION
7.01. TERMINATION. This Agreement may, by written notice, be terminated at
any time prior to the Closing:
(a) by the mutual consent of the Board of Directors of Dreyfus and the
Board of Directors of Mellon; or
(b) by either Dreyfus or Mellon, at any time after December 31, 1994
by action of its Board of Directors (or a duly constituted committee of the
Board, if the Closing shall not theretofore have occurred; or
(c) by either Dreyfus or Mellon in the event of the breach by the
other party of representations, warranties or agreements contained herein
that would create a Dreyfus Material Adverse Effect or Mellon Material
Adverse Effect (as the case may be) and which cannot be or has not been
cured within 30 days after written notice to the party committing such
breach; or
(d) by Mellon, if shareholders of one or more Measurement Funds
representing more than 10% of the aggregate net assets as of the close of
business on December 3, 1993 for all of the Measurement Funds, shall have
met and failed to approve the proposal recommended pursuant to Section
4.03(b); or
(e) by either Dreyfus or Mellon, if any permanent injunction or action
by any court or other governmental agency or body of competent jurisdiction
enjoining, denying approval of, or otherwise prohibiting the consummation
of the Merger shall have become final and nonappealable; or
(f) by either Dreyfus or Mellon, if this Agreement and the Merger
shall fail to receive the requisite vote for approval and adoption by the
shareholders of Dreyfus or Mellon at the Shareholders Meetings;
(g) by Dreyfus if Dreyfus's Board of Directors shall have approved an
Acquisition Proposal after determining, upon the basis of written advice of
outside counsel (who may be Dreyfus's regularly retained
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outside counsel), that such approval is necessary in the exercise of its
fiduciary obligation under applicable law.
Notwithstanding the foregoing, a party in material breach of any provision
of this Agreement may not terminate this Agreement pursuant to this Section
7.01.
7.02. FEE. (a) Dreyfus hereby agrees to pay Mellon, subject to the terms
and conditions of this Section 7.02, upon the occurrence of the events specified
in this Section, a fee (the "Fee") of $ 50,000,000.
(b) Mellon shall be entitled to payment of the Fee following the occurrence
of a Purchase Event (as defined below); provided that Mellon shall have sent
written notice of such entitlement within 90 days following such Purchase Event.
Such payment shall be made in immediately available funds within five business
days after delivery of such notice. The right to receive the Fee shall terminate
if any of the following (a "Fee Termination Event") occurs prior to a Purchase
Event: (i) the Effective Time of the Merger, (ii) termination of this Agreement
in accordance with the provisions hereof if such termination occurs prior to the
occurrence of a Preliminary Purchase Event, except a termination by Mellon
pursuant to Section 7.01(c) hereof (unless the breach by Dreyfus is
non-volitional), or (iii) the passage of twelve months after termination of this
Agreement if such termination follows the occurrence of a Preliminary Purchase
Event or a termination by Mellon pursuant to Section 7.01(c) of this Agreement
(unless the breach by Dreyfus is non-volitional) (provided that if a Preliminary
Purchase Event continues or occurs beyond such termination, the Fee Termination
Event shall be twelve months from the expiration of the Last Preliminary
Purchase Event but in no event more than 18 months after such termination). The
"Last Preliminary Purchase Event" shall mean the last Preliminary Purchase Event
to expire.
(c) The term "Preliminary Purchase Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Dreyfus or any of the Dreyfus Subsidiaries without having received
Mellon's prior written consent, shall have entered into an agreement to
engage in an Acquisition Transaction (as defined below) with any person
(the term "person" for purposes of this Agreement having the meaning
assigned thereto in Sections 3(a)(9) and 13(d)(3) of the Securities
Exchange Act of 1934, as amended (the "Securities Exchange Act") and the
rules and regulations thereunder) other than Mellon or any of the Mellon
Subsidiaries or the Board of Directors of Dreyfus shall have approved or
recommended that the shareholders of Dreyfus approve or accept any
Acquisition Transaction with any person other than Mellon or any Mellon
Subsidiary. For purposes of this Agreement, "Acquisition Transaction" shall
mean (A) a merger or consolidation, or any similar transaction, involving
Dreyfus or any Dreyfus Material Subsidiary, (B) a purchase, lease or other
acquisition of all or substantially all of the assets of Dreyfus or any
Dreyfus Material Subsidiary, (C) a purchase or other acquisition (including
by way of merger, consolidation, share exchange or otherwise) of securities
representing 10% or more of the voting power of Dreyfus or a Dreyfus
Material Subsidiary; provided that the term "Acquisition Transaction" does
not include any internal merger or any divestiture pursuant to Section 4.01
(m) or (D) any substantially similar transaction;
(ii) (A) Any person (other than Mellon or any Mellon Subsidiary) shall
have acquired beneficial ownership or the right to acquire beneficial
ownership of 10% or more of the outstanding shares of Dreyfus Common Stock
(the term "beneficial ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the Securities Exchange Act,
and the rules and regulations thereunder), or (B) any group (as such term
"group" is defined in Section 13(d)(3) of the Securities Exchange Act),
other than a group of which Mellon or any Mellon Subsidiary is a member,
shall have been formed that beneficially owns 10% or more of the Dreyfus
Common Stock then outstanding;
(iii) Any person other than Mellon or any Mellon Subsidiary shall have
made a bona fide proposal to Dreyfus or its shareholders, by public
announcement or written communication that is or becomes the subject of
public disclosure, to engage in an Acquisition Transaction (including,
without limitation, any situation which any person other than Mellon or any
Mellon Subsidiary shall have commenced (as such term is defined in Rule
14d-2 under the Securities Exchange Act) or shall have filed a registration
statement under the Securities Act with respect to, a tender offer or
exchange offer to purchase any
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shares of Dreyfus Common Stock such that, upon consummation of such offer,
such person would own or control 25% or more of the then outstanding shares
of Dreyfus Common Stock (such an offer being referred to herein as a
"Tender Offer" or an "Exchange Offer", respectively));
(iv) After a proposal is made by a third party to Dreyfus or its
shareholders to engage in an Acquisition Transaction, Dreyfus shall have
breached any covenant or obligation contained in this Agreement and such
breach would entitle Mellon to terminate this Agreement under Section
7.01(c) of this Agreement (without regard to the cure periods provided for
therein unless such cure is promptly effected without jeopardizing
consummation of the Merger pursuant to the terms of this Agreement) and
such breach shall not have been cured within 30 days after written notice
thereof from Mellon;
(v) Any person other than Mellon or any Mellon Subsidiary, other than
in connection with a transaction to which Mellon has given its prior
written consent, shall have filed an application or notice with a
governmental authority or regulatory or administrative agency or
commission, domestic or foreign, for approval to engage in an Acquisition
Transaction; or
(vi) the holders of Dreyfus Common Stock shall not have approved this
Agreement at the meeting of such stockholders held for the purpose of
voting on this Agreement, such meeting shall not have been held or shall
have been canceled prior to termination of this Agreement or Dreyfus's
Board of Directors shall have withdrawn or modified in a manner adverse to
Mellon the recommendation of Dreyfus's Board of Directors with respect to
this Agreement, in each case after it shall have been publicly announced
that any person (other than Mellon or any Mellon Subsidiary) shall have (A)
made, or disclosed an intention to make, a proposal to engage in an
Acquisition Transaction or (B) commenced a Tender Offer or filed a
registration statement under the Securities Act with respect to an Exchange
Offer.
(d) The Term "Purchase Event" shall mean either of the following events or
transactions occurring after the date hereof:
(i) The acquisition by any person, other than Mellon or any Mellon
Subsidiary, alone or together with such person's affiliates and associates,
or any group (as defined in Section 13(d)(3) of the Securities Exchange
Act), of beneficial ownership of 25% or more of the then Dreyfus Common
Stock; or
(ii) The occurrence of a Preliminary Purchase Event described in
Section 7.02(c)(i) except that the percentage referred to in clause (C)
shall be 25%.
(e) Dreyfus shall notify Mellon promptly in writing of its knowledge of the
occurrence of any Preliminary Purchase Event or Purchase Event; provided,
however, that the giving of such notice by Dreyfus shall not be a condition to
the right of Mellon to the Fee.
7.03. EFFECT OF TERMINATION AND ABANDONMENT. In the event of termination of
this Agreement and abandonment of the transactions contemplated hereby pursuant
to this Article VII, except as otherwise specifically provided herein, no party
hereto (or any of its directors, officers or employees) shall have any liability
or further obligation to any other party to this Agreement, except that nothing
herein will relieve any party from liability for any breach of this Agreement.
ARTICLE VIII
INDEMNIFICATION AND INSURANCE
8.01 INDEMNIFICATION AND INSURANCE. (a) Upon consummation of the Merger and
for a period of six years after the Effective Time, to the fullest extent
permitted by law, Mellon and Mellon Bank jointly and severally shall indemnify,
defend and hold harmless each person who is now, or has been at any time prior
to the date hereof or who becomes prior to the Effective Time, a director
(whether elected or appointed), officer or employee of Dreyfus or any Dreyfus
Company or serves or has served at the request of any Dreyfus Company in any
capacity with any other person (collectively, the "indemnitees") against any and
all claims, damages, liabilities, losses, costs, charges, expenses (including,
without limitation, reasonable costs of investigation, and the reasonable fees
and disbursements of legal counsel and other advisers and experts as incurred),
judgments, fines, penalties and amounts paid in settlement, asserted against,
incurred by or imposed upon any Indemnitee,
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(i) in connection with, arising out of or relating to any threatened, pending or
completed claim, action, suit or proceeding (whether civil, criminal,
administrative of investigative), including, without limitation, any and all
claims, actions, suits, proceedings or investigations by or on behalf of or in
the right of or against Dreyfus or any Dreyfus Company or their affiliates, or
by any present or former shareholder of Dreyfus (collectively, "Claims"),
including, without limitation, any claim which is based upon, arises out of or
in any way relates to the Merger, the Registration Statement, the solicitation
of the approval of the Funds contemplated by Section 4.03(b), this Agreement,
any of the transactions contemplated by this Agreement (including, without
limitation, any schedule or appendix hereto), the Indemnitee's service as a
member of Dreyfus's Board of Directors or any committee of Dreyfus's Board of
Directors, the events leading up to the execution of this Agreement or related
thereto and any breach of any duty in connection with any of the foregoing, and
(ii) in connection with, arising out of or relating to the enforcement of the
obligations of Mellon and Mellon Bank set forth in this Section 8.01, in each
case to the fullest extent permitted by law under any indemnification agreement
between Dreyfus and such Indemnitee, Dreyfus's Certificate of Incorporation or
its By-laws (and shall also advance expenses as incurred to the fullest extent
permitted under any thereof).
(b) Upon consummation of the Merger, and from and after the Effective Time,
to the fullest extent permitted by law, Mellon shall assume and honor any
obligation of Dreyfus immediately prior to the Effective Time, to the fullest
extent permitted by law, with respect to the indemnification of the Indemnitees
arising out of Dreyfus's Certificate of Incorporation or By-Laws or any
indemnification agreement to which Dreyfus and any Indemnitee are parties as of
the date hereof as if such obligations were pursuant to a contract or
arrangement between Mellon and such Indemnitees.
(c) In the event either of Mellon or Mellon Bank or any of their respective
successors or assigns (i) reorganizes or consolidates with or merges into or
enters into another business combination transaction with any other person or
entity and is not the resulting, continuing or surviving corporation or entity
of such consolidation, merger or transaction, or (ii) liquidates, dissolves or
transfers all or substantially all of its properties and assets to any person or
entity, then, and in each such case, proper provision shall be made so that the
successors and assigns of Mellon or Mellon Bank, as the case may be, assume the
obligations set forth in this Section 8.01.
(d) Mellon shall cause Dreyfus's current officers' and directors' liability
insurance to be continuously maintained in full force and effect without
reduction of coverage for a period of six years after the Effective time
(provided that Mellon may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are not materially
less advantageous).
(e) This Section 8.01 shall be construed as an agreement, as to which the
Indemnitees are intended to be third-parties beneficiaries, between Mellon and
Mellon Bank and the Indemnitees, as unaffiliated third parties, and is not
subject to any limitations to which Mellon or Mellon Bank may be subject in
indemnifying its own directors, officers, employees, agents and other persons
who serve at the request of Mellon or Mellon Bank.
ARTICLE IX
EMPLOYEE BENEFITS
9.01 INITIAL EMPLOYEE BENEFITS AND OTHER MATTERS.
(a) IN GENERAL. Continuing Corporation shall offer continued employment on
and after the Effective Time to all common law employees of Dreyfus who were
such immediately prior to the Effective Time (the "Continued Employees"). Except
as otherwise provided in this Article IX, from the Effective Time until the date
which is two years subsequent to the Effective Time, (which date shall be
hereinafter referred to as the "Applicable Benefit Changeover Date"), Continuing
Corporation shall provide such Continued Employees with each Dreyfus Benefit
Plan without adverse change thereto. Without limiting the generality of the
foregoing and except as otherwise provided in this Article IX, each executive
compensation or equity program (including, but not limited to, executive bonus
plans, supplemental executive retirement plans and executive incentive
compensation programs) and tax qualified plan maintained by any Dreyfus Company
immediately before the Effective Time, except as otherwise specifically provided
herein, shall be maintained on and after the Effective Time on substantially the
same terms and conditions.
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(b) LIMITATIONS. Notwithstanding anything in subsection (a) to the
contrary, any such offer of continued employment shall not be construed to limit
the ability of Continuing Corporation to terminate Continued Employees at any
time for any reason.
9.02 EMPLOYEE BENEFIT CHANGEOVER DATE.
(a) IN GENERAL. Mellon and Continuing Corporation, as the case may be,
hereby agree that from and after the Applicable Benefit Changeover Date,
Continued Employees shall be eligible to participate in the pension, welfare
and/or fringe benefit plans (or any other plans, programs, etc., in the nature
of a Dreyfus Benefit Plan or Mellon Benefit Plan) which are generally available
to employees of Mellon and Continuing Corporation, on the same basis as such
benefits are otherwise made available to similarly situated employees of Mellon
and Continuing Corporation. Except as otherwise provided in Section 9.03, such
Continued Employees will be credited for their length of service with Dreyfus
for all purposes, including eligibility, accrual, and vesting, under all such
employee pension, welfare and/or fringe benefit (or such other) plans. Credit
shall also be given for all purposes relating to waiting periods, deductibles,
and co-payments.
(b) EXCEPTIONS. Notwithstanding anything in subsection (a) to the contrary,
(i) at any time of reference, the weeks of vacation provided by Mellon or
Continuing Corporation, as the case may be, to a Continued Employee with less
than 25 years of service with Dreyfus shall equal the greater of (A) the weeks
of vacation (not in excess of 4) provided to such employee by Continuing
Corporation on the day before the Applicable Benefit Changeover Date, and (B)
the maximum vacation which may be earned by similarly situated employees of
Mellon or Continuing Corporation; (ii) a Continued Employee with 25 or more
years of service with Dreyfus shall be entitled to the weeks of vacation to
which the Continued Employee was entitled on the day before the Applicable
Benefit Changeover Date; with such entitlement continuing through the last day
of the calendar year which includes the applicable Benefit Changeover Date;
(iii) on or after the first day of the calendar year following the calendar year
which includes the Applicable Benefit Changeover Date, such a Continued Employee
with 25 or more years of service will be entitled to the vacation which may be
earned by similarly situated employees of Mellon or Continuing Corporation;
provided that, except as required by applicable laws, in no event shall Mellon
or Continuing Corporation be required to compensate Continued Employees,
regardless of their years of service with Dreyfus, for unused weeks of vacation
to which they were entitled on the day before the Applicable Benefit Changeover
Date; and (iv) all preexisting illnesses, injuries and pregnancies of Continued
Employees that would have been covered under Mellon's Welfare Benefit Plans but
for their occurrence prior to the Applicable Benefit Changeover Date will be
covered under the comparable plans of Mellon or Continuing Corporation from and
after the Applicable Benefit Changeover Date.
9.03 RETIREMENT PLAN MATTERS. As of the Applicable Benefit Changeover Date,
(a) Continuing Corporation shall amend the Dreyfus Pension Plan ("Dreyfus
Retirement Plan") to provide Continued Employees with future benefits comparable
to those provided to similarly situated employees of Mellon and Continuing
Corporation under the Mellon Pension Plan ("Mellon Retirement Plan"); or (b)
Mellon shall amend the Mellon Retirement Plan to cover Continued Employees as of
the Applicable Benefit Changeover Date; or (c) Mellon or Continuing Corporation
shall take such action as it, in its sole discretion, determines to be necessary
or appropriate to provide benefits to Continued Employees participating in the
Dreyfus Retirement Plan which are comparable to those then provided to similarly
situated participants in the Mellon Retirement Plan; provided, however, that any
such action taken pursuant to (a), (b) or (c) shall provide that Continued
Employees will receive accruals and credit for their service and earnings for
all periods of employment with Dreyfus to the same extent and for the same
purposes as would have been recognized under the Dreyfus Pension Plan. To the
extent that Continued Employees are thereafter paid benefits from the Mellon
Pension Plan, such benefits shall be offset by such benefits, if any, paid or
payable from the Dreyfus Retirement Plan.
9.04 RETIREMENT SAVINGS PLAN MATTERS. Continued Employees (and any newly
eligible employee) shall receive the same contribution levels under the Dreyfus
Retirement Profit-Sharing Plan ("Dreyfus Profit-Sharing Plan") as a percentage
of compensation for all plan years ending on or before the Applicable Benefit
Changeover Date as were provided for the 1992 plan year. As of the Applicable
Benefit Changeover Date, (a) Continuing Corporation shall amend the Dreyfus
Profit-Sharing Plan to provide Continued Employees with
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future contributions comparable to those provided to similarly situated
employees of Mellon and Continuing Corporation under the Mellon Retirement
Savings Plan ("Mellon Retirement Savings Plan"); or (b) Mellon shall cause the
Mellon Retirement Savings Plan to cover Continued Employees as of the Applicable
Benefit Changeover Date; or (c) Mellon or Continuing Corporation shall take such
action as it, in its sole discretion, determines to be necessary or appropriate
to provide contributions to Continued Employees participating in the Dreyfus
Profit-Sharing Plan which are comparable to those then provided to similarly
situated participants in the Mellon Retirement Savings Plan and all amounts held
under the Dreyfus Profit-Sharing Plan as of the Applicable Benefit Changeover
Date, other than at a participant's direction or which are distributed or are
required to be distributed under the Code upon termination, shall be maintained
on and after the Effective Time in a plan that is qualified under Section 401(a)
of the Code and which provides for participant investment direction in
accordance with Section 404(c) of ERISA (with an employer securities option to
the extent of any investment option in employer securities as of the Effective
Time).
9.05. NONQUALIFIED EXCESS PLAN. Without limiting the generality of the
obligation above of Continuing Corporation to continue the Dreyfus excess plan
as an active plan through the Applicable Benefit Changeover Date, all amounts
credited under the Dreyfus excess plan shall become fully vested as to each
participant as of the Effective Time and paid out in accordance with the plan.
9.06. ADDITIONAL STOCK OPTIONS, STOCK PURCHASE RIGHTS OR RELATED INCENTIVE
PAYMENTS. Except as otherwise provided below, absent prior express written
approval of Mellon, during the period commencing on the date of this Agreement
and ending on the Effective Time, Dreyfus shall grant no new options or rights
under, repurchase any outstanding shares of Dreyfus under, or accept any new
participants in any stock option, stock purchase rights and related incentive
payment plans.
9.07. STOCK OPTIONS, ETC. Any nonqualified options to purchase Dreyfus
Common Stock shall be converted at the Effective Time at the Exchange Ratio into
otherwise identical options to purchase Mellon Common Stock (with an appropriate
adjustment in the option exercise price per share). Dreyfus will use its best
efforts to cause the holders of each outstanding option under the Dreyfus
Incentive Stock Option Plan (the "Book Value Plan") to consent, on or before 30
days prior to the Effective Time, to the conversion of such options, at the
Effective Time, into Mellon Common Stock having a fair market value equal to the
value of such options (as agreed upon by Mellon and Dreyfus). Dreyfus will use
its best efforts to cause the holders of each outstanding share of restricted
Dreyfus Common Stock issued under the Book Value Plan to consent, on or before
30 days prior to the Effective Time, to the conversion of such share, at the
Effective Time, into shares of Mellon Common Stock having a fair market value
equal to the value of such share (as agreed upon by Mellon and Dreyfus). On or
before the date which is 45 days before the Effective Time, Mellon shall file
with the SEC, and cause to become effective under the Securities Act, a
registration statement on Form S-8 with respect to any Mellon Common Stock that
is subject to options under any plan described in this Section 9.07 or that is
to be issued in exchange for any options or shares of Dreyfus Common Stock
described in this Section 9.07.
9.08. SALARIES AS OF THE CLOSING DATE. The salaries of Continued Employees
shall be determined (subject to the following) by the management of Dreyfus
prior to the Effective Time, and immediately following the Effective Time the
salaries so determined shall be subject to review by the Executive Committee of
the Dreyfus Board of Directors described in Section 5.16(d) and ratification by
the Board of Directors of Mellon.
9.09. RETENTION PLAN. Mellon and Dreyfus shall establish or cause to be
established a Retention Plan (the "Retention Plan"). Only those certain
employees of Dreyfus determined to be essential to the operation of Dreyfus and,
after the Effective Time, Continuing Corporation, who are expressly designated
as a result of the mutual agreement of Mellon and Dreyfus during the period
commencing on the date of this Agreement and ending at the Effective Time and
who are duly notified, in writing, of such designation (the "Retention Plan
Employees") shall be eligible to participate in the Retention Plan. The
Retention Plan shall provide for Mellon and Dreyfus to mutually agree on the
aggregate dollar amount or "pool" of potentially available retention bonus
awards (the "Retention Pool") and authorize the management of Mellon, Dreyfus
and their successors, or their delegates, to mutually agree to make individual
awards of a share or interest in such Retention Pool to each Retention Plan
Employee. Each Retention Plan Employee who becomes a Continued Employee at the
Effective Time shall be entitled to a cash payment in an amount equal to
one-half ( 1/2) of his
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interest in the Retention Plan determined and paid effective as of six months
following the Effective Time. Unless earlier forfeited as hereinafter provided,
an amount equal to their remaining interest ("Remaining Interest") in the
Retention Pool will be paid to each Retention Plan Employee effective as of the
earlier of (i) or (ii) where (i) is the last day of the eighteen (18) month
period commencing at the Effective Time and (ii) is the date, if ever, of the
affected Retention Plan Employee's involuntary termination of employment from
the Continuing Corporation (the "Retention Period"). Any Retention Plan Employee
who voluntarily terminates his or her employment with Continuing Corporation or
whose employment is terminated by Continuing Corporation for cause shall forfeit
any and all rights to receive his Remaining Interest. The Retention Plan shall
provided that a "voluntary" termination shall not include a termination during
the Retention Period which occurs after the date: (A) the sum of a Retention
Plan Employee's base compensation plus cash bonus, exclusive of pension, welfare
and fringe benefits, is reduced below an amount equal to eighty percent (80%) of
such amount determined as of the day before Closing; (B) a Retention Plan
Employee is relocated to an office or facility beyond thirty (30) miles from his
previous workplace; (C) a Retention Plan Employee retires on or after the normal
retirement age established in the retirement plans generally available to
employees of Continuing Corporation; and (D) of such other events or
circumstances which Mellon and Dreyfus may mutually agree may be necessary or
appropriate in order to effectuate the intent of the Retention Plan. Amounts
payable under the Retention Plan shall be in addition to any amounts payable
under any severance benefits program.
9.10. CERTAIN BONUS, INCENTIVE, PERFORMANCE, ETC. PLANS. For any bonus,
incentive, performance, etc. plan for which payments are determined with respect
to a period, the period shall be deemed to end at the Effective Time. The level
of any conditions required under such a plan for payment of benefits, and the
amount of the payments, shall be prorated to reflect the shortened period.
9.11. SEVERANCE BENEFITS. Notwithstanding anything to the contrary in this
Article IX, Mellon or Continuing Corporation, as the case may be, shall provide
each Continued Employee who is terminated from employment with Continuing
Corporation after the Effective Time with the severance benefits provided to
similarly situated employees of Mellon under the Mellon Displacement Policy,
Policy Number CPP-504-20, revised 09/09/91 or, if superior, the benefits
provided under the Dreyfus severance program immediately prior to the Effective
Time.
9.12 AMENDMENT OF CONTINGENT BENEFIT PLAN. Effective as of the Effective
Time, Dreyfus shall amend the Dreyfus Contingent Benefit Plan ("Contingent
Plan") with respect to each Dreyfus employee who is both a beneficiary with an
outstanding Contingent Benefit Agreement under the Contingent Plan ("Contingent
Plan Beneficiary") and who agrees to such amendments to provide (capitalized
terms not otherwise defined shall have the meanings ascribed to them in the
Contingent Plan): (i) that the definition of a "Change of Control" shall not
include the transactions contemplated by this Agreement (except with respect to
the operation of the proviso contained at the end of the first sentence of
paragraph 9 of the Contingent Plan, which proviso shall continue in effect);
(ii) that all Contingent Plan Beneficiaries who become Continued Employees of
Continuing Corporation at the Effective Time shall be paid an amount equal to
one-half (1/2) of the value of their Units determined and paid effective at the
Effective Time; (iii) that an amount equal to the remaining one-half (1/2) of
the value of their Units determined in (ii) will be paid effective as of the
earlier of (A) or (B) where (A) is the last day of the eighteen (18) month
period commencing at the Effective Time and (B) is the date, if ever, of the
affected Contingent Plan Beneficiary's termination of employment from Continuing
Corporation (including, without limitation, the affected Contingent Plan
Beneficiary's death or disability); (iv) to provide that the payments described
in (ii) and (iii) will be unconditional (including, without limitation, without
regard to Paragraph 8 of the Contingent Plan); (v) to provide that other than
the payments described in (ii) and (iii), no other payments or benefits will be
made or provided under or pursuant to the Contingent Plan as a result of the
transactions contemplated by this Agreement (except with respect to the
operation of the proviso contained at the end of the first sentence of paragraph
9 of the Contingent Plan, which proviso shall continue in effect); (vi) that no
Contingent Plan Beneficiary receiving the payments described in (ii) and (iii)
shall be entitled to any other Contingent Benefits as a result of a Change of
Control occurring after the Effective Time; and (vii) to provide that the
Contingent Plan, as amended herein, shall terminate with the last payment made
to a Contingent Plan Beneficiary (except with respect to the operation of the
proviso contained at the end of the first sentence of paragraph 9 of the
Contingent Plan, which proviso
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<PAGE> 143
shall continue in effect); provided that no amount shall be payable under this
Section 9.12 that, together with any other "parachute payments" (as defined in
Section 280G of the Code), would be in excess of 2.99 times a participant's
"base amount" (as defined in Section 280G of the Code), as determined in good
faith by Dreyfus prior to the Effective Time. Mellon Bank, as sole stockholder
of the Continuing Corporation, shall approve the foregoing amendments to the
Contingent Plan.
ARTICLE X
GENERAL PROVISIONS
10.01. SURVIVAL. If the Closing occurs, no representations, warranties,
agreements and covenants contained in this Agreement shall survive the Effective
Time, except as otherwise explicitly stated herein (including but not limited to
Sections 2.03, 2.04, 2.05, 5.13, 5.16, 8.01 and Article IX). If this Agreement
is terminated prior to the Effective Time, the agreements of the parties in
Sections 5.02(b), 7.02, 7.03 and 10.05 shall survive.
10.02. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly received (i) on the date given if
delivered personally or by cable, telegram, telex or telecopy or (ii) on the
date received if mailed by registered or certified mail (return receipt
requested), to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
<TABLE>
<C> <S>
(a) if to Mellon: James M. Gockley, Esq.
Mellon Bank Corporation
One Mellon Bank Center
Room 1910 Pittsburgh, PA 15258
(412) 234-5222
Fax: (412) 234-8417
Copies to: Thomas Todd, Esq.
Reed Smith Shaw & McClay
435 Sixth Avenue
Pittsburgh, PA 15219
(412) 288-3264
Fax: (412) 288-3063
and
(b) if to Dreyfus: Daniel C. Maclean, Esq.
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
(212) 922-6020
Fax: (212) 922-6038
Copies to: John A. Healy, Esq.
Rogers & Wells
200 Park Avenue
New York, NY 10166
(212) 878-8281
Fax: (212) 878-8375
</TABLE>
10.03. COUNTERPARTS. This Agreement may be executed in counterparts
(including executed counterparts delivered and exchanged by facsimile
transmission) each of which shall be deemed to constitute an original, but all
of which together shall constitute one and the same instrument.
10.04. GOVERNING LAW. This Agreement shall be governed by, and interpreted
in accordance with, the laws of the State of New York.
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<PAGE> 144
10.05. EXPENSES. Each party hereto will bear all expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby except
printing, mailing and proxy solicitation expenses, which shall be shared equally
between Dreyfus and Mellon.
10.06. WAIVER; AMENDMENT. Any provision of this Agreement may be (i)
amended or modified at any time (including the structure of the transactions
contemplated hereby, or any part thereof), by an agreement in writing among the
parties hereto and executed in the same manner as this Agreement or (ii) waived
by the party benefitted by the provision.
10.07. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES; ETC. This Agreement
represents the entire understanding of the parties hereto with reference to the
transactions contemplated hereby and supersedes any and all other oral or
written agreements heretofore made. All terms and provisions of the Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective personal representatives, heirs, Successors and permitted
assigns. Except for Article IX and except as otherwise explicitly stated herein,
nothing in this Agreement is intended to confer upon any other person any rights
or remedies of any nature whatsoever under or by reason of this Agreement.
10.08. ASSIGNMENT. This Agreement may not be assigned by any party hereto
without the written consent of the other parties and any purported assignment in
violation hereof shall be null and void.
10.09. KNOWLEDGE OF DREYFUS. As used herein, the term "knowledge of
Dreyfus" or words of similar import mean the knowledge of any executive officer
of Dreyfus.
10.10. KNOWLEDGE OF MELLON. As used herein, the term "knowledge of Mellon"
or words of similar import mean the knowledge of any executive officer of
Mellon.
IN WITNESS WHEREOF, the parties have duly executed this Agreement, all as
of the date first written above.
The Dreyfus Corporation
By HOWARD STEIN
----------------------------------
Title: Chairman of the Board
Mellon Bank Corporation
By FRANK V. CAHOUET
----------------------------------
Title: Chairman, President and Chief
Executive Officer
Mellon Bank, N.A.
By FRANK V. CAHOUET
----------------------------------
Title: Chairman, President and Chief
Executive Officer
XYZ Sub Corporation
By JAMES M. GOCKLEY
-----------------------------------
Title: President
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<PAGE> 145
EXHIBIT 5.04
TO APPENDIX I
AFFILIATE AGREEMENT
THIS AGREEMENT (this "Agreement"), dated December , 1993, between Mellon
Bank Corporation, a Delaware corporation ("Mellon"), and the undersigned
stockholder (the "Stockholder") of The Dreyfus Corporation, a New York
corporation ("Dreyfus"),
WITNESSETH:
WHEREAS, an Agreement and Plan of Merger (the "Merger Agreement"), dated as
of December 5, 1993, has been entered into between Dreyfus, Mellon, Mellon Bank,
a wholly-owned subsidiary of Mellon, and XYZ Sub Corporation ("Merger
Subsidiary"), a wholly-owned subsidiary of Mellon Bank, which provides for the
merger (the "Merger") of Merger Subsidiary into Dreyfus;
WHEREAS, the Stockholder is a stockholder of Dreyfus who may be deemed to
be an "affiliate" of Dreyfus within the meaning of Rule 145 ("Rule 145") of the
General Rules and Regulations under the Securities Act of 1933, as amended (the
" '33 Act");
WHEREAS, Mellon contemplates that the Merger will be treated as a "pooling
of interests" under generally accepted accounting principles; and Stockholder is
or may be limited with respect to the sale of the shares of Common Stock, par
value $0.50 per share, of Mellon ("Mellon Common Stock") to be issued to the
Stockholder in the Merger (the "Mellon Securities") upon the conversion of the
shares of Common Stock, par value $0.10 per share, of Dreyfus ("Dreyfus Common
Stock") set forth below the Stockholder's signature hereto.
NOW, THEREFORE, Mellon and the Stockholder, intending to be legally bound
hereby, agree as follows:
1. The Stockholder hereby represents and warrants to Mellon that:
(a) Set forth below the Stockholder's signature hereto are the exact
numbers of shares of Dreyfus Common Stock which such Stockholder owns of
record only, beneficially only and of record and beneficially; and
(b) Such ownership is free and clear of any security interest, lien,
encumbrance, charge, equity, claim or restriction whatsoever, except as set
forth below the Stockholder's signature hereto and as may be imposed by
reason of the '33 Act or the General Rules and Regulations thereunder.
2. The Stockholder hereby represents and warrants to and covenants with
Mellon that the Stockholder will not, directly or indirectly, sell, transfer or
otherwise dispose of, or cause any Mellon Securities to be sold, transferred or
otherwise disposed of, until such time as unaudited financial statements
covering at least 30 days of the combined operations of Dreyfus and Mellon
following the Merger have been published by Mellon. The Stockholder hereby also
represents and warrants to and covenants with Mellon that subsequent to
publication of such financial statements he will not, directly or indirectly,
sell, transfer or otherwise dispose of, or cause any Mellon Securities to be
sold, transferred or otherwise disposed of, except in accordance with the
provisions of the '33 Act and the General Rules and Regulations thereunder.
3. All certificates representing Mellon Securities and any certificates
issued in substitution therefor, shall bear the following legend:
"The shares of Common Stock of Mellon Bank Corporation represented by
this certificate may not be sold or otherwise transferred unless they are
at the time registered under the Securities Act of 1933, as amended, or the
sale or transfer thereof is not required to be so registered or is made
pursuant to an applicable exemption from registration provided by said Act
or the General Rules and Regulations thereunder. In addition, the shares
may not be sold, transferred or otherwise disposed of except in
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<PAGE> 146
accordance with the terms of an Affiliate Agreement, dated as of
, a copy of which is on file at the principal office of
Mellon Bank Corporation."
The Stockholder hereby authorizes Mellon to notify its transfer agent (the
"Transfer Agent") of this Agreement and, at Mellon's discretion, to cause stop
transfer orders to be placed with respect to all certificates representing the
Mellon Securities owned by the Stockholder that bear such legend. Any such
orders shall state that no transfer may be made with respect to the Mellon
Securities unless Mellon shall have advised its Transfer Agent that the proposed
transfer is made in compliance with the terms of this Agreement.
4. The Stockholder, when intending to sell or to cause the Mellon
Securities to be sold pursuant to paragraph (d) of Rule 145, shall deliver to
Mellon, within a reasonable time prior to any such sale, (i) a written request
for delivery of certificates without any legend, indicating the number of Mellon
Securities to be sold, the estimated date of such sale and the name and office
of the broker through whom the sale will be made, (ii) a written statement by
the Stockholder that the sale will be in compliance with Rule 145, (iii) if
requested by Mellon, an opinion of counsel satisfactory to Mellon to the effect
that such sale complies with Rule 145 and (iv) certificates bearing the legend
representing the Mellon Securities to be sold. Upon receipt of such request,
statement, opinion, if any, and certificates, Mellon shall promptly deliver or
cause to be delivered, the requested certificates to or on behalf of the
Stockholder.
5. The Stockholder hereby agrees that he will not dispose of, or cause any
Mellon Securities to be disposed of, under circumstances involving violation of
the '33 Act, the Securities Exchange Act of 1934, as amended, or any similar
Federal or state requirement then in force.
6. Except as otherwise provided in writing, all notices and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given at the time delivered personally or mailed, first class
postage prepaid,
(a) If to Mellon ,
or
(b) if to the Stockholder, at the address set forth after the Stockholder's
signature below or to such other address as the Stockholder may from time to
time designate to Mellon in writing.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
MELLON BANK CORPORATION
By
----------------------------------------
Stockholder
Dreyfus Common Stock Ownership:
----------------------------------------
Of Record Only
----------------------------------------
Beneficially Owned
----------------------------------------
Of Record and Beneficially Owned
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<PAGE> 147
[FORM OF OPINION OF LAZARD FRERES & CO.]
APPENDIX II
July 19, 1994
Board of Directors
The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Gentlemen and Madame:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of shares of Common Stock, par value $0.10 per share
("Shares"), of The Dreyfus Corporation ("Dreyfus") of the exchange ratio (the
"Exchange Ratio") of 0.88017 shares of common stock, par value $0.50 per share
(the "Mellon Common Stock"), of Mellon Bank Corporation ("Mellon") to be
exchanged for each Share in the proposed merger (the "Merger") of Dreyfus with a
wholly-owned subsidiary ("Merger Subsidiary") of Mellon Bank, N.A. ("Mellon
Bank") pursuant to the Amended and Restated Agreement and Plan of Merger dated
as of December 5, 1993, by and among Dreyfus, Mellon, Mellon Bank and Merger
Subsidiary (the "Agreement").
As an investment banker, we are continually engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
underwritings, distributions of securities and similar activities. We are
familiar with Dreyfus having acted as its financial advisor in connection with,
and having participated in certain of the negotiations leading to, the
Agreement. We will receive from Dreyfus a fee for our services, a substantial
portion of which is contingent upon the consummation of the Merger. In the
course of our activities, we have provided certain investment banking services
to Mellon, for which we have received customary compensation.
In connection with this opinion, we have reviewed, among other things, the
Prospectus/Joint Proxy Statement relating to the Merger; the Agreement; Annual
Reports to Stockholders and Annual Reports on Form 10-K for the five years ended
December 31, 1993 of Dreyfus and Mellon; certain interim reports to stockholders
and Quarterly Reports on Form 10-Q of Dreyfus and Mellon, and certain other
communications from Dreyfus and Mellon to their respective stockholders; and
certain internal financial analyses for Dreyfus and Mellon prepared by their
respective managements. We have held discussions with members of the senior
managements of Dreyfus and Mellon, respectively, regarding their past and
current business operations and financial condition, regulatory relationships
and the future prospects of their respective companies. We have also held
discussions with the independent auditors for each of Dreyfus and Mellon
regarding the financial and accounting affairs of the respective companies. In
addition, we have reviewed the reported price and trading activity for the
Shares and shares of Mellon Common Stock, compared certain financial and stock
market information for Dreyfus and Mellon with similar information for other
companies the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations in the investment management
industry specifically and in other industries generally and have performed such
other studies and analyses as we considered appropriate. We did not consider the
relative merits of the Merger and alternative business strategies for Dreyfus.
Pursuant to the instructions we received from Dreyfus following its November 11,
1993 press announcement that Dreyfus had terminated preliminary discussions
regarding a possible merger with another financial institution, we did not
solicit other merger proposals and we advised the companies that contacted us
(or were referred to us by Dreyfus) to express interest in a merger or
acquisition transaction with Dreyfus prior to the date of the Agreement that
Dreyfus was not seeking to enter into a business combination at that time. None
of the parties that contacted us made a specific proposal, discussed possible
ranges of value or requested financial or other information about Dreyfus. Since
the execution of the Agreement on December 5, 1993, we have not received any
proposals from third parties relating to a merger or acquisition transaction
with Dreyfus.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. We are not experts in the
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<PAGE> 148
evaluation of loan portfolios for purposes of assessing the adequacy of the
allowances for losses with respect thereto and have assumed, with your consent,
that such allowances for Mellon are in the aggregate adequate to cover such
losses. In addition, we have not reviewed any individual credit files nor have
we made any independent evaluation or appraisal of the assets and liabilities of
Dreyfus or Mellon or any of their subsidiaries and we have not been furnished
with any such evaluation or appraisal. Our opinion is necessarily based on
economic, market and other conditions as in effect on, and the information made
available to us as of, the date hereof.
We have further assumed, with your consent, that the Merger will be
consummated in accordance with the terms described in the Agreement, without any
further amendment thereto, and without waiver by Dreyfus of any of the
conditions to its obligation to close thereunder.
It is understood that this letter is for the information of the Board of
Directors of Dreyfus only, and may not be used for any other purpose or
disclosed or otherwise referred to without our prior written consent.
Based upon and subject to the foregoing and such other matters as we
consider relevant, it is our opinion that as of the date hereof the Exchange
Ratio is fair, from a financial point of view, to the common stockholders of
Dreyfus.
Very truly yours,
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<PAGE> 149
[FORM OF OPINION OF SALOMON BROTHERS]
APPENDIX III
July 19, 1994
The Board of Directors
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Members of the Board:
You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, to the common stockholders of The Dreyfus
Corporation ("Dreyfus" or the "Company") of the Exchange Ratio in the proposed
merger (the "Merger") of the Company with and into the Mellon Bank Corporation,
or a subsidiary ("Mellon"). The terms of the Merger are set forth in the Amended
and Restated Agreement and Plan of Merger (the "Merger Agreement") dated as of
December 5, 1993. As more specifically detailed in the Merger Agreement, each
issued and outstanding share of Dreyfus common stock, par value $0.10 per share
("Dreyfus Common Stock"), will be converted into 0.88017 (the "Exchange Ratio")
shares of Mellon common stock, par value $0.50 per share ("Mellon Common
Stock").
In arriving at our opinion, we have reviewed, analyzed and relied upon
material bearing upon the financial and operating condition and prospects of
Dreyfus and Mellon and material prepared in connection with the Merger, and we
have considered such financial and other factors as we have deemed appropriate
under the circumstances, including, among other things, the following: (i) the
Merger Agreement; (ii) the Registration Statement (including the
Prospectus/Joint Proxy Statement); (iii) the Annual Reports on Form 10-K of
Dreyfus and Mellon for each calendar year in the six-year period ended December
31, 1993 and the Quarterly Reports on Form 10-Q of Dreyfus and Mellon for the
quarters ended March 31, 1993, June 30, 1993, September 30, 1993 and March 31,
1994; (iv) certain other publicly available financial and other information
concerning Dreyfus and Mellon; (v) certain publicly available information
concerning the trading of, and the trading markets for Dreyfus Common Stock and
Mellon Common Stock; (vi) certain other internal information, including certain
financial forecasts for Dreyfus and Mellon for the current year prepared by the
respective managements of such companies and certain pro forma combined
financial forecasts for 1993 and 1994 prepared by management of Dreyfus and
Mellon and furnished to us for the purpose of our analysis; (vii) the nature and
terms of certain recent transactions which we believe to be reasonably
comparable to the Merger or otherwise relevant to our inquiry; and (viii)
certain publicly available information regarding certain other companies that we
believe to be comparable to Dreyfus or Mellon and the trading markets for
certain of such other companies' securities. We have also met with certain
officers and representatives of Dreyfus and Mellon to discuss the foregoing as
well as other matters we believe relevant to our inquiry. We have also taken
into account our assessment of general economic, market and financial conditions
and our experience in similar transactions, as well as our experience in
securities valuation and our knowledge of the financial services industry
generally.
In conducting our review and in arriving at our opinion, we have relied
upon and assumed the accuracy and completeness of the financial and other
information provided to us or publicly available and have not attempted
independently to verify the same. With respect to financial forecasts, we have
assumed that such forecasts have been reasonably prepared on a basis reflecting
the best currently available estimates and judgments of the respective
managements of Dreyfus and Mellon, and we express no opinion with respect to
such forecasts or the assumptions on which they are based. We have not made or
obtained any evaluations or appraisals of the properties, assets, liabilities or
reserves of Dreyfus or Mellon. We did not participate in the discussions or
negotiations with respect to the Merger. We were not requested to and have not
approached any other parties with respect to a business combination involving
the Company. Our opinion as expressed herein is limited to the fairness, from a
financial point of view, to the holders of Dreyfus Common Stock of the Exchange
Ratio and does not address Dreyfus' underlying business decision to participate
in the Merger, and
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<PAGE> 150
does not constitute a recommendation to any Dreyfus stockholder as to how such
stockholder should vote with respect to the Merger. Our opinion necessarily is
based upon conditions as they exist and can be evaluated on the date hereof.
In rendering our opinion we have assumed that in the course of obtaining
the necessary regulatory approvals for the Merger no restrictions will be
imposed that would have a material adverse affect on the contemplated benefits
of the Merger to Dreyfus following the Merger. We understand that the Merger
will qualify as a tax-free reorganization under the Internal Revenue Code and
that, for accounting purposes, the Merger will be accounted for as a pooling of
interests.
In the ordinary course of our securities business we actively trade the
debt and equity securities of Dreyfus and Mellon for our own account and the
accounts of our customers, and we therefore may from time to time hold a long or
short position in such securities.
Based upon and subject to the foregoing, it is our opinion as investment
bankers, that, as of the date hereof, the Exchange Ratio is fair, from a
financial point of view, to the holders of Dreyfus Common Stock.
Very truly yours,
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<PAGE> 151
[FORM OF OPINION OF GOLDMAN SACHS & CO.]
APPENDIX IV
July 19, 1994
Board of Directors
Mellon Bank Corporation
Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Gentlemen and Madame:
You have requested our opinion as to the fairness to Mellon Bank Corporation
(the "Company") of the exchange ratio of 0.88017 shares of Common Stock, par
value $0.50 per share (the "Company Shares"), of the Company to be paid for each
share of Common Stock, par value $0.10 per share (the "Dreyfus Shares"), of The
Dreyfus Corporation ("Dreyfus") (the "Exchange Ratio") pursuant to the merger
(the "Merger") contemplated by the Amended and Restated Agreement and Plan of
Merger dated as of December 5, 1993 by and among the Company, Mellon Bank, N.A.
(the "Bank"), a wholly-owned subsidiary of the Company, XYZ Sub Corporation, a
wholly-owned subsidiary of the Bank, and Dreyfus (the "Agreement").
Goldman, Sachs & Co., as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. We are familiar with
the Company, having acted as lead managing underwriter for the Company's common
equity offerings in May 1991 and January 1993, having acted as co-manager in
various other recent public offerings of preferred stock and debt for the
Company, and having acted as financial advisor to the Company for the past
several years, including having acted as financial advisor in connection with,
and having participated in certain negotiations leading to, the Agreement.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Registration Statement on Form S-4, including the
Prospectus/Joint Proxy Statement relating to the Special Meetings of
Stockholders of the Company and Dreyfus to be held in connection with the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company and Dreyfus for the five years ended December 31, 1993; certain interim
reports to stockholders and Quarterly Reports on Form 10-Q of the Company and
Dreyfus; certain other communications from the Company and Dreyfus to their
respective stockholders; and certain internal financial analyses and forecasts
for the Company and Dreyfus prepared by their respective managements. We also
have held discussions with members of the senior managements of the Company and
Dreyfus regarding the past and current business operations, regulatory
relationships, financial condition and future prospects of their respective
companies. We also have reviewed with members of the senior management of the
Company the results of the Company's due diligence examination of Dreyfus and
the strategic benefits expected to be derived from the Merger for the business
and capital position of the Company. In addition, we have reviewed the reported
price and trading activity for the Company Shares and the Dreyfus Shares,
compared certain financial and stock market information for the Company and
Dreyfus with similar information for certain other companies the securities of
which are publicly traded, reviewed the financial terms of certain recent
business combinations in the investment management industry specifically and in
other industries generally and performed such other studies and analyses as we
considered appropriate.
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<PAGE> 152
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. In that regard, we have assumed, with your consent,
that the financial forecasts, including, without limitation, projected cost
savings and operating synergies resulting from the Merger, have been reasonably
prepared on a basis reflecting the best currently available judgments and
estimates of the Company and that such forecasts will be realized in the amounts
and at the times contemplated thereby. In addition, you have advised us that you
expect the strategic benefits to be derived from the Merger for the business and
capital position of the Company to outweigh the impact of the reduction in
earnings per share that is expected to result for a period of time. We have not
made an independent evaluation or appraisal of the assets and liabilities of the
Company or Dreyfus or any of their subsidiaries and we have not been furnished
with any such evaluation or appraisal. We have assumed, with your consent, that
the Merger will be accounted for as a pooling of interests under generally
accepted accounting principles.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the Exchange
Ratio pursuant to the Agreement is fair to the Company.
Very truly yours,
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<PAGE> 153
APPENDIX V
SEC. 623. PROCEDURE TO ENFORCE SHAREHOLDER'S RIGHT TO RECEIVE PAYMENT FOR SHARES
(a) A shareholder intending to enforce his right under a section of this
chapter to receive payment for his shares if the proposed corporate action
referred to therein is taken shall file with the corporation, before the meeting
of shareholders at which the action is submitted to a vote, or at such meeting
but before the vote, written objection to the action. The objection shall
include a notice of his election to dissent, his name and residence address, the
number and classes of shares as to which he dissents and a demand for payment of
the fair value of his shares if the action is taken. Such objection is not
required from any shareholder to whom the corporation did not give notice of
such meeting in accordance with this chapter or where the proposed action is
authorized by written consent of shareholders without a meeting.
(b) Within ten days after the shareholders' authorization date, which term
as used in this section means the date on which the shareholders' vote
authorizing such action was taken, or the date on which such consent without a
meeting was obtained from the requisite shareholders, the corporation shall give
written notice of such authorization or consent by registered mail to each
shareholder who filed written objection or from whom written objection was not
required, excepting any shareholder who voted for or consented in writing to the
proposed action and who thereby is deemed to have elected not to enforce his
right to receive payment for his shares.
(c) Within twenty days after the giving of notice to him, any shareholder
from whom written objection was not required and who elects to dissent shall
file with the corporation a written notice of such election, stating his name
and residence address, the number and classes of shares as to which he dissents
and a demand for payment of the fair value of his shares. Any shareholder who
elects to dissent from a merger under section 905 (Merger of subsidiary
corporation) or paragraph (c) of section 907 (Merger or consolidation of
domestic and foreign corporations) or from a share exchange under paragraph (g)
of section 913 (Share exchanges) shall file a written notice of such election to
dissent within twenty days after the giving to him of a copy of the plan of
merger or exchange or an outline of the material features thereof under section
905 or 913.
(d) A shareholder may not dissent as to less than all of the shares, as to
which he has a right to dissent, held by him of record, that he owns
beneficially. A nominee or fiduciary may not dissent on behalf of any beneficial
owner as to less than all of the shares of such owner, as to which such nominee
or fiduciary has a right to dissent, held of record by such nominee or
fiduciary.
(e) Upon consummation of the corporate action, the shareholder shall cease
to have any of the rights of a shareholder except the right to be paid the fair
value of his shares and any other rights under this section. A notice of
election may be withdrawn by the shareholder at any time prior to his acceptance
in writing of an offer made by the corporation, as provided in paragraph (g),
but in no case later than sixty days from the date of consummation of the
corporate action except that if the corporation fails to make a timely offer, as
provided in paragraph (g), the time for withdrawing a notice of election shall
be extended until sixty days from the date an offer is made. Upon expiration of
such time, withdrawal of a notice of election shall require the written consent
of the corporation. In order to be effective, withdrawal of a notice of election
must be accompanied by the return to the corporation of any advance payment made
to the shareholder as provided in paragraph (g). If a notice of election is
withdrawn, or the corporate action is rescinded, or a court shall determine that
the shareholder is not entitled to receive payment for his shares, or the
shareholder shall otherwise lose his dissenter's rights, he shall not have the
right to receive payment for his shares and he shall be reinstated to all his
rights as a shareholder as of the consummation of the corporate action,
including any intervening preemptive rights and the right to payment of any
intervening dividend or other distribution or, if any such rights have expired
or any such dividend or distribution other than in cash has been completed, in
lieu thereof, at the election of the corporation, the fair value thereof in cash
as determined by the board as of the time of such expiration or completion, but
without prejudice otherwise to any corporate proceedings that may have been
taken in the interim.
(f) At the time of filing the notice of election to dissent or within one
month thereafter the shareholder of shares represented by certificates shall
submit the certificates representing his shares to the corporation, or to
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its transfer agent, which shall forthwith note conspicuously thereon that a
notice of election has been filed and shall return the certificates to the
shareholder or other person who submitted them on his behalf. Any shareholder of
shares represented by certificates who fails to submit his certificates for such
notation as herein specified shall, at the option of the corporation exercised
by written notice to him within forty-five days from the date of filing of such
notice of election to dissent, lose his dissenter's rights unless a court, for
good cause shown, shall otherwise direct. Upon transfer of a certificate bearing
such notation, each new certificate issued therefor shall bear a similar
notation together with the name of the original dissenting holder of the shares
and a transferee shall acquire no rights in the corporation except those which
the original dissenting shareholder had at the time of transfer.
(g) Within fifteen days after the expiration of the period within which
shareholders may file their notices of election to dissent, or within fifteen
days after the proposed corporate action is consummated, whichever is later (but
in no case later than ninety days from the shareholders' authorization date),
the corporation or, in the case of a merger or consolidation, the surviving or
new corporation, shall make a written offer by registered mail to each
shareholder who has filed such notice of election to pay for his shares at a
specified price which the corporation considers to be their fair value. Such
offer shall be accompanied by a statement setting forth the aggregate number of
shares with respect to which notices of election to dissent have been received
and the aggregate number of holders of such shares. If the corporate action has
been consummated, such offer shall aslo (sic) be accompanied by (1) advance
payment to each such shareholder who has submitted the certificates representing
his shares to the corporation, as provided in paragraph (f), of an amount equal
to eighty percent of the amount of such offer, or (2) as to each shareholder who
has not yet submitted his certificates a statement that advance payment to him
of an amount equal to eighty percent of the amount of such offer will be made by
the corporation promptly upon submission of his certificates. If the corporate
action has not been consummated at the time of the making of the offer, such
advance payment or statement as to advance payment shall be sent to each
shareholder entitled thereto forthwith upon consummation of the corporate
action. Every advance payment or statement as to advance payment shall include
advice to the shareholder to the effect that acceptance of such payment does not
constitute a waiver of any dissenters' rights. If the corporate action has not
been consummated upon the expiration of the ninety day period after the
shareholders' authorization date, the offer may be conditioned upon the
consummation of such action. Such offer shall be made at the same price per
share to all dissenting shareholders of the same class, or if divided into
series, of the same series and shall be accompanied by a balance sheet of the
corporation whose shares the dissenting shareholder holds as of the latest
available date, which shall not be earlier than twelve months before the making
of such offer, and a profit and loss statement or statements for not less than a
twelve month period ended on the date of such balance sheet or, if the
corporation was not in existence throughout such twelve month period, for the
portion thereof during which it was in existence. Notwithstanding the foregoing,
the corporation shall not be required to furnish a balance sheet or profit and
loss statement or statements to any shareholder to whom such balance sheet or
profit and loss statement or statements were previously furnished, nor if in
connection with obtaining the shareholders' authorization for or consent to the
proposed corporate action the shareholders were furnished with a proxy or
information statement, which included financial statements, pursuant to
Regulation 14A or Regulation 14C of the United States Securities and Exchange
Commission. If within thirty days after the making of such offer, the
corporation making the offer and any shareholder agree upon the price to be paid
for his shares, payment therefor shall be made within sixty days after the
making of such offer or the consummation of the proposed corporate action,
whichever is later, upon the surrender of the certificates for any such shares
represented by certificates.
(h) The following procedure shall apply if the corporation fails to make
such offer within such period of fifteen days, or if it makes the offer and any
dissenting shareholder or shareholders fail to agree with it within the period
of thirty days thereafter upon the price to be paid for their shares:
(1) The corporation shall, within twenty days after the expiration of
whichever is applicable of the two periods last mentioned, institute a special
proceeding in the supreme court in the judicial district in which the office of
the corporation is located to determine the rights of dissenting shareholders
and to fix the fair value of their shares. If, in the case of merger or
consolidation, the surviving or new corporation is a foreign corporation
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without an office in this state, such proceeding shall be brought in the county
where the office of the domestic corporation, whose shares are to be valued, was
located.
(2) If the corporation fails to institute such proceeding within such
period of twenty days, any dissenting shareholder may institute such proceeding
for the same purpose not later than thirty days after the expiration of such
twenty day period. If such proceeding is not instituted within such thirty day
period, all dissenter's rights shall be lost unless the supreme court, for good
cause shown, shall otherwise direct.
(3) All dissenting shareholders, excepting those who, as provided in
paragraph (g), have agreed with the corporation upon the price to be paid for
their shares, shall be made parties to such proceeding, which shall have the
effect of an action quasi in rem against their shares. The corporation shall
serve a copy of the petition in such proceeding upon each dissenting shareholder
who is a resident of this state in the manner provided by law for the service of
a summons, and upon each nonresident dissenting shareholder either by registered
mail and publication, or in such other manner as is permitted by law. The
jurisdiction of the court shall be plenary and exclusive.
(4) The court shall determine whether each dissenting shareholder, as to
whom the corporation requests the court to make such determination, is entitled
to receive payment for his shares. If the corporation does not request any such
determination or if the court finds that any dissenting shareholder is so
entitled, it shall proceed to fix the value of the shares, which, for the
purposes of this section, shall be the fair value as of the close of business on
the day prior to the shareholders' authorization date. In fixing the fair value
of the shares, the court shall consider the nature of the transaction giving
rise to the shareholder's right to receive payment for shares and its effects on
the corporation and its shareholders, the concepts and methods then customary in
the relevant securities and financial markets for determining fair value of
shares of a corporation engaging in a similar transaction under comparable
circumstances and all other relevant factors. The court shall determine the fair
value of the shares without a jury and without referral to an appraiser or
referee. Upon application by the corporation or by any shareholder who is a
party to the proceeding, the court may, in its discretion, permit pretrial
disclosure, including, but not limited to, disclosure of any expert's reports
relating to the fair value of the shares whether or not intended for use at the
trial in the proceeding and notwithstanding subdivision (d) of section 3101 of
the civil practice law and rules.
(5) The final order in the proceeding shall be entered against the
corporation in favor of each dissenting shareholder who is a party to the
proceeding and is entitled thereto for the value of his shares so determined.
(6) The final order shall include an allowance for interest at such rate as
the court finds to be equitable, from the date the corporate action was
consummated to the date of payment. In determining the rate of interest, the
court shall consider all relevant factors, including the rate of interest which
the corporation would have had to pay to borrow money during the pendency of the
proceeding. If the court finds that the refusal of any shareholder to accept the
corporate offer of payment for his shares was arbitrary, vexatious or otherwise
not in good faith, no interest shall be allowed to him.
(7) Each party to such proceeding shall bear its own costs and expenses,
including the fees and expenses of its counsel and of any experts employed by
it. Notwithstanding the foregoing, the court may, in its discretion, apportion
and assess all or any part of the costs, expenses and fees incurred by the
corporation against any or all of the dissenting shareholders who are parties to
the proceeding, including any who have withdrawn their notices of election as
provided in paragraph (e), if the court finds that their refusal to accept the
corporate offer was arbitrary, vexatious or otherwise not in good faith. The
court may, in its discretion, apportion and assess all or any part of the costs,
expenses and fees incurred by any or all of the dissenting shareholders who are
parties to the proceeding against the corporation if the court finds any of the
following: (A) that the fair value of the shares as determined materially
exceeds the amount which the corporation offered to pay; (B) that no offer or
required advance payment was made by the corporation; (C) that the corporation
failed to institute the special proceeding within the period specified therefor;
or (D) that the action of the corporation in complying with its obligations as
provided in this section was arbitrary, vexatious or otherwise not in good
faith. In making any determination as provided in clause (A), the court may
consider the dollar amount or the percentage, or both, by which the fair value
of the shares as determined exceeds the corporate offer.
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<PAGE> 156
(8) Within sixty days after final determination of the proceeding, the
corporation shall pay to each dissenting shareholder the amount found to be due
him, upon surrender of the certificates for any such shares represented by
certificates.
(i) Shares acquired by the corporation upon the payment of the agreed value
therefor or of the amount due under the final order, as provided in this
section, shall become treasury shares or be cancelled as provided in section 515
(Reacquired shares), except that, in the case of a merger or consolidation, they
may be held and disposed of as the plan of merger or consolidation may otherwise
provide.
(j) No payment shall be made to a dissenting shareholder under this section
at a time when the corporation is insolvent or when such payment would make it
insolvent. In such event, the dissenting shareholder shall, at his option:
(1) Withdraw his notice of election, which shall in such event be deemed
withdrawn with the written consent of the corporation; or
(2) Retain his status as a claimant against the corporation and, if it is
liquidated, be subordinated to the rights of creditors of the corporation, but
have rights superior to the non-dissenting shareholders, and if it is not
liquidated, retain his right to be paid for his shares, which right the
corporation shall be obliged to satisfy when the restrictions of this paragraph
do not apply.
(3) The dissenting shareholder shall exercise such option under
subparagraph (1) or (2) by written notice filed with the corporation within
thirty days after the corporation has given him written notice that payment for
his shares cannot be made because of the restrictions of this paragraph. If the
dissenting shareholder fails to exercise such option as provided, the
corporation shall exercise the option by written notice given to him within
twenty days after the expiration of such period of thirty days.
(k) The enforcement by a shareholder of his right to receive payment for
his shares in the manner provided herein shall exclude the enforcement by such
shareholder of any other right to which he might otherwise be entitled by virtue
of share ownership, except as provided in paragraph (e), and except that this
section shall not exclude the right of such shareholder to bring or maintain an
appropriate action to obtain relief on the ground that such corporate action
will be or is unlawful or fraudulent as to him.
(l) Except as otherwise expressly provided in this section, any notice to
be given by a corporation to a shareholder under this section shall be given in
the manner provided in section 605 (Notice of meetings of shareholders).
(m) This section shall not apply to foreign corporations except as provided
in subparagraph (e)(2) of section 907 (Merger or consolidation of domestic and
foreign corporations). (Last amended by Ch. 117), ('86, eff. 9-1-86.)
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<PAGE> 157
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
See "Comparison of Shareholders' Rights--Limitation on Directors'
Liability" and "--Indemnification" in the Prospectus/Joint Proxy Statement for a
description of the general effect of certain provisions of the Pennsylvania
Business Corporation Law and Mellon's Restated Articles of Incorporation which
provide for the indemnification of directors and officers of Mellon against
certain liabilities incurred in their capacity as such.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
See the Exhibit Index located at page II-4.
(b) Financial Statement Schedules
All financial statement schedules have been omitted because they are not
applicable or the required information is shown in the financial statements or
related notes thereto incorporated by reference in the Prospectus/Joint Proxy
Statement.
(c) Information provided pursuant to Item 4(b) of Form S-4 (Opinions of
Financial Advisers) is furnished as Appendices II, III and IV to the
Prospectus/Joint Proxy Statement.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Act of 1934) that is incorporated by reference in the Registration
Statement shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by
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<PAGE> 158
any person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), such reoffering prospectus will contain the information called for
by the applicable registration form with respect to reofferings by persons who
may be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
The Registrant undertakes that every prospectus: (i) that is filed pursuant
to the paragraph immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to existing provisions or arrangements, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of or included
in the Registration Statement when it became effective.
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<PAGE> 159
SIGNATURES
MELLON BANK CORPORATION
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, MELLON BANK
CORPORATION HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF PITTSBURGH,
COMMONWEALTH OF PENNSYLVANIA, ON THE 18TH DAY OF JULY , 1994.
MELLON BANK CORPORATION
BY: FRANK V. CAHOUET
----------------
Frank V. Cahouet
Chairman, President and
Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON THE 18TH DAY OF JULY , 1994.
STEVEN G. ELLIOTT
-----------------
Steven G. Elliott
Principal Financial Officer
and Principal Accounting
Officer
BURTON C. BORGELT, Director; CAROL R. BROWN, Director; FRANK V. CAHOUET,
Director and Principal Executive Officer; J. W. CONNOLLY, Director; CHARLES A.
CORRY, Director; C. FREDERICK FETTEROLF, Director; IRA J. GUMBERG, Director;
PEMBERTON HUTCHINSON, Director; ROTAN E. LEE, Director; ANDREW W. MATHIESON,
Director; ROBERT MEHRABIAN, Director; SEWARD PROSSER MELLON, Director; DAVID S.
SHAPIRA, Director; H. ROBERT SHARBAUGH, Director; W. KEITH SMITH, Director; JOAB
L. THOMAS, Director; WESLEY W. von SCHACK, Director; WILLIAM J. YOUNG, Director.
BY: JAMES M. GOCKLEY
----------------
James M. Gockley
Attorney-in-fact
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<PAGE> 160
MELLON BANK CORPORATION
FORM S-4
REGISTRATION STATEMENT
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
FORM S-4
EXHIBIT NO.
DESCRIPTION METHOD OF FILING
- --------- -------------------------------- ----------------------------------
<C> <S> <C>
2.1 Amended and Restated Agreement and Plan
of Merger, dated as of December 5, 1993,
by and among Mellon Bank Corporation,
Mellon Bank, N.A., XYZ Sub Corporation
and The Dreyfus Corporation, (included
as Appendix I to the Prospectus/Joint
Proxy Statement)
2.2 Agreement dated as of July 5, 1994, by Filed herewith
and among Mellon Bank Corporation, The
Dreyfus Corporation, Mellon Bank, N.A.,
and XYZ Sub Corporation, relating to
certain retention and severance benefits
3.1 Restated Articles of Incorporation of Previously filed as Exhibit 3.1 to
Mellon Bank Corporation, as amended and Quarterly Report on Form 10-Q for the
restated as of September 2, 1993 quarter ended September 30, 1993, and
incorporated herein by reference
3.2 By-Laws of Mellon Bank Corporation, as Previously filed as Exhibit 3.2 to
amended, effective July 17, 1990 Annual Report on Form 10-K for the year
ended December 31, 1990, and
incorporated herein by reference
4.1 Statement affecting Series B Preferred Previously filed as Exhibit 3.2 on Form
Stock, $1.00 Par Value 10-K for the year ended December 31, 1993,
and incorporated herein by reference
4.2 Mellon Bank Corporation's Shareholder Previously filed as Exhibit 1 to Form
Protection Rights Agreement and Form of 8-A Registration Statement dated August
Rights Certificate 15, 1989, and incorporated herein by
reference
Mellon Bank Corporation agrees to
provide to the Commission, upon request,
copies of any agreement defining rights
of long-term debt holders.
4.3 Form of Common Stock Certificate Previously filed as Exhibit 4.3 to
Registration Statement on Form S-3 (No.
33-56228) dated December 22, 1992, and
incorporated herein by reference
5.1 Opinion of James M. Gockley, Esq. as to Filed herewith
the legality of the Common Stock being
registered
8.1 Opinion of Reed Smith Shaw & McClay as Filed herewith
to certain tax matters
8.2 Opinion of Rogers & Wells as to certain Filed herewith
tax matters
</TABLE>
II-4
<PAGE> 161
<TABLE>
<CAPTION>
FORM S-4
EXHIBIT
DESCRIPTION METHOD OF FILING
- --------- ---------------------------------------- ----------------------------------------
<C> <S> <C>
23.1 Consent of James M. Gockley, Esq.
(included in Exhibit 5.1)
23.2 Consent of Reed Smith Shaw & McClay
(included in Exhibit 8.1)
23.3 Consent of Rogers & Wells (included in
Exhibit 8.2)
23.4 Consent of KPMG Peat Marwick Filed herewith
23.5 Consent of Ernst & Young Filed herewith
23.6 Consent of Ernst & Young as to Report on Filed herewith
Financial Statements of The Boston
Company
23.7 Consent of Lazard Freres & Co. Filed herewith
23.8 Consent of Salomon Brothers Inc Filed herewith
23.9 Consent of Goldman, Sachs & Co. Filed herewith
24.1 Power of Attorney Filed herewith
99.1 Opinion of Lazard Freres & Co.
(included as Appendix II to the
Prospectus/Joint Proxy Statement)
99.2 Opinion of Salomon Brothers Inc
(included as Appendix III to the
Prospectus/Joint Proxy Statement)
99.3 Opinion of Goldman, Sachs & Co. (included
as Appendix IV to the Prospectus/Joint
Proxy Statement)
99.4 Consent of Howard Stein Filed herewith
99.5 Consent of Joseph S. DiMartino Filed herewith
99.6 Consent of Edward J. McAniff Filed herewith
99.7 Forms of Proxy Filed herewith
Mellon--Common Stock
--Series D Preferred Stock
Dreyfus--Common Stock
</TABLE>
II-5
<PAGE> 1
EX-2.2
AGREEMENT
AGREEMENT dated as of the 5th day of July, 1994 (the "Agreement") by and
among Mellon Bank Corporation ("Mellon"), The Dreyfus Corporation ("Dreyfus"),
Mellon Bank, N.A. and XYZ Sub Corporation.
WHEREAS, Mellon and Dreyfus are parties to an Amended and Restated
Agreement and Plan of Merger dated as of December 5, 1993 by and among Mellon,
Mellon Bank, N.A., XYZ Sub Corporation and Dreyfus (the "Merger Agreement"); and
WHEREAS, Section 9.11 of the Merger Agreement contains provisions relating
to certain severance benefits; and
WHEREAS, pursuant to the Merger Agreement, Mellon and Dreyfus agreed that a
Retention Plan would be established for the benefit of certain employees of
Dreyfus who are deemed to be essential to the operation of Dreyfus during the
period immediately following the merger involving Dreyfus, Mellon Bank, N.A. and
certain affiliates, as set forth in the Merger Agreement (the "Merger"); and
WHEREAS, Mellon and Dreyfus desire that certain of Dreyfus' employees be
provided with enhanced severance and certain other benefits;
NOW, THEREFORE, IT IS AGREED THAT
1. The severance plan that shall apply to Continued Employees (as defined
in the Merger Agreement) through the Applicable Benefit Changeover Date
(as so defined) shall be the Mellon Displacement Policy as in effect at
the time of the Merger; and, thereafter, each Continued Employee shall
be entitled to such severance benefits as are generally applicable to
similarly situated employees of Mellon at the time of the Continued
Employee's termination.
2. Dreyfus shall establish the Retention Plan of The Dreyfus Corporation
substantially in accordance with the terms set forth in Exhibit 1
hereto.
3. Dreyfus shall establish The Dreyfus Corporation Special Retention
Program substantially in accordance with the terms set forth in Exhibit
2 hereto.
4. The appropriate officers and employees of Mellon and Dreyfus shall take
all such actions as they deem necessary for the establishment of the
plans and programs described in Exhibits 1 and 2 and to establish
appropriate definitive documentation and administrative procedures with
respect thereto.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
<TABLE>
<S> <C>
THE DREYFUS CORPORATION
By PHILIP L. TOIA By W. KEITH SMITH
-------------- --------------
Title: Vice President Title: Vice Chairman
MELLON BANK CORPORATION XYZ SUB CORPORATION
By W. KEITH SMITH By JAMES M. GOCKLEY
-------------- ----------------
Title: Vice Chairman Title: President
</TABLE>
<PAGE> 2
EXHIBIT 1
TERMS SHEET
RETENTION PLAN OF THE DREYFUS CORPORATION
1. Effective Date. Subject to paragraph 4 below, the Retention Plan of The
Dreyfus Corporation (the "Plan") shall be effective as of the date of the
Effective Time of the Merger (the "Effective Date").
2. Eligibility. Employees selected by Dreyfus (or a committee of employees
thereof, or of its board of directors), subject only to the approval of
Mellon (the "Eligible Employees"), that remain employed by Dreyfus (or an
affiliate) as of the Effective Time shall participate in the Plan.
3. Retention Pool. $2,500,000 (the "Retention Pool") shall be the amount
available to make payments under the Plan. The size of the Retention Pool may
be increased from time to time in the discretion of Dreyfus (or a committee
of employees thereof, or of its board of directors), subject only to the
approval of Mellon, as to all or any specified (either by name or category)
Eligible Employees. The Retention Pool shall be a mere bookkeeping entry on
the books and records of Dreyfus.
4. Individual Awards. Except as otherwise expressly provided in paragraph 3 or 6
herein, each Eligible Employee's relative share of the Retention Pool shall
be determined by Dreyfus (or a committee of employees thereof, or of its
board of directors), subject only to the approval of Mellon, on or before the
Effective Time.
5. Payment of Awards. Subject to paragraph 6 below, each Eligible Employee who
continues to be employed by Dreyfus on and after the Effective Date shall be
entitled to payment of his or her award as follows:
(i) an amount equal to one-half ( 1/2) of his or her interest in the
Retention Pool shall be determined and paid effective as of six months
following the Effective Date; and
(ii) an amount equal to the Eligible Employee's interest in the Retention
Pool remaining after payment of the amount due pursuant to paragraph (i)
will be paid effective as of the earlier of (A) the last day of the
18-month period commencing on the Effective Date, and (B) the date, if
ever, of the Eligible Employee's involuntary termination of employment from
Dreyfus (the "Retention Period").
6. Forfeiture. Any Eligible employee who voluntarily terminates his or her
employment with Dreyfus after the Effective Date, or whose employment is
terminated by Dreyfus after the Effective Date for cause, shall forfeit any
and all rights to receive any payments under the Plan that are not yet
payable as of the time of such termination. Each forfeited interest shall
reduce the amount of the Retention Pool or shall be reallocated among other
Eligible Employees in the discretion of Dreyfus (or a committee of employees
thereof, or of its board of directors), subject only to the approval of
Mellon. A "voluntary" termination shall not include a termination during the
Retention Period which occurs after the date: (i) the sum of an Eligible
Employee's base compensation plus cash bonus, exclusive of pension, welfare
and fringe benefits, is reduced below an amount equal to eighty percent (80%)
of such amount determined as of the day before the Effective Date; (ii) an
Eligible Employee is relocated to an office or facility beyond thirty (30)
miles from his previous workplace; (iii) an Eligible Employee retires on or
after the normal retirement age established in the retirement plans generally
available to employees of Dreyfus; and (iv) of such other events or
circumstances which Dreyfus (or a committee of employees thereof, or of its
board of directors), in its discretion may determine, subject only to the
approval of Mellon.
7. Separate Plan. Amounts payable under the Plan shall be in addition to any
amounts payable under any severance benefits program otherwise available to
an Eligible Employee.
8. Definitions. All capitalized terms used but not defined above shall have the
respective meanings ascribed thereto in the Amended and Restated Agreement
and Plan of Merger dated as of December 5, 1993 by and among Mellon, Mellon
Bank, N.A., XYZ Sub Corporation and Dreyfus.
<PAGE> 3
EXHIBIT 2
TERMS SHEET
THE DREYFUS CORPORATION SPECIAL RETENTION PROGRAM
1. Effective Date. The Dreyfus Corporation Special Retention Program (the
"Plan") shall be effective as of the Effective Time.
2. Eligibility. Employees selected by Dreyfus (or a committee of employees
thereof, or of its board of directors), subject only to the approval of
Mellon (the "Eligible Employees"), that remain employed by Dreyfus (or an
affiliate) as of the Effective Time shall participate in the Plan.
3. In General. The severance pay plan applicable to the Eligible Employees shall
be the Mellon Displacement Policy as in effect as of January 3, 1994 (the
"Mellon Policy"), except as provided below.
4. Severance period. The basic severance period for purposes of determining
severance benefits applicable to an Eligible Employee who is terminated
within one year after the Effective Time under conditions which would entitle
similarly situated employees to benefits under the Mellon Policy will be the
greater of (i) the period otherwise applicable under the Mellon Policy or
(ii) 26 weeks. In addition, Eligible Employees who are so terminated within
such one-year period will receive 12 weeks of extended severance benefits
without regard to their job classification or salary, if otherwise entitled
to extended severance benefits under the terms of the Mellon Policy.
5. Other Payments. An Eligible Employee, if employed by Dreyfus (or an
affiliate) at the expiration of the one-year period following the Effective
Time, will receive in one lump sum payment, as soon as practicable after the
expiration of such period, an amount equal to one week of pay (but not less
than 13 weeks nor more than 26 weeks) for each year of service both before
and after the Effective Time. Any payment made under the foregoing sentence
shall be in addition to any payments and other benefits under the Mellon
Policy.
6. Definitions. All capitalized terms used but not defined above shall have the
respective meanings ascribed thereto in the Amended and Restated Agreement
and Plan of Merger dated as of December 5, 1993 by and among Mellon, Mellon
Bank, N.A., XYZ Sub Corporation and Dreyfus.
<PAGE> 1
EX-5.1
EX-23.1
July 18, 1994
Mellon Bank Corporation
500 Grant Street
Pittsburgh, PA 15258
RE: Mellon Bank Corporation
Common Stock Registration Statement on Form S-4
Dear Sirs:
I am Assistant General Counsel of Mellon Bank Corporation, a Pennsylvania
corporation (the "Corporation"), and, in that capacity, have acted as counsel
for the Corporation in connection with the preparation of a Registration
Statement on Form S-4 (the "Registration Statement") relating to the
registration of up to 32.750 million shares of the Corporation's Common Stock,
par value $.50 per share (the "Common Stock") and up to 32.750 million related
preferred stock purchase rights (the "Rights") to be issued pursuant to the
Shareholder Protection Rights Agreement, dated as of August 15, 1989 (the
"Rights Agreement"), between the Corporation and Mellon Bank, N.A., as Rights
Agent (the "Rights Agent"). This opinion is being furnished pursuant to the
requirements of Form S-4 and Item 601 of Regulation S-K under the Securities Act
of 1933, as amended (the "Act").
In furnishing this opinion, I, or attorneys under my supervision, have examined
the Registration Statement, as well as the prospectus/joint proxy statement
included therein (the "Prospectus/Joint Proxy Statement"), to be filed with the
Securities and Exchange Commission, in connection with which this opinion is to
be filed as an Exhibit. In addition, I, or they, have examined such other
documents, legal opinions and precedents, corporate and other records of the
Corporation and certificates of public officials and officers of the Corporation
as I have deemed necessary or appropriate to provide a basis for the opinions
set forth herein. In such examination, I have assumed the genuineness of all
signatures, the authenticity of all documents submitted to me as originals and
the conformity to original documents of all documents submitted to me as
certified or photostatic copies.
<PAGE> 2
Mellon Bank Corporation
July 18, 1994
Page 2
Based upon the foregoing, I am of the opinion that:
1. The Corporation has been duly incorporated and is validly existing as a
corporation under the laws of the Commonwealth of Pennsylvania;
2. The Registration Statement has been duly authorized by all necessary
corporate action of the Corporation;
3. When the Registration Statement has become effective under the Act and
the shares of Common Stock have been issued and delivered pursuant to the
terms of the Merger Agreement (included as Appendix I to the
Prospectus/Joint Proxy Statement), the shares of Common Stock will be
validly issued, fully paid and nonassessable; and
4. Assuming that the Rights Agreement has been duly authorized, executed
and delivered by the Rights Agent, then when the Registration Statement has
become effective under the Act and the shares of Common Stock have been
issued and delivered pursuant to the terms of the Merger Agreement, the
Rights attributable to the shares of Common Stock will be validly issued.
In connection with my opinion set forth in paragraph 4 above, I note that the
question whether the Board of Directors of the Corporation might be required to
redeem the Rights at some future time will depend upon the facts and
circumstances existing at that time and, accordingly, is beyond the scope of
such opinion.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of my name in the Prospectus/Joint Proxy Statement
under the heading "Legal Opinions." By giving such consent, I do not thereby
admit that I am within the category of persons whose consents are required under
Section 7 of the Act.
I do not purport to be an expert on the laws of any jurisdiction other than the
laws of the Commonwealth of Pennsylvania and the laws of the United States of
America as applied to bank holding companies, and I express no opinion herein as
to the effect of any other laws.
<PAGE> 3
Mellon Bank Corporation
July 18, 1994
Page 3
This opinion is being rendered solely for your benefit in connection with the
Registration Statement. You may not rely on this opinion for any other purpose
without my express written consent. This opinion is rendered as of the date
hereof, and I am under no obligation to update it or to advise you of any
subsequent event which could affect it. This opinion may not be assigned, quoted
or used without my express written consent.
Very truly yours,
James M. Gockley
<PAGE> 1
EX-8.1
EX-23.2
July 18, 1994
Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, PA 15258
Ladies and Gentlemen:
We have acted as counsel to Mellon Bank Corporation, a Pennsylvania
corporation (the "Corporation"), in connection with the merger (the "Merger") of
XYZ Sub Corporation with and into The Dreyfus Corporation pursuant to the
Amended and Restated Agreement and Plan of Merger dated as of December 5, 1993
by and among Mellon Bank Corporation, Mellon Bank, N.A., XYZ Sub Corporation and
The Dreyfus Corporation.
We hereby confirm to you that the disclosure set forth under the caption
"Federal Income Tax Considerations" in the Prospectus/Joint Proxy Statement
filed as part of the Registration Statement on Form S-4 under the Securities Act
of 1933, as amended, for the registration of the shares of Mellon Bank
Corporation Common Stock issuable in the Merger (the "Registration Statement")
sets forth the material federal income tax consequences of the Merger.
We hereby consent to the filing with the Securities and Exchange Commission
of this letter as an exhibit to the Registration Statement and to the reference
to us in the Prospectus/Joint Proxy Statement under the caption "Federal Income
Tax Considerations." In giving such consent, we do not thereby admit that we are
within the category of persons whose consent is required under Section 7 of the
Securities Act.
Very truly yours,
REED SMITH SHAW & McCLAY
<PAGE> 1
EX- 8.2
EX-23.3
July 18, 1994
The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Re: Federal Income Tax Consequences of the Merger of XYZ Sub Corporation
with and into The Dreyfus Corporation
Dear Sirs:
You have requested our opinion as to certain federal income tax
consequences arising out of the merger (the "Merger") pursuant to the Amended
and Restated Agreement and Plan of Merger, dated as of December 5, 1993 (the
"Merger Agreement"), by and among The Dreyfus Corporation, a New York
corporation ("Dreyfus"), Mellon Bank Corporation, a Pennsylvania corporation
("Mellon"), Mellon Bank, N.A., a wholly-owned subsidiary of Mellon ("Mellon
Bank"), and XYZ Sub Corporation, a wholly-owned subsidiary of Mellon Bank
("Merger Subsidiary"), pursuant to which Merger Subsidiary will merge with and
into Dreyfus and Dreyfus will become a wholly-owned subsidiary of Mellon Bank.
Our conclusions are based on the facts and assumptions set forth below, our
examination of the Merger Agreement and the Prospectus/ Joint Proxy Statement,
filed as part of the Registration Statement on Form S-4 of Mellon of July 18,
1994 (the "Registration Statement"), and upon the representations furnished to
us by Dreyfus and Mellon. In addition, we have considered such other factual and
legal matters as we have deemed appropriate. Capitalized terms not defined in
this letter have the meaning given them in the Merger Agreement.
Pursuant to the Merger Agreement, Merger Subsidiary will merge with and
into Dreyfus and the separate corporate existence of Merger Subsidiary will
cease. In the Merger, each issued and outstanding share of Dreyfus Common Stock
(other than shares held by holders who properly exercise dissenters' rights and
fractional shares) will be converted into the right to receive 0.88017 shares of
Mellon Common Stock. No fractional shares of Mellon will be issued in the
Merger. Dreyfus stockholders who otherwise would receive fractional shares or
who properly exercise dissenters' rights will receive cash under procedures set
forth in the Prospectus/Joint Proxy Statement.
In rendering the opinions set forth below, we have assumed that (i) the
Merger will be consummated in the manner described in the Merger Agreement, and
(ii) the representations made to us by Dreyfus and Mellon in the letters dated
July 18, 1994, and July 18, 1994, respectively, are true on and as of the
Effective Date.
Based upon and subject to the foregoing, we are of the opinion that:
1. The formation of Merger Subsidiary and its merger into Dreyfus, as
described above, will be treated for federal income tax purposes as the
acquisition by Mellon Bank of all of the outstanding shares of Dreyfus Common
Stock in exchange solely for shares of Mellon voting stock, and will constitute
a reorganization within the meaning of the Internal Revenue Code of 1986, as
amended (the "Code") sec.368(a)(1)(B). See Rev. Rul. 67-448, 1967-2 C.B. 144.
Mellon, Mellon Bank and Dreyfus will each be a "party to a reorganization"
within the meaning of Code sec.368(b).
2. No gain or loss will be recognized by Mellon Bank upon the receipt of
shares of Dreyfus Common Stock solely in exchange for shares of Mellon Common
Stock. Code sec.1032.
<PAGE> 2
- 2 -
3. No gain or loss will be recognized by the stockholders of Dreyfus upon
the receipt of shares of Mellon Common Stock (including any fractional share
interests to which they may be entitled) solely in exchange for their shares of
Dreyfus Common Stock. Code sec.354(a)(1).
4. The basis of the Dreyfus stockholders in the shares of Mellon Common
Stock to be received in the Merger (including any fractional share interests to
which they may be entitled) will be the same as their basis in the shares of
Dreyfus Common Stock surrendered in exchange therefor. Code sec.358(a)(1).
5. The holding period of the shares of Mellon Common Stock to be received
in the Merger by the stockholders of Dreyfus will include the period during
which the shares of Dreyfus Common Stock surrendered in exchange therefor were
held, provided that the shares of Dreyfus Common Stock were held as capital
assets on the date of the Merger. Code sec.1223(1).
6. Stockholders of Dreyfus who exercise dissenters' rights and receive only
cash will be treated as having received that cash as a distribution in
redemption of their shares of Dreyfus Common Stock subject to the provisions and
limitations of Code sec.302. The Dreyfus stockholders in this category who hold
no shares of Mellon Common Stock immediately following the Merger, directly or
through the application of Code sec.318(a), shall be treated as having a
complete termination of interest within the meaning of Code sec.302(b)(3), and
the cash received by them will be treated as a distribution in full payment for
their shares of Dreyfus Common Stock. Code sec.302(a). Gain will be realized and
recognized by such Dreyfus stockholders in an amount equal to the difference
between the redemption price and the adjusted basis of the shares of Dreyfus
Common Stock surrendered by them as determined under Code sec.1011. Code
sec.1001; Rev. Rul. 74-515, 1974-2 C.B. 118.
7. The payment of cash to a holder of Dreyfus Common Stock in lieu of a
fractional share of Mellon Common Stock will be treated for federal income tax
purposes as if the fractional share was distributed as part of the Merger and
then was redeemed by Mellon. This cash payment will be treated as having been
received as a distribution in full payment for the stock redeemed. Code
sec.302(a); Rev. Rul. 66-365, 1966-2 C.B. 116 and Rev. Proc. 77-41, 1977-2 C.B.
574. Gain will be realized and recognized by the Dreyfus stockholder receiving
cash in lieu of a fractional share of Mellon Common Stock equal to the
difference between the cash received and the basis of the fractional share
interest.
8. Gain or loss recognized by a holder of Dreyfus Common Stock upon receipt
of cash in exchange for the holder's fractional share interest or upon exercise
of dissenters' rights will be capital gain or loss, provided the shares of
Dreyfus Common Stock were held as capital assets on the date of the Merger. If
the shares of Dreyfus Common Stock have been held for longer than one year, the
gain or loss will be long-term capital gain or loss. Code sec.1222.
9. The basis of Mellon Bank in the shares of Dreyfus Common Stock to be
received in the Merger will be the same as the basis of such shares in the hands
of the Dreyfus stockholders immediately prior to the Merger. Code sec.362(b).
10. The holding period of Mellon Bank in the shares of Dreyfus Common Stock
to be received in the Merger will include the period during which such shares
were held by the Dreyfus stockholders. Code sec.1223(2).
We consent to the reference to our firm under the caption "The
Merger--Federal Income Tax Consequences" in the Registration Statement and to
the filing of this opinion as an exhibit to the Registration Statement.
Very truly yours,
ROGERS & WELLS
<PAGE> 1
EX-23.4
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
of Mellon Bank Corporation:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the Prospectus.
Pittsburgh, Pennsylvania
July 18, 1994
KPMG PEAT MARWICK
<PAGE> 1
EX-23.5
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated January 27, 1994, on the consolidated financial
statements of The Dreyfus Corporation and Subsidiary Companies included in The
Dreyfus Corporation Annual Report on Form 10-K for the year ended December 31,
1993 incorporated by reference in the Joint Proxy Statement of Mellon Bank
Corporation and The Dreyfus Corporation which is made a part of the Registration
Statement on Form S-4 and Prospectus of Mellon Bank Corporation for the
registration of its common stock.
New York, New York
July 14, 1994
ERNST & YOUNG
<PAGE> 1
EX-23.6
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-4) and related Prospectus of Mellon Bank Corporation for the registration of
32,750,000 shares of its common stock of our report dated February 3, 1993 with
respect to the consolidated financial statements of The Boston Company, Inc. and
Subsidiaries for the years ended December 31, 1992, 1991 and 1990 included in
Amendment No. 2 on Form 8 dated February 24, 1993 to the Current Report on Form
8-K of Mellon Bank Corporation dated September 14, 1992.
Boston, Massachusetts
July 18, 1994
ERNST & YOUNG
<PAGE> 1
EX-23.7
We hereby consent to the references to the opinion of our firm under the
captions "SUMMARY--Opinions of Financial Advisors," "BACKGROUND OF AND REASONS
FOR THE MERGER"--Reasons for the Merger--Dreyfus; Recommendation of Dreyfus
Board," and "--Opinions of Dreyfus Financial Advisors--Lazard Opinions" and to
the inclusion of the opinion of our firm in the Prospectus/Joint Proxy Statement
of Mellon Bank Corporation and The Dreyfus Corporation constituting a part of
the Registration Statement on Form S-4 of Mellon Bank Corporation filed with the
Securities and Exchange Commission. In giving the foregoing consent, we do not
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
July 18, 1994
LAZARD FRERES & CO.
<PAGE> 1
EX 23.8
We hereby consent to the use of our opinion letter to the Board of
Directors of The Dreyfus Corporation included as Appendix III to the
Prospectus/Joint Proxy Statement which forms a part of the Registration
Statement on Form S-4 relating to the proposed merger of a subsidiary of Mellon
Bank with and into The Dreyfus Corporation and to the references to our firm
name under the captions "SUMMARY--Opinions of Financial Advisors," "BACKGROUND
OF AND REASONS FOR THE MERGER--Background of the Merger," "--Reasons for the
Merger--Dreyfus; Recommendation of Dreyfus Board," and "--Opinions of Dreyfus
Financial Advisers--Salomon Brothers Opinions" in such Prospectus/Joint Proxy
Statement. In giving such consent, we do not admit and we hereby disclaim that
we come within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder, nor do we thereby admit that we
are experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder.
SALOMON BROTHERS INC
By DAVID W. LEVY
Dated: July 18, 1994
<PAGE> 1
EX-23.9
July 18, 1994
Board of Directors
Mellon Bank Corporation
Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Re: Registration Statement of Mellon Bank Corporation on Form S-4 dated July 18,
1994 including the Joint Proxy Statement of Mellon Bank Corporation and The
Dreyfus Corporation.
Gentlemen and Madame:
Attached is our opinion letter dated July 19, 1994 with respect to the fairness
to Mellon Bank Corporation (the "Company") of the exchange ratio of 0.88017
shares of Common Stock, par value $0.50 per share, of the Company to be paid for
each share of Common Stock, par value $0.10 per share, of The Dreyfus
Corporation ("Dreyfus") pursuant to the Amended and Restated Agreement and Plan
of Merger dated as of December 5, 1993 by and among the Company, Mellon Bank,
N.A. (the "Bank"), a wholly-owned subsidiary of the Company, XYZ Sub
Corporation, a wholly-owned subsidiary of the Bank, and Dreyfus.
The foregoing opinion letter is solely for the information and assistance of the
Board of Directors of the Company in connection with its consideration of the
transaction contemplated therein and is not to be used, circulated, quoted or
otherwise referred to for any other purpose, nor is it to be filed with,
included in or referred to in whole or in part in any registration statement,
proxy statement or any other document, except in accordance with our prior
written consent.
In that regard, we hereby consent to the reference to the opinion of our Firm
under the caption "SUMMARY--Opinions of Financial Advisers," "BACKGROUND OF
AND REASONS FOR THE MERGER--Reasons for the Merger--Mellon; Recommendation
of Mellon Board " and "--Opinions of Mellon Financial Adviser" and to the
inclusion of the foregoing opinion in the Prospectus/Joint Proxy Statement
included in the above-mentioned Registration Statement. In giving such consent,
we do not thereby admit that we come within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933 or the rules
and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
GOLDMAN, SACHS & CO.
<PAGE> 2
July 19, 1994
Board of Directors
Mellon Bank Corporation
Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Gentlemen and Madame:
You have requested our opinion as to the fairness to Mellon Bank Corporation
(the "Company") of the exchange ratio of 0.88017 shares of Common Stock, par
value $0.50 per share (the "Company Shares"), of the Company to be paid for each
share of Common Stock, par value $0.10 per share (the "Dreyfus Shares"), of The
Dreyfus Corporation ("Dreyfus") (the "Exchange Ratio") pursuant to the merger
(the "Merger") contemplated by the Amended and Restated Agreement and Plan of
Merger dated as of December 5, 1993 by and among the Company, Mellon Bank, N.A.
(the "Bank"), a wholly-owned subsidiary of the Company, XYZ Sub Corporation, a
wholly-owned subsidiary of the Bank, and Dreyfus (the "Agreement").
Goldman, Sachs & Co., as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. We are familiar with
the Company, having acted as lead managing underwriter for the Company's common
equity offerings in May 1991 and January 1993, having acted as co-manager in
various other recent public offerings of preferred stock and debt for the
Company, and having acted as financial advisor to the Company for the past
several years, including having acted as financial advisor in connection with,
and having participated in certain negotiations leading to, the Agreement.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Registration Statement on Form S-4, including the
Prospectus/Joint Proxy Statement relating to the Special Meetings of
Stockholders of the Company and Dreyfus to be held in connection with the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company and Dreyfus for the five years ended December 31, 1993; certain interim
reports to stockholders and Quarterly Reports on Form 10-Q of the Company and
Dreyfus; certain other communications from the Company and Dreyfus to their
respective stockholders; and certain internal financial analyses and forecasts
for the Company and Dreyfus prepared by their respective managements. We also
have held discussions with members of the senior managements of the Company and
Dreyfus regarding the past and current business operations, regulatory
relationships, financial condition and future prospects of their respective
companies. We also have reviewed with members of the senior management of the
Company the results of the Company's due diligence examination of Dreyfus and
the strategic benefits expected to be derived from the Merger for the business
and capital position of the Company. In addition, we have reviewed the reported
price and trading activity for the Company Shares and the Dreyfus Shares,
compared certain financial and stock market information for the Company and
Dreyfus with similar information for certain other companies the securities of
which are publicly traded, reviewed the financial terms of certain recent
business combinations in the investment management industry specifically and in
other industries generally and performed such other studies and analyses as we
considered appropriate.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. In that regard, we have assumed, with your consent,
that the financial forecasts, including, without limitation, projected cost
savings and operating synergies resulting from the Merger, have been reasonably
prepared on a basis reflecting the best currently available judgments and
estimates of the Company and that such forecasts will be realized in the amounts
and
2
<PAGE> 3
at the times contemplated thereby. In addition, you have advised us that you
expect the strategic benefits to be derived from the Merger for the business and
capital position of the Company to outweigh the impact of the reduction in
earnings per share that is expected to result for a period of time. We have not
made an independent evaluation or appraisal of the assets and liabilities of the
Company or Dreyfus or any of their subsidiaries and we have not been furnished
with any such evaluation or appraisal. We have assumed, with your consent, that
the Merger will be accounted for as a pooling of interests under generally
accepted accounting principles.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the Exchange
Ratio pursuant to the Agreement is fair to the Company.
Very truly yours,
3
<PAGE> 1
EX-24.1
POWER OF ATTORNEY
MELLON BANK CORPORATION
Know all men by these presents, that each person whose signature appears
below constitutes and appoints James M. Gockley and William E. Marquis, and each
of them, such person's true and lawful attorney-in-fact and agent, with full
power of substitution and revocation, for such person and in such person's name,
place and stead, in any and all capacities, to execute and file with the
Securities and Exchange Commission one or more registration statement or
statements on Form S-4 or any other appropriate form or forms pursuant to the
Securities Act of 1933, as amended, with respect to the registration of 35
million shares of Mellon Bank Corporation's (the "Corporation") common stock to
be issued pursuant to the Agreement and Plan of Merger dated as of December 5,
1993 among the Corporation, Mellon Bank, N.A., a subsidiary of Mellon Bank, N.A.
and The Dreyfus Corporation; and any and all amendments, including
post-effective amendments and exhibits to such registration statements, and any
and all applications or other documents to be filed with the Commission or
elsewhere pertaining to the securities to which such registration statement
relates, granting unto said attorney-in-fact and agent, and each of them full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as such persons might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent and each of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
WITNESS the due execution hereof by the following persons in the capacities
indicated on this 5th day of December, 1993.
<TABLE>
<S> <C>
FRANK V. CAHOUET
- -------------------------------------------- --------------------------------------------
Frank V. Cahouet, Director and C. Frederick Fetterolf, Director
Chief Executive Officer
BURTON C. BORGELT IRA J. GUMBERG
- -------------------------------------------- --------------------------------------------
Burton C. Borgelt, Director Ira J. Gumberg, Director
PEMBERTON HUTCHINSON
- -------------------------------------------- --------------------------------------------
Carol R. Brown, Director Pemberton Hutchinson, Director
ROTAN E. LEE
- -------------------------------------------- --------------------------------------------
J. W. Connolly, Director Rotan E. Lee, Director
- --------------------------------------------
Charles A. Corry, Director
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
ANDREW W. MATHIESON W. KEITH SMITH
- -------------------------------------------- --------------------------------------------
Andrew W. Mathieson, Director W. Keith Smith, Director
SEWARD PROSSER MELLON
- -------------------------------------------- --------------------------------------------
Seward Prosser Mellon, Director Joab L. Thomas, Director
DAVID S. SHAPIRA WESLEY W. VON SCHACK
- -------------------------------------------- --------------------------------------------
David S. Shapira, Director Wesley W. von Schack, Director
H. ROBERT SHARBAUGH WILLIAM J. YOUNG
- -------------------------------------------- --------------------------------------------
H. Robert Sharbaugh, Director William J. Young, Director
</TABLE>
<PAGE> 3
POWER OF ATTORNEY
MELLON BANK CORPORATION
Know all men by these presents, that each person whose signature appears
below constitutes and appoints James M. Gockley and William E. Marquis, and each
of them, such person's true and lawful attorney-in-fact and agent, with full
power of substitution and revocation, for such person and in such person's name,
place and stead, in any and all capacities, to execute and file with the
Securities and Exchange Commission one or more registration statement or
statements on Form S-4 or any other appropriate form or forms pursuant to the
Securities Act of 1933, as amended, with respect to the registration of 35
million shares of Mellon Bank Corporation's (the "Corporation") common stock to
be issued pursuant to the Agreement and Plan of Merger dated as of December 5,
1993 among the Corporation, Mellon Bank, N.A., a subsidiary of Mellon Bank, N.A.
and The Dreyfus Corporation; and any and all amendments, including
post-effective amendments and exhibits to such registration statements, and any
and all applications or other documents to be filed with the Commission or
elsewhere pertaining to the securities to which such registration statement
relates, granting unto said attorney-in-fact and agent, and each of them full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as such persons might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent and each of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
WITNESS the due execution hereof by the following persons in the capacities
indicated on this 6th day of December, 1993.
<TABLE>
<S> <C>
CAROL R. BROWN CHARLES A. CORRY
- -------------------------------------------- --------------------------------------------
Carol R. Brown, Director Charles A. Corry, Director
C. FREDERICK FETTEROLF JOAB L. THOMAS
- -------------------------------------------- --------------------------------------------
C. Frederick Fetterolf, Director Joab L. Thomas, Director
</TABLE>
<PAGE> 4
POWER OF ATTORNEY
MELLON BANK CORPORATION
Know all men by these presents, that each person whose signature appears
below constitutes and appoints James M. Gockley and William E. Marquis, and each
of them, such person's true and lawful attorney-in-fact and agent, with full
power of substitution and revocation, for such person and in such person's name,
place and stead, in any and all capacities, to execute and file with the
Securities and Exchange Commission one or more registration statement or
statements on Form S-4 or any other appropriate form or forms pursuant to the
Securities Act of 1933, as amended, with respect to the registration of 35
million shares of Mellon Bank Corporation's (the "Corporation") common stock to
be issued pursuant to the Agreement and Plan of Merger dated as of December 5,
1993 among the Corporation, Mellon Bank, N.A., a subsidiary of Mellon Bank, N.A.
and The Dreyfus Corporation; and any and all amendments, including
post-effective amendments and exhibits to such registration statements, and any
and all applications or other documents to be filed with the Commission or
elsewhere pertaining to the securities to which such registration statement
relates, granting unto said attorney-in-fact and agent, and each of them full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as such persons might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent and each of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
WITNESS the due execution hereof by the following person in the capacities
indicated on this 14th day of February, 1994.
J. W. CONNOLLY
- --------------------------------------------
J. W. Connolly, Director
<PAGE> 5
POWER OF ATTORNEY
MELLON BANK CORPORATION
Know all men by these presents, that each person whose signature appears
below constitutes and appoints James M. Gockley and William E. Marquis, and each
of them, such person's true and lawful attorney-in-fact and agent, with full
power of substitution and revocation, for such person and in such person's name,
place and stead, in any and all capacities, to execute and file with the
Securities and Exchange Commission one or more registration statement or
statements on Form S-4 or any other appropriate form or forms pursuant to the
Securities Act of 1933, as amended, with respect to the registration of 35
million shares of Mellon Bank Corporation's (the "Corporation") common stock to
be issued pursuant to the Agreement and Plan of Merger dated as of December 5,
1993 among the Corporation, Mellon Bank, N.A., a subsidiary of Mellon Bank, N.A.
and The Dreyfus Corporation; and any and all amendments, including
post-effective amendments and exhibits to such registration statements, and any
and all applications or other documents to be filed with the Commission or
elsewhere pertaining to the securities to which such registration statement
relates, granting unto said attorney-in-fact and agent, and each of them full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as such persons might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent and each of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
WITNESS the due execution hereof by the following person in the capacities
indicated on this 6th day of June, 1994.
ROBERT MEHRABIAN
- --------------------------------------------
Robert Mehrabian, Director
<PAGE> 1
EX-99.4
CONSENT OF PERSON TO BECOME A DIRECTOR
I hereby consent to being named in this Registration Statement and the
Joint Proxy Statement contained herein, as a person who may become a director of
Mellon Bank Corporation.
HOWARD STEIN
--------------------------------------
Howard Stein
Dated: July 18, 1994
<PAGE> 1
EX-99.5
CONSENT OF PERSON TO BECOME A DIRECTOR
I hereby consent to being named in this Registration Statement and the
Joint Proxy Statement contained herein, as a person who may become a director of
Mellon Bank Corporation.
JOSEPH S. DIMARTINO
--------------------------------------
Joseph S. DiMartino
Dated: July 18, 1994
<PAGE> 1
EX-99.6
CONSENT OF PERSON TO BECOME A DIRECTOR
I hereby consent to being named in this Registration Statement and the
Joint Proxy Statement contained herein, as a person who may become a director of
Mellon Bank Corporation.
EDWARD J. MCANIFF
--------------------------------------
Edward J. McAniff
Dated: July 18, 1994
<PAGE> 1
EX-99.7
MELLON BANK CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE CORPORATION.
The undersigned hereby appoints James M. Gockley and Ann M. Sawchuck, or either
of them, each with full power of substitution as attorneys and proxies of the
undersigned to vote all Mellon Bank Corporation Common Stock of the undersigned
at the Special Meeting of Shareholders of the Corporation to be held on Tuesday,
August 23, 1994, at 11:00 A.M., on the 10th Floor of the Union Trust Building,
501 Grant Street, Pittsburgh, Pennsylvania, and at any adjournment of such
meeting, as fully and effectually as the undersigned could do if personally
present, and hereby revokes all previous proxies for said meeting. WHERE A VOTE
IS NOT SPECIFIED, THE PROXIES WILL VOTE THE SHARES REPRESENTED BY THIS PROXY FOR
THE PROPOSAL, AND WILL VOTE IN THEIR DISCRETION ON SUCH OTHER MATTERS THAT MAY
PROPERLY COME BEFORE THE MEETING.
This Proxy is solicited on behalf of the Board of Directors of the Corporation,
and may be revoked prior to its exercise. The Board of Directors recommends a
vote FOR the proposal.
(Continued, and to be signed and dated, on reverse side)
<PAGE> 2
WHERE A VOTE IS NOT SPECIFIED, THE PROXIES WILL VOTE SHARES REPRESENTED BY THIS
PROXY FOR THE PROPOSAL AND WILL VOTE IN THEIR DISCRETION ON SUCH OTHER MATTERS
THAT MAY PROPERLY COME BEFORE THE MEETING.
<TABLE>
<S> <C> <C> <C>
Proposal to approve the Amended and Restated Agreement and Plan of Merger dated as of December 5, 1993, by and among The
Dreyfus Corporation ("Dreyfus"), Mellon Bank Corporation ("Mellon"), Mellon Bank, N.A. ("Mellon Bank"), and XYZ Sub
Corporation, a wholly owned subsidiary of Mellon Bank ("Merger Subsidiary"), pursuant to which Merger Subsidiary would
be merged with and into Dreyfus, and Dreyfus would become a wholly owned subsidiary of Mellon Bank and an indirect
wholly owned subsidiary of Mellon (the "Merger"). By virtue of the Merger, each outstanding share of Dreyfus Common
Stock will be converted into 0.88017 shares of Mellon Common Stock.
For Against Abstain
0 0 0
</TABLE>
Please date and sign exactly as name
appears hereon. When signing as
attorney, executor, administrator,
trustee, guardian, etc., full title
as such should be shown. For joint
accounts, each joint owner should
sign. If more than one trustee is
listed, all trustees should sign,
unless one trustee has power to sign
for all.
___________________________________
(Signature of Shareholder)
___________________________________
(Signature of Shareholder)
___________________________________
Dated: , 1994
"PLEASE MARK INSIDE BLUE BOXES SO THAT DATA
PROCESSING EQUIPMENT WILL RECORD YOUR VOTES"
<PAGE> 3
EX-99.7
MELLON BANK CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE CORPORATION.
The undersigned hereby appoints James M. Gockley and Ann M. Sawchuck, or either
of them, each with full power of substitution as attorneys and proxies of the
undersigned to vote all Mellon Bank Corporation Series D Junior Preferred Stock
of the undersigned at the Special Meeting of Shareholders of the Corporation to
be held on Tuesday, August 23, 1994, at 11:00 A.M., on the 10th Floor of the
Union Trust Building, 501 Grant Street, Pittsburgh, Pennsylvania, and at any
adjournment of such meeting, as fully and effectually as the undersigned could
do if personally present, and hereby revokes all previous proxies for said
meeting. PURSUANT TO THE TERMS OF THE AGREEMENTS UNDER WHICH THE SERIES D JUNIOR
PREFERRED STOCK WAS ISSUED, THE PROXIES WILL VOTE THE SHARES REPRESENTED BY THIS
PROXY AS DIRECTED BY YOU WITH RESPECT TO THE PROPOSAL; PROVIDED, HOWEVER, THE
PERCENTAGE OF SUCH SHARES VOTED FOR THE PROPOSAL WILL BE NO LESS THAN THE
PERCENTAGE OF ALL VOTED SHARES OF THE CORPORATION VOTED FOR THE PROPOSAL AT THE
SPECIAL MEETING. WHERE A VOTE IS NOT SPECIFIED, THE PROXIES WILL VOTE THE SHARES
REPRESENTED BY THIS PROXY FOR THE PROPOSAL, AND WILL VOTE IN THEIR DISCRETION ON
SUCH OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING.
This Proxy is solicited on behalf of the Board of Directors of the Corporation,
and may be revoked prior to its exercise. The Board of Directors recommends a
vote FOR the proposal.
(Continued, and to be signed and dated, on reverse side)
<PAGE> 4
THE PROXIES WILL VOTE THE SHARES REPRESENTED BY THIS PROXY AS INDICATED ON THE
FRONT SIDE OF THIS CARD.
<TABLE>
<S> <C> <C> <C>
Proposal to approve the Amended and Restated Agreement and Plan of Merger dated as of December 5, 1993, by and among The
Dreyfus Corporation ("Dreyfus"), Mellon Bank Corporation ("Mellon"), Mellon Bank, N.A. ("Mellon Bank"), and XYZ Sub
Corporation, a wholly owned subsidiary of Mellon Bank ("Merger Subsidiary"), pursuant to which Merger Subsidiary would
be merged with and into Dreyfus, and Dreyfus would become a wholly owned subsidiary of Mellon Bank and an indirect
wholly owned subsidiary of Mellon (the "Merger"). By virtue of the Merger, each outstanding share of Dreyfus Common
Stock will be converted into 0.88017 shares of Mellon Common Stock.
For Against Abstain
0 0 0
</TABLE>
Please date and sign exactly as name
appears hereon. When signing as
attorney, executor, administrator,
trustee, guardian, etc., full title
as such should be shown. For joint
accounts, each joint owner should
sign. If more than one trustee is
listed, all trustees should sign,
unless one trustee has power to sign
for all.
___________________________________
(Signature of Shareholder)
___________________________________
(Signature of Shareholder)
___________________________________
Dated: , 1994
"PLEASE MARK INSIDE BLUE BOXES SO THAT DATA
PROCESSING EQUIPMENT WILL RECORD YOUR VOTES"
<PAGE> 5
EX-99.7
PROXY
THE DREYFUS CORPORATION
SPECIAL MEETING OF STOCKHOLDERS--AUGUST 23, 1994
The undersigned stockholder of THE DREYFUS CORPORATION hereby appoints
CHRISTINE PAVALOS and STEVEN F. NEWMAN, and each of them, with full power of
substitution, the attorneys and proxies of the undersigned, to vote, as
indicated herein, all of the shares of common stock of THE DREYFUS CORPORATION
standing in the name of the undersigned at the close of business on July 19,
1994, at the Special Meeting of Stockholders of the Corporation to be held at
the New York Marriott Marquis, 1535 Broadway, (between 45th and 46th Streets),
Westside South Center, 5th Floor, New York, N.Y. 10036, at 11:00 a.m., local
time, in the forenoon on August 23, 1994, and at any and all adjournments or
postponements thereof, with all of the powers the undersigned would possess if
then and there personally present. The undersigned acknowledges receipt of the
Notice and the Prospectus/Joint Proxy Statement dated July 19, 1994.
The shares represented by this proxy will be voted as directed by the
stockholder. IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS RETURNED,
SUCH SHARES WILL BE VOTED FOR THE PROPOSAL.
(PLEASE DATE AND SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE.)
<PAGE> 6
<TABLE>
<S> <C>
1. Proposal to adopt the Amended and Restated Agreement and Plan of Merger, dated as
of December 5, 1993, (the "Merger Agreement") by and among Mellon Bank Corporation,
Mellon Bank, N.A., XYZ Sub Corporation, a wholly-owned subsidiary of Mellon Bank,
N.A., and The Dreyfus Corporation ("Dreyfus"), providing for the merger of XYZ Sub
Corporation with and into Dreyfus (the "Merger"). By virtue of the Merger, each
outstanding share of Dreyfus common stock will be converted into 0.88017 shares of
Mellon Bank Corporation common stock.
FOR AGAINST ABSTAIN
0 0 0
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE MERGER AGREEMENT
2. In their discretion, the Proxies are authorized to vote upon such other business as
may properly come before the meeting, or any adjournment(s) or postponement(s)
thereof.
</TABLE>
Address Change and/or Comments Mark
Here / /
PROXY DEPARTMENT
NEW YORK, N.Y. 10203-0902
Signature(s) should be exactly as
name or names appearing on this
Proxy. If stock is held jointly,
each holder should sign. If signing
is by attorney, executor,
administrator, trustee or guardian,
please give full title.
Dated: _______________________, 1994
____________________________________
____________________________________
(Joint Signature)
PLEASE INDICATE YOUR CHOICE BY
MARKING AN "X" IN EITHER
BLACK OR BLUE INK AS IN THIS
EXAMPLE. / /
SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
