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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[X] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Mellon Bank Corporation
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(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
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LOGO
MELLON BANK CORPORATION Mellon Bank Corporation One Mellon Bank
Center Pittsburgh, PA 15258-0001
March 7, 1996
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Mellon Bank Corporation in Pittsburgh on Tuesday, April 16, 1996, at 10:00 A.M.
Further information about the meeting and the matters to be considered is
contained in the formal Notice of Annual Meeting and Proxy Statement on the
following pages.
It is important that your shares be represented at this meeting. Whether or not
you plan to attend, we hope that you will sign, date and return your Proxy
promptly in the enclosed envelope. Completing and returning the enclosed Proxy
will not limit your right to vote in person or to attend the meeting.
Sincerely,
/s/ Frank V. Cahouet
Frank V. Cahouet Chairman, President and Chief Executive Officer
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LOGO
MELLON BANK CORPORATION
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258-0001
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders:
Notice is hereby given that the Annual Meeting of Shareholders of Mellon Bank
Corporation (the "Corporation") will be held on the 10th Floor of the Union
Trust Building, 501 Grant Street, Pittsburgh, Pennsylvania, on Tuesday, April
16, 1996, at 10:00 A.M., for the purpose of considering and acting upon the
following:
1.the election of directors;
2.a proposal to amend and restate the Corporation's Long-Term Profit Incentive
Plan (1981);
3. the ratification of the appointment of KPMG Peat Marwick LLP as independent
public accountants of the Corporation for the year 1996; and
4.such other matters as may properly come before the meeting.
The Board of Directors has fixed the close of business on Thursday, February
15, 1996, as the record date for the determination of shareholders entitled to
notice of and to vote at the meeting or any adjournment thereof.
Enclosed are a Proxy Statement, a form of Proxy, an addressed return envelope
and the Corporation's 1995 Annual Report. All shareholders, whether or not they
expect to be present at the meeting, are requested to sign and date the Proxy
and to return it in the addressed envelope promptly. Shareholders who plan to
attend the meeting in person are also requested to complete and return the
reservation form which appears at the end of the Proxy Statement. Shareholders
who attend the meeting may, if they wish, vote in person even though they have
previously submitted a Proxy.
By Order of the Board of Directors
/s/ Carl Krasik
Carl Krasik
Secretary
March 7, 1996
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LOGO
MELLON BANK CORPORATION
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258-0001
PROXY STATEMENT
March 7, 1996
The accompanying Proxy is solicited by the Board of Directors of Mellon Bank
Corporation (the "Corporation") for use at the Annual Meeting of Shareholders
of the Corporation scheduled to be held on Tuesday, April 16, 1996. Proxies are
being solicited from holders of the Corporation's common stock, par value $0.50
per share (the "Common Stock"). If the Proxy is properly executed and returned,
the shares represented thereby will be voted and, where specification is made
by the shareholder as provided therein, will be voted in accordance with such
specification, subject to limitations applicable to certain shares of Common
Stock, as described below. The Proxy may, nevertheless, be revoked by notice to
the Secretary of the Corporation at any time prior to the voting thereof. In
addition, shareholders who attend the annual meeting may, if they wish, vote in
person even though they have submitted a Proxy, in which event, their Proxy
will be deemed to have been revoked.
Subject to the limitations described below, unless a Proxy is revoked or
contains other instructions, the shares represented thereby will be voted at
the meeting FOR the election as directors of the nominees of the Board of
Directors set forth below (Proxy Item 1), FOR the proposal to amend and restate
the Corporation's Long-Term Profit Incentive Plan (1981) (Proxy Item 2) and FOR
ratification of the appointment of KPMG Peat Marwick LLP as independent public
accountants of the Corporation for the year 1996 (Proxy Item 3). However, if a
broker or nominee limits on the proxy card the number of shares voted on a
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 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
meeting.
At the annual meeting, holders of Common Stock will be entitled to one vote for
each share held and will not be entitled to cumulative voting. Pursuant to the
terms of agreements under which the Corporation's Series D Junior Preferred
Stock, par value $1.00 per share (the "Series D Stock") was issued and
subsequently converted into Common Stock, those shares of Common Stock held by
Warburg, Pincus Capital Company, L.P., Warburg, Pincus Capital Partners, L.P.
and other former Series D holders will be voted FOR the election of the
nominees named below and will be voted as directed by the holder on all other
matters; provided, however, that such shares will be voted on such other
matters in a manner that is no less favorable to the position recommended by
the Board of Directors than the allocation of the votes cast by all other
shareholders of the Corporation voting on such other matters.
The close of business on Thursday, February 15, 1996, has been fixed by the
Board of Directors as the record date for the determination of shareholders
entitled to notice of and to vote at the annual meeting or any adjournment
thereof. As of that date, the Corporation had outstanding 134,310,279 shares of
Common Stock. Proxies, ballots and voting tabulations that identify individual
holders of Common Stock will be held in confidence by the Corporation's
transfer agent. The vote of any holder of Common Stock will not be disclosed
except as may be necessary to meet legal requirements, in the case of a
contested proxy solicitation or as may be requested by the particular
shareholder. The distribution of these proxy materials, consisting of the
Notice of Annual Meeting, the Proxy Statement and the form of Proxy, together
with the Corporation's 1995 Annual Report, is expected to commence on or about
March 7, 1996.
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ELECTION OF DIRECTORS (PROXY ITEM 1)
The By-Laws of the Corporation provide that the directors of the Corporation
shall be classified into three classes, as nearly equal in number as possible,
with such classes of directors serving staggered, three-year terms of office.
Accordingly, at each annual meeting of shareholders, a class consisting of
approximately one-third of the Corporation's directors is elected to hold
office for a term expiring at the annual meeting of shareholders to be held in
the third year following the year of their election and until their successors
have been duly elected and qualified. The By-Laws further provide that the
Corporation's Board of Directors shall consist of such number of directors as
shall be fixed from time to time by a majority vote of the full Board of
Directors. The Board of Directors has fixed the number of directors at 19, and
at this year's annual meeting of shareholders six directors will be elected to
the class of directors whose terms end in 1999 and one director will be elected
to the class of directors whose terms end in 1997. J. W. Connolly, Charles A.
Corry, Pemberton Hutchinson, Rotan E. Lee, Esquire, Robert Mehrabian and Wesley
W. von Schack all of whom are presently serving as directors of the
Corporation, have been nominated for election at this year's annual meeting to
the term ending in 1999. Howard Stein, who was elected as a director by the
Board of Directors in August of 1994 pursuant to the terms of the Amended and
Restated Agreement and Plan of Merger between the Corporation and The Dreyfus
Corporation (the "Dreyfus Merger Agreement"), has been nominated by the Board
of Directors for election to the class of directors whose terms end in 1997. It
was contemplated that Mr. Stein would serve as a director of the Corporation
for a period of time following the acquisition of The Dreyfus Corporation
during which the operations of the two companies were being integrated. That is
expected to be completed in 1996 and, accordingly, Mr. Stein has agreed to
serve, if elected, as a director whose term ends in 1997. To satisfy the
requirement that the classes of directors be as nearly equal in number as
possible, Mr. Corry, who was elected by the shareholders in 1994 for a term
ending in 1997, has agreed to stand for election for a three-year term ending
in 1999.
Any vacancies in the Board of Directors resulting from death, retirement,
resignation, disqualification, removal from office or other cause, as well as
any vacancy resulting from an increase in the number of directors that occurs
between annual meetings of shareholders, will be filled by a majority vote of
the remaining directors then in office. Directors so chosen to fill vacancies
will hold office until the expiration of the term of the class to which they
have been elected.
It is intended that the shares of Common Stock represented by the enclosed
Proxy will be voted FOR the election of the nominees named below, unless such
authority to vote for one or more of the nominees is withheld. Pursuant to the
terms of the agreements mentioned above, Proxies submitted representing shares
of Common Stock received by the holders thereof upon conversion of their Series
D Stock will be voted FOR the election of the nominees named below. In the
event that one or more of the nominees is unable or unwilling to serve as a
director, the persons named in the Proxy will vote for the election of such
substitute nominee, if any, as shall be named by the Nominating Committee of
the Board of Directors. The Board of Directors has no reason to believe that
any of the nominees will be unable or unwilling to serve as a director, as each
of the nominees has expressed a willingness to serve if elected.
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BIOGRAPHICAL SUMMARIES OF NOMINEES AND CONTINUING DIRECTORS
Certain information regarding the nominees for election at this year's annual
meeting, as well as information regarding the continuing directors whose terms
expire in 1997 and 1998, is set forth below. Each of the nominees other than
Mr. Corry, Mr. Lee, Dr. Mehrabian, and Mr. Stein was previously elected by the
shareholders at the Corporation's 1993 annual meeting of shareholders. Mr.
Corry was elected by the shareholders at the Corporation's 1994 annual meeting,
Mr. Lee was elected by the Board of Directors in 1993, Dr. Mehrabian was
elected by the Board of Directors in 1994 and Mr. Stein was elected by the
Board of Directors in 1994 pursuant to the terms of the Dreyfus Merger
Agreement.
NOMINEES FOR DIRECTOR--TERM EXPIRES 1999
J. W. Connolly Director Since 1989 Age 62
Retired (1993) Senior Vice President, H. J.
Heinz Company (food manufacturer). Mr.
Connolly is also a director of Consolidated
Natural Gas Company. He serves on the
Corporation's Executive Committee, Audit
Committee and Human Resources Committee (Vice
Chairman).
Charles A. Corry Director Since 1991 Age 64
Retired (1995) Chairman and Chief Executive
Officer, USX Corporation (energy and steel).
Mr. Corry is a director of USX Corporation and
GenCorp. He serves on the Corporation's
Executive Committee, Audit Committee,
Nominating Committee (Chairman) and Human
Resources Committee.
Pemberton Hutchinson Director Since 1989 Age 64
Chairman and director, Westmoreland Coal
Company (coal mining company). Mr. Hutchinson
is a director of Westmoreland Coal Company and
The Pep Boys--Manny, Moe and Jack and Teleflex
Incorporated. He serves on the Corporation's
Nominating Committee, Trust and Investment
Committee and Community Responsibility
Committee.
Rotan E. Lee, Esquire Director Since 1993 Age 46
Chief Operating Officer, RMS Technologies,
Inc. (information technology); of Counsel,
Sherr, Joffe & Zuckerman, P.C. (full service
law firm). Prior to 1994, Mr. Lee was a
partner with Fox, Rothschild, O'Brien &
Frankel (full service law firm). Mr. Lee
serves on the Corporation's Trust and
Investment Committee and Community
Responsibility Committee.
Robert Mehrabian Director Since 1994 Age 54
President, Carnegie Mellon University (private
co-educational research institution). Dr.
Mehrabian is also a director of DQE, Duquesne
Light Company and PPG Industries, Inc. He
serves on the Corporation's Audit Committee
and Technology Committee (Chairman).
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Wesley W. von Schack Director Since 1989 Age 51
Chairman, President, Chief Executive Officer
and director, DQE (energy services company).
Mr. von Schack is also a director of Duquesne
Light Company and RMI Titanium Company. He
serves on the Corporation's Executive
Committee, Nominating Committee, Human
Resources Committee, Technology Committee and
Community Responsibility Committee (Chairman).
NOMINEE FOR DIRECTOR--TERM EXPIRES 1997
Howard Stein Director Since 1994 Age 69
Chairman and Chief Executive Officer, The
Dreyfus Corporation. Mr. Stein is also a
director of Avnet, Inc. He serves on the
Corporation's Executive Committee.
CONTINUING DIRECTORS--TERM EXPIRES 1997
Burton C. Borgelt Director Since 1991 Age 63
Chairman of the Board and director, Dentsply
International, Inc. (manufacturer of
artificial teeth and consumable dental
products). Mr. Borgelt is also a director of
DeVlieg-Bullard, Inc. He serves on the
Corporation's Trust and Investment Committee
and Community Responsibility Committee.
Carol R. Brown Director Since 1992 Age 62
President, The Pittsburgh Cultural Trust
(cultural and economic growth organization).
Mrs. Brown serves on the Corporation's Audit
Committee and Community Responsibility
Committee.
Frank V. Cahouet Director Since 1987 Age 63
Chairman, President and Chief Executive
Officer of the Corporation and of Mellon Bank,
N.A. ("Mellon Bank"). Mr. Cahouet is also a
director of Avery Dennison Corporation, Saint-
Gobain Corporation and Teledyne, Inc. He
serves as Chairman of the Corporation's
Executive Committee.
C. Frederick Fetterolf Director Since 1984 Age 67
Retired (1991) President and Chief Operating
Officer, Aluminum Company of America (aluminum
and chemicals). Mr. Fetterolf is also a
director of Allegheny Ludlum Corporation,
Praxair, CasTech Aluminum Group, Quaker State
Corporation, Union Carbide Corporation and
Urethane Technologies, Inc. He serves on the
Corporation's Executive Committee, Audit
Committee (Chairman), Trust and Investment
Committee and Community Responsibility
Committee (Vice Chairman).
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Andrew W. Mathieson Director Since 1981 Age 67
Executive Vice President, Richard K. Mellon
and Sons (investments and philanthropy). Mr.
Mathieson is also a director of General Re
Corporation. He serves on the Corporation's
Executive Committee, Nominating Committee
(Vice Chairman) and Human Resources Committee
(Chairman).
Seward Prosser Mellon Director Since 1972 Age 53
President and Chief Executive Officer, Richard
K. Mellon and Sons (investments) and Richard
King Mellon Foundation (philanthropy).
CONTINUING DIRECTORS--TERM EXPIRES 1998
Ira J. Gumberg Director Since 1989 Age 42
President, Chief Executive Officer and
director, J.J. Gumberg Co. (real estate
management and development). Mr. Gumberg is
also a director of Fabri-Centers of America.
He serves on the Corporation's Executive
Committee, Audit Committee and Trust and
Investment Committee (Chairman).
Edward J. McAniff Director Since 1994 Age 61
Partner, O'Melveny & Myers (full service law
firm). Mr. McAniff serves on the Corporation's
Community Responsibility Committee and Trust
and Investment Committee.
David S. Shapira Director Since 1986 Age 54
Chairman, Chief Executive Officer and
director, Giant Eagle, Inc. (retail grocery
store chain). Mr. Shapira is also a director
of Action Industries, Inc. and Equitable
Resources, Inc. He serves on the Corporation's
Executive Committee, Audit Committee (Vice
Chairman), Trust and Investment Committee and
Technology Committee.
W. Keith Smith Director Since 1987 Age 61
Vice Chairman of the Corporation and Mellon
Bank. Mr. Smith is also a director of Dentsply
International, Inc. He serves on the
Corporation's Executive Committee.
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Joab L. Thomas Director Since 1993 Age 63
President Emeritus (1995), The Pennsylvania
State University (major public research
university). Dr. Thomas is also a director of
Blount, Inc. and Lukens, Inc. He serves on the
Corporation's Human Resources Committee and
Technology Committee.
William J. Young Director Since 1964* Age 67
Retired President, Portland Cement Association
(trade association for the Portland Cement
Industry). Mr. Young is also a director of St.
Marys Cement Company. He serves on the
Corporation's Human Resources Committee, Trust
and Investment Committee (Vice Chairman) and
Community Responsibility Committee.
* Served as a director of The Girard Company from the date indicated until its
merger with the Corporation in 1983.
ACTION BY SHAREHOLDERS
The six nominees for the term expiring in 1999 and the one nominee for the term
expiring in 1997 receiving the highest number of votes cast at the annual
meeting by all holders of shares of Common Stock will be elected as directors
for terms expiring in 1999 and 1997, respectively. A vote indicated as withheld
from a nominee will not be cast for such nominee but will be counted in
determining the presence of a quorum.
WITH RESPECT TO THE ELECTION OF DIRECTORS (PROXY ITEM 1), THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES.
THE BOARD AND ITS COMMITTEES; DIRECTORS' COMPENSATION
The Board of Directors held 12 regular meetings during 1995. Each incumbent
director attended at least 75 percent of the aggregate number of meetings of
the Board and of the committees of which he or she was a member during the
period served in 1995, with the exception of Messrs. Borgelt and Stein whose
attendance was affected by schedule conflicts. With the exception of the
Executive Committee, all committees of the Board of Directors are composed of
directors who are not officers of the Corporation.
The committees of the Board of Directors and a general description of their
respective duties follow:
EXECUTIVE COMMITTEE
The Executive Committee has the power and authority of the Board of Directors
to manage the affairs of the Corporation between meetings of the Board of
Directors. The Committee also regularly reviews significant corporate matters
and recommends action as appropriate to the Board. The Executive Committee met
13 times during 1995.
AUDIT COMMITTEE
The Audit Committee oversees the credit policies, accounting practices,
auditing policies, controls and other material financial matters of the
Corporation and its subsidiaries. The Committee meets monthly with the head of
the Auditing Department of the Corporation and with representatives of the
Corporation's independent public accountants at least quarterly, with and
without representatives of management present, to review accounting, auditing
and financial reporting matters, including the review of audit plans.
Appointment of the independent public accountants is made by the Board of
Directors upon the recommendation of the Audit Committee and is ratified by the
shareholders. The Audit Committee met 11 times during 1995.
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NOMINATING COMMITTEE
The Nominating Committee considers and recommends to the Board of Directors of
the Corporation and to the Boards of Directors of its various significant
subsidiaries such as Mellon Bank, Mellon Bank (DE), Mellon Bank (MD), Boston
Safe Deposit and Trust Company, Mellon PSFS (NJ), Mellon Bank, F.S.B. (together
referred to as the "Banks"), The Boston Company and The Dreyfus Corporation,
candidates for nomination for election as directors of those respective
entities.
The Committee also considers nominees recommended by shareholders for election
as directors of the Corporation. To make such a recommendation, a shareholder
should submit in writing the name, address and qualifications of the proposed
nominee to the Secretary of the Corporation, One Mellon Bank Center, Room 1820,
Pittsburgh, Pennsylvania 15258-0001. In addition, the By-Laws of the
Corporation set forth specific procedures that, if followed, enable any
shareholder entitled to vote in the election of directors to make nominations
directly at a meeting of shareholders. The procedures set forth in the By-Laws
include a requirement for written notice to the Corporation at least 90 days
prior to the anniversary date of the previous year's annual meeting of
shareholders.
The Committee also reviews and recommends to the Board of Directors of the
Corporation and the Boards of Directors of its various significant subsidiaries
policies relating to practices and responsibilities of the Boards of Directors
and their various committees and the components of the directors' compensation.
The Nominating Committee met one time during 1995.
HUMAN RESOURCES COMMITTEE
The Human Resources Committee establishes the compensation and benefits of the
Chairman and Chief Executive Officer and reviews the performance of such senior
officers of the Corporation and its subsidiaries as the Committee designates.
The Committee also generally advises and assists management in implementing
programs designed to assure the selection and development of key personnel and
receives and reviews reports on other significant matters and actions taken in
connection with the operation and administration of the Corporation's employee
benefits plans. The Committee administers the Corporation's Profit Bonus Plan,
Long-Term Profit Incentive Plan and Phantom Stock Unit Plan, including the
making of awards thereunder. The Committee met 11 times during 1995.
TRUST AND INVESTMENT COMMITTEE
The Trust and Investment Committee has general oversight of the trust and
investment activities of the Corporation's subsidiaries. It ensures that assets
held in a fiduciary capacity are being administered in accordance with
applicable law and regulations. It also acts as a channel independent of
management through which auditing and bank examination reports regarding trust
and investment activities are presented to the Banks' Boards of Directors. The
Committee is also responsible for overseeing the administration of fiduciary
responsibilities for the non-bank subsidiaries of the Corporation and has
general oversight responsibilities for the trust departments of the Banks. The
Committee met nine times during 1995.
COMMUNITY RESPONSIBILITY COMMITTEE
The Community Responsibility Committee has general oversight responsibility
for, and may take such action as the Committee deems necessary or desirable in
connection with, the Corporation's policy concerning overall compliance with
the Community Reinvestment Act ("CRA") and Fair Lending laws. In addition to
these oversight responsibilities, the Committee also has specific
responsibilities for reviewing the Corporation's overall policy and goals
concerning CRA and Fair Lending activities and approving the Bank's Annual CRA
Statements, monitoring each Bank's compliance and reviewing reports from each
of the Banks concerning their contributions program. The Committee also reviews
the examination reports of the Corporation and the Banks by regulatory
authorities concerning CRA and Fair Lending compliance and renders a report to
the Board with respect thereto. The Committee met four times during 1995.
TECHNOLOGY COMMITTEE
The Technology Committee has general oversight responsibility for, and may take
such action as the Committee deems necessary or desirable in connection with,
the overall role of technology and its use
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throughout the Corporation. It advises and assists management in the
formulation and implementation of operating and strategic plans designed to
take full advantage of existing and emerging technology. It also monitors the
performance of technology throughout the Corporation. The Committee met four
times during 1995.
DIRECTORS' COMPENSATION
Each director of the Corporation who does not receive a salary from the
Corporation or one of its subsidiaries currently receives a monthly retainer of
$2,083 and, in addition, a per meeting fee of $900 for each meeting at which
such director renders services to the Corporation, including meetings of
shareholders, the Board of Directors or any committee of the Board of Directors
on which such director serves, and separate meetings (if any) with senior
management of the Corporation at which services are rendered. In addition, each
director who serves as a Committee chairman receives a quarterly retainer
ranging from $500 to $625, according to the Committee on which he serves. The
directors also serve as the Board of Directors of Mellon Bank and are paid a
per meeting fee of $900 for attending any meeting of such Board on a day when
the Corporation's Board of Directors does not meet. Non-employee directors may
defer all or a portion of their fees pursuant to the terms of an elective
deferred compensation plan, which pays interest at a rate based on the 120
month moving average rates on 10-year Treasury Notes, plus a premium based on
service which is credited retroactively upon termination of service.
In addition, non-employee directors receive stock option grants under the
Corporation's Stock Option Plan for Outside Directors (1989) (the "Directors
Option Plan"), a formula plan under which options to purchase Common Stock are
granted each year on the third business day following the Corporation's annual
meeting of shareholders. Currently, the number of shares of Common Stock
covered by each grant is equal to 8.1% of the dollar value of the annual
retainer for the service year in which the grant is made. Directors (if any)
elected during the service year at a time other than the annual meeting of
shareholders receive an option grant covering a prorated number of shares but
with all other terms identical to those options granted on the regular grant
date. All options have a term of 10 years, are not exercisable until one year
from the regular grant date (at which time they become fully exercisable), and
have an exercise price equal to the closing price of the Common Stock on the
New York Stock Exchange on the regular grant date. Options that have not become
exercisable are forfeited as of the date the optionee ceases to serve as a
director for any reason other than the director's death, disability or
completion of term of service. Options that have become exercisable remain
exercisable throughout their 10-year term, regardless of whether the optionee
is a director at the time of exercise. In April 1995, each of the directors,
except Messrs. Cahouet, Smith and Stein, was granted an option covering 2,025
shares of Common Stock at an exercise price of $38.75 per share.
Directors also participate in the Directors' Retirement Plan which is intended
to assure that compensation arrangements for directors of the Corporation are
adequate to attract and retain highly qualified individuals. Under the
Directors' Retirement Plan an eligible director will receive monthly benefits
equal to the monthly retainer in effect at his or her time of retirement from
the Board for a period equal to his or her total months of service on the Board
but no longer than 120 months. Only directors who are not officers of the
Corporation are eligible to receive this benefit and a director must serve on
the Board for at least five years before this benefit vests. As a result of
informal life insurance funding, the program is not expected to result in any
material cost to the Corporation.
As part of its overall program to promote charitable giving, the Corporation
has also established a Directors' Charitable Giving Program to be funded by
Corporation-owned life insurance policies on the directors. Under the program,
upon the death of a director, the Corporation will donate up to an aggregate of
$250,000 to one or more qualifying charitable organizations designated by the
director. The donations are paid by the Corporation over a 10-year period
following the director's death and the Corporation is reimbursed for the
donation by the life insurance proceeds. A director must have served on the
Board for three years to be eligible to participate in the Charitable Giving
Program.
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ADVISORY BOARD
The Corporation also enjoys the services of the Advisory Board, whose current
members are profiled below. The Advisory Board provides to the Board and
management of the Corporation, as requested, general policy advice and
assistance on various business matters. Any person who has been a member of the
Corporation's Board of Directors or who otherwise demonstrates the abilities
required on the Advisory Board, and who has not yet attained the age of 72, is
eligible for annual election by the Board of Directors to the Advisory Board.
Members of the Advisory Board have demonstrated the experience, ability and
willingness to be able to provide valuable advice and assistance to the
Corporation. They are regularly invited to participate in meetings and other
activities of the Board of Directors but are not entitled to vote or take part
in any formal action by the Board. Policies of the Board of Directors generally
require that persons who have attained age 68 are not eligible for election to
the Board of Directors.
Howard O. Beaver, Jr. Advisory Board Since 1990
Retired Chairman and Chief Executive Officer,
Carpenter Technology Corporation (wrought
specialty steel producer). Mr. Beaver served
on the Corporation's Board of Directors from
1983 through 1990. Mr. Beaver served as a
director of The Girard Company from 1972 until
its merger with the Corporation in 1983.
Alexander W. Calder Advisory Board Since 1988
Retired Chairman, President and Chief
Executive Officer, Joy Manufacturing Company
(machinery and equipment). Mr. Calder served
on the Corporation's Board of Directors from
1984 through 1988.
H. Bryce Jordan Advisory Board Since 1993
President Emeritus, The Pennsylvania State
University. Dr. Jordan served on the
Corporation's Board of Directors from 1984
through 1993.
John C. Marous Advisory Board Since 1994
Retired Chairman and Chief Executive Officer,
Westinghouse Electric Corporation (electronic
products and services). Mr. Marous served on
the Corporation's Board of Directors from 1987
through 1994.
10
<PAGE>
- --------------------------------------------------------------------------------
Masaaki Morita Advisory Board Since 1992
Chairman, Sony USA Foundation. Mr. Morita
served on the Corporation's Board of Directors
from 1991 through 1992.
Nathan W. Pearson Advisory Board Since 1991
Financial Advisor, Paul Mellon Family
Interests. Mr. Pearson served on the
Corporation's Board of Directors from 1972
through 1991. Mr. Pearson also served as
Chairman of the Board of Directors in 1987.
H. Robert Sharbaugh Advisory Board Since 1995
Retired Chairman, Sun Company, Inc. (energy
services). Mr. Sharbaugh served on the
Corporation's Board of Directors from 1983
through 1995. Mr. Sharbaugh served as a
director of The Girard Company from 1972 until
its merger with the Corporation in 1983.
Richard M. Smith Advisory Board Since 1994
Retired Vice Chairman, Bethlehem Steel
Corporation (integrated steel producer). Mr.
Smith served on the Corporation's Board of
Directors from 1983 through 1994. Mr. Smith
served as a director of The Girard Company
from 1974 until its merger with the
Corporation in 1983.
11
<PAGE>
- --------------------------------------------------------------------------------
BUSINESS RELATIONSHIPS; RELATED TRANSACTIONS; CERTAIN LEGAL PROCEEDINGS
Certain directors, executive officers and principal shareholders of the
Corporation and their associates were customers of and had transactions with
one or more of the Banks or other subsidiaries of the Corporation in the
ordinary course of business during 1995. Similar transactions may be expected
to take place in the future. Loans and commitments included in such
transactions were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with other persons and did not involve more than the normal risk
of collectibility, nor did they present other unfavorable features. The Banks,
in the ordinary course of business, also engage in purchases and sales of
government and municipal securities and in other money market transactions with
certain directors, executive officers and principal shareholders of the
Corporation and their associates. In addition, the Banks act as fiduciaries
under various employee benefit plans of certain customers, the officers of
which are directors of the Corporation and of Mellon Bank.
During 1995, the purchase of goods and services, or the lease of property, by
the Corporation, the Banks or other subsidiaries of the Corporation in the
ordinary course of business included transactions with various director-related
companies and with principal shareholders of the Corporation. The amounts
involved in these transactions were in no case material in relation to the
business of the Corporation, any of the Banks or any of the other subsidiaries
of the Corporation. It is also believed that the amounts involved in such
transactions, as well as the transactions themselves, were not material in
relation to the business of any such director-related company or principal
shareholder and that no director had a material interest in any such
transaction.
On August 17, 1992, Phar-Mor, Inc. and a number of its related entities filed a
voluntary petition under Chapter 11 of the United States Bankruptcy Code (the
"Bankruptcy Code") in the United States Bankruptcy Court for the Northern
District of Ohio (the "Chapter 11 filing"). At the time of the Chapter 11
filing, David S. Shapira, a director of the Corporation, was the Chief
Executive Officer and a shareholder of Phar-Mor. On August 29, 1995, the plan
of reorganization was confirmed and on September 11, 1995 the plan was
consummated and Phar-Mor emerged from bankruptcy proceedings.
Westmoreland Coal Company ("Westmoreland") filed a voluntary petition under
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the
District of Delaware on November 8, 1994. On December 22, 1994, the plan of
reorganization was confirmed and Westmoreland emerged from bankruptcy
proceedings. Pemberton Hutchinson, a director of the Corporation, is Chairman
of the Board of Directors of Westmoreland and served as an executive officer
until his retirement as Chief Executive Officer in June of 1993.
12
<PAGE>
- --------------------------------------------------------------------------------
BENEFICIAL OWNERSHIP OF STOCK
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following table sets forth, as of February 15, 1996, the amount of the
Corporation's stock beneficially owned by each incumbent director, each nominee
and each executive officer named in the Summary Compensation Table appearing on
page 15 and by all incumbent directors, nominees and executive officers of the
Corporation as a group. Except as otherwise indicated, sole voting power and
sole investment power with respect to the shares shown in the table are held
either by the individual alone or by the individual together with their spouse.
<TABLE>
<CAPTION>
Common Stock Owned
Name Beneficially (1) (2)
- -------------------------------------------------------------------------------
<S> <C>
Burton C. Borgelt......................................... 13,880
Carol R. Brown............................................ 5,275
Frank V. Cahouet.......................................... 615,075(3)
J.W. Connolly............................................. 17,688
Christopher M. Condron.................................... 33,051
Charles A. Corry.......................................... 11,937(4)
Steven G. Elliott......................................... 88,531
C. Frederick Fetterolf.................................... 16,390
Ira J. Gumberg............................................ 55,106
Pemberton Hutchinson...................................... 3,725
Rotan E. Lee.............................................. 3,041
Andrew W. Mathieson....................................... 25,864(5)
Edward J. McAniff......................................... 2,847
Martin G. McGuinn......................................... 91,160
Robert Mehrabian.......................................... 4,131
Seward Prosser Mellon..................................... 113,486(6)
Keith P. Russell.......................................... 41,210
David S. Shapira.......................................... 17,367
W. Keith Smith............................................ 153,069(7)
Howard Stein.............................................. 1,544,882(8)
Joab L. Thomas............................................ 8,607
Wesley W. von Schack...................................... 22,867
William J. Young.......................................... 18,717
Directors, Nominees and Executive Officers as a group (28
persons).................................................. 3,118,698
</TABLE>
- ------
(1) On February 15, 1996, none of the individuals named in the above table,
except Mr. Stein, beneficially owned more than 1% of the Corporation's
outstanding shares of Common Stock. On that date, Mr. Stein owned
beneficially approximately 1.2% and all the directors, nominees and
executive officers as a group owned beneficially approximately 2.3% of the
Corporation's outstanding Common Stock.
(2) The amounts shown include the following amounts of Common Stock which the
indicated individuals and group have the right to acquire within 60 days of
February 15, 1996, through the exercise of stock options granted pursuant
to the Corporation's stock option plans: Mr. Borgelt, 10,730; Ms. Brown,
2,025; Mr. Cahouet, 101,384; Mr. Condron, 15,765; Mr. Connolly, 15,438; Mr.
Corry, 9,437; Mr. Elliott, 19,134; Mr. Fetterolf, 14,217; Mr. Hutchinson,
0; Mr. Lee, 2,891; Mr. McAniff, 1,332; Mr. McGuinn, 17,762; Dr. Mehrabian,
2,631; Mr. Russell, 18,375; Mr. Smith, 76,664; Dr. Thomas, 3,207; all other
directors 17,217 shares each; and all directors, nominees and executive
officers as a group, 529,423 shares. The foregoing totals exclude Mr. Stein
whose beneficial ownership is described in footnote (8) below. Shares held
in accounts under the Corporation's Retirement Savings Plan, a 401(k) plan,
as to which the holders have voting power but not investment power, are
also included as follows: Mr. Cahouet, 1,782 shares; Mr. Condron, 195
shares; Mr. Elliott, 1,383 shares; Mr. McGuinn, 1,537 shares; Mr. Russell,
75 shares; Mr. Smith, 1,515 shares; and all executive officers as a group,
10,789 shares.
(3) Of these shares, 158,662 are held in trust for Mr. Cahouet's wife. Mellon
Bank is the sole trustee for the trust and Mr. Cahouet has no voting or
investment control over such shares and disclaims their beneficial
ownership.
(footnotes continued on next page)
13
<PAGE>
- --------------------------------------------------------------------------------
(4) Mr. Corry also holds 1,000 shares of Series I Preferred Stock and 6,200
shares of Series K Preferred Stock of the Corporation. These holdings
represent less than 1% of the Corporation's outstanding shares of Series I
or Series K Preferred Stock.
(5) Mr. Mathieson is a co-trustee with others, including Mellon Bank, and
shares voting and investment control for trusts which hold an aggregate of
1,574,566 shares of Common Stock, not shown in the table. In addition, Mr.
Mathieson is a general partner, with others, and shares voting and
investment control for a limited partnership which holds 6,919 shares of
Common Stock, not shown in the table. Mr. Mathieson disclaims beneficial
ownership of all such shares.
(6) Mr. Mellon is a general partner of the limited partnership referred to in
footnote (5) and shares voting and investment control over the 6,919 shares
of Common Stock held by the partnership, which shares are not shown in the
table. Mr. Mellon disclaims beneficial ownership of these shares.
(7) Of these shares, 15,000 are held by Mr. Smith's wife. Mr. Smith disclaims
beneficial ownership of such shares.
(8) The amount shown includes 82,026 shares which Mr. Stein has the right to
acquire within 60 days of February 15, 1996, through the exercise of stock
options granted pursuant to The Dreyfus Corporation 1989 NonQualified Stock
Option Plan, 251,782 shares held in The Dreyfus Corporation Retirement
Profit-Sharing Plan, as to which Mr. Stein has voting and investment power,
and 79,215 shares which are held by Mr. Stein's wife. Mr. Stein disclaims
beneficial ownership of the shares held by his wife.
PRINCIPAL SHAREHOLDERS
The following table sets forth, to the knowledge of the Corporation, the
beneficial owners, as of February 15, 1996, of more than 5% of the outstanding
shares of the Corporation's Common Stock.
<TABLE>
<CAPTION>
Common Stock Owned
Beneficially
-------------------------
Number Percent of
Name Address of Shares Class
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Warburg, Pincus 466 Lexington Avenue
Capital Company, L.P. (1) New York, NY 10017 11,015,266 8.20%
Warburg, Pincus 466 Lexington Avenue
Capital Partners, L.P. (1) New York, NY 10017 2,074,270 1.54%
</TABLE>
- ------
(1) The sole general partner of Warburg, Pincus Capital Company, L.P. ("WPCC")
and Warburg, Pincus Capital Partners, L.P. ("WPCP") is Warburg, Pincus &
Co., a New York general partnership ("WP"). Lionel I. Pincus is the
managing partner of WP and may be deemed to control it. E.M. Warburg Pincus
& Co., Inc. ("EMW"), through a wholly owned subsidiary, manages WPCC and
WPCP. WP owns all of the outstanding stock of EMW and, as the sole general
partner of WPCC and WPCP, has a 20% interest in the profits of WPCC and
WPCP. EMW owns 0.8% of the limited partnership interests in WPCC and 1.5%
of the limited partnership interests in WPCP. Pursuant to a Purchase
Agreement, dated as of July 25, 1988, among the Corporation, WPCC and WPCP
(the "Purchase Agreement"), under which shares of the Corporation's Series
D Stock were originally acquired (which shares were converted into Common
Stock, pursuant to their terms), WPCC and WPCP are entitled to have a
representative attend every meeting of the Board of Directors of the
Corporation and each committee of the Board of Directors of the Corporation
in an observer capacity. Such representative does not vote or receive any
retainer or fee for such attendance.
14
<PAGE>
- --------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows the compensation for the past three years of each of
the Corporation's six most highly compensated officers, including the chief
executive officer (the "named executive officers").
<TABLE>
<CAPTION>
Long Term
Compensation
-----------------------------------
Annual Compensation Awards Payouts
------------------------------------------ ------------------------ ----------
Other Annual Restricted Securities LTIP All Other
Name and Compensation Stock Awards Underlying Payouts Compensation
Principal Position Year Salary ($) Bonus (1) ($) ($) ($) (1) (2) Options (#) ($) (3) ($) (4)
- ------------------ ---- ---------- ------------- ------------ ------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Frank V. Cahouet........ 1995 $860,000 $645,000 $11,100 $268,650 173,446 $1,613,127 $244,905
Chairman, President 1994 826,667 322,500 6,400 136,063 300,402 -0- 284,527
and Chief Executive 1993 760,000 625,000 6,200 -0- 250,006 2,091,250 190,080
Officer
W. Keith Smith.......... 1995 408,333 240,000 15,000 99,500 -0- 493,126 36,149
Vice Chairman 1994 400,000 105,000 8,400 44,706 163,996 -0- 27,450
1993 376,537 280,000 900 -0- 34,493 493,125 20,079
Christopher M. Condron.. 1995 313,750 588,036 5,300 134,325 52,350 123,000 19,852
Vice Chairman 1994 275,000 96,000 -0- 37,000 54,950 -0- 818,792(5)
Steven G. Elliott....... 1995 285,833 183,750 5,300 77,113 14,707 334,330 11,495
Vice Chairman and 1994 270,000 147,000 2,100 62,200 96,177 -0- 9,285
Chief Financial 1993 240,000 170,000 1,400 -0- 21,134 342,219 14,231
Officer
Martin G. McGuinn....... 1995 285,833 168,000 3,600 69,650 15,176 304,000 20,858
Vice Chairman 1994 270,250 147,000 1,500 62,200 83,313 -0- 27,120
1993 241,000 170,000 1,400 -0- 23,789 304,000 21,341
Keith P. Russell........ 1995 285,833 183,750 6,000 77,113 -0- 330,375 6,746
Vice Chairman 1994 266,250 98,250 2,100 42,763 59,501 -0- 4,124
1993 225,000 160,000 1,300 -0- -0- 416,000 6,800
</TABLE>
- ----
(1) Bonus awards for 1994 and 1995 were payable 75% in cash and 25% in
restricted shares of the Corporation's Common Stock or phantom stock units
equivalent to restricted shares. Bonus awards for 1993 were paid entirely
in cash. In calculating the number of restricted shares or phantom stock
units to be awarded as the non-cash portion of the 1994 and 1995 bonus
awards, the value of the non-cash portion of the award was divided by the
per share fair market value of the Common Stock with the result multiplied
by 125% to take into account the financial impact of the restrictions
placed on the stock or phantom stock units. The restrictions generally
prevent transfer or sale of the stock for a three year period and subject
the shares to forfeiture in the event the executive terminates his
employment with the Corporation during that three year period. Similarly,
phantom stock units would become payable in cash at the end of three years
and are subject to forfeiture upon earlier termination of employment.
During the restriction period, the executive has full voting rights with
respect to restricted shares and receives dividends, or dividend
equivalents with respect to phantom stock units, at the same rate as other
holders of the Corporation's Common Stock. The aggregate market value of
such restricted stock or phantom stock units on the award date is disclosed
as Long Term Compensation under "Restricted Stock Awards". Mr. Condron's
bonus amount for 1995 also reflects a cash bonus paid in connection with
his assumption of additional responsibilities.
(2) The number and value of the aggregate restricted stock and phantom stock
unit holdings of each of the named officers at the end of 1995 were as
follows: Mr. Cahouet-3,500/$188,125; Mr. Smith-1,150/$61,813; Mr. Condron-
800/$43,000; Mr. Elliott-1,600/$86,000; Mr. McGuinn-1,600/$86,000; Mr.
Russell-1,100/$59,125. The preceding restricted stock and phantom stock
units were valued using the Common Stock's December 29, 1995 closing price
of $53.75 per share on the New York Stock Exchange.
(3) LTIP Payouts, in the form of deferred cash incentive awards were also paid
in January of 1996 in connection with the exercise of accelerated stock
options, including payments to Messrs. Cahouet,
(footnotes continued on next page)
15
<PAGE>
- --------------------------------------------------------------------------------
Smith, Condron, Elliott, McGuinn and Russell, of $1,944,377, $704,818,
$312,516, $554,989, $434,016 and $567,844, respectively. These January, 1996
payments will be recorded as 1996 LTIP Payouts in the Summary Compensation
Table included in next year's Proxy Statement.
(4) Includes for 1995 for Messrs. Cahouet, Smith, Condron, Elliott, McGuinn and
Russell, respectively, the following compensation amounts: (i) the portion
of interest accrued (but not currently paid or payable) on deferred
compensation above 120% of the applicable federal long-term rate at the
maximum rate payable under the Corporation's Elective Deferred Compensation
Plan for Senior Officers, $100,873, $776, $3,286, $3,115, $14,132, -0-;
(ii) matching contributions under the Corporation's Retirement Savings
Plan, a 401(k) plan, $2,700, $3,000, $3,000, $3,000, $3,000, $3,000;
(iii) the present value of the economic benefit to the executive from
corporate premiums paid to purchase split dollar life insurance contracts
under the Mellon Bank Senior Executive and Optional Life Insurance Plans,
$133,548, $29,975, $12,931, $4,697, $2,870, $3,022; and (iv) cash paid to
the executive equal to his imputed income under the Mellon Bank Senior
Executive Life Insurance Plan, $7,684, $2,398, $635, $683, $856, $724.
(5) In 1994, Mr. Condron was paid $800,000 to remain with the Corporation
pending completion of the Corporation's acquisition of The Boston Company.
OPTION GRANTS IN 1995
Shown below is information on grants of stock options pursuant to the
Corporation's Long-Term Profit Incentive Plan (1981) (the "Option Plan") during
the year ended December 31, 1995. The Option Plan is administered by the Human
Resources Committee of the Board of Directors, which has authority to determine
the individuals to whom options are granted and the terms of all grants
thereunder. No stock appreciation rights were granted under the Option Plan in
1995. In the event of a change of control of the Corporation, as defined in the
Option Plan, all the option grants shown below would become immediately
exercisable.
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------
Percent
Number of of Total
Securities Options
Underlying Granted to Exercise Grant Date
Options Employees Price (per Expiration Present
Name Granted in 1995 share) ($) Date Value ($) (4)
- ---- ---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Frank V. Cahouet........ 122,008(1) 6.8% $38.75 10/22/02 $858,460
51,438(1) 2.8% 52.00 10/22/02 483,679
Christopher Condron..... 6,614(1) .4% 49.25 10/20/04 61,765
5,736(1) .3% 49.25 5/23/03 51,999
20,000(2) 1.1% 53.375 11/20/05 209,278
20,000(3) 1.1% 53.375 11/20/05 138,002
Steven G. Elliott....... 7,827(1) .4% 52.00 10/22/02 73,598
6,880(1) .4% 52.00 10/20/04 67,842
Martin G. McGuinn....... 7,085(1) .4% 50.125 10/20/04 67,324
8,091(1) .4% 50.125 10/22/02 73,275
</TABLE>
- ------
(1) Reload options granted in 1995 become exercisable three years after their
grant date; provided, however, that if the option holder sells any of the
shares acquired on exercise of the underlying option before such date, the
entire reload option will expire. The reload option grants shown above
would become exercisable as follows: Mr. Cahouet--4/21/98, 10/23/98; Mr.
Condron--10/25/98, 10/25/98; Mr. Elliott--10/23/98, 10/23/98; Mr. McGuinn--
10/30/98, 10/30/98.
(2) Option becomes exercisable annually in thirds beginning on 11/21/96. Reload
option rights are attached to each option and reload options will be
automatically granted on exercise when the exercise price is paid by
delivering or withholding shares of Common Stock; provided the closing
price of the Common Stock on the New York Stock Exchange on the date of
exercise exceeds the
(footnotes continued on next page)
16
<PAGE>
- --------------------------------------------------------------------------------
exercise price by at least 25 percent. Reload options have an exercise price
equal to the closing price of the Common Stock on their grant date and the
same expiration date as the underlying option.
(3) Option becomes exercisable in full on 9/21/05. Exercisability may be
accelerated to an earlier date at the discretion of the Human Resources
Committee based on the Committee's review of the option holder's individual
performance. In determining the number of options, if any, to be
accelerated in any year, the executive officer's performance is reviewed by
the Human Resources Committee. In past years, such performance has been
evaluated on the basis of several factors, including the trends indicated
by financial performance and the progress made toward the achievement of
the longer term goals for the lines of business for which such executive is
responsible. A deferred cash incentive award was granted with this option
in the amount of the option exercise price. In the event the exercisability
of the option is accelerated (except in the event of a change of control),
the deferred cash incentive award becomes operative and must be used by the
officer to pay the option's exercise price upon exercise; provided however,
that such award will only be payable if the Corporation achieves certain
pre-established performance goals. The deferred cash incentive award is
disclosed in the Long-Term Incentive Plans Table below.
(4) Based on the Black-Scholes model adapted for use in valuing executive stock
options. There is no assurance the value realized by an executive will be
at or near the value estimated by the Black-Scholes model. The actual
value, if any, an executive may realize will depend on the excess of the
stock price over the exercise price on the date the option is exercised. In
determining the Black-Scholes value, the following underlying assumptions
were used: (i) stock price volatility represents the standard deviation of
the Common Stock over the three year period prior to grant of the option
(i.e., from 0.1728 to 0.2142); (ii) dividend yield represents the
cumulative dividends per share for the 12-month period prior to grant of
the option, divided by the average monthly price of the Common Stock over
the same period (i.e., from 4.27% to 4.96%); (iii) the risk-free rate of
return represents the average weekly yield on 10-year Treasury Bills over
the 52 week period prior to grant of the option as derived from the Value-
Line Investment Survey--Selection & Opinion (i.e., from 6.78% to 7.42%);
(iv) option term represents the period from the date of grant of each
option to the expiration of the term of the option; (v) vesting
restrictions are reflected by reducing the value of the option determined
by the Black-Scholes model by 4% for each full year of vesting restrictions
(i.e., by 12% for each of the options being valued), assuming that the
option described in footnote (3) does not accelerate.
AGGREGATED OPTION EXERCISES IN 1995 AND YEAR-END OPTION/SAR VALUES
The following table shows information with respect to the exercise of stock
options during 1995 by each of the named executive officers and the value of
unexercised options and stock appreciation rights ("SARs") on December 31,
1995.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/SARs
Options/SARs at Year-End at Year-End ($)(2)
------------------------- -------------------------
Shares Value
Acquired on Realized
Name Exercise ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Frank V. Cahouet........ 271,875 $3,192,257 37,634 794,970 $ 632,420 $12,944,760
W. Keith Smith.......... 19,125 164,296 55,064 211,675 1,204,299 3,762,785
Christopher M. Condron.. 18,315 190,450 -0- 106,940 -0- 984,418
Steven G. Elliott....... 32,213 473,720 1,323 141,882 21,830 2,326,202
Martin G. McGuinn....... 35,250 476,791 4,600 128,678 67,400 2,043,473
Keith P. Russell........ 53,500 950,311 -0- 71,251 -0- 1,354,829
</TABLE>
- ------
(1) The "Value Realized" is equal to the difference between the option exercise
price and the fair market value of the Common Stock on New York Stock
Exchange on the date of exercise. No SARs were exercised during 1995.
(2) The "Value of Unexercised In-The-Money Options/SARs at Year-End" is equal
to the difference between the option/SAR exercise price and the Common
Stock's December 29, 1995 closing price of $53.75 per share on the New York
Stock Exchange.
17
<PAGE>
- --------------------------------------------------------------------------------
LONG-TERM INCENTIVE PLANS--AWARDS IN 1995
The following table shows a deferred cash incentive award granted to one of the
named executive officers during the year ended December 31, 1995 under the
Option Plan. Deferred cash incentive awards are granted only in connection with
the grant of certain stock options and become payable only upon the Human
Resources Committee's acceleration of the exercisability of the related stock
option prior to a date 60 days before its expiration. (See footnote (3) on page
17.) The deferred cash, when paid to the executive, must be used by the
executive to pay the exercise price of the related option. Upon acceleration of
the option and actual payment of the deferred cash to the executive, such
payment is reported in the Summary Compensation Table under LTIP Payouts.
<TABLE>
<CAPTION>
Estimated
Future
Payouts
----------
Maximum
Number of Performance
Shares, Units Period Until
or Other Maturation Maximum
Name Rights or Payout Payout (1)
- ---- ------------- ------------ ----------
<S> <C> <C> <C>
Christopher M. Condron.................... 20,000 9/21/05 $1,067,500
</TABLE>
- ------
(1) The amount shown represents the aggregate exercise price of the related
options granted to the named executive officer. The Human Resources
Committee can choose in its discretion to accelerate all, part or none of
the stock options related to such award. If such option is not accelerated,
no payout of the award is made. Deferred cash incentive awards become
payable only if the Corporation achieves performance goals which are
established for a calendar year or longer period by the Human Resources
Committee. Performance goals are based on one or more business criteria
(including return on equity, return on assets, net income and earnings per
share) as defined by the Committee. The Committee retains the discretion to
reduce (but not to increase) the portion of any deferred cash incentive
award which would otherwise be payable for any calendar year based on
achieving such performance goals.
PENSION PLAN TABLE
The following table sets forth the estimated annual benefits payable on a
single-life annuity basis on retirement at age 65 pursuant to the retirement
plans of the Corporation and Mellon Bank to participating employees, including
officers, in specified compensation and years-of-service classifications. The
credited years of service for Messrs. Cahouet, Smith, Condron, Elliott, McGuinn
and Russell are, 9, 9, 17, 9, 15 and 4, respectively. Benefits are determined
based upon average base salary for the five years of highest compensation
during the 10 years preceding retirement.
<TABLE>
<CAPTION>
Estimated Annual Pension for Representative Years of Credited Service
-----------------------------------------------------------------------
Average Annual
Base Salary 10 15 20 25 30 35
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 200,000 $ 28,500 $ 43,000 $ 57,000 $ 71,500 $ 86,000 $100,000
300,000 43,500 65,500 87,000 109,000 131,000 152,500
400,000 58,500 88,000 117,000 146,500 176,000 205,000
500,000 73,500 110,500 147,000 184,000 221,000 257,500
600,000 88,500 133,000 177,000 221,500 266,000 310,000
700,000 103,500 155,500 207,000 259,000 311,000 362,500
800,000 118,500 178,000 237,000 296,500 356,000 415,000
900,000 133,500 200,500 267,000 334,000 401,000 467,500
1,000,000 148,500 223,000 297,000 371,500 446,000 520,000
</TABLE>
Payment of the amounts shown in the table is subject to annual limitations
imposed by the Internal Revenue Code on tax-qualified plans. To the extent the
benefits set forth above exceed these limitations, benefits will be paid
pursuant to nonqualified supplemental plans maintained by the Corporation and
Mellon Bank.
18
<PAGE>
- --------------------------------------------------------------------------------
SUPPLEMENTAL RETIREMENT AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
In order to attract and motivate senior executives and to encourage such
executives to remain with the Corporation and its affiliates, the Corporation
has provided certain of the named executive officers with retirement and/or
death benefits, as described below, supplementing those available under the
retirement plans described above.
Mr. Cahouet
Under the terms of his employment agreement with Mellon Bank (discussed below),
Mr. Cahouet will be entitled to receive an unfunded supplemental retirement
benefit. The supplemental benefit is calculated on an unreduced 50% joint and
survivor basis and would be a monthly amount equal to Mr. Cahouet's Final
Average Compensation (as defined below) multiplied by a Compensation Percentage
(defined below) and reduced by the total monthly amount of benefits provided to
him under all retirement plans maintained by the Corporation and Mellon Bank.
"Final Average Compensation" means the average monthly amount of Mr. Cahouet's
base salary and any bonus award for the 36 consecutive months within the term
of his employment agreements that produce the highest average amount.
"Compensation Percentage" means 50% plus 2.5% for each full year of employment
which Mr. Cahouet has completed under his current employment agreement
(discussed below). If Mr. Cahouet's termination of employment with the
Corporation were due to his death prior to the commencement of the payment of
the supplemental benefits under his employment agreement, his spouse would be
entitled to a pre-retirement death benefit, payable in the form of a lifetime
annuity, equal to the benefit that would have been payable had he retired
immediately prior to death assuming election of an unreduced 50% joint and
survivor annuity. If Mr. Cahouet retires after age 65, he will be entitled for
the period after he attains age 65 until his actual retirement date to receive
both (A) an actuarial increase in the gross supplemental retirement benefit
which would have been payable to him if he had retired when he attained age 65
and (B) an additional incremental gross supplemental retirement benefit,
without actuarial increase, based on his additional service and increase, if
any, in his Final Average Compensation subsequent to attaining age 65. For
purposes of determining the benefit described in clause (A), Final Average
Compensation may be determined based on Base Salary for the 36 consecutive
months from June 1, 1994 to May 31, 1997 and bonus awards paid to Mr. Cahouet
for work performed in the 36-month period from January 1, 1995 to December 31,
1997, if such base salary and bonus awards result in a higher Final Average
Compensation. Based on his 1995 compensation, and assuming retirement at age 65
or at the end of the term of his employment agreement, supplemental retirement
benefits payable to Mr. Cahouet under the agreement are estimated at
approximately $948,000 or $1,193,000, respectively, per year.
Mr. Smith
Under the terms of his employment agreement with Mellon Bank (discussed below),
Mr. Smith is entitled to receive an unfunded supplemental retirement benefit
equal to the difference between the amounts to which he is entitled under the
retirement plans included in the above Pension Table (the "Corporation
Retirement Benefits") and the amount of Corporation Retirement Benefits he
would receive if he were credited with 8 years of additional service to the
Corporation and his final average compensation under the retirement plans were
to include base salary and any bonuses awarded to him by the Corporation in the
relevant years. Mr. Smith's employment agreement also provides that he may earn
additional credit for up to five years of service based on, and in addition to,
his actual service with the Corporation and its subsidiaries after August 1,
1994 through his retirement date. Currently, Mr. Smith is deemed to have 18
years of service for purposes of calculating his benefits under the retirement
plans and his supplemental retirement agreement.
EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
Mr. Cahouet
In connection with Mr. Cahouet's appointment in June 1987 as the Chairman and
Chief Executive Officer and a director of the Corporation and Mellon Bank, Mr.
Cahouet entered into an employment agreement with Mellon Bank which had a term
lasting until July 25, 1993. In July of 1993, Mr. Cahouet entered into a new
employment agreement with Mellon Bank with a termination date of May 31, 1997,
and in 1995 this termination date was extended to December 31, 1998. The
current
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employment agreement provides, among other things, for an annual base salary of
$760,000, subject to periodic increases which must take into consideration the
salaries of the chief executive officers of the 10 largest bank holding
companies in the United States, life insurance in the amount of twice his
annual salary, perquisites appropriate to his position, including club
memberships, physical examinations and personal financial planning services,
and the supplemental retirement benefits described above. The employment
agreement was amended in 1995 to provide Mr. Cahouet with certain additional
supplemental retirement benefits, described above, which become payable if he
retires after age 65. The bank holding companies against whose chief executive
officers Mr. Cahouet's salary is measured are included in both the Standard &
Poor's 500 Stock Index and the KBW 50 Index used to prepare the Corporation's
Performance Graph shown on page 21. The agreement also provides that, if Mr.
Cahouet's employment is terminated other than for cause, he will receive full
salary and benefits until the expiration of its term and a pro-rated portion of
any bonuses for the year of termination. If Mr. Cahouet's employment is
terminated for cause or Mr. Cahouet terminates his employment for reasons other
than a constructive discharge, permanent disability or retirement, he will
receive any benefits that may have vested prior to such termination under the
supplemental retirement provisions of his employment agreement or under the
terms of the Corporation's generally applicable employee benefit plans. The
terms of the agreement prohibit "excess parachute payments" by the Corporation,
as defined under Section 280G of the Internal Revenue Code.
Mr. Smith
In connection with Mr. Smith's appointment in July 1987 as Vice Chairman and
Chief Financial Officer and a director of the Corporation and Mellon Bank, Mr.
Smith entered into an employment agreement with Mellon Bank which had a term
lasting until July 25, 1993. In July of 1993, Mr. Smith entered into a new
employment agreement with Mellon Bank with a termination date of July 31, 1996.
It provides, among other things, for an annual base salary of $400,000, subject
to periodic increases, perquisites appropriate to Mr. Smith's position,
including club memberships, physical examinations and personal financial
planning services, and the supplemental retirement benefits described above.
The agreement also provides that if Mr. Smith's employment is terminated other
than for cause, he will receive full salary and benefits until one year after
the expiration of its term and a pro-rated portion of any bonuses for the year
of termination. If Mr. Smith's employment is terminated for cause or Mr. Smith
terminates his employment for reasons other than a constructive discharge,
permanent disability or retirement, he will receive any benefits that may have
vested prior to such termination under the supplemental retirement provisions
of the agreement or under the terms of the Corporation's generally applicable
employee benefit plans. The terms of the agreement prohibit "excess parachute
payments" by the Corporation, as defined under Section 280G of the Internal
Revenue Code.
OTHER COMPENSATION
Displacement Policy and Changes in Control
Under the Corporation's Employee Displacement Program, employees of the
Corporation, including the named executive officers, may receive certain
benefits if their employment with the Corporation is terminated due to
technological changes or other business reasons not related to individual
performance. Such benefits may include temporary assignments, placement
assistance, benefits continuation and/or severance payments based upon years of
service. The program is subject to revision or termination at the Corporation's
discretion at any time.
In addition to any other benefits available to employees under other severance
policies, all employees, including the named executive officers, are entitled
to 12 months of base salary and benefit continuation if they are terminated,
other than for good cause, within three years after a change in control of the
Corporation. Such benefits would offset amounts due to Mr. Cahouet and Mr.
Smith under the terms of their employment contracts upon termination after a
change in control. In addition, if a change in control of the Corporation
occurs, employees will have a nonforfeitable right to their accrued benefits
under Mellon Bank's tax-qualified retirement plan and will be entitled to
certain increased retirement benefits if the retirement plan's assets exceed
its liabilities at the time the change in control occurs. These rights to
salary and benefit continuation and increased retirement benefits may not be
amended after the occurrence of such a change in control.
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PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total shareholder
return on the Corporation's Common Stock, based on the market price of the
Common Stock and assuming reinvestment of dividends, with the cumulative total
return of companies on the Standard & Poor's 500 Stock Index and the KBW 50
Index. The KBW 50 Index, available from Keefe, Bruyette & Woods, Inc., is a
market-capitalization-weighted bank-stock index made up of 50 of the nation's
most important banking companies including all money-center and most major
regional banks. The Corporation is included in the KBW 50 Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
Among S&P 500 Index, KBW 50 Index and Mellon Bank Corporation.
[INSERT CHART HERE]
<TABLE>
<CAPTION>
December 31,
-----------------------------
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Mellon Bank Corporation........................... 100 154 242 249 225 415
S&P 500 Index..................................... 100 131 141 155 157 215
KBW 50 Index...................................... 100 158 202 213 202 325
</TABLE>
* Assumes that the value of the investment in the Corporation's Common Stock
and each index was $100 on December 31, 1990 and that all dividends were
reinvested.
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COMPENSATION COMMITTEE REPORT
INTRODUCTION
The Corporation's Human Resources Committee (the "Committee") is composed
entirely of independent outside directors. The Committee has among its duties
the responsibility for establishing and reviewing the compensation and benefits
of the senior managers of the Corporation and its subsidiaries, including the
compensation of the Chairman and the other named executive officers. The
Committee actively advises and assists management in formulating and in
implementing policies designed to assure the selection, development and
retention of key personnel.
Under the guidance of the Committee, the Corporation's compensation policies
have been cast within the larger framework of managing the Corporation towards
overall enhanced profitability and increased shareholder value. Accordingly, two
principles underlying the Corporation's compensation policy for all senior
managers, including the Chairman and the other named executive officers, are (i)
aligning the financial interests of senior managers with those of the
Corporation's shareholders and (ii) paying for corporate and individual
performance. These principles are reflected in the structure of the
Corporation's compensation program for senior managers which consists of three
basic components: base salary, awards under the annual Profit Bonus Plan (the
"Bonus Plan") and awards under the Long-Term Profit Incentive Plan (1981) (the
"Option Plan"). In creating this structure, the Committee has consciously placed
an increasing emphasis on the "at risk" elements of compensation for senior
managers. As a result, base salaries are generally set somewhat below the market
with the senior managers and the Corporation both relying to a larger degree on
the incentive components of the Bonus Plan and the Option Plan. There were no
changes made during 1995 in either the Corporation's overall compensation policy
for senior managers or in the implementation of that policy.
Awards under the Corporation's incentive plans are tied to corporate, business
unit and individual performance. The accomplishment of the goals and objectives
woven throughout the Corporation's operating and strategic plans are at the
core of the basis for making awards under the Bonus Plan and the Option Plan
and, except where performance goals have been set under the Option Plan, there
is no formal weighting of various factors. Together, the plans provide the
Committee with the flexibility to grant awards in a manner that is believed by
the Committee to encourage managers to continually focus on building high
quality profitability and long-term shareholder value. In 1994 the Committee
took action to limit the payment of deferred cash incentive awards under the
Option Plan to those situations where certain preestablished performance goals
set by the Committee have been achieved. The Long-Term Profit Incentive Plan
(1996) submitted to the shareholders for approval at this annual meeting
extends the application of preestablished performance goals to performance
units and performance-based restricted stock awarded under the Option Plan.
Where such performance goals have been set, payments cannot be made under the
Option Plan if the goals are not achieved and the Committee may apply its
discretion, where the goals have been met, only to decrease the preestablished
amount of the award. These actions have been taken so that the amounts paid to
executive officers under such awards will qualify for the "performance based
compensation" exception to the cap on deductibilty of executive compensation
set forth in the regulations adopted under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code").
BASE SALARY
In December, 1995 the Committee reviewed and took action to increase the base
salaries for five of the named executive officers. In considering the
recommendations for increases in the base salaries of the named executive
officers, the Committee reviewed the performance of each officer against
various objectives, including performance against the business plans to date
for 1995 for those lines of business for which he was responsible. The
Corporation's business plans and the elements thereof applicable to its various
lines of business include financial performance targets such as: income,
expense, asset quality, operating margin, return on assets and return on
capital, as well as strategic development imperatives. One of the executive
officers also assumed significant additional responsibilities during the year
and this was considered in setting his salary. In addition to such evaluations,
the Committee considered the recommendations for increases in base salary for
those officers within the parameters established by compensation data based on
surveys of comparable executive officers of nine other financial institutions
similar to the Corporation in terms of size,
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and/or the mix of its lines of business. These comparative financial
institutions are included within the KBW 50 Index used for the Performance
Graph on page 21.
The base salary for the Chairman was last increased in May of 1994 and remained
unchanged during 1995. The Chairman's base salary is established pursuant to
his employment contract. The contract requires that when setting the salary of
the Chairman, the Committee must take into consideration the salaries of the
chief executive officers of the ten largest bank holding companies in the
United States. These institutions are included within the KBW 50 Index. In
1995, the term of the Chairman's employment contract was extended through the
end of 1998 and certain increased supplemental retirement benefits were agreed
to if he retires after age 65. (See "Supplemental Retirement Agreements with
Named Executive Officers" and "Employment Agreements With Named Executive
Officers" on pages 19-20).
OPTION PLAN AWARDS
In addition to conducting evaluations in connection with base salary actions
taken in 1995, the Committee also reviewed the performance of senior managers,
including the Chairman and the other named executive officers, in the context
of examining the long-term incentive component of total compensation. One of
the named executive officers received a grant of options in recognition of his
assumption of significant additional responsibilities during the year. The
number of options previously held by the officer was considered in determining
the number of shares to be granted. Historically, the Committee reviews the
performance of senior managers annually and within its discretion considers
whether the exercise date for certain previously granted options should be
accelerated. As provided for in the Option Plan, the exercise of these
accelerated options is intended to include the payout of a deferred cash
incentive award to the optionee in an amount equal to the exercise price for
such options. The optionee must use the cash award to pay the option exercise
price of such accelerated options. Such acceleration, and payment of the
attendant deferred cash incentive awards, are a significant element of the
incentive component of total compensation for the Corporation's senior
managers.
As discussed above, the Committee has taken action to tie the payment of
deferred cash incentive awards to the achievement of preestablished corporate
level performance goals. Accordingly, in February of 1994, the Committee
adopted performance goals applicable to the calendar year 1994 which must have
been achieved in order for a set percentage of the outstanding deferred cash
incentive award to be earned. The performance goals required the achievement of
certain levels of core net income available to Common Stock, earnings per share
of Common Stock or core return on common equity. The required levels were
achieved for 1994 and, accordingly, in February of 1995 the Committee certified
the achievement of the performance goals and the payment of the deferred cash
incentive awards in the amount of one-fourth of any such outstanding award
granted to the named executive officers. These awards are disclosed in the LTIP
Payout column on the "Summary Compensation Table" on page 15. Similarly, in
February of 1995, the Committee adopted performance goals applicable to the
calendar year 1995 which required the achievement of certain levels of core net
income available to Common Stock, earnings per share of Common Stock or core
return on common equity. In January of 1996, the Committee certified the
performance goals for 1995 to have been achieved, and the deferred cash
incentive awards were paid in amounts of up to one-fourth of the outstanding
awards granted to the named executive officers.
BONUS PLAN AWARDS
The Committee considered and approved bonus awards for 1995 for the
Corporation's senior managers, including the Chairman and the other named
executive officers, which were payable 75% with cash and 25% with restricted
shares of the Corporation's Common Stock or phantom stock units. Phantom stock
unit grants are equivalent in value to restricted share grants and increase or
decrease in accordance with the Common Stock. Upon vesting, however, phantom
stock units are payable entirely in cash which is deferred into the
Corporation's Elective Deferred Compensation Plan for Senior Officers. The
Committee took into consideration the deferral strategies of the officers,
among other factors, when making the grants.
In connection with making awards under the Corporation's Bonus Plan for 1995,
the Committee again examined the performance of its senior managers. This
review focused on the individual performance of each officer for full year 1995
and on the Corporation's overall performance in
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achieving the objectives of its 1995 operating plan and taking significant
steps in the execution of its strategic plan. Each officer was evaluated based
in significant measure upon the performance against the 1995 business plan for
the lines of business for which he was responsible including the achievement of
financial targets such as income, expense, asset growth, operating margin and
return on capital. In determining the Chairman's Bonus Plan award for 1995, the
Committee evaluated the Chairman within the context of the year experienced by
the Corporation in terms of achieving the objectives of its 1995 operating
plan, as well as the Chairman's leadership in the planning and implementation
of the strategic and operating initiatives to position the Corporation to
increase further the long-term value of the Corporation's franchise. The
results of each officer's evaluation was then applied to a matrix correlating
the numerical rating from his performance evaluation and his office or position
to yield a target Bonus Plan award ranging from zero percent to 70% of base
salary. One of the executive officers assumed significant additional
responsibilities during the year, which was considered in determining his bonus
and resulted in a higher award. In recognition of the Chairman's leadership
during 1995, a year that saw the Corporation's best annual earnings performance
ever, the Chairman's Bonus Plan award for 1995 was increased to 100% of his
base salary.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
As part of the Omnibus Budget Reconciliation Act of 1993 (the "Act"), Section
162(m) limiting the deductibility of executive compensation for officers of
public companies was added to the Code. In December 1995, the Internal Revenue
Service issued final regulations defining the "performance-based compensation"
exception to Section 162(m)'s general disallowance of the ordinary business
expense deduction for compensation in excess of $1 million paid to a company's
chief executive officer and each of the next four most highly compensated
executive officers. In light of the Act and the then proposed regulations, the
Committee took action in 1994 as discussed above to limit the payment of
deferred cash incentive awards under the Option Plan so that amounts paid to
executive officers as deferred cash incentive awards would qualify for the
performance-based compensation exception as set forth in the proposed
regulations. The Long-Term Profit Incentive Plan (1996), which is being
presented for shareholder approval, has been designed to allow the Committee,
in its discretion, to grant incentive compensation awards that comply with the
final regulations.
The Corporation and the Committee will continue to examine the issue of
deductibility of executive compensation within the context of the overall
operation of the Corporation's compensation plans and will consider what
additional actions should be taken, if any, to operate the compensation plans
in a tax effective manner. The Committee will examine carefully any
compensation proposal or program if there is a reasonable likelihood that the
Corporation would lose a deduction as a consequence of its adoption.
The foregoing report is presented by the Human Resources Committee of the Board
of Directors.
Andrew W. Mathieson, Chairman Joab L. Thomas
J. W. Connolly, Vice Chairman Wesley W. von Schack
Charles A. Corry William J. Young
APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE LONG-TERM PROFIT INCENTIVE
PLAN (1981) (PROXY ITEM 2)
Upon the recommendation of the Human Resources Committee (the "Committee"), the
Board of Directors has adopted, subject to shareholder approval, the Long-Term
Profit Incentive Plan (1996) (the "Option Plan"), an amendment and restatement
of the Long-Term Profit Incentive Plan (1981) (the "1981 Plan"). The major
changes to the 1981 Plan are as follows:
1. an increase of 6,200,000 in the total number of shares of Common Stock
reserved for future issuance pursuant to awards;
2. limitation of future awards of restricted stock to a total of 1,000,000
shares;
3. limitation of annual awards of options or stock appreciation rights to any
one participant to a maximum of 1,000,000 shares;
4. limitation of annual payments under performance units to any one participant
to a maximum of $1,000,000; and
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5. adoption of criteria for performance goals the particular terms of which may
be set by the Committee in connection with the issuance of deferred cash
incentive awards, performance units and performance-based restricted stock.
REASONS FOR THE AMENDMENTS
The Board of Directors believes that in order to continue to attract, retain
and reward valuable personnel, it is important for the Corporation to grant
long-term, stock-based incentive compensation awards to its key employees. The
two principles underlying the Corporation's compensation policy for all senior
managers are (i) aligning the financial interests of senior managers with those
of the Corporation's shareholders and (ii) paying for corporate and individual
performance. Implementing this philosophy places an increasing emphasis on the
"at risk" elements of compensation, and the function of the Option Plan in
providing such compensation has become increasingly important. The principles
applicable to senior managers carry over to the compensation of all key
employees.
The 1981 Plan currently provides that 13,500,000 shares of Common Stock are
reserved for issuance. As of January 31, 1996, approximately 1,300,000 shares
remained available for future awards. Also on that date, options covering
approximately 7,100,000 shares were outstanding of which approximately
2,130,412 were exercisable. In order to continue to provide long-term, stock
based incentives to the Corporation's key employees, it is now necessary to
increase the authorized shares available under the Plan. Therefore, the Board
recommends that 6,200,000 additional shares of Common Stock be reserved under
the Option Plan for issuance pursuant to future grants.
In addition, the Board of Directors has determined that the 1981 Plan should be
revised to comply with the final regulations adopted under Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code") in December of 1995.
The changes to the 1981 Plan listed in 3-5 above will give the Committee the
flexibility to grant awards that qualify for the performance-based exception to
the limits on deductibility of executive compensation under Section 162(m) of
the Code. Other changes to the format of the awards will update the Option Plan
and permit the Committee to continue to grant awards which will encourage
managers to focus on building high quality profitability and long-term
shareholder value.
The description of the Option Plan set forth below is a summary, does not
purport to be complete and is qualified in its entirety by reference to the
provisions of the Option Plan, a copy of which is attached hereto as Annex A.
SUMMARY OF AMENDED AND RESTATED PLAN
Purposes. The purposes of the Option Plan are to promote the growth and
profitability of the Corporation and its affiliates by providing officers and
other key executives with incentives to achieve long-term corporate objectives,
to attract and retain officers and other key executives of outstanding
competence, and to provide such key employees with an equity interest in the
Corporation.
Administration. The Option Plan is administered by the Committee, each member
of which shall at the time of any action under the Plan be a "disinterested
person" as then defined under Rule 16b-3 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and an "outside director" as then
defined under Section 162(m) of the Code. The Committee has the authority under
the Option Plan, among other things, to grant awards, prescribe limitations,
restrictions and conditions upon awards, adopt, amend and rescind rules and
regulations and interpret the Option Plan.
Participation. The Committee may grant awards under the Option Plan to any
eligible employee. Eligible employees include any full-time corporate officer,
key executive, administrative or professional employee of the Corporation or
any of its affiliates. Affiliates of the Corporation include any corporation,
limited partnership or other organization in which the Corporation owns,
directly or indirectly, 50% or more of the voting power. In practice, awards
have been granted to a group of approximately 1,100 employees, including
employees who are considered to have a high potential for contributing to the
future success of the Corporation.
Authorized Shares. The aggregate number of shares of Common Stock reserved for
issue under the Option Plan on and after its effective date will be 14,600,000
shares. The effective date for the Option Plan will be April 16, 1996, the date
of expected approval by the Corporation's shareholders. The
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aggregate total of 14,600,000 shares of Common Stock will cover (i)
approximately 7,100,000 shares to be issued pursuant to options outstanding and
unexercised on the effective date, (ii) approximately 1,300,000 shares
previously authorized for issuance under the 1981 Plan and remaining available
for future awards, and (iii) approximately 6,200,000 additional shares for
future awards. The aggregate number of shares that may be issued as restricted
stock under the Option Plan, after the effective date, will be limited to
1,000,000 shares.
For purposes of determining how many shares have been issued under the Option
Plan, the following will be counted against the total number of shares of
Common Stock reserved for issuance; (i) shares actually issued upon exercise of
an option, except that when options are exercised by the delivery of shares of
Common Stock (including withholding shares on exercise) the charge against the
total is limited to the net new shares of Common Stock issued; (ii) shares
actually issued upon exercise of a stock appreciation right, (iii) shares
actually issued upon payment of a performance unit, and (iv) shares of Common
Stock that are granted as restricted stock. Shares of Common Stock that are
subject to an option which for any reason either terminates unexercised or
expires, except by reason of exercise of a related stock appreciation right,
and shares of restricted stock that are surrendered or forfeited to the
Corporation shall again be available for issuance under the Option Plan. Shares
of Common Stock issued pursuant to awards may be newly issued shares or shares
which have been reacquired by the Corporation and are held in treasury. On
February 15, 1996, the closing price of a share of Common Stock on the New York
Stock Exchange was $54.25.
Adjustments. The Option Plan provides that if there is any change in the Common
Stock by reason of any stock split, stock dividend, spin-off, split-up, spin-
out, recapitalization, merger, consolidation, reorganization, combination or
exchange of shares, or any other similar transaction, the number and kind of
shares available for grant or subject to or granted pursuant to an outstanding
award and the price thereof, and any other numeric limitations under the Option
Plan, shall be appropriately adjusted by the Committee or the Board of
Directors.
Amendments. The Committee or the Board may at any time terminate or amend the
Option Plan as it may deem advisable. Any such action may be taken without the
approval of the Corporation's shareholders, but only to the extent that
shareholder approval is not required by applicable law or regulation, including
Rule 16b-3 of the Exchange Act, or the rules of any stock exchange on which the
Common Stock is listed. The termination or amendment of the Plan shall not,
without the consent of a participant, adversely affect such participant's
rights under an award previously granted.
Change of Control. Upon the occurrence of a Change in Control Event, as defined
under the Option Plan, outstanding options and SARs (unless expressly provided
otherwise in the agreement) will become fully exercisable, restrictions placed
upon restricted stock will lapse, and if provided in the agreement evidencing
the award, outstanding deferred cash incentive awards will become payable.
AUTHORIZED AWARDS
Performance Goals. Performance goals shall be established by the Committee in
connection with the grant of performance units and deferred cash incentive
awards and may be established in connection with the grant of restricted stock.
Performance goals shall be established by the Committee in compliance with
Section 162(m) of the Code covering a performance period set by the Committee
and based on maintenance of or changes in one or more of the following
objective business criteria: earnings or earnings per share; return on equity,
assets or investment; revenues; expenses; stock price; market share; charge-
offs; or non-performing assets. Performance goals may be applicable to a
business unit or to the Corporation as a whole and need not be the same for
each type of award or for each individual receiving the same type of award. The
Committee may retain the discretion to reduce (but not to increase) the portion
of any award which will be earned based on achieving performance goals.
Stock Options and SARs. Stock options may be granted as nonqualified options or
incentive stock options qualified under Section 422 of the Code. Options are
granted with terms not exceeding 10 years from the date of grant and generally
become exercisable pursuant to a vesting schedule set at the time of grant,
although the Committee retains the discretion to accelerate exercisability. The
exercise price for any option may not be less than 100% of the fair market
value per share of the Common Stock on the date of grant. The exercise price of
an option, including required withholding taxes, may be paid by a participant
in cash or in shares of Common Stock, including shares which are withheld at
the direction of the participant upon exercise of the option. Where the
exercise price is
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paid in shares of Common Stock, the shares, or an equivalent number of shares
where shares are withheld, must have been owned by the participant for six
months or longer prior to delivery to the Corporation.
Reload option rights may be awarded in conjunction with any grant of options
and entitle the participant upon exercise of that option through the delivery
or withholding of shares of Common Stock, to automatically be granted on the
date of such exercise a new reload option for a number of shares not greater
than the number of shares delivered or withheld, including shares delivered or
withheld in payment of the exercise price and withholding taxes. Reload options
have an exercise price not less than the fair market value of the Common Stock
on the date of grant, an expiration date not later than the expiration date of
the original option and other terms which are permissible for the grant of any
other stock option under the Option Plan. Reload option rights may be granted
in conjunction with reload options. Reload option rights outstanding under the
1981 Plan provide that reload options will only be issued if the closing price
of the Common Stock on the New York Stock Exchange on the date of exercise
exceeds the exercise price by at least 25 percent. Outstanding reload options
vest in full three years after their date of grant and do not carry reload
option rights.
Stock appreciation rights ("SARs"), which may be granted in tandem with options
or on a stand-alone basis, entitle participants to receive upon exercise the
difference between the fair market value on the date of exercise of the shares
of Common Stock subject to the SAR and the designated base price. The base
price for any SAR may not be less than 100% of the fair market value per share
of the Common Stock on the date of grant. In the sole discretion of the
Committee, the Corporation may pay all or any part of its obligation arising
out of a SAR exercise in cash, shares of Common Stock or some combination
thereof.
Both options and SARs are generally exercisable for two years after retirement
after age 55 with the consent of the Corporation or termination of employment
due to death or disability, to the extent that they were exercisable upon
termination of employment. If termination of employment occurs after the
occurrence of a Change in Control Event and is "without cause", as defined in
the Option Plan, options and SARs remain exercisable for one year thereafter.
Otherwise, options and SARs will generally terminate on termination of
employment unless otherwise determined by the Committee and provided in the
option or SAR agreement. The Committee has the authority to grant longer post-
employment exercise periods, including through the remaining term of the
option. However, no option or SAR may be exercised after the end of its
original term. The maximum number of shares of Common Stock available for
grants of options or SARs to any one participant under the Option Plan during a
calendar year may not exceed 1,000,000 shares. This maximum limitation shall be
interpreted and applied in a manner consistent with Section 162(m) of the Code.
Deferred Cash Incentive Awards. Deferred cash incentive awards may be granted
in conjunction with all or any part of an option either at the time the option
is granted or at any time thereafter during the term of the option. Except in
the event of death, disability or the occurrence of a Change in Control Event,
any deferred cash incentive award only becomes earned and payable if the
Corporation achieves performance goals which are established for a performance
period (which must be a calendar year or longer) by the Committee in compliance
with Section 162(m) of the Code. A deferred cash incentive award entitles the
participant to receive from the Corporation at the time the related option is
exercised an amount of cash equal to the exercise price of the option (i.e.,
the fair market value of the Common Stock subject to the option on the date of
grant). Under no circumstances may a deferred cash incentive award be applied
to any purpose other than the payment of the exercise price of a properly
exercised related option. No participant may in any calendar year receive
payment of deferred cash incentive awards with respect to options for more than
750,000 shares of Common Stock. The Committee may reduce (but not increase) the
amount payable, provided the applicable performance goals have been met.
Performance Units. Performance units represent the right of a participant to
receive shares of Common Stock or cash at a future date upon the achievement of
performance goals which are established for a performance period (which may be
less or more than one calendar year) by the Committee in accordance with
Section 162(m) of the Code. In the sole discretion of the Committee, the
Corporation may pay all or any part of its obligation under a performance unit
in (i) cash, (ii) shares of Common Stock or (iii) cash and shares of Common
Stock. No more than $1,000,000 may be paid in cash or fair market value of
Common Stock (valued no later than three days after the date the Committee
certifies the achievement of the performance goals) under all performance units
paid
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to any one participant during a calendar year. The Committee may reduce (but
not increase) the amount payable under any performance unit, provided the
applicable performance goals have been met.
Restricted Stock. Restricted stock awards cover shares of Common Stock which
are registered in the participant's name upon grant. The participant generally
enjoys all the incidents of stock ownership with respect to such shares,
including the right to receive cash dividends and to vote the shares. However,
the participant may not sell, transfer, assign or otherwise encumber or dispose
of the shares until the restrictions have lapsed. The lapse of the restrictions
may be conditioned on the fulfillment of one or more employment or performance
based conditions, which may or may not include the achievement of performance
goals which are established for a performance period (which may be less or more
than one calendar year) by the Committee in accordance with Section 162(m) of
the Code. The compensation payable to a participant upon the achievement of
performance goals is equal to the fair market value of a share of Common Stock
for each share of restricted stock covered by the award. No individual may in
any one calendar year receive payment of a performance based restricted stock
award covering more than 100,000 shares of Common Stock. Transfer restrictions
will also generally lapse upon death, disability, retirement after age 55 with
the written consent of the Corporation (except in the case of performance based
restricted stock) and the occurrence of a Change in Control Event.
NEW PLAN BENEFITS
The selection of participants who will receive awards under the Option Plan, if
it is approved by the shareholders, and the size and type of awards are
generally to be determined by the Committee in its discretion. Such future
grants are not presently determinable, and it is not possible to predict the
benefits or amounts that will be received by or allocated to particular
individuals or groups in 1996.
The following table shows deferred cash incentive awards granted under the 1981
Plan but not yet accelerated by the Committee upon achieving performance goals
and reload options which may be granted on the qualifying exercise of stock
options previously granted and outstanding under the 1981 Plan as of February
15, 1996.
OPTION PLAN
<TABLE>
<CAPTION>
Options With
Deferred Cash Options With
Incentive Awards Reload Option Rights*
------------------- ---------------------
Number Maximum
of Dollar
Name and Position Shares Value Number of Shares
- ----------------- ------- ----------- ---------------------
<S> <C> <C> <C>
Frank V. Cahouet.................... 82,500 $ 2,606,876 25,000
Chairman, President and Chief
Executive Officer
W. Keith Smith...................... 45,149 $ 1,559,808 76,500
Vice Chairman
Christopher M. Condron.............. 31,775 $ 1,506,119 39,200
Vice Chairman
Steven G. Elliott................... 27,375 $ 957,157 17,000
Vice Chairman and Chief Financial
Officer
Martin G. McGuinn................... 28,837 $ 1,005,360 17,000
Vice Chairman
Keith P. Russell.................... 25,500 $ 887,313 17,000
Vice Chairman
Executive Officer Group (11)........ 320,776 $11,347,688 277,250
Non-Executive Officer Group......... 175,459 $ 6,415,345 232,290
</TABLE>
- ------
* Reload options will be automatically granted on exercise when the exercise
price is paid by delivering or withholding shares of Common Stock; provided
the closing price of the Common Stock on the New York Stock Exchange on the
date of exercise exceeds the exercise price by at least 25 percent. Reload
options have an exercise price equal to the closing price of the Common Stock
on their grant date and the same expiration date as the underlying option.
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FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the Federal income tax consequences to
participants who may receive grants of awards under the Option Plan. The
discussion is based upon interpretations of the Code in effect as of January 1,
1996, and regulations promulgated thereunder as of such date.
Nonqualified Stock Options. For Federal income tax purposes, no income is
recognized by a participant upon the grant of a nonqualified stock option under
the Option Plan. Upon the exercise of an option, however, compensation taxable
as ordinary income will be realized by the participant in an amount equal to
the excess of the fair market value of a share of Common Stock on the date of
such exercise over the exercise price times the number of shares exercised. A
subsequent sale or exchange of such shares will result in gain or loss measured
by the difference between (i) the exercise price, increased by any compensation
reported upon the participant's exercise of the option, and (ii) the amount
realized on such sale or exchange. Such gain or loss will be capital in nature
if the shares were held as a capital asset and will be long-term if such shares
were held for more than one year. Reload options are treated as nonqualified
stock options for purposes of this discussion.
The Corporation is entitled to a deduction (subject to the provisions of
Section 162(m) of the Code) for compensation paid to a participant at the same
time and in the same amount as the participant is considered to have realized
compensation by reason of the exercise of an option.
Incentive Stock Options. No taxable income is realized by the participant upon
the grant or exercise of an incentive stock option. If shares of Common Stock
are issued to a participant pursuant to the exercise of an incentive stock
option granted under the Option Plan, and if no disqualifying disposition of
such shares is made by such participant within two years after the date of
grant or within one year after the transfer of such shares to a participant,
then (a) upon sale of such shares, any amount realized in excess of the option
price will be taxed to such participant as a long-term capital gain and any
loss sustained will be a long-term capital loss, and (b) no deduction will be
allowed to the Corporation for Federal income tax purposes. Upon exercise of an
incentive stock option, the participant may be subject to alternative minimum
tax on certain items of tax preference. If shares of Common Stock acquired upon
the exercise of an incentive stock option are disposed of prior to the
expiration of the two-years-from-grant/one-year-from-transfer holding period,
generally (a) the participant will realize ordinary income in the year of
disposition in the amount equal to the excess (if any) of the fair market value
of the shares at exercise (or, if less, the amount realized on the disposition
of the shares) over the option price thereof, and (b) the Corporation will be
entitled to deduct such amount (subject to the provisions of Section 162(m) of
the Code). Any further gain or loss realized will be taxed as short-term
capital gain or loss, as the case may be, and will not result in any deduction
by the Corporation. If an incentive stock option is exercised at a time when it
no longer qualifies as an incentive stock option, the option is treated as a
nonqualified stock option.
Stock Appreciation Rights. No taxable income is recognized by a participant
upon the grant of a SAR under the Option Plan. Upon the exercise of a SAR,
however, compensation taxable as ordinary income will be realized by the
participant in an amount equal to the cash received upon exercise, plus the
fair market value on the date of exercise of any shares of Common Stock
received upon exercise. Shares of Common Stock received on the exercise of a
SAR will be eligible for capital gain treatment, with the capital gain holding
period commencing on the date of exercise of the SAR. The Corporation is
entitled to a deduction (subject to the provisions of Section 162(m) of the
Code) for compensation paid to a participant at the same time and in the same
amount as the participant is considered to have realized compensation by reason
of the exercise of a SAR.
Restricted Stock. Awards of restricted stock will not result in taxable income
to the participant or a tax deduction to the Corporation for Federal income tax
purposes at the time of grant. A recipient of restricted stock generally will
be subject to tax at ordinary income rates on the fair market value of the
Common Stock at the time the restricted stock is no longer subject to
forfeiture. However, a recipient who so elects under Section 83(b) of the Code
within 30 days of the date of the grant will have ordinary taxable income on
the date of the grant equal to the fair market value of the restricted stock as
if such shares were unrestricted and could be sold immediately. If the
restricted stock subject to such election is forfeited, the recipient will not
be entitled to any deduction, refund or loss for tax purposes with respect to
the forfeited shares. Upon sale of the restricted stock after the forfeiture
period has expired, the holding period to determine whether the recipient has
long-term or short-term capital gain or loss begins when the restriction period
expires. However, if the recipient timely elects to be taxed as of the date of
the grant, the holding period commences on the date of the grant and the
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tax basis will be equal to the fair market value of the restricted shares on
the date of the grant as if such shares were then unrestricted and could be
sold immediately. The award of shares of restricted stock which are subject to
the achievement of performance goals, will not result in taxable income to the
participant or a tax deduction to the Corporation for Federal income tax
purposes at the time of grant. A recipient of such an award generally will be
subject to tax at the same time and in the same manner as applicable to
recipients of restricted shares as described above. The Corporation is entitled
to a deduction (subject to the provisions of Section 162(m) of the Code) for
compensation paid to a participant at the same time and in the same amount as
the participant is considered to have realized compensation by reason of the
lapse of restrictions on an award of restricted stock or an election under
Section 83(b) of the Code.
Performance Units. The Federal income tax consequences of performance units
will depend on how such awards are structured. Generally, the Corporation will
be entitled to a deduction (subject to the provisions of Section 162(m) of the
Code) with respect to such awards only to the extent that the recipient
realizes compensation income in connection with such awards. It is anticipated
that such awards will usually result in compensation income to the recipient in
some amount.
Deferred Cash Incentive Awards. No taxable income is realized by a participant
upon the grant of a deferred cash incentive award in connection with the grant
of an option. A deferred cash incentive award can only be used to pay the
exercise price of the related option. A participant recognizes compensation
income related to the deferred cash incentive award after the related option
has vested and the Committee has certified 1) the achievement of the
performance goals related to the deferred cash incentive award and 2) the
amount of the deferred cash incentive award to be paid. The amount of
compensation income a participant recognizes is equal to the option exercise
price. Generally, the Corporation will be entitled to a deduction (subject to
the provisions of Section 162(m) of the Code) with respect to such awards only
to the extent that the recipient recognizes compensation income in connection
with such award.
Limits on Deductions. Under Section 162(m) of the Code, the amount of
compensation paid to the Chief Executive Officer and the four other most highly
paid executive officers of the Corporation in the year for which a deduction is
claimed by the Corporation (including its subsidiaries) is limited to
$1,000,000 per person, except that compensation that is performance-based will
be excluded for purposes of calculating the amount of compensation subject to
this $1,000,000 limitation. The ability of the Corporation to claim a deduction
for compensation paid to any other executive officer or employee of the
Corporation (including its subsidiaries) is not affected by this provision.
The Corporation has structured the Option Plan so that any compensation for
which the Corporation may claim a deduction in connection with the exercise of
nonqualified stock options and SARs, the disposition by an optionee of shares
acquired upon the exercise of incentive stock options and payments made
pursuant to performance units and deferred cash incentive awards will be
performance-based within the meaning of Section 162(m) of the Code. Grants of
restricted stock may or may not be performance-based and therefore any amounts
for which the Corporation may claim a deduction may or may not be subject to
the limitations on deductibility in Section 162(m) of the Code.
ACTION BY SHAREHOLDERS
The Board of Directors believes that the above described amendment and
restatement of the 1981 Plan is appropriate and consistent with the
Corporation's objectives of attracting and retaining officers and key
executives of outstanding competence and providing incentives for such
employees to improve the long-range profitability of the Corporation.
Accordingly, the Board believes that approval of the amended and restated
Option Plan by the Corporation's shareholders is in the best interests of the
Corporation and its shareholders.
Approval of this proposal requires the affirmative vote of the holders of a
majority of the shares of the Corporation's Common Stock present, either in
person or by proxy, at the annual meeting and entitled to vote. Since the
aggregate number of shares for which a vote "For", "Against" or "Abstain" is
made will be counted in determining the minimum number of affirmative votes
required for approval of the proposal, an abstention will have the same legal
effect as a vote "Against" the proposal.
WITH RESPECT TO PROXY ITEM 2, THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE LONG-TERM PROFIT INCENTIVE
PLAN (1981).
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RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS (PROXY ITEM 3)
The Board of Directors, at its February 20, 1996 meeting, appointed KPMG Peat
Marwick LLP as independent public accountants of the Corporation for the year
ending December 31, 1996. KPMG Peat Marwick LLP served as the Corporation's
independent public accountants for the year ended December 31, 1995. Although
the appointment of independent public accountants is not required to be
approved by shareholders, the Board of Directors believes shareholders should
participate in such selection through ratification. If the shareholders fail to
ratify KPMG Peat Marwick LLP as the independent public accountants, the Board
of Directors will reconsider its selection. Representatives of KPMG Peat
Marwick LLP will be present at the annual meeting with an opportunity to make a
statement if they so desire and will be available to respond to appropriate
questions.
ACTION BY SHAREHOLDERS
Adoption of the proposal requires the approval of a majority of the votes cast
at the annual meeting by all holders of Common Stock. The Pennsylvania Business
Corporation Law provides that an abstention is not a vote cast. Therefore, in a
case like this where the favorable vote of the holders of a
majority of the votes cast at the annual meeting is required, an abstention
will not have the effect of
a vote for or against the proposal and will not be counted in determining the
number of votes required for approval, though it will be counted in determining
the presence of a quorum.
WITH RESPECT TO THE RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS (PROXY ITEM
3), THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT PUBLIC ACCOUNTANTS OF THE
CORPORATION FOR THE YEAR ENDING DECEMBER 31, 1996.
ADDITIONAL INFORMATION; SHAREHOLDER PROPOSALS
No matters other than those set forth in the Notice of Annual Meeting
accompanying this Proxy Statement are expected to be presented to shareholders
for action at the annual meeting. However, if other matters are presented which
are proper subjects for action by shareholders, it is the intention of those
named in the accompanying Proxy to vote such Proxy in accordance with their
judgment upon such matters.
Proposals of shareholders intended to be presented at the Corporation's annual
meeting to be held in 1997 must be received by the Corporation no later than
November 7, 1996 to be considered for inclusion in the Proxy Statement and form
of Proxy relating to the 1997 annual meeting.
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Corporation's executive officers and directors, and persons who own more than
10% of a registered class of the Corporation's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission (the "SEC") and the New York Stock Exchange. Executive officers,
directors and greater than 10% shareholders are required by SEC regulation to
furnish the Corporation with copies of all Section 16(a) forms they file. Based
solely on its review of the copies of such forms received by the Corporation,
or written representations from certain reporting persons that no Form 5's were
required for those persons, the Corporation believes that, since January 1,
1995, all such filing requirements were complied with.
The cost of solicitation of proxies for the 1996 annual meeting will be borne
by the Corporation. In addition to solicitation by mail, regular employees of
the Corporation may solicit proxies by telephone, telegraph or personal
interview. Brokerage houses and other custodians, nominees and fiduciaries will
be requested to forward soliciting material to the beneficial owners of Common
Stock held of record by such persons and will be reimbursed by the Corporation
for their expenses. In addition, the Corporation has retained D. F. King & Co.,
Inc., 77 Water Street, New York, New York 10005 to aid in the solicitation of
proxies from brokers, banks, other nominees and institutional holders at an
estimated fee of $7,000 plus expenses.
By Order of the Board of Directors
Carl Krasik Secretary
March 7, 1996
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ANNEX A
MELLON BANK CORPORATION LONG-TERM PROFIT INCENTIVE PLAN (1996)
I. PURPOSES
The purposes of this Long-Term Profit Incentive Plan (1996), as amended and
restated, are to promote the growth and profitability of Mellon Bank
Corporation ("Corporation") and its Affiliates, to provide officers and other
key executives of the Corporation and its Affiliates with the incentive to
achieve long-term corporate objectives, to attract and retain officers and
other key executives of outstanding competence, and to provide such officers
and key executives with an equity interest in the Corporation.
II. DEFINITIONS
The following terms shall have the meanings shown:
2.1 "Affiliate" shall mean any corporation, limited partnership or other
organization in which the Corporation owns, directly or indirectly, 50% or more
of the voting power.
2.2 "Award" shall mean Options, SARs, Performance Units, Restricted Stock and
Deferred Cash Incentive Awards, as defined in and granted under the Plan.
2.3 "Board of Directors" shall mean the Board of Directors of the Corporation.
2.4 "Change in Control Event" shall mean any of the following events:
(a) The occurrence with respect to the Corporation of a "control transaction",
as such term is defined in Section 2542 of the Pennsylvania Business
Corporation Law of 1988, as of August 15, 1989; or
(b) Approval by the stockholders of the Corporation of (i) any consolidation or
merger of the Corporation in which the holders of voting stock of the
Corporation immediately before the merger or consolidation will not own 50% or
more of the voting shares of the continuing or surviving corporation
immediately after such merger or consolidation, or (ii) any sale, lease or
exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all the assets of the Corporation; or
(c) A change of 25% (rounded to the next whole person) in the membership of the
Board of Directors within a 12-month period, unless the election or nomination
for election by stockholders of each new director within such period was
approved by the vote of 85% (rounded to the next whole person) of the directors
then still in office who were in office at the beginning of the 12-month
period.
2.5 "Code" shall mean the Internal Revenue Code of 1986, as amended, and any
successor statute of similar import, and regulations thereunder, in each case
as in effect from time to time. References to sections of the Code shall be
construed also to refer to any successor sections.
2.6 "Committee" shall mean the Human Resources Committee of the Board of
Directors, or any successor committee.
2.7 "Common Stock" shall mean Common Stock of the Corporation.
2.8 "Deferred Cash Incentive Award" shall mean an Award granted pursuant to
Article VII of the Plan.
2.9 "Fair Market Value" shall mean the closing price of a share of Common Stock
in the New York Stock Exchange Composite Transactions on the relevant date, or,
if no sale shall have been made on such exchange on that date, the closing
price in the New York Stock Exchange Composite Transactions on the last
preceding day on which there was a sale.
2.10 "Incentive Stock Option" shall mean an option qualifying under Section 422
of the Code granted by the Corporation.
2.11 "Options" shall mean rights to purchase shares of Common Stock granted
pursuant to Article IV of the Plan.
2.12 "Participant" shall mean an eligible employee who is granted an Award
under the Plan.
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2.13 "Performance Goals" shall mean goals established by the Committee in
compliance with Section 162(m) of the Code covering a performance period set by
the Committee and based on maintenance of or changes in one or more of the
following objective business criteria: earnings or earnings per share; return
on equity, assets or investment; revenues; expenses; stock price; market share;
charge-offs; or non-performing assets. Performance Goals shall be established
by the Committee in connection with the grant of Performance Units and Deferred
Cash Incentive Awards and may be established in connection with the grant of
Restricted Stock. Performance Goals may be applicable to a business unit or to
the Corporation as a whole and need not be the same for each of the foregoing
types of Awards or for each individual receiving the same type of Award. The
Committee may retain the discretion to reduce (but not to increase) the portion
of any Award which will be earned based on achieving Performance Goals.
2.14 "Performance Units" shall mean units granted pursuant to Article VI of the
Plan.
2.15 "Plan" shall mean the Mellon Bank Corporation Long-Term Profit Incentive
Plan (1996), as amended and restated.
2.16 "Reload Option Rights" and "Reload Options" shall have the meanings set
forth in Article IV of the Plan.
2.17 "Restricted Stock" shall mean any share of Common Stock granted pursuant
to Article VIII of the Plan.
2.18 "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended from
time to time, or any successor rule.
2.19 "SAR" shall mean any stock appreciation right granted pursuant to Article
V of the Plan.
III. GENERAL
3.1 Administration.
(a) The Plan shall be administered by the Committee, each member of which shall
at the time of any action under the Plan be (i) a "disinterested person" as
then defined under Rule 16b-3 and (ii) an "outside director" as then defined
under Section 162(m) of the Code.
(b) The Committee shall have the authority in its sole discretion from time to
time: (i) to designate the employees eligible to participate in the Plan; (ii)
to grant Awards under the Plan; (iii) to prescribe such limitations,
restrictions and conditions upon any such Award as the Committee shall deem
appropriate; and (iv) to interpret the Plan, to adopt, amend and rescind rules
and regulations relating to the Plan, and to make all other determinations and
take all other action necessary or advisable for the implementation and
administration of the Plan. A majority of the Committee shall constitute a
quorum, and the action of a majority of members of the Committee present at any
meeting at which a quorum is present, or acts unanimously adopted in writing
without the holding of a meeting, shall be the acts of the Committee.
(c) All actions of the Committee shall be final, conclusive and binding upon
the Participant. No member of the Committee shall be liable for any action
taken or decision made in good faith relating to the Plan or any Award
thereunder.
3.2 Eligibility. The Committee may grant Awards under the Plan to any full-time
corporate officer, key executive, administrative or professional employee of
the Corporation or any of its Affiliates. In granting such Awards and
determining their form and amount, the Committee shall give consideration to
the functions and responsibilities of the employee, his or her potential
contributions to profitability and to the sound growth of the Corporation and
such other factors as the Committee may deem relevant.
3.3 Effective and Expiration Dates of Plan. The amended and restated Plan shall
become effective on the date (herein referred to as the "effective date")
approved by the holders of a majority of the shares present or represented and
entitled to vote at the 1996 Annual Meeting of Shareholders of the Corporation.
No Award shall be granted after December 31, 2005, except that Reload Options
may be granted pursuant to Reload Option Rights then outstanding.
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3.4 Aggregate and Individual Limitations on Awards.
(a) The aggregate number of shares of Common Stock reserved for issue under the
Plan on and after its effective date shall not exceed 14,600,000 shares,
subject to adjustments pursuant to Section 9.7. No more than 1,000,000 shares
of Common Stock may be issued as Restricted Stock. Shares of Common Stock which
may be issued pursuant to Awards granted under the Plan may be either
authorized and unissued shares of Common Stock or authorized and issued shares
of Common Stock held in the Corporation's treasury.
(b) For purposes of paragraph (a) of this Section 3.4, shares of Common Stock
that are actually issued upon exercise of an Option shall be counted against
the total number of shares reserved for issuance, except that when Options are
exercised by the delivery of shares of Common Stock the charge against the
shares reserved for issuance shall be limited to the net new shares of Common
Stock issued. In addition to shares of Common Stock actually issued pursuant to
the exercise of Options, there shall be deemed to have been issued under the
Plan a number of shares of Common Stock equal to (i) the number of shares
issued pursuant to SARs which shall have been exercised pursuant to the Plan,
(ii) the number of Performance Units which shall have been paid in shares of
Common Stock pursuant to the Plan and (iii) the number of shares of Restricted
Stock which shall have been granted pursuant to the Plan. For purposes of
paragraph (a) of this Section 3.4, the payment of a Deferred Cash Incentive
Award shall not be deemed to result in the issuance of any shares of Common
Stock in addition to those issued pursuant to the exercise of the related
Option.
(c) For purposes of paragraph (a) of this Section 3.4, any shares of Common
Stock subject to an Option which for any reason either terminates unexercised,
or expires except by reason of the exercise of a related SAR, and any shares of
Restricted Stock granted under this Plan which are surrendered or forfeited to
the Corporation, shall again be available for issuance under the Plan.
(d) The maximum number of shares of Common Stock available for grants of
Options or SARs to any one Participant under the Plan during a calendar year
shall not exceed 1,000,000 shares. The limitation in the preceding sentence
shall be interpreted and applied in a manner consistent with Section 162(m) of
the Code. To the extent consistent with Section 162(m) of the Code, a Reload
Option (A) shall be deemed to have been granted at the same time as the
original underlying Option grant and (B) shall not be deemed to increase the
number of shares covered by the original underlying Option.
IV. OPTIONS
4.1 Grant. The Committee may from time to time, subject to the provisions of
the Plan, in its discretion grant Options to Participants to purchase for cash
or shares of Common Stock the number of shares of Common Stock allotted by the
Committee. In the discretion of the Committee, any Options or portions thereof
granted pursuant to this Plan may be designated as Incentive Stock Options. The
aggregate Fair Market Value (determined as of the time the Incentive Stock
Option is granted) of Common Stock and any other stock of the Corporation or
any parent, subsidiary or affiliate corporation with respect to which such
Incentive Stock Options are exercisable for the first time by a Participant in
any calendar year under all plans of the Corporation, its subsidiaries and
affiliates shall not exceed $100,000 or such sum as may from time to time be
permitted under Section 422 of the Code. The Committee shall also have the
authority, in its discretion, to award reload option rights ("Reload Option
Rights") in conjunction with the grant of Options with the effect described in
Section 4.7. Reload Option Rights may be awarded either at the time an Option
is granted or, except in the case of Incentive Stock Options, at any time
thereafter during the term of the Option.
4.2 Option Agreements. The grant of any Option shall be evidenced by a written
"Stock Option Agreement" executed by the Corporation and the Participant,
stating the number of shares of Common Stock subject to the Option evidenced
thereby and such other terms and conditions of the Option as the Committee may
from time to time determine.
4.3 Option Price. The option price for the Common Stock covered by any Option
granted under the Plan shall in no case be less than 100% of the Fair Market
Value of said Common Stock on the date of grant. Except as otherwise provided
in the Stock Option Agreement, the option price of an Option may be paid in
whole or in part by delivery to the Corporation of a number of shares of Common
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Stock having a Fair Market Value on the date of exercise equal to the option
price or portion thereof to be paid; provided, however, that no shares may be
delivered in payment of the option price of an Option unless such shares, or an
equivalent number of shares, shall have been held by the Participant (or other
person entitled to exercise the Option) for at least six months prior to such
delivery.
4.4 Term of Options. The terms of each Option granted under the Plan shall be
for such period as the Committee shall determine, but for not more than 10
years from the date of grant thereof. Each Option shall be subject to earlier
termination as provided in Sections 4.6 and 5.4 hereof.
4.5 Exercise of Options. Each Option granted under the Plan shall be
exercisable on such date or dates during the term thereof and for such number
of shares of Common Stock as may be provided in the Stock Option Agreement
evidencing its grant. Pursuant to the terms of the Stock Option Agreement or
otherwise, the Committee may change the date on which an outstanding Option
becomes exercisable; provided, however, that an exercise date designated in a
Stock Option Agreement may not be changed to a later date without the consent
of the holder of the Option. Notwithstanding any other provision of this Plan,
unless expressly provided to the contrary in the applicable Stock Option
Agreement, all Options granted under the Plan shall become fully exercisable
immediately and automatically upon the occurrence of a Change in Control Event.
4.6 Termination of Employment. Except as otherwise provided in the Stock Option
Agreement:
(a) If termination of employment of a Participant is due to retirement after
age 55 with the written consent of the Corporation or an Affiliate, the
Participant shall have the right to exercise his or her Options within the
period of two years after such retirement, to the extent such Options were
exercisable at the time of retirement; provided, however, that such post-
retirement exercise period may be extended by action of the Committee for up to
the full term of such Options.
(b) If a Participant shall die while employed by the Corporation or an
Affiliate or within a period following termination of employment during which
the Option remains exercisable under paragraphs (a), (c) or (d) of this Section
4.6, his or her Options may be exercised to the extent exercisable by the
Participant at the time of his or her death within a period of two years from
the date of death by the executor or administrator of the Participant's estate
or by the person or persons to whom the Participant shall have transferred such
right by will or by the laws of descent and distribution.
(c) If termination of employment of a Participant is by reason of the total and
permanent disability of the Participant covered by a disability plan of the
Corporation or an Affiliate then in effect, the Participant shall have the
right to exercise his or her Options within the period of two years after the
date of termination of employment, to the extent such Options were exercisable
at the time of termination of employment.
(d) In the event the employment of a Participant is terminated by the
Corporation or an Affiliate without cause within two years after the occurrence
of a Change in Control Event, the Participant shall have the right to exercise
his or her Options within one year after the date such termination occurred, to
the extent such Options were exercisable at the time of such termination of
employment. For purposes of this paragraph, "without cause" shall mean any
termination of employment where it cannot be shown that the employee has (i)
willfully failed to perform his or her employment duties for the Corporation or
an Affiliate, (ii) willfully engaged in conduct that is materially injurious to
the Corporation or an Affiliate, monetarily or otherwise, or (iii) committed
acts that constitute a felony under applicable federal or state law or
constitute common law fraud. For purposes of this paragraph, no act or failure
to act on the Participant's part shall be considered "willful" unless done, or
omitted to be done, by him or her not in good faith and without reasonable
belief that his or her action or omission was in the best interest of the
Corporation or Affiliate.
(e) In the event all employment of a Participant with the Corporation or an
Affiliate is terminated for any reason other than as stated in the preceding
paragraphs (a)--(d), his or her Options shall terminate upon such termination
of employment.
(f) Notwithstanding the foregoing, in no event shall an Option granted
hereunder be exercisable after the expiration of its term.
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4.7 Reload Option Rights. Reload Option Rights if awarded with respect to an
Option shall entitle the original grantee of the Option (and unless otherwise
determined by the Committee, in its discretion, only such original grantee),
upon exercise of the Option or any portion thereof through delivery of shares
of Common Stock, automatically to be granted on the date of such exercise an
additional Option (a "Reload Option") (i) for that number of shares of Common
Stock not greater than the number of shares delivered by the Participant in
payment of the option price of the original Option and any withholding taxes
related thereto, (ii) having an option price not less than 100% of the Fair
Market Value of the Common Stock covered by the Reload Option on the date of
grant of such Reload Option, (iii) having an expiration date not later than the
expiration date of the original Option so exercised and (iv) otherwise having
terms permissible for the grant of an Option under the Plan. Subject to the
preceding sentence and the other provisions of the Plan, Reload Option Rights
and Reload Options shall have such terms and be subject to such restrictions
and conditions, if any, as shall be determined, in its discretion, by the
Committee. In granting Reload Option Rights, the Committee, may, in its
discretion, provide for successive Reload Option grants upon the exercise of
Reload Options granted hereunder. Unless otherwise determined by the Committee,
in its discretion, Reload Option Rights shall entitle the Participant to be
granted Reload Options only if the underlying Option to which they relate is
exercised by the Participant during employment with the Corporation or any of
its Affiliates. Except as otherwise specifically provided herein or required by
the context, the term Option as used in this Plan shall include Reload Options
granted hereunder.
V. SARS
5.1 Grant. SARs may be granted by the Committee as stand-alone SARs or in
tandem with all or any part of any Option granted under the Plan. SARs which
are granted in tandem with an Option may be granted either at the time of the
grant of such Option or, except in the case of an Incentive Stock Option, at
any time thereafter during the term of such Option.
5.2 SAR Agreements. The grant of any SAR shall be evidenced by the related
Stock Option Agreement or by a written "Stock Appreciation Rights Agreement"
executed by the Corporation and the Participant, stating the number of shares
of Common Stock covered by the SAR, the base price of a stand-alone SAR and
such other terms and conditions of the SAR as the Committee may from time to
time determine. The base price for stand-alone SARs (the "base price") shall be
such price as the Committee, in its sole discretion, shall determine but shall
not be less than 100% of the Fair Market Value per share of the Common Stock
covered by the stand-alone SAR on the date of grant.
5.3 Payment. SARs shall entitle the Participant upon exercise to receive the
amount by which the Fair Market Value of a share of Common Stock on the date of
exercise exceeds the option price of any tandem Option or the base price of a
stand-alone SAR, multiplied by the number of shares in respect of which the SAR
shall have been exercised. In the sole discretion of the Committee, the
Corporation may pay all or any part of its obligation arising out of a SAR
exercise in (i) cash, (ii) shares of Common Stock or (iii) cash and shares of
Common Stock. Payment shall be made by the Corporation as soon as practicable
after the date of exercise.
5.4 Exercise of Tandem Award. If SARs are granted in tandem with an Option (i)
the SARs shall be exercisable at such time or times and to such extent, but
only to such extent, that the related Option shall be exercisable, (ii) the
exercise of the related Option shall cause a share for share reduction in the
number of SARs which were granted in tandem with the Option; and (iii) the
payment of SARs shall cause a share for share reduction in the number of shares
covered by such Option.
5.5 Termination of Employment. Except as otherwise provided in the Stock
Appreciation Rights Agreement:
(a) If termination of employment of a Participant is due to retirement after
age 55 with the written consent of the Corporation or an Affiliate, the
Participant shall have the right to exercise his or her stand-alone SARs within
the period of two years after such retirement, to the extent such SARs were
exercisable at the time of retirement; provided, however, that such post-
retirement exercise period may be extended by action of the Committee for up to
the full term of such SARs.
(b) If a Participant shall die while employed by the Corporation or an
Affiliate thereof or within a period following termination of employment during
which the SARs remain exercisable under paragraphs (a), (c) or (d) of this
Section 5.5, his or her stand-alone SARs may be exercised to the
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extent exercisable by the Participant at the time of his or her death within a
period of two years from the date of death by the executor or administrator of
the Participant's estate or by the person or persons to whom the Participant
shall have transferred such right by will or by the laws of descent and
distribution.
(c) If termination of employment of a Participant is by reason of the total and
permanent disability of the Participant covered by a disability plan of the
Corporation or an Affiliate then in effect, the Participant shall have the
right to exercise his or her stand-alone SARs within the period of two years
after the date of termination of employment, to the extent such SARs were
exercisable at the time of termination of employment.
(d) In the event all employment of a Participant with the Corporation or an
Affiliate is terminated without cause within two years after the occurrence of
a Change in Control Event, the Participant shall have the right to exercise his
or her stand-alone SARs within one year after the date such termination
occurred, to the extent such stand-alone SARs were exercisable at the time of
such termination of employment. For purposes of this paragraph, "without cause"
shall have the meaning provided in Section 4.6(d).
(e) In the event all employment of a Participant with the Corporation or an
Affiliate is terminated for any reason other than as stated in the preceding
paragraphs (a)--(d), his or her stand-alone SARs shall terminate upon such
termination of employment.
(f) Notwithstanding the foregoing, in no event shall a stand-alone SAR granted
hereunder be exercisable after the expiration of its term.
VI. PERFORMANCE UNITS
6.1 Grant. The Committee may from time to time grant one or more Performance
Units to eligible employees. Performance Units shall represent the right of a
Participant to receive shares of Common Stock or cash at a future date upon the
achievement of Performance Goals which are established by the Committee.
6.2 Performance Unit Agreements. The grant of any Performance Unit shall be
evidenced by a written "Performance Unit Agreement", executed by the
Corporation and the Participant stating the amount of cash and/or number of
shares of Common Stock covered by the Performance Unit and such other terms and
conditions of the Performance Unit as the Committee may determine, including
the performance period to be covered by the award and the Performance Goals to
be achieved.
6.3 Payment. After the completion of a performance period, performance during
such period shall be measured against the Performance Goals set by the
Committee. If the Performance Goals are met or exceeded, the Committee shall
certify that fact in writing in the Committee minutes or elsewhere and certify
the amount to be paid to the Participant under the Performance Unit. In the
sole discretion of the Committee, the Corporation may pay all or any part of
its obligation under the Performance Unit in (i) cash, (ii) shares of Common
Stock or (iii) cash and shares of Common Stock. Payment shall be made by the
Corporation as soon as practicable after the certification of achievement of
the Performance Goals.
6.4 Termination of Employment. To be entitled to receive payment under a
Performance Unit, a Participant must remain in the employment of the
Corporation or an Affiliate through the end of the applicable performance
period; except that this limitation shall not apply where a Participant's
employment is terminated by the Corporation or an Affiliate without cause (as
defined in Section 4.6(d)) following the occurrence of a Change in Control
Event.
6.5 Maximum Cash Payment. The maximum amount that may be paid in cash or in
Fair Market Value of Common Stock (to be valued no later than three days after
the date the Committee certifies the achievement of the Performance Goals)
under all Performance Units paid to any one Participant during a calendar year
shall in no event exceed $1,000,000.
VII. DEFERRED CASH INCENTIVE AWARDS
7.1 Granting of Deferred Cash Incentive Awards. Deferred Cash Incentive Awards,
as hereafter described, may be granted in conjunction with all or any part of
any Option (other than an Incentive
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Stock Option) granted under the Plan, either at the time of the grant of such
Option or at any time thereafter during the term of such Option.
7.2 Deferred Cash Incentive Agreements. Deferred Cash Incentive Awards shall
entitle the holder of an Option to receive from the Corporation an amount of
cash equal to the aggregate exercise price of all Options exercised by such
Participant in accordance with the terms of a written "Deferred Cash Incentive
Agreement" executed by the Corporation and the Participant. Deferred Cash
Incentive Agreements shall specify the conditions under which Deferred Cash
Incentive Awards become payable, the conditions under which Deferred Cash
Incentive Awards are forfeited and any other terms and conditions as the
Committee may from time to time determine. Under no circumstances may a
Deferred Cash Incentive Award be applied to any purpose other than the payment
of the exercise price of a properly exercised related Option.
7.3 Preestablished Performance Goals.
(a) Except in the event of death, total and permanent disability covered by a
disability plan of the Corporation or an Affiliate then in effect or the
occurrence of a Change in Control Event, any Deferred Cash Incentive Award
shall only be earned and become payable if the Corporation achieves Performance
Goals which are established for a calendar year or longer period by the
Committee. After the completion of a performance period, performance during
such period shall be measured against the Performance Goals set by the
Committee. If the Performance Goals are met or exceeded, the Committee shall
certify that fact in writing in the Committee minutes or elsewhere.
(b) The amount payable to a Participant upon achieving the Performance Goals
set by the Committee for the Deferred Cash Incentive Award shall be equal to
the option price of the related Option, which shall be the Fair Market Value of
the shares of Common Stock subject to the Option on the date the Option is
granted. No individual may in any calendar year receive payment of Deferred
Cash Incentive Awards with respect to Options for more than 750,000 shares of
Common Stock.
VIII. RESTRICTED STOCK
8.1 Award of Restricted Stock. The Committee may from time to time, subject to
the provisions of the Plan and such other terms and conditions as it may
prescribe, grant one or more shares of Restricted Stock to eligible employees.
In the discretion of the Committee, shares of Restricted Stock may be granted
alone, in addition to or in tandem with other Awards granted under the Plan
and/or cash awards made outside of the Plan.
8.2 Restricted Stock Agreements. Each award of Restricted Stock under the Plan
shall be evidenced by a written Restricted Stock Agreement executed by the
Corporation and the Participant in such form as the Committee shall prescribe
from time to time in accordance with the Plan.
8.3 Restrictions. Shares of Restricted Stock issued to a Participant may not be
sold, assigned, transferred, pledged, hypothecated or otherwise disposed of,
except by will or the laws of descent and distribution, for such period as the
Committee shall determine, beginning on the date on which the Award is granted
(the "Restricted Period"). The Committee may also impose such other
restrictions and conditions on the shares or the release of the restrictions
thereon as it deems appropriate, including the achievement of Performance Goals
established by the Committee. In determining the Restricted Period of an Award,
the Committee may provide that the foregoing restrictions shall lapse with
respect to specified percentages of the awarded shares on specified dates
following the date of such Award or all at once.
8.4 Stock Certificate. As soon as practicable following the making of an award,
the Restricted Stock shall be registered in the Participant's name in
certificate or book-entry form. If a certificate is issued, it shall bear an
appropriate legend referring to the restrictions and it shall be held by the
Corporation on behalf of the Participant until the restrictions are satisfied.
If the shares are registered in book-entry form, the restrictions shall be
placed on the book-entry registration. Except for the transfer restrictions,
the Participant shall have all other rights of a holder of shares of Common
Stock, including the right to receive dividends paid with respect to the
Restricted Stock and the right to vote such shares. As soon as is practicable
following the date on which transfer restrictions on any shares lapse, the
Corporation shall deliver to the Participant the certificates for such shares,
provided that the Participant shall have complied with all conditions for
delivery of such
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shares contained in the Restricted Stock Agreement or otherwise reasonably
required by the Corporation.
8.5 Termination of Employment.
(a) Unless expressly provided to the contrary in the applicable Restricted
Stock Agreement, all restrictions placed upon Restricted Stock shall lapse
immediately upon (i) termination of the Participant's employment with the
Corporation or an Affiliate if, and only if, such termination is by reason of
the Participant's death, total and permanent disability covered by a disability
plan of the Corporation or an Affiliate then in effect or (except where
Performance Goals have been set for the Award) retirement after age 55 with the
written consent of the Corporation or an Affiliate or (ii) the occurrence of a
Change in Control Event. In addition, the Committee may in its discretion
(except where Performance Goals have been set for the Award) allow restrictions
on Restricted Stock to lapse prior to the date specified in a Restricted Stock
Agreement.
(b) Except as otherwise provided in the Restricted Stock Agreement, upon the
effective date of a termination for any reason not specified in paragraph (a)
of this Section 8.5, all shares then subject to restrictions immediately shall
be forfeited to the Corporation without consideration or further action being
required of the Corporation. For purposes of this paragraph (b), the effective
date of a Participant's termination shall be the date upon which such
Participant ceases to perform services as an employee of the Corporation or any
of its Affiliates, without regard to accrued vacation, severance or other
benefits or the characterization thereof on the payroll records of the
Corporation or Affiliate.
8.6 Maximum Award. The compensation payable to a Participant upon achieving any
Performance Goals set by the Committee for Restricted Stock shall be equal to
the Fair Market Value of a share of Common Stock for each share of Restricted
Stock that is granted. No individual Participant may in any one calendar year
receive payment of a Restricted Stock Award (where Performance Goals have been
set for the Award) covering more than 100,000 shares of Common Stock.
IX. MISCELLANEOUS
9.1 General Restriction. Each Award under the Plan shall be subject to the
requirement that, if at any time the Committee shall determine that any listing
or registration of the shares of Common Stock or any consent or approval of any
governmental body, or any other agreement or consent is necessary or desirable
as a condition of the granting of an Award or issuance of Common Stock or cash
in satisfaction thereof, such Award may not be consummated unless such
requirement is satisfied in a manner acceptable to the Committee.
9.2 Non-Assignability. No Award under the Plan shall be assignable or
transferable by a Participant, except by will or by the laws of descent and
distribution or by such other means as the Committee may approve from time to
time. During the life of the Participant, such Award shall be exercisable only
by such Participant or by such other persons as the Committee may approve from
time to time.
9.3 Withholding Taxes. Whenever the Corporation proposes or is required to
issue or transfer shares of Common Stock under the Plan, the Corporation shall
have the right to require the Participant to remit to the Corporation an amount
sufficient to satisfy any federal, state, local or other withholding tax
requirements prior to the delivery of any certificate for such shares. Whenever
under the Plan payments are to be made in cash, such payments shall be net of
an amount sufficient to satisfy any federal, state, local or other withholding
tax requirements.
9.4 No Right to Employment. Nothing in the Plan or in any agreement entered
into pursuant to it shall confer upon any Participant the right to continue in
the employment of the Corporation or an Affiliate or affect any right which the
Corporation or an Affiliate may have to terminate the employment of such
Participant.
9.5 Non-Uniform Determinations. The Committee's determinations under the Plan
(including without limitation its determinations of the employees to receive
Awards, the form, amount and timing of such Awards, the terms and provisions of
such Awards and the establishment of performance goals and performance periods)
need not be uniform and may be made by it selectively among employees who
receive, or are eligible to receive, Awards under the Plan, whether or not such
persons are similarly situated.
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9.6 No Rights as Shareholders. Participants as such shall have no rights as
shareholders of the Corporation, except as provided in Section 8.4, unless and
until shares of Common Stock are registered in their name.
9.7 Adjustments of Stock. If there is any change in the Common Stock by reason
of any stock split, stock dividend, spin-off, split-up, spin-out,
recapitalization, merger, consolidation, reorganization, combination or
exchange of shares, or any other similar transaction, the number and kind of
shares available for grant under the Plan or subject to or granted pursuant to
an Award and the price thereof, or other numeric limitations under the Plan, as
applicable, shall be appropriately adjusted by the Committee or the Board.
9.8 Amendment or Termination of the Plan. The Committee or the Board may at any
time terminate the Plan or any part thereof and may from time to time amend the
Plan as it may deem advisable. Any such action of the Committee or the Board
may be taken without the approval of the Corporation's shareholders, but only
to the extent that such shareholder approval is not required by applicable law
or regulation, including specifically Rule 16b-3, or the rules of any stock
exchange on which the Common Stock is listed. The termination or amendment of
the Plan shall not, without the consent of the Participant, adversely affect
such Participant's rights under an Award previously granted.
9.9 Awards to Foreign Nationals and Employees Outside the United States. To the
extent the Committee deems it necessary, appropriate or desirable to comply
with foreign law or practice and to further the purpose of the Plan, the
Committee may, without amending the Plan, (i) establish special rules
applicable to Awards granted to Participants who are foreign nationals, are
employed outside the United States, or both, including rules that differ from
those set forth in this Plan, and (ii) grant Awards to such Participants in
accordance with those rules.
9.10 Previously Granted Awards. Awards outstanding on the date of shareholder
approval of this amended and restated Plan shall continue to be governed by and
construed in accordance with the Plan as in effect prior to amendment and
restatement; except that outstanding Deferred Cash Incentive Awards shall be
subject to the limitations of new Section 7.3(a) and (b) of the Plan and, to
the extent required by Section 162(m) of the Code, a grant of a Reload Option
shall be subject to the limitation of new Section 3.4(d) of the Plan.
April 1996
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- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
RESERVATION FORM FOR MELLON BANK CORPORATION ANNUAL MEETING OF SHAREHOLDERS
Admission cards will be forwarded to shareholders whose reservation forms are
received by April 2, 1996. All other admission cards will be provided at the
check-in desk at the meeting.
I expect to attend the Annual Meeting at 10:00 A.M., on April 16, 1996, in
Pittsburgh, PA.
Name ............................
(Please Print)
Address
............................
(Please Print)
..................................
(PLEASE COMPLETE AND RETURN IN THE ENCLOSED ENVELOPE IF YOU PLAN
TO ATTEND THE ANNUAL MEETING)
<PAGE>
[LOGO OF MELLON BANK CORPORATION] MELLON BANK CORPORATION
This Proxy is solicited on behalf of the Board of Directors of the Corporation.
The undersigned hereby appoints Carl Krasik 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 Annual Meeting of Shareholders of the Corporation to
be held on Tuesday, April 16, 1996, at 10:00 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 election of all nominees for director,
FOR Proxy Item 2 and FOR Proxy Item 3 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
votes FOR the election of all nominees for director, FOR Proxy Item 2 and
FOR Proxy Item 3.
(Continued, and to be signed and dated, on reverse side)
FOLD AND DETACH HERE
<PAGE>
Please mark
your votes as [X]
indicated in
this sample
Where a vote is not specified, the proxies will vote shares represented
by this Proxy FOR the election of directors, FOR Proxy Item 2, FOR Proxy
Item 3 and will vote in their discretion on such other matters that may
properly come before the meeting.
Proxy Item 1-
The election of directors
FOR WITHHOLD
all nominees AUTHORITY
listed herein to vote for all
(except as withheld nominees
in space provided) listed herein
[_] [_]
Nominees: J.W. Connolly, Charles A. Corry, Pemberton Hutchinson, Rotan E.
Lee, Robert Mehrabian, Wesley W. von Schack and Howard Stein.
(Instructions: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
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Note: A vote FOR the election of directors includes discretionary authority
to vote for a substitute if any nominee is unable to serve or for good cause
will not serve.
Proxy Item 2-Proposal to amend and restate the Corporation's Long-Term Profit
Incentive Plan (1981).
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Proxy Item 3-Ratification of appointment of KPMG Peat Marwick LLP as
independent public accountants.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please date and sign exactly as name appears herein. 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.
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(Signature of Shareholder)
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(Signature of Shareholder)
Dated: , 1996
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FOLD AND DETACH HERE
