<PAGE>
As filed with the Securities and Exchange Commission on May 28, 1997
Registration No. 333-
--------
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------------
MELLON BANK CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 6712
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
25-1233834
(I.R.S. Employer
Identification No.)
One Mellon Bank Center
500 Grant Street
Pittsburgh, Pennsylvania 15258
(412) 234-5000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
James M. Gockley, Esq.
Assistant General Counsel and Secretary
Mellon Bank Corporation
One Mellon Bank Center
500 Grant Street
Pittsburgh, Pennsylvania 15258
(412) 234-2053
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Robert K. Morris, Esq. George P. O'Sullivan, Esq.
Reed Smith Shaw & McClay O'Sullivan Graev & Karabell, LLP
435 Sixth Avenue 30 Rockefeller Plaza
Pittsburgh, PA 15230 New York, NY 10112
Approximate date of commencement of the proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective and all other conditions to the merger (the "Merger") of Buck
Consultants, Inc. with and into an indirect wholly owned subsidiary of the
Registrant pursuant to the Merger Agreement described in the enclosed
Prospectus/Proxy Statement have been satisfied or waived.
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------
Title of Proposed Proposed
securities Amount maximum maximum Amount of
to be to be offering price aggregate registration
registered registered(1) per share (1) offering price fee (3)
(2)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.50 par value . . . N/A N/A $63,934,000 $19,374
==================================================================================================================
</TABLE>
(1) The Securities to be offered hereby will be offered on the basis of a
maximum aggregate offering price. Accordingly, pursuant to Rule 457(o), the
number of shares offered and, as a consequence, the maximum offering price per
share are omitted from this table.
(2) The registration fee was computed pursuant to Rule 457(f)(2) under the
Securities Act of 1933, as amended, based on the book value of Buck Common Stock
as of the most recent practicable date, March 31, 1997.
(3) In accordance with Rule 457(b), the total registration fee of $19,374 has
been reduced by $26,941 which was paid on April 16, 1997, at the time of the
filing under the Securities Exchange Act of 1934, as amended, of preliminary
copies of Buck's proxy materials included herein. As this is a negative number,
no registration fee is payable upon filing of this Registration Statement.
---------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
===============================================================================
<PAGE>
MELLON BANK CORPORATION
Cross-Reference Sheet between
Items of Form S-4
and Captions in Prospectus/Proxy Statement
------------------------------------------
<TABLE>
<CAPTION>
Form S-4 Item Caption(s) or Location in
Number and Caption Prospectus/Proxy Statement
- ------------------ --------------------------
<S> <C>
A. Information About the Transaction
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus.............. Facing Page of Registration Statement; Outside
Front Cover Page of Prospectus/Proxy Statement
2. Inside Front and Outside Back Cover
Pages of Prospectus................................. Inside front cover page of Prospectus/Proxy
Statement; Available Information; Mellon
Documents Incorporated by Reference; Table
of Contents
3. Risk Factors, Ratio of Earnings to
Fixed Charges and Other Information................. Summary -- Selected Financial Information
(unaudited); -- Comparative Per Share Data
(unaudited); The Merger; Mellon Bank
Corporation and Subsidiaries Consolidated
Selected Historical Financial Data;
Information Concerning Buck; Market Prices
of Mellon Common Stock; Buck Historical
Audited Financial Statements
4. Terms of the Transaction............................ Summary; The Merger; Comparison of
Shareholders' Rights
5. Pro Forma Financial Information..................... Summary -- Comparative Per Share Data
(unaudited)
6. Material Contacts with the Company
Being Acquired...................................... Not Applicable
7. Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters........................... Not Applicable
8. Interests of Named Experts and Counsel.............. Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities...... Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Form S-4 Item Caption(s) or Location in
Number and Caption Prospectus/Proxy Statement
- ------------------ --------------------------
<S> <C>
B. Information About the Registrant
10. Information with Respect to S-3 Registrants......... Available Information; The Merger -- The
Companies -- Mellon; Information Concerning
Mellon
11. Incorporation of Certain Information
by Reference........................................ Available Information
12. Information with Respect to S-2
or S-3 Registrants.................................. Not Applicable
13. Incorporation of Certain Information
by Reference........................................ Not Applicable
14. Information with Respect to Registrants Other than
S-3 or S-2 Registrants.............................. Not Applicable
C. Information About the Company Being Acquired
15. Information with Respect to S-3 Companies........... Not Applicable
16. Information with Respect to S-2
or S-3 Companies.................................... Not Applicable
17. Information with Respect to Companies
Other Than S-2 or S-3 Companies..................... Selected Financial Information (unaudited);
Buck Historical Audited Financial
Statements; The Merger -- The Companies --
Buck; Information Concerning Buck
D. Voting and Management Information
18. Information if Proxies, Consents or Authorizations
are to be Solicited................................. The Buck Meeting; The Merger
19. Information if Proxies, Consents or
Authorizations are Not to be Solicited,
or in Exchange Offer................................ Not Applicable
</TABLE>
<PAGE>
BUCK CONSULTANTS, INC.
May 30, 1997
Joseph A. LoCicero Two Pennsylvania Plaza
President and Chief Executive Officer New York, NY 10121
Phone: (212) 330-1000
Dear Fellow Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
Buck Consultants, Inc. ("Buck") to be held at Buck's offices at Two Pennsylvania
Plaza, New York, New York on June 27, 1997. The meeting will begin at 8 a.m.,
local time. At the meeting, you will be asked to adopt the Agreement and Plan of
Reorganization dated as of March 17, 1997 (the "Merger Agreement") by and
between Mellon Bank Corporation ("Mellon") and Buck. By virtue of the merger,
holders of Buck common stock will be entitled to receive an aggregate of $225
million in cash or Mellon common stock, less payments to retired stockholders
under Buck's Retiree Protection Plan, as described in the accompanying
Prospectus/Proxy Statement.
As most of you are aware, nearly a year ago we embarked on the course
which led us to this agreement with Mellon. Our goals and our strategy for
reaching them throughout that process remained the same. We are committed to
being a top tier consulting firm. Our vision of being a top tier consulting firm
includes being a major player in the outsourcing business. Because of the
changing market for our services, particularly in the benefits outsourcing
business in the U.S. and our continuing commitment to that business, we
concluded that a "partner" also committed to that business could help provide
the resources to capture a greater market share of the rapidly growing
outsourcing business and help provide the tools and technology which are
necessary to accomplish such goals. In Mellon, we have found an organization
which shares our vision, understands our strategy and is committed to long-term,
mutual business growth.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY ADOPTED AND APPROVED THE MERGER
AGREEMENT AND DETERMINED THAT THE MERGER IS FAIR TO AND IN THE BEST INTERESTS
OF BUCK AND THE BUCK STOCKHOLDERS AND RECOMMENDS A VOTE FOR THE PROPOSAL TO
---
ADOPT THE MERGER AGREEMENT.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN,
DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE.
You are also being sent a Form of Election/Letter of Transmittal which
stockholders of Buck should use to express their preference for the type of
consideration they wish to receive in the merger. Please note that the deadline
for submitting the Form of Election/Letter of Transmittal is June 20, 1997. The
failure of a stockholder to execute and deliver a valid Form of Election/Letter
of Transmittal will result in such stockholder receiving common stock of Mellon
rather than cash in the merger.
Further details regarding the merger are set forth in the accompanying
materials. For the merger to become effective, the proposal must have the
support of a majority of the issued and outstanding shares of Buck common stock,
and your vote is important no matter how many shares you hold. An abstention or
failure to vote will have the same effect as a vote against the merger.
If you have any questions, please feel free to call Karl W. Lohwater at
(212) 330-1160.
Thank you.
Sincerely,
/s/ Joseph A. LoCicero
Joseph A. LoCicero
<PAGE>
BUCK CONSULTANTS, INC.
-------------
Notice of Special Meeting of Stockholders
May 30, 1997
-------------
To the Stockholders of
BUCK CONSULTANTS, INC.
A Special Meeting of Stockholders of Buck Consultants, Inc. ("Buck")
will be held at Buck's offices at Two Pennsylvania Plaza, New York, New York, on
June 27, 1997 at 8 a.m., local time, for the following purposes:
1. The voting on the adoption of the Agreement and Plan of
Reorganization dated as of March 17, 1997 (the "Merger
Agreement") by and between Mellon Bank Corporation ("Mellon")
and Buck providing for the merger of Buck with and into a wholly
owned subsidiary of Mellon, as described in the accompanying
Prospectus/Proxy Statement; and
2. The transaction of such other business as may properly come
before the meeting, or any adjournment(s) or postponement(s)
thereof.
Only stockholders of record at the close of business on May 28, 1997
will be entitled to receive notice of and to vote at the meeting.
The accompanying document constitutes the Proxy Statement of Buck and
the Prospectus of Mellon for the Special Meeting of Buck Stockholders. A copy of
the Merger Agreement is attached as Annex A to the Prospectus/Proxy Statement.
In connection with the proposed merger, dissenters' rights will be
available to those stockholders of Buck who meet and comply with the
requirements of Section 262 of the Delaware General Corporation Law (the
"DGCL"), a copy of which is included as Annex C to the attached Prospectus/Proxy
Statement. Reference is made to the section entitled "The Merger--Dissenters'
Rights of Buck Stockholders" in the attached Prospectus/Proxy Statement for a
discussion of the procedures to be followed in asserting dissenters' rights in
connection with the proposed merger under Section 262 of the DGCL.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED
AS SOON AS POSSIBLE. AN ABSTENTION OR FAILURE TO VOTE WILL HAVE THE SAME EFFECT
AS A VOTE AGAINST THE MERGER.
You are also being sent a Form of Election/Letter of Transmittal
which stockholders of Buck should use to express their preference for the type
of consideration they wish to receive in the merger. Please note that the
deadline for submitting the Form of Election/Letter of Transmittal is June 20,
1997. The failure of a stockholder to execute and deliver a valid Form of
Election/Letter of Transmittal will result in such stockholder receiving common
stock of Mellon rather than cash in the merger.
By Order of the Board of Directors,
/s/ Merril S. Delon
Merril S. Delon
Secretary
<PAGE>
Prospectus/Proxy Statement
MELLON BANK CORPORATION
Shares of Common Stock, $.50 par value
BUCK CONSULTANTS, INC.
This Prospectus/Proxy Statement is being furnished to the stockholders
of Buck Consultants, Inc., a Delaware corporation ("Buck"), in connection with
the proposed merger (the "Merger") of Buck into Buck Acquisition Corporation, a
Delaware corporation ("Merger Subsidiary"), and a wholly owned subsidiary of
Mellon Bank Corporation, a Pennsylvania corporation ("Mellon"). In the Merger,
Merger Subsidiary, which will be the surviving corporation, will succeed to all
of the assets and liabilities of Buck, and the stockholders of Buck will become
shareholders of Mellon if they receive shares of common stock of Mellon in
payment for their stock. Each outstanding share of Class A Common Stock and
Class B Common Stock of Buck ("Buck Class A Common Stock" and "Buck Class B
Common Stock," respectively, and collectively "Buck Common Stock") will be
converted in the Merger into a value specified in the Agreement and Plan of
Reorganization dated as of March 17, 1997 by and between Mellon and Buck ("the
Merger Agreement"), payable in cash or shares of common stock, par value $.50
per share of Mellon ("Mellon Common Stock"), as elected by a holder of shares of
Buck Class A Common Stock or Buck Class B Common Stock, subject to the
limitations described herein. Based upon the number of shares of Buck Common
Stock outstanding on the date hereof, and subject to possible adjustment as
described herein, it is estimated that each share of Buck Class A Common Stock
will be converted into approximately $281 in value and each share of Buck Class
B Common Stock will be converted into approximately $267 in value. Where the
holder elects to have value paid in shares of Mellon Common Stock, the number of
shares issued will be equal to such value divided by the average of the daily
closing price of Mellon Common Stock for the ten consecutive trading days ending
on the fifth business day prior to the Closing Date, such price as reported by
the New York Stock Exchange (the "NYSE") composite transactions reporting system
(as reported by The Wall Street Journal) (the "Transaction Share Price"). On May
23, 1997, the closing sale price for Mellon Common Stock on the NYSE was
$44 per share.
This Prospectus/Proxy Statement is a Prospectus for the shares of
Mellon Common Stock issuable in the Merger and a Proxy Statement for the
solicitation of proxies by the Board of Directors of Buck for use at a Special
Meeting of Stockholders of Buck (the "Buck Special Meeting") to be held on June
27, 1997 for the purpose of voting upon the Merger.
----------------
THE SHARES OF MELLON COMMON STOCK TO BE ISSUED IN THE MERGER HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE SHARES OF MELLON COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
AGENCY.
---------------------------
No person has been authorized to give any information or to make any
representation not contained herein, and, if given or made, any such information
or representation should not be relied upon as having been authorized. This
Prospectus/Proxy Statement does not constitute an offer or solicitation by any
person in any State or other jurisdiction in which such offer or solicitation is
not authorized by the laws thereof or in which the person making such offer or
solicitation is not qualified to make the same. Neither the delivery of this
Prospectus/Proxy Statement at any time nor the distribution of Mellon Common
Stock hereunder shall imply that the information herein is correct as of any
time subsequent to its date.
The date of this Prospectus/Proxy Statement is May 30, 1997.
<PAGE>
AVAILABLE INFORMATION
Mellon is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "SEC"). Such reports, proxy statements and other information can
be inspected and copied at the public reference facilities maintained by the SEC
at Room 1024, 450 Fifth Street, N.W., Washington, D.C.; Suite 1300, 7 World
Trade Center, New York, New York; and Suite 1400, Citicorp Center, 500 West
Madison Street, Chicago, Illinois. Copies of such material can also be obtained
at prescribed rates by writing to the SEC, Public Reference Section, Washington,
D.C. 20549. Such material may also be accessed electronically by means of the
SEC's home page on the Internet at http://www.sec.gov. Mellon Common Stock is
listed on the NYSE, and such reports, proxy statements and other Mellon
information can also be inspected at the office of the NYSE, 20 Broad Street,
New York, New York 10055.
Mellon has filed with the SEC under the Securities Act of 1933 (the
"Securities Act") a Registration Statement on Form S-4 (the "Registration
Statement") covering the shares of Mellon Common Stock issuable in the Merger.
As permitted by the rules and regulations of the SEC, this Prospectus/Proxy
Statement omits certain information, exhibits and undertakings contained in the
Registration Statement. The statements contained in this Prospectus/Proxy
Statement as to the contents of any contract or other document filed or
incorporated by reference as an exhibit to the Registration Statement are of
necessity brief descriptions and are not necessarily complete. Each such
statement is qualified in its entirety by reference to the copy of such contract
or document filed or incorporated by reference as an exhibit to the Registration
Statement. The Registration Statement and the exhibits thereto can be inspected
at the public reference facilities of the SEC at the addresses set forth above
or through the SEC's home page on the Internet. Copies of such material can be
obtained at prescribed rates by mail addressed to the SEC, Public Reference
Section, Washington, D.C. 20549.
This Prospectus/Proxy Statement incorporates by reference certain
documents relating to Mellon which are not presented herein or delivered
herewith. See "Information Concerning Mellon--Mellon Documents Incorporated by
Reference." Copies of such documents are available upon request and without
charge to any person to whom this Prospectus/Proxy Statement has been delivered.
Requests for such documents should be directed to Mellon Bank Corporation, One
Mellon Bank Center, 500 Grant Street, Pittsburgh, Pennsylvania 15258, Attention:
Secretary (telephone: 412-234-5000). In order to ensure timely delivery of the
documents, any request should be made at least five business days before the
date of the Buck Special Meeting.
<PAGE>
MELLON BANK CORPORATION
and
BUCK CONSULTANTS, INC.
PROSPECTUS/PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SUMMARY............................................................................................................. 1
Introduction............................................................................................ 1
The Companies........................................................................................... 1
Buck........................................................................................ 1
Mellon...................................................................................... 1
Background of the Merger................................................................................ 1
Reasons for the Merger.................................................................................. 2
Buck; Recommendation of the Buck Board of Directors......................................... 2
Opinions of Buck Financial Advisors......................................................... 3
Mellon...................................................................................... 3
Interests of Certain Persons in the Merger.............................................................. 3
Terms of the Merger..................................................................................... 3
General..................................................................................... 3
Conversion of Buck Common Stock..............................................................3
Conditions to the Merger.................................................................... 4
No Solicitations............................................................................ 4
Right of the Buck Board to Withdraw its Recommendation...................................... 4
Termination................................................................................. 4
Waiver and Amendment; Revisions to Transaction.............................................. 4
Regulatory Approvals........................................................................ 4
Certain Federal Income Tax Consequences of the Merger to Buck Stockholders.............................. 5
Accounting Treatment of the Merger.......................................................................5
NYSE Listing............................................................................................ 5
Dissenters' Rights...................................................................................... 5
Differences in Stockholder Rights....................................................................... 5
The Buck Meeting........................................................................................ 5
Selected Financial Information--(unaudited)..............................................................6
Comparative Per Share Data--(unaudited)................................................................. 8
INTRODUCTION....................................................................................................... 10
THE BUCK MEETING................................................................................................... 10
Solicitation, Voting and Revocability of Proxies....................................................... 10
THE MERGER......................................................................................................... 11
General................................................................................................ 11
The Companies.......................................................................................... 11
Buck....................................................................................... 11
Mellon..................................................................................... 12
Background of and Reasons for the Merger............................................................... 12
Background of the Merger................................................................... 12
Reasons for the Merger--Mellon............................................................. 13
Reasons for the Merger--Buck; Recommendation of Buck Board................................. 13
Opinions of Buck Financial Advisors........................................................ 14
General.................................................................................... 14
Materials and Information Considered With Respect to the Merger............................ 14
Written Opinion for Proxy Statement........................................................ 15
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Limitation on Opinions..................................................................... 15
Fees Payable to BGG........................................................................ 15
Interests of Certain Persons in the Merger............................................................. 15
Effective Time......................................................................................... 16
Conversion of Buck Common Stock........................................................................ 16
Conversion of Buck Common Stock............................................................ 16
Election Procedures, Limitations, and Surrender of Shares.................................. 17
Effect on Mellon Shareholders.............................................................. 17
No Fractional Shares of Mellon Common Stock to be Issued................................... 17
Dissenters' Rights......................................................................... 17
Rights of Holders of Buck Stock Certificates Prior to Surrender............................ 17
Conduct of Buck's Business Pending the Merger.......................................................... 18
Conditions to the Merger............................................................................... 18
Description of Buck Key Performers Supplemental Payment Plan........................................... 20
No Solicitations....................................................................................... 20
Regulatory Approvals................................................................................... 21
Right of the Buck Board to Withdraw its Recommendation................................................. 21
Termination of the Merger Agreement; Fee............................................................... 21
Termination................................................................................ 21
Fee........................................................................................ 22
Waiver and Amendment; Revisions to Transaction......................................................... 22
NYSE Listing of Mellon Common Stock.................................................................... 22
Certain Federal Income Tax Consequences of the Merger to Buck Stockholders............................. 22
Accounting Treatment of the Merger..................................................................... 24
Resales by Affiliates of Mellon Common Stock Received in the Merger.................................... 24
Dissenters' Rights of Buck Stockholders................................................................ 24
INFORMATION CONCERNING MELLON...................................................................................... 28
Mellon Selected Financial Data......................................................................... 28
MELLON BANK CORPORATION AND SUBSIDIARIES CONSOLIDATED SELECTED HISTORICAL
FINANCIAL DATA................................................................................................... 29
MARKET PRICES OF MELLON COMMON STOCK; CASH DIVIDENDS............................................................... 32
MELLON DOCUMENTS INCORPORATED BY REFERENCE......................................................................... 33
INFORMATION CONCERNING BUCK........................................................................................ 33
Management's Discussion and Analysis of Financial Condition and Results of Operations
of Buck.............................................................................................. 33
Year Ended March 31, 1997 Compared to Year Ended March 31, 1996............................ 33
Year Ended March 31, 1996 Compared to Year Ended March 31, 1995............................ 34
Liquidity and Capital Resources............................................................ 34
Description of Buck's Business......................................................................... 34
Recent Acquisition..................................................................................... 35
Services............................................................................................... 35
Plan Actuarial Services.................................................................... 35
General Employee Benefits Consulting Services.............................................. 35
Plan Administration and Outsourcing Services............................................... 35
Products ........................................................................................... 36
Customers ........................................................................................... 36
Competition ........................................................................................... 36
Employees ........................................................................................... 37
Properties ........................................................................................... 37
Management of Buck..................................................................................... 38
Security Ownership of Certain Beneficial Owners and Management of Buck................................. 41
Market Price of and Dividends on Buck Common Stock..................................................... 42
COMPARISON OF SHAREHOLDERS' RIGHTS..................................................................................42
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Cumulative Voting..................................................................................... 42
Dividends............................................................................................. 42
Dissenters' Rights.................................................................................... 42
Business Combinations Following a Change in Control................................................... 43
Mellon Shareholder Protection Rights Plan............................................................. 44
Buck Purchase Agreements.............................................................................. 44
LEGAL OPINIONS.................................................................................................... 45
EXPERTS........................................................................................................... 45
OTHER MATTERS..................................................................................................... 45
BUCK HISTORICAL AUDITED FINANCIAL STATEMENTS...................................................................... 46
</TABLE>
Annex A - Agreement and Plan of Reorganization Dated as of March 17, 1997
Annex B - Opinions of Buck Financial Advisors
Annex C - Statutory Provisions
Annex D - Buck Key Performers Supplemental Payment Plan
-iii-
<PAGE>
SUMMARY
The following discussion is intended to summarize certain information
contained elsewhere in this Prospectus/Proxy Statement. This summary is not
intended to be complete and is qualified in its entirety by reference to the
more detailed information contained elsewhere in this Prospectus/Proxy
Statement, the appendices hereto and the documents referred to and incorporated
herein.
Introduction
The Board of Directors of Buck and the Board of Directors of Mellon
have each unanimously adopted and approved the Merger Agreement, pursuant to
which Buck will be merged with and into Merger Subsidiary if the stockholders of
Buck adopt and approve the Merger Agreement by the requisite stockholder vote,
certain governmental authorizations are received and certain other conditions
are satisfied. Merger Subsidiary will be the surviving corporation in the Merger
and will be a wholly owned subsidiary of Mellon. Each outstanding share of Buck
Class A Common Stock and Buck Class B Common Stock will be converted in the
Merger into cash or a number of shares of Mellon Common Stock having a value
specified in the Merger Agreement. Based upon the number of shares of Buck
Common Stock outstanding on the date hereof, and subject to possible adjustment
as described herein, it is estimated that each share of Buck Class A Common
Stock will be converted into approximately $281 in value and each share of Buck
Class B Common Stock will be converted into approximately $267 in value. A
holder of shares of Buck Class A Common Stock or shares of Buck Class B Common
Stock may elect to have the value into which such shares are converted in the
Merger paid in cash, shares of Mellon Common Stock or a combination thereof, as
elected by the holder thereof subject to the limitations described herein. Where
the holder elects to have value paid in shares of Mellon Common Stock, the
number of shares issued will be equal to such value divided by the Transaction
Share Price. On May 23, 1997, the closing sale price for Mellon Common Stock on
the NYSE was $44 per share.
The Companies
Buck. Buck is the oldest actuarial, employee benefit and compensation
consulting firm in North America. Established in 1916 as a sole proprietorship,
Buck has grown into a globally diversified consulting firm providing actuarial,
employee benefit, compensation and human resources consulting and related
services. In 1970, Buck was converted to a closely-held, employee-owned
corporation. Buck provides its services to approximately 5,000 clients including
many large multi-national corporations, medium and small businesses,
not-for-profit organizations, educational institutions, health care providers,
state and local government retirement systems, national and international
quasi-governmental organizations and Taft-Hartley plans. Headquartered in New
York City, Buck has 67 offices in 16 countries and services clients throughout
the United States and the world.
Mellon. Mellon is a multibank holding company incorporated under the
laws of Pennsylvania in August 1971 and registered under the Federal Bank
Holding Company Act of 1956, as amended. At December 31, 1996, it was the
twenty-second largest bank holding company in the United States in terms of
assets. Its principal direct subsidiaries are Mellon Bank, N.A., The Boston
Company, Inc., Mellon Bank (DE) National Association, Mellon Bank (MD) National
Association, and a number of companies known as Mellon Financial Services
Corporation. Mellon also owns a federal savings bank headquartered in
Pennsylvania, Mellon Bank, F.S.B. The Dreyfus Corporation, one of the nation's
largest mutual fund companies, is a wholly owned subsidiary of Mellon Bank, N.A.
At March 31, 1997, Mellon on a consolidated basis had total assets of
approximately $42.1 billion, loans net of the reserve for credit losses of
approximately $27.0 billion and total shareholders' equity of approximately $3.7
billion.
Background of the Merger
In the fourth calendar quarter of 1995, Buck approached Mellon with a
proposal to form an employee benefits consulting joint venture. Following
preliminary discussions which were held in the fourth calendar quarter of 1995
and the first calendar quarter of 1996, both Buck and Mellon identified
obstacles to a mutually-beneficial joint venture arrangement. Subsequently, the
Buck Board authorized a committee (the "Strategic Planning Committee") to pursue
potential strategic transactions and business combinations in connection with
the implementation of Buck's long-term corporate objectives. The Strategic
Planning Committee circulated a Confidential Information Memorandum to potential
partners, including Mellon, in the second calendar quarter of 1996. Mellon
thereafter submitted to Buck a preliminary proposal for a strategic transaction.
After Buck's
<PAGE>
consideration of Mellon's proposed acquisition and a proposal by a second party,
negotiations regarding the structure and parameters of an acquisition by Mellon
ensued, which culminated in the execution of a letter of intent in the fourth
calendar quarter of 1996. Following due diligence and the negotiation of a
definitive agreement, the definitive agreement was executed on March 17, 1997.
See "The Merger--Background of and Reasons for the Merger."
Reasons for the Merger
Buck; Recommendation of the Buck Board of Directors.
In reaching its decision to adopt and approve the Merger Agreement on
March 10, 1997, the Buck Board consulted with the Strategic Planning Committee
and Buck's financial and legal advisors and considered many factors, including,
but not limited to, the following (the Buck Board did not assign any specific or
relative weight to the following factors in the course of its consideration):
(a) the presentation made by Buck's financial advisor,
Benedetto, Gartland & Greene, Inc. ("BGG"), and the opinion of BGG that
the Merger is fair, as of the time of delivery of such opinion, from a
financial point of view to the stockholders of Buck (See "The Merger--
Background of and Reasons for the Merger--Opinions of Buck Financial
Advisors");
(b) the Buck Board's review with its legal and financial
advisors of the provisions of the Merger Agreement;
(c) the results of senior management's evaluation of Mellon,
The Dreyfus Corporation, Dreyfus Retirement Services, The Boston
Company and their respective information technology capabilities;
(d) the potential synergies which could result from combining
Mellon and Buck, including the combined company's ability to market a
more diverse array of products and services to clients;
(e) the assurances of Mellon that Buck will be operated as a
separate subsidiary of Mellon following the Merger;
(f) the assurances of Mellon that the basic organizational
structure of Buck will, after the Merger, be substantially consistent
with the current organizational structure of Buck;
(g) the fact that Buck would retain its professional
independence after the Merger;
(h) the expectation that the Merger will be a tax-free exchange
for federal income tax purposes to Buck and stockholders of Buck
residing in the United States (other than in respect of cash paid to
such stockholders on the Closing Date and cash paid in lieu of
fractional shares or to dissenting stockholders); and
(i) the expectation that the necessary regulatory approvals of
the Merger would be obtained.
THE BUCK BOARD HAS UNANIMOUSLY ADOPTED AND APPROVED THE MERGER
AGREEMENT AND DETERMINED THAT THE MERGER IS FAIR TO AND IN THE BEST INTERESTS OF
BUCK AND THE STOCKHOLDERS OF BUCK AND RECOMMENDS THAT BUCK STOCKHOLDERS VOTE FOR
---
THE ADOPTION OF THE MERGER AGREEMENT. The Buck Board has the right, under
certain circumstances, to withdraw, modify or amend the foregoing
recommendations of the Buck Board. See "Right of the Buck Board to Withdraw its
Recommendation."
Opinions of Buck Financial Advisors. BGG has rendered opinions to the
Buck Board that, as of the date the Merger Agreement was approved by the Buck
Board and as of the date of this Prospectus/Proxy Statement, respectively,the
Merger was fair, from a financial point of view, to Buck and its stockholders.
The full text of
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<PAGE>
BGG's opinions are attached as Annex B to this Prospectus/Proxy Statement and
should be read in their entirety for information as to the matters considered
and the assumptions made in rendering such opinions. See "The Merger--Background
of and Reasons for the Merger--Opinions of Buck Financial Advisors."
Mellon. Mellon believes that there will be an increasing demand for the
services of a provider like Buck who offers a full range of plan actuarial,
employee benefit, compensation and human resources consulting services and
products among many of Buck's and Mellon's current customers. The proven
expertise of Buck combined with the resources and capabilities of Mellon will
enable Buck, following the Merger, to fully develop its potential to meet the
needs of clients as they rely increasingly upon benefit consulting and
outsourcing firms to develop, implement, administer and coordinate virtually all
of their complex benefits and human resources activities. Mellon also
anticipates an ability to cross-sell its broad array of financial products to
Buck's customers. Finally, Buck's international network of clients may provide
an entry channel for Mellon into investment management opportunities abroad.
Interests of Certain Persons in the Merger
Certain members of Buck's management and the Buck Board may be deemed
to have interests in the Merger that are in addition to their interests as
stockholders of Buck generally. Pursuant to the terms of the Merger Agreement,
upon consummation of the Merger, the Board of Directors of the surviving
corporation will be enlarged to consist of 16 members and will include all of
the current members of the Buck Board, except Mr. Giegerich who will retire upon
consummation of the Merger. In addition, current members of the Buck Board will
be eligible as Level 1 employees during their active employment to participate
in the Buck Key Performers Supplemental Payment Plan which will be implemented
in connection with the Merger. See "The Merger--Description of Buck Key
Performers Supplemental Payment Plan." After giving effect to the Merger, Joseph
A. LoCicero will continue to be the Chief Executive Officer of Buck and will
become a member of Mellon's Senior Management Committee. Certain members of the
Buck Board and certain members of Buck's management have entered into employment
agreements with Buck as a condition to the closing of the Merger.
All members of the Buck Board other than Mr. Sutton have agreed with
Mellon, pursuant to letters dated March 10, 1997, that in their individual
capacities as stockholders of Buck, they will vote, at any meeting of the
stockholders of Buck called for the purpose of voting upon the Merger, all of
their shares of Common Stock in favor of the Merger. All of such persons have
also agreed that until the Merger Agreement is terminated, they will not vote
their shares in favor of any merger, consolidation, plan of liquidation, sale of
assets, reclassification or other transaction which would have the effect of any
person other than Mellon, or an affiliate thereof, acquiring control over Buck
or any substantial portion of its assets. Because of Canadian tax
considerations, Mr. Sutton will not vote his shares in favor of or against the
Merger.
Terms of the Merger
General. Pursuant to the Merger Agreement, at the Effective Time, Buck
will be merged with and into Merger Subsidiary, a wholly owned subsidiary of
Mellon. Following the closing, Merger Subsidiary will change its name to Buck
Consultants, Inc. See "The Merger--General."
Conversion of Buck Common Stock. At the Effective Time, each
outstanding share of Buck Class A Common Stock and Buck Class B Common Stock,
other than shares as to which dissenters' rights are properly exercised, will be
converted in the Merger into cash, a number of shares of Mellon Common Stock
having a value specified in the Merger Agreement or a combination of cash and
shares of Mellon Common Stock. Based upon the number of shares of Buck Common
Stock outstanding on the date hereof, and subject to possible adjustment as
described herein, it is estimated that each share of Buck Class A Common Stock
will be converted into approximately $281 in value and each share of Buck Class
B Common Stock will be converted into approximately $267 in value. A holder of
shares of Buck Class A Common Stock or shares of Buck Class B Common Stock may
elect to have the value into which such shares are converted in the Merger paid
in cash, shares of Mellon Common Stock or a combination thereof, as elected by
the holder thereof subject to the limitations described herein. Where the holder
elects to have value paid in shares of Mellon Common Stock, the number of shares
issued will be equal to such value divided by the Transaction Share Price. On
May 23, 1997, the closing sale price for Mellon Common Stock on the NYSE was
$44 per share. Each share of Mellon Common Stock issued and outstanding at
the Effective Time will continue as one
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<PAGE>
share of Mellon Common Stock. See "The Merger--Conversion of Buck Common Stock
- -- Effect on Mellon Shareholders," "--Dissenters' Rights" and "Comparison of
Shareholders' Rights."
Conditions to the Merger. Consummation of the Merger is conditioned
upon the satisfaction or waiver of certain conditions specified in the Merger
Agreement, including, among others, (i) adoption and approval of the Merger
Agreement by the requisite votes of holders of shares of Buck Common Stock; (ii)
receipt of all necessary approvals for the Merger by governmental regulatory
agencies, including the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") and various licensing entities; (iii) the expiration or
termination of the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"); (iv) receipt by
each of Mellon and Buck of a favorable opinion from legal counsel including a
favorable tax opinion received by Buck; (v) the continuing accuracy of the
representations and warranties of Mellon and Buck; (vi) the achievement by Buck
of certain revenue levels for the fiscal year ended March 31, 1997 and a
specified increase in the book value of Buck Class B Common Stock for the fiscal
year ended March 31, 1997, (vii) the execution of employment agreements, offer
letters and stockholder covenants in certain cases, (viii) adoption, full force
and effectiveness of the Buck Key Performers Supplemental Payment Plan, and (ix)
performance of specified obligations by Mellon and Buck. See "The
Merger--Conditions to the Merger" and "--Regulatory Approvals."
No Solicitations. Under the Merger Agreement, unless the Buck Board
determines on the basis of written advice from outside counsel that certain
actions are necessary in order for the Buck Board to act in a manner consistent
with its fiduciary obligation under applicable law, neither Buck nor any of its
officers, directors, employees, agents or representatives may initiate, solicit
or encourage, directly or indirectly, any inquiries or the making of any
proposal or offer with respect to a merger, consolidation or similar transaction
involving, or any purchase of any substantial portion of the equity securities
of, Buck or any Buck Company (as defined in the Merger Agreement). See "The
Merger--No Solicitations."
Right of the Buck Board to Withdraw its Recommendation. The Buck Board
is permitted under the Merger Agreement to modify, withdraw or amend its
recommendation to the Buck stockholders that they adopt the Merger Agreement if
the Buck Board reasonably determines, upon the basis of written advice of
outside counsel, that such action is necessary in order for the Buck Board to
act in a manner which is consistent with its fiduciary obligation under
applicable law. See "The Merger--Right of the Buck Board to Withdraw its
Recommendation."
Termination. The Merger Agreement may be terminated, and the Merger
abandoned, prior to the Effective Time, whether before or after its adoption and
approval by the stockholders of Buck (i) by the mutual consent of the Buck Board
and the Mellon Board, or (ii) by either Buck or Mellon under certain specified
circumstances, including by either party if the Merger has not been consummated
by September 30, 1997 (provided such right is not available to any party whose
failure to fulfill a material obligation of the Merger Agreement was a cause of
or resulted in the failure of the Closing to occur on or before such date) and
(iii) by either party if the Buck Board has made a determination to initiate,
solicit, encourage, or pursue an alternative acquisition proposal after
determining, upon the basis of written advice of outside counsel, that such
approval is necessary in the exercise of its fiduciary obligation under
applicable law. Pursuant to the Merger Agreement, under certain circumstances,
Buck is required to pay Mellon a fee of $3,000,000 upon termination of the
Merger Agreement and a fee of $12,000,000 upon Buck's commitment to consummate a
merger, consolidation, combination or joint venture or similar transaction with
another party within 12 months of such termination. See "The Merger--Termination
of the Merger Agreement--Fee."
Waiver and Amendment; Revisions to Transaction. Any provision of the
Merger Agreement may be waived by the party benefited by the provision. The
Merger Agreement also provides that it may be amended by mutual consent of the
parties thereto.
Regulatory Approvals. The Merger requires the approval of the Board of
Governors of the Federal Reserve System, various licensing entities, and the
expiration or termination of the applicable waiting period under the HSR Act.
Applications for these approvals will be filed and are expected to be approved,
although no assurances may be given as to whether such approvals will be
received. See "The Merger--Regulatory Approvals."
Certain Federal Income Tax Consequences of the Merger to Buck Stockholders
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<PAGE>
Consummation of the Merger is conditioned upon receipt by Buck of an
opinion from its counsel to the effect that the Merger will constitute a
tax-free reorganization under the Internal Revenue Code of 1986, as amended.
Because the Merger will be a tax-free reorganization, no gain or loss for
federal income tax purposes will be recognized by U.S. stockholders of Buck to
the extent that they elect to exchange their shares for Mellon Common Stock in
the Merger, but income, gain or loss will be recognized by holders of Buck
Common Stock upon the exercise of dissenters' rights or upon receipt of cash in
lieu of fractional shares of Mellon Common Stock. For a more complete
description of the federal income tax consequences of the Merger, see "The
Merger--Certain Federal Income Tax Consequences of the Merger to Buck
Stockholders."
Accounting Treatment of the Merger
The Merger will be accounted for under the purchase method of
accounting. The assets and liabilities of Buck acquired in the Merger will be
recorded by Mellon for financial reporting purposes at their estimated fair
values as of the date of the Merger, and any excess consideration paid over the
net estimated fair value acquired will be recorded and amortized as goodwill.
NYSE Listing
Under the Merger Agreement, it is a condition precedent to the Merger
that the shares of Mellon Common Stock issued in the Merger be approved for
listing on the NYSE upon notice of issuance. Mellon intends to file an
application with the NYSE for approval of such listing.
Dissenters' Rights
Record holders of Buck Common Stock who object to the Merger and comply
with the prescribed statutory procedures are entitled to have the fair value of
their shares determined in accordance with the DGCL and paid to them in cash in
lieu of the shares of Mellon Common Stock or cash that they would otherwise be
entitled to receive in the Merger. A copy of the pertinent statutory provisions
is attached to this Prospectus/Proxy Statement as Annex C. Failure to follow
such provisions precisely may result in a loss of dissenters' rights. See "The
Merger--Dissenters' Rights of Buck Stockholders."
Differences in Stockholder Rights
The rights of the holders of Mellon Common Stock differ in certain
respects from those of the holders of Buck Common Stock. While the statutes
governing both Mellon and Buck contain provisions that may discourage takeover
attempts by outside persons, the provisions of the two statutes are not the
same. Unlike Buck, Mellon has established a Shareholder Protection Rights Plan
which may discourage outside persons from attempting to acquire control of
Mellon. Also, under the DGCL, Buck's ability to pay dividends differs from
Mellon's ability to pay dividends under the Pennsylvania Business Corporation
Law (the "PBCL"). Unlike Buck, Mellon shareholders do not have the right to
demand cash payment of the fair market value of their shares in the case of
mergers, sales of substantially all assets or similar transactions.
The Buck Meeting
The Buck Special Meeting will be held on June 27, 1997, 8 a.m. local
time at Buck's offices at Two Pennsylvania Plaza, New York, New York. Only
holders of record of Class A Common Stock, par value $5.459 per share, and Class
B Common Stock, par value $1 per share, at the close of business on May 28, 1997
will be entitled to vote at the Buck Special Meeting. At that date, 85,844
shares of Buck Class A Common Stock and 686,208 shares of Buck Class B Common
Stock were outstanding, each share being entitled to one vote. See
"Introduction."
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<PAGE>
Selected Financial Information--(unaudited)
The following table sets forth certain historical financial information
for Mellon and Buck. This information is based on the historical financial
statements of Mellon incorporated herein by reference. The selected financial
information of Buck for each of the years in the five year period ended March
31, 1997 have been derived from consolidated financial statements of Buck
(including those appearing elsewhere in this Prospectus/Proxy Statement). The
financial statements of Buck for the years ended March 31, 1995 through March
31, 1997 have been audited by Grant Thornton, independent certified public
accountants. The selected financial information of Mellon for the three months
ended March 31, 1997 and 1996 are derived from unaudited financial statements
which, in the opinion of Mellon, include all adjustments (consisting primarily
of normal recurring adjustments) necessary for a fair presentation of such
information. The results for the three months ended March 31, 1997 are not
necessarily indicative of the results expected for the full fiscal year. The
information set forth below should be read in conjunction with the financial
statements and the related notes appearing elsewhere in this Prospectus/Proxy
Statement or incorporated herein by reference. On April 15, 1997, Mellon
announced a two-for-one split of Mellon Common Stock. The two-for-one stock
split will take the form of a stock dividend of one additional share of Mellon
Common Stock being paid on each outstanding share of Mellon Common Stock. The
additional shares resulting from the stock split will be distributed on June 2,
1997, to shareholders of record at the close of business on May 1, 1997. The
information set forth below has not been adjusted to reflect the stock split.
<TABLE>
<CAPTION>
Three months ended March 31, Year ended December 31,
--------------------------- ---------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
(In Millions, Except Per Share Amounts)
Mellon
Earnings
Net interest revenue $370 $363 $ 1,478 $ 1,548 $ 1,508 $ 1,329 $ 1,182
Noninterest revenue 536 504 2,023 1,676 1,647 1,638 1,283
Provision for credit
losses 25 25 155 105 70 125 185
Net income 191 179 733 691 433 460 528
Per Common Share
Fully diluted net
income $1.38 $1.24 $ 5.15 $ 4.46 $ 2.42 $ 2.73 $ 3.53
Cash dividends
declared .60 .55 2.35 2.00 1.57 1.01 .93
Period End
Loans $27,525 $26,857 $27,393 $27,690 $26,733 $24,484 $19,961
Total assets 42,068 41,582 42,596 40,646 38,644 37,052 32,447
Deposits 29,936 29,898 31,374 29,261 27,570 27,564 25,165
Notes and debentures 2,512 1,972 2,518 1,443 1,568 1,990 1,587
Redeemable preferred
stock -- -- -- -- -- -- --
Total shareholders' equity 3,696 3,819 3,746 4,025 4,122 4,138 3,337
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Year ended March 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993(1)
---- ---- ---- ---- -------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C>
Buck
Earnings
Revenue $238,611 $197,719 $177,102 $164,765 $157,129
Net Income 3,812 8,034 8,827 9,380 8,482
Per Share
Net income $5.60 $11.34 $11.58 $11.93 $10.10
Cash dividends declared -- -- -- -- --
Period End
Total assets $208,178 $159,955 $140,371 $127,078 $113,084
Debt 29.203 6,557 4,581 4,844 3,416
Redeemable preferred stock -- -- -- -- --
Total stockholders' equity 63,934 63,687 60,100 53,731 49,036
</TABLE>
(1) The financial statements of Buck for the year ended March 31, 1994 and
1993 have been restated as explained in Note A of the Notes to the
consolidated financial statements of Buck.
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<PAGE>
Comparative Per Share Data--(unaudited)
The following tables set forth for the period indicated (i) historical
earnings, book values and dividends per share for Mellon and Buck Common Stock
and (ii) pro forma comparative earnings and book values per share of Mellon and
Buck Common Stock giving effect to the Merger, assuming conversion ratios of
3.306 and 3.139 for the Buck Class A and Class B Common Stock, respectively,
under the purchase method of accounting and (iii) pro forma comparative
dividends per share for Buck Common Stock. The following data is based on the
historical financial statements of Mellon and Buck included elsewhere in their
Prospectus/Proxy Statement or incorporated herein by reference and should be
read in conjunction with such financial statements and the related notes.
<TABLE>
<CAPTION>
Three months ended March 31, Year ended December 31,
1997 1996
--------------------------- ----------------------
<S> <C> <C>
Net Income (Loss) Per Common Share
Mellon Shareholders
Mellon $ 1.38 $ 5.15
Mellon and Buck pro forma 1.37 (a) 5.07 (b)
Book Value Per Common Share
Mellon Shareholders
Mellon $27.19 $26.86
Mellon and Buck pro forma (c) 27.19 26.86
Cash Dividends Declared Per Common Share
Mellon Shareholders
Mellon $ .60 $ 2.35
<CAPTION>
Three months ended March 31, Twelve months ended December 31,
1997 1996
--------------------------- -------------------------------
<S> <C> <C>
Net Income (Loss) Per Common Share
Buck Stockholders
Buck Class A $3.37 $ 7.82
Buck Class B 3.37 7.82
Buck Class A Pro Forma Equivalent (d) 4.53 16.76
Buck Class B Pro Forma Equivalent (d) 4.30 15.91
Book Value Per Common Share
Buck Stockholders
Buck Class A $95.02 $93.00
Buck Class B 93.68 91.65
Buck Class A Pro Forma Equivalent (d) 89.89 88.80
Buck Class B Pro Forma Equivalent (d) 85.35 84.31
Cash Dividends Declared Per Common Share
Buck Stockholders
Buck Class A -- --
Buck Class B -- --
Buck Class A Pro Forma Equivalent (d) 1.98 $7.77
Buck Class B Pro Forma Equivalent (d) 1.88 7.38
</TABLE>
The pro forma financial data in the tables above for the year ended and twelve
months ended December 31, 1996 and for the three months ended March 31, 1997
combine the historical net income and equity of Mellon and Buck. Purchase
accounting adjustments may change as additional information becomes available.
The pro forma data is intended for information purposes only and is not
necessarily indicative of the financial position or results of
-8-
<PAGE>
operations that actually would have occurred if the Merger had been in effect
during the periods set forth above or which may be attained in the future. In
addition, the results for the three months ended March 31, 1997 are not
necessarily indicative of the results expected for a full year.
Mellon's financial statements have historically been presented on a calendar
year basis. Buck's financial statements have historically been presented on a
March 31, fiscal year basis. For purposes of this pro forma financial data for
the twelve months ended December 31, 1996, Buck's financial data has been
converted to a calendar year basis. As a result, the year ended and twelve
months ended December 31, 1996 includes Buck's fourth quarter of fiscal year
1996 and the first nine months of fiscal year 1997.
(a) Calculated by adjusting Mellon's first quarter 1997 net income
available to common shareholders of $182 million by the amortization
expense of goodwill and intangibles that would have been recorded as a
result of and by the interest expense that would have been paid to fund
the Merger. Amortization expense of $2 million was assumed based on
$173 million of goodwill and intangibles representing the excess of the
purchase price of $225 million over the estimated fair value of net
assets to be acquired. An estimated life of 25 years was used to
calculate the amortization expense. The funding of the purchase price
of $225 million was assumed to be with short-term funds borrowed at an
assumed interest rate of 5.5%, resulting in a pre-tax expense of $3
million. The tax effect of these pro forma adjustments was assumed to
be Mellon's average combined statutory tax rate for federal, state and
local taxes of 36.3% for the first quarter of 1997. Mellon's pro forma
first quarter 1997 net income available to common shareholders of $179
million was added to Buck's fiscal fourth quarter ending March 31, 1997
net income of $2 million, for total pro forma first quarter 1997 net
income available to common shareholders of $181 million. Total common
shares outstanding, on a fully diluted basis was assumed to be 131.6
million shares, Mellon's actual average outstanding shares in the first
quarter of 1997. No additional shares were assumed issued for purposes
of this pro forma calculation because Mellon intends to issue shares
from treasury stock and to then repurchase an equivalent number of
shares in the open market as previously announced based upon
authorization of Mellon's board of directors received in March 1997.
(b) Calculated by adjusting Mellon's 1996 net income available to common
shareholders of $689 million by the amortization expense of goodwill
and intangibles that would have been recorded as a result of and by the
interest expense that would have been paid to fund the Merger.
Amortization expense of $7 million was assumed based on $173 million of
goodwill and intangibles representing the excess of the purchase price
of $225 million over the estimated fair value of net assets to be
acquired. An estimated life of 25 years was used to calculate the
amortization expense. The funding of the purchase price of $225 million
was assumed to be with short-term funds borrowed at an assumed interest
rate of 5.50%, resulting in a pre-tax expense of $12 million. The tax
effect of these pro forma adjustments was assumed to be Mellon's
average combined statutory tax rate for federal, state and local taxes
of 36.3% for 1996. Mellon's pro forma 1996 net income available to
common shareholders of $674 million was added to Buck's 1996 net income
of $6 million, computed on a calendar year basis, for total pro forma
1996 net income available to common shareholders of $680 million. Total
common shares outstanding, on a fully diluted basis was assumed to be
133.9 million shares, Mellon's actual average outstanding shares in
1996. As explained in note (a) above, Mellon does not intend to
increase the common shares outstanding as a result of the Merger.
(c) Mellon and Buck pro forma book value per common share equals Mellon's
historical book value per common share as of December 31, 1996 and
March 31, 1997. As explained in note (a) above, Mellon does not intend
to increase the common shares outstanding as a result of this merger.
(d) Buck Class A and Class B pro forma equivalent amounts of net income per
common share, book value per common share and cash dividends per common
share were calculated by multiplying the conversion ratio for the Class
A and Class B shares by the respective Mellon and Buck pro forma
amounts. For purposes of these pro forma equivalent amounts, conversion
ratios of 3.306 and 3.139 for the Buck Class A and Class B Common
Stock, respectively, were assumed. The conversion ratios were
calculated by dividing estimated values of the Buck Class A and Class B
Common Stock of $281 and $267, respectively, by Mellon's common stock
closing price of $85.00 per common share on May 15, 1997.
-9-
<PAGE>
INTRODUCTION
This Prospectus/Proxy Statement serves as a prospectus of Mellon for
the Merger Shares, and is being furnished as a proxy statement in connection
with the solicitation of proxies by the Buck Board for use at the Buck Special
Meeting to be held on June 27, 1997 at 8 a.m. at Buck's offices at Two
Pennsylvania Plaza, New York, New York and at any adjournments or postponements
thereof. This Prospectus/Proxy Statement, and the accompanying Proxy Card and
Form of Election/Letter of Transmittal, are being first mailed to stockholders
of Buck on or about May 30, 1997.
THE BUCK MEETING
The purpose of the Buck Special Meeting is to consider and vote upon
whether to adopt the Merger Agreement and to approve the transactions
contemplated thereby, including the Merger. No other business is expected to be
transacted at the Buck Special Meeting other than possible adjournments or
postponements thereof.
The Merger is subject to a number of conditions, including the receipt
of required regulatory and stockholder approvals. See "The Merger--Conditions to
the Merger" and "--Regulatory Approvals."
The Buck Board has unanimously determined that the Merger is fair to
and in the best interests of Buck and its stockholders and has approved the
Merger Agreement. THE BUCK BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF
BUCK VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. See "Background of
and Reasons for the Merger--Reasons for the Merger--Buck" and "--Recommendation
of the Buck Board."
Solicitation, Voting and Revocability of Proxies
The Buck Board has fixed the close of business on May 28, 1997 as the
Record Date for the determination of the stockholders of Buck entitled to notice
of and to vote at the Buck Special Meeting, including any adjournments or
postponements thereof. Only holders of record of shares of Buck Class A Common
Stock and Buck Class B Common Stock at the close of business on the Record Date
will be entitled to vote on each matter properly presented at the Buck Special
Meeting. On the Record Date, 85,844 shares of Buck Class A Common Stock and
686,208 shares of Buck Class B Common Stock were issued and outstanding. Votes
may be cast in person or by proxy, and each share of Buck Class A Common Stock
and Buck Class B Common Stock entitles its holder to one vote, with the holders
of Buck Class A Common Stock and Buck Class B Common Stock voting together as
one class.
Pursuant to the By-Laws of Buck (the "Buck By-Laws") and in accordance
with the DGCL, the presence of the holders of a majority of the shares of Buck
Class A Common Stock and Buck Class B Common Stock issued and outstanding, in
person or by proxy, is required for and shall constitute a quorum for the
transaction of business at the Buck Special Meeting. For such purpose,
abstentions will be counted in establishing the quorum. A majority of the shares
of Buck Class A Common Stock and Buck Class B Common Stock present at the Buck
Special Meeting, in person or by proxy, whether or not constituting a quorum,
may vote to, or the Buck Board in its discretion may, adjourn the Buck Special
Meeting from time to time without further notice, including for the purpose of
soliciting additional proxies. Proxies containing a vote against the Merger will
not be used to vote in favor of any such adjournment. Under the DGCL, the
affirmative vote of the holders of at least a majority of the total number of
outstanding shares of Buck Class A Common Stock and Buck Class B Common Stock is
required to approve the Merger. An abstention would thus have the same effect as
a vote against the Merger. In addition, the failure to return a properly
executed proxy card or to vote at the Buck Special Meeting will have the same
effect as a vote against the Merger.
Proxies in the accompanying form which are properly executed and
returned to Buck will be voted at the Buck Special Meeting in accordance with
the stockholders' instructions contained in such proxies and, at the discretion
of the proxy holders, on such other matters as may properly come before the
meeting. If a stockholder returns a proxy card that is signed, dated and not
marked, that stockholder will be deemed to have voted for the Merger. An
executed proxy may be revoked at any time prior to its exercise by submitting
another proxy with a later date, by appearing in person at the Buck Special
Meeting, notifying the Assistant Secretary of the revocation and voting, or by
sending a written, signed and dated revocation which clearly identifies the
proxy being revoked to the
-10-
<PAGE>
principal executive offices of Buck at Two Pennsylvania Plaza, New York, New
York 10121, Attention: Karl W. Lohwater, Assistant Secretary of Buck. A
revocation may be in any written form validly signed by the record holder as
long as it clearly states that the proxy previously given is no longer
effective. In addition, stockholders whose shares of Buck Class A Common Stock
and Buck Class B Common Stock are not registered in their own name will need
additional documentation from the record holder of such shares to vote in person
at the Buck Special Meeting.
Proxies will be solicited by mail, telephone, telegraph, telex,
telecopier and in person. Solicitation may be made in the same manner by
directors, officers and other representatives of Buck who will not be specially
compensated for such activities, but who may be reimbursed for reasonable
out-of-pocket expenses in connection with such solicitation. In addition,
proxies may be solicited in the foregoing manner by directors, officers,
employees and representatives of Mellon.
The expenses related to the proxy solicitation for the Buck Special
Meeting will be borne by Buck, except that the cost of printing and mailing this
Prospectus/Proxy Statement will be borne by Mellon.
It is expected that (i) 37,150 shares of Buck Class A Common Stock and
(ii) 175,200 shares of Buck Class B Common Stock beneficially owned by directors
and executive officers of Buck and their affiliates as of the Record Date (27.4%
of the total number of outstanding shares of Buck Class A Common Stock and the
Buck Class B Common Stock combined at such date) will be voted for approval of
the Merger.
STOCKHOLDERS OF BUCK ARE INSTRUCTED THAT THEY MAY SEND IN THE INSTRUMENTS
REPRESENTING THEIR SECURITIES AT THE SAME TIME AS THEIR PROXY CARDS AND FORM OF
ELECTION/LETTER OF TRANSMITTAL. THE DEADLINE FOR SUBMITTING THE FORM OF
ELECTION/LETTER OF TRANSMITTAL IS JUNE 20, 1997. SEE "THE MERGER--CONVERSION OF
BUCK COMMON STOCK --ELECTION PROCEDURES, LIMITATIONS AND SURRENDER OF SHARES"
AND "--NO FRACTIONAL SHARES OF MELLON COMMON STOCK TO BE ISSUED."
THE MERGER
This portion of the Prospectus/Proxy Statement describes various
aspects of the Merger, including all aspects deemed material by Mellon and Buck.
The following description does not purport to be complete and is qualified in
its entirety by reference to the Merger Agreement attached hereto as Annex A and
incorporated herein by reference. All stockholders of Buck are urged to read the
Merger Agreement in its entirety. Capitalized terms used and not defined herein
have the respective meanings ascribed in the Merger Agreement.
General
The Merger Agreement provides that, subject to the satisfaction of
certain conditions (including, among other things, adoption and approval of the
Merger Agreement by the stockholders of Buck and receipt of certain government
approvals), or, in certain cases, waiver of certain conditions, Buck will be
merged with and into Merger Subsidiary, a wholly owned subsidiary of Mellon.
Upon consummation of the Merger, the name of Merger Subsidiary will be changed
to Buck Consultants, Inc., and the stockholders of Buck will become shareholders
of Mellon if they receive shares of Mellon Common Stock in payment for their
stock.
The Companies
Buck. Buck is the oldest actuarial, employee benefit and compensation
consulting firm in North America. Established in 1916 as a sole proprietorship,
Buck has grown into a globally diversified consulting firm providing actuarial,
employee benefit, compensation and human resources consulting and related
services. In 1970, Buck was converted to a closely-held, employee-owned
corporation. Headquartered in New York City, Buck has 67 offices in 16 countries
and serves clients throughout the United States and the world.
Buck provides a broad array of actuarial, employee benefit,
compensation and human resources consulting and related services to
approximately 5,000 clients including many large multi-national corporations,
medium and small businesses, not-for-profit organizations, educational
institutions, health care providers, state and local government retirement
systems, national and international quasi-governmental organizations and Taft-
Hartley plans. Buck employs approximately 2,600 individuals.
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In November 1996, Buck acquired the WF Coroon's human resource and
employee benefit and compensation consulting business from Willis Corroon Group
plc. As a result of the acquisition, Buck expanded its presence in the United
States and abroad and added approximately 500 employees to its work force. The
acquisition added six new Buck offices in the United States and nine new Buck
offices in the United Kingdom. The additional employees and offices are included
in the total numbers described above.
Buck's principal executive offices are located at Two Pennsylvania
Plaza, New York, New York 10121 (telephone (212) 330-1000).
Mellon. Mellon is a multibank holding company incorporated under the
laws of Pennsylvania in August 1971 and registered under the Federal Bank
Holding Company Act of 1956, as amended. At December 31, 1996, it was the
twenty-second largest bank holding company in the United States in terms of
assets. Its principal direct subsidiaries are Mellon Bank, N.A., The Boston
Company, Inc., Mellon Bank (DE) National Association, Mellon Bank (MD) National
Association, and a number of companies known as Mellon Financial Services
Corporation. Mellon also owns a federal savings bank headquartered in
Pennsylvania, Mellon Bank, F.S.B. The Dreyfus Corporation, one of the nation's
largest mutual fund companies, is a wholly owned subsidiary of Mellon Bank. At
March 31, 1997, Mellon on a consolidated basis had total assets of approximately
$42.1 billion, loans net of the reserve for credit losses of approximately $27.0
billion and total shareholders' equity of approximately $3.7 billion.
Mellon's banking subsidiaries engage in retail financial services,
commercial banking, trust and investment management services, residential real
estate loan financing, mortgage servicing, equipment leasing, mutual fund
activities and various securities-related activities. Through other
subsidiaries, Mellon provides a broad range of bank-related services including
equipment leasing, commercial loan financing, stock transfer services, cash
management and numerous trust and investment management services. The Dreyfus
Corporation serves primarily as an investment advisor, manager and administrator
of mutual funds. The Boston Company, through Boston Safe Deposit and Trust
Company and other subsidiaries, engages in the business of institutional trust
and custody, institutional asset management, private investment management and
banking services.
Mellon's principal executive offices are located at One Mellon Bank
Center, 500 Grant Street, Pittsburgh, Pennsylvania 15258 (telephone (412)
234-5000).
Background of and Reasons for the Merger
Background of the Merger.
In the fourth calendar quarter of 1995, Buck approached Mellon with a
proposal to form an employee benefits consulting joint venture. Following
preliminary discussions which were held in the fourth calendar quarter of 1995
and the first calendar quarter of 1996, both Buck and Mellon identified
obstacles to a mutually beneficial joint venture arrangement. On March 22, 1996,
the Buck Board authorized Joseph A. LoCicero, with the assistance of Edward I.
Farb, Frederick W. Rumack and J. Robinson Lynch (collectively, the "Strategic
Planning Committee"), to pursue potential strategic transactions and business
combinations in connection with the implementation of Buck's long-term corporate
objectives. On April 2, 1996, Buck engaged BGG as its financial advisor to
assist it in evaluating potential strategic transactions and business
combinations.
During April 1996, Mr. LoCicero and the Strategic Planning Committee
met with BGG and its legal advisors on several occasions to discuss and evaluate
potential transactions and to prepare a Confidential Information Memorandum
containing financial and other information about Buck for distribution to
potential partners. On April 29, 1996, BGG made a presentation to the Buck Board
outlining strategic alternatives and identifying potential strategic partners to
be approached by Buck in connection with a strategic transaction. At the board
meeting immediately following the BGG presentation, the Buck Board authorized
Mr. LoCicero and the Strategic Planning Committee to approach and have
preliminary discussions with several identified potential partners. In May and
June 1996, the Confidential Information Memorandum was finalized by Buck and BGG
and distributed to potential partners, including Mellon, expressing an interest
in Buck. During July, August and September 1996, Mr. LoCicero, the Strategic
Planning Committee and BGG engaged in preliminary discussions with certain
persons regarding the possibility of a strategic transaction.
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On October 23, 1996, Buck received a preliminary proposal for a
strategic transaction from Mellon (the "Mellon Proposal"). On October 24, 1996,
the Strategic Planning Committee, BGG and Buck's legal advisors met to discuss
and evaluate the terms of the Mellon Proposal. On October 30, 1996, Buck
received a preliminary proposal for a strategic transaction from a third party
(the "Second Proposal"). During the first week of November 1996, the Strategic
Planning Committee, BGG and Buck's legal advisors met to discuss, evaluate and
compare the terms of the Mellon Proposal and the Second Proposal. At a meeting
of the Buck Board held on November 21, 1996, the Buck Board considered the terms
and conditions of the Mellon Proposal and the Second Proposal and authorized Mr.
LoCicero to negotiate a term sheet for the proposed merger of Buck and Mellon.
During December 1996, the Strategic Planning Committee, with the assistance of
BGG and Buck's legal advisors, had numerous negotiations and discussions with
Mellon. On December 20, 1996, the Buck Board approved and Buck and Mellon
entered into a Letter of Intent and Preliminary Term Sheet for the merger of
Buck and Mellon.
During January, February and early March 1997, the Strategic Planning
Committee, with the assistance of Buck's legal and financial advisors,
negotiated the terms of the proposed Merger Agreement with Mellon. On March 10,
1997, the Buck Board determined the terms of the Merger to be fair to the
stockholders of Buck, unanimously approved the Merger Agreement and resolved to
recommend that the stockholders of Buck vote for and approve the Merger. See "--
Reasons for the Merger--Buck; Recommendation of Buck Board." The Merger
Agreement was executed by Buck and Mellon on March 17, 1997.
Reasons for the Merger--Mellon.
Mellon believes that there will be an increasing demand for the
services of a provider like Buck who offers a full range of plan actuarial,
employee benefit, compensation and human resources consulting services and
products among many of Buck's and Mellon's current customers. The proven
expertise of Buck combined with the resources and capabilities of Mellon will
enable Buck, following the Merger, to fully develop its potential to meet the
needs of clients as they rely increasingly upon benefit consulting and
outsourcing firms to develop, implement, administer and coordinate virtually all
of their complex benefits and human resources activities. Mellon also
anticipates an ability to cross-sell its broad array of financial products to
Buck's customers. Finally, Buck's international network of clients may provide
an entry channel for Mellon into investment management opportunities abroad.
Reasons for the Merger--Buck; Recommendation of Buck Board.
In reaching its decision to adopt and approve the Merger Agreement on
March 10, 1997, the Buck Board consulted with the Strategic Planning Committee
and Buck's financial and legal advisors and considered many factors, including,
but not limited to, the following (the Buck Board did not assign any specific or
relative weight to the following factors in the course of its consideration):
(a) the presentation made by BGG, and the opinion of BGG that
the Merger is fair, as of the time of delivery of such opinion, from a
financial point of view to the stockholders of Buck (See "Opinions of
Buck Financial Advisors");
(b) the Buck Board's review with its legal and financial
advisors of the provisions of the Merger Agreement;
(c) the results of senior management's evaluation of Mellon,
The Dreyfus Corporation, Dreyfus Retirement Services, The Boston
Company and their respective information technology capabilities;
(d) the potential synergies which could result from combining
Mellon and Buck, including the combined company's ability to market a
more diverse array of products and services to clients;
(e) the assurances of Mellon that Buck will be operated as a
separate subsidiary of Mellon following the Merger;
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(f) the assurances of Mellon that the basic organizational
structure of Buck will, after the Merger, be substantially consistent
with the current organizational structure of Buck;
(g) the fact that Buck would retain its professional
independence after the Merger;
(h) the expectation that the Merger will be a tax-free
exchange for federal income tax purposes to stockholders of Buck
residing in the United States (other than in respect of cash paid to
such stockholders on the Closing Date and cash paid in lieu of
fractional shares or to dissenting stockholders); and
(i) the expectation that the necessary regulatory approvals
of the Merger would be obtained.
THE BUCK BOARD HAS UNANIMOUSLY ADOPTED AND APPROVED THE MERGER
AGREEMENT AND DETERMINED THAT THE MERGER IS FAIR TO AND IN THE BEST INTERESTS OF
BUCK AND THE STOCKHOLDERS OF BUCK AND RECOMMENDS THAT BUCK STOCKHOLDERS VOTE FOR
---
THE ADOPTION OF THE MERGER AGREEMENT. The Buck Board has the right, under
certain circumstances, to withdraw, modify or amend the foregoing
recommendations of the Buck Board. See "Right of the Buck Board to Withdraw its
Recommendation."
Opinions of Buck Financial Advisors.
General. Buck retained BGG in April 1996 to render financial advisory
and investment banking services to Buck in connection with an evaluation of
potential strategic transactions and business combinations.
BGG is a nationally recognized investment banking firm, and as part of
its investment banking business, engages in the valuation of businesses and
their securities in connection with mergers and acquisitions, underwritings,
distributions of securities and similar activities. BGG was selected on the
basis of its experience and expertise. BGG has acted exclusively for the Buck
Board in rendering its fairness opinion and will receive a fee from Buck for its
services, a substantial portion of which is contingent upon consummation of the
Merger. See "--Fees Payable to BGG." BGG also acted as financial advisor to Buck
in connection with discussions with potential strategic partners, the evaluation
of various proposals submitted to Buck and the negotiation of certain terms of
the merger with Mellon.
BGG rendered written opinions to the Buck Board that, as of the date
the Merger Agreement was approved by the Buck Board and as of the date of this
Prospectus/Proxy Statement, respectively, the Merger was fair, from a financial
point of view, to the stockholders of Buck. The full text of BGG's opinions,
dated as of the date of the Merger Agreement and of this Prospectus/Proxy
Statement, are attached as Annex B hereto. The summary of the written opinions
set forth herein is qualified in their entirety by reference to the full text of
the opinions attached hereto as Annex B. Buck stockholders are urged to read the
opinions in their entirety for a description of the procedures followed,
assumptions made, matters considered, and qualifications and limitations on the
review undertaken, by BGG in connection therewith.
Materials and Information Considered With Respect to the Merger. In
connection with its opinions, BGG reviewed and analyzed various information
bearing upon the financial and operating conditions and prospects of Buck and
held discussions with persons involved in the Merger. During its engagement by
Buck, BGG initiated and participated in discussions with potential strategic
partners other than Mellon. Such discussions and initiatives provided BGG with
certain insights which it considered in rendering its opinions on the fairness
of the Merger. In addition to the foregoing, BGG took such other steps as it
deemed appropriate to form its opinions which included, among other things, the
following: (i) a review of various documents of Buck describing the business,
products and services of Buck; (ii) a review and analysis of Buck's operating
results and historical financial statements for the past three years; (iii) a
review and analysis of certain financial projections prepared by and provided to
BGG by Buck; (iv) extensive discussions with senior management regarding the
past and current operations, business and prospects of Buck; (v) a review with
senior management of the changing competitive market in which Buck operates and
implications for future growth; (vi) discussions with management regarding
possible reasons for a transaction, available options and long-range corporate
goals; (vii) analysis of the terms of transactions similar to the Merger to the
extent deemed to be comparable or relevant; (ix) a review of the recent
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operating and financial performance of Mellon and analysis of the market
performance of its stock relative to comparables; and (x) such other factors and
analysis as it deemed appropriate for the purpose of its opinions.
In conducting its review and arriving at its opinions, BGG relied,
without independent verification, upon the accuracy and completeness of all of
the financial and other information provided to it or publicly available. BGG
did not make or obtain any independent evaluation or appraisal of the assets and
liabilities of Buck or Mellon or any of their subsidiaries.
Written Opinion for Proxy Statement. In connection with its written
opinion dated as of the date of this Prospectus/Proxy Statement, BGG confirmed
the appropriateness of its reliance on the analyses used to render its March 10,
1997 opinion by performing procedures to update certain of such analyses and by
reviewing the assumptions on which such analyses were based and the factors
considered in connection therewith.
Limitation on Opinions. This summary does not purport to be a complete
description of the analyses performed by BGG in connection with the rendering of
its fairness opinions. The preparation of a fairness opinion is not necessarily
susceptible to partial analysis or summary description. BGG believes that its
analyses and the summary set forth above must be considered as a whole and that
selecting portions of its analyses, without considering all analyses, or
selecting part of all of the above summary, without considering all factors and
analyses, would create an incomplete view of the process underlying the analyses
set forth in the BGG presentations and opinions.
Fees Payable to BGG. Buck's engagement of BGG provides for payments to
be made to BGG upon the execution of the engagement letter with Buck and upon
completion of certain defined tasks. As of the date hereof, BGG has been paid an
aggregate of $150,000. In addition to the foregoing payments, BGG will receive a
success fee of $700,000 which is contingent and will be paid upon consummation
of the Merger. Buck has also agreed to reimburse BGG for its reasonable
out-of-pocket expenses and to indemnify BGG for claims arising out of BGG's
engagement by Buck other than claims against BGG arising out of BGG's own
negligence or willful misconduct.
Interests of Certain Persons in the Merger
Certain members of Buck's management and the Buck Board may be deemed
to have interests in the Merger that are in addition to their interests as
stockholders of Buck generally. Pursuant to the terms of the Merger Agreement,
upon consummation of the Merger the Board of Directors of the surviving
corporation will be enlarged to consist of 16 members and will include all of
the current members of the Buck Board, except Mr. Giegerich who will retire upon
consummation of the Merger. In addition, current members of the Buck Board will
be eligible as Level 1 employees during their active employment to participate
in the Buck Key Performers Supplemental Payment Plan which will be implemented
in connection with the Merger. See "--Description of Buck Key Performers
Supplemental Payment Plan." After giving effect to the Merger, Joseph A.
LoCicero will continue to be the Chief Executive Officer of Buck and will become
a member of Mellon's Senior Management Committee. Certain members of the Buck
Board and certain members of Buck's management have entered into employment
agreements with Buck as a condition to the closing of the Merger.
All members of the Buck Board other than Mr. Sutton have agreed with
Mellon, pursuant to letters dated March 10, 1997, that in their individual
capacities as stockholders of Buck, they will vote, at any meeting of the
stockholders of Buck called for the purpose of voting upon the Merger, all of
their shares of Buck Common Stock, in favor of the Merger. All of such persons
have also agreed that until the Merger Agreement is terminated, they will not
vote their shares in favor of any merger, consolidation, plan of liquidation,
sale of assets, reclassification or other transaction which would have the
effect of any person other than Mellon or an affiliate thereof, acquiring
control over Buck or any substantial portion of its assets. Because of Canadian
tax considerations, Mr. Sutton will not vote his shares in favor of or against
the Merger.
Effective Time
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The Merger will become effective at the time as specified in the
appropriate Certificate of Merger filed by Buck and Merger Subsidiary with the
Delaware Secretary of State in accordance with the DGCL. Upon the Merger
becoming effective, Merger Subsidiary will be the surviving corporation and the
separate existence of Buck will cease. Merger Subsidiary will thereupon change
its name to Buck Consultants, Inc. For a description of circumstances under
which Buck or Mellon may terminate the Merger Agreement, see "--Termination of
the Merger Agreement; Fee." Buck and Mellon currently anticipate that the Merger
will be completed as soon as practicable following the Buck Special Meeting.
Conversion of Buck Common Stock
Conversion of Buck Common Stock. Mellon has agreed to pay an aggregate
of $225 million, in cash or Mellon Common Stock, in the Merger. A portion of
this amount will be paid in cash to certain persons who have retired from Buck
within a period of sixty months prior to the Closing Date, pursuant to Buck's
Retiree Protection Plan. Such Plan entitles such persons to certain payments in
the event of a transaction such as the Merger. The amount of such payments to
each retiree is based upon the differential between the value received by
holders of outstanding shares of Buck Common Stock in the Merger and the book
value of such shares as of the end of the most recent fiscal year, the number of
shares of Buck Common Stock tendered to Buck upon the retirement of such
individual, and the amount of time that has elapsed since such retirement. As of
the date of this Prospectus/Proxy Statement and assuming a Closing date of July
1, 1997, Buck and Mellon estimate that the aggregate amount payable in cash to
such retirees as a result of the Merger will be approximately $19,000,000.
However, such amount is subject to decrease as a result of the additional lapse
of time from the retiree's date of retirement to the Effective Time of the
Merger and is subject to increase if additional individuals retire between the
date of this Prospectus/Proxy Statement and the Effective Time of the Merger.
The remainder of the price paid in the Merger in cash or Mellon Common
Stock (estimated as of the date of this Prospectus/Proxy Statement by Buck and
Mellon to be approximately $206,000,000), will be allocated to the aggregate
outstanding shares of Buck Class A Common Stock and the aggregate outstanding
shares of Buck Class B Common Stock proportionately to the relative book value
of Buck represented by such classes as determined based upon the most recent
audited financial statements of Buck and the Buck Certificate of Incorporation.
The aggregate outstanding shares will include the issuable shares received by
Buck stockholders as described in the accompanying Form of Election/Letter of
Transmittal. As of the date of this Prospectus/Proxy Statement, Mellon and Buck
estimate that the price payable in the Merger with respect to the aggregate
outstanding shares of Buck Class A Common Stock is approximately $24,600,000,
and with respect to the aggregate outstanding shares of Buck Class B Common
Stock is approximately $181,400,000. Based upon the number of shares of Buck
Class A Common Stock outstanding on the date hereof, the price payable in the
Merger with respect to each such outstanding share is estimated to be
approximately $281. Based upon the number of shares of Buck Class B Common Stock
outstanding on the date hereof, the price payable in the Merger with respect to
each such outstanding share is estimated to be approximately $267. Under the
Buck Certificate of Incorporation, in determining the book value of the Buck
Class A Common Stock and Buck Class B Common Stock, the income for the most
recently completed fiscal year as of the date of determination, as shown in the
audited financial statements of Buck for such fiscal year, is allocated equally
to the aggregate outstanding shares of Class A Common Stock and the aggregate
outstanding shares of Class B Common Stock, respectively.
Although the effect of retirements of Buck personnel could change the
value per share of Class A Common Stock and Class B Common Stock paid in the
Merger from the estimated value set forth herein, any such change would be an
increase in such value per share.
Subject to the limitations described below, each Buck stockholder may
elect to have the amount payable with respect to his shares of Buck Common Stock
paid in cash, in shares of Mellon Common Stock or a combination thereof. The
number of shares of Mellon Common Stock issued with respect to any such payment
will equal the value of the payment in question divided by the Transaction Share
Price, except that cash will be paid in lieu of any fractional shares as
described below.
In the event that any of the ten consecutive trading days used to
calculate the Transaction Share Price occurs on or after the date a dividend is
declared on Mellon Common Stock but before the date the Mellon Common Stock
begins to trade on an ex-dividend basis with respect to such dividend, then for
purposes of
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determining the Transaction Share Price the reported closing price of Mellon
Common Stock will be reduced by the value of the declared dividend.
Election Procedures, Limitations, and Surrender of Shares. Each Buck
stockholder will receive concurrently with this Prospectus/Proxy Statement, a
Form of Election/Transmittal Letter pursuant to which the stockholder may make a
"Stock Election" to receive only Mellon Common Stock in exchange for the
holder's Buck Common Stock, a "Cash Election" to receive only cash in exchange
for the holder's Buck Common Stock, or a "Mixed Payment Election" to receive a
portion in Mellon Common Stock and a portion in cash, in ten percent increments,
in exchange for the holder's Buck Common Stock. An election must be properly
completed, signed and received by Buck prior to June 20, 1997 (the "Election
Deadline") in order to be effective. Buck stockholders who fail to make an
effective election shall be deemed to have made a Stock Election. Buck
stockholders may generally only make one election with respect to all shares of
Buck Common Stock held, provided that nominee holders may make an election for
each of their beneficial owners if the nominee certifies to the satisfaction of
Mellon that the shares are held as a nominee for more than one beneficial owner
and that only one election is made for all the shares of each such beneficial
owner. Any Buck stockholder who has made an election may change it at any time
prior to the Election Deadline.
The effectiveness of all Cash Elections and the cash portion of all
Mixed Payment Elections made by Buck stockholders are also subject to the
limitation that the aggregate market value, on the day prior to the Effective
Time, of Mellon Common Stock to be issued pursuant to Stock Elections (and the
stock portion of any Mixed Payment Elections) must be at least equal to 55.6% of
the Total Consideration used in the Merger, as that term is defined in the
Merger Agreement. If Mellon determines that the limitation may be violated, it
will automatically convert the Cash Elections and the cash portion of all Mixed
Payment Elections to Stock Elections and to stock portions of Mixed Payment
Elections to the extent necessary to satisfy the limitation. Any such conversion
will be done equitably to treat all Buck stockholders who have elected cash
equally based on the amount of cash elected to be received.
Each Buck stockholder may return their election form and share
certificates prior to the Buck Special Meeting along with their proxy card.
Effect on Mellon Shareholders. At the Effective Time, each share of
Mellon Common Stock then issued and outstanding will continue as one share of
Mellon Common Stock. The Merger will be recorded under the purchase method of
accounting.
No Fractional Shares of Mellon Common Stock to be Issued. No fractional
shares of Mellon Common Stock will be issued in the Merger. Holders of Buck
Common Stock who otherwise would receive fractional shares instead will receive
cash in an amount equal to such fractional part of a share multiplied by the
Transaction Share Price.
Dissenters' Rights. No conversion of Buck Common Stock into Mellon
Common Stock will be made with respect to any share of Buck Common Stock as to
which a stockholder of Buck has properly elected to exercise any rights to
dissent and obtain payment of the appraised value of his shares under the DGCL.
See "Dissenters' Rights--Buck Stockholders."
Rights of Holders of Buck Stock Certificates Prior to Surrender. Prior
to the time certificates representing shares of Buck Common Stock are
surrendered, dividends and other distributions declared or payable to holders of
record of Mellon Common Stock as of any time subsequent to the Effective Time
will be payable to the holder of any unsurrendered certificate representing Buck
Common Stock, but only upon surrender of such certificate. Upon surrender by any
such shareholder of his certificates representing Buck Common Stock in
accordance with instructions contained herein and consummation of the Merger,
the former Buck stockholder will receive certificates representing the shares of
Mellon Common Stock and/or the amount of cash into which the holder's shares of
Buck Common Stock were converted (without interest) and cash in lieu of
fractional shares (without interest) and the dividends or other distributions
(without interest) that are payable with respect to such shares of Mellon Common
Stock since the Effective Time (and have not previously been paid to such
holder).
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Conduct of Buck's Business Pending the Merger
The Merger Agreement contains certain restrictions on the
conduct of the business of Buck and its subsidiaries pending consummation of the
Merger. In particular, Buck has agreed that it and each of its subsidiaries will
operate its business only in the ordinary course, and will use its best efforts
to preserve intact its business organization, except for certain dissolutions
and closures, and will maintain relations and good will with those with whom it
has business relationships.
The Merger Agreement also prohibits Buck from engaging in
certain activities prior to the Effective Time without the prior written consent
of Mellon. Specifically, without such consent, Buck and any Buck Company may
not:
(a) change any Buck Company's authorized or issued capital
stock; grant any stock option or right to purchase shares of capital
stock of any Buck Company; issue any security convertible into such
capital stock; grant any registration rights; purchase, redeem, retire
or otherwise acquire any shares of its capital stock; or declare or pay
any dividend or other distribution or make any payment in respect of
shares of capital stock;
(b) amend the organizational documents of any Buck Company;
(c) pay or increase any bonuses, salaries or other compensation
(except in the ordinary course of business) to any stockholder,
director, officer or employee of any Buck Company or enter into any
employment, retention, severance or similar contract with any director,
officer or employee;
(d) adopt or increase the payments to or benefits under, any
Buck Benefit Plans;
(e) damage, destroy or lose any asset or property of any Buck
Company, whether or not covered by insurance, which results in a loss
in excess of $250,000;
(f) enter into, terminate or receive notice of termination of
(i) any license, joint venture, credit or similar agreement or (ii) any
contract or transaction involving a total remaining commitment by or to
any Buck Company of at least $250,000;
(g) sell, lease or dispose of any material asset or property of
any Buck Company or impose any encumbrance on any material asset or
property of any Buck Company, including the sale, lease or other
disposition of any of the intellectual property assets;
(h) purchase a business or an interest in a business by any Buck
Company, whether by merger, consolidation, acquisition of shares,
acquisition of assets, joint venture arrangement or otherwise;
(i) cancel or waive any claims or rights with a value to any
Buck Company in excess of $250,000;
(j) materially change the accounting methods used by any Buck
Company; or
(k) agree, whether orally or in writing, to do any of the
foregoing.
Conditions to the Merger
The respective obligations of Buck and Mellon to effect the
Merger are subject to the satisfaction or waiver prior to the Effective Time of
certain conditions, including, but not limited to, the following significant
conditions:
(a) the stockholders of Buck shall have adopted and approved the
Merger Agreement, as and to the extent required by law and by the
provisions of any governing instruments;
(b) the transactions contemplated by the Merger Agreement shall
have been approved by each governmental regulatory authority whose
approval is required to permit consummation of such transactions,
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including the Federal Reserve Board, without the imposition of any
condition, requirement or commitment which is reasonably likely to have
a Buck Material Adverse Effect or a Mellon Material Adverse Effect, and
all waiting periods arising under the HSR Act or any other applicable
Legal Requirement shall have duly lapsed or been terminated;
(c) none of Mellon, or any subsidiary nor any Buck Company,
shall be subject to any order which either enjoins or prohibits the
consummation of any of the transactions contemplated by the Merger
Agreement;
(d) the representations and warranties of the other party set
forth or referred to in the Merger Agreement shall be true and correct
both individually and in the aggregate in all material respects as of
the date of the Merger Agreement and as of the Effective Time, except
for any representations and warranties made as of a specified date,
which shall be true and correct in all material respects as of such
date, and except as otherwise expressly contemplated or permitted by
the Merger Agreement. For these purposes, a representation or warranty
will be deemed to be correct in all material respects unless a breach,
if any, thereof (excluding for these purposes any materiality
limitations therein), has a Buck Material Adverse Effect or a Mellon
Material Adverse Effect (as the case may be). The representations and
warranties will be deemed in the aggregate to be true and correct in
all material respects unless the breaches of all the representations
and warranties, if any (excluding, for these purposes, any materiality
limitations therein) have, as a whole, a Buck Material Adverse Effect
or a Mellon Material Adverse Effect (as the case may be);
(e) the agreements and covenants of each party to be performed
and complied with pursuant to the Merger Agreement prior to the
Effective Time shall have been duly performed and complied with by it
in all material respects;
(f) each party shall have received an opinion addressed to it
from outside counsel as to the matters related to the Merger Agreement
and Buck shall have received a tax opinion addressed to it from its
outside counsel to the effect that subject to customary representations
and assumptions referred to therein, (1) the Merger will constitute a
tax-free reorganization, within the meaning of Section 368(a)(1)(A) and
Section 368(a)(2)(D) of the Internal Revenue Code, (2) except for cash
received in lieu of fractional shares, no gain or loss will be
recognized by the stockholders of Buck who receive solely Mellon Common
Stock on the exchange of their shares of Buck Common Stock for shares
of Mellon Common Stock, (3) where a stockholder of Buck receives solely
cash in exchange for Buck Common Stock, such cash will be treated as
having been received by the Buck stockholder as a distribution in
redemption of such stock, subject to the provisions and limitations of
Section 302 of the Internal Revenue Code of 1986, and (4) where a
stockholder of Buck receives both Mellon Common Stock and cash in
exchange for Buck Common Stock, the Buck stockholder will recognize
gain, if any, equal to the lesser of the total gain realized by the
Buck stockholder on the exchange or the amount of cash received;
(g) the Registration Statement shall be effective under the
Securities Act and no stop orders suspending the effectiveness of the
Registration Statement shall be in effect and no proceedings for such
purpose shall be pending before or threatened by the SEC. The shares of
Mellon Common Stock issuable in the Merger shall have been approved for
listing on the NYSE upon notice of issuance;
(h) all or substantially all of the persons jointly determined
by Buck and Mellon shall have, by April 30, 1997, executed employment
agreements, and the absence of any particular employment agreements do
not materially or adversely impede the conduct of the Buck Companies
taken as a whole;
(i) Buck's audited 1997 financial statements shall set forth
gross revenue of at least $225,000,000 and the book value of a share of
Buck Class B Common Stock as of March 31, 1997 will be at least 7% more
than the book value of such stock as of March 31, 1996, subject to
certain adjustments;
(j) substantially all of the Level 1 and Level 2 employees of
any Buck Company organized in the U.S., Buck Consultants Limited
(U.K.), Buck Investments Consultants Limited (U.K.), Bevis Trustees
Limited, Buck & Willis Healthcare Limited, Buck Consultants Limited
(Canada), or as determined by Mellon and Buck, those Buck Companies
organized in a country other than the U.S. or Australia, shall have
executed offer letters;
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(k) the 10 largest stockholders of Buck shall have executed a
stockholder covenant;
(l) Buck shall have obtained a waiver from Allianz GmbH of its
right to acquire all of the shares of Heissman GmbH owned by Buck;
(m) Buck Australia Pty Ltd and National Mutual Life shall have
entered into an amendment to their shareholders agreement, pursuant to
which the non-competition provisions of such agreement will only apply
to Australia; and
(n) the Buck Key Performers Supplemental Payment Plan (the
"Plan"), as described below shall be in full force and effect.
Description of Buck Key Performers Supplemental Payment Plan
The purpose of the Plan is to retain, incent and reward Level 1
and Level 2 employees ("Key Performers") for their efforts in furthering the
goals of Buck Consultants, Inc. after the Merger (the "Company" for purposes of
this description of the Plan). Under the Plan, Key Performers are eligible to
share in up to $90,000,000 paid in either cash or restricted shares of Mellon
Common Stock, of which $25,000,000 is a guaranteed portion not contingent on
performance of the Company and up to $65,000,000 is a contingent portion based
on performance of the Company. Such amounts are to be awarded in addition to the
Company's regular bonus amounts.
The guaranteed portion is divided into three equal amounts of
$8,333,333.33 which, together with interest from the Closing Date, is allocated
to Key Performers on the first, second and third anniversaries of the Closing
Date. The contingent portion is earned over the four calendar years 1998, 1999,
2000 and 2001 depending on whether the Company has achieved certain threshold
levels of operating income before discretionary items ("OIBDI") for such
periods. However, all or part of the contingent portion will be earned without
regard to these thresholds if Mellon takes or fails to take any action which (i)
materially and adversely impedes or affects the ability of the Company to attain
certain OIBDI thresholds, (ii) is not necessitated or warranted by the failure
of the Company to meet certain OIBDI thresholds and (iii) results in a
substantial departure from the expected governance or organizational structure
of the Company as set forth in the Merger Agreement or other fundamental change
in the nature of the Company's business or operations.
The guaranteed and contingent portions described above are
generally allocated among Key Performers actively employed on the allocation
date based on their most recent individual bonuses, subject to adjustment by up
to 25% by the Company's Chief Executive Officer with the concurrence of Mellon's
Vice Chairman, provided that such adjustments will not affect the total amount
allocated under the Plan. The amounts so allocated are subject to forfeiture in
the event the Key Performer terminates employment prior to the end of the
separate 2 year vesting period commencing on the allocation date of each
separate award, subject to certain limits and exceptions in the case of death,
retirement, disability, or termination by the Company without cause. Key
Performers identified as Level 1 employees of the Company may also elect to
defer receipt of any guaranteed or contingent portion otherwise payable in cash.
The Plan is attached as Annex D to this Prospectus/Proxy Statement.
No Solicitations
Buck has agreed in the Merger Agreement that, except as
described below, neither Buck nor any of its officers, directors, employees,
agents or representatives (including, without limitation, any investment banker,
attorney or accountant retained by any of them) may initiate, solicit or
encourage, directly or indirectly, any inquiries or the making of any proposal
or offer with respect to a merger, consolidation or similar transaction
involving any purchase of any portion of the assets or business, or any portion
of the equity securities of, Buck or any Buck Company, (an "Acquisition
Proposal") or engage in any negotiations concerning or provide any confidential
data to or have any discussions with, any person relating to such an Acquisition
Proposal or otherwise facilitate any effort or attempt to make or implement such
an Acquisition Proposal.
To the extent that the Buck Board determines on the basis of
written advice from outside counsel that certain actions are necessary in order
for the Buck Board to act in a manner consistent with its fiduciary obligation
under applicable law, Buck may engage in negotiations concerning or provide any
confidential data to or have any discussions with, any persons relating to an
Acquisition Proposal or otherwise facilitate an effort to make or
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implement an Acquisition Proposal, and withdraw or modify its recommendation to
Buck stockholders that they adopt the Merger Agreement.
Regulatory Approvals
Consummation of the Merger is conditioned on the receipt by
Mellon and Buck of all necessary approvals by governmental regulatory agencies.
The regulatory approvals include approvals of the Federal Reserve Board and
various licensing entities. Consummation of the Merger is also conditioned on
the expiration or termination of the applicable waiting period under the HSR
Act. While Mellon and Buck believe that they will receive the requisite
regulatory approvals for the Merger, there can be no assurance as to whether
such approvals will be obtained prior to the Buck Special Meeting on
satisfactory terms or otherwise.
Right of the Buck Board to Withdraw its Recommendation
In the Merger Agreement, Buck agreed that the Buck Board would
recommend to the Buck stockholders that they adopt the Merger Agreement.
However, the Buck Board may withdraw, modify or amend such recommendation to the
extent the Buck Board reasonably determines, upon the basis of written advice of
outside counsel, that such action is necessary in order for the Buck Board to
act in a manner which is consistent with its fiduciary obligations under
applicable law.
Termination of the Merger Agreement; Fee
Termination. The Merger Agreement may be terminated at any time
prior to the Effective Time, as follows:
(a) by the mutual consent of the Buck Board and the Mellon
Board;
(b) by either Buck or Mellon, at any time after September 30,
1997, if the Closing has not occurred (provided that the right to
terminate the Merger Agreement shall not be available to any party
whose failure to fulfill any material obligation under the Merger
Agreement has been a cause of or has resulted in the failure of the
Closing to occur on or before such date);
(c) by either Buck or Mellon if a court of competent
jurisdiction or other governmental body shall have issued a
nonappealable final Order having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger;
(d) by Mellon, if, at the Buck Special Meeting (including any
adjournment or postponement), the requisite vote of the stockholders of
Buck in favor of this Agreement and the Merger shall not have been
obtained;
(e) by Mellon, if (i) the Board of Directors of Buck shall have
withdrawn or modified its recommendation of the Merger Agreement or the
Merger in a manner adverse to consummation of the Merger or shall have
resolved to do any of the foregoing; (ii) the Board of Directors of
Buck shall have recommended to the stockholders of Buck an Acquisition
Proposal; (iii) a tender offer or exchange offer for any of the
outstanding shares of Buck Common Stock is commenced (other than by
Mellon or an affiliate of Mellon) and the Board of Directors of Buck
recommends that the stockholders of Buck tender their shares in such
tender or exchange offer; or (iv) for any reason Buck fails to call and
hold the Buck Special Meeting within 45 days after the effective date
of the Registration Statement;
(f) by Mellon or Buck, if the Board of Directors of Buck shall
have made a determination to initiate, solicit, encourage or pursue an
Acquisition Proposal;
(g) by Mellon or Buck, if any governmental body having
jurisdiction (including without limitation the Board of Governors of
the Federal Reserve System) shall have denied its approval of the
Merger; or
(h) by Buck or Mellon, if (i) the other has breached any
representation or warranty contained in the Merger Agreement, and such
breach shall not have been cured prior to the Effective Time (except
where
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such breach would not have a Buck Material Adverse Effect or Mellon
Material Adverse Effect, as the case may be) or (ii) if there has been
a material breach of a covenant or agreement set forth in the Merger
Agreement on the part of the other, which shall not have been cured
within 15 business days following receipt by the breaching party of
written notice of such material breach from the other party (provided
that a party shall have the right to terminate the Merger Agreement in
the event of a material breach on the part of the breaching party which
is not subject to cure only if such breach would have a Buck Material
Adverse Effect).
Fee. Under the Merger Agreement, Mellon is entitled to payment
of a fee of $3,000,000 by Buck upon the earliest to occur of the termination of
the Merger Agreement pursuant to paragraphs (e) or (f) above. In addition, if
within 12 months of termination of the Merger Agreement pursuant to paragraphs
(e), (f), or (h) above, Buck enters into a commitment to consummate a merger,
consolidation, combination or joint venture or similar transaction with another
party involving any purchase of any portion of the assets or business or any
portion of the equity securities of Buck or any Buck Company, or if any such
transaction is consummated within such 12 month period, Mellon is entitled to
payment of a fee of $12,000,000 by Buck upon the earliest to occur of the making
of such commitment or such consummation.
Waiver and Amendment; Revisions to Transaction
Any provision of the Merger Agreement may be waived by the party
benefited by the provision. The Merger Agreement also provides that it may be
amended by mutual consent of the parties thereto.
NYSE Listing of Mellon Common Stock
Under the Merger Agreement, it is a condition precedent that the
shares of Mellon Common Stock to be issued in the Merger be approved for listing
on the NYSE upon notice of issuance. Mellon intends to file an application with
the NYSE for approval of such listing.
Certain Federal Income Tax Consequences of the Merger to Buck Stockholders
The following discussion addresses the material federal income
tax considerations of the Merger that are applicable to holders of Buck Common
Stock. This discussion reflects the opinions of Reed Smith Shaw & McClay,
counsel to Mellon, and O'Sullivan Graev & Karabell, LLP, counsel to Buck,
attached as Exhibits 8.1 and 8.2 to the Registration Statement of which this
Prospectus/Proxy Statement is a part (the "Exhibit Opinions"). The Exhibit
Opinions are based on certain assumptions and representations and are subject to
certain limitations and qualifications as noted in the opinions.
The following summary of the material federal income tax
consequences of the Merger to holders who hold shares of Buck Common Stock as
capital assets deals only with holders who are (i) citizens or residents of the
United States, (ii) domestic corporations or (iii) otherwise subject to United
States federal income tax on a net income basis in respect of Shares ("U.S.
Holders"). This summary may not apply to certain classes of taxpayers,
including, without limitation, persons who acquired shares, or rights to
payments in exchange for their shares, of Buck Common Stock pursuant to the
exercise of employee stock options or rights or otherwise as compensation.
Also, the summary does not address state, local or foreign tax
consequences of the Merger. Consequently, each holder should consult such
holder's own tax advisor as to the specific tax consequences of the Merger to
such holder.
This summary is based on current law. Future legislative,
judicial, or administrative changes or interpretations, which may be
retroactive, could alter or modify the statements set forth herein. Neither
Mellon nor Buck has requested or will request any ruling from the Internal
Revenue Service as to the United States federal income tax consequences of the
Merger.
It is intended that the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), and that, accordingly, for federal income tax
purposes no gain or loss will be recognized by either Mellon or Buck as a result
of the Merger.
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Reed Smith Shaw & McClay, counsel to Mellon, and O'Sullivan
Graev &Karabell, LLP, counsel to Buck, have advised Mellon and Buck,
respectively, that the material federal income tax consequences to U.S. Holders
who exchange shares of Buck Common Stock for shares of Mellon Common Stock
and/or the Cash Consideration will be as follows:
(i) No loss will be recognized upon the exchange. Gain
will be calculated separately on each block of Buck Common Stock
exchanged (a block consists of shares of Buck Common Stock
acquired at the same time for the same price). This gain will be
measured by the difference between the Buck stockholder's
adjusted tax basis in each block of the Buck Common Stock
surrendered and the aggregate fair market value of the Mellon
Common Stock and Cash Consideration received therefor. However,
Buck stockholders will recognize this gain as taxable only to
the extent of the Cash Consideration received. Any such gain
recognized by a Buck stockholder pursuant to the Merger will
likely be treated as capital gain provided that the stockholder
held such Buck Common Stock as a capital asset. Such capital
gain will be long term if the stockholder has held the Buck
Common Stock for more than one year at the Effective Time.
(ii) Buck stockholders' aggregate tax basis in the
Mellon Common Stock received (including a fractional share
interest in Mellon Common Stock deemed received and redeemed as
described below) will be equal to the aggregate tax basis of the
Buck Common Stock surrendered in the Merger, increased by any
gain recognized as a result of the Merger and decreased by the
amount of Cash Consideration received. Such tax basis will be
attributed separately to each block of Mellon Common Stock
received in exchange for each block (as described above) of Buck
Common Stock surrendered therefor.
(iii) The holding period of the Mellon Common Stock
received pursuant to the Merger will include the holding period
of the Buck Common Stock surrendered in exchange therefor,
provided that such Buck Common Stock was held as a capital asset
by the Buck stockholder.
(iv) A U.S. Holder of Buck Common Stock who receives
cash in lieu of a fractional share interest in Mellon Common
Stock will be treated as having received such fractional share
interest and then as having received the cash in redemption of
such fractional share interest. A stockholder of Buck should
recognize capital gain or loss on the receipt of cash in lieu of
a fractional share interest in Mellon Common Stock. The capital
gain or loss will be long-term capital gain or loss if the U.S.
Holder's holding period in the fractional share interest is more
than one year.
The advice of Reed Smith Shaw & McClay and O'Sullivan Graev &
Karabell, LLP, set forth in the summary above is based, among other things, on
assumptions relating to certain facts and circumstances of, and the intentions
of the parties to, the Merger, which assumptions have been made with the consent
of Mellon and Buck. One such assumption is that no part of the Merger
consideration will be subject to taxation as compensation. It is also assumed
that payments to retirees pursuant to Buck's Retiree Protection Plan and to Key
Performers will be subject to taxation as compensation and that the parties
intend to treat them as such. Reed Smith Shaw & McClay and O'Sullivan Graev &
Karabell, LLP, have not conducted independent investigation of these
assumptions. If these assumptions should not be true, then the summary
description of tax consequences above may not be accurate.
The obligation of Buck to consummate the Merger is conditioned
on the receipt by Buck of an opinion of its counsel, O'Sullivan Graev &
Karabell, LLP, dated as of the Effective Time, substantially to the effect that
the Merger will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code and that, accordingly, (i) no
gain or loss will be recognized by Mellon as a result of the Merger; and (ii)
the summary description above of the material federal income tax consequences to
U.S. Holders is, taking into account the assumptions and limited scope of the
summary as set forth above, accurate in all material respects. The opinion of
O'Sullivan Graev & Karabell, LLP, referred to in this paragraph will be based
upon certain facts, assumptions, and representations and/or covenants, including
those contained in certificates of officers of Mellon and Buck and, possibly, of
others. Subject to the receipt of such representations and/or covenants,
O'Sullivan Graev & Karabell, LLP, anticipates that it will render such opinion.
If such opinion is not received, the Merger will not be consummated unless the
condition requiring its receipt is waived. Buck currently anticipates that such
opinion will be delivered and that Buck will not waive the conditions requiring
receipt of such opinion.
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Accounting Treatment of the Merger
The Merger will be accounted for under the purchase method of
accounting. The assets and liabilities of Buck acquired in the Merger will be
recorded by Mellon for financial reporting purposes at their estimated fair
values as of the date of the Merger, and any excess of the consideration paid
over the net estimated fair value acquired will be recorded and amortized as
goodwill.
Resales by Affiliates of Mellon Common Stock Received in the Merger
All shares of Mellon Common Stock received by Buck stockholders
in the Merger will be freely transferable, except that shares of Mellon Common
Stock received by persons who are "affiliates" (as such term is defined under
the Securities Act) of Buck prior to the Merger may be resold by them only in
transactions permitted by the resale provisions of Rule 145 promulgated under
the Securities Act (or Rule 144 in the case of such persons who become
affiliates of Mellon) or as otherwise permitted under the Securities Act.
Persons who may be deemed to be affiliates of Buck or Mellon generally include
individuals or entities that control, are controlled by, or are under common
control with, such party and may include certain officers and directors of such
party as well as principal shareholders of such party.
The Merger Agreement requires Buck to use its best efforts to
cause each of its affiliates to enter into an agreement to the effect that such
person will comply with the above-described transferability restrictions.
Dissenters' Rights of Buck Stockholders
Pursuant to Section 262 of the DGCL ("Section 262"), any holder
of Buck Class A Common Stock and Buck Class B Common Stock who does not wish to
accept the consideration to be paid pursuant to the Merger Agreement may dissent
from the Merger and elect to have the fair value of such stockholder's shares of
Buck Class A Common Stock and Buck Class B Common Stock (exclusive of any
element of value arising from the accomplishment or expectation of the Merger)
judicially determined and paid to such stockholder in cash, together with a fair
rate of interest. The following discussion is not a complete statement of the
law pertaining to appraisal rights under Delaware law, and is qualified in its
entirety by the full text of Section 262, which is provided in its entirety as
Annex C to this Prospectus/Proxy Statement, and any future amendments thereto.
Any stockholder who wishes to exercise such appraisal rights or
who wishes to preserve the right to do so should review carefully Annex C to
this Prospectus/Proxy Statement because failure to comply with the procedures
specified in Section 262 timely and properly will result in the loss of
appraisal rights. Moreover, because of the complexity of the procedures for
exercising the right to seek appraisal of the Buck Class A Common Stock or Buck
Class B Common Stock, Buck believes that stockholders who consider exercising
such rights should seek the advice of counsel.
Any holder of Buck Class A Common Stock or Buck Class B Common
Stock wishing to exercise the right to dissent from the Merger and demand
appraisal under Section 262 must satisfy each of the following conditions:
(i) Such stockholder must deliver to Buck a written
demand for appraisal of such stockholder's shares before the
vote on the Merger Agreement at the Buck Special Meeting. This
written demand for appraisal must be in addition to and separate
from any proxy or vote against the Merger Agreement; merely
voting against, abstaining from voting or failing to vote in
favor of approval and adoption of the Merger Agreement will not
constitute a demand for appraisal within the meaning of Section
262.
(ii) Such stockholder must not vote for approval and
adoption of the Merger Agreement. A failure to vote will satisfy
this requirement, but a vote in favor of the Merger Agreement,
by proxy or in person, or the return of a signed proxy that does
not specify a vote against approval and adoption of the Merger
Agreement or a direction to abstain in connection with the
proposal, will constitute a waiver of such stockholder's right
of appraisal and will nullify any previously filed written
demand for appraisal because, in the absence of express contrary
instructions, such shares will be voted in favor of the
proposal. Accordingly, a stockholder who desires to perfect
appraisal
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rights with respect to any of such stockholder's shares must, as
one of the procedural steps involved in such perfection, either
(i) refrain from executing and returning the enclosed proxy card
and from voting in person in favor of the proposal to approve
the Merger Agreement or (ii) check either the "Against" or the
"Abstain" box next to the proposal on such card or vote in
person against the proposal or register in person an abstention
with respect thereto.
(iii) Such stockholder must continuously hold such
shares from the date of making the demand through the Effective
Time. Accordingly, a stockholder who is the record holder of
shares of Buck Class A Common Stock or Buck Class B Common
Stock, as applicable, on the date the written demand for
appraisal is made but who thereafter transfers such shares prior
to the Effective Time will lose any right to appraisal in
respect of such shares.
A demand for appraisal should be executed by or on behalf of the
stockholder of record, fully and correctly, as such stockholder's name appears
on such stock certificates, should specify the stockholder's name and mailing
address, the number of shares of Buck Class A Common Stock and Buck Class B
Common Stock owned and that such stockholder intends thereby to demand appraisal
of such stockholder's stock. However, such demand will be sufficient if it
reasonably informs Buck of the stockholder's identity and intent to demand the
appraisal of his shares. If the shares are owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, execution of the demand
should be made in that capacity, and if the shares are owned of record by more
than one person as in a joint tenancy or tenancy in common, the demand should be
executed by or on behalf of all owners. An authorized agent, including one or
more joint owners, may execute a demand for appraisal on behalf of a
stockholder; however, the agent must identify the record owner or owners and
expressly disclose the fact that, in executing the demand, the agent is acting
as agent for such owner or owners.
A stockholder who elects to exercise appraisal rights should
mail or deliver a written demand to Buck Consultants, Inc., Two Pennsylvania
Plaza, New York, New York 10121, Attention: Assistant Secretary.
Within ten days after the Effective Time, Merger Subsidiary must
give written notice that the Merger has become effective to each stockholder who
has filed a written demand meeting the requirements of Section 262. Any
stockholder who has complied with Section 262 and is entitled to appraisal
rights may, within 20 days after the date of mailing such notice, demand in
writing from Merger Subsidiary the appraisal of such stockholder's shares.
Within 120 days after the Effective Time, but not thereafter, either Merger
Subsidiary or any stockholder who has complied with the requirements of Section
262 may file a petition in the Delaware Court of Chancery demanding a
determination of the value of the shares of Buck Class A Common Stock and Buck
Class B Common Stock held by all dissenting stockholders. Merger Subsidiary does
not presently intend to file such a petition, and stockholders seeking to
exercise appraisal rights should not assume that Merger Subsidiary will file
such a petition or that Merger Subsidiary will initiate any negotiations with
respect to the fair value of such shares. Accordingly, stockholders who desire
to have their shares appraised should initiate any petitions necessary for the
perfection of their appraisal rights within the time periods and in the manner
prescribed in Section 262. Inasmuch as Merger Subsidiary has no obligation to
file such a petition, the failure of a stockholder to do so within the period
specified could nullify such stockholder's previous written demand for
appraisal.
Pursuant to the Merger Agreement, Buck has agreed to give Mellon
prompt notice of any demands for appraisal received by it, and, prior to the
Effective Time, (i) Mellon has the right to participate in and direct all
negotiations and proceedings with respect to demands for appraisal received by
Buck and (ii) Buck will not, except with the prior written consent of Mellon,
which shall not be unreasonably withheld, make any payment with respect to, or
offer to settle, any such demands.
Within 120 days after the Effective Time, any stockholder who
has complied with the provisions of Section 262 to that point in time will be
entitled to receive from Merger Subsidiary, upon written request, a statement
setting forth the aggregate number of shares not voted in favor of the Merger
Agreement and with respect to which demands for appraisal have been received and
the aggregate number of holders of such shares. Merger Subsidiary must mail such
statement to the stockholder within 10 days of receipt of such request or the
expiration of the period for delivery of demands for appraisal.
If a petition for an appraisal is timely filed, after a hearing
on such petition, the Delaware Chancery Court will determine which stockholders
are entitled to appraisal rights and will appraise the "fair value" of their
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shares, exclusive of any element of value arising from the accomplishment or
expectation of the Merger, together with a fair rate of interest, if any, to be
paid upon the amount determined to be the fair value. The costs of the action
may be determined by the Delaware Chancery Court and taxed upon the parties as
the Delaware Chancery Court deems equitable. Upon application of a dissenting
stockholder, the Delaware Chancery Court may also order that all or a portion of
the expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts, be charged pro rata against the value of all of
the shares entitled to appraisal. Stockholders considering seeking appraisal
should be aware that the fair value of their shares as determined under Section
262 could be more than, the same as or less than the consideration they would
receive pursuant to the Merger Agreement if they did not seek appraisal of their
shares and that investment banking opinions are not opinions as to fair value
under Section 262.
In determining fair value, the Delaware Chancery Court is to
take into account all relevant factors. The Delaware Supreme Court has discussed
the factors that can be considered in determining fair value in an appraisal
proceeding, stating that "proof of value by any techniques or methods which are
generally considered acceptable in the financial community and otherwise
admissible in court" should be considered, and that "fair price obviously
requires consideration of all relevant factors involving the value of a
company." The Delaware Supreme Court has stated that, in making this
determination of fair value, the court must consider market value, asset value,
dividends, earnings prospects, the nature of the enterprise and any other facts
which could be ascertained as of the date of the merger that throw any light on
future prospects of the merged corporation. The Delaware Supreme Court has also
stated that "elements of future value, including the nature of the enterprise,
which are known or susceptible of proof as of the date of the merger and not the
product of speculation, may be considered."
Any stockholder who has duly demanded an appraisal in compliance
with Section 262 will not, after the Effective Time, be entitled to vote the
shares subject to such demand for any purpose or be entitled to the payment of
dividends or other distributions on those shares (except dividends or other
distributions payable to holders of record of shares as of a record date prior
to the Effective Time) unless the demand is withdrawn or the appraisal rights
are not perfected.
At any time within 60 days after the Effective Time, any
stockholder who has demanded appraisal rights will have the right to withdraw
such demand for appraisal and to accept the terms offered in the Merger; after
this period, the stockholder may withdraw such demand for appraisal only with
the consent of Merger Subsidiary. If no petition for appraisal is filed with the
Delaware Chancery Court within 120 days after the Effective Time, or if such
stockholder has withdrawn such demand for appraisal as discussed in the
preceding sentence, such stockholder's rights to appraisal shall cease, and all
holders of shares of Buck Class A Common Stock and Buck Class B Common Stock
will be entitled to receive the Merger Consideration applicable thereto. Any
stockholder may withdraw such stockholder's demand for appraisal by delivering
to Merger Subsidiary a written withdrawal of such stockholder's demand for
appraisal and acceptance of the Merger, except that (i) any such attempt to
withdraw made more than 60 days after the Effective Time will require written
approval of Merger Subsidiary and (ii) no appraisal proceeding in the Delaware
Chancery Court shall be dismissed as to any stockholder without the approval of
the Delaware Chancery Court, and such approval may be conditioned upon such
terms as the Delaware Chancery Court deems just.
Failure to comply strictly with the procedures set forth in Section 262 will
result in the loss of a stockholder's statutory appraisal rights. Consequently,
any stockholder wishing to exercise appraisal rights is urged to consult legal
counsel before attempting to exercise such rights.
-26-
<PAGE>
INFORMATION CONCERNING MELLON
Mellon Selected Financial Data
The following tables captioned "Mellon Bank Corporation and
Subsidiaries--Consolidated Selected Historical Financial Data" set forth
selected historical financial data for Mellon. Such data have been derived from,
and should be read in conjunction with, the audited consolidated financial
statements of Mellon including the notes thereto, incorporated by reference in
this Prospectus/Proxy Statement. See "Incorporation of Certain Documents By
Reference."
-27-
<PAGE>
MELLON BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED SELECTED HISTORICAL FINANCIAL DATA
This summary is qualified in its entirety by the detailed
information and financial statements included in the documents incorporated
herein by reference. See "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
Three months ended March 31, Year ended December 31,
--------------------------- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
(dollar amounts in millions, 1997 1996 1996 1995 1994 1993 1992
except per share amounts) ---- ---- ---- ---- ---- ---- ----
Income statement data:
Net interest revenue $370 $363 $ 1,478 $ 1,548 $ 1,508 $ 1,329 $ 1,182
Provision for credit losses 25 25 155 105 70 125 185
--- --- ------ ------ ------ ------ ------
Net interest revenue after
provision for credit losses 345 338 1,323 1,443 1,438 1,204 997
Fee revenue 536 503 2,019 1,670 1,652 1,538 1,154
Gains (losses) on sale of
securities -- 1 4 6 (5) 100 129
Net expense (revenue) of
acquired property (3) (8) (13) (20) (28) 59 95
Securities lending charge
and merger expense -- -- -- -- 327 175 36
Other operating expense 585 568 2,208 2,047 2,075 1,850 1,517
Provision for income
taxes 108 103 418 401 278 298 104
--- --- ------ ------ ------ ------ ------
Net income 191 179 733 691 433 460 528
Net income applicable to
common stock 182 169 689 652 358 397 477
Consolidated per common
share data (pre-stock
split):
Primary net income $1.38 $1.24 $ 5.17 $ 4.50 $ 2.42 $ 2.73 $ 3.56
Fully diluted net income 1.38 1.24 5.15 4.46 2.42 2.73 3.53
Dividends .60 .55 2.35 2.00 1.57 1.01 .93
Book value at period-end 27.19 25.55 26.86 26.17 25.06 24.28 21.37
Average common shares
and equivalents
outstanding:
Primary (in thousands) 131,520 136,506 133,195 145,074 149,069 147,083 134,858
Fully diluted (in thousands) 131,602 136,721 133,912 146,182 149,230 147,293 137,338
Key ratios:
Return on assets (A) 1.83% 1.76% 1.74% 1.72% 1.14% 1.29% 1.72%
Return on common
shareholders' equity (A) 21.2 19.7 20.4 17.8 9.8 12.1 18.5
Net interest margin (A) (B) 4.37 4.35 4.26 4.62 4.71 4.39 4.46
Dividends per common
share as a percentage of:
Primary net income per
share 42.54 44.09 44.96 44.18 54.66 31.28 21.11
Fully diluted net income
per share 42.53 44.08 44.95 44.17 54.63 30.94 20.90
</TABLE>
-28-
<PAGE>
<TABLE>
<CAPTION>
Three months ended March 31, Year ended December 31,
---------------------------- ----------------------------------------------------
(dollar amounts in millions, 1997 1996 1996 1995 1994 1993 1992
except per share amounts) ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Results excluding
certain items (C)
Net income applicable to
common stock $ 182 $ 169 $ 689 $ 652 $ 593 $ 456 $ 347
Fully diluted net income
per common share
(pre-stock split) 1.38 1.24 5.15 4.46 4.00 3.13 2.59
Return on common shareholders'
equity (A) 21.2 % 19.7 % 20.4 % 17.8 % 16.0 % 13.7 % 13.1 %
Return on assets (A) 1.83 1.76 1.74 1.72 1.71 1.46 1.29
Consolidated balance sheet
data-average balances (A):
Money market investments $ 1,032 $ 1,290 $ 1,381 $ 1,222 $ 1,656 $ 3,821 $ 1,905
Securities 6,018 5,339 6,184 4,922 5,149 4,804 6,500
Loans 27,404 27,058 27,233 27,321 25,097 21,763 18,235
Total interest-earning assets 34,615 33,825 34,944 33,761 32,282 30,657 26,948
Total assets 42,187 40,848 42,013 40,097 38,106 35,635 30,758
Deposits 30,280 29,274 30,838 27,951 27,248 26,541 22,684
Notes and debentures 2,517 1,554 2,038 1,670 1,768 1,991 1,365
Trust-preferred securities 990 -- 32 -- -- -- --
Common shareholders' equity 3,490 3,459 3,381 3,671 3,691 3,323 2,603
Total shareholders' equity 3,735 3,894 3,810 4,106 4,277 3,964 3,112
Capital ratios:
Common shareholders'
equity to assets (D) 8.33% 8.14% 8.11% 8.83% 9.54% 9.57% 8.85%
Tier I capital ratio (D) 8.74 7.69 8.38 8.14 9.48 9.70 10.20
Total (Tier I plus Tier II)
capital ratio (D) 13.65 12.20 13.58 11.29 12.90 13.22 13.83
Leverage capital ratio (D) 8.75 7.52 8.31 7.80 8.67 9.00 9.45
Asset quality ratios (E):
Reserve for credit losses
as a percentage of:
Total loans (D) 1.88% 1.74% 1.92% 1.70% 2.27% 2.45% 2.54%
Nonperforming loans (D) 543 265 556 282 403 297 152
Net credit losses as a
percentage of average
loans (A) 0.48 0.41 0.46 0.91 0.27 0.64 1.52
Nonperforming assets as a
percentage of total loans
and net acquired
property (D) 0.62 0.93 0.63 0.85 0.89 1.39 2.94
</TABLE>
Footnotes
Note: The comparability of this information has been affected by Mellon's
October 1, 1996, acquisition of First United Leasing Corporation, the
September 30, 1996 acquisition of the business equipment financing unit
of USL Capital Corporation, the December 1993 acquisition of AFCO
Credit Corporation and CAFO, Inc., the May 1993 acquisition of The
Boston Company, and the December 1992 acquisition of certain assets and
deposit liabilities of Meritor Savings Banks ("Meritor"). These
acquisitions, as well as other less material
-29-
<PAGE>
acquisitions and divestitures, are described in detail in Mellon's
Annual Reports on Form 10-K for the years ended December 31, 1992
through 1996, or other documents incorporated by reference herein.
(A) Computed on a daily average basis.
(B) Calculated on a taxable equivalent basis, at tax rates approximating
35% for the first quarter 1997, the first quarter 1996 and the full
years 1996, 1995, 1994 and 1993 and 34% in 1992. Loan fees, nonaccrual
loans and the related effect on income have been included in the
calculation of the net interest margin.
(C) Results for 1994 exclude a $130 million after tax securities lending
charge, $79 million after-tax of Dreyfus merger-related expense, $10
million after-tax of losses on the disposition of securities available
for sale previously owned by Dreyfus and $16 million of preferred stock
dividends recorded in connection with the redemption of Mellon Series H
preferred stock. Results for 1993 exclude $112 million after-tax of
merger expense and $53 million after-tax of gains on the sale of
securities related to the acquisition of The Boston Company. Results
for 1992 were calculated by applying a normalized effective tax rate of
approximately 38% to pretax income. The unrecorded tax benefit that
existed at the beginning of 1992 was included in the determination of
the return on average common shareholders' equity.
(D) Period-end ratio.
(E) Segregated assets acquired in the 1992 Meritor acquisition are not
reported as loans and therefore are not included in nonperforming
loans. The reserve for segregated assets is not included in the reserve
for credit losses.
-30-
<PAGE>
MARKET PRICES OF MELLON COMMON STOCK; CASH DIVIDENDS
Mellon Common Stock is listed and traded on the NYSE. The table below
sets forth, for the quarters indicated, the high and low closing sales prices
per share of Mellon Common Stock, as reported on the NYSE Composite Transactions
Tape, and the common stock cash dividends declared for such quarters.
Mellon Common Stock
-------------------
<TABLE>
<CAPTION>
Cash Dividends
High Low Per Share
---- --- ---------
<S> <C> <C> <C>
1994 First Quarter $39 1/2 $35 $.3733
Second Quarter 40 3/8 36 1/8 .3733
Third Quarter 39 3/4 37 .3733
Fourth Quarter 38 3/8 30 .45
1995 First Quarter $41 3/4 $30 5/8 $.45
Second Quarter 44 3/4 37 3/4 .50
Third Quarter 47 3/4 39 5/8 .50
Fourth Quarter 56 1/2 44 5/8 .55
1996 First Quarter $58 1/2 $48 1/4 $.55
Second Quarter 60 1/8 51 5/8 .60
Third Quarter 60 3/4 50 1/2 .60
Fourth Quarter 74 3/4 59 7/8 .60
1997 First Quarter 86 1/4 71 3/4 .60
</TABLE>
On March 14, 1997, the last business day before the first public
announcement of the Merger on March 17, 1997, the closing sales price of Mellon
Common Stock, as reported on the NYSE Composite Transactions Tape, was $81.125
per share.
On May 15, 1997, the closing sales price of Mellon Common Stock as
reported on the NYSE Composite Transactions Tape was $85.00 per share. No
assurance can be given as to the market price of Mellon Common Stock if and at
the time the Merger is consummated.
On May 15, 1997, there were approximately 23,700 holders of record of
Mellon Common Stock.
On April 15, 1997, Mellon announced a two-for-one split of Mellon
Common Stock. The two-for-one stock split will take the form of a stock dividend
of one additional share of Mellon Common Stock being paid on each outstanding
share of Mellon Common Stock. The additional shares resulting from the stock
split will be distributed on June 2, 1997, to shareholders of record at the
close of business on May 1, 1997. The information set forth above has not been
adjusted to reflect the Stock split.
-31-
<PAGE>
MELLON DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed by Mellon with the SEC
pursuant to the Exchange Act (File No. 1-7410) are hereby incorporated by
reference into this Prospectus/Proxy Statement:
1. Mellon's Annual Report on Form 10-K for the year ended December 31,
1996 and Quarterly Report on Form 10-Q for the quarter ended March 31, 1997;
and
2. Mellon's Current Reports on Form 8-K dated January 8, 1997, January
17, 1997, March 17, 1997 and April 14, 1997; and
3. The description of the Mellon Common Stock which is contained in
Mellon's Current Report on Form 8-K dated January 17, 1997.
All documents filed by Mellon with the SEC pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus/Proxy
Statement and prior to the date of the Buck Special Meeting shall be deemed to
be incorporated by reference in this Prospectus/Proxy Statement and to be a part
hereof from the date of the filing of such documents.
Mellon shareholders or Buck stockholders who wish to obtain copies of
the Mellon documents incorporated by reference herein may do so by following the
instructions under "Available Information" above.
INFORMATION CONCERNING BUCK
Management's Discussion and Analysis of Financial
Condition and Results of Operations of Buck
Year Ended March 31, 1997 Compared to Year Ended March 31, 1996
Revenues were $238.6 million for fiscal 1997 as compared to $197.7
million for fiscal 1996, an increase of $40.9 million or 20.7%. U.S. revenues
increased $28.0 million, or 19.1% and non-U.S. revenues increased $12.9 million,
or 25.2%. Revenue growth was favorably impacted by the WF Corroon acquisition on
November 29, 1996. The revenue growth occurred across most service lines with
strong results from actuarial, administrative services, compensation consulting
and health and welfare.
Compensation and benefit expenses were $170.1 million in fiscal 1997 as
compared to $138.7 million in fiscal 1996. The increase was largely attributable
to increased staffing in the U.S. where headcount increased by more than 500,
with approximately 300 attributable to the Corroon acquisition. Non-U.S.
compensation and benefits increased by $8.5 million for fiscal 1997 as compared
to the prior period. This is the result of expanded operations in Spain and
Singapore, the opening of an office in Geneva, the full year's impact of the
Australian joint venture, and the Corroon acquisition in the United Kingdom.
General operating expenses (including interest expense) for fiscal 1997
were $61.0 million as compared to $44.5 million for fiscal 1996. The increase
was attributable to the Corroon acquisition, higher costs of supplies and
software, increased recruiting expenses and occupancy expenses. Non-U.S.
operating expenses accounted for $4.0 million of the increase, primarily as a
result of expanded operations in Spain and Singapore, the full year's impact of
the Australian joint venture and the Corroon acquisition.
Depreciation and amortization expense was $6.6 million for fiscal 1997
as compared to $4.5 million for fiscal 1996. The increase was primarily
attributable to the Corroon acquisition.
Income before income taxes and minority interest declined to $7.5
million for fiscal 1997 from $14.6 million for fiscal 1996, primarily as a
result of the increase in total operating expenses from staff investments made
in administrative services and outsourcing exceeding revenue growth in the
period.
Net income for fiscal 1997 declined to $3.8 million from $8.0 million
for fiscal 1996.
-32-
<PAGE>
Year Ended March 31, 1996 Compared to Year Ended March 31, 1995
Revenues were $197.7 million in fiscal 1996 as compared to $177.1
million in fiscal 1995, an increase of $20.6 million or 11.5%. Revenue growth
occurred across most lines of business in the U.S., and in non-U.S. operations.
Fiscal 1996 revenues include $15.0 million from the Australian joint venture
which began in May 1995.
Compensation and benefit expenses were $138.7 million in fiscal 1996 as
compared to $120.8 million in fiscal 1995, an increase of $17.9 million. The
increase is primarily attributable to the increased number of staff added to
administrative and outsourcing services in the U.S. and the impact of the
Australian joint venture.
General operating expenses (net of interest income) were $44.5 million
in fiscal 1996 as compared to $39.4 million in fiscal 1995, an increase of $5.1
million or 12.9%. After the effect of capitalizing certain administrative
systems software development costs in fiscal 1996, general operating expenses in
the U.S. were essentially flat in fiscal 1996 as compared to those in fiscal
1995. The increase in general operating expenses in fiscal 1996 was principally
related to the non-U.S. operations, particularly the expanded operation in
Australia.
Depreciation and amortization expense was $4.5 million in fiscal 1996
as compared to $4.4 million in fiscal 1995.
Income before income taxes and minority interest decreased to $14.6
million in fiscal 1996 from $16.9 million in fiscal 1995, a decline of $2.3
million. The decline was largely attributable to significant investments that
were made in administrative services and outsourcing.
Net income in fiscal 1996 declined to $8.0 million from $8.8 million in
fiscal 1995.
Liquidity and Capital Resources
Buck relies primarily on funds from operations and on occasional
short-term borrowing as its sources of liquidity. Buck's cash and cash
equivalents at March 31, 1997 and 1996 were $11.9 million and $13.5 million,
respectively. At March 31, 1997, Buck had short-term borrowings of $1.9 million
as compared to $2.8 million at March 31, 1996.
Buck's operating cash flow is generally stable and typically does not
fluctuate widely within a period. Operating cash flows for March 31, 1997 were
$10.9 million as compared to $18.0 million for March 31, 1996.
Buck's ratio of current assets to current liabilities was 1.43 at March
31, 1997 and 1.66 at March 31, 1996.
Investing activity cash outflow was $26.8 million in fiscal 1997 and
$8.2 million in fiscal 1996. The increase was largely due to administrative
system software development and the Coroon acquisition.
Financing activity cash inflow was $14.2 million in fiscal 1997 as
compared to a cash outflow of $5.6 million in fiscal 1996. The change reflects
the bank borrowings used to make the Corroon acquisition offset by the
repurchase of Buck Common Stock during fiscal 1997.
Description of Buck's Business
Buck is the oldest actuarial, employee benefit and compensation
consulting firm in North America. Established in 1916 as a sole proprietorship,
Buck has grown into a globally diversified consulting firm providing actuarial,
employee benefit, compensation and human resources consulting and related
services. In 1970, Buck was converted to a closely-held, employee-owned
corporation. Headquartered in New York City, Buck has 67 offices in 16 countries
and services clients throughout the United States and the world.
-33-
<PAGE>
Recent Acquisition
In November 1996, Buck acquired the WF Coroon human resource and
employee benefit and compensation consulting business from Willis Corroon Group
plc. As a result of the acquisition, Buck expanded its presence in the United
States and abroad and added approximately 500 employees to its work force. The
acquisition added six new Buck offices in the United States and nine new Buck
offices in the United Kingdom.
Services
Buck's activities generally fall into three broad categories: (i) plan
actuarial services and related activities, (ii) general employee benefits
consulting services and related activities, and (iii) administration and
outsourcing services and related activities.
Plan Actuarial Services. Buck offers a wide array of recurring plan
actuarial services to its clients by acting as actuarial consultant on
retirement as well as health and welfare benefit plans of all types and sizes.
These activities include designing plans to meet specific needs of clients,
recurring valuations of plan assets and liabilities, allocations of costs of
plans, actuarial funding levels and projections of costs associated with
implementing new plans and/or modifying existing plans, and preparation of
actuarial information for governmental filings and financial statements. Buck
also assists clients in determining the impact of various aspects of pension
policy decisions and advises employers on issues regarding the financial
implications affecting various retirement and benefit plans in the context of
plan terminations, plant shutdowns and spin-offs, labor negotiations and
merger/acquisition situations.
General Employee Benefits Consulting Services. Buck has extensive
experience and offers a wide range of consulting services to clients in the
areas of defined benefit and defined contribution plans as well as all manner of
employee health and welfare benefit plans and general compensation and human
resources management plans. These general employee benefits consulting
activities are targeted specifically to various client sectors (e.g., large
domestic and foreign corporate, medium and small businesses, governmental and
quasi-governmental entities (national and international), multi-employer plans
and multi-national employer plans). Plan design, implementation and analysis are
key elements to Buck's general employee benefits consulting practice and Buck's
extensive experience in developing or modifying plans, and effectively utilizing
the necessary sophisticated computer systems, enable Buck to provide services to
meet the demands of its clients. Buck's full service consulting capability
enables it to provide employers and plan sponsors with expert advice beyond the
initial development and implementation into the areas of plan financing,
administration, maintenance, monitoring and employee communication. The range of
plans, plan sponsor and employer activities included under Buck's general
employee benefits consulting practice includes defined benefit and defined
contribution plans, employee stock ownership plans, retirement savings plans,
deferred compensation plans, group life, health, disability and death benefit
plans, managed health care plans, flexible benefit and dependent care plans,
executive compensation plans, alternative reward, and incentive or performance
based plans and general compensation plans. Numerous clients of Buck rely on
Buck's general employee benefits consulting services with respect to more than
one specific plan, and many times also utilize Buck's plan administration and
outsourcing services in connection with those plans.
Plan Administration and Outsourcing Services. Buck offers a broad range
of integrated services from straight forward recordkeeping to full outsourcing
to help clients administer their various defined benefit, defined contribution,
health and welfare benefit and compensation plans. Buck's outsourcing services
include feasibility studies, full administrative and recordkeeping expertise,
voice response capabilities and a service center with experienced
representatives to assist employee participants in utilizing such plans.
Employee plan participant communication and education services are increasingly
becoming a more important element of plan administration as the plans grow in
complexity and the number of choices available to employee participants
proliferates. As a result, Buck assists employers with a wide range of
educational services, audio visual presentations, interactive video, voice
response and other computer generated communication tools to assist its clients
in evaluating, designing and implementing effective communication programs to
inform employees of their benefit choices and how to utilize their benefits most
effectively.
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<PAGE>
Products
Buck utilizes a number of innovative actuarial computer systems
(ACTVAL, PENVAL and GINSU) and other computer systems (BENCAL, Interactive Data
Program (IDP), Buck Social Security, The Buck Retirement Planner(TM),
Recordkeeping Plus(TM), Universal Health & Welfare System, Buck Information
Technology Human Resource Manager and Worldbase(TM)) in performing services for
its clients.
Buck's actuarial systems -- ACTVAL for active participants, PENVAL for
inactive participants entitled to current or future benefits, and GINSU which
manipulates data into the necessary format for valuation purposes -- provide the
framework for performing actuarial valuations. These systems comprise a
completely parameterized, state-of-the-art valuation package for defined benefit
and post-retirement welfare plans.
Other computer systems utilized by Buck on both PC and mainframe
platforms include:
BENCAL - A comprehensive defined benefit administration system
which performs all the tasks required to administer defined benefit
pension plans.
Interactive Data Program - A program which affords users immediate
and continuous access to data in their files and is a powerful tool
for manipulating valuation, recordkeeping and research data.
Buck Social Security - A program which assists the user in
calculating a variety of Social Security Benefits and payments.
Recordkeeping Plus/(TM)/ - A comprehensive on-line system for the
administration of all types of defined contribution and defined
benefit plans providing inquiry, transaction, loan administration,
payroll processing and daily defined contribution valuation and
voice response capabilities.
Universal Health & Welfare System - An integrated system which
supports Buck's health and welfare administrative and recordkeeping
services.
Buck Information Technology Human Resource Manager - An integrated
Windows-based database which allows the user to store and access
complete personnel records and produce standard and customized
management reports.
Buck Retirement Planner/(TM)/ - An interactive personal computer
program which helps users plan for retirement.
Several of Buck's proprietary computer systems are available for
purchase or lease by clients.
Customers
Buck provides professional services to approximately 5,000 clients
ranging from large multi-national corporations to small businesses. Buck's top
100 clients include a number of Fortune 500 companies. Buck's clients include
not-for-profit organizations, educational institutions, health care providers,
state and local government retirement systems, prestigious national and
international quasi-governmental organizations and Taft-Hartley plans.
Competition
The principal elements of competition in the actuarial and employee
benefit consulting industry are breadth and quality of services offered and
pricing. Historically, Buck's principal competitors have been other employee
benefit consulting firms such as Towers Perrin, William Mercer & Co., Hewitt
Associates and Watson-Wyatt Worldwide. The growth of outsourcing has spurred
competition from nontraditional sources (i.e., financial institutions, data
processing companies and mutual funds) as such sources begin to develop employee
benefit administration/outsourcing services.
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<PAGE>
Employees
Buck employs approximately 2600 employees.
Properties
Buck and its subsidiaries have 67 offices located in 16 countries
around the world. All of Buck's offices are leased. The following table shows
the countries in which Buck and its subsidiaries and affiliates have offices.
Country Number of Offices
------- -----------------
Australia/1/ 6
Austria 1
Belgium 1
Canada 4
France 1
Germany/1/ 1
Hong Kong 1
Ireland 2
Mexico 2
Netherlands 1
Singapore 1
Spain 2
Switzerland 1
Trinidad 1
United Kingdom 12
United States 30
/1/ Operated by an affiliate of Buck.
-36-
<PAGE>
Management of Buck
The following table provides information as of March 31,
1997 with respect to Buck's directors and executive officers.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Joseph A. LoCicero 50 President, Chief Executive Officer, Consulting Actuary and Director
William E. Giegerich, Jr. 50 Chairman and Director
Merrill S. Delon 48 Secretary, Consulting Actuary and Director
Gary S. Stephen 46 Treasurer and Controller
Stephen D. Diamond 48 Consulting Actuary and Director
Edward I. Farb 53 Group Executive, Consulting Actuary and Director
Brian W. Kruse 56 Group Executive, Consulting Actuary and Director
Karl W. Lohwater 42 Assistant Secretary and General Counsel
J. Robinson Lynch 41 Group Executive, Benefit Consultant and Director
Frederick W. Rumack 54 National Director of Tax and Legal Services and Director
Raymond E. Sharp 51 Consulting Actuary and Director
Barry S. Sutton 57 President and Chief Executive Officer of GBB Buck Consultants Limited and Director
Vincent M. Tobin 62 Group Executive, Consulting Actuary and Director
Gregory J. Wiber 45 Group Executive and Director
</TABLE>
Joseph A. LoCicero has been President and Chief Executive Officer of
Buck since 1995. Prior thereto, he was a Group Executive and Consulting Actuary
since prior to 1992. Mr. LoCicero is also a member of the Board of Directors and
a Principal of Buck. Mr. LoCicero is an Enrolled Actuary, a Member and former
Committee Chairman of the American Academy of Actuaries and a Member of the
American Society of Pension Actuaries. Mr. LoCicero has a B.A. degree from
Hunter College and a J.D. degree from New York University Law School.
William E. Giegerich, Jr. is the Chairman, a member of the Board of
Directors and a Principal of Buck. Mr. Giegerich was the Chief Executive Officer
of Buck from prior to 1992 to 1995 and has been employed by Buck since 1970. Mr.
Giegerich is a Fellow of the Society of Actuaries, a Fellow of the Conference of
Consulting Actuaries, a member of the American Academy of Actuaries, and an
Enrolled Actuary. Mr. Giegerich has a B.S. degree from St. Francis College and
an M.S. degree from Northeastern University.
Merril S. Delon is the Secretary, a Consulting Actuary, a member of the
Board of Directors and a Principal of Buck. Ms. Delon has been a Consulting
Actuary with Buck since prior to 1992. She is an Associate of the Society of
Actuaries, a Member of the American Academy of Actuaries, a Member of the
Conference of
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<PAGE>
Consulting Actuaries and an Enrolled Actuary. Ms. Delon has a B.A. degree from
Douglass College of Rutgers University.
Gary S. Stephen has been the Treasurer, the Controller and a Principal
of Buck since prior to 1992. Mr. Stephen is a CPA and has a B.A. degree from
Franklin and Marshall College and an M.B.A. from Fairleigh Dickinson University.
Stephen D. Diamond has been a Consulting Actuary with Buck since prior
to 1992. He is also a member of the Board of Directors and a Principal of Buck.
Mr. Diamond is an Enrolled Actuary and Fellow of the Society of Actuaries and
the Conference of Consulting Actuaries and a Member of the American Academy of
Actuaries. Mr. Diamond has a B.S. degree from Georgia Institute of Technology,
and an M.A.S. from Georgia State University.
Edward I. Farb has been the Managing Principal of Buck's New York/New
Jersey office since 1995. He has been a Group Executive since prior to 1992 and
is also a Consulting Actuary, a member of the Board of Directors and a Principal
of Buck. Mr. Farb is a Fellow of the Society of Actuaries, a Fellow of the
Conference of Consulting Actuaries, a Member of the American Academy of
Actuaries and an Enrolled Actuary. Mr. Farb has an A.B. degree from the College
of William and Mary and did graduate work at New York University Graduate School
of Business Administration.
Brian W. Kruse has been a Group Executive with Buck since prior to
1992. He is also a Consulting Actuary, a member of the Board of Directors and a
Principal of Buck. Mr. Kruse is an Enrolled Actuary, a Fellow of the American
Society of Pension Actuaries and a member of the American Academy of Actuaries.
Mr. Kruse has a B.A. degree from La Salle University.
Karl W. Lohwater is the Assistant Secretary, General Counsel and a
Principal of Buck. Mr. Lohwater joined Buck in 1995 from Towers Perrin, where he
served as General Counsel and Secretary since prior to 1992. Mr. Lohwater has a
B.A. degree from The College of Wooster and a J.D. degree from Columbia
University Law School.
J. Robinson Lynch has been the Managing Principal of Buck's San
Francisco office since prior to 1992. He is also a Group Executive and a member
of the Board of Directors of Buck. Mr. Lynch has a B.A. degree from Ohio
Wesleyan University and did post-graduate work at Golden Gate University. He is
a past Director of the Northern California Employee Benefits Council and current
Director of Vision Service Plan, a national health care organization.
Frederick W. Rumack has been Buck's National Director of Tax and Legal
Services and Research since prior to 1992. He is a member of the Board of
Directors and a Principal of Buck. Mr. Rumack has a B.A. degree from Queens
College, a J.D. degree from Brooklyn Law School and an L.L.M. in taxation from
New York University.
Raymond E. Sharp has been a Consulting Actuary with Buck since prior to
1992. He is also a member of the Board of Directors and a Principal of Buck. Mr.
Sharp is a Fellow of both the British Institute of Actuaries and the U.S.
Society of Actuaries. In addition, he is a Member of the American Academy of
Actuaries, the International Actuarial Association, a Fellow of the Royal
Statistical Society and is an Enrolled Actuary. He has a B. Tech. degree from
the University of Bradford, England.
Barry S. Sutton has been the President and Chief Executive Officer of
Buck Consultants Limited, Buck's Canadian subsidiary since prior to 1992. He is
also a member of the Board of Directors and a Principal of Buck. Mr. Sutton is a
Fellow of the Society of Actuaries, a Fellow of the Canadian Institute of
Actuaries, a member of the American Academy of Actuaries, a member of the
International Actuarial Association, a member of the International Association
of Consulting Actuaries and an Enrolled Actuary. Mr. Sutton has a B. Comm.
degree from the University of Toronto and an M.B.A. from York University.
Vincent M. Tobin has been a Group Executive of Buck since prior to
1992. He is also a Consulting Actuary, a member of the Board of Directors and a
Principal of Buck. Mr. Tobin is also Buck's National
-38-
<PAGE>
Director of Consulting Activities. Mr. Tobin is a Fellow of the Society of
Actuaries, a Fellow of the Conference of Consulting Actuaries, a Member of the
American Academy of Actuaries and an Enrolled Actuary.
Gregory J. Wiber is the Managing Principal of Buck's Philadelphia
office and a member of the Board of Directors of Buck. He has also been a Group
Executive and a Principal of Buck since prior to 1992. Mr. Wiber received a
bachelor's degree from Yale University and an M.B.A. in finance from New York
University.
-39-
<PAGE>
Security Ownership of Certain Beneficial Owners and Management of Buck
The following table sets forth, as of the date of this
Prospectus/Proxy Statement, the beneficial ownership of Buck Class A Common
Stock and Buck Class B Common Stock by each director of Buck, each executive
officer of Buck and the directors and executive officers of Buck as a group, and
each person who beneficially owns more than 5% of the outstanding shares of Buck
Class A Common Stock and Buck Class B Common Stock.
<TABLE>
<CAPTION>
Amount and Nature Percent of Outstanding
Name of Beneficial Shares of Buck
Ownership
<S> <C> <C>
Merrill S. Delon 13,000 1.70
Stephen D. Diamond 7,500 1.00
Edward I. Farb 25,300 3.30
William E. Giegerich, Jr 47,500 6.10
Brian W. Kruse 8,000 1.00
Joseph A. LoCicero 24,100(1) 3.10
Karl W. Lohwater 500(2) 0.10
James Robinson Lynch 4,600(3) 0.60
Frederick W. Rumack 20,000 2.60
Raymond E. Sharp 10,000 1.30
Gary S. Stephen 2,500(4) 0.30
Barry S. Sutton 24,011 3.10
Vincent M. Tobin 44,750 5.80
Gregory J. Wiber 4,600(5) 0.60
All directors and executive officers as a group
(14 persons) 236,361(6) 30.50
</TABLE>
- --------------------------------
(1) Includes 8,000 issuable shares of Buck Class B Common Stock.
(2) Includes 400 issuable shares of Buck Class B Common Stock.
(3) Includes 1,270 issuable shares of Buck Class B Common Stock.
(4) Includes 420 issuable shares of Buck Class B Common Stock.
(5) Includes 1,340 issuable shares of Buck Class B Common Stock.
(6) Includes 11,430 issuable shares of Buck Class B Common Stock.
-40-
<PAGE>
Market Price of and Dividends on Buck Common Stock
Buck Common Stock is not listed, traded or quoted on any stock exchange
or quotation system and Buck has never paid any dividends thereon.
COMPARISON OF SHAREHOLDERS' RIGHTS
Upon consummation of the Merger, the stockholders of Buck will become
stockholders of Mellon. The following summary compares the material differences
between the rights of holders of shares of Buck Common Stock and the rights of
holders of shares of Mellon Common Stock. These differences arise from (i) the
distinctions between the laws of the jurisdictions in which Buck and Mellon are
incorporated (the State of Delaware and Commonwealth of Pennsylvania,
respectively) and (ii) the distinctions between the Certificate of Incorporation
and By-Laws of Buck and the Articles of Incorporation and By-Laws of Mellon.
The following summary includes all material aspects, but does not
purport to be a complete statement, of the rights of holders of shares of Buck
Common Stock and shares of Mellon Common Stock under, and is qualified in its
entirety by reference to, Delaware and Pennsylvania law, the respective
Certificate and Articles of Incorporation and the By-Laws of Buck and Mellon.
Cumulative Voting
The holders of Buck Common Stock are entitled to one vote for each
share held of record on all matters submitted to a shareholder vote and do not
have cumulative voting rights in the election of directors. The absence of
cumulative voting means that a nominee for director must receive the votes of a
plurality of the shares voted in order to be elected.
Pennsylvania law provides that unless the articles of incorporation
specify otherwise, shareholders are entitled to cumulative voting in the
election of directors. Mellon's Articles of Incorporation expressly provide that
shareholders do not have any such cumulative voting rights.
Dividends
The holders of Buck Common Stock are entitled to dividends when and as
declared by the Buck Board of Directors out of funds legally available therefor.
Under Delaware law, dividends may be paid out of either surplus or net profits,
limited in certain cases where a corporation's capital has been diminished below
certain amounts.
Pennsylvania law allows dividends to be paid as long as (i) after
payment of the dividends the corporation could pay its debts when they become
due in the usual course of business and (ii) the total assets of the corporation
would not be less than the sum of total liabilities plus (unless provided in the
articles of incorporation) the amount needed to satisfy preferential rights upon
dissolution of the corporation. Pennsylvania law does not limit payment of
dividends to situations in which surplus or net profits exist.
Dissenters' Rights
The DGCL provides for dissenters' rights in certain mergers or
consolidations. Shareholders of a Delaware corporation are not, however,
entitled to such appraisal rights under the DGCL if their stock is either (i)
listed on a national securities exchange or designated as a NASDAQ National
Market System security or (ii) held of record by more than 2,000 shareholders,
except in certain cases in which the shareholders would be required to accept
for their shares something other than (i) stock of the surviving or resulting
corporation, or (ii) stock of another corporation which is listed on a national
securities exchange, designated as a NASDAQ National Market System security or
held of record by more than 2,000 shareholders (or cash in lieu of fractional
shares). Because Buck Common Stock is not listed on a national securities
exchange, designated as a NASDAQ National Market System security or held of
record by more than 2,000 shareholders, stockholders of Buck will have the right
to dissent from the Merger. See "The Merger--Background of and Reasons for the
Merger--Conversion of Buck Common Stock--Dissenters' Rights."
-41-
<PAGE>
Under Pennsylvania law, dissenting shareholders who follow prescribed
statutory procedures are entitled to obtain payment of the fair value of such
shareholders' shares in connection with a plan of merger or consolidation, share
exchange, division, conversion or sale of substantially all of the assets of a
corporation and certain other transactions on which shareholders are entitled to
vote. However, such appraisal rights are not provided, except in limited
circumstances, to a shareholder under Pennsylvania law where shares of the class
held by the shareholder and entitling the shareholder to vote on the plan, are
held of record by more than 2,000 shareholders or are listed on a national
securities exchange, provided that, among other things, the shares are converted
solely into shares of another corporation and cash in lieu of fractional
interests. Furthermore, Pennsylvania law does not provide, except in limited
circumstances, appraisal rights to shareholders of a registered corporation in
connection with the sale, lease, exchange or other disposition of all or
substantially all of its properties and assets. Under Pennsylvania law, a
corporation may, within its articles of incorporation, by-laws or resolution of
the board of directors, grant appraisal rights to shareholders in situations
where such shareholders would not otherwise be entitled to appraisal rights
under Pennsylvania law. Mellon has not granted such additional appraisal rights
to its shareholders. Accordingly, Buck stockholders who become Mellon
shareholders will not have the right to demand cash payment of the fair value of
their shares in the case of mergers, sales of substantially all assets or
similar transactions described above involving Mellon. As noted above, Buck
stockholders currently have such right, including in connection with the Merger.
Business Combinations Following a Change in Control
Under Section 203 of the DGCL, a corporation may not engage in a
"business combination" with an "interested stockholder" for a period of three
years following the time that the shareholder became an interested stockholder
unless (1) prior to such time the corporation's board of directors approved
either the business combination or the transaction which resulted in the
shareholder becoming an interested stockholder, (2) upon consummation of the
transaction in which the shareholder became an interested stockholder, the
interested stockholder owned at least 85% of the outstanding corporation's
Common Stock, excluding shares owned by persons who are both directors and
officers of the corporation or by certain employee stock plans or (3) at or
subsequent to such time the business combination is approved by the
corporation's board of directors and authorized at an annual or special meeting
by the vote of at least two-thirds of the corporation's Common Stock which is
not beneficially owned by the interested stockholder. For purposes of Section
203, an "interested stockholder" is generally (i) a beneficial owner of 15% or
more of the outstanding corporation's Common Stock or (ii) an affiliate or
associate of the corporation which was a 15% beneficial owner at any time during
the preceding three years.
Under Pennsylvania law, a registered corporation shall not at any time
engage, except in certain instances, in any business combination with any
interested shareholder (a beneficial owner of more than 20% of the outstanding
stock entitled to elect directors or an affiliate or associate of the
corporation who at any time within the previous five years was the beneficial
owner of more than 20% of the outstanding stock entitled to elect directors,
excluding, in each case, shares held continuously since January 1, 1983) of the
corporation other than (i) a business combination approved by the board of
directors of the corporation, (ii) by the affirmative vote of all of the holders
of the outstanding common stock of the corporation, (iii) if the consideration
payable to shareholders of the corporation in the business combination complies
with certain fair price conditions specified by Pennsylvania law, by holders of
a majority of the voting shares (excluding the shares held by the interested
shareholder or any associate or affiliate thereof) at a meeting called for such
purpose, no earlier than three months after the interested shareholder becomes
the beneficial owner of at least 80% of the corporation's voting shares, or (iv)
if the interested shareholder waits at least five years after its share
acquisition date and (a) obtains a majority of the votes of the shareholders
entitled to vote (excluding the shares held by the interested shareholder or any
associate or affiliate thereof) or (b) the business combination complies with
certain fair price conditions specified by Pennsylvania law and is approved by
the shareholders. The statute does not apply to business combinations with an
interested shareholder who was the beneficial owner of at least 15% of the
voting stock of such corporation on March 23, 1988 and remains so to the share
acquisition date of the interested shareholder.
The PBCL includes control share acquisition provisions, together with
disgorgement and severance compensation provisions which provide for the
recovery by a corporation of profits from the sale of the corporation's shares
and severance payments to terminated employees, in the event of certain control
share acquisitions (acquisitions of a corporation's stock by a holder of 20% or
more of stock entitled to vote in the election of directors). Mellon, pursuant
to its By-Laws, has opted out of these statutes as permitted thereunder. The
PBCL also includes a fair price provision which gives a corporation's
shareholders the ability, in certain instances, to
-42-
<PAGE>
require a person who has become a 20% or more shareholder to buy the other
shareholders' stock at a "fair price," as determined by the PBCL.
Mellon Shareholder Protection Rights Plan
Mellon has adopted a Shareholder Protection Rights Plan under which
each holder of shares of Mellon Common Stock on October 15, 1996 or issued
thereafter (including shares to be issued in the Merger) receives one right (a
"Right") for each share of Mellon Common Stock (the "Voting Stock") held. The
Rights are currently represented by the certificates for, and trade only with,
the Voting Stock. The Rights would separate from the Voting Stock and become
exercisable only if a person or group acquires 15% or more of the voting power
of the Voting Stock or ten days after a person or group commences a tender offer
that would result in ownership of 15% or more of such voting power. At that
time, each Right would entitle the holder to purchase for $225 (the "exercise
price") one one-hundredth of a share of participating preferred stock, which is
designed to have economic and voting rights generally equivalent to one share of
common stock. Should a person or group actually acquire 15% or more of the
Mellon Common Stock, each Right held by the acquiring person or group (or their
transferees) would become void and each Right held by Mellon's other
shareholders would entitle those holders to purchase for the exercise price a
number of shares of the Mellon Common Stock having a market value of twice the
exercise price. Should Mellon, at any time after a person or group has become a
15% beneficial owner and acquired control of Mellon's board of directors, be
involved in a merger or similar transaction with any person or group or sell
assets to any person or group, each outstanding Right would then entitle its
holder to purchase for the exercise price a number of shares of such other
company having a market value of twice the exercise price. In addition, if any
person or group acquires 15% or more of the Mellon Common Stock, Mellon may, at
its option and to the fullest extent permitted by law, exchange one share of
Common Stock for each outstanding Right. The Rights are not exercisable until
the above events occur and will expire on October 31, 2006, unless earlier
exchanged or redeemed by Mellon. Mellon may redeem the Rights for $.01 per Right
under certain circumstances. The Rights will not become exercisable by virtue of
the Merger because, based upon available public information as to beneficial
ownership of Buck Common Stock and Mellon Common Stock, no person or group will
acquire in the Merger sufficient shares to give such person or group beneficial
ownership of 15% or more of the voting power of the Voting Stock.
The existence of the Shareholder Protection Rights Plan could make it
more difficult for a third party to acquire control of Mellon than would be the
case if Mellon had no such plan.
Buck Purchase Agreements
The outstanding shares of Buck Common Stock are subject to certain
transfer restrictions contained in the stock purchase agreements (the "Buck
Purchase Agreements") pursuant to which such shares were purchased by the
employees of Buck. Generally, the Buck Purchase Agreements provide that at any
time prior to (i) the occurrence of an initial public offering of Buck, (ii) a
sale of substantially all of the assets of Buck or (iii) a transaction resulting
in the stockholders of Buck failing to maintain control of the post-transaction
entity, the holders of the Buck Common Stock may not sell, transfer or otherwise
dispose of their shares except as provided in the Buck Purchase Agreements.
The Buck Purchase Agreements also provide that upon the death,
retirement or termination of employment of a holder of Buck Common Stock, such
holder's shares are purchased by Buck at the book value of such shares. The Buck
Purchase Agreements provide further that if a holder of Buck Common Stock
desires to transfer all or a part of such holder's shares, such holder must
first offer such shares to Buck and the other stockholders of Buck.
Mellon Common Stock is not subject to any purchase agreements.
Accordingly, Buck stockholders who become Mellon shareholders will not have any
rights or obligations to offer or sell their shares to Mellon and Mellon will,
correspondingly, have no rights or obligations to purchase such shares.
-43-
<PAGE>
LEGAL OPINIONS
Opinions with respect to certain legal matters in connection with the
Merger will be rendered by Reed Smith Shaw & McClay, Pittsburgh, Pennsylvania,
as counsel for Mellon and by O'Sullivan Graev & Karabell, LLP, New York, New
York, and Pepper Hamilton & Scheetz, Philadelphia, Pennsylvania, as counsel for
Buck.
EXPERTS
The consolidated financial statements of Mellon incorporated by
reference in Mellon's Annual Report on Form 10-K as of December 31, 1996 and
1995 and for each of the years in the three-year period ended December 31, 1996
have been audited by KPMG Peat Marwick LLP, independent auditors, as set forth
in their report thereon incorporated therein and herein by reference. Such
consolidated financial statements are incorporated herein in reliance upon such
report, given upon the authority of such firm as experts in auditing and
accounting.
The consolidated financial statements of Buck as of March 31, 1997 and
1996, and for each of the years in the three-year period ended March 31, 1997,
have been audited by Grant Thornton, independent certified public accountants,
as set forth in their report thereon included herein. Representatives of Grant
Thornton are expected to be present at the Buck Special Meeting and will have
the opportunity to make a statement if they desire to do so and will also be
available to respond to appropriate questions from Buck Stockholders.
OTHER MATTERS
The managements of Mellon and Buck do not know of any other matters
intended to be presented for shareholder action at the Buck Special Meeting. If
any other matter does properly come before the Buck Special Meeting and is put
to a shareholder vote, the proxies solicited hereby will be voted in accordance
with the judgment of the proxyholders named thereon.
-44-
<PAGE>
BUCK HISTORICAL AUDITED FINANCIAL STATEMENTS
-45-
<PAGE>
FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
BUCK CONSULTANTS, INC. AND SUBSIDIARIES
March 31, 1997, 1996 and 1995
<PAGE>
C O N T E N T S
Page
----
Report of Independent Certified Public Accountants 3
Financial Statements
Consolidated Balance Sheets 4
Consolidated Statements of Income 5
Consolidated Statement of Changes in Stockholders' Equity 6
Consolidated Statements of Cash Flows 7
Notes to Consolidated Financial Statements 8 - 23
<PAGE>
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Buck Consultants, Inc.
We have audited the accompanying consolidated balance sheets of Buck
Consultants, Inc. and Subsidiaries as of March 31, 1997 and 1996, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the years ended March 31, 1997, 1996 and 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the 1997, 1996 and 1995 financial statements of the
Company's consolidated Canadian subsidiary. These statements reflect total
assets constituting 10% as of March 31, 1997 and 13% as of March 31, 1996 and
total revenues constituting 9%, 11% and 11% of the related consolidated totals
for the years ended March 31, 1997, 1996 and 1995, respectively. Those
statements were audited by other auditors whose reports have been furnished to
us, and our opinion, insofar as it relates to the amounts included for the
aforementioned subsidiary, is based solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Buck Consultants, Inc. and Subsidiaries
at March 31, 1997 and 1996, and the consolidated results of their operations and
their consolidated cash flows for the years ended March 31, 1997, 1996 and 1995
in conformity with generally accepted accounting principles.
New York, New York
May 21, 1997
-3-
<PAGE>
BUCK CONSULTANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
ASSETS 1997 1996
-------------- -------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 11,875,651 $ 13,515,812
Accounts receivable
Billed, less allowance for doubtful accounts (1997 - $2,423,000
and 1996 - $2,076,000) 40,373,439 32,185,606
Unbilled 57,373,622 45,343,677
------------ ------------
97,747,061 77,529,283
Recoverable income taxes 2,623,238 7,683,947
Prepaid expenses and other current assets 5,240,349 4,179,397
------------- -------------
TOTAL CURRENT ASSETS 117,486,299 102,908,439
FURNITURE, EQUIPMENT AND LEASEHOLD
IMPROVEMENTS, at cost
Furniture and equipment 52,549,374 42,824,081
Leasehold improvements 8,772,851 8,138,792
------------- -------------
61,322,225 50,962,873
Less allowance for depreciation and amortization (40,605,376) (36,699,314)
------------ ------------
20,716,849 14,263,559
OTHER ASSETS
Cost in excess of net assets of businesses acquired,
less accumulated amortization (1997 - $4,663,513 and
1996 - $3,065,650) 24,360,596 5,950,294
Software development costs, less accumulated amortization
(1997 - $1,957,507 and 1996 - $545,852) 7,028,028 3,011,793
Deferred income taxes 13,725,101 10,739,879
Other 24,861,545 23,081,358
------------ ------------
69,975,270 42,783,324
------------ ------------
$208,178,418 $159,955,322
=========== ===========
<CAPTION>
March 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
---------------- --------------
<S> <C> <C>
CURRENT LIABILITIES
Notes payable $ 5,332,457 $ 2,973,651
Accounts payable and accrued expenses 39,593,137 26,912,586
Income taxes payable 1,916,309 1,052,771
Deferred income taxes 35,224,747 31,135,288
------------ ------------
TOTAL CURRENT LIABILITIES 82,066,650 62,074,296
INSTALLMENT OBLIGATIONS ARISING FROM
COMMON STOCK REDEMPTIONS 7,076,053 6,321,513
OTHER LONG-TERM LIABILITIES 52,931,504 25,368,739
MINORITY INTEREST 2,170,186 2,504,243
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock:
Class A, par value $5.459 per share:
Authorized, 1,200,000 shares; issued and outstanding,
88,243 shares in 1997 and 115,233 shares in 1996 481,719 629,057
Class B, par value $1.00 per share:
Authorized, 1,000,000 shares; issued and outstanding,
592,953 shares in 1997 and 593,395 shares in 1996 592,953 593,395
------------ ------------
Class C, par value $1.00 per share:
Authorized, 1,000,000 shares; none issued
1,074,672 1,222,452
Common stock issuable pursuant to stock purchase
agreements (93,755 Class B shares in 1997 and
56,898 Class B shares in 1996) 7,978,746 4,012,912
Receivable from employees for future issuance of common
stock pursuant to stock purchase agreement (7,978,746) (4,012,912)
Additional paid-in capital 12,427,472 10,162,941
Retained earnings 51,295,494 52,850,517
Foreign currency translation adjustments (863,613) (549,379)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 63,934,025 63,686,531
------------ ------------
$208,178,418 $159,955,322
=========== ===========
</TABLE>
-4-
<PAGE>
BUCK CONSULTANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Year ended March 31,
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- -----------
<S> <C> <C> <C>
Revenues $238,611,003 $197,718,791 $177,102,259
Costs and expenses
Compensation and benefit costs 170,142,023 138,655,900 120,773,273
Operating expenses 60,095,135 44,637,483 39,752,240
Interest, net 920,359 (154,307) (339,492)
-------------- -------------- --------------
231,157,517 183,139,076 160,186,021
----------- ----------- -----------
Income before income taxes and minority
interest 7,453,486 14,579,715 16,916,238
Income taxes 4,397,467 6,961,038 7,884,976
------------- ------------- -------------
Income before minority interest 3,056,019 7,618,677 9,031,262
Minority interest (756,272) (415,360) 203,941
------------- -------------- --------------
NET INCOME $ 3,812,291 $ 8,034,037 $ 8,827,321
=========== ============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
-5-
<PAGE>
BUCK CONSULTANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended March 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Common stock Common stock issuable
------------------------------------------- ---------------------
Class A Class B Class B
--------------------- --------------------- ---------------------
Shares Amount Shares Amount Shares Amount
--------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1994 127,848 $ 697,922 658,312 $658,312 56,616 $ 2,733,466
Shares authorized for issuance pursuant to stock purchase
agreements 1,200 1,200 35,330 2,425,227
Issuance of common stock to employees pursuant to stock
purchase agreements 29,684 29,684 (29,684) (1,470,023)
Repurchase of common stock from retired or terminated
employees (6,492) (35,440) (48,182) (48,182) (4,958) (262,343)
Net income for year ended March 31, 1995
Foreign currency translation adjustments
Forfeitures of stock appreciation
-------- ----------- --------- ---------- -------- -------------
Balance at March 31, 1995 121,356 662,482 641,014 641,014 57,304 3,426,327
Shares authorized for issuance pursuant to stock purchase
agreements 24,421 24,421 33,675 2,691,239
Issuance of common stock to employees pursuant to stock
purchase agreements 27,621 27,621 (27,621) (1,686,997)
Repurchase of common stock from retired or terminated
employees (6,123) (33,425) (99,661) (99,661) (6,460) (417,657)
Net income for the year ended March 31, 1996
Foreign currency translation adjustments
Forfeitures of stock appreciation
-------- ----------- --------- ---------- -------- -------------
Balance at March 31, 1996 115,233 629,057 593,395 593,395 56,898 4,012,912
Shares authorized for issuance pursuant to stock purchase
agreements 77,700 7,108,385
Issuance of common stock to employees pursuant to stock
purchase agreements 35,893 35,893 (35,893) (2,755,141)
Repurchase of common stock from retired or terminated
employees (26,990) (147,338) (36,335) (36,335) (4,950) (387,410)
Net income for the year ended March 31, 1997
Foreign currency translation adjustments
Forfeitures of stock appreciation
-------- ----------- --------- ---------- -------- -------------
Balance at March 31, 1997 88,243 $ 481,719 592,953 $592,953 93,755 $ 7,978,746
====== ======== ======= ======= ======= ==========
<CAPTION>
Foreign
Additional currency
Employee paid-in Retained translation
receivable capital earnings adjustments Total
------------ ------------ ---------- ------------- -------
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1994 $(2,733,466) $ 6,905,800 $46,299,449 $ (830,304) $53,731,179
Shares authorized for issuance pursuant to stock purchase
agreements (2,425,227) 81,174 82,374
Issuance of common stock to employees pursuant to stock
purchase agreements 1,470,023 1,440,339 1,470,023
Repurchase of common stock from retired or terminated
employees 262,343 (702,003) (3,078,959) (3,864,584)
Net income for year ended March 31, 1995 8,827,321 8,827,321
Foreign currency translation adjustments (196,055) (196,055)
Forfeitures of stock appreciation 49,748 49,748
------------- --------------- ------------ ------------ -----------
Balance at March 31, 1995 (3,426,327) 7,725,310 52,097,559 (1,026,359) 60,100,006
Shares authorized for issuance pursuant to stock purchase
agreements (2,691,239) 1,927,256 1,951,677
Issuance of common stock to employees pursuant to stock
purchase agreements 1,686,997 1,659,376 1,686,997
Repurchase of common stock from retired or terminated
employees 417,657 (1,149,001) (7,302,164) (8,584,251)
Net income for the year ended March 31, 1996 8,034,037 8,034,037
Foreign currency translation adjustments 476,980 476,980
Forfeitures of stock appreciation 21,085 21,085
------------- --------------- ------------ ------------ -----------
Balance at March 31, 1996 (4,012,912) 10,162,941 52,850,517 (549,379) 63,686,531
Shares authorized for issuance pursuant to stock purchase
agreements (7,108,385)
Issuance of common stock to employees pursuant to stock
purchase agreements 2,755,141 2,719,248 2,755,141
Repurchase of common stock from retired or terminated
employees 387,410 (454,717) (5,359,580) (5,997,970)
Net income for the year ended March 31, 1997 3,812,291 3,812,291
Foreign currency translation adjustments (314,234) (314,234)
Forfeitures of stock appreciation (7,734) (7,734)
------------- --------------- ------------- ------------ ------------
Balance at March 31, 1997 $(7,978,746) $12,427,472 $51,295,494 $ (863,613) $63,934,025
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
-6-
<PAGE>
BUCK CONSULTANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended March 31,
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- -----------
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 3,812,291 $ 8,034,037 $ 8,827,321
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization 6,624,460 4,463,157 4,416,497
Deferred rent (32,931) (296,237) (210,632)
Nonqualified pension benefits 1,910,666 (235,077) (3,555,663)
Postretirement health and other benefits 503,464 1,197,137 1,329,148
Provision for income taxes 4,397,467 6,961,038 7,884,976
Income tax receipts (payments), net 2,668,058 (9,333,597) (4,235,018)
Minority interest (334,057) 429,582 203,941
Changes in other operating assets and liabilities
Decrease (increase) in marketable securities 9,357,169 (2,628,045)
Increase in accounts receivable (20,217,778) (10,913,797) (4,580,029)
(Increase) decrease in prepaid expenses
and other assets (1,060,952) (840,494) (651,621)
Increase in accounts payable and accrued expenses 12,556,435 8,685,051 2,331,991
Increase (decrease) in deferred service income 124,116 550,492 (148,357)
------------- ------------- -----------
Net cash provided by operating activities 10,951,239 18,058,461 8,984,509
------------- ------------- -----------
Cash flows from investing activities
Additions of furniture, equipment and leasehold improvements (9,855,088) (4,693,784) (4,057,555)
Business investments/acquisitions (11,519,654) 76,498 (572,160)
Investment in software development (5,437,418) (3,557,645)
------------- ------------- -----------
Net cash used in investing activities (26,812,160) (8,174,931) (4,629,715)
------------- ------------- -----------
Cash flows from financing activities
Proceeds from sale of Company common stock 2,755,141 3,638,674 1,552,397
Repurchase of Company common stock (5,243,430) (6,441,271) (4,553,749)
Payments on borrowings (2,292,520) (3,281,792) (632,155)
Proceeds from debt 18,633,146 104,188 100,780
Other 368,423 399,935 (545,063)
------------- ------------- -----------
Net cash provided by (used in) financing activities 14,220,760 (5,580,266) (4,077,790)
------------- ------------- -----------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (1,640,161) 4,303,264 277,004
Cash and cash equivalents at beginning of year 13,515,812 9,212,548 8,935,544
------------- ------------- -----------
Cash and cash equivalents at end of year $ 11,875,651 $ 13,515,812 $ 9,212,548
============= ============= ===========
</TABLE>
Noncash investing and financing activities consist of issuance of Company stock
for notes in the amount of $7,108,385, $2,691,239 and $2,425,227 for 1997, 1996
and 1995, respectively, and the acquisition of W F Corroon in 1997.
The accompanying notes are an integral part of these statements.
-7-
<PAGE>
BUCK CONSULTANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Buck Consultants, Inc. together with its subsidiaries is a diversified
international company engaged in providing a wide array of actuarial, employee
benefit, compensation and related services to its clients.
Sale of Company
The Company has agreed, subject to final shareholder approval, to a sale and
merger with a major financial institution. The sale is expected to be
finalized on or about July 1, 1997.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
all of its subsidiaries, consisting of its wholly-owned subsidiaries and its
60% - owned Australian joint venture, Buck Consultants Pty. Ltd. All material
intercompany accounts and transactions have been eliminated.
Accounts Receivable
Unbilled receivables are based on accumulated time on client projects that are
currently in process, valued at the lower of standard billing rates or
expected recoveries.
Furniture, Equipment and Leasehold Improvements
Furniture and equipment are depreciated on the straight-line basis over the
estimated useful lives of the individual assets. Leasehold improvements are
being amortized over the periods of the respective leases, if those periods
are shorter than the estimated useful lives of the related assets. Estimated
useful lives for furniture and equipment range from 4 to 15 years. Estimated
useful lives for leasehold improvements range from 1 to 20 years.
-8-
<PAGE>
BUCK CONSULTANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 1997, 1996 and 1995
NOTE A (continued)
Cost in Excess of Net Assets of Businesses Acquired
Cost in excess of net assets of acquired businesses is being amortized using
the straight-line method over periods generally ranging from 15 to 40 years.
The amortization of a portion of the costs in excess of net assets of
businesses represents a change in accounting method to an acceptable method in
contemplation of a public filing. On an ongoing basis, management reviews the
valuation and amortization of intangibles to determine possible impairment by
comparing the carrying value to the undiscounted cash flows of the related
asset. Should the Company determine that the intangibles are impaired, it
would adjust the intangibles to reflect the fair value at that time.
Translation of Foreign Currencies
All balance sheet accounts of foreign operations are translated into U.S.
dollars at the year-end rate of exchange. The resulting translation
adjustments are made directly to a separate component of stockholders' equity.
The statement of income items are translated at the average exchange rates for
the year and are reflected in the statement of income for that year.
Statements of Cash Flows
For purposes of this statement, the Company considers all highly liquid
investments with a maturity of three months or less at the time of purchase to
be cash equivalents.
Use of Estimates
In preparing the Company's financial statements in conformity with generally
accepted accounting principles, management is required to make estimates and
assumptions in determining the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
-9-
<PAGE>
BUCK CONSULTANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 1997, 1996 and 1995
NOTE A (continued)
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable and
accounts payable and accrued liabilities approximate fair value, principally
because of the short maturity of these items.
Based on borrowing rates currently available to the Company for bank loans
with similar terms and maturities, the fair value of the Company's long-term
debt and installment obligations approximates the carrying value.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of certain cash and cash equivalents and
receivables from clients. The Company invests its excess cash with high credit
quality financial institutions. Concentrations of credit risk with respect to
receivables from clients are limited due to the Company's large number of
customers and their dispersion across many industries and geographic regions.
Software Development Costs
During 1996, the Company changed its method of accounting for software
development costs which were not significant in prior years.
Software development costs capitalized in fiscal 1997 and 1996 relate
principally to software that will be or is currently being used in providing
services to clients in the U.S., Canada, and Australia. The software costs are
being amortized over a three-year useful life beginning when the products are
placed in service. At March 31, 1997 and 1996, accumulated amortization was
$1,957,507 and $545,852, respectively.
-10-
<PAGE>
BUCK CONSULTANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 1997, 1996 and 1995
NOTE B - INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
State
Non-U.S. Federal and local Total
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Year ended March 31, 1997
Current $1,229,564 $ 978,093 $ 780,466 $2,988,123
Deferred 252,227 878,907 278,210 1,409,344
--------- ------- ------- ---------
$1,481,791 $1,857,000 $1,058,676 $4,397,467
========= ========= ========= =========
Year ended March 31, 1996
Current $1,372,537 $1,731,329 $ 974,582 $4,078,448
Deferred 19,289 2,210,671 652,630 2,882,590
--------- --------- ------- ---------
$1,391,826 $3,942,000 $1,627,212 $6,961,038
========= ========= ========= =========
Year ended March 31, 1995
Current $ 516,837 $5,668,000 $1,942,912 $8,127,749
Deferred 408,787 (598,959) (52,601) (242,773)
--------- --------- --------- ---------
$ 925,624 $5,069,041 $1,890,311 $7,884,976
========== ========= ========= =========
</TABLE>
The Company recognizes a deferred tax benefit for the operating losses of its
non-U.S. subsidiaries as management is of the opinion that the benefit of
these losses will be realized in the future.
-11-
<PAGE>
BUCK CONSULTANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 1997, 1996 and 1995
NOTE B (continued)
Deferred income taxes at March 31, 1997 and 1996 are comprised of the
following:
<TABLE>
<CAPTION>
Current Noncurrent
-------------- --------------
<S> <C> <C>
1997
Assets
Accrual to cash basis adjustments $ 12,377,320
Net operating loss carryforward of foreign
subsidiaries in the U.K. and Belgium 1,199,594
Liabilities
Accrual to cash basis adjustments $(35,225,618)
Depreciation 148,187
Other 871
----------- ----------
Current deferred tax liability $(35,224,747)
-----------
Net noncurrent deferred tax asset $13,725,101
----------
1996
Assets
Accrual to cash basis adjustments $ 9,900,049
Net operating loss carryforward of foreign
subsidiaries in the U.K. and Belgium 1,368,020
Liabilities
Accrual to cash basis adjustments $(30,765,294)
Depreciation (528,190)
Other (369,994)
----------- ----------
Current deferred tax liability $(31,135,288)
-----------
Net noncurrent deferred tax asset $10,739,879
----------
</TABLE>
-12-
<PAGE>
BUCK CONSULTANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 1997, 1996 and 1995
NOTE B (continued)
No provision has been made for taxes which could result from the remittance of
undistributed earnings ($10,344,382 at March 31, 1997) of the Company's non-
U.S. subsidiaries since the Company intends to reinvest such earnings
indefinitely.
The difference (expressed as a percentage of pretax income) between the
statutory Federal income tax rate and effective income tax rate is reflected
in the accompanying consolidated statements of earnings as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Statutory Federal income tax rate 35.0% 35.0% 35.0%
Excess foreign tax credit 4.3 - -
State income taxes 9.2 7.3 7.3
Foreign income tax differential 2.3 1.3 1.3
Travel and entertainment 1.9 0.7 0.5
Amortization - goodwill 3.2 1.1 0.9
Minority interest 3.8 1.0
Other (0.7) 1.3 1.6
------ ----- -----
Effective tax rate 59.0% 47.7% 46.6%
==== ==== ====
</TABLE>
-13-
<PAGE>
BUCK CONSULTANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 1997, 1996 and 1995
NOTE C - ACQUISITIONS
Effective November 29, 1996, the Company purchased certain assets and
agreed to assume certain liabilities of W F Corroon, and purchased all the
issued share capital of W F Corroon Limited. The minimum purchase price is
$20,250,000, to be adjusted based on future revenue, with $10,000,000 paid
at closing and the balance payable in quarterly installments over three
years. The payments in excess of one year are collateralized by a letter
of credit. The acquisition was recorded using the purchase method of
accounting and the results of operations of W F Corroon and W F Corroon
Limited have been included in the Company's consolidated financial
statements for the period from December 1, 1996 through March 31, 1997.
The following unaudited pro forma summary combines the consolidated
results of operations of the Company, W F Corroon and W F Corroon Limited
as if the acquisition had occurred at the beginning of fiscal years 1997
and 1996. The pro forma summary does not necessarily reflect the results
of operations as they would have been if the Company and W F Corroon had
constituted a single entity during such periods.
<TABLE>
<CAPTION>
March 31,
-----------------------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Revenues $274,582,000 $250,033,000
Net Income 5,155,000 10,205,000
</TABLE>
The following summarizes the cash paid in conjunction with the
acquisition:
<TABLE>
<CAPTION>
<S> <C>
Assets purchased $21,497,117
Liabilities assumed (1,015,736)
Debt issued (9,131,667)
-----------
Cash paid $11,349,714
===========
</TABLE>
Effective May 15, 1995, the Company entered into a joint venture agreement
with National Mutual Life Insurance Company in Australia. The Company and
National Mutual Life Insurance established a new company called Buck
Consultants Pty. Ltd. which is majority 60% owned by Buck and 40% owned by
National Mutual Life. The joint venture was capitalized with a combined
contribution of $7,299,000 from the Company and National Mutual Life
according to their respective ownership percentage. The new entity
provides consulting and administrative services in Australia.
-14-
<PAGE>
BUCK CONSULTANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 1997, 1996 and 1995
NOTE C (continued)
Effective May 1, 1995, the Company acquired all of the stock of Acumen
Limited located in Port-of-Spain, Trinidad and Tobago, from Guardian Life
of the Caribbean Limited. The acquisition was recorded using the purchase
method of accounting, and the results of operations of Acumen have been
included in the Company's consolidated financial statements since the
effective date of the acquisition.
NOTE D - INTERNATIONAL OPERATIONS
At March 31, 1997, 1996, and 1995, the Company's non-U.S. operations
included:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Assets $63,653,142 $46,817,475 $33,007,998
Liabilities 28,002,742 18,608,371 17,375,539
Revenues 64,033,722 50,925,138 35,425,700
Loss before income taxes (1,028,412) (592,082) (641,271)
</TABLE>
NOTE E - COMMITMENTS AND CONTINGENCIES
The Company has executed irrevocable letters of credit in the amount of
$6,150,000 which expire on various dates through December 31, 1999, as
part of its acquisition of W F Corroon and W F Corroon Limited.
The Company may be obligated under certain circumstances to invest
additional amounts up to $1,200,000 with regard to the formation of
Professional Consultants Insurance Company. In connection therewith, the
Company has executed an irrevocable letter of credit expiring on March 31,
1998 (see Note G).
-15-
<PAGE>
BUCK CONSULTANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 1997, 1996 and 1995
NOTE F - BANK CREDIT LINES
The Company has line of credit agreements with its principal banks
approximating $25,605,777. At March 31, 1997 and 1996, the Company had
borrowings against these lines of credit of $1,874,035 and $2,780,387,
respectively, with interest payable at various rates. This obligation is
classified as current since it is required to be settled annually.
During 1997, the Company entered into a credit agreement with one of its
principal banks which provides for $25,000,000 of revolving credit, of
which the unused portion is $8,000,000 at March 31, 1997. Under the credit
agreement, borrowing shall be evidenced by a promissory note bearing
interest at Eurodollar Rate plus 1%. The credit agreement contains certain
financial covenants including but not limited to minimum consolidated
tangible net worth and a consolidated current ratio of not less than 1.5
to 1. At March 31, 1997, the Company is in violation of the current ratio
requirement. The violation has been waived by the bank and will be amended
during fiscal year 1998.
The commitment amount automatically reduces by $5,000,000 annually
commencing November 29, 1998.
Interest paid during 1997 and 1996 amounted to $1,887,375 and $1,587,184,
respectively.
NOTE G - OTHER NONCURRENT ASSETS AND LONG-TERM LIABILITIES
In July 1991, the Company established a German holding company, Buck
Consultants GmbH, which has a 25% ownership interest in the employee
benefits and compensation consulting firm of Heissmann/IPC. The investment
is accounted for by the equity method of accounting and its carrying value
at March 31, 1997 and 1996 was $3,973,840 and $3,997,491, respectively.
Also included in other noncurrent assets is a prepaid pension asset of
$18,705,000 and $17,563,000 at March 31, 1997 and 1996, respectively.
Included in other long-term liabilities are accrued pension costs of
$13,731,000 and $10,845,000 and accrued postretirement benefit costs of
$14,153,000 and $13,552,000 at March 31, 1997 and 1996, respectively.
-16-
<PAGE>
BUCK CONSULTANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 1997, 1996 and 1995
NOTE G (continued)
In November 1987, the Company with several other employee benefit and
management consulting firms established Professional Consultants Insurance
Company, which provides professional liability insurance to member firms.
The Company's cash investment of $400,000 is classified as an other
noncurrent asset (see Note E).
NOTE H - LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
March 31,
------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Notes payable - primarily due in quarterly
installments, at various interest rates and
end dates through 2001 $ 8,585,811 $ 428,558
Less current portion (3,458,422) (193,264)
---------- --------
$ 5,127,389 $ 235,294
========== ========
</TABLE>
Noncurrent portion of long-term debt at March 31, 1997 matures as follows:
$2,883,303 in 1999, $2,235,331 in 2000, $8,755 in 2001.
NOTE I - INSTALLMENT OBLIGATIONS ARISING FROM
COMMON STOCK REDEMPTIONS
Installment obligations result from the repurchase of shares of the
Company's common stock from retired stockholders. The notes bear interest
at 120% of the prime rate at the fiscal year-end preceding retirement. The
obligations are payable in annual installments each April, as follows:
$2,567,644 in 1998, $2,005,411 in 1999, $1,677,294 in 2000 and $825,704 in
2001. The April 1997 installment of $3,950,074 was paid prior to March 31,
1997.
-17-
<PAGE>
BUCK CONSULTANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 1997, 1996 and 1995
NOTE J - COMMON STOCK
The Company is obligated to repurchase its outstanding common stock from
its stockholders in the event of retirement, death, termination of
employment or their permanent disability. In the event of retirement,
stockholders representing approximately 42% of the Class A Common Stock
shares and all shares for Class B Common Stock shall offer to sell the
shares at a purchase price equal to the book value of the shares at the
fiscal year-end preceding such offer. Principal payments will be made in
five equal annual installments with interest payable at 120% of the then
existing prime rate.
Stockholders representing approximately 58% of the Class A Common Stock
shares shall offer to sell such shares in varying increments for five
successive years, at a purchase price equal to the book value of the
shares at the fiscal year-end preceding each incremental offer. In the
event of death in service or termination, the purchase price for shares
being repurchased shall be equal to the book value of the shares as of the
end of the Company's fiscal year preceding the offer to sell (or in event
of the death of a stockholder, the book value of the shares as of the end
of the Company's succeeding fiscal year, if such value is greater). In the
event of permanent disability, holders of Class A Common Stock shares
shall offer to sell such shares in varying increments for five successive
years, at a purchase price equal to the book value of the shares at the
fiscal year-end preceding each incremental offer. In the event a selling
stockholder engages in any business competing with the Company, or the
employment of a selling stockholder is terminated for cause, the Company
has the right to reduce the purchase price of the shares by an amount up
to 50% of the excess, if any, of such purchase price over such selling
stockholder's cost.
In addition to the Fixed Payment Option, retirees are entitled to
participate, during the five-year period immediately following their
retirement, in the premium, if any, received from the sale or other
liquidation of the Corporation during such period. The additional payment
will be calculated on a declining monthly basis and based on the value of
the Corporation stock that was repurchased from the stockholder by the
Corporation upon retirement pursuant to the Fixed Payment Option. Retiring
stockholders who satisfy criteria regarding age and years of service will
be eligible to receive the additional payment. Retirees are not eligible
to receive the additional payment in the event they are deemed by the
Board of Directors to be in violation of the noncompete clause contained
in the stock purchase agreement.
-18-
<PAGE>
BUCK CONSULTANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 1997, 1996 and 1995
NOTE J (continued)
The Company, pursuant to Board of Directors approval, authorized the sale
in U.S. dollars, and certain employees agreed to purchase shares of Class
B Common Stock, 77,700 shares in 1997 and 33,675 shares in 1996, at a
price per share equal to the book value per share at the beginning of the
fiscal year. Unissued shares from each sale at March 31, 1997, are to be
purchased over periods through 2001 and will be issued in proportion to
the employees' payments.
NOTE K - EMPLOYEES' RETIREMENT AND OTHER BENEFIT PLANS
The Company has five defined benefit pension plans covering substantially
all employees; two are nonqualified plans which provide benefits in excess
of those which are provided by the qualified plans. The benefits under
each plan are based on an employee's years of service and average total
compensation, as defined. The Company's funding policy for the qualified
plans is to contribute annually amounts which are not less than the
minimum required by applicable regulations.
Net pension costs for the U.S. and non-U.S. plans include the following
components:
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 5,555,000 $ 4,443,000 $ 5,095,000
Interest cost on projected benefit obligation 8,000,000 7,102,000 6,911,000
Actual return on assets (14,675,000) (25,563,000) (10,250,000)
Net amortization and deferral 3,408,000 14,914,000 405,000
----------- ----------- -------------
NET PERIODIC PENSION COST $ 2,288,000 $ 896,000 $ 2,161,000
============= ============= ============
</TABLE>
The expected long-term rate of return on assets ranged from 9.5% to 10.0%
for the years ended March 31, 1997, 1996 and 1995, respectively.
-19-
<PAGE>
BUCK CONSULTANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 1997, 1996 and 1995
NOTE K (continued)
The actuarial calculations of the U.S. and non-U.S. plans are performed by
enrolled actuaries of the Company. The following tables set forth the
funded status and the amounts recognized in the Company's balance sheets
at March 31, 1997 and 1996 for the plans so indicated:
<TABLE>
<CAPTION>
Qualified Nonqualified
plans plans Total
------------ -------------- ------------
1997
<S> <C> <C> <C>
Actuarial present value of benefit obligations
Vested benefit obligation $ (68,978,000) $ (10,312,000) $ (79,290,000)
============ ============= ============
Accumulated benefit obligation $ (78,918,000) $ (12,285,000) $ (91,203,000)
============ ============= ============
Projected benefit obligation $ (93,033,000) $(20,893,000) $ (113,926,000)
Plan assets at fair value, primarily listed stocks
and bonds 134,785,000 134,785,000
----------- ----------- -----------
FUNDED STATUS 41,752,000 (20,893,000) 20,859,000
Unrecognized net (asset) obligation (4,241,000) 223,000 (4,018,000)
Unrecognized prior service cost (benefit) (3,044,000) 6,323,000 3,279,000
Unrecognized (gain) loss (15,762,000) 616,000 (15,146,000)
------------ ------------- ------------
PREPAID (ACCRUED) PENSION COST $ 18,705,000 $(13,731,000) $ 4,974,000
============ =========== =============
1996
Actuarial present value of benefit obligations
Vested benefit obligation $ (62,616,000) $ (7,278,000) $ (69,894,000)
============ ============ ============
Accumulated benefit obligation $ (71,226,000) $ (9,816,000) $ (81,042,000)
============ ============ ============
Projected benefit obligation $ (82,287,000) $(17,499,000) $ (99,786,000)
Plan assets at fair value, primarily listed stocks
and bonds 122,490,000 122,490,000
----------- ----------- -----------
FUNDED STATUS 40,203,000 (17,499,000) 22,704,000
Unrecognized net (asset) obligation (5,088,000) 260,000 (4,828,000)
Unrecognized prior service cost (benefit) (4,445,000) 6,512,000 2,067,000
Unrecognized loss (gain) (13,107,000) (118,000) (13,225,000)
------------ ----------- ------------
PREPAID (ACCRUED) PENSION COST $ 17,563,000 $(10,845,000) $ 6,718,000
============ =========== =============
</TABLE>
-20-
<PAGE>
BUCK CONSULTANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 1997, 1996 and 1995
NOTE K (continued)
The weighted average discount rates and rates of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligations for the year ended March 31, 1997 ranged
from 8.0% to 9.0%, and 5.0% to 6.0%, respectively, and for the year ended
March 31, 1996 ranged from 7.6% to 9.5%, and 4.6% to 6.0%, respectively.
The Company has a savings and profit sharing plan for U.S. employees which
requires the Company to contribute a specified percentage of employee
contributions and permits the Company to make additional contributions up
to the maximum amount deductible for Federal income tax purposes. Total
expense to the plan amounted to $4,100,000 and $3,376,000 for the years
ended March 31, 1997 and 1996, respectively.
The Company provides postretirement health benefits to its U.S. retirees.
Effective as of the beginning of Fiscal 1992, the Company adopted SFAS No.
106 ("SFAS No. 106"), "Employers Accounting for Postretirement Benefits
Other Than Pensions," for its U.S. plan. As permitted by SFAS No. 106, the
Company elected to amortize the transition obligation as of the adoption
date over the working lifetime of those expected to benefit.
The net periodic postretirement benefit expenses for the years ended March
31, 1997, 1996 and 1995 included the following components:
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Service cost $ 514,000 $ 499,000 $ 767,000
Interest cost 671,000 721,000 833,000
Net amortization of transition obligation (196,000) (151,000) 13,000
---------- ---------- -----------
NET PERIODIC POSTRETIREMENT
BENEFIT EXPENSE $ 989,000 $1,069,000 $1,613,000
=========== ========= =========
</TABLE>
The assumptions used to develop the net periodic postretirement benefit
expense were a discount rate of 8.0% in 1997, and 8.3% in 1996 and 1995
and a medical care cost trend rate of 7.9% in 1997 and 8.3% in 1996 and
1995. The medical care cost trend rate used in the computation ultimately
reduces to 5.4% in 2005 and subsequent years. The accrued postretirement
benefits cost at March 31, 1997
-21-
<PAGE>
BUCK CONSULTANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 1997, 1996 and 1995
NOTE K (continued)
reflects a discount rate of 8.0%. The plan was amended on October 1, 1995
to be effective January 1, 1996. The benefit obligations for the U.S. plan
are presented below as of March 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Retirees $ (3,583,000) $ (3,372,000)
Eligible active plan participants (1,589,000) (1,609,000)
Other active plan participants (4,504,000) (4,359,000)
------------ ------------
Accumulated postretirement benefit obligations (9,676,000) (9,340,000)
Plan assets at fair value - -
------------ ------------
FUNDED STATUS (9,676,000) (9,340,000)
Unrecognized net loss (5,317,000) (5,104,000)
Unrecognized transition obligation 840,000 892,000
------------ ------------
ACCRUED POSTRETIREMENT
BENEFITS COST $(14,153,000) $(13,552,000)
============ ============
</TABLE>
The effect of a one percentage point increase in each future year's
assumed medical care cost trend rate, holding all other assumptions
constant, would have been to increase the net periodic postretirement
benefit expense by $286,000 and the accumulated postretirement benefits
cost by $1,900,000.
NOTE L - LEASE COMMITMENTS
The Company leases office space and equipment under operating leases for
periods ranging from one to twenty years. The majority of the office
leases contain escalation clauses relating to increases in real estate
taxes and operating expenses. It is expected that as these office leases
expire they will be renewed or replaced by other leases.
-22-
<PAGE>
BUCK CONSULTANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 1997, 1996 and 1995
NOTE L (continued)
Future minimum rental commitments under noncancelable operating leases in
excess of one year as of March 31, 1997 are as follows:
<TABLE>
<CAPTION>
Fiscal year Amount
----------- -----------
<S> <C>
1998 $16,482,270
1999 14,012,546
2000 12,327,148
2001 10,658,678
2002 9,553,263
Thereafter 37,854,256
-----------
$100,888,161
===========
</TABLE>
Total annual rental expense under all operating leases amounted to
$17,130,141, $13,084,000 and $11,700,000 for the years ended March 31,
1997, 1996 and 1995, respectively.
-23-
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
---------
as of March 17, 1997, by MELLON BANK CORPORATION, a Pennsylvania corporation
("MBC"), and BUCK CONSULTANTS, INC., a Delaware corporation ("Buck"), pursuant
- ----- ----
to the terms of the Delaware General Corporation Law. For purposes of this
Agreement, capitalized terms used herein which are not otherwise defined shall
have the respective meanings assigned to them in Appendix A attached hereto.
----------
RECITALS
A. Buck Common Stock. Buck is a corporation duly organized and
-----------------
existing in good standing under the laws of the State of Delaware, with its
principal executive offices located in New York, New York. As of the date
hereof, Buck has: (1) 1,200,000 authorized shares of Class A Common Stock, par
value $5.459 per share ("Class A Common Stock"), of which, as of the date
--------------------
hereof, no more than 88,243 shares were issued and outstanding; (2) 1,000,000
authorized shares of Class B Common Stock, par value $1.00 per share ("Class B
-------
Common Stock"), of which, as of the date hereof, no more than 687,958 shares
- ------------
were issued and outstanding; and (3) 1,000,000 authorized shares of Class C
Common Stock, par value $1.00 per share ("Class C Common Stock"), of which, as
--------------------
of the date hereof, no shares were issued and outstanding (the Class A Common
Stock, Class B Common Stock and Class C Common Stock being referred to
collectively as the "Buck Common Stock"). No other class of capital stock of
-----------------
Buck is authorized.
B. Retiree Protection Plan. The annex to the Buck Disclosure Letter
-----------------------
sets forth the Buck corporate policy (the "Retiree Protection Plan") pursuant to
-----------------------
which certain persons who have retired from Buck within 60 months prior to the
Closing Date may be entitled to an Additional Payment (as that term is defined
in the Retiree Protection Plan and herein so defined). The amount of the
Additional Payment for each such eligible person, generally stated, is the
product of the "premium" of the Merger consideration per share of Buck Common
Stock over the book value per share of Buck Common Stock, multiplied by a number
of units which, for each eligible person, is a function of (x) the number of
shares of Buck Common Stock tendered to Buck at the retirement of such person
and (y) the relative proximity of time of such person's retirement to the
Closing Date. Accordingly, the entitlement of an eligible retiree is commonly
referred to as being based on the number of "phantom shares" or "equivalent
shares" associated with such person, it being understood, however, that such
person's entitlement is wholly contractual in nature and such person is not a
stockholder of Buck and has no rights as a stockholder.
C. Non-Voting and Non-Electing Stockholders. Each holder of Buck
----------------------------------------
Common Stock who does not vote for the Merger and is a Non-Electing Holder will
have his or her shares taken and exchanged and converted into the Statutory
Class A Payment and the Statutory Class B Payment, as the case may be (less, in
----
the case of Issuable Shares, the Cost thereof), at the Effective Time pursuant
to the terms and provisions of Section 251 of the Delaware General Corporation
Law without any further action on behalf of such holder pursuant to Section 2.03
below.
D. Intention of the Parties. It is the intention of the parties that
------------------------
the transactions contemplated hereby shall qualify as a reorganization under
Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the
"Code"), by reason of Section 368(a)(2)(D) of the Code, and that this Agreement
----
constitute a "plan of reorganization" within the meaning of Section 368 of the
Code.
NOW, THEREFORE, in consideration of the mutual promises hereinafter
set forth and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged and intending to be legally bound hereby, the
parties hereby agree as follows:
A-1
<PAGE>
ARTICLE I
THE MERGER
1.01. The Merger. The reorganization contemplated by this Agreement
----------
is the merger of Buck and Buck Acquisition Corporation, a Delaware corporation
and a wholly-owned subsidiary of MBC ("Merger Subsidiary") pursuant to the
-----------------
Agreement and Plan of Merger attached hereto as Appendix B (the "Merger
---------- ------
Agreement"). As provided in the Merger Agreement, at the Effective Time:
- ---------
(a) The Continuing Corporation. Buck shall merge (the "Merger") with
-------------------------- ------
and into Merger Subsidiary, the separate existence of Buck shall cease and
Merger Subsidiary (the "Continuing Corporation") shall be the surviving
----------------------
corporation in the Merger.
(b) Rights, Etc. The Continuing Corporation shall thereupon and
-----------
thereafter possess all of the rights, privileges, immunities and franchises, of
a public as well as of a private nature, of each of the merging corporations;
and all property, real, personal and mixed and all debts due on whatever account
and all other choses in action and all and every other interest, of or belonging
to or due to each of the corporations so merged, shall be deemed to be vested in
the Continuing Corporation without further act or deed; and the title to any
real estate or any interest therein, vested in any of such corporations, shall
not revert or be in any way impaired by reason of the Merger.
(c) Liabilities. The Continuing Corporation shall thenceforth be
-----------
responsible and liable for all the liabilities, obligations and penalties of
each of the corporations so merged.
(d) Certificate of Incorporation; Bylaws; Directors; Officers. The
---------------------------------------------------------
Certificate of Incorporation and Bylaws of the Continuing Corporation shall be
those of Merger Subsidiary, as amended and restated in accordance with the
provisions of the Merger Agreement. The directors and officers of Buck in
office immediately prior to the Merger becoming effective shall be the directors
and officers of the Continuing Corporation, together with such additional
directors and officers as may thereafter be elected, who shall hold office until
such time as their successors are elected and qualified.
1.02. Closing and Effective Time. Subject to the conditions to the
--------------------------
obligations of the parties to consummate the transactions contemplated by this
Agreement as set forth in Sections 7.02 and 7.03, the closing of the
transactions contemplated by this Agreement and the Merger Agreement (the
"Closing") shall take place at the offices of Mellon Bank Corporation,
- --------
Pittsburgh, Pennsylvania, at 10:00 a.m., local time, on the second Business Day
following the fulfillment of all conditions set forth in Section 7.01 hereof or
at such other place, time and date as the parties shall agree (the date of the
Closing being referred to as the "Closing Date"). Prior to the Closing, Buck
------------
and Merger Subsidiary shall execute and deliver to the Delaware Secretary of
State a Certificate of Merger in proper form for filing under the Delaware
General Corporation Law on the Closing Date. The Certificate of Merger shall
specify an effective time for the Merger, and the Merger shall become effective
at such time on the Closing Date as is so specified, such time being herein
called the "Effective Time."
--------------
ARTICLE II
CONSIDERATION
2.01. Consideration. Subject to the provisions of this Agreement, at
-------------
the Effective Time:
(a) Outstanding Capital Stock of Merger Subsidiary. Each share of
----------------------------------------------
capital stock of Merger Subsidiary issued and outstanding immediately prior to
the Effective Time shall remain outstanding, without change therein by reason of
the Merger.
(b) Outstanding Buck Common Stock. Subject to the provisions of
-----------------------------
Section 2.03(b) hereof with respect to the payment of fractional shares in cash
and Section 2.05 hereof with respect to dissenters' rights, at the Effective
Time each issued and outstanding share of Class A Common Stock shall receive the
Class A Payment and each share of Class B Common Stock which is issued and
outstanding or which is an Issuable Share shall receive the
A-2
<PAGE>
Class B Payment; provided, however, that any share of Class B Common Stock which
-----------------
is an Issuable Share shall receive the Class B Payment less the Cost of such
----
Issuable Share; provided, further, however that such Cost may be paid by the
-----------------
delivery of shares of Class B Common Stock to Buck (having a value of the Class
B Payment) which will be treated as outstanding shares for purposes of the
Merger, but that such shares so delivered to Buck shall be cancelled immediately
prior to the Effective Time such that no payment of the Merger consideration
shall be made therefor; and provided further, that each holder of shares of Buck
--------------------
Common Stock who did not vote for the Merger and did not perfect his or her
dissenters' rights under Section 262 of the Delaware General Corporation Law and
who is a Non-Electing Holder shall have his or her Buck Common Stock taken and
converted and exchanged, at the Effective Time pursuant to Section 251 of the
Delaware General Corporation Law, into the Statutory Class A Payment and the
Statutory Class B Payment, as the case may be, less, in the case of Issuable
----
Shares, the Cost thereof. The number of shares of MBC Common Stock to be
received by a Buck stockholder who made a Stock Election or a Mixed Payment
Election shall be determined on the basis of the Transaction Share Price as of
the Effective Time. "Transaction Share Price" shall mean, as of any date, the
-------------------------
average of the daily closing price of MBC Common Stock (adjusting both the
number of shares and price of shares as may be necessary to account for a
pending stock split, if any) for a period consisting of 10 consecutive trading
days ending the fifth Business Day prior to such date, such last sale prices in
each case as reported by the NYSE composite transactions reporting system (as
reported in The Wall Street Journal); provided however, that in the circumstance
----------------------- ----------------
where the Closing Date is after the record date with respect to a dividend
declared on the MBC Common Stock and any of such 10 consecutive trading days
occurs on a date from and after the date of declaration of such dividend to but
excluding the date MBC Common Stock begins to trade on an ex-dividend basis,
then for purposes of determining the Transaction Share Price, the reported
closing price of MBC Common Stock for each of such days which occur during such
period will not include the value of such declared dividend.
(c) Payments to Eligible Buck Retirees. Each Class A Retiree shall
----------------------------------
receive, in cash, the Class A Retiree Payment multiplied by the Class A
Equivalents owned by such Class A Retiree, and each Class B Retiree shall
receive, in cash, the Class B Retiree Payment multiplied by the Class B
Equivalents owned by such Class B Retiree.
(d) Certain Definitions. For purposes of the foregoing, the
-------------------
following terms shall have the meanings set forth below:
(i) "Book Value of Class A Common Stock" or "BVA" means the book
---------------------------------- ---
value of a share of Class A Common Stock as of the end of the
most recent fiscal year of Buck prior to the Closing Date.
(ii) "Book Value of Class B Common Stock" or "BVB" means the book
---------------------------------- ---
value of a share of Class B Common Stock as of the end of the
most recent fiscal year of Buck prior to the Closing Date.
(iii) "Class A Common Stock Outstanding" or "NA" means the number of
-------------------------------- --
shares of Class A Common Stock outstanding on the Closing Date.
(iv) "Class B Common Stock Outstanding" or "NB" means the number of
-------------------------------- --
shares of Class B Common Stock outstanding on the Closing Date
including Issuable Shares as of such date.
(v) "Class A Equivalents" or "NEA" means the number of shares of
------------------- ---
Class A Common Stock previously repurchased by Buck which are
entitled to receive an Additional Payment under the Retiree
Protection Plan.
(vi) "Class B Equivalents" or "NEB" means the number of shares of
------------------- ---
Class B Common Stock previously repurchased by Buck which are
entitled to receive an Additional Payment under the Retiree
Protection Plan.
A-3
<PAGE>
(vii) " Class A Payment" or "CAP" and "Class B Payment" or "CBP" means
--------------- --- --------------- ---
the respective per share amount determined by the joint solutions
of the following formulas:
CAP = BVA x CBP
-----------
BVB
PP = (CAP x NA) + (CBP x NB) + [(CAP - BVA) x NEA] + [(CBP - BVB) x
NEB], where
"Class A Retiree" means a holder of Class A Equivalents.
---------------
"Class B Retiree" means a holder of Class B Equivalents.
---------------
"Class A Retiree Payment" means the Class A Payment (CAP) less
----------------------- ----
the Book Value of Class A Common Stock (BVA).
"Class B Retiree Payment" means the Class B Payment (CBP) less
----------------------- ----
the Book Value of Class B Common Stock (BVB).
"Cost" of any Issuable Share means the amount required to be paid
----
to Buck to acquire such Issuable Share.
"Issuable Share" means any share of unissued Class B Common Stock
--------------
which is issuable upon payment therefor to Buck pursuant to any
Purchase Agreement in effect on the Closing Date.
"Purchase Agreement" means an agreement between Buck and a
------------------
stockholder of Buck pursuant to which Buck has agreed to issue
and sell Buck Common Stock to such stockholder and such
stockholder has agreed to purchase and pay for such Buck Common
Stock, all in accordance with the terms and conditions thereof.
"Purchase Price" or "PP" means $225,000,000.
-------------- --
"Retiree Protection Plan" has the meaning assigned to that term
-----------------------
in the Recitals hereof.
"Statutory Class A Payment" means the Class A Payment payable
-------------------------
solely in MBC Common Stock (subject to Section 2.03(b) hereof).
"Statutory Class B Payment" means the Class B Payment payable
-------------------------
solely in MBC Common Stock (subject to Section 2.03(b) hereof).
(e) Pro Forma Calculation. For purposes of elucidation of the payment
---------------------
methodology set forth in Sections 2.01(a), (b) and (c), above, Part A of the
Buck Disclosure Letter sets forth a pro forma calculation, as of the date
hereof, of the Class A Payment, the Class B Payment, the Class A Retiree
Payment and the Class B Retiree Payment. Said Part A of the Buck Disclosure
Letter shall set forth detailed schedules identifying all of the variables
included in the payment methodology (as of the date hereof), including without
limitation, listings of the Class A Retirees and Class B Retirees and
identification of the Class A Equivalents and Class B Equivalents associated
therewith. The parties acknowledge and agree that the final calculation of
such payment amounts will be at and as of the Effective Time.
2.02. Election Procedures.
-------------------
(a) An election form (the "Election Form") pursuant to which each
-------------
holder of Buck Common Stock may elect to receive (i) only MBC Common Stock
with respect to such holder's Buck Common Stock (the "Stock Election"), (ii)
--------------
only cash with respect to such holder's Buck Common Stock (the "Cash
----
Election") or
--------
A-4
<PAGE>
(iii) (A) MBC Common Stock with respect to a percentage of such holder's Buck
Common Stock (such percentage to equal a minimum of 10% of such holder's Buck
Common Stock or, if in excess of 10% of such holder's Buck Common Stock, an
integral multiple of 10% up to 90% of such holder's Buck Common Stock) and (B)
cash with respect to a percentage of such holder's Buck Common Stock (such
percentage, when added to the percentage elected under sub-clause (A), to
equal 100%), rounded in each case to the nearest whole share ("Mixed Payment
-------------
Election") will be mailed to each holder of record of Buck Common Stock on the
--------
record date (the "Buck Record Date") for the meeting of stockholders of Buck
----------------
to be called to take action with respect to the Merger (the "Buck
----
Stockholders' Meeting"). In addition, Buck will use its commercially
---------------------
reasonable efforts to make the Election Form available to all persons who
become holders of record of Buck Common Stock between the Buck Record Date and
the Election Deadline. To be effective, an Election Form (or a facsimile
thereof), properly completed and signed, must be received by Buck no later
than 5:00 p.m., local time, on the last business day before the date of the
Buck Stockholders' Meeting (the "Election Deadline"). Any holder of record of
-----------------
Buck Common Stock whose Election Form is not so received by the Election
Deadline (a "Non-Electing Holder") shall be deemed to have made the Stock
-------------------
Election. Subject to the provisions of this Section 2.02, the shares subject
to Mixed Payment Elections shall be divided by MBC into such proportion with
respect to which the holder has elected to receive MBC Common Stock ("Mixed
-----
Stock Shares") and such portion with respect to which the holder has elected
------------
to receive cash ("Mixed Cash Shares") for purposes of allocating the total
-----------------
consideration as specified below.
(b) Except as otherwise hereinafter provided, each holder of record
of Buck Common Stock may make only the Stock Election or the Cash Election or
the Mixed Payment Election with respect to all shares of Buck Common Stock
held of record by such holder, whether such shares be held in a single or in
multiple stockholder accounts. For purposes of this Agreement, a person
holding shares of record individually will be treated as a separate holder
from the same person holding shares of record jointly with another person or
in a fiduciary capacity. A holder of record of Buck Common Stock who is a
nominee only may submit one or more Election Forms indicating thereon a
combination of Elections covering up to the aggregate number of shares of Buck
Common Stock registered in the name of such holder; provided that such holder
--------
certifies to the satisfaction of MBC that such shares are held by such holder
as nominee for more than one beneficial owner and that the Stock Election or
the Cash Election or the Mixed Payment Election has been made with respect to
all shares held as nominee for any one beneficial owner. For purposes of this
Agreement, each beneficial owner for which such an Election Form is so
submitted will be treated as a separate holder of Buck Common Stock.
(c) Any holder of record who has made an Election may change it at
any time prior to the Election Deadline by submitting to Buck a revised
Election Form (or a facsimile thereof), properly completed and signed. Upon
the Election Deadline, Elections will become irrevocable except to the extent
changes therein are made as provided in or are permitted by MBC in order to
satisfy the limitations referred to in this Section 2.02. Unless changed as
aforesaid, an Election Form submitted by any holder of record of Buck Common
Stock shall be binding upon any transferee of the shares of such holder.
(d) Holders of shares of Buck Common Stock who do not vote for the
Merger, do not perfect their dissenters' rights under Section 262 of the
Delaware General Corporation Law and who are Non-Electing Holders shall be
entitled only to the Statutory Class A Payment and to the Statutory Class B
Payment, as the case may be, less, in the case of Issuable Shares, the Cost
----
thereof.
(e) Notwithstanding any other provision contained herein or in any
Election Form, the effectiveness of the Elections by holders of Buck Common
Stock herein provided for shall be subject to the limitation that the
aggregate market value on the day prior to the Effective Time of all whole
shares of MBC Common Stock to be issued pursuant to the Stock Election
(including shares of Buck Common Stock held by Non-Electing Holders deemed to
have made the Stock Election pursuant to Section 2.02(a)) and the Mixed
Payment Election (the "Stock Value") shall be at least equal to 55.6% of the
-----------
Total Consideration (the "Minimum Stock Limitation"). For purposes of the
------------------------
Minimum Stock Limitation, the term "Total Consideration" shall mean the sum of
-------------------
(i) the Stock Value, (ii) the aggregate amount of cash to be paid pursuant to
the Cash Election and the Mixed Payment Election, (iii) the aggregate amount
of cash to be paid in lieu of fractional shares of MBC Common Stock pursuant
to the Stock Election and the Mixed Payment Election, (iv) the aggregate
amount of cash which MBC determines may be payable to all holders of Buck
Common Stock who as of the Effective Time
A-5
<PAGE>
may perfect rights of dissenting stockholders pursuant to Delaware law and (v)
the aggregate amount of cash to be paid in respect of the Class A Retiree
Payments and the Class B Retiree Payments pursuant to Section 2.01(c) hereof.
(f) In applying the Minimum Stock Limitation, if, after tentatively
giving effect to the Elections by holders of Buck Common Stock herein provided
for, MBC shall determine that the Minimum Stock Limitation may be violated,
then certain of such Elections shall be deemed ineffective as follows: if the
Minimum Stock Limitation might otherwise not be met, MBC shall automatically
convert, on a pro rata basis, the number of shares of Buck Common Stock
--- ----
subject to Cash Elections and the Mixed Cash Shares to the Stock Election and
to Mixed Stock Shares, respectively, to the extent MBC shall determine to be
reasonably necessary in order to assure that the Minimum Stock Limitation
shall be met. The pro rata conversion to be used by MBC shall consist of an
--- ----
equitable proration process reasonably designed to treat all holders of Buck
Common Stock who have elected the Cash Election and who have elected the Mixed
Shares Election equally based on the amount of cash elected to be received by
such holders.
(g) If, after tentatively giving effect to the Elections by holders
of Buck Common Stock herein provided for, MBC and Buck shall mutually
determine that it would be reasonable to reduce the number of Stock Elections
in a particular jurisdiction (other than the United States) in order to
obviate the need to comply with the securities registration requirements of
that jurisdiction (or to reduce the costs of compliance with such
requirements), then MBC shall have the authority to automatically convert, on
a reasonable basis, the number of shares of Buck Common Stock subject to Stock
Elections relating to that jurisdiction to the Cash Election to the extent MBC
shall determine to be reasonably necessary in order to achieve such goals.
(h) MBC shall have the right to establish additional procedures and
to make reasonable determinations not inconsistent with the provisions of this
Agreement governing any matters in connection with this Agreement, including
but not limited to procedures and determinations as to the manner, form and
validity of Elections. Any such procedures established shall be effective as
if set forth in this Agreement and any such determinations made by MBC in good
faith shall be final and conclusive.
2.03. Surrender and Exchange of Buck Certificates.
-------------------------------------------
(a) As promptly as practicable after the Effective Time, MBC shall
cause to be sent to each person who immediately prior to the Effective Time
was a holder of record of Buck Common Stock transmittal materials and
instructions for surrendering certificates for Buck Common Stock ("Old
---
Certificates") in exchange for a certificate or certificates for the number of
------------
whole shares of MBC Common Stock or for the cash to which such person is
entitled hereunder. Alternatively, as may be agreed to by MBC and Buck, prior
to the Effective Time Buck shall send to each holder of record of Buck Common
Stock such transmittal materials and instructions and Buck shall hold the Old
Certificates in escrow pending the Closing Date.
(b) No certificates for fractional shares of MBC Common Stock shall
be issued in connection with the Merger. In lieu thereof, MBC shall issue to
any holder of Old Certificates otherwise entitled to a fractional share, upon
surrender of such Old Certificates in accordance with the instructions
furnished by MBC, a check for an amount of cash (without interest thereon and
less the amount of Taxes, if any, which are required to be imposed or paid
thereon) equal to the fraction of a share of MBC Common Stock represented by
the Old Certificates so surrendered multiplied by the Transaction Share Price
as of the Effective Time.
(c) No interest shall accrue or be payable in respect of any cash
payable upon surrender for exchange of Old Certificates. If any dividend on
MBC Common Stock is declared with a record date after the Effective Time, the
declaration shall include dividends on all whole shares of MBC Common Stock
into which shares of Buck Common Stock have been converted under this
Agreement, but no former holder of record of Buck Common Stock shall be
entitled to receive payment of any such dividend until surrender of the
stockholder's Old Certificates shall have been effected in accordance with the
instructions furnished by MBC. Upon such surrender for exchange of a
stockholder's Old Certificates, such stockholder shall be entitled to receive
from MBC (without interest thereon and less the amount of Taxes, if any, which
may have been imposed or paid thereon) an amount equal to all such dividends
declared and for which the payment date has occurred, on the
A-6
<PAGE>
whole shares of MBC Common Stock into which the shares represented by such Old
Certificates have been converted.
(d) After the Effective Time, there shall be no transfer on the
stock transfer books of Buck or MBC of shares of Buck Common Stock. If Old
Certificates are presented for transfer after the Effective Time, they shall
be cancelled and certificates representing whole shares of MBC Common Stock
(and a check in lieu of any fractional share) or cash, as the case may be,
shall be issued or paid in exchange therefor as provided herein.
2.04. Stockholder Rights. At the Effective Time, holders of Buck
------------------
Common Stock shall cease to be and shall have no rights as, stockholders of
Buck, other than to receive the consideration provided under this Article II.
2.05. Dissenting Stockholders.
-----------------------
(a) Any holder of shares of Buck Common Stock who perfects his or
her dissenters' rights of appraisal in accordance with and as contemplated by
Section 262 of the Delaware General Corporation Law (the shares held by such
holder being referred to herein as "Dissenters' Shares") shall be entitled to
------------------
receive the value of such shares as determined pursuant to such provision of
law; provided, however, that no such payment shall be made to any dissenting
-------- -------
stockholder unless and until such dissenting stockholder has complied with the
applicable provisions of the Delaware General Corporation Law and duly
surrendered the certificate or certificates representing the shares for which
payment is being made. If a dissenting stockholder of Buck fails to perfect
or effectively withdraws or loses, his or her rights to appraisal and of
payment for his or her shares, after the Effective Time, such holder shall be
deemed to have made a Stock Election or Cash Election, as determined by MBC
in its sole discretion and MBC shall issue and deliver the consideration to
which such holder is entitled hereunder (without interest) upon surrender by
such holder of the Old Certificates representing shares of Buck Common Stock
held by him or her.
(b) Any holder of shares of Buck Common Stock who does not vote for
the Merger, does not perfect his or her dissenters' rights under Section 262
of the Delaware General Corporation Law and is a Non-Electing Holder shall
only be entitled to the Statutory Class A Payment and the Statutory Class B
Payment, as the case may be, less, in the case of Issuable Shares, the Cost
----
thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUCK
Buck represents and warrants to MBC that the statements contained in
the Recitals that relate to Buck are true and correct. Buck further
represents and warrants to MBC that the following matters are true and
correct.
3.01. Organization; Good Standing; Power and Authority.
------------------------------------------------
(a) Part 3.01 of the Buck Disclosure Letter contains a complete and
accurate list for each Buck Company of its name, a summary of its business
activities which it carries on in the ordinary course on the date hereof (as
to each Buck Company, its "Business"), its jurisdiction of incorporation,
--------
other jurisdictions in which it is authorized to do business and its
capitalization (including the identity of each stockholder and the number of
shares held by each). Each Buck Company is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, and has the full corporate power and authority to conduct its
Business. Each Buck Company is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state or other
jurisdiction in which the failure to be duly qualified would have a Buck
Material Adverse Effect.
(b) Buck has delivered to MBC copies of the Organizational
Documents, as currently in effect, of those of the Buck Companies in which
Buck or another Buck Company owns a majority interest.
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<PAGE>
3.02. Authorization; Enforceability; No Conflict.
------------------------------------------
(a) The execution and delivery of this Agreement and the Merger
Agreement by Buck and the consummation by Buck of the transactions
contemplated herein and therein, subject to Buck Stockholder approval with
respect to the Merger, have been duly and validly authorized by all necessary
corporate action on the part of Buck. This Agreement represents the valid and
legally binding obligation of Buck, enforceable against Buck in accordance
with its terms, subject to bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting the rights and remedies of creditors generally and
general principles of equity, whether such principles are considered in a
proceeding in equity or law. The Merger Agreement, when executed by Buck and
subject to the approval of the stockholders of Buck to the extent required by
applicable Legal Requirements, shall represent the valid and legally binding
obligation of Buck, enforceable against Buck in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the rights and remedies of creditors generally and general
principles of equity, whether such principles are considered in a proceeding
in equity or law.
(b) Except as set forth in Part 3.02 of the Buck Disclosure Letter,
neither the execution and delivery of this Agreement by Buck nor the
consummation or performance of any of the transactions contemplated hereby by
Buck will, directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with or result in a violation of (A) any
provision of the Organizational Documents of the Buck Companies
or (B) any resolution adopted by the Board of Directors or the
stockholders of any Buck Company;
(ii) contravene, conflict with or result in a violation of or give
any Governmental Body or other Person the right to exercise any
remedy or obtain any relief under, any Legal Requirement or any
Order to which any Buck Company may be subject, except such
contravention, conflict or violation which, individually or in
the aggregate, would not materially and adversely impede the
conduct of the Business of the Buck Company;
(iii) contravene, conflict with or result in a violation of any of
the terms or requirements of or give any Governmental Body the
right to revoke, withdraw, suspend, cancel, terminate or
modify, any Governmental Authorization that is held by any Buck
Company or that otherwise relates to the Business of any Buck
Company, except for any such result which, individually or in
the aggregate, would not materially and adversely impede the
conduct of the Business of the Buck Company;
(iv) cause any Major Buck Company to become subject to or to become
liable for the payment of any Tax or cause any of the assets
owned by any Major Buck Company to be reassessed or revalued by
any taxing authority pursuant to any existing agreement between
such Major Buck Company and taxing authority or by operation of
law;
(v) contravene, conflict with or result in a violation or breach of
any provision of or give any Person the right to declare a
default or exercise any remedy under or to accelerate the
maturity or performance of or to cancel, terminate or modify,
any Applicable Contract, other than Contracts the acceleration,
cancellation, termination or modification of which,
individually or in the aggregate, would not materially and
adversely impede the conduct of the Business of the Buck
Company; or
(vi) except for the voting agreement for the Board of Directors
contemplated hereby, result in the imposition or creation of
any Encumbrance upon or with respect to the Buck Common Stock
or any of the assets owned or used by any Buck Company.
Part 3.02-A of the Buck Disclosure Letter sets forth all notices or Consents
required to be given to or obtained from any Person by any Buck Company in
connection with the execution and delivery of this Agreement or the
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<PAGE>
consummation or performance of any of the transactions contemplated hereby,
and Part 3.02-B of the Buck Disclosure Letter is a subset thereof setting
forth thereof, as to each Buck Company, those notices or Consents the failure
to give or obtain, individually or in the aggregate, would materially and
adversely impede the conduct of the Business of the Buck Company.
3.03. Capitalization. As of the date hereof, the equity securities
--------------
and other securities of Buck are as described in the Recitals. Except as set
forth in Part 3.03 of the Buck Disclosure Letter, all of the outstanding
equity securities and other securities of each Buck Company (other than Buck)
are owned of record and beneficially by one or more of the Buck Companies
(other than director qualifying shares or up to 5% of the shares of Buck
Companies required to be held by local employees, the identity of ownership of
which, in each case, is described in Part 3.01 of the Buck Disclosure Letter),
free and clear of all Encumbrances. Except as set forth in Part 3.03 of the
Buck Disclosure Letter, no legend or other reference to any purported
Encumbrance appears on any certificate representing equity securities or other
securities of any Buck Company. All of the outstanding equity securities or
other securities of each Buck Company have been duly authorized and validly
issued and, except as set forth in Part 3.03 of the Buck Disclosure Letter,
are fully paid and nonassessable. Except as set forth in Part 3.03 of the
Buck Disclosure Letter, there are no Contracts relating to the issuance, sale
or transfer of any equity securities or other securities of any Buck Company.
None of the outstanding equity securities or other securities of any Buck
Company was issued in violation of the Securities Act or any other Legal
Requirement. No Buck Company owns or has any Contract to acquire, any equity
securities or other securities of any Person (other than Buck Companies) or
any direct or indirect equity or ownership interest in any other company other
than equity interests resulting from the accounts receivable of insolvent
clients which in the aggregate do not have a fair market value in excess of
$10,000.
3.04. Financial Statements. Buck has delivered to MBC, prior to
--------------------
the execution of this Agreement, the Buck Financial Statements in respect of
periods ended on or prior to March 31, 1996, and, in accordance with Section
5.14 hereof, will deliver copies of the Buck Financial Statements in respect
of periods ending after March 31, 1996. The Buck Financial Statements (as of
the dates thereof and for the periods covered thereby): (a) are (and, in the
case of the Buck Financial Statements in respect of periods ending after March
31, 1996, will be) in accordance with the books and records of the Buck
Companies and have been prepared (and, in the case of the Buck Financial
Statements in respect of periods ending after March 31, 1996, will be
prepared), except as set forth in Part 3.04 of the Buck Disclosure Letter, in
accordance with GAAP and (b) present fairly (and, in the case of the Buck
Financial Statements in respect of periods ending after March 31, 1996, will
present fairly), in all material respects, the consolidated financial position
and the consolidated results of operations, changes in stockholders' equity
and cash flows of the Buck Companies as of the dates and for the periods
indicated, in accordance with GAAP applied, except as otherwise disclosed
therein, on a basis consistent with prior periods (subject in the case of
interim financial statements to normal recurring year-end adjustments normal
in nature and amount). "Buck Financial Statements" shall mean (i) the
-------------------------
consolidated balance sheets of the Buck Companies as at March 31 in each of
the years 1994, 1995, 1996 and the related consolidated statements of income,
changes in stockholders' equity and cash flow for each of the fiscal years
then ended, together with the report thereon of Grant Thornton LLP,
independent certified public accountants, (ii) when prepared as required by
Section 5.14, the consolidated balance sheets of the Buck Companies as at
December 31 in each of the years 1995 and 1996 and the related consolidated
statements of income, changes in stockholders' equity and cash flow for each
of the nine months then ended, (iii) when prepared as required by Section
5.14, the consolidated balance sheets of the Buck Companies as at March 31,
1997 and the related consolidated statements of income, changes in
stockholders' equity and cash flow for the fiscal year then ended, together
with the report thereon of Grant Thornton LLP, independent certified public
accountants, and (iv) when prepared as required by Section 5.14, the quarterly
unaudited consolidated balance sheets of the Buck Companies and the related
quarterly unaudited consolidated statements of income, changes in
stockholders' equity and cash flow for the fiscal quarter then ended,
including in each case the notes thereto, for each fiscal quarter of the Buck
Companies from and after March 31, 1997 through the Closing Date.
3.05. Books and Records. Except as set forth in Part 3.05 of the
-----------------
Buck Disclosure Letter, the books of account, minute books, stock record books
and other records of the Major Buck Companies, all of which have been made
available to MBC, are complete and correct and have been maintained in
accordance with sound business practices, including the maintenance of an
adequate system of internal controls. Except as set forth in
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<PAGE>
Part 3.05 of the Buck Disclosure Letter, the minute books of the Major Buck
Companies contain accurate and complete records of all meetings held of and
corporate action taken by, the stockholders, the Boards of Directors and
committees of the Boards of Directors of the Major Buck Companies and, except
as set forth in Part 3.05 of the Buck Disclosure Letter, no meeting of any
such stockholders, Board of Directors or committee has been held for which
minutes have not been prepared and are not contained in such minute books. At
the Closing, all of the books and records of the Buck Companies will be in the
possession of the respective Buck Companies.
3.06. No Undisclosed Liabilities. The Buck Companies have no
--------------------------
liabilities or obligations of any nature (whether known or unknown and whether
absolute, accrued, contingent or otherwise) required by GAAP to be reflected,
reserved against or disclosed, except for liabilities or obligations set forth
on Part 3.06 of the Buck Disclosure Letter, those reflected or reserved
against or disclosed in the 1996 Balance Sheet and current liabilities
incurred in the ordinary course of business since the date thereof.
3.07. Taxes.
-----
(a) The Buck Companies have filed or caused to be filed all Tax
Returns that are or were required to be filed by or with respect to any of
them, either separately or as a member of a group of corporations, pursuant to
applicable Legal Requirements, except for categories of Tax Returns which are
described on Part 3.07 of the Buck Disclosure Letter. Buck has delivered or
made available to MBC copies of and Part 3.07 of the Buck Disclosure Letter
contains a complete and accurate list of, all such Tax Returns filed since
March 31, 1994. The Buck Companies have paid or made provision for the
payment of, all Taxes that have or may have become due pursuant to those Tax
Returns or otherwise or pursuant to any assessment received by any Buck
Company, except such Taxes, if any, as are listed in Part 3.07 of the Buck
Disclosure Letter and are being contested in good faith and as to which
adequate reserves (determined in accordance with GAAP) have been provided in
the 1996 Balance Sheet.
(b) The United States federal and state income Tax Returns of each
Buck Company subject to such Taxes have been audited by the IRS or relevant
state tax authorities or are closed by the applicable statute of limitations
for all taxable years through March 31, 1993. Part 3.07 of the Buck
Disclosure Letter contains a complete and accurate list of all audits of all
such Tax Returns, including a summary of the nature and outcome of each audit.
Except as set forth in Part 3.07 of the Buck Disclosure Letter, all
deficiencies proposed as a result of such audits have been paid, reserved
against, settled or, as described in Part 3.07 of the Buck Disclosure Letter,
are being contested in good faith by appropriate proceedings. Part 3.07 of
the Buck Disclosure Letter describes all adjustments to the U.S. federal
income Tax Returns filed by any Buck Company or any group of corporations
including any Buck Company for all taxable years since March 31, 1993 and the
resulting deficiencies proposed by the IRS. Except as described in Part 3.07
of the Buck Disclosure Letter, no Buck Company has given or been requested to
give waivers or extensions (or is or would be subject to a waiver or extension
given by any other Person) of any statute of limitations relating to the
payment of Taxes of any Buck Company or for which any Buck Company may be
liable. Except as set forth in Part 3.07 of the Buck Disclosure Letter, no
audit or other proceeding by any Governmental Body is pending or threatened
with respect to any Taxes due from or with respect to any Buck Company or any
Tax Return filed by or with respect to any Buck Company.
(c) The charges, accruals and reserves with respect to Taxes on the
respective books of each Buck Company are adequate (determined in accordance
with GAAP) and are at least equal to that Buck Company's liability for Taxes.
Buck has not been notified of any proposed tax assessment against any Buck
Company except as disclosed in the 1996 Balance Sheet or in Part 3.07 of the
Buck Disclosure Letter. No consent to the application of Section 341(f)(2) of
the IRC has been filed with respect to any property or assets held, acquired
or to be acquired by any Buck Company. All Taxes that any Buck Company is or
was required by Legal Requirements to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the
proper Governmental Body or other Person. Except as disclosed in Part 3.07 of
the Buck Disclosure Letter, the Buck Companies are not currently subject to an
agreement or requirement to make any adjustment pursuant to Section 481 of the
IRC by reason of any change in any accounting method of the Buck Companies and
there is no application pending with any Governmental Body requesting
permission for any changes in any accounting period. No Buck Company holds
any "interest in U.S. real property" within the
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<PAGE>
meaning of Section 1445(a) of the IRC. No payment to employees or former
employees of any Buck Companies is, or as a result of the transactions
contemplated hereunder, will be subject to Section 280G of the IRC. None of
the Buck Companies has any deferred gains, income, deduction or losses with
respect to intercompany transactions under Treasury Regulation Section
1.1502-13.
(d) All Tax Returns filed by (or that include on a consolidated
basis) any Buck Company are true, correct and complete. There is no tax
sharing agreement that will require any payment by any Buck Company after the
date of this Agreement. No Buck Company is or within the five-year period
preceding the Closing Date has been, an "S" corporation as defined in Section
1361 of the IRC. There are no Encumbrances with respect to Taxes which have
been placed on the assets or stock of any of the Buck Companies.
3.08. Accounts Receivable. All accounts receivable of the Major
-------------------
Buck Companies that are reflected on the 1996 Balance Sheet or on the
accounting records of the Buck Companies as of the Closing Date (collectively,
the "Accounts Receivable") represent or will represent valid obligations
-------------------
arising from sales actually made or services actually performed in the
ordinary course of business. Unless paid prior to the Closing Date, the
Accounts Receivable are or will be as of the Closing Date current and
collectible net of the respective reserves shown on the 1996 Balance Sheet or
on the accounting records of the Buck Companies as of the Closing Date (which
reserves are adequate and calculated consistent with past practice and will
not represent a material adverse change in the composition of such Accounts
Receivable in terms of aging). Part 3.08 of the Buck Disclosure Letter
contains a complete and accurate list of all Accounts Receivable as of the
date of the 1996 Balance Sheet, which list sets forth the aging of such
Accounts Receivable.
3.09. No Material Adverse Change. Since March 31, 1996, there has
--------------------------
not been any material adverse change in the business, operations, properties,
assets or condition of any Buck Company and no event has occurred or
circumstance exists that may result in such a material adverse change.
3.10. Employee Benefits.
-----------------
(a) Buck has delivered or made available to MBC, prior to the
execution of this Agreement, copies (or, with respect to unwritten plans,
written descriptions) of (i) each pension, retirement, deferred compensation,
stock option, stock purchase, savings, employee stock ownership, restricted
stock, phantom stock, stock ownership or other similar plan as in effect on
the date of this Agreement, including, without limitation, any "employee
pension benefit plan", as that term is defined in Section 3(2) of ERISA, in
respect of any of the present or former employees or independent contractors
of or dependents, spouses or other beneficiaries of any of such employees or
independent contractors of, any of the Buck Companies (the "Buck Pension
------------
Plans"), (ii) each employment or consulting agreement, severance (including,
without limitation, change of control or golden parachute agreements or
arrangements), bonus, profit-sharing, incentive, deferred compensation,
supplemental or excess retirement, life insurance, health or other plan,
policy, contract or arrangement as in effect on the date of this Agreement,
other than an Buck Pension Plan or Buck Welfare Plan (as hereinafter defined)
which provides benefits or perquisites to or in respect of any of the present
or former directors or officers ("Buck Executive Plans") or dependents,
--------------------
spouses or other beneficiaries of any of such directors or officers of, any of
the Buck Companies and (iii) each severance, bonus, profit-sharing, incentive,
deferred compensation, supplemental or excess retirement, life insurance,
health, vacation, tuition assistance or reimbursement, legal services, salary
continuation, travel or accident insurance or benefits, disability insurance
or benefits, unemployment benefits or other plans, policies, contracts or
arrangements, including, without limitation, each "employee welfare benefit
plan" within the meaning of Section 3(1) of ERISA as in effect on the date of
this Agreement which provides benefits or perquisites to or in respect of
present or former employees or independent contractors of or dependents,
spouses or other beneficiaries of, any of such employees or independent
contractors of, any of the Buck Companies (the "Buck Non-Executive Plans")
------------------------
(the Buck Executive and Non-Executive Plans being collectively referred to as
the "Buck Welfare Plans") (all the foregoing being collectively referred to as
------------------
the "Buck Benefit Plans"). All such Buck Benefit Plans are listed on Part
------------------
3.10 of the Buck Disclosure Letter. No Buck Company has participated in or
been a member of and no Buck Benefit Plan is or has been, a "multiemployer
plan" within the meaning of Section 3(37) of ERISA or a "multiple employer
plan" within the meaning of Section 413(c) of the Code.
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<PAGE>
(b) All Buck Benefit Plans conform to and their administration is
in compliance with, the applicable provisions of ERISA and the Code and any
other applicable Legal Requirement. With respect to the Buck Benefit Plans,
no event has occurred and no condition or set of circumstances exists, in
connection with which any of the Buck Companies could be directly or
indirectly, through any other trade or business (whether or not incorporated)
which together with the Buck Companies would be deemed to be part of a
"controlled group" within the meaning of Section 4001 of ERISA (an "ERISA
-----
Affiliate"), subject to any liability, Encumbrance or loss of tax deduction
---------
under ERISA or the Code or any other Legal Requirement or under any agreement,
instrument, statute, rule of law or regulation pursuant to or under which any
of the Buck Companies has indemnified or is required to indemnify any person
against any such liability (except liability for benefit claims and funding
obligations payable in the ordinary course). No notice of a "reportable
event," as that term is defined in Section 4043 of ERISA, for which the 30-day
reporting requirement has not been waived has been required to be filed for
any Buck Pension Plan which is subject to Title IV of ERISA within the 12-
month period ending on the date of this Agreement. None of the Buck Companies
has provided or is required to provide, security to any Buck Pension Plan
which is subject to Title IV of ERISA pursuant to Section 401(a)(29) of the
Code. No material liability (other than annual premiums, all of which
premiums due prior to the Closing have or will be paid) to the Pension Benefit
Guaranty Corporation has been incurred with respect to any Buck Pension Plan
which is subject to Title IV of ERISA.
(c) With respect to each Buck Benefit Plan, each of the Buck
Companies have made or will make and/or accrue all payments due from them with
respect to periods ending on or prior to the Closing Date. No Buck Pension
Plan which is subject to Title IV of ERISA has any "unfunded current
liability," as that term is defined in Section 302(d)(8)(A) of ERISA and the
present fair market value of the assets of each such plan exceeds the plan's
"benefit liabilities," as that term is defined in Section 4001(a)(16) of
ERISA, when determined under actuarial factors that would apply if the plan
terminated as of the date of this Agreement in accordance with all applicable
Legal Requirements. Each such Buck Pension Plan which is intended to qualify
under Section 401(a) of the Code has received a favorable determination letter
and nothing has occurred since the date of such letter that would adversely
affect such qualification. Each Buck Welfare Plan which is a "group health
plan" (as defined in ERISA Section 607(1)) has been operated in compliance
with the provisions of Part 6 of Title I of ERISA and Code Section 4980B at
all times.
(d) Except as otherwise provided in Part 3.10 of the Buck
Disclosure Letter, no Buck Welfare Plan provides medical or death benefits
(whether or not insured) with respect to current or former employees beyond
their date of retirement or other termination of service (other than coverage
mandated by Section 601 of ERISA, the cost of which is fully paid by the
former employee or his or her dependents).
(e) Except as set forth in Part 3.10 of the Buck Disclosure Letter,
the consummation of the transactions contemplated by this Agreement will not
obligate any of the Buck Companies to provide any current or former officer,
director or employee of any Buck Company, including, but not limited to,
Continued Employees described in Article X, with severance pay, unemployment
compensation or any similar payment, nor accelerate the time of payment or
vesting or increase any compensation due to any such employee or former
employee under any Buck Benefit Plan.
(f) None of the Buck Companies has taken any action which would
commit any of the Buck Companies to continue any Buck Benefit Plan for any
present or former officer, director or employee of any of the Buck Companies,
without regard to whether they are Continued Employees, nor has any Buck
Company taken any action which would prevent any Buck Company from changing or
terminating the Buck Benefit Plans at any time.
(g) By way of clarification and not intending to limit the
generality of the preceding paragraphs of this Section 3.10, each Buck Benefit
Plan subject to the Legal Requirements of a Foreign Jurisdiction conforms to
and their administration and funding is in compliance with all applicable
Legal Requirements in each such Foreign Jurisdiction and no event has occurred
and no condition or set of circumstances exists in connection with which any
of the Buck Companies could be directly or indirectly subject to any
liability, Encumbrance or loss of Tax or similar deduction under the Legal
Requirements of such Foreign Jurisdictions, except such nonconformance,
noncompliance, event, condition or circumstance which, individually
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<PAGE>
or in the aggregate, would not materially and adversely impede the conduct of
the Business of the Buck Company.
3.11. Compliance with Legal Requirements; Governmental
------------------------------------------------
Authorizations.
--------------
(a) Except as set forth in Part 3.11 of the Buck Disclosure Letter:
(i) each Buck Company is and at all times since March 31, 1995, has
been, in compliance with each Legal Requirement that is or was
applicable to its Business, except for such circumstances of
noncompliance which, individually or in the aggregate, would
not materially and adversely impede the conduct of the Business
of the Buck Company;
(ii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) constitutes a violation by
any Buck Company of or a failure on the part of any Buck
Company to comply with, any Legal Requirement, or (B) results
in the imposition of any Encumbrance against any Buck Company
or any of its property under any Legal Requirement, except for
such events or circumstances which, individually or in the
aggregate, would not materially and adversely impede the
conduct of the Business of the Buck Company; and
(iii) no Buck Company has received, at any time since March 31,
1995, any written notice or other written communication from
any Governmental Body or any other Person regarding any actual
or alleged violation of or failure to comply with, any Legal
Requirement.
(b) Part 3.11 of the Buck Disclosure Letter contains a complete and
accurate list of each Governmental Authorization that is held by each Buck
Company and that relates to its Business, except for such Governmental
Authorizations the absence of which, individually or in the aggregate, would
not materially and adversely impede the conduct of the Business of the Buck
Company. Each such Governmental Authorization is valid and in full force and
effect. Except as set forth in Part 3.11 of the Buck Disclosure Letter:
(i) each Buck Company is and at all times since March 31, 1995, has
been, in compliance with all of the terms and requirements of
each Governmental Authorization, except for such circumstances
of non-compliance which, individually or in the aggregate,
would not materially and adversely impede the conduct of the
Business of the Buck Company;
(ii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) constitutes directly or
indirectly a violation of or a failure to comply with any term
or requirement of any such Governmental Authorization, except
for such violations or circumstances of non-compliance which,
individually or in the aggregate, would not materially and
adversely impede the conduct of the Business of the Buck
Company or (B) would result directly or indirectly in the
revocation, withdrawal, suspension, cancellation or termination
of or any modification to, any such Governmental Authorization;
(iii) no Buck Company has received, at any time since March 31,
1995 any written notice or other written communication from any
Governmental Body or any other Person regarding (A) any actual
or alleged violation of or failure to comply with any term or
requirement of any Governmental Authorization or (B) any actual
or proposed revocation, withdrawal, suspension, cancellation,
termination of or modification to any Governmental
Authorization; and
(iv) all applications required to have been filed for the renewal of
such Governmental Authorizations have been duly filed on a
timely basis with the appropriate Governmental Bodies and all
other filings required to have been made with respect to
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<PAGE>
such Governmental Authorizations have been duly made on a
timely basis with the appropriate Governmental Bodies.
Except for such Governmental Authorizations the absence of which, individually
or in the aggregate, would not materially and adversely impede the ability of
such Buck Company to conduct and operate its Business, the Governmental
Authorizations listed in Part 3.11 of the Buck Disclosure Letter as to each
Buck Company collectively constitute all of the Governmental Authorizations
necessary to permit such Buck Company to lawfully conduct and operate its
Business.
3.12. Legal Proceedings; Orders.
-------------------------
(a) Except as set forth in Part 3.12 of the Buck Disclosure Letter,
there is no pending Proceeding:
(i) that has been commenced by or against any Buck Company; or
(ii) that challenges or that may have the effect of preventing,
delaying, making illegal or otherwise interfering with, any of
the transactions contemplated hereby.
Further, no such Proceeding has been Threatened against any Buck Company.
Buck has delivered to MBC copies of all material pleadings, correspondence and
other documents relating to each Proceeding listed in Part 3.12 of the Buck
Disclosure Letter. The Proceedings listed in Part 3.12 of the Buck Disclosure
Letter, if adversely determined against the Buck Company, will not have a Buck
Material Adverse Effect.
(b) Except as set forth in Part 3.12 of the Buck Disclosure Letter:
(i) there is no Order to which any of the Buck Companies, or any
Business of a Buck Company, is subject; and
(ii) no officer, director, agent or employee of any Buck Company is
subject to any Order that prohibits such officer, director,
agent or employee from engaging in or continuing any conduct,
activity or practice relating to the Business of the Buck
Company.
(c) Except as set forth in Part 3.12 of the Buck Disclosure Letter:
(i) each Buck Company is and at all times since March 31, 1995, has
been, in full compliance with all of the terms and requirements
of each Order to which its Business is or has been subject;
(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of
time) a violation of or failure to comply with any term or
requirement of any Order to which any Buck Company or its
Business is subject; and
(iii) no Buck Company has received, at any time since March 31,
1995, any written notice from any Governmental Body regarding
any actual, alleged, possible or potential violation of or
failure to comply with, any term or requirement of any Order to
which any Buck Company or its Business, is or has been subject.
3.13. Absence of Certain Changes and Events. Except as set forth
-------------------------------------
in Part 3.13 of the Buck Disclosure Letter, since March 31, 1996, the Buck
Companies have conducted their businesses only in the ordinary course of
business and there has not been any:
(a) change in any Buck Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of capital stock
of any Buck Company; issuance of any security convertible into such capital
stock; grant of any registration rights; purchase, redemption, retirement or
other acquisition by any Buck
A-14
<PAGE>
Company of any shares of any such capital stock; or declaration or payment of
any dividend or other distribution or payment in respect of shares of capital
stock;
(b) amendment to the Organizational Documents of any Buck Company;
(c) payment or increase by any Buck Company of any bonuses,
salaries or other compensation (except in the ordinary course of business) to
any stockholder, director, officer or employee or entry into any employment,
retention, severance or similar Contract with any director, officer or
employee;
(d) adoption of or increase in the payments to or benefits under,
any Buck Benefit Plans;
(e) damage to or destruction or loss of any asset or property of
any Buck Company, whether or not covered by insurance, which resulted in a
loss in excess of $250,000;
(f) entry into, termination of or receipt of notice of termination
of (i) any license, joint venture, credit or similar agreement or (ii) any
Contract or transaction involving a total remaining commitment by or to any
Buck Company of at least $250,000;
(g) sale, lease or other disposition of any material asset or
property of any Buck Company or imposition of any Encumbrance on any material
asset or property of any Buck Company, including the sale, lease or other
disposition of any of the Intellectual Property Assets;
(h) purchase of a business or an interest in a business by any Buck
Company, whether by merger, consolidation, acquisition of shares, acquisition
of assets, joint venture arrangement or otherwise;
(j) cancellation or waiver of any claims or rights with a value to
any Buck Company in excess of $250,000;
(k) material change in the accounting methods used by any Buck
Company; or
(l) agreement, whether oral or written, by any Buck Company to do
any of the foregoing.
3.14. Contracts; No Defaults.
----------------------
(a) As of the date hereof, Part 3.14(a) of the Buck Disclosure
Letter contains a complete and accurate list, and Buck has made available to
MBC true and complete copies (or, as specified below, written summaries of
oral Contracts), of the following Contracts:
(i) written summaries of each Contract for the provision of
outsourcing services (including without limitation defined
benefit outsourcing, defined contribution outsourcing and total
outsourcing);
(ii) each written Contract that involves performance of services or
delivery of goods or materials to one or more Buck Companies of
an amount or value in excess of $100,000 with respect to
obligations to be performed thereunder;
(iii) each written lease, rental or occupancy agreement, license,
installment and conditional sale agreement and other Contract
affecting the ownership of, leasing of, title to, use of or
any leasehold or other interest in, any real or personal
property (except personal property leases and installment and
conditional sales agreements having a value per item or
aggregate payments of less than $100,000 and with terms of less
than one year);
A-15
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(iv) each written licensing agreement or other Contract with respect
to software (other than software which is available on a retail
basis), patents, trademarks, copyrights or other intellectual
property;
(v) each joint venture, partnership and other written Contract
(however named) involving a sharing of profits, losses, costs
or liabilities by any Buck Company with any other Person, Buck
hereby representing to MBC that no Contract contemplated by
this Section 3.14(a)(v) is an oral Contract;
(vi) each written Contract containing covenants that in any way
purport to restrict the Business activity of any Buck Company
or limit the freedom of any Buck Company to engage in any line
of business or to compete with any Person, Buck hereby
representing to MBC that no Contract contemplated by this
Section 3.14(a)(vi) is an oral Contract;
(vii) each written Contract for capital expenditures to be made
after the date hereof requiring payments in excess of $100,000;
(ix) each written warranty, guaranty and or other similar
undertaking with respect to contractual performance extended by
any Buck Company other than in the ordinary course of business;
(x) written summaries of each consulting arrangement or Contract
(whether written or oral) for professional, advisory and other
services by one or more Buck Companies which was in effect on
March 31, 1996 with respect to the 96 largest United States and
20 largest Canadian, Australian and UK clients of Buck and the
Buck Companies taken as a whole;
(xi) each written Contract that contains a right of first refusal or
option, whether or not for the benefit of a Buck Company (but
excluding extension options under real estate leases and
customary renewal options under vendor agreements where the
payment obligation under such vendor agreement is less than
$100,000), Buck hereby representing to MBC that no Contract
contemplated by this Section 3.14(a)(xi) is an oral Contract;
(xii) any indemnification agreement from a Buck Company in favor of
any director (whether elected or appointed), officer or
employee of a Buck Company;
(xiii) each credit arrangement, however such credit arrangement may
be structured, relating to outstanding borrowings in excess of
$100,000; and
(xiv) each amendment, supplement and modification (whether oral or
written) in respect of any of the foregoing; and
(b) No officer, director or employee of any Buck Company is bound
by any agreement or arrangement, including any confidentiality, noncompetition
or proprietary rights agreement, between such officer, director or employee
and any other Person that purports to limit the ability of such officer,
director or employee to (i) engage in or continue any conduct, activity or
practice relating to the Business of any Buck Company or (ii) assign to any
Buck Company or to any other Person any rights to any invention, improvement
or discovery, except for such contractual provisions the effect of which,
individually or in the aggregate, would not materially and adversely impede
the conduct of the Business of the Buck Company.
(c) Except as set forth in Part 3.14(d) of the Buck Disclosure
Letter:
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<PAGE>
(i) each Buck Company is and at all times since March 31, 1995, has
been, in full compliance with all applicable terms and
requirements of each Applicable Contract under which such Buck
Company has or had any obligation or liability, except for such
circumstances of noncompliance which, individually or in the
aggregate, would not materially and adversely impede the
conduct of the Business of the Buck Company; and
(ii) no Buck Company has given to or received from any other Person,
at any time since March 31, 1995, any written notice or other
written communication regarding any actual, alleged, possible
or potential violation or breach of or default under, any
Applicable Contract.
(d) There are no renegotiations of, attempts to renegotiate or
outstanding rights to renegotiate any amount paid or payable to any Buck
Company in excess of $100,000 under current or completed Applicable Contracts
with any Person and no such Person has made written demand for such
renegotiation.
(e) The Applicable Contracts relating to the sale, design,
manufacture or provision of products or services by a Buck Company have been
entered into in the ordinary course of business and have been entered into
without the commission of any act alone or in concert with any other Person or
any consideration having been paid or promised, that is or would be in
violation of any Legal Requirement, except for such violations the effect of
which, individually or in the aggregate, would not materially and adversely
impede the conduct of the Business of the Buck Company.
3.15. Insurance.
---------
(a) Buck has furnished to MBC with respect to each Major Buck
Company:
(i) true and complete copies of all policies of insurance to which
any Major Buck Company is a party or under which any Major Buck
Company or any director of any Major Buck Company is covered as
of the date of this Agreement;
(ii) true and complete copies of all pending applications for
policies of insurance;
(iii) accurate explanations of any self-insurance arrangement by or
affecting any Major Buck Company, including any reserves
established thereunder (excluding retentions under insurance
policies which have been furnished to MBC);
(iv) any contract or arrangement, other than a policy of insurance,
for the transfer or sharing of any risk by any Major Buck
Company.
(v) for each Major Buck Company a summary of the loss experience
under each policy (for the current policy year and each of the
five (5) preceding policy years); and
(vi) a statement describing the loss experience of all claims that
were self-insured (excluding retentions under insurance
policies which have been furnished to MBC), including the
number and aggregate cost of such claims (for the current
policy year and each of the five (5) preceding policy years).
(b) Except as set forth on Part 3.15(d) of the Buck Disclosure
Letter:
(i) all policies to which any Buck Company is a party or that
provide coverage to any Buck Company or any director or officer
of any Buck Company:
(A) are valid, outstanding and enforceable;
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<PAGE>
(B) are issued by an insurer that is financially sound and
reputable;
(C) taken together, provide adequate insurance coverage for
the assets and the operations of the Buck Companies for
all risks normally insured against by a Person carrying on
the same or similar business or businesses as the Buck
Companies;
(D) are sufficient for compliance with all Legal Requirements
and Applicable Contracts to which any Buck Company is a
party or by which any of them is bound;
(E) will continue in full force and effect following the
consummation of the transactions contemplated hereby; and
(F) do not provide for any retrospective premium adjustment or
other experienced-based liability on the part of any Buck
Company (except for the professional liability insurance
provided to the Buck Companies by Professional Consultants
Insurance Company, Inc.).
(ii) No Buck Company has received, under any current insurance
policy in favor of such Buck Company (A) any refusal of
coverage or (B) any notice of cancellation or any other
indication that any insurance policy is no longer in full force
or effect or will not be renewed or that the issuer of any
policy is not willing or able to perform its obligations
thereunder.
(iii) The Buck Companies have paid all premiums due and have
otherwise performed all of their respective obligations, under
each policy to which any Buck Company is a party or that
provides coverage to any Buck Company or director thereof.
(iv) The Buck Companies have given notice to the insurer of all
material claims that may be insured thereby.
3.16. Environmental Matters. Each Buck Company is in compliance
---------------------
with all applicable Legal Requirements relating to air, water, soil, solid
waste management, Hazardous Substances or the protection of health or the
environment (collectively, the "Environmental Laws"). Except as set forth on
------------------
Part 3.16 of the Buck Disclosure Letter, there are no claims, actions, suits
or proceedings pending or Threatened against or involving a Buck Company under
any of the Environmental Laws (whether by reason of any failure to comply with
any of the Environmental Laws or otherwise). No Order under any of the
Environmental Laws has been entered against any Buck Company. There has not
been a Release by any Buck Company on any property owned or leased by a Buck
Company of any Hazardous Substance and no Buck Company has received any
notification from any Governmental Body that as to any property owned or
leased by such Buck Company or any business and activities conducted on any
such property, there exists or has occurred a violation by any Buck Company of
applicable environmental laws or potential liability for Release of Hazardous
Substances. For purposes of this Section 3.16, "Hazardous Substance" shall
-------------------
mean a hazardous or toxic substance (as defined under the Comprehensive
Environmental Response, Compensation and Liability Act, as amended) and
petroleum, including crude oil or any fraction thereof, and "Release" shall
-------
mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping or other disposal in any amount into or
onto the air, ground or surface water, land or other parts of the environment,
however caused.
3.17. Employee Relationships. Except as set forth on Part 3.17 of
----------------------
the Buck Disclosure Letter, there are no labor or collective bargaining
agreements, contracts or understandings with a labor union or labor
organization which are binding upon any Buck Company. As of the date hereof,
no Buck Company is the subject of a Proceeding asserting it has committed an
unfair labor practice or seeking to compel it to a bargain with any labor
organization as to wages and conditions of employment, nor is any such
Proceeding Threatened, nor is there pending or Threatened any strike or other
labor dispute by employees of any Buck Company nor is there
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<PAGE>
any activity involving any such employees seeking to certify a collective
bargaining unit or engaging in any other union organizational activity.
3.18. Intellectual Property.
---------------------
(a) Part 3.18 of the Buck Disclosure Letter contains, with respect
to each Buck Company, a complete and accurate list and summary description of
all trademarks, tradenames, service marks and copyrights which are owned, used
or licensed by such Buck Company and which have either been registered with a
Governmental Body or are material to the Business of the Buck Company. Part
3.18 of the Buck Disclosure Letter also contains, with respect to each Buck
Company, a complete and accurate list and summary description of all software
which is owned, used or licensed by any Buck Company (other than software
which is generally available on a retail basis). All such trademarks,
tradenames, service marks, copyrights and software are referred to as the
"Intellectual Property Assets". No Buck Company owns or has any rights to any
-----------------------------
patents.
(b) Each Buck Company has the unrestricted right to use its
Intellectual Property Assets in its Business, subject to the provisions of
Applicable Contracts. The Intellectual Property Assets owned by a Buck
Company, used in connection the Business of the Buck Company, are free and
clear of all Encumbrances. No Buck Company unlawfully or wrongfully uses any
Intellectual Property Asset, or infringes upon the rights of third parties
through its use of the Intellectual Property Assets, except for such
infringements the effect of which, individually or in the aggregate, would not
materially and adversely impede the conduct of the Business of the Buck
Company. No Buck Company is in default under, or has received any notice any
claim of infringement or any other claim or proceeding relating to any
Intellectual Property Asset, except for such defaults or claims the effect of
which, individually or in the aggregate, would not materially and adversely
impede the conduct of the Business of the Buck Company. No present or former
employee of any Buck Company and no other Person owns or has any proprietary,
financial or other interest, direct or indirect, in whole or in part, in any
Intellectual Property Asset. Each Buck Company has taken all necessary steps
to ensure the validity and enforceability of its Intellectual Property Assets.
(c) Each Buck Company has in place Contracts with current or former
employees, consultants or contractors regarding the assignment to such Buck
Company of any know-how or other rights of such person in or to all
Intellectual Property Assets, as well as including written agreements
regarding the appropriation or the non-disclosure of any Intellectual Property
Assets, other than with respect to such know-how or Intellectual Property the
absence of such protective Contracts related thereto would not materially and
adversely impede the conduct of the Business of such Buck Company.
3.19. Statements True and Correct. None of the information
---------------------------
supplied in writing by Buck or to be supplied in writing by Buck for inclusion
in the registration statement (the "Registration Statement") to be filed by
----------------------
MBC with the SEC in connection with the MBC Common Stock to be issued in the
Merger, the proxy statement (the "Proxy Statement") to be mailed to Buck's
---------------
stockholders in connection with the Buck Stockholders' Meeting or any other
documents to be filed with the SEC or any other Governmental Body in
connection with the transactions contemplated hereby, will, at the respective
times such documents are filed or, in the case of the Registration Statement,
when it becomes effective and, with respect to the Proxy Statement, when first
mailed to the stockholders of Buck, be false or misleading with respect to any
material fact or omit to state any material fact necessary in order to make
the statements therein not misleading or, in the case of the Proxy Statement
or any amendment thereof or supplement thereto, at the time of the Buck
Stockholders' Meeting, be false or misleading with respect to any material
fact or omit to state any material fact necessary to make the statements
therein in light of the circumstances under which they were made not
misleading.
3.20. Properties and Assets. Part 3.20 of the Buck Disclosure
---------------------
Letter sets forth a complete and correct list of all real property owned or
leased by the Buck Companies. Each Buck Company owns, or has a valid right to
use or a leasehold interest in, all real property used by it in the conduct of
its business as such business has been or are now being conducted. Except as
otherwise disclosed on Part 3.20 of the Buck Disclosure Letter, each Buck
Company's ownership or leasehold interest in such property is subject to no
Encumbrance. All Governmental Authorizations required for the lawful use and
occupancy of any real property by each Buck Company have been obtained and are
in full force and effect. Except as otherwise disclosed in Part 3.20 of the
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<PAGE>
Buck Disclosure Letter, all personal property owned by each Buck Company or
used by such Buck Company in the conduct of its Business is owned free and
clear of any Encumbrances, and all of said assets are in good working
condition, normal wear and tear excepted. The assets reflected on the 1996
Balance Sheet or identified in this Agreement or in the Buck Disclosure Letter
include (a) all of the assets owned by the Buck Companies, except for those
subsequently disposed of by a Buck Company for fair value in the ordinary
course of business, and (b) all of the assets used by the Buck Companies in
the conduct of their Businesses.
3.21. Clients. Buck has made available to MBC a list of all
-------
material clients of the Buck Companies for whom any of the Buck Companies has
provided any services at any time from March 31, 1996 through December 31,
1996.
3.22. Dissolution of Buck Consultants International, Inc. The
---------------------------------------------------
dissolution of Buck Consultants International, Inc. has and will not result in
a Buck Material Adverse Effect.
3.23. Matters Relating to Acquisitions and Dispositions by Buck
---------------------------------------------------------
Companies.
---------
(a) Part 3.23(a) of the Buck Disclosure Letter sets forth a list of
(i) all purchases and sales of material assets to which any Buck Company has
been a party, (ii) all purchases of a business or an interest in a business by
any Buck Company, whether by merger, consolidation, acquisition of shares,
acquisition of assets, joint venture arrangement or otherwise, and (iii) all
dispositions of a business or an interest in a business by any Buck Company,
whether by sale of assets, shares or otherwise, in each case since January 1,
1986 (collectively, "Acquisitions and Dispositions").
-----------------------------
(b) Except as set forth in Part 3.23(b) of the Buck Disclosure
Letter, no Buck Company has guaranteed or otherwise assured any other party to
an Acquisition or Disposition that such other party will receive a minimum
rate of return on shares of Buck Common Stock issued to such other party in
connection with such Acquisition or Disposition. The Continuing Corporation
shall have no further obligation with respect to the matters set forth on Part
3.23(b) of the Buck Disclosure Letter (the "Guaranteed Returns") after the
------------------
Merger, except to the extent set forth on Part 3.23(b) of the Buck Disclosure
Letter.
(c) Except as set forth in Part 3.23(c) of the Buck Disclosure
Letter, no Buck Company has any continuing obligation to the other party to
any Acquisition or Disposition, including without limitation obligations with
respect to (x) payment of any deferred portion of the purchase price paid in
connection with such Acquisition or Disposition (whether in cash or in shares
of Buck Common Stock), (y) supplemental retirement or severance payments to be
paid to any persons (whether or not such persons are currently employees of a
Buck Company) and (z) tax indemnities and tax sharing arrangements.
(d) Except as set forth in Part 3.23(d) of the Buck Disclosure
Letter, with respect to (x) the acquisition of certain assets from Introspect
Inc. pursuant to the Asset Purchase Agreement dated August 6, 1996 (the
"Introspect Acquisition") and (y) the acquisition of certain assets and stock
-----------------------
from Willis Corroon Group plc and its affiliates pursuant to the Acquisition
Agreement dated October 31, 1996 and the Sale and Purchase Agreement dated
October 31, 1996 (the "Corroon Acquisition"), all material Consents required
-------------------
in connection with the Introspect Acquisition and the Corroon Acquisition have
been obtained or waived in writing.
3.24. Brokers and Finders. Except for Benedetto, Gartland &
-------------------
Greene, Inc. pursuant to agreements previously provided to MBC, Buck has not
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finder's fees or similar fees
and no broker or finder has acted, directly or indirectly, for Buck, in
connection with this Agreement or the transactions contemplated hereby.
3.25. Disclosure. No representation or warranty of Buck in this
----------
Agreement and no statement in the Buck Disclosure Letter omits to state a
material fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not misleading.
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<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MBC
MBC represents and warrants to Buck that the following matters are
true and correct.
4.01. Organization; Good Standing; Power and Authority.
------------------------------------------------
(a) MBC is a corporation duly organized and validly subsisting
under the laws of the Commonwealth of Pennsylvania, with full corporate power
and authority to conduct its business as it is now being conducted and to own
or use the properties and assets that it purports to own or use.
(b) Merger Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with
full corporate power and authority to conduct its business as it is now being
conducted and to own or use the properties and assets that it purports to own
or use. MBC has delivered to Buck copies of the Organizational Documents for
Merger Subsidiary, as currently in effect.
4.02. Authorization; Enforceability; No Conflict.
------------------------------------------
(a) The execution and delivery of this Agreement by MBC and the
execution and delivery of the Merger Agreement by MBC and Merger Subsidiary
and the consummation by MBC and Merger Subsidiary of the transactions
contemplated herein and therein have been duly and validly authorized by all
necessary corporate action on the part of MBC and Merger Subsidiary. This
Agreement represents the valid and legally binding obligation of MBC,
enforceable against MBC in accordance with its terms. The Merger Agreement,
when executed by MBC and Merger Subsidiary and subject to the receipt of
necessary Governmental Authorizations, shall represent the valid and legally
binding obligation of MBC and Merger Subsidiary, enforceable against MBC and
Merger Subsidiary in accordance with its terms.
(b) Except as set forth in Part 4.02 of the MBC Disclosure Letter,
neither the execution and delivery of this Agreement nor the consummation or
performance of any of the transactions contemplated hereby (including the
execution, delivery and performance by MBC and Merger Subsidiary of the Merger
Agreement) will, directly or indirectly (with or without notice or lapse of
time):
(i) contravene, conflict with or result in a violation of (A) any
provision of the Organizational Documents of MBC or Merger
Subsidiary or (B) any resolution adopted by the Board of
Directors or the stockholders of MBC or Merger Subsidiary;
(ii) contravene, conflict with or result in a violation of or give
any Governmental Body or other Person the right to exercise any
remedy or obtain any relief under, any Legal Requirement or any
Order to which MBC or Merger Subsidiary may be subject, except
such contravention, conflict or violation which, individually
or in the aggregate, would not materially and adversely impede
the conduct of the business of MBC or Merger Subsidiary;
(iii) contravene, conflict with or result in a violation of any of
the terms or requirements of or give any Governmental Body the
right to revoke, withdraw, suspend, cancel, terminate or
modify, any Governmental Authorization that is held by MBC or
Merger Subsidiary or that otherwise relates to the business of
MBC or Merger Subsidiary, except for any such result which,
individually or in the aggregate, would not materially and
adversely impede the conduct of the business of MBC or Merger
Subsidiary;
Except as set forth in Part 4.02 of the MBC Disclosure Letter, neither MBC nor
Merger Subsidiary will be required to give any notice to or obtain any Consent
from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the transactions
contemplated hereby.
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<PAGE>
4.03. Capitalization. As of the date hereof, MBC has: 200,000,000
--------------
authorized shares of MBC Common Stock and the authorized shares of preferred
stock ("MBC Preferred Stock") listed in the MBC Disclosure Letter, of which no
-------------------
more than 130,000,000 shares of MBC Common Stock and the shares of MBC
Preferred Stock listed in the MBC Disclosure Letter, were issued and
outstanding as of December 31, 1996. All of the outstanding shares of MBC
Common Stock and MBC Preferred Stock have been duly authorized and validly
issued and are fully paid and nonassessable, and upon consummation of the
Merger the shares of MBC Common Stock to be issued pursuant to the Merger
Agreement will be duly authorized and validly issued and fully paid and
nonassessable.
4.04. Financial Statements. MBC has delivered to Buck, prior to
--------------------
the execution of this Agreement, the MBC Financial Statements (as hereinafter
defined) in respect of periods ending on or prior to September 30, 1996. The
MBC Financial Statements (as of the dates thereof and for the periods covered
thereby): (a) are in accordance with the books and records of MBC and its
Subsidiaries (the "MBC Companies") and have been and will continue to be
-------------
prepared in accordance with GAAP and good business practices and (b) present
fairly, in all material respects, the consolidated financial position and the
consolidated results of operations, changes in stockholders' equity and cash
flows of the MBC Companies as of the dates and for the periods indicated, in
accordance with GAAP applied, except as otherwise disclosed therein, on a
basis consistent with prior periods (subject in the case of interim financial
statements to normal recurring year-end adjustments normal in nature and
amount). "MBC Financial Statements" shall mean the consolidated balance
------------------------
sheets (including related notes and schedules, if any) of MBC as of September
30, 1996 and as of December 31, 1995, 1994 and 1993 and the related
consolidated statements of income, of changes in stockholders' equity and of
cash flows (including related notes and schedules, if any) for the nine months
ended September 30, 1996 and for each of the three years ended December 31,
1995, 1994 and 1993, as filed by MBC with the SEC.
4.05. Reports. Since January 1, 1993, each of the MBC Companies
-------
has filed all reports and statements, together with any amendments required to
be made with respect thereto, that it was required to file with (a) the SEC
and (b) any other applicable Federal or state banking, securities or other
Governmental Bodies (except state filings which are not material or filings
with Governmental Bodies other than Federal or state banking or securities
authorities which are not material). As of their respective dates (and
without giving effect to any amendments or modifications filed after the date
of this Agreement with respect to reports and documents filed before the date
of this Agreement), each of such reports and documents, including the
financial statements, exhibits and schedules thereto, complied in all material
respects with all of the Legal Requirements enforced or promulgated by the
Governmental Body with which they were filed and did not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein in light of the circumstances under
which they were made not misleading.
4.06. Brokers and Finders. MBC has not employed any broker or
-------------------
finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or finder's fees or similar fees and no broker or finder has
acted, directly or indirectly, for MBC, in connection with this Agreement or
the transactions contemplated hereby.
ARTICLE V
CERTAIN INTERIM COVENANTS
5.01. Operation of the Businesses of the Buck Companies. Between
-------------------------------------------------
the date of this Agreement and the Closing Date, Buck will and will cause each
Buck Company to:
(a) conduct the business of such Buck Company only in the ordinary
course of business; and
(b) use all reasonable efforts to preserve intact the current
business organization of such Buck Company, except for dissolutions of dormant
subsidiaries, the merger of Buck Consultants International, Inc. into Buck,
the closure of certain operations in France and the consolidation of certain
offices in the United Kingdom in effectuation of the Buck/Corroon business
plan, keep available the services of the current officers, employees
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<PAGE>
and agents of such Buck Company and maintain the relations and good will with
clients, suppliers, customers, landlords, creditors, employees, agents and
others having business relationships with such Buck Company.
5.02. Negative Covenant. Except as otherwise expressly permitted
-----------------
by this Agreement, between the date of this Agreement and the Closing Date,
Buck will not and will cause each Buck Company not to, without the prior
consent of MBC, take any affirmative action or fail to take any reasonable
action within their or its control, as a result of which any of the changes or
events listed in Section 3.13 is likely to occur.
5.03. Notification. Between the date of this Agreement and the
------------
Closing Date, each party will promptly notify the other party in writing if
(a) such party becomes aware of any fact or condition that causes or
constitutes a Breach of any of such party's representations and warranties as
of the date of this Agreement, (b) such party becomes aware of the occurrence
after the date of this Agreement of any fact or condition that would cause or
constitute a Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition, (c) such party becomes aware of any matter which
should have been set forth or described on such party's Disclosure Letter as
of the date of this Agreement or (d) such party becomes aware of the
occurrence or existence after the date of this Agreement of any fact or
condition that would have been required to have been set forth or described on
such party's Disclosure Letter had such fact or condition existed or occurred
on or before the date of this Agreement. During the same period, each party
shall promptly notify the other party of the occurrence of any event that may
make the satisfaction of the conditions in Article VII impossible or unlikely.
No notice or amendment or supplement to any party's Disclosure Letter pursuant
to this Section 5.03 shall be deemed to cure any Breach of any representation
or warranty made by such party in this Agreement.
5.04. Required Approvals.
------------------
(a) As promptly as practicable after the date of this Agreement,
Buck will and will cause each Buck Company to, make all filings required by
Legal Requirements to be made by them in order to consummate the transactions
contemplated hereby (including all filings under the HSR Act). Between the
date of this Agreement and the Closing Date, Buck will and will cause each
Buck Company to (i) cooperate with MBC with respect to all filings that MBC
elects to make or is required by Legal Requirements to make in connection with
the transactions contemplated hereby and (ii) cooperate with MBC in obtaining
all Consents identified in Part 4.02 of the MBC Disclosure Letter (including
taking all actions requested by MBC to cause early termination of any
applicable waiting period under the HSR Act).
(b) As promptly as practicable after the date of this Agreement,
MBC will make all filings required by Legal Requirements to be made by it to
consummate the transactions contemplated hereby (including all filings under
the HSR Act). Between the date of this Agreement and the Closing Date, MBC
will and will cause each MBC Subsidiary to (i) cooperate with Buck with
respect to all filings that Buck is required by Legal Requirements to make in
connection with the transactions contemplated hereby and (ii) cooperate with
Buck in obtaining all consents identified in Part 3.02 of the Buck Disclosure
Letter; provided that this Agreement will not require MBC to dispose of or
--------
make any change in any portion of its business or to incur any other burden to
obtain a Governmental Authorization.
5.05. Reasonable Efforts.
------------------
(a) Between the date of this Agreement and the Closing Date, Buck
will use commercially reasonable efforts to cause the conditions in Article
VII to be satisfied.
(b) Between the date of this Agreement and the Closing Date, MBC
will use commercially reasonable efforts to cause the conditions in Article
VII to be satisfied.
5.06. Current Information. During the period from the date of this
-------------------
Agreement to the Closing, Buck will cause one or more of its representatives
to confer on a regular and frequent basis with representatives of MBC with
respect to the status of the ongoing operations of the Buck Companies. Buck
will promptly notify MBC of any material change in the normal course of its
business or of any complaints from a Governmental
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<PAGE>
Body or of any Proceedings (or communications indicating that the same may be
contemplated) or the institution or the Threatened institution of any
litigation that comes to its attention which would, in any manner, challenge,
prevent, alter or materially delay any of the transactions contemplated hereby
and Buck will keep MBC informed with respect to such events. Buck and MBC will
notify each other of the status of applications with Governmental Bodies and
third party Consents related to the transactions contemplated hereby.
5.07. Access; Information.
-------------------
(a) Buck shall afford to MBC and its representatives such access
during normal business hours and without material business interruption to the
Buck Companies' books, records (including, without limitation, Tax Returns
and appropriate work papers of independent auditors under normal professional
courtesy), properties and to such other information as MBC or such
representative may reasonably request. During the period from the date of
this Agreement to the Closing, MBC representatives shall be permitted to
attend, as invited guests, meetings of the Buck Board of Directors, with the
understanding that the Buck Board of Directors shall have the right to go into
executive session to the exclusion of such MBC representatives in order to
consider matters arising under this Agreement or such other matters as may
properly be considered by the Buck Board of Directors, in the opinion of
Buck's legal counsel, only in executive session.
(b) All non-public records, books, contracts, instruments, computer
data and other data and information (collectively, the "Information")
-----------
concerning the Buck Companies furnished to MBC or any of its representatives
pursuant to this Agreement shall be subject to the confidentiality agreement
previously entered into between the parties.
5.08. Effect of Investigations. No investigation by the parties
------------------------
hereto made heretofore or hereafter or the vision of any documents, whether
pursuant to this Agreement or otherwise shall affect the representations and
warranties of the parties which are contained herein.
5.09. Acquisition Proposals.
---------------------
(a) Buck agrees that neither it nor any of its officers, directors,
employees, agents or representatives (including, without limitation, any
investment banker, attorney or accountant retained by any of them)
(collectively, "Buck Representatives") shall initiate, solicit or encourage,
--------------------
directly or indirectly, any inquiries or the making of any proposal or offer
with respect to a merger, consolidation, combination or joint venture or
similar transaction involving any purchase of any portion of the assets or
business or any portion of the equity securities of Buck or any Buck Company
(any such proposal or offer being hereinafter referred to as an "Acquisition
-----------
Proposal") or, except as the Board of Directors of Buck shall determine on the
--------
basis of advice in writing by outside counsel (who may be Buck's regularly
retained outside counsel) that it is necessary in order for the Board of
Directors to act in a manner which is consistent with its fiduciary
obligations under applicable Legal Requirements, engage in any negotiations
concerning or provide any confidential information or data to or have any
discussions with, any Person relating to an Acquisition Proposal or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal.
(b) Buck will take the necessary steps to inform the Buck
Representatives of the obligations undertaken in Section 5.09(a). For
purposes of this Agreement, an Acquisition Proposal shall include any
proposal or arrangement providing for or requiring Buck to or contemplating
that Buck would, abandon, terminate or fail to consummate the Merger or any of
the other transactions contemplated under this Agreement.
5.10. Customers. After execution of this Agreement and prior to
---------
the Closing, Buck shall, in conjunction with MBC, continue to notify the
clients and customers of the Buck Companies of the transactions contemplated
hereby.
5.11. Press Releases, Etc. Buck and MBC shall consult with each
-------------------
other as to the form, substance and timing of any press release or other
public disclosure of matters related to this Agreement or any of the
transactions contemplated hereby and no such press release or other public
disclosure shall be made without the consent of the other party, which shall
not be unreasonably withheld or delayed; provided, however, that the
-------- -------
A-24
<PAGE>
parties may make such disclosures as are required by Legal Requirements after
making reasonable efforts in the circumstances to consult in advance with the
other parties.
5.12. Securities Registration and Disclosure. As soon as
--------------------------------------
reasonably practicable after the date hereof, MBC shall prepare and file with
the SEC the Registration Statement and shall use its best efforts to have the
Registration Statement declared effective. Buck shall cooperate with MBC in
the preparation, filing and process of securing the effectiveness of the
Registration Statement and shall furnish to MBC such information relating to
it and the other Buck Companies and the transactions contemplated in this
Agreement and the Merger Agreement and such further and supplemental
information as may be necessary or as may be reasonably requested by MBC for
use in the Registration Statement, the Proxy Statement to be contained therein
and any amendments or supplements thereto. MBC will use its commercially
reasonable efforts to obtain all necessary blue sky permits and approvals
required to permit the issuance of the MBC Common Stock in the Merger and to
obtain approval for listing the shares of MBC Common Stock to be issued in the
Merger on the NYSE, and Buck shall furnish MBC all information concerning Buck
and its stockholders as MBC may reasonably request in connection with any such
action. Each party will promptly provide the other with copies of all
correspondence, comment letters, notices or other communications to or from
the SEC relating to the Registration Statement, the Proxy Statement or any
amendment or supplement thereto, and MBC will advise Buck promptly after it
receives notice thereof, of the effectiveness of the Registration Statement,
of the issuance of any stop order with respect to the effectiveness thereof,
of the suspension of the qualification of the MBC Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or of the
initiation or threat of any proceeding for any such purpose.
5.13. Buck Stockholders' Meeting. Buck will take appropriate
--------------------------
action to call the Buck Stockholders' Meeting, to be held not more than 45
days after the effective date of the Registration Statement, to consider
approval of the Merger and the Merger Agreement and will use its best efforts
to secure such approval. In connection with the Buck Stockholders' Meeting,
Buck and MBC will duly solicit, in compliance with Section 14(a) of the
Securities Exchange Act of 1934, as amended, and the proxy rules of the SEC
thereunder, the vote of the Buck stockholders by mailing or delivering to each
such Stockholder, as soon as practicable after the effectiveness of the
Registration Statement, the Proxy Statement, and as soon as practicable
thereafter, any amendments or supplements thereto as may be necessary to
assure that at the date of the Buck Stockholders' Meeting the Proxy Statement
shall conform to the requirements of applicable Legal Requirements. Buck,
acting through its Board of Directors, shall recommend to the Buck
stockholders that they vote their shares in favor of the Merger and the Merger
Agreement and shall reflect such recommendation in the Proxy Statement. Buck
shall take all lawful action to solicit proxies for and otherwise obtain
stockholder approval of the Merger and Merger Agreement. Buck shall cause
each member of the Board of Directors of Buck to execute a voting agreement in
form and substance substantially as set forth on Appendix C attached hereto.
----------
5.14. Additional Financial Statements. By March 15, 1997 or as
-------------------------------
soon as practicable thereafter, Buck shall deliver to MBC the consolidated
balance sheets of the Buck Companies as at December 31 in each of the years
1995 and 1996 and the related consolidated statements of income, changes in
stockholders' equity and cash flow for each of the nine months then ended. By
May 15, 1997 or as soon as practicable thereafter, Buck shall deliver to MBC
the consolidated balance sheets of the Buck Companies as at March 31, 1997 and
the related consolidated statements of income, changes in stockholders' equity
and cash flow for the fiscal year then ended, together with the report thereon
of Grant Thornton LLP, independent certified public accountants (the "Audited
-------
1997 Financial Statements"). Further, prior to the Closing Date (and in any
-------------------------
event not later than 20 days after the end of each fiscal quarter of Buck
commencing with the fiscal quarter ended June 30, 1997), Buck shall deliver to
MBC the quarterly unaudited consolidated balance sheets of the Buck Companies
and the related quarterly unaudited consolidated statements of income, changes
in stockholders' equity and cash flow for the fiscal quarter then ended,
including in each case the notes thereto.
5.15. Affiliate Agreements. Within two weeks following the date of
--------------------
this Agreement, Buck will provide MBC with a list of those persons who are, in
Buck's reasonable judgment after review by its independent counsel,
"affiliates" of it within the meaning of Rule 145 promulgated under the
Securities Act ("Rule 145") (each such person who is an "affiliate" within the
--------
meaning of Rule 145 is referred to herein as a "Rule 145 Affiliate"). Buck
------------------
shall provide MBC with such information and documents as MBC shall reasonably
request for
A-25
<PAGE>
purposes of reviewing such list and shall notify MBC in writing regarding any
change in the identity of its Rule 145 Affiliates prior to the Effective Time.
Buck shall use its commercially reasonable efforts to deliver or cause to be
delivered to MBC prior to the Effective Time from each of its Rule 145
Affiliates, an executed Affiliate Agreement, in substantially the form
attached hereto as Appendix D an "Affiliate Agreement"). MBC shall be entitled
---------- -------------------
to place appropriate legends on the certificates evidencing any MBC Common
Stock to be received by such Rule 145 Affiliates pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the transfer
agent for MBC Common Stock, consistent with the terms of the Affiliate
Agreements
5.16. Employee Information. Buck shall deliver to MBC complete and
--------------------
accurate reports in accordance with FAS 106 and FAS 87 for the fiscal year
ended March 31, 1997 no later than 5 days prior to the Closing Date.
5.17. IRS Closing Agreement. Between the date of this Agreement
---------------------
and the Closing Date Buck shall furnish to the IRS a closing agreement with
the IRS of the type described in Treasury Regulation 1.1503-2(g)(2)(iv)(B)(2).
Except to the extent otherwise required by the IRS, such closing agreement
shall be in substantially the form set forth in Appendix E.
----------
ARTICLE VI
GOVERNANCE MATTERS
6.01. Name. Following the Closing, MBC will cause the Continuing
----
Corporation to change its name to "Buck Consultants, Inc." and each other Buck
Company shall retain its corporate name, but each Buck Company shall trade and
do business only by reference to an affiliation with MBC, such as, for
example, "Buck Consultants, Inc., an Affiliated Company of Mellon Bank
Corporation".
6.02. Certain Governance Matters. Following the Closing, MBC will,
--------------------------
subject to Section 6.03, comply with the governance provisions set forth
below, based on the expectation and understanding of the parties that the
Continuing Corporation will remain primarily responsible for its operational
affairs without diminishing MBC's rights as the sole stockholder.
(a) At the Effective Time the Board of Directors of the Continuing
Corporation will be enlarged to be comprised of 16 members and will be
reconstituted to include (i) the twelve persons who served on the Buck Board
of Directors immediately prior to the Effective Time (to the extent such
persons are able and willing to serve on the Board of Directors of the
Continuing Corporation) with the terms of such members being extended to
December of the year in which their respective terms are otherwise due to
expire, (ii) two senior officers of MBC (or another MBC Company) and (iii) two
Buck Level 1 employees selected by MBC (the terms of such Buck Level 1
employees selected by MBC expiring December, 2000). With respect to the
twelve directors of the Continuing Corporation who prior to the Effective Time
were directors of Buck, and so as to generally continue the staggered terms
and Buck nomination process for such directors, four of those twelve director
positions for the Continuing Corporation will be up for election each year,
the first election following the Effective Time to be held in December, 1997
for a Board term expiring December, 2000. At such meeting in December, 1997,
and at the annual meetings of stockholders of the Continuing Corporation
thereafter, of such four nominees, two Level 1 employees will be nominated by
the Level 1 employees of the Continuing Corporation in accordance with the
Buck director nomination process and two Level 1 employees will be nominated
by the MBC Vice Chairman-Trust, with the understanding that in the election to
be held in December, 2000, and so as to include the Board positions described
in item (iii) above which will be up for re-election at that time in such
nomination process, three Level 1 employees at that time will be nominated by
the Level 1 employees of the Continuing Corporation in accordance with the
Buck director nomination process and three Level 1 employees at that time will
be nominated by the MBC Vice Chairman-Trust. The MBC Vice Chairman-Trust will
be under no constraint whatsoever in his selection of such two nominees (or
three nominees, as the case may be) but due consideration will be given to the
Level 1 employees who had participated in such nomination process. Upon the
death or resignation of any director, his or her successor would be nominated
in the same manner as such director was nominated.
A-26
<PAGE>
(b) The chief executive officer of the Continuing Corporation shall
be appointed by and serve at the pleasure of the MBC Vice Chairman-Trust, and
would become a member of MBC's Senior Management Committee. The initial chief
executive officer of the Continuing Corporation shall be Joseph LoCicero.
(c) The basic organizational structure of the Continuing
Corporation and the other Buck Companies in general would be consistent with
the organizational structure of the Buck Companies as exists on the date
hereof, with the additional understanding that (i) the daily defined
contribution administration businesses of the Continuing Corporation and the
other Buck Companies and Dreyfus Retirement Services and, ultimately, all
defined contribution and service center driven administrative services would
be combined into one organization or organized in another manner as determined
jointly by the chief executive officer of the Continuing Corporation and the
MBC Vice Chairman-Trust with common systems under MBC management, (ii) as is
the common practice of other MBC Companies, certain corporate staff functions
(computer, personnel, finance and other corporate staff functions) of the
Continuing Corporation and the other Buck Companies would fall under the
functional management of the corporate staff departments of Mellon Bank, N.A.
or another MBC Company, but with dual reporting to the line management of the
Continuing Corporation and (iii) while maintaining the business organization
structure, certain restructurings, reorganizations or liquidations of legal
entities may be undertaken to minimize Taxes.
6.03. Stockholder Rights. Nothing in Section 6.02 shall impede the
------------------
ability of the stockholder of the Continuing Corporation from exercising any
right it may enjoy as stockholder, including without limitation the
discontinuation at any time of any or all of the arrangements described in
Section 6.02.
ARTICLE VII
CONDITIONS TO THE MERGER
7.01. Conditions to Each Party's Obligations to Consummate. The
----------------------------------------------------
respective obligations of each party to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment at or prior
to the Closing of the following conditions:
(a) Governmental Authorizations. The transactions contemplated by
---------------------------
this Agreement shall have been approved by any Governmental Body the approval
of which is required to permit consummation thereof, including the Board of
Governors of the Federal Reserve System, without the imposition of any
condition, requirement or commitment which is reasonably likely to have a Buck
Material Adverse Effect or an MBC Material Adverse Effect; and all waiting
periods arising under the HSR Act or any other applicable Legal Requirement
shall have duly lapsed or been terminated.
(b) No Orders. Neither MBC or any MBC Subsidiary nor any Buck
---------
Company shall be subject to any Order which enjoins or prohibits the
consummation of any of the transactions contemplated by this Agreement.
(c) Stockholder Approval. The Buck stockholders shall have
--------------------
approved the Merger in accordance with the Buck Organizational Documents and
applicable Legal Requirements.
(d) Registration Statement; NYSE Listing. The Registration
------------------------------------
Statement shall be effective under the Securities Act and no stop orders
suspending the effectiveness of the Registration Statement shall be in effect
and no proceedings for such purpose shall be pending before or threatened by
the SEC. The shares of MBC Common Stock issuable in the Merger shall have
been approved for listing on the NYSE upon notice of issuance.
7.02. MBC Conditions to Merger. The obligations of MBC to
------------------------
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment or waiver at or prior to the Closing of the following
conditions:
A-27
<PAGE>
(a) Representations and Warranties. The representations and
------------------------------
warranties of Buck set forth or referred to in this Agreement shall be true
and correct both individually and in the aggregate in all material respects as
of the date of this Agreement and as of the Effective Time with the same
effect as though all such representations and warranties had been made on and
as of the Effective Time (without giving effect to any notices or supplements
or amendments to the Buck Disclosure Letter provided pursuant to Section 5.03
hereof), except (i) for any such representations and warranties made as of a
specified date, which shall be true and correct in all material respects as of
such date or (ii) as expressly contemplated or permitted by this Agreement.
For purposes hereof, a representation or warranty shall be deemed to be
correct in all material respects unless a Breach, if any, thereof (excluding
for these purposes any materiality limitations therein), has a Buck Material
Adverse Effect. The representations and warranties shall be deemed in the
aggregate to be true and correct in all material respects unless the Breaches
of all the representations and warranties, if any (excluding, for these
purposes, any materiality limitations therein) have, as a whole, a Buck
Material Adverse Effect.
(b) Performance of Agreements and Covenants. Each and all of the
---------------------------------------
agreements and covenants of Buck to be performed and complied with pursuant to
this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with by it in all
material respects.
(c) Certificates. Buck shall have delivered to MBC a certificate,
------------
dated as of the Effective Time and signed on its behalf by a senior officer,
to the effect that the conditions of its obligations set forth in Sections
7.02(a) and (b) of this Agreement with respect to it have been satisfied.
(d) Legal Opinion. MBC shall have received from O'Sullivan Graev &
-------------
Karabell, LLP, or other counsel for Buck, an opinion dated the date of the
Closing and in substantially the form attached hereto as Appendix F or in such
----------
other form or as to such other matters related to this Agreement, the Merger
Agreement and the transactions contemplated thereby as the parties may agree.
(e) Consents. Each of the Consents identified in Part 3.02-B of
--------
the Buck Disclosure Letter shall have been obtained and be in full force and
effect.
(f) Employment Agreements. Persons jointly determined by Buck and
---------------------
MBC shall have, by April 30, 1997, executed employment agreements in form and
substance substantially as set forth on Appendix G (with such modifications as
----------
shall be necessary or appropriate to comply with Legal Requirements and
customary personnel practices of a particular country), which employment
agreements shall become effective at the Closing, provided that this condition
shall be met if substantially all of such persons shall have timely executed
such employment agreements, so long as the absence of such employment
agreements shall not, individually or in the aggregate, materially and
adversely impede the conduct of the Buck Companies taken as a whole.
(g) Offer Letters. Substantially all Level 1 and Level 2 employees
-------------
(as defined in the Organizational Documents of Buck or defined pursuant to the
ordinary course of business of Buck) of the following Buck Companies shall
have executed offer letters: each Buck Company organized in one of the states
of the United States; Buck Consultants Limited (UK); Buck Investment
Consultants Limited (UK); Bevis Trustees Limited; Buck & Willis Healthcare
Limited; Buck Consultants Limited (Canada); and, as determined by Buck and
MBC, those of the Buck Companies organized in a country other than the United
States or Australia. Such offer letters to be so executed shall be in form
and substance substantially as set forth on Appendix H (US form), with such
-------------------
modifications as shall be necessary or appropriate to comply with Legal
Requirements and customary personnel practices of a particular country.
(h) Stockholder Covenants. The 10 largest stockholders of Buck
---------------------
shall have, contemporaneously with the execution of this Agreement, executed a
stockholder covenant in form and substance substantially as set forth on
Appendix I, which stockholder covenant shall become effective at the Closing.
----------
(i) 1997 Financial Results. The Audited 1997 Financial Statements
----------------------
shall set forth gross revenue of at least $225,000,000. Further, the book
value of a share of Class B Common Stock at and as of March 31, 1997 will be
at least 7% more than the book value of a share of Class B Common Stock at and
as of
A-28
<PAGE>
March 31, 1996, determined by Grant Thornton LLP in a manner consistent
with the determination of Buck's audited financial statements for the year
ended March 31, 1996, with the following exclusions: (A) all Transaction
Expenses of Buck up to but not exceeding $1,600,000 of Transaction Expenses;
(B) all foreign currency translation adjustments; and (C) the settlement costs
of any lawsuits in excess of reserves therefor.
(j) Waiver of Right to Acquire Buck's Interest in Heissmann. Buck
-------------------------------------------------------
shall have obtained from Allianz GmbH ("Allianz") a waiver of Allianz's right
-------
to acquire from Buck all the shares of Heissmann GmbH ("Heissmann") owned by
---------
Buck, which right shall be triggered by the Merger.
(k) Amendment to Shareholders Agreement for Buck Consultants Pty
------------------------------------------------------------
Ltd. Buck Australia Pty Ltd ("Buck Australia") and National Mutual Life
--- --------------
("NML") shall have entered into an amendment to the Shareholders Agreement
---
dated October 27, 1995 (the "Shareholders Agreement") between Buck Australia
----------------------
and NML relating to Buck Consultants Pty Ltd (the "Australian Joint Venture"),
------------------------
pursuant to which the Shareholders Agreement shall be amended to provide that
the non-competition provisions contained therein apply only to Australia.
7.03. Buck Conditions to Merger. The obligations of Buck to
-------------------------
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment or waiver at or prior to the Closing of the following
conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of MBC set forth or referred to in this Agreement shall be true and
correct both individually and in the aggregate in all material respects as of
the date of this Agreement and as of the Effective Time with the same effect
as though all such representations and warranties had been made on and as of
the Effective Time (without giving effect to any notices or supplements or
amendments to the MBC Disclosure Letter provided pursuant to Section 5.03
hereof), except (i) for any such representations and warranties made as of a
specified date, which shall be true and correct in all material respects as of
such date or (ii) as expressly contemplated or permitted by this Agreement.
For purposes hereof, a representation or warranty shall be deemed to be
correct in all material respects unless a Breach, if any, thereof (excluding
for these purposes any materiality limitations therein), has an MBC Material
Adverse Effect. The representations and warranties shall be deemed in the
aggregate to be true and correct in all material respects unless the Breaches
of all the representations and warranties, if any (excluding, for these
purposes, any materiality limitations therein) have, as a whole, an MBC
Material Adverse Effect.
(b) Performance of Agreements and Covenants. Each and all of the
---------------------------------------
agreements and covenants of MBC to be performed and complied with pursuant to
this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with by it in all
material respects.
(c) Certificates. MBC shall have delivered to Buck a certificate,
------------
dated as of the Effective Time and signed on its behalf by a senior officer,
to the effect that the conditions of its obligations set forth in Sections
7.03(a) and (b) of this Agreement with respect to it have been satisfied.
(d) Legal Opinion. Buck shall have received from Reed Smith Shaw &
-------------
McClay, counsel for MBC, an opinion dated the date of the Closing and in
substantially the form attached hereto as Appendix J or in such other form or
----------
as to such other matters related to this Agreement, the Merger Agreement and
the transactions contemplated thereby as the parties may agree.
(e) Buck Key Performers Supplemental Payment Plan. The Buck Key
---------------------------------------------
Performers Supplemental Payment Plan (herein so defined) in substantially the
form attached hereto as Appendix K shall be in full force and effect.
----------
(f) Federal Tax Opinion. Buck shall have received an opinion of
-------------------
counsel or of independent public accountants, reasonably satisfactory to Buck,
to the effect that:
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<PAGE>
(i) The Merger will constitute a reorganization within the meaning
of Section 368(a)(1)(A) and Section 368(a)(2)(D) of the Code;
(ii) Except for cash received in lieu of fractional shares, no gain
or loss will be recognized by the stockholders of Buck who
receive solely MBC Common Stock on the exchange of their shares
of Buck Common Stock for shares of MBC Common Stock;
(iii) Where a stockholder of Buck receives solely cash in exchange
for Buck Common Stock, such cash will be treated as having been
received by the Buck stockholder as a distribution in
redemption of such stock, subject to the provisions and
limitations of Section 302 of the Code; and
(iv) Where a stockholder of Buck receives both MBC Common Stock and
cash in exchange for Buck Common Stock, the Buck stockholder
will recognize gain, if any, equal to the lesser of the total
gain realized by the Buck stockholder on the exchange or the
amount of cash received.
ARTICLE VIII
TERMINATION; FEES AND EXPENSES
8.01 Termination. This Agreement may be terminated at any time
-----------
prior to the Effective Time by written notice by the terminating party to the
other party under the circumstances set forth below:
(a) by mutual consent of the Board of Directors of Buck and the
Board of Directors of MBC; or
(b) by either Buck or MBC if the Closing shall not have occurred by
September 30, 1997 (provided that the right to terminate this Agreement under
this Section 8.01(b) shall not be available to any party whose failure to
fulfill any material obligation under this Agreement has been a cause of or
has resulted in the failure of the Closing to occur on or before such date);
or
(c) by either Buck or MBC if a court of competent jurisdiction or
other Governmental Body shall have issued a nonappealable final Order having
the effect of permanently restraining, enjoining or otherwise prohibiting the
Merger; or
(d) by MBC, if, at the Buck Stockholders' Meeting (including any
adjournment or postponement), the requisite vote of the stockholders of Buck
in favor of this Agreement and the Merger shall not have been obtained; or
(e) by MBC, if (i) the Board of Directors of Buck shall have
withdrawn or modified its recommendation of this Agreement or the Merger in a
manner adverse to consummation of the Merger or shall have resolved to do any
of the foregoing; (ii) the Board of Directors of Buck shall have recommended
to the stockholders of Buck an Acquisition Proposal; (iii) a tender offer or
exchange offer for any of the outstanding shares of Buck Common Stock is
commenced (other than by MBC or an affiliate of MBC) and the Board of
Directors of Buck recommends that the stockholders of Buck tender their shares
in such tender or exchange offer, or (iv) for any reason Buck fails to call
and hold the Buck Stockholders' Meeting within 45 days after the effective
date of the Registration Statement; or
(f) by MBC or Buck, if the Board of Directors of Buck shall have
made a determination pursuant to Section 5.09 to initiate, solicit, encourage
or pursue an Acquisition Proposal;
(g) by MBC or Buck, if any Governmental Body having jurisdiction
(including without limitation the Board of Governors of the Federal Reserve
System) shall have denied its approval of the Merger; or
A-30
<PAGE>
(h) by Buck or MBC, if (i) the other has Breached any
representation or warranty contained in this Agreement, and such Breach shall
not have been cured prior to the Effective Time (except where such Breach
would not have a Buck Material Adverse Effect or MBC Material Adverse Effect,
as the case may be) or (ii) if there has been a material Breach of a covenant
or agreement set forth in this Agreement on the part of the other, which shall
not have been cured within 15 Business Days following receipt by the breaching
party of written notice of such material Breach from the other party (provided
that a party shall have the right to terminate this Agreement in the event of
a material Breach on the part of the breaching party which is not subject to
cure only if such Breach would have a Buck Material Adverse Effect).
8.02 Effect of Termination. In the event of termination of this
---------------------
Agreement as provided in Section 8.01, this Agreement shall immediately become
void and there shall be no liability or obligation on the part of any party
hereto or their respective officers, directors, stockholders or affiliates
arising from the execution and delivery of this Agreement or its termination,
except as set forth in Section 8.03 or as otherwise expressly set forth in
this Agreement; provided however, that, the provisions of Section 8.03 of this
----------------
Agreement shall remain in full force and effect and survive any termination of
this Agreement; provided further, that nothing herein shall relieve any party
----------------
from liability for any material Breach of this Agreement.
8.03 Fees and Expenses.
-----------------
(a) Except as set forth in this Section 8.03, the stockholders of
Buck with respect to Buck, on the one hand, and MBC, on the other hand, will
bear their respective expenses incurred in connection with the negotiation,
preparation and consummation of this Agreement and the transactions and
ancillary documents contemplated hereby, including all fees and expenses of
agents, representatives, financial advisors, lawyers and accountants (a
party's "Transaction Expenses"); provided, however, that if the Closing
-------------------- -------- --------
occurs, MBC will only recognize the absorption by Buck of up to $1,600,000 of
its Transaction Expenses.
(b) MBC shall reimburse Buck for out-of-pocket expenses reasonably
incurred by Buck relating to the transactions contemplated by this Agreement
prior to termination (including, but not limited to, fees and expenses of
Buck's lawyers, accountants and financial advisor), upon the termination of
this Agreement by Buck pursuant to Section 8.01(h). Buck shall reimburse MBC
for out-of-pocket expenses reasonably incurred by MBC relating to the
transactions contemplated by this Agreement prior to termination (including,
but not limited to, fees and expenses of MBC's lawyers and accountants), upon
termination of this Agreement by MBC pursuant to Section 8.01(h).
(c) Buck shall pay MBC a fee of $3,000,000 upon the earliest to
occur of the termination of this Agreement pursuant to Section 8.01(e) or
Section 8.01(f). Further, if, within 12 months of such termination of this
Agreement for any of such reasons or within 12 months of termination of this
Agreement by MBC pursuant to Section 8.01(h) Buck enters into a commitment to
consummate a merger, consolidation, combination or joint venture or similar
transaction involving any purchase of any portion of the assets or business or
any portion of the equity securities of Buck or any Buck Company, or if any
such transaction is consummated within such 12-month period, Buck shall also
pay to MBC a fee of $12,000,000 upon the earliest to occur of the making of
such commitment or such consummation.
(d) The expenses and fees, if applicable, payable pursuant to
Sections 8.03(b) and (c) shall be paid in immediately available funds within
one Business Day after the first to occur of any of the events described in
Sections 8.03(b) and (c); provided, however, that in no event shall MBC or
-------- --------
Buck, as the case may be, be required to pay such expenses and fees to the
other if, immediately prior to the termination of this Agreement, the party to
receive such expenses and fees was in material Breach of its obligations under
this Agreement.
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<PAGE>
ARTICLE IX
INDEMNIFICATION AND INSURANCE
9.01 Indemnification and Insurance.
-----------------------------
(a) From and after the Effective Time, MBC shall assume and honor
any obligation of Buck immediately prior to the Effective Time with respect to
the indemnification of each person who is now or has been at any time prior to
the date hereof or who becomes prior to the Effective Time, a director
(whether elected or appointed), officer or employee of Buck (collectively, the
"Indemnitees") arising out of Buck's Organizational Documents or any
-----------
indemnification agreement to which Buck and any Indemnitee are parties as of
the date hereof as if such obligations were pursuant to a contract or
arrangement between MBC and such Indemnitees.
(b) If MBC or any of its successors or assigns reorganizes or
consolidates with or merges into or enters into another business combination
transaction with any other Person and is not the resulting, continuing or
surviving Person of such consolidation, merger or transaction or (ii)
liquidates, dissolves or transfers all or substantially all of its properties
and assets to any Person, then and in each such case, proper provision shall
be made so that the successors and assigns of MBC assume the obligations set
forth in this Section 9.01.
(c) MBC shall cause Buck's current officers' and directors'
liability insurance to be continuously maintained in full force and effect
without reduction of coverage for a period of six years after the Effective
Time; provided, however, that MBC may substitute therefor policies of at least
-------- -------
the same coverage and amounts containing terms and conditions which are not
materially less advantageous; provided further, that in no event shall this
----------------
obligation require the expenditure of any amount per annum in excess of 200%
of the amount of the annual premiums paid as of the date hereof by Buck for
such insurance.
(d) This Section 9.01 shall be construed as an agreement, as to
which the Indemnitees are intended to be third-parties beneficiaries, between
MBC and the Indemnitees, as unaffiliated third parties and is not subject to
any limitations to which MBC may be subject in indemnifying its own directors,
officers, employees, agents and other persons who serve at the request of MBC.
ARTICLE X
EMPLOYEE BENEFITS
10.01 Employment; Benefits Prior to 2001.
----------------------------------
(a) Employment.
----------
(i) Contract Employees. MBC shall cause the Continuing Corporation
------------------
to offer continued employment to all employees (each, a "Contract Employee")
-----------------
of any Buck Company whose terms and conditions of employment are governed by
an offer letter, an employment agreement or other written instrument binding
on any Buck Company (each, an "Employment Agreement"), whether or not such
--------------------
Employment Agreement provides for "at will" employment, in accordance with the
terms of each such Employment Agreement.
(ii) Regular Employees. MBC shall cause the Continuing Corporation
-----------------
to offer continued employment on and after the Closing Date to all common law
employees of any Buck Company, other than a Contract Employee, who were such
immediately prior to the Closing Date (each, a "Regular Employee"). Contract
----------------
Employees and Regular Employees shall be collectively referred to as
"Continued Employees".
--------------------
(iii) New Employees. Any person hired or rehired by MBC or one of
-------------
the Buck Companies, as the case may be, on or after the Closing Date
(including, without limitation, former Contract or Continued Employees who
terminated employment with all of the Buck Companies on or after the Closing
Date and are rehired after incurring a break in service) to perform services
for one of the Buck Companies shall be hereinafter referred to as a "New
---
Employee".
--------
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<PAGE>
(iv) Cash Compensation. While recognizing that base and overall
-----------------
compensation plans of the Continuing Corporation need to evolve over time, MBC
acknowledges that as of the date hereof it is comfortable with Buck's current
levels of base and overall cash compensation plans and does not presently
recognize a need to make any substantive changes in such plans or levels of
cash compensation as continued in the Continuing Corporation.
(b) Benefits During the Transition Period to Continued Employees.
------------------------------------------------------------
Except as otherwise provided in this Article X, as may be agreed to by the
Board of Directors of the Continuing Corporation or as may be provided in any
Employment Agreement, during the period (the "Transition Period") commencing
-----------------
on the Closing Date and ending as of the close of business of the last
Business Day prior to January 1, 2001 (the "Benefit Changeover Date"), (i)
-----------------------
Continued Employees, (ii) all existing retirees of Buck as of the Closing Date
and (iii) all employees of Buck as of the Closing Date who retire on or prior
to the Benefit Changeover Date shall be provided benefits under the following
Buck Benefit Plans without adverse change thereto: (x) each Buck Pension
Plan; (y) each Buck Executive Plan; and (z) each Buck Welfare Plan to the
extent such Buck Welfare Plan provides group life insurance, LTD, STD,
severance, group medical, dental and vision benefits and/or flexible spending
accounts to employees, retirees and their dependents. The benefits provided
under the Buck Benefit Plans described in (x), (y) and (z) shall be
collectively referred to as the "Protected Benefits".
------------------
(c) Benefits Provided to New Employees. Notwithstanding anything
----------------------------------
in this Article X to the contrary, New Employees shall be eligible to
participate in the Protected Benefits, other than the Buck Retirement Plan,
for the period beginning on their date of hire and ending on the Benefit
Changeover Date in accordance with the same terms and conditions governing the
participation of similarly situated Continued Employees in said Protected
Benefits as set forth in this Article X.
(d) At-will Employment. Notwithstanding anything in subsection (a)
------------------
to the contrary and except as otherwise provided in any Employment Agreement,
any offer of continued employment to a Continued Employee or offer of
employment to a New Employee, as the case may be, shall not be construed to
limit the ability of MBC to terminate Continued and/or New Employees at any
time for any reason.
10.02 Benefits On and After January 1, 2001.
-------------------------------------
(a) Benefit Analyses. Prior to the execution of this Agreement,
----------------
Buck has provided MBC with such information and analyses (the "Benefit
-------
Studies") as MBC and Buck have determined to be necessary or appropriate to
enable MBC to evaluate projected direct and indirect future expenses and
liabilities under each of the Buck Benefit Plans and the impact on various
categories of Continued Employees and New Employees of covering such Employees
under the corresponding component plans included within MBC's Benefit Plans
(as hereinafter defined). Not later than 120 days prior to the expiration of
the Transition Period, Buck will deliver to MBC a complete and accurate list
of the following information (the "Updated Information") for each employee or
-------------------
director of Continuing Corporation, including each employee on leave of
absence or layoff status, prepared as of the Benefit Changeover Date:
employer; name; job title; current compensation paid or payable; vacation
accrued; Cost-Sharing Ratio (as defined in Section 10.02(d)(ii)); and Combined
Service (as defined in Section 10.02(d)(iii)). Such Benefit Studies and
Updated Information shall be used by MBC to develop a methodology to
transition Continued Employees and New Employees, if applicable, to the
pension, welfare and/or fringe benefit plans and any other plans, programs,
etc., in the nature of a pension, welfare and/or fringe benefit plan (the "MBC
---
Benefit Plans") which are generally available to employees of MBC on the same
-------------
basis as such benefits are otherwise made available to similarly situated
employees of MBC at the end of the Transition Period. Notwithstanding the
information set forth in the Benefit Studies or disclosed in the Updated
Information, the benefits to be provided to Continued Employees and New
Employees, if applicable, on and after the Benefit Changeover Date shall be
governed by the provisions set forth in the remainder of this Section 10.02
and the following Sections of this Article X.
(b) Participation in MBC Benefit Plans; Credit for Prior Service.
------------------------------------------------------------
Except as otherwise provided in any Employment Agreement, from and after the
Benefit Changeover Date, Continued Employees and New Employees, if applicable,
shall be eligible to participate in the MBC Benefit Plans on the same basis as
such
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<PAGE>
MBC Benefit Plans are otherwise then made available to similarly situated
employees of MBC. Except as otherwise provided in this Section 10.02 and the
remaining Sections of this Article X, Continued Employees will be credited for
their Combined Service for all purposes under all such MBC Benefit Plans.
(c) Vacation Benefits. As of any time of reference on and after
-----------------
the Benefit Changeover Date, MBC shall cause Continued Employees to be
provided with the greater of: (i) the weeks of vacation (not in excess of four
(4)) to which they were entitled from the Buck Companies on the day before the
Benefit Changeover Date, and (ii) the weeks of vacation to which similarly
situated employees of MBC are then entitled under the terms of MBC's vacation
policies; provided, however, that Continued Employees shall not be permitted
-----------------
to accumulate or carry over unused days of vacation; and provided, further,
------------------
that except as required by applicable Legal Requirements, in no event shall
MBC be required to compensate Continued Employees for any unused vacation to
which they were entitled on the day before the Benefit Changeover Date.
(d) Medical Plan Matters.
--------------------
(i) In General. With respect to the component medical, dental and
----------
prescription drug plans included within MBC's Benefit Plans ("MBC's Medical
-------------
Plans") made available to Continued Employees and New Employees, if
-----
applicable, on and after the Benefit Changeover Date, except as otherwise
hereinafter provided with respect to certain long service employees and
retirees, Continued Employees and New Employees, if applicable, shall be
treated in the same manner as similarly situated new employees of MBC and, as
such, shall not be eligible to elect the "cash benefit in lieu of coverage"
option available only to MBC employees hired before December 31, 1992 who
elect to "opt out" of coverage under the MBC's Medical Plans. To the extent
applicable, MBC shall also administer MBC's Medical Plans so as to coordinate
deductibles, "out-of-pocket" maximums and maximum benefit restrictions so
that: (A) Continued Employees and New Employees, if applicable, receive
credit under the MBC Medical Plans toward any deductible under the MBC Medical
Plans for deductibles paid under any of the component medical, dental and
prescription drug plans included within the Buck Welfare Plans ("Buck Medical
------------
Plans") prior to the Benefit Changeover Date which, had the Continued Employee
-----
and New Employee, if applicable, been covered by the MBC Medical Plan, would
have been taken into account by the MBC Medical Plan, (B) Continued Employees
and New Employees, if applicable, receive credit for their eligible out-of-
pocket costs with respect to eligible claims incurred under the Buck Medical
Plans prior to the Benefit Changeover Date which, had the Continued Employee
and New Employee, if applicable, been covered by the MBC Medical Plan, would
have been taken into account by the MBC Medical Plan toward any "out-of-
pocket" maximums under the MBC Medical Plans, and (C) Continued Employees and
New Employees, if applicable, are credited with benefits received under the
Buck Medical Plans prior to the Benefit Changeover Date which, had the
Continued Employee and New Employee, if applicable, been covered by the MBC
Medical Plan, would have been taken into account by the MBC Medical Plan for
purposes of applying the maximum benefit restrictions under the MBC Medical
Plans.
(ii) Coverage Provided to Existing Retirees. Any retiree of any of
--------------------------------------
the Buck Companies covered under the Buck Medical Plan as of the day before
the Benefit Changeover Date ("Existing Retirees"), shall be provided with
-----------------
medical coverage in accordance with (A) or (B), as applicable.
(A) Existing Retirees Under Age 65. An Existing Retiree who has
------------------------------
not attained age 65 as of the Benefit Changeover Date shall be
provided with the same coverage under MBC's Medical Plans as is then
being provided to similarly situated employees of MBC for the period
commencing on the Benefit Changeover Date and ending as of the last
day of the month in which such Existing Retiree attains age 65. MBC
shall subsidize the cost of any coverage in accordance with the cost
sharing ratio (the "Cost-Sharing Ratio") in effect with respect to
------------------
such Existing Retiree under the Buck Medical Plan on the day before
the Benefit Changeover Date and as set forth on Part 10.02 of the
Buck Disclosure Letter or in the Updated Information provided
pursuant to Section 10.02(a), as applicable.
(B) Existing Retirees Age 65 or Older. An Existing Retiree age 65
---------------------------------
or older as of the Benefit Changeover Date and any Existing Retiree
described in (A) who attains age 65 after the Benefit Changeover
Date, shall be provided with the following two options: (1) to
participate
A-34
<PAGE>
in the Mellon Medicare risk Health Maintenance Organization
("Medicare Risk HMO") program; or (2) to participate in Medicare and
-----------------
one or both of: MBC's so-called "65 Special" plan; and/or the MBC
post-65 "major medical" plan (the "Self-Insured Plans"). MBC shall
------------------
pay the entire cost of any Medicare Risk HMO coverage elected by
such Existing Retiree except for so-called "Medicare Part B
coverage." MBC shall subsidize the cost of any coverage elected
under the Self-Insured Plans by an Existing Retiree in accordance
with the Cost-Sharing Ratio in effect with respect to such Existing
Retiree under the Buck Medical Plan on the day before the Benefit
Changeover Date and as set forth on Part 10.02 of the Buck
Disclosure Letter or in the Updated Information provided pursuant to
Section 10.02(a), as applicable.
(iii) Coverage Provided to Rule of 55 Retirees. If for Continued
----------------------------------------
Employees: (A) the sum of whose age and years of service with any of the Buck
Companies, any ERISA Affiliate and MBC; including such service earned prior to
the Closing Date ("Combined Service") determined as of the Benefit Changeover
----------------
Date equals or exceeds 55 ("Rule of 55 Retirees"); and who (B) have at least
-------------------
10 years of Combined Service at the date of their actual termination of
employment from MBC and each of the Buck Companies, then such Continued
Employees shall be eligible to elect from among the coverage options described
in (ii); provided, however, that the Cost Sharing Ratio shall be determined
-----------------
under the terms of the Buck Medical Plan applicable to Existing Retirees as in
effect on the day before the Benefit Changeover Date based on the Rule of 55
Retiree's Combined Service as of the Benefit Changeover Date.
(iv) Coverage Provided to Other Retirees. Any Continued or New
-----------------------------------
Employee not included within the definitions of an Existing Retiree or a Rule
of 55 Retiree who retires from MBC and any of the Buck Companies shall be
eligible to participate in those medical coverages, if any, then provided to
similarly situated employees who retire from MBC. Solely for purposes of
determining their eligibility to receive any such coverages which might be
available to retired employees under the MBC Medical Plans, Continued
Employees will be credited for their Combined Service.
(v) Reservation of Right of Modification and/or Termination.
-------------------------------------------------------
Notwithstanding anything in this Article X to the contrary, the Board of
Directors of the Continuing Corporation expressly reserves the right to modify
and/or terminate any of the benefits provided by this Section 10.02 as it, in
its sole discretion, deems necessary or appropriate to establish and/or
continue the benefits tax-qualified status, if applicable, and/or to take into
account substantive changes in the regulatory, legal or financial
circumstances in existence as of the date hereof. By way of illustration and
not limitation, the Board of Directors of the Continuing Corporation reserves
the right to modify or terminate the retiree coverage provided in this Section
10.02 to take into account substantive changes in the federal Medicare program
which become effective after the date hereof.
10.03 Retirement Plan Matters.
-----------------------
(a) Options With Respect to the Existing Plans After the Benefit
------------------------------------------------------------
Changeover Date. As of the Benefit Changeover Date, the Continuing
---------------
Corporation and/or MBC, as the case may be, shall exercise one or more of the
following options with respect to the Employee's Retirement Plan of George B.
Buck Consulting Actuaries, Inc. and any related plan providing excess or
supplemental benefits to eligible Continued Employees participating in the
Employee's Retirement Plan of George B. Buck Consulting Actuaries, Inc.
(collectively, the "Buck Retirement Plan") and/or the Mellon Bank Retirement
--------------------
Plan and any related plan providing excess or supplemental benefits to
eligible MBC employees participating in the Mellon Bank Retirement Plan
(collectively, the "MBC Retirement Plan"): (i) amend the Buck Retirement Plan
-------------------
to provide Continued Employees with accruals, benefits, rights and features on
and after the Benefit Changeover Date comparable to those then provided to
similarly situated employees of MBC under the Mellon Bank Retirement Plan;
(ii) amend the MBC Retirement Plan to provide Continued Employees with
accruals, benefits, rights and features on and after the Benefit Changeover
Date comparable to those then provided to similarly situated employees of MBC
under the Mellon Bank Retirement Plan; or (iii) terminate, freeze, merge
either or both retirement plans and/or take such other action as either or
both of the Continuing Corporation and MBC then determines to be necessary or
appropriate to provide Continued Employees with accruals, benefits, rights and
features with respect to service
A-35
<PAGE>
earned on and after the Benefit Changeover Date which are comparable to those
then provided to similarly situated participants in the MBC Retirement Plan.
(b) Benefits Payable with Respect to Service Accrued Prior to
---------------------------------------------------------
January 1, 2001. Notwithstanding anything in subsection (a) to the contrary,
---------------
the benefits payable with respect to any Continued Employee attributable to
service earned prior to the Benefit Changeover Date shall be determined under
the terms of the Buck Retirement Plan as in effect on the day before the
Benefit Changeover Date but based on the Continued Employee's actual Combined
Service, as defined in Section 10.02(d)(iii), determined as of the Benefit
Changeover Date but using total compensation and bonus history determined as
of the Continued Employee's actual termination or retirement date.
10.04 401(k) Plan Matters.
-------------------
(a) During the Transition Period. Continued Employees and New
----------------------------
Employees, if applicable, participating in the Savings and Profit Sharing Plan
of George B. Buck Consulting Actuaries, Inc. and any related plan providing
excess or supplemental benefits to eligible Continued Employees participating
in the Savings and Profit Sharing Plan of George B. Buck Consulting Actuaries,
Inc. (collectively, the "Buck 401(k) Plan") shall be entitled to receive the
----------------
following contributions for all plan years ending on or before the Benefit
Changeover Date: (i) the matching contribution provided under the terms of
the Buck 401(k) Plan as in effect on the day before the Closing Date; (ii)
discretionary profit sharing contributions, if any, no greater than those
which, when stated as a percentage of compensation, were provided for the 1995
plan year; and (iii) any other contributions, benefits, rights and features
provided under the terms of the Buck 401(k) Plan as in effect on the day
before the Closing Date.
(b) Options with Respect to the Existing 401(k) Plans After the
-----------------------------------------------------------
Benefit Changeover Date. As of the Benefit Changeover Date, the Continuing
-----------------------
Corporation and/or MBC, as the case may be, shall exercise one or more of the
following options with respect to the Buck 401(k) Plan and/or the Mellon Bank
Corporation 401(k) Retirement Savings Plan and any related plan providing
excess or supplemental benefits to eligible MBC employees participating in the
Mellon Bank Corporation 401(k) Retirement Savings Plan (collectively, the "MBC
---
401(k) Plan"): (i) amend the Buck 401(k) Plan to provide Continued Employees
-----------
with contributions, benefits, rights and features on and after the Benefit
Changeover Date comparable to those provided to similarly situated employees
of MBC under the MBC 401(k) Plan; (ii) amend the MBC 401(k) Plan to provide
Continued Employees with contributions, benefits, rights and features on and
after the Benefit Changeover Date comparable to those provided to similarly
situated employees of MBC under the MBC 401(k) Plan; or (iii) terminate,
freeze, merge either or both 401(k) plans and/or take such other action as
either or both of the Continuing Corporation and/or MBC then determines to be
necessary or appropriate to provide contributions, benefits, rights and
features to Continued Employees with respect to service earned on and after
the Benefit Changeover Date which are comparable to those then provided to
similarly situated participants in the MBC 401(k) Plan.
(c) Combined Service Credited for Purposes of Eligibility and
---------------------------------------------------------
Vesting. Notwithstanding anything in this Section 10.04 to the contrary,
-------
Continued Employees shall be credited with their Combined Service, as defined
in Section 10.02(d)(iii), for purposes of determining eligibility for
participation (including eligibility for any early retirement benefits) and
vesting under the Buck and MBC 401(k) Plans.
10.05 Treatment of Unfunded Deferred Compensation and Excess
------------------------------------------------------
Pension Plans. Notwithstanding anything in this Article X to the contrary, on
-------------
and after the Closing Date: (a) MBC and/or the Continuing Corporation, as
the case may be, shall cause the obligations of the Buck Companies with
respect to the benefits provided under the Buck Deferred Compensation
Plan/Split Dollar Plan to be secured through the use of a so-called "rabbi" or
grantor trust and an appropriate related investment vehicle; and (b) MBC shall
guarantee the obligations of the Buck Companies under the Buck Excess
Retirement Plan pursuant to such arrangements as MBC, in its sole discretion,
determines to be necessary or appropriate, but in any event in a manner no
less secure than such arrangements in effect with respect to senior management
of MBC.
10.06. Employee Stock Option Plan. Continued Employees described
--------------------------
in Section 7.02(f) who are required to enter into employment agreements shall
be eligible to be considered for annual awards of options
A-36
<PAGE>
of MBC Common Stock ("MBC Stock Options") in accordance with the terms and
-----------------
conditions of the program then in effect under Article IV of the Mellon Bank
Corporation Long-Term Profit Incentive Plan (1996) with respect to similarly
situated employees of MBC holding the title of Vice President. In addition to
the awards described above potentially available to such employees, MBC shall
consider making awards of MBC Stock Options to other Continued Employees, to
be selected by MBC, in its sole discretion; provided, however, that the total
-----------------
number of shares of MBC Common Stock to be affected by all such MBC Stock
Options in a single year (for both the Continued Employees entering into
employment agreements and other Continued Employees) shall not exceed 50,000
for 1997 and a number of shares in years after 1997 that would produce a
similar aggregated benefit, in any such case as adjusted to take into account
stock splits which may take place after the date hereof.
10.07. Treatment of Benefits Under Non-US Plans. By way of
----------------------------------------
clarification and not limitation of the generality of the provisions of this
Article X, not later than 120 days prior to the expiration of the Transition
Period, Continuing Corporation will prepare and deliver to MBC such
information and analyses (the "Foreign Benefit Studies") with respect to those
-----------------------
Buck Benefit Plans established or maintained with respect to a Foreign
Jurisdiction (the "Foreign Benefit Plans") as MBC and Continuing Corporation
---------------------
shall determine to be necessary or appropriate to enable MBC and Continuing
Corporation to evaluate the changes, if any, to be made to such Foreign
Benefit Plans on and after the Benefit Changeover Date.
10.08. Regular Bonus Plan Payments. (a) For the Year Ending March
--------------------------- -------------------------
31, 1997. The annual discretionary Regular Bonus payments to be made to
--------
employees of Continuing Corporation for the year ending March 31, 1997 shall
be determined by Buck consistent with past practice and paid in accordance
with past practice; provided, however, that the aggregate of all such Regular
-------- -------
Bonus payments taken as a percentage of aggregate base compensation for the
year ended March 31, 1997 shall not exceed the corresponding percentage for
the year ended March 31, 1996; provided further, that such Regular Bonus
----------------
payments taken as a percentage of gross revenue for the year ended March 31,
1997 shall not exceed the corresponding percentage of Regular Bonus payments
made for the year ended March 31, 1996 taken as a percentage of gross revenue
for the year ended March 31, 1996.
(b) For Periods Commencing on and after April 1, 1997. The total
-------------------------------------------------
Regular Bonus Amount for the period from April 1, 1997 to December 31, 1997
and thereafter for calendar year 1998, 1999 and 2000 shall be equal to the
greater of (i) 20% of OIBDI or (ii) an amount to be established each year by
the Board of Directors of the Continuing Corporation and the MBC Vice
Chairman-Trust reflecting historical percentages of aggregate base salaries
for each level of employees; provided however, that limits will be established
-------- -------
to ensure that any amounts so determined shall not exceed seven and one-half
percent (7.5%) of revenue of the Continuing Corporation in the nine (9) month
period ending December 31, 1997 and each of the three (3) subsequent calendar
years of 1998, 1999 and 2000; provided further, that for the period April 1,
----------------
1997 to December 31, 1997, the Regular Bonus Amount shall be prorated to
convert to a calendar year cycle. For periods after December 31, 2000, the
total Regular Bonus Amount shall revert to a formula determined by the MBC
Vice Chairman-Trust based on OIBDI.
(c) Employment as a Precondition to Payment. Regular Bonuses
---------------------------------------
related to a calendar year (commencing in 1997) shall be payable on a date to
be determined early in the following calendar year but not later than March 31
(the "Regular Bonus Payment Date"). Notwithstanding anything in this Section
--------------------------
10.08 to the contrary, no Regular Bonus payment shall be made to any person
not actively employed by the Buck Companies on the Regular Bonus Payment Date.
Any Regular Bonuses not paid pursuant to the preceding sentence shall be
deemed to be forfeited and shall revert to the Buck Companies.
ARTICLE XI
GENERAL PROVISIONS
11.01. Survival. If the Closing occurs, no representations,
--------
warranties, agreements and covenants contained in this Agreement shall survive
the Effective Time, except as otherwise explicitly stated herein. If this
Agreement is terminated prior to the Effective Time, the agreements and
representations of the parties in Section 5.07(b) shall survive.
A-37
<PAGE>
11.02. Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to have been duly received (a) on the
date given if delivered personally or by cable, telegram, telex or telecopy or
(b) on the date received if mailed by registered or certified mail (return
receipt requested), to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to MBC:
Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, PA 15258-0001
Attention: Vice Chairman-Trust
Telephone Number: (412) 234-3673
Facsimile Number: (412) 234-7525
Copies to:
Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, PA 15258-0001
Attention: James M. Gockley, Esq.
Assistant General Counsel
Telephone Number: (412) 234-2053
Facsimile Number: (412) 234-0555
Reed Smith Shaw & McClay
435 Sixth Avenue
Pittsburgh, PA 15219
Attention: Frederick C. Leech, Esq.
Telephone Number: (412) 288-4178
Facsimile Number: (412) 288-3063
and
(b) if to Buck:
Buck Consultants, Inc.
Two Pennsylvania Plaza
New York, NY 10121
Attention: President
Telephone Number: (212) 330-1000
Facsimile Number: (212) 330-1039
Copies to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza, 41st Floor
New York, NY 10112
Attention: George P. O'Sullivan, Esq.
Telephone Number: (212) 408-2400
Facsimile Number: (212) 408-2420
11.03. Counterparts. This Agreement may be executed in counterparts
------------
(including executed counterparts delivered and exchanged by facsimile
transmission) each of which shall be deemed to constitute an original, but all
of which together shall constitute one and the same instrument.
A-38
<PAGE>
11.04. Governing Law. All questions concerning the construction,
-------------
interpretation and validity of this Agreement shall be governed by and construed
and enforced in accordance with the domestic laws of the Commonwealth of
Pennsylvania, without giving effect to any choice or conflict of law provision
or rule (whether in the Commonwealth of Pennsylvania or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
Commonwealth of Pennsylvania. In furtherance of the foregoing, the internal law
of the Commonwealth of Pennsylvania will control the interpretation and
construction of this Agreement, even if under such jurisdiction's choice of law
or conflict of law analysis, the substantive law of some other jurisdiction
would ordinarily apply. Notwithstanding the foregoing provisions of this
Section 11.4, those provisions of this Agreement that relate to the Merger or
the internal governance of Buck, Buck Acquisition Corporation and the Continuing
Corporation shall be governed by and construed and enforced in accordance with
the internal laws of the State of Delaware.
11.05. Waiver; Amendment. Any provision of this Agreement may be (a)
-----------------
amended or modified at any time (including the structure of the transactions
contemplated hereby or any part thereof), by an agreement in writing among the
parties hereto and executed in the same manner as this Agreement or (b) waived
by the party benefitted by the provision.
11.06. Entire Agreement; No Third-Party Beneficiaries; Etc. This
---------------------------------------------------
Agreement represents the entire understanding of the parties hereto with
reference to the transactions contemplated hereby and supersedes any and all
other oral or written agreements heretofore made. All terms and provisions of
the Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective personal representatives, heirs, successors
and permitted assigns. Except as otherwise explicitly stated herein, nothing in
this Agreement is intended to confer upon any other Person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
11.07. Assignment. This Agreement may not be assigned by either
----------
party hereto without the written consent of the other party and any purported
assignment in violation hereof shall be null and void.
11.08. Disclosure Letters.
------------------
(a) The disclosures in the Buck Disclosure Letter and the MBC
Disclosure Letter, as the case may be, must relate only to the representations
and warranties in the Section of the Agreement to which they expressly relate
and not to any other representation or warranty in this Agreement.
(b) In the event of any inconsistency between the statements in the
body of this Agreement and those in the Buck Disclosure Letter or the MBC
Disclosure Letter, as the case may be (other than an exception expressly set
forth as such in the Buck Disclosure Letter or the MBC Disclosure Letter, as the
case may be, with respect to a specifically identified representation or
warranty), the statements in the body of this Agreement will control.
11.09. Severability. If any provision of this Agreement is held
------------
invalid or unenforceable by any Governmental Body of competent jurisdiction, the
other provisions of this Agreement will remain in full force and effect. Any
provision of this Agreement held invalid or unenforceable only in part or degree
will remain in full force and effect to the extent not held invalid or
unenforceable.
11.10. Article and Section Headings, Construction. The headings of
------------------------------------------
Sections in this Agreement are provided for convenience only and will not affect
its construction or interpretation. All references to "Article", "Articles",
"Section" or "Sections" refer to the corresponding Article, Articles, Section or
Sections of this Agreement. All words used in this Agreement will be construed
to be of such gender or number as the circumstances require. Unless otherwise
expressly provided, the word "including" does not limit the preceding words or
terms
A-39
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement and
Plan of Reorganization as of the date first written above.
Buck Consultants, Inc.
By
------------------------------------
Title:
Mellon Bank Corporation
By
------------------------------------
Title:
A-40
<PAGE>
Appendix A
Definitions
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Article I:
"1996 Balance Sheet"--the audited consolidated balance sheet of the Buck
------------------
Companies as of March 31, 1996.
"Accounts Receivable"--as defined in Section 3.08.
-------------------
"Acquisitions and Dispositions"--as defined in Section 3.23(a).
-----------------------------
"Acquisition Proposal"--as defined in Section 5.09(a).
--------------------
"Affiliate Agreement"--as defined in Section 5.15.
-------------------
"Agreement"--as defined in the first paragraph of this Agreement.
---------
"Allianz"--as defined in Section 7.02(j).
-------
"Audited 1997 Financial Statements"--as defined in Section 5.14.
---------------------------------
"Australian Joint Venture"--as defined in Section 7.02(k).
------------------------
"Benefit Changeover Date"--as defined in Section 10.01(b).
-----------------------
"Benefit Studies"--as defined in Section 10.02(a).
---------------
"Book Value of Class A Common Stock" or "BVA"--as defined in Section
---------------------------------- ---
2.01(d)(i).
"Book Value of Class B Common Stock" or "BVB"--as defined in Section
---------------------------------- ---
2.01(d)(ii).
"Breach"--a "Breach" of a representation, warranty, covenant, obligation or
------
other provision of this Agreement or any instrument delivered pursuant to this
Agreement will be deemed to have occurred if there is or has been any inaccuracy
in or breach of or any failure to perform or comply with, such representation,
warranty, covenant, obligation or other provision.
"Buck"--as defined in the first paragraph of this Agreement.
----
"Buck 401(k) Plan"--as defined in Section 10.04(a).
----------------
"Buck Australia"--as defined in Section 7.02(k).
--------------
"Buck Benefit Plans"--as defined in Section 3.10(a).
------------------
"Buck Common Stock"--as defined in the Recitals of this Agreement.
-----------------
"Buck Companies"--Buck and each Person in which Buck has an ownership
--------------
interest, including without limitation all Subsidiaries of Buck and all Persons
in which Buck (or a Subsidiary of Buck) owns a joint venture interest or more
than 10% of the capital stock of such Person.
"Buck Disclosure Letter"--the disclosure letter delivered by Buck to MBC
----------------------
concurrently with the execution and delivery of this Agreement.
A-41
<PAGE>
"Buck Executive Plans"--as defined in Section 3.10(a).
--------------------
"Buck Financial Statements"--as defined in Section 3.04.
-------------------------
"Buck Material Adverse Effect"--a material adverse effect on the
-----------------------------
business, operations, assets, condition (financial or otherwise) or results of
operations of the Buck Companies, taken as a whole or Buck's ability to
consummate the transactions contemplated by this Agreement.
"Buck Medical Plans"--as defined in Section 10.02(d)(i).
------------------
"Buck Non-Executive Plans"--as defined in Section 3.10(a).
------------------------
"Buck Pension Plans"--as defined in Section 3.10(a).
------------------
"Buck Record Date"--as defined in Section 2.02(a).
----------------
"Buck Representatives"--as defined in Section 5.09(a).
--------------------
"Buck Retirement Plan"--as defined in Section 10.03(a).
--------------------
"Buck Stockholders' Meeting"--as defined in Section 2.02(a).
--------------------------
"Buck Welfare Plans"--as defined in Section 3.10(a).
------------------
"Business"--as defined in Section 3.01(a).
--------
"Business Day"--any day other than a Saturday, Sunday, public holiday
------------
under the laws of Pennsylvania and New York.
"Cash Election"--as defined in Section 2.02(a).
-------------
"Class A Common Stock"--as defined in the Recitals of this Agreement.
--------------------
"Class A Common Stock Outstanding" or "NA"--as defined in Section
-------------------------------- --
2.01(d)(iii).
"Class A Equivalents" or "NEA"--as defined in Section 2.01(d)(v).
------------------- ---
"Class A Payment" or "CAP"--as defined in Section 2.01(d)(vii)
--------------- ---
"Class A Retiree"--as defined in Section 2.01(d)(vii).
---------------
"Class A Retiree Payment"--as defined in Section 2.01(d)(vii).
-----------------------
"Class B Common Stock"--as defined in the Recitals of this Agreement.
--------------------
"Class B Common Stock Outstanding" or "NB"--as defined in Section
-------------------------------- --
2.01(d)(iv).
"Class B Equivalents" or "NEB"--as defined in Section 2.01(d)(vi).
------------------- ---
"Class B Payment" or "CBP"--as defined in Section 2.01(d)(vii).
--------------- ---
"Class B Retiree"--as defined in Section 2.01(d)(vii).
---------------
"Class B Retiree Payment"--as defined in Section 2.01(d)(vii).
-----------------------
A-42
<PAGE>
"Class C Common Stock"--as defined in the Recitals of this Agreement.
--------------------
"Closing"--as defined in Section 1.02.
-------
"Closing Date"--as defined in Section 1.02.
------------
"Code"--as defined in the Recitals of this Agreement.
----
"Combined Service"--as defined in Section 10.02(d)(iii).
----------------
"Consent"--any approval, consent, ratification, waiver or other
-------
authorization (including any Governmental Authorization).
"Continued Employees"--as defined in Section 10.01(a).
-------------------
"Continuing Corporation"--as defined in Section 1.01(a).
----------------------
"Contract"--any agreement, contract, obligation, promise or undertaking
--------
(whether written or oral and whether express or implied) that is legally binding
(a) under which any Buck Company has or may acquire any rights, (b) under which
any Buck Company has or may become subject to any obligation or liability or (c)
by which any Buck Company or any of the assets owned or used by it is or may
become bound.
"Contract Employees"--as defined in Section 10.01(a).
------------------
"Corroon"--as defined in Section 10.08(c)(ii).
-------
"Corroon Acquisition"--as defined in Section 3.23(d).
-------------------
"Cost"--as defined in Section 2.01(d)(vii).
----
"Cost Sharing Ratio"--as defined in Section 10.02(d)(ii)(A).
------------------
"Dissenters' Shares"--as defined in Section 2.05.
------------------
"Effective Time"--as defined in Section 1.02.
--------------
"Election"--the Cash Election, the Stock Election or the Mixed Payment
---------
Election, as the case may be.
"Election Deadline"--as defined in Section 2.02(a).
-----------------
"Election Form"--as defined in Section 2.02(a).
-------------
"Encumbrance"--any mortgage, easement, right of way, charge, claim,
-----------
community property interest, condition, equitable interest, lien, option,
pledge, security interest, right of first refusal or restriction or adverse
claim of any kind, including any restriction on use, voting, transfer, receipt
of income or exercise of any other attribute of ownership or any other
encumbrance or exception to title of any kind, other than, with respect solely
to any asset of a Buck Company, Permitted Encumbrances.
"Environmental Laws"--as defined in Section 3.16.
------------------
"ERISA"--the Employee Retirement Income Security Act of 1974 or any
-----
successor law and regulations and rules issued pursuant to that Act or any
successor law.
"ERISA Affiliate"--as defined in Section 3.10(b).
---------------
A-43
<PAGE>
"Existing Retirees"--as defined in Section 10.02(d)(ii).
-----------------
"Foreign Benefit Plans"--as defined in Section 10.07.
---------------------
"Foreign Benefit Studies"--as defined in Section 10.07.
-----------------------
"Foreign Jurisdictions"--each country (other than the United States)
---------------------
or subdivision thereof in which a Buck Company is licensed or otherwise
authorized to conduct business and each other country or subdivision thereof, if
any, of residence and/or domicile, as the case may be, of each Continued
Employee receiving or eligible to receive any contributions, benefits or
coverages under any of the Buck Benefit Plans.
"GAAP"--generally accepted United States accounting principles,
----
applied on a basis consistent with the basis on which the Balance Sheet and the
other financial statements referred to in Section 3.04(b) were prepared.
"Governmental Authorization"--any approval, consent, license, permit,
--------------------------
certification, registration, waiver or other authorization issued, granted,
given or otherwise made available by or under the authority of any Governmental
Body or pursuant to any Legal Requirement.
"Governmental Body"--any:
-----------------
(a) nation, state, county, city, town, village,
district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government;
(c) governmental or quasi-governmental authority of any nature (including
any governmental agency, branch, department, official or entity and
any court or other tribunal); or
(d) body exercising or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory or taxing
authority or power of any nature.
"Guaranteed Returns"--as defined in Section
------------------
"Hazardous Substance"--as defined in Section 3.16.
-------------------
"Heissmann"--as defined in Section 7.02(j).
---------
"HSR Act"--the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or
-------
any successor law and regulations and rules issued pursuant to that Act or any
successor law.
"Indemnitees"--as defined in Section 9.01(a).
-----------
"Information"--as defined in Section 5.07(b).
-----------
"Intellectual Property Assets"--as defined in Section 3.18(a).
----------------------------
"Introspect Acquisition"--as defined in Section 3.23(d).
----------------------
"IRS"--the United States Internal Revenue Service or any successor
---
agency and, to the extent relevant, the United States Department of the
Treasury.
"Issuable Shares"-- as defined in Section 2.01(d)(vii).
---------------
A-44
<PAGE>
Legal Requirement"--any federal, state, local, municipal, foreign,
-----------------
international, multinational or other administrative order, constitution, law,
ordinance, principle of common law, court order, consent, decree, regulation,
governmental license, permit, statute or treaty.
"Major Buck Companies"--each Buck Company which was organized in one
--------------------
of the states of the United States and the following Buck Companies which were
organized in a country other than the United States: Buck Consultants Limited
(UK); Buck Investment Consultants Limited (UK); Bevis Trustees Limited; Buck &
Willis Healthcare Limited; Buck Consultants Limited (Canada); 3243818 Canada,
Inc.; Buck Australia PTY; Buck Consultants PTY Ltd.; Buck Consultants Services
PTY Ltd.; Buck Consultants Nominees PTY Ltd.; Buck Consultants Taxation Services
PTY Ltd.
"MBC"--as defined in the first paragraph of this Agreement.
---
"MBC 401(k) Plan"--defined in Section 10.04(b).
---------------
"MBC Benefit Plans" --as defined in Section 10.01(c).
-----------------
"MBC Common Stock"--Common Stock of Mellon Bank Corporation, each of $.50
----------------
par value.
"MBC Companies"--as defined in Section 4.04.
-------------
"MBC Disclosure Letter"--the disclosure letter delivered by MBC to
---------------------
Buck concurrently with the execution and delivery of this Agreement.
"MBC Financial Statements"--as defined in Section 4.04.
------------------------
"MBC Material Adverse Effect"--a material adverse effect on the business
---------------------------
operations, assets, condition (financial or otherwise) or results of operations
of the MBC Companies, taken as a whole or MBC's ability to consummate the
transactions contemplated by this Agreement
"MBC's Medical Plans"--as defined in Section 10.02(d)(i).
-------------------
"MBC Preferred Stock"--as defined in Section 4.03.
-------------------
"MBC Retirement Plan"--as defined in Section 10.03(a).
-------------------
"MBC Stock Options"--as defined in Section 10.06.
-----------------
"MBC Vice Chairman-Trust"--the Vice Chairman of MBC with responsibility
-----------------------
for Mellon Trust (including any designee(s)).
"Medicare Risk HMO"--10.02(d)(ii)(B).
-----------------
"Merger"--as defined in Section 1.01(a).
------
"Merger Agreement"--as defined in Section 1.01.
----------------
"Merger Subsidiary"--as defined in Section 1.01.
-----------------
"Minimum Stock Limitation"--as defined in Section 2.02(e).
------------------------
"Mixed Cash Shares"--as defined in Section 2.02(a).
-----------------
"Mixed Payment Election"--as defined in Section 2.02(a).
----------------------
A-45
<PAGE>
"Mixed Stock Shares"--as defined in Section 2.02(a).
------------------
"NML"--as defined in Section 7.02(k).
---
"New Employee"--as defined in Section 10.01(a).
------------
"Non-Electing Holder"--as defined in Section 2.02(a).
-------------------
"NYSE"--New York Stock Exchange.
----
"OIBDI"--as defined in the Buck Key Performers Supplemental Payment Plan.
-----
"Old Certificates"--as defined in Section 2.03(a).
----------------
"Order"--any award, decision, injunction, judgment order, ruling,
-----
subpoena or verdict entered, issued, made or rendered by any court,
administrative agency or other Governmental Body or by any arbitrator.
"Organizational Documents"--(a) the articles or certificate of
------------------------
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) the certificate of organization and limited liability company
agreement of a limited liability company; (e) any charter or similar document
adopted or filed in connection with the creation, formation or organization of a
Person; and (f) any amendment to any of the foregoing.
"Permitted Encumbrance"--any lien for current Taxes not yet due and
---------------------
payable; any lien securing Taxes or any lien of materialmen, carriers, landlords
and similar Persons, in each case not yet due or payable; and any minor interest
in an asset in favor of another Person which does materially impair the value,
ownership or use of such asset.
"Person"--any individual, corporation (including any non-profit
------
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association organization, labor union or other entity or
Governmental Body.
"Proceeding"--any action, arbitration, audit, hearing, investigation,
----------
litigation or suit (whether civil, criminal, administrative, investigative or
informal) commenced, brought, conducted or heard by or before or otherwise
involving, any Governmental Body or arbitrator.
"Protected Benefits"--as defined in Section 10.01(b).
------------------
"Proxy Statement"--as defined in Section 3.19.
---------------
"Purchase Agreement"--as defined in Section 2.01(d)(vii).
------------------
"Purchase Price" or "PP"--as defined in Section 2.01(d)(vii).
-------------- ----
"Registration Statement"--as defined in Section 3.19.
----------------------
"Regular Bonus"--the annual bonus, if any, to which an individual
-------------
employee is entitled to receive under the target performance bonus program
applicable to employees of Continuing Corporation similarly situated to the
particular employee; determined without regard to: (a) any payments under the
Buck Key Performers Supplemental Payment Plan, (b) any bonus or other incentive
payment negotiated or promised in lieu of and/or in addition to the annual
bonus, if any, which would otherwise be payable to the employee if the
employee's performance were measured against the performance targets applicable
to similarly situated employees under the regular target performance bonus
program, and (c) any other performance incentive program of Continuing
A-46
<PAGE>
Corporation or any other MBC Company. The aggregate of all such individual
Regular Bonuses for employees classified by Continuing Corporation as "level I"
or "level II" shall be referred to as the "Regular Bonus Amount."
--------------------
"Regular Bonus Amount"--as defined in the definition of Regular Bonus.
--------------------
"Regular Bonus Payment Date"--as defined in Section 10.08(c).
--------------------------
"Release"--as defined in Section 3.16.
-------
"Retiree Protection Plan"--as defined in the Recitals of this
-----------------------
Agreement.
"Rule of 55 Retirees"--as defined in Section 10.02(d)(iii).
-------------------
"Rule 145"--as defined in Section 5.15.
--------
"Rule 145 Affiliate"--as defined in Section 5.15.
------------------
"SEC"--the Securities and Exchange Commission (or its successor
---
Governmental Body).
"Securities Act"--the Securities Act of 1933 or any successor law and
--------------
regulations and rules issued pursuant to that Act or any successor law.
"Self-Insured Plans"--as defined in Section 10.02(d)(ii)(B).
------------------
"Shareholders Agreement"--as defined in Section 7.02(k).
----------------------
"Statutory Class A Payment"--as defined in Section 2.01(d).
-------------------------
"Statutory Class B Payment"--as defined in Section 2.01(d).
------------------------
"Stock Election"--as defined in Section 2.02(a).
--------------
"Stock Value"--as defined in Section 2.02(e).
-----------
"Subsidiary"--with respect to any Person (the "Owner"), any
----------
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries.
"Tax"--Any tax, charge, fee, levy, or other assessment of whatever
---
kind or nature, including without limitation, any net income, gross income,
gross receipts, capital gains, value added, sales, use, services, property, ad
valorem, estate, gift, generation skipping tax, tariff, duty, occupation,
transfer, franchise, capital stock, profits, license, withholding, payroll,
employment, unemployment, excise, estimated, severance, stamp, occupancy tax, or
charges of any kind whatever (together with any interest, penalty or addition to
tax) imposed, assessed or collected by or under the authority of any
Governmental Body or payable pursuant to any tax-sharing agreement or any other
Contract relating to the sharing or payment of any such Tax.
"Tax Return"--any return (including any information return), report,
----------
statement, schedule, notice, form or other document or information filed with
or submitted to or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection or payment or
any Tax or in connection with the administration, implementation or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"Threatened"--a claim, Proceeding, dispute, action or other matter
----------
will be deemed to have been "Threatened" if any demand or statement has been
made (in writing) or any notice has been given (in writing) that
A-47
<PAGE>
would lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action or other matter is likely to be asserted, commenced, taken or otherwise
pursued in the future against such Person.
"Total Consideration"--as defined in Section 2.02(e).
-------------------
"Transaction Expenses"--as defined in Section 8.03.
--------------------
"Transaction Share Price"--as defined in Section 2.01(b).
-----------------------
"Transition Period"--as defined in Section 10.01(b)
-----------------
"Updated Information"--as defined in Section 10.02(a).
-------------------
<PAGE>
ANNEX B
OPINION OF FINANCIAL ADVISORS TO BUCK
<PAGE>
Benedetto, Gartland & Greene, Inc.
1330 Avenue of the Americas, New York, New York 10019
Telephone 212.424.9700
Facsimile 212.262.6708
[LOGO OF BENEDETTO GARTLAND & GREENE]
Investment Bankers
March 10, 1997
Board of Directors
Buck Consultants, Inc.
Two Pennsylvania Plaza
New York, NY 10121
Members of the Board:
You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, to the common shareholders of Buck Consultants,
Inc. ("Buck" or the "Company") of the consideration to be paid to the
Shareholders, pursuant to the Agreement and Plan of Reorganization proposed (the
"Agreement") by and between Mellon Bank Corporation ("Mellon") and Buck. The
Agreement contemplates a merger (the "Transaction") of Buck into a wholly-owned
affiliate of Mellon. It is our understanding that as of the date of the
Agreement there were no more than 88,243 shares of Class A Common Stock ("A
Stock"), par value $5,459 per share, issued and outstanding and no more than
687,958 shares of Class B Common Stock ("B Stock"), par value $1.00 per share,
issued and outstanding (the A Stock and B Stock being referred to collectively
herein as the "Buck Common Stock" and the holders of A Stock and B Stock being
referred to collectively as "Shareholders"). The Agreement states that the
Shareholders will receive aggregate consideration equal to $225,000,000 from
Mellon at the closing of the Transaction. In addition, we understand that the
consideration will be allocated between the A Stock and the B Stock so that each
will receive an equal percentage premium above the respective book values of the
shares. We also understand that Buck maintains a Retirement Protection Plan (the
"Plan") under the terms of which eligible retired and former shareholders are
entitled to receive a portion of the consideration relating to the Transaction,
such portion to be determined by the size of an individual's holdings prior to
retirement and the amount of time passed since retirement. This obligation is a
corporate liability of Buck and the $225,000,000 of consideration to be
allocated between the A Stock and B Stock will be reduced first by the amount
necessary to satisfy the obligation reflected in the Plan. We understand that
this amount is approximately $18,000,000. In addition to the aggregate
consideration of $225,000,000 payable to the Shareholders and referred to above,
the Company will be relieved of any liability for deferred purchase payments
relating to Buck's previously consummated acquisition of W. F. Corroon. Finally,
the Shareholders will be able to individually elect as to whether they wish to
receive their portion of the consideration in the form of cash, Common Stock of
Mellon or a combination subject to a requirement that at least 55.6% of the
total consideration paid by Mellon will be in the form of Common Stock.
<PAGE>
Benedetto, Gartland & Greene, Inc.
In arriving at our opinion, we have reviewed and analyzed various
information bearing upon the financial and operating conditions and prospects of
Buck and have held discussions with parties related to the Transaction. We have
taken such other steps as we have deemed appropriate to form our opinion. Our
activities have included, among other things, the following:
(i) a review of various Company documents describing the business,
products and services of Buck;
(ii) a review and analysis of the Company's operating results and
historical financial statements for the past three years;
(iii) a review and analysis of certain financial projections prepared by
and provided to us by the Company;
(iv) extensive discussions with senior management regarding the past and
current operations, business and prospects of the Company;
(v) a review with senior management of the changing competitive market
in which the Company operates and implications for future growth;
(vi) discussions with management regarding possible reasons for a
transaction, available options and long range corporate goals;
(vii) analysis and review of Company performance relative to comparable
entities to the extent such information was available in a
meaningful form;
(viii) analysis of the terms of transactions similar to the Transaction to
the extent that we deemed them to be comparable or relevant;
(ix) reviewed the recent operating and financial performance of Mellon
and analysis of the market performance of its stock relative to
comparables; and
(x) consideration of such other factors and completion of such other
analysis as we deemed appropriate for the purpose of this opinion.
During the period of our engagement by the Company, we initiated and
participated in discussions with potential partners to a transaction other than
Mellon. These discussions and initiatives have provided us with additional
insights which we have considered in rendering our opinion on the fairness of
the Transaction.
<PAGE>
We have also taken into account our assessment of general economic
conditions, the state and outlook for the securities and financial markets and
such other conditions as our experience in evaluating similar transactions and
securities valuation in general would suggest as appropriate.
In conducting our review and arriving at our opinion, we have relied upon
the completeness and accuracy of the operating and financial information
provided to us by Buck and Mellon, whether or not publicly available, and have
not assumed any responsibility to independently verify the accuracy or
completeness of any such information. In the course of our work, we have not
obtained or made any appraisal of the Company's assets.
Based upon and subject to the foregoing, it is our opinion that, as for the
date hereof, the consideration to be received in the Transaction is fair, from a
financial point of view, to the Shareholders.
Very truly yours,
Benedetto, Gartland & Greene, Inc.
by: [SIGNATURE APPEARS HERE]
-------------------------------
Benedetto, Gartland & Green, Inc. BENEDETTO
1330 Avenue of the Americas, New York, New York 10019 GARTLAND
Telephone 212.424.9700 & GREENE
Facsimile 212.262.8708
Investment Bankers
May 30, 1997
Board of Directors
Buck Consultants, Inc.
Two Pennsylvania Plaza
New York, NY 10121
Members of the Board:
We refer to our letter of March 10, 1997 to the Members of the Board,
relating to the Agreement and Plan of Reorganization dated as of March 17, 1997
by and between Mellon Bank Corporation and Buck Consultants, Inc. We reaffirm as
of the date hereof (and as though made on the date hereof) all statements made
in that letter.
Very truly yours,
Benedetto, Gartland & Greene, Inc.
by: /s/ [SIGNATURE APPEARS HERE]
------------------------------
<PAGE>
ANNEX C
STATUTORY PROVISIONS CONCERNING DISSENTERS' RIGHTS
OF BUCK STOCKHOLDERS
DELAWARE GENERAL CORPORATION LAW
SECTION 262--APPRAISAL RIGHTS
262 APPRAISAL RIGHTS.--(a) Any stockholder of a corporation of this
State who holds shares of stock on the date of the making of a demand pursuant
to subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to (S)228 of this title shall be entitled to an appraisal by the Court
of Chancery of the fair value of his shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class
or series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to (S)251 (other than a merger effected pursuant to
subsection (g) of Section 251), 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of (S)251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any class or
series of stock of a constituent corporation if the holders thereof are
required by the terms of an agreement of merger or consolidation pursuant
to (S)(S)251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting
from such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock or depository
receipts at the effective date of the merger or consolidation will be
either listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system by
the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
C-1
<PAGE>
d. Any combination of the shares of stock, depository receipts
and cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a., b. and c. of
this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under (S)253 of this title is not
owned by the parent corporation immediately prior to the merger, appraisal
rights shall be available for the shares of the subsidiary Delaware
corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing
to take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to (S)228 or
(S)253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within twenty days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intend thereby to demand the appraisal
of such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the effective
date of the merger or consolidation notifying each of the holders of any
class or series of stock of such constituent corporation that are entitled
to appraisal rights of the effective date of the merger or consolidation or
(ii) the surviving or resulting corporation shall send such a second notice
to all such holders on or within 10 days after such effective date;
provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only be
sent to each stockholder who is entitled to appraisal rights and who has
demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit
C-2
<PAGE>
of the secretary or assistant secretary or of the transfer agent of the
corporation that is required to give either notice that such notice has
been given shall, in the absence of fraud, be prima facie evidence of the
facts stated therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix, in advance,
a record date that shall be not more than 10 days prior to the date the
notice is given; provided that, if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be
such effective date. If no record date is fixed and the notice is given
prior to the effective date, the record date shall be the close of business
on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be approved by the
Court, and the costs thereof shall be borne by the surviving or resulting
corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair
rate of interest, the Court may consider all relevant factors, including the
rate of interest which the surviving or resulting corporation would have had to
pay to borrow money during the pendency of the proceeding. Upon application by
the surviving or resulting corporation or by any stockholder entitled to
participate in the appraisal proceeding, the Court may, in its discretion,
permit discovery or other pretrial proceedings and may proceed to trial upon the
appraisal prior to the final determination of the stockholder entitled to an
appraisal. Any stockholder whose name appears on the list filed by the
surviving or resulting corporation pursuant to subsection (f) of this section
and who has submitted his certificates of stock to the Register in Chancery, if
such is
C-3
<PAGE>
required, may participate fully in all proceedings until it is finally
determined that he is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by the certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation. (Last amended by Ch.
349, L. '96, eff. 7-1-96.)
C-4
<PAGE>
ANNEX D
BUCK KEY PERFORMERS SUPPLEMENTAL PAYMENT PLAN
I. PURPOSE
-------
Mellon Bank Corporation ("MBC"), as sole stockholder of the Company,
---
acknowledges that the purpose of the Buck Key Performers Supplemental
Payment Plan (the "Plan") is to incent and reward Key Performers for their
----
efforts in furthering the goals of the Company and in contributing to the
success of the Company in meeting certain thresholds established for the
Company.
II. BASIC PROVISIONS OF THE PLAN
----------------------------
Supplemental Payments to Key Performers: Up to $90 million in cash or
---------------------------------------
restricted shares of MBC Common Stock shall be available for awards
("Awards") to Key Performers under the Plan, of which $25 million (the
--------
"Guaranteed Portion") shall not be contingent on Company performance and up
-------------------
to $65 million (the "Contingent Portion") shall be contingent on Company
------------------
performance as described herein.
Payment Method: Prior to (i) the commencement of the period for which an
---------------
Award shall be payable, or (ii) with respect to an individual identified as
a Key Performer after the commencement of such period for which an Award
shall be payable, within thirty (30) days after being identified as a Key
Performer; an individual identified as a Key Performer with respect to such
period shall make an irrevocable election to receive any such Award in cash
or in restricted shares of MBC Common Stock. The number of shares to be
awarded to Key Performers timely electing shares of MBC Common Stock, and
the restrictions on such shares, shall be determined in accordance with the
provisions of II.F. below. Notwithstanding anything in this Plan to the
contrary, MBC expressly reserves the right to modify the terms and
conditions governing the issuance of shares of restricted MBC Common Stock
to Key Performers working in a Foreign Jurisdiction; including, without
limitation, expressly reserving the right to issue all Awards to such Key
Performers entirely in cash.
Optional Deferral Election for Level 1 Employees. Key Performers
-------------------------------------------------
identified as "Level 1" employees by the Company who timely elect to
receive any Award payable hereunder in cash shall also make an irrevocable
election whether or not to defer such cash Award into the Deferred
Compensation Plan. Key Performers who fail to make an election by the
times specified in (i) and (ii) in the prior paragraph shall receive the
Award to which the election related in cash on the Payment Date related to
the Award.
A. Guaranteed Portion
------------------
Key Performer Payments Not Subject to Company Performance: The Guaranteed
---------------------------------------------------------
Portion shall be divided into three equal amounts of $8,333,333.33 which,
together with interest at the Interest Rate from the Closing (each a
"Guaranteed Installment"), shall be awarded on the first, second and third
-----------------------
anniversaries of the Closing Date (the "Anniversary Dates"). A Guaranteed
-----------------
Installment shall be in addition to the Contract Bonus, Regular Bonus or
Guaranteed Bonus amount, if any, payable to the Key Performer and will be
allocated to individual Key Performers who are active employees of the
Company on such Anniversary Date in an amount (each a "Guaranteed Award")
----------------
equal to the product of (a) the Guaranteed Installment and (b) a fraction,
the numerator of which shall be the most recent Contract Bonus, Regular
Bonus or Stipulated Bonus, if any, awarded to that Key Performer and the
denominator of which shall be the total of all the most recent Contract
Bonuses, Regular Bonuses and Stipulated Bonuses awarded to all Key
Performers actively employed by the Company on that Anniversary Date;
provided, however, the amount of any Key Performer's Guaranteed Award may
-------- -------
be adjusted (either increased or decreased) by up to 25% by the Buck CEO
with the concurrence of MBC Vice Chairman; provided further that under no
----------------
circumstances shall the total Guaranteed Installment be changed in
connection with such adjustment. Individuals who are not active employees
of the Company (including by reason of death, Disability or Retirement) on
an applicable Anniversary Date shall forfeit their right to receive any
Guaranteed Award with respect to the Guaranteed Installment awarded as of
such date.
D-1
<PAGE>
Two Year Vesting Period for Guaranteed Awards: Each Guaranteed Award shall
---------------------------------------------
be subject to forfeiture, as hereinafter described, during the two (2) year
period which begins on the Anniversary Date applicable to each such Award
and ends as of the close of business on the last business day before the
second anniversary of such Award (the "Guaranteed Award Vesting Period").
-------------------------------
Guaranteed Awards to be paid in cash will: (A) be credited with interest at
the Interest Rate during the Guaranteed Award Vesting Period, and (B) be
payable in cash promptly following the Payment Date for such Award, or,
based on the prior election of that Key Performer, if applicable, deferred
into the Deferred Compensation Plan as of the applicable Payment Date for
such Award. Subject to the provisions of II.F below, Guaranteed Awards to
be paid in restricted shares of MBC Common Stock will: (X) receive any
dividends declared during the Guaranteed Award Vesting Period, and (Y) be
distributed to the Key Performer promptly following the Payment Date for
such Award. Shares of restricted MBC Common Stock may not be deferred into
the Deferred Compensation Plan.
Forfeiture Upon Termination of Employment. Key Performers who terminate
------------------------------------------
their employment with the Company voluntarily after being allocated a
Guaranteed Award but prior to the expiration of the applicable Guaranteed
Award Vesting Period shall forfeit their right to receive that Guaranteed
Award and the amount of such forfeited Guaranteed Award shall be
reallocated to remaining Key Performers in proportion to their individual
Guaranteed Awards for the period in which the forfeited Guaranteed Award
was granted. Notwithstanding the foregoing, all Guaranteed Awards shall
become nonforfeitable upon the death of the Key Performer which may occur
during the Guaranteed Award Vesting Period and shall be paid promptly
following the Payment Date for each such Award.
Special Rule for Retirement or Disability. Key Performers who Retire or
------------------------------------------
become Disabled during the Guaranteed Award Vesting Period with respect to
any Guaranteed Award shall be entitled to receive such Award promptly
following the Payment Date for each such Award so long as such Key
Performer has not, prior to the Payment Date applicable with respect to any
such Guaranteed Award, engaged, directly or indirectly, whether as
principal or as agent, officer, director, employee, consultant, shareholder
or otherwise, alone or in association with any other person, corporation or
other entity, in any Competing Business. Subject to the provisions of the
MBC Code of Conduct, the preceding sentence shall not prohibit the Key
Performer from owning up to 1% of the outstanding capital stock of a public
or non-public company that is a Competing Business. For purposes of this
Plan, "Competing Business" shall mean any person, corporation, partnership
------------------
or other entity which provides or performs any human resources and employee
benefits consulting, employee benefit administration, and any other
services heretofore provided by the Company to its customers.
Guaranteed Awards shall not be included in a Key Performer's compensation
for purposes of any benefit calculations related to the Buck 401(k) Plan,
the MBC 401(k) Plan, the MBC Retirement Plan or the Buck Retirement Plan.
B. Contingent Portion
------------------
Key Performer Payments Contingent Upon Company Performance: The Contingent
----------------------------------------------------------
Portion shall consist in the aggregate of up to $65 million and shall be
subject to periodic cumulative maximum amounts. In accordance with the
provisions hereof, financial determinations shall be made for each of the
four twelve-month periods ending December 31, 1998, 1999, 2000 and 2001
(the "Determination Periods"). The Contingent Portion (subject to the
---------------------
cumulative maximum amounts set forth below) shall be an amount equal to 40%
of the difference between:
(a) Operating income before discretionary items ("OIBDI") for the
-----
Determination Period, over
D-2
<PAGE>
(b) The following OIBDI thresholds for that same Determination Period:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Determination Period 1st 2nd 3rd 4th
----- ----- ----- -----
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Threshold ($ millions) $36.0 $40.0 $40.0 $44.0
- --------------------------------------------------------------------
</TABLE>
The Contingent Portion shall be subject to the following cumulative maximum
amounts:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Determination Period 1st 2nd 3rd 4th
----- ----- ----- -----
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Maximum $15.0 $35.0 $55.0 $65.0
($ millions)
- --------------------------------------------------------------------
</TABLE>
Determination of OIBDI. OIBDI means an amount calculated in a manner
-----------------------
consistent with "Contribution Before Allocation" as shown in the Buck
Consultants, Inc. Summary of U.S. and Non - U.S. Operations dated October
2, 1996, which was furnished to MBC (the "Summary of Operations"), with the
---------------------
adjustments set forth below. The Summary of Operations was prepared in a
manner consistent with Buck's audited financial statements for the years
ending March 31, 1995 and 1996, and is intended (with the adjustments set
forth below) to define the method and accounting convention for determining
the Contingent Payment Portion for any Determination Period. Except for
the adjustments set forth below all items attributable to Buck's operations
whether such items relate to the period before or after MBC's acquisition
of Buck, shall be reflected in the determination of OIBDI. Therefore, any
changes in accounting methods adopted after March 31, 1996, in the
preparation of its financial statements will not be used in the
determination of OIBDI.
Adjustment to OIBDI. In the determination of OIBDI, the following
--------------------
adjustments will be made:
(a) Corroon Acquisition: There will be excluded the following expenses
--------------------
associated with the acquisition by Buck of the human resources and employee
benefits consulting business of Willis Corroon Group plc conducted under
the name of W.F. Corroon: amortization of goodwill; finance charges
arising from any additional contingent purchase price (earnout); and
expense arising from Buck's application of purchase accounting to the
acquisition. [Mellon needs to receive from Buck and review purchase
accounting calculations for Corroon transaction.]
(b) Extraordinary Items: There will be excluded amortization of goodwill
--------------------
(other than good will amortization of which was reflected the Summary of
Operations); and any expense associated with this Plan.
(c) BASIS Systems Capitalization: "Contribution Before Allocation" will be
-----------------------------
adjusted to exclude current expense and amortization of capitalized
expenses, in each case related to systems development of Buck's Australian,
Canadian and U.S. (BASIS) administration systems.
(d) Expense Savings: Expense charge-backs imposed on Buck by MBC in
----------------
respect of any level of staff support coming under the functional
management of MBC corporate staff functions, together with increases in the
level of staff support for Buck for a particular staff function, will not
exceed the annual level of staff expenses incurred by Buck determined on
the basis of an annualization of the fourth fiscal quarter of Buck ending
March 31, 1997; and, if expense savings are realized, such expense savings
will be recognized in the determination of OIBDI.
(e) Defined Contribution / Service Center Administration: The daily
-----------------------------------------------------
defined contribution administration businesses of Buck and Dreyfus
Retirement Services and, ultimately, all defined
D-3
<PAGE>
contribution and service center driven administrative services business of
Buck may be combined into one organization with common systems under MBC
management. The expenses associated with such combination will be excluded
in the determination of OIBDI. Buck will receive credit for all revenues of
such organization attributable to Buck Administration Clients (as herein
defined). "Buck Administration Clients" means administration clients
---------------------------
transferred by Buck to such organization, administration clients for which
Buck is given account executive or billing responsibility and
administration clients introduced to such organization (or another MBC
Company) by Buck. Buck will be charged the cost of such organization
attributable to providing administration services to Buck Administration
Clients; such cost to be determined by such organization's cost estimate,
if any, for a particular Buck Administration Client, by such organization's
schedule of costs, if applicable, or otherwise by reasonable cost
allocation methods consistently applied.
(f) Cross Sales of Mellon Trust Products / Dreyfus Investment Services:
-------------------------------------------------------------------
For purposes of determining OIBDI, Buck will receive credit for the
specified operating margin earned on the cross sale of Mellon Trust
products targeted specifically for cross sale and trailer fees attributable
to the cross sale of Dreyfus investment management services targeted
specifically for cross sale. The MBC Vice Chairman shall identify the
Mellon Trust products and Dreyfus investment management services which are
targeted specifically for cross sale. A qualifying cross sale results when
such products or services are sold as a result of introductions by Buck.
(g) Bundled Services. MBC, Dreyfus or another MBC Company may from time to
-----------------
time request Buck to perform services for clients of MBC, Dreyfus or such
other MBC Company. In instances in which MBC, Dreyfus, or the other MBC
Company invoices such clients for such work or bundles such services with
other services without invoicing such services separately, Buck will
receive revenue credit for such services; such revenue credit to be
determined by Buck's cost estimate, if any, for the specific services, or
otherwise by reasonable transfer prices consistently applied.
(h) E & O Insurance. If MBC chooses to secure professional indemnity/errors
---------------
and omissions insurance with a self-insured retention of greater than $1
million per occurrence or with exclusions for certain acts, then
"Contribution Before Allocation" will be adjusted to exclude any expense
related to any error or omission in excess of $1 million which is not
covered by such insurance.
Rules for Calculating OIBDI Not Applicable Upon the Occurrence of Certain
-------------------------------------------------------------------------
Material Adverse Actions. In the event MBC takes or fails to take any
-------------------------
Material Adverse Action (as defined below), then any Pro-Rated Unawarded
Contingent Portion (as defined below) shall be allocated ratably to Key
Performers over the remaining Determination Periods without regard to the
above-described OIBDI thresholds, subject to the vesting and other
requirements set forth in this Plan.
"Material Adverse Action," as used herein, means and shall be limited to
-----------------------
MBC taking or failing to take any action which:
(a) materially and adversely impedes or affects the ability of the Company
to attain the OIBDI thresholds set forth in paragraph II.B; and
(b) is not necessitated or warranted by a failure of the Company to meet
the OIBDI thresholds set forth in the following table; and
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
1st Determination Period 2nd Determination Period 3rd Determination Period
- ------------------------------------------------------------------------------
<S> <C> <C>
$45 million $55 million $65 million
- ------------------------------------------------------------------------------
</TABLE>
(c) results in a substantial departure from the expected governance or
organizational structure of the Company as set forth in Article VI of the
Definitive Agreement or other fundamental change in the nature of the
Company's business or operations.
"Pro-Rated Unawarded Contingent Portion," as used herein, means and shall
--------------------------------------
be limited, to the amount set forth below opposite the Determination Period
during which occurs the Material Adverse Action:
D-4
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
Determination Before or During During the During the During the
Period the 1st Period 2nd Period 3rd Period 4th Period
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Amount $65 $50 $30 $10
(in $ millions)
- -----------------------------------------------------------------------
</TABLE>
Award of Contingent Portion: The Contingent Portion for any Determination
---------------------------
Period shall constitute an additional amount (the "Additional Amount") to
-----------------
be awarded not later than March 31 ("Regular Bonus Payment Date") following
--------------------------
the end of calendar years 1998, 1999, 2000 and 2001. An Additional Amount
shall be in addition to the Contract Bonus, Regular Bonus or Guaranteed
Bonus amount, if any, payable to the Key Performer and will be allocated to
individual Key Performers who are active employees of the Company at a
Regular Bonus Payment Date in an amount (each an "Additional Award") equal
----------------
to the product of (x) the Additional Amount for that period and (y) a
fraction, the numerator of which is the Contract Bonus, Regular Bonus or
Stipulated Bonus, if any, to be awarded to that Key Performer, and the
denominator of which is the total of all Contract Bonuses, Regular Bonuses
and Stipulated Bonuses to be awarded to all Key Performers actively
employed by the Company at a Regular Bonus Payment Date; provided, however,
-------- -------
the amount of any Key Performer's Additional Award may be adjusted (either
increased or decreased) by up to 25% by the Buck CEO with the concurrence
of MBC Vice Chairman; provided further that under no circumstances shall
----------------
the total Additional Amount be changed in connection with such adjustment.
Individuals who are not active employees of the Company (including by
reason of death, Disability or Retirement) on an applicable Regular Bonus
Payment Date shall forfeit their right to receive any Additional Award with
respect to the Additional Amount awarded as of such date.
Two Year Vesting Period for Additional Awards: Each Additional Award shall
---------------------------------------------
be subject to forfeiture, as hereinafter described, during the two (2) year
period which begins on January 1 of the calendar year in which the
Additional Award is made and ends as of the close of business on December
31 of the following year (the "Additional Award Vesting Period").
-------------------------------
Additional Awards to be paid in cash shall: (A) be credited with interest
at the Interest Rate for the period commencing on the day following the
earlier of: the Regular Bonus Payment Date, or the actual date on which
the Additional Award was made and ending on the Payment Date for such
Award, and (B) be paid in cash promptly following the Payment Date for such
Award, or, based upon the prior election of the Key Performer, if
applicable, deferred into the Deferred Compensation Plan as of the
applicable Payment Date for such Award. Subject to the provisions of II.F
below, Additional Awards to be paid in restricted shares of MBC Common
Stock will: (X) receive any dividends declared during the Additional Award
Vesting Period, and (Y) be distributed to the Key Performer promptly
following the Payment Date for such Award. Shares of restricted MBC Common
Stock may not be deferred into the Deferred Compensation Plan.
Forfeiture Upon Termination of Employment. Key Performers who terminate
------------------------------------------
their employment with the Company voluntarily after being allocated an
Additional Award but prior to the expiration of the Additional Award
Vesting Period shall forfeit their right to receive that Additional Award
and the forfeited Additional Award shall revert to MBC. Notwithstanding
the foregoing, all Additional Awards shall become nonforfeitable upon the
death of the Key Performer which may occur during the Additional Award
Vesting Period and shall be paid promptly following the Payment Date for
each such Award.
Special Rule for Retirement or Disability. Key Performers who Retire or
------------------------------------------
become Disabled during the Additional Award Vesting Period with respect to
any Additional Award shall be entitled to receive such Award promptly
following the Payment Date for each such Award so long as such Key
Performer has not, prior to the Payment Date applicable with respect to any
such Additional Award, engaged, directly or indirectly, whether as
principal or as agent, officer, director, employee, consultant, shareholder
or otherwise, alone or in association with any other person, corporation or
other entity, in any Competing Business. Subject to the provisions of the
MBC Code of Conduct, the preceding sentence shall not prohibit the Key
Performer from owning up to 1% of the outstanding capital stock of a public
or non-public company that is a Competing Business.
D-5
<PAGE>
Additional Awards shall not be included in compensation for purposes of any
benefit calculations related to the Buck 401(k) Plan, the MBC 401(k) Plan,
the MBC Retirement Plan or the Buck Retirement Plan.
C. Effect of Termination of Employment by the Company Prior to Vesting
-------------------------------------------------------------------
Termination Without Cause: If a Key Performer's employment with the
-------------------------
Company is terminated by the Company, other than for Cause, subsequent to
the Anniversary Date and/or Regular Bonus Payment Date, as applicable, as
of which a Key Performer was allocated a Guaranteed Award or an Additional
Award but prior to the end of the Guaranteed or Additional Award Vesting
Period applicable to each Award, a portion of each separate Award, as
follows, shall vest: (a) with respect to a Guaranteed Award, an amount
equal to the product of (i) the original amount of the Award and (ii) a
fraction, the numerator of which is the number of full months which have
elapsed since the beginning of the applicable Guaranteed Award Vesting
Period and the denominator of which is twenty-four (24); and (b) with
respect to an Additional Award, an amount equal to (i) 80% of the original
amount of the Award and (ii) a fraction, the numerator of which is the
number of full months which have elapsed since the beginning of the
applicable Additional Award Vesting Period and the denominator of which is
twenty-four (24). Subject to any provisions in a 3 Year Contract requiring
a different result, a Key Performer shall be entitled to receive such
portion of the Award promptly following the Payment Date for such Award so
long as such Key Performer has not, prior to the Payment Date applicable
with respect thereto, directly or indirectly, in any capacity whatsoever
(whether as proprietor, partner, investor, shareholder, director, officer,
employer, employee consultant, independent contractor, co-venturer,
financier, agent, representative or otherwise), either: (x) solicited
business from or performed services for any client or prospective client of
the Company for whom the Key Performer performed services or solicited
business on behalf of the Company during the two year period ending on the
date of the Key Performer's termination from employment without cause; or
(y) encouraged, counseled or induced any employee to leave the employ of
the Company, or solicited for employment, employed or engaged the services
of any employee of the Company, or assisted any person, company or entity
in any such conduct. Any portion of a Guaranteed Award which does not so
vest shall be reallocated to remaining Key Performers in proportion to
their individual Guaranteed Awards for the period in which the forfeited
Guaranteed Awards (or portion thereof) were originally granted. Any
unallocated portion of an Additional Award shall revert to MBC.
Termination for Cause: If a Key Performer is terminated for Cause, all
---------------------
unvested Guaranteed Awards shall be forfeited in their entirety and
reallocated to remaining Key Performers in proportion to their individual
Guaranteed Awards for the period in which the forfeited Guaranteed Awards
were originally granted. All unvested Additional Awards shall be forfeited
in their entirety and shall revert to MBC.
D. Determination of Key Performers and Awards
------------------------------------------
Key Performers: With respect to each 12-month period for which a
--------------
Guaranteed Installment or Additional Amount is to be awarded, only those
Key Performers who are employed during such applicable 12 month period
shall be entitled to share in the allocation of the applicable award to be
made with respect to such period.
Determination Process; Contingent Portion: As soon as reasonably possible
-----------------------------------------
following the end of a Determination Period, the Buck CEO and the MBC Vice
Chairman shall jointly cause to be prepared and shall approve a written
statement setting forth the amount of the Additional Amount and a
calculation of OIBDI together with all work papers and supporting
information relating thereto.
Treatment of Key Performers Receiving Certain Amounts under a 3 Year
--------------------------------------------------------------------
Contract. Notwithstanding anything in this Plan to the contrary, any and
---------
all payments made to a Key Performer who is party to a 3 Year Contract and
which are computed on the basis of the Guaranteed Installments and
Additional Amounts awarded under this Plan shall reduce the applicable
Guaranteed Installment and/or Additional Amount available for allocation
under this Plan.
D-6
<PAGE>
E. Notice:
-------
The Plan Committee shall provide Key Performers with notice of their
Guaranteed and Additional Awards, if any, and the end of the Guaranteed
and/or Additional Award Vesting Period applicable to each such Award. Such
notice shall also confirm to the Key Performer the prior election of the
Key Performer regarding the method of payment (cash or restricted shares of
MBC Common Stock) and, if applicable, the portion of each such Award, if
any, to be deferred into the Deferred Compensation Plan.
F. Issuance of MBC Common Stock
----------------------------
Price of MBC Common Stock: The price of MBC Common Stock to be used with
-------------------------
reference to a relevant award date for purposes of determining the number
of shares to be awarded shall be the Transaction Share Price on such award
date.
Issuance of MBC Common Stock: If a Key Performer elects to take all or a
----------------------------
portion of any Award in MBC Common Stock, the Award shall be confirmed by a
written agreement (the "Restricted Stock Agreement") between MBC and the
--------------------------
Key Performer setting forth the number of whole and fractional shares of
MBC Common Stock represented by the award, the restrictions imposed thereon
by applicable federal, state and local securities laws (including without
limitation restrictions on the right of the Key Performer to sell, assign,
transfer or encumber such shares) and the events the occurrence of which
shall cause such shares to be forfeited in accordance with the Plan.
Promptly following the execution of the Restricted Stock Agreement,
certificates for such shares shall be issued in the name of the Key
Performer and held by MBC until the end of the Guaranteed or Additional
Award Vesting Period applicable to such Award in accordance with its
policies applicable to restricted shares of MBC Common Stock issued under
the MBC Long-Term Profit Incentive Plan ("PIP") together with related stock
powers signed by the Key Performer. All or the vested portion (determined
in accordance with II.C, above) of the shares of restricted MBC Common
Stock representing a Guaranteed and/or Additional Award shall be
distributed to the Key Performer promptly following the Payment Date for
such Award in accordance with the terms and conditions applicable to
similar distributions under the PIP.
Dividends declared with respect to the shares of restricted MBC Common
Stock representing the Award after the Anniversary Date and/or Regular
Bonus Payment Date, as applicable, as of which the Guaranteed and/or
Additional Award was allocated but prior to the Payment Date applicable to
the Award shall be paid to the Key Performer in accordance with the terms
and conditions applicable to similar dividends under the PIP. By way of
clarification and not limitation, cash dividends would be payable in cash
and stock dividends, including shares issued as a result of a stock split,
would be issued in shares subject to the same restrictions as the shares to
which they relate. Nothing in this paragraph shall require the payment of
any dividends with respect to any portion of an Award forfeited under the
terms of this Plan.
Subject to the preceding provisions of this paragraph F and the other
restrictions imposed under the Plan, from the later of: the date the Key
Performer elects to receive all or a portion of an Award in MBC Common
Stock, or the actual date on which an Award is made, as applicable, the Key
Performer shall be a stockholder of MBC with respect to all the shares of
MBC Common Stock representing the Award and shall have all the rights of a
stockholder with respect thereto, including, without limitation, the right
to receive dividends and vote such shares.
III. GENERAL PROVISIONS
------------------
Effective Date: This Plan shall be effective at the Effective Time, and
--------------
shall not become effective if the Merger is not consummated.
Administration: The Plan shall be administered, in consultation with MBC,
--------------
by a committee of the Board of Directors of the Company (the "Plan
----
Committee"). The Plan Committee shall consist of those
---------
D-7
<PAGE>
members of the Board of Directors of the Company as may exist from time to
time who were Level 1 employees of Buck Consultants, Inc. immediately prior
to the Effective Time. The Plan Committee shall have the full authority to
employ and rely on such legal counsel, actuaries and accountants (which may
also be those of the Company and MBC), and other agents, designees and
delegates, as it may deem advisable to assist in the administration of the
Plan. The Company shall indemnify each member of the Plan Committee for any
liability or expense relating to the administration of the Plan, to the
maximum extent permitted by law. By way of clarification, the Plan
Committee shall have no authority to determine the amount of any Award or
the eligibility of any person to receive an Award; and, except for
amendments otherwise permitted by the Amendment and Termination provisions
of this Plan, the Plan Committee shall have no authority to amend the Plan.
No Reduction for Other Benefits: Amounts payable under the Plan shall be
-------------------------------
in addition to any amounts payable under any Buck Benefit Plan and/or MBC
Benefit Plan (including, without limitation any other displacement policy,
plan or program) otherwise available to a Key Performer.
Priority of Bonuses: Regardless of the number of bonuses payable with
--------------------
respect to a Key Performer prior to any Anniversary Date or Regular Bonus
Payment Date, only one such bonus shall be taken into account for purposes
of determining the amount of any Guaranteed Installment and/or Additional
Amount to be allocated to a Key Performer. Where more than one bonus is
payable, this Plan shall determine the bonus to be used in all allocations
in accordance with the following order of priority (from highest to
lowest): Contract Bonuses, then Stipulated Bonuses, then Regular Bonuses.
Funding: Key Performers shall have the status of general unsecured
-------
creditors of the Company and MBC, and the Plan constitutes a mere promise,
subject to the terms and conditions hereof, by the Company and MBC to make
payments under the Plan in the future. The Plan is not intended to be a
funded plan for purposes of the Code or ERISA, and shall be construed
consistently with this intent. Any payments hereunder shall be made out of
the general assets of MBC.
Withholding: The Company and MBC shall be entitled to withhold from any
-----------
payments or deemed payments any amount of withholding required by law.
Amendment and Termination: This Plan shall terminate as of the final
--------------------------
Payment Date with respect to any Award made hereunder and not prior to such
time. No amendment to this Plan may limit or adversely affect the rights
of Key Performers or the rights of Buck employees to be designated Key
Performers for future Determination Periods and share in future Awards
under the Plan. The Plan Committee may, consistent with the foregoing,
make minor or administrative amendments to the Plan and amendments required
by law, but no such required amendment may limit or adversely affect such
rights if another permissible method of compliance with law is available.
Controlling Law: The Plan shall be construed, administered and enforced
---------------
according to the laws of the Commonwealth of Pennsylvania, without regard
to principles of conflicts of law, except to the extent preempted by
federal law.
Not Employment Agreement: This Plan is not an employment contract or an
------------------------
agreement of any kind between the Company and/or MBC or any other MBC
Company and the Key Performers. This Plan shall not be construed to confer
upon any MBC associate, including any employee of the Company, any right to
continued employment or any right to any award hereunder.
[Definitions Follow in Appendix A Attached Hereto]
D-8
<PAGE>
Appendix A
----------
Definitions
-----------
"Additional Amount": as defined in Part II.B of this Plan.
-----------------
"Additional Award": as defined in Part II.B of this Plan.
----------------
"Anniversary Dates": as defined in Part II.A of this Plan.
-----------------
"Additional Award Vesting Period": as defined in Part II.B of this Plan.
-------------------------------
"Awards": as defined in Part II of this Plan.
------
"Buck": Buck Consultants, Inc.
----
"Buck Administrative Clients": as defined in Part II.B of this Plan.
---------------------------
"Buck Benefit Plan": as defined in the Definitive Agreement
-----------------
"Buck 401(k) Plan": as defined in the Definitive Agreement.
----------------
"Buck CEO": the Chief Executive Officer of the Company.
--------
"Buck Retirement Plan": as defined in the Definitive Agreement.
--------------------
"Cause": A Key Performer shall be deemed to have been terminated for
-----
"Cause" if such person shall have been terminated for cause as defined
------
under his or her employment agreement with the Company if such employment
agreement defines cause; otherwise, if such termination is in connection
with the Key Performer's (a) conviction for a felony, a crime of moral
turpitude, dishonesty, breach of trust or unethical business conduct, or
any crime involving an MBC Company, (b) gross neglect, fraud, willful
misappropriation or embezzlement in the performance of the Key Performer's
duties, (c) willful and prolonged absence from work without approval, other
than for reasons of illness or reasons otherwise permitted under policies
and practices of the Company and MBC existing from time to time, (d)
material breach or material failure to perform his or her duties under any
applicable employment or noncompetition contract, the Mellon Code of
Conduct and any applicable MBC securities trading policies, or (e) in
addition to any restrictions which may be set forth in an employment or
noncompetition agreement, (i) engaging in the operation or management of a
business (whether as owner, partner, officer, director, employee or
otherwise) which is in competition with MBC or any MBC Company (including
the Company), (ii) inducing or attempting to induce any customer, supplier,
licensee or other individual, corporation or other business organization
having a business relationship with MBC or any MBC Company (including the
Company) to cease doing business with MBC or any MBC Company (including the
Company) or in any way interfering with the relationship between such
customer, supplier, licensee or other person and MBC or any MBC Company
(including the Company) or (iii) soliciting any employee of MBC or any MBC
Company (including the Company) to leave the employment thereof or in any
way interfering with the relationship of such employee with MBC or any MBC
Company (including the Company).
"Code": shall mean the Internal Revenue Code of 1986.
----
"Closing": as defined in the Definitive Agreement.
-------
"Closing Date": as defined in the Definitive Agreement.
------------
"Company": Buck and its Subsidiaries.
-------
D-9
<PAGE>
"Contingent Portion": as defined in Part II of this Plan.
------------------
"Contract Bonus": shall mean the annual bonus actually payable to the Key
--------------
Performer pursuant to the terms of any 3 Year Contract to which a Key
Performer is a party. Such Contract Bonus shall be used to determine all
allocations of any Guaranteed Installments and Additional Amounts to be
made to the Key Performer under this Plan.
"Deferred Compensation Plan": shall mean the newly established or existing
--------------------------
deferred compensation plan of MBC or the Company which MBC and the Company
mutually agree to establish or amend for Key Performers identified by the
Company as "Level 1" employees, with such new or amended plan to contain
terms generally as favorable as the Elective Deferred Compensation Plan for
Long-Term Incentives (1996), for the purpose of accepting any deferrals of
cash Awards from such Level 1 Key Performers which become payable under the
Plan.
"Definitive Agreement": the Agreement and Plan of Reorganization dated as
--------------------
of March __, 1997, between MBC and Buck.
"Determination Periods": as defined in Part II.B of this Plan.
---------------------
"Disability": shall mean eligibility to receive benefits under the
----------
Company's generally available Long-Term Disability Plan or any successor
plan, fund or program.
"Effective Time": as defined in the Definitive Agreement
--------------
"Foreign Jurisdiction": as defined in the Definitive Agreement
--------------------
"Guaranteed Award": as defined in Part II.A of this Plan.
----------------
"Guaranteed Award Vesting Period": as defined in Part II of this Plan.
-------------------------------
"Guaranteed Bonus": shall mean a bonus or other incentive payment, other
----------------
than a Contract Bonus, negotiated or promised in lieu of and/or in addition
to the Regular Bonus, if any, which would otherwise be payable to the Key
Performer if the Key Performer's performance were measured against the
performance targets applicable to similarly situated employees under the
Company's regular annual target bonus program.
"Guaranteed Installments": as defined in Part II.A of this Plan.
-----------------------
"Guaranteed Portion": as defined in Part II of this Plan.
------------------
"Interest Rate": shall mean as to any amount of the Guaranteed Portion,
-------------
the rate determined two business days immediately preceding the Closing
Date, and adjusted two business days before each Anniversary Date, in each
case, equal to the five year constant maturity Treasury yield as published
in Federal Reserve Release H-15 for such date of determination, plus 100
basis points; and as to each Additional Award, a rate determined two
business days before the earlier of the Regular Bonus Payment Date
applicable to an Additional Award, or the actual date on which the
Additional Awards are made, equal to the two year constant maturity
Treasury yield as published in Federal Reserve Release H-15 for such date
of determination, plus 137.5 basis points. In each case such Interest Rate
shall be expressed as an annual rate but interest credited to the
Guaranteed and Additional Awards shall be effected on a semi-annual basis.
"Key Performers": shall mean all employees of the Company and its
--------------
subsidiaries designated as "Level 1" and "Level 2" employees by the
Company.
"OIBDI": as defined in Part II.B of this Plan.
-----
D-10
<PAGE>
"Legal Requirements": as defined in the Definitive Agreement.
------------------
"Material Adverse Action": as defined in II.B of this Plan.
-----------------------
"MBC": Mellon Bank Corporation or its successors.
---
"MBC 401(k) Plan": as defined in the Definitive Agreement.
---------------
"MBC Benefit Plan": as defined in the Definitive Agreement
----------------
"MBC Common Stock": as defined in the Definitive Agreement.
----------------
"MBC Company": as defined in the Definitive Agreement.
-----------
"MBC Retirement Plan": as defined in the Definitive Agreement.
-------------------
"MBC Vice Chairman": the Vice Chairman of MBC with responsibility for
-----------------
Mellon Trust (including any designee(s)) thereof.
"Merger": as defined in the Definitive Agreement.
------
"OIBDI": as defined in Part II.B of this Plan.
-----
"Payment Date": with respect to each separate Award, shall mean the first
------------
business day following the Additional Award Vesting Period or Guaranteed
Award Vesting Period, as applicable, for such Award; determined without
regard to whether such Award became nonforfeitable prior to the end of such
Additional or Guaranteed Award Vesting Period, as applicable, on account of
Disability or Retirement; provided, however, that the Payment Date with
------------------
respect to an Award which became nonforfeitable on account of the death of
the Key Performer shall be the earliest date following the date of death on
which the award can reasonably be paid.
"Plan": as defined in Part I of this Plan.
----
"Plan Committee": as defined in Part III of this Plan.
--------------
"Pro Rated Unawarded Contingent Portion": as defined in Part II.B of this
--------------------------------------
Plan.
"Regular Bonus": the annual bonus, if any, to which the Key Performer is
-------------
(or, with respect to Key Performers entitled to receive a Contract Bonus or
Guaranteed Bonus, would have been) entitled based on the Key Performer's
actual performance under the target performance bonus program applicable to
Company employees similarly situated to the Key Performer; determined
without regard to any payments under this Plan; any Contract Bonuses,
Guaranteed Bonuses and any other performance incentive program of the
Company or any other MBC Company.
"Regular Bonus Payment Date": as defined in Part II.B of this Plan.
--------------------------
"Restricted Stock Agreement": as defined in Part II.F of this Plan.
--------------------------
"Retirement": a termination from employment from the Company and related
----------
election to commence the receipt of early, normal or late retirement
benefits in accordance with the terms and conditions of the Company's
Employee Retirement Plan or any successor plan.
"Stipulated Bonus": shall mean the annual bonus, if any, to which a Key
----------------
Performer entitled to a Guaranteed Bonus would have been entitled to based
on actual performance under the target performance bonus program applicable
to Company employees similarly situated to the Key Performer; determined
without regard to any prior agreements or commitments.
D-11
<PAGE>
"Subsidiary": as defined in the Definitive Agreement.
----------
"Summary of Operations": as defined in Part II.B of this Plan.
---------------------
"3 Year Contract": shall mean the employment agreements attached as
---------------
Appendix G to the Definitive Agreement and which are required to be entered
into by employees described in Section 7.02(f) of the Definitive Agreement.
"Transaction Share Price": as defined in the Definitive Agreement.
-----------------------
D-12
<PAGE>
BUCK CONSULTANTS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
OF BUCK CONSULTANTS, INC.
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 27, 1997
The undersigned stockholder of Buck Consultants, Inc., a Delaware
corporation ("Buck"), hereby appoints Joseph A. LoCicero and Karl W. Lohwater,
and each of them, the lawful attorneys and proxies of the undersigned, each with
several powers of substitution, to vote all of the shares of common stock of
Buck held of record by the undersigned on June 27, 1997 at the Special Meeting
of Stockholders, or any adjournments or postponements thereof (the "Special
Meeting"), with all the powers the undersigned would possess if personally
present, upon all matters set forth in the Notice of Special Meeting of
Stockholders and the Prospectus/Proxy Statement, each dated May 30, 1997.
The undersigned hereby revokes any proxy or proxies heretofore given to
vote such stock, and hereby ratifies and confirms all that said attorneys and
proxies, or other substitutes, may do by virtue hereof. If only one attorney and
proxy shall be present and acting, then that one shall have and may exercise all
the powers of said attorneys and proxies.
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
THE BOARD OF DIRECTORS OF BUCK RECOMMENDS A VOTE FOR PROPOSAL 1:
FOR AGAINST ABSTAIN
1. The proposal to adopt the Agreement [_] [_] [_]
and Plan of Merger, dated as of
March 17, 1997, by and among Buck
Consultants, Inc. and Mellon
Bank Corporation.
2. In the discretion of the Board of [_] [_] [_]
Directors of Buck with respect to any
other matters that may properly come
before the Special Meeting.
The shares represented by this proxy
will be voted in accordance with the
specifications made herein. If this
proxy is signed but no specifications
are made, this proxy will be voted FOR
proposal 1.
(continued on reverse side)
<PAGE>
The undersigned hereby acknowledges receipt of the Notice of Special
Meeting of Stockholders and the Prospectus/Proxy Statement with respect to the
Special Meeting.
RECORD DATE SHARES: ( )
------------------------------------------
Dated: , 1997
--------------
Please sign as name(s) appear on
this proxy. If a joint account,
each joint owner must sign. If
signing for a corporation or a
partnership or as agent, attorney
or fiduciary, indicate the
capacity in which you are signing.
-----------------------------------
Signature (s)
Mark box at right if comments or
address change have been noted on
the reverse side of this card.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
1. Pennsylvania Business Corporation Law. Sections 1741 and 1742 of the
PBCL provide that a business corporation shall have the power to indemnify any
person who was or is a party, or is threatened to be made a party, to any
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such person is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such proceeding, if such person acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation, and, with respect to any criminal proceeding, had no reasonable
cause to believe his conduct was unlawful. In the case of an action by or in the
right of the corporation, such indemnification is limited to expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action, except that no indemnification
shall be made in respect of any claim, issue or matter as to which such person
has been adjudged to be liable to the corporation unless, and only to the extent
that, a court determines upon application that, despite the adjudication of
liability but in view of all the circumstances, such person is fairly and
reasonably entitled to indemnity for the expenses that the court deems proper.
PBCL Section 1744 provides that, unless ordered by a court, any
indemnification referred to above shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification is
proper in the circumstances because the indemnitee has met the applicable
standard of conduct. Such determination shall be made:
(1) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the proceeding; or
(2) if such a quorum is not obtainable, or if obtainable and a
majority vote of a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion; or
(3) by the shareholders.
Notwithstanding the above, PBCL Section 1743 provides that to the
extent that a director, officer, employee or agent of a business corporation is
successful on the merits or otherwise in defense of any proceeding referred to
above, or in defense of any claim, issue or matter therein, such person shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection therewith.
PBCL Section 1745 provides that expenses (including attorneys' fees)
incurred by an officer, director, employee or agent of a business corporation in
defending any proceeding may be paid by the corporation in advance of the final
disposition of the proceeding upon receipt of an undertaking to repay the amount
advanced if it is ultimately determined that the indemnitee is not entitled to
be indemnified by the corporation.
PBCL Section 1746 provides that the indemnification and advancement of
expenses provided by, or granted pursuant to, the foregoing provisions is not
exclusive of any other rights to which a person seeking indemnification may be
entitled under any bylaw, agreement, vote of shareholders or directors or
otherwise, and that indemnification may be granted under any bylaw, agreement,
vote of shareholders or disinterested directors or otherwise for any action
taken or any failure to take any action whether or not the corporation would
have the power to indemnify the person under any other provision of law and
whether or not the indemnified liability arises or arose from any action by or
in the right of the corporation, provided, however, that no indemnification may
be
II-1
<PAGE>
made in any case where the act or failure to act giving rise to the claim for
indemnification is determined by a court to have constituted willful misconduct
or recklessness.
PBCL Section 1747 permits a Pennsylvania business corporation to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation or other enterprise, against any liability asserted against
such person and incurred by him in any such capacity, or arising out of his
status as such, whether or not the corporation would have the power to indemnify
the person against such liability under the provisions described above.
The Registrant has purchased liability insurance policies covering
its directors and officers to insure against claims arising out of certain
alleged wrongful acts on the part of such directors and officers and against
claims arising out of certain alleged breaches of fiduciary duty under the
Employee Retirement Income Security Act of 1974 on the part of such directors
and officers.
The Restated Articles of Incorporation, as amended, of the
Registrant (the "Articles") provide that, except as prohibited by law, every
director and officer of the Registrant shall be entitled as of right to be
indemnified by the Registrant against expenses and any liability paid or
incurred by such person in connection with any actual or threatened claim,
action, suit or proceeding, civil, criminal, administrative, investigative or
other, whether brought by or in the right of the Registrant or otherwise, in
which such person may be involved (subject to certain limitations in the case of
actions by such person against the Registrant) by reason of such person being or
having been a director or officer of the Registrant or serving or having served
at the request of the Registrant as a director, officer, employee, fiduciary or
other representative of another entity. The Articles also give to indemnitees
the right to have their expenses in defending such actions paid in advance by
the Registrant, subject to any obligation imposed by law or otherwise to
reimburse the Registrant in certain events. The Registrant has entered into an
indemnity agreement (the "Indemnity Agreement") with each director and certain
of its officers which provides a contractual right to indemnification against
such expenses and liabilities (subject to certain limitations and exceptions)
and a contractual right to advancement of expenses and contains additional
provisions regarding determination of entitlement, defense of claims, rights of
contribution and other matters.
The specific indemnity provisions of the PBCL, which are by their
terms not intended to be exclusive, are, in general, not as broad as the
provisions of the Articles and the Indemnity Agreement; however, one provision
would preclude indemnification in any case where the act or failure to act
giving rise to the claim for indemnification is determined by a court to have
constituted willful misconduct or recklessness, and another provision requires
that advances of expenses may be made by a corporation only upon receipt of an
undertaking to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the corporation.
Article Seventh of the Articles and Article Two of the Registrant's
By-Laws, as amended, both adopted by the shareholders of the Registrant at their
annual meeting on April 20, 1987, further provide that, to the fullest extent
that the laws of Pennsylvania, as in effect on January 27, 1987 or as thereafter
amended, permit elimination or limitation of the liability of directors, no
director of the Corporation shall be personally liable for monetary damages as
such for any action taken, or any failure to take any action, as a director. The
PBCL provides that whenever the by-laws of a corporation by a vote of the
shareholders so provide, a director shall not be personally liable for monetary
damages as such for any action taken, or failure to take any action, unless (i)
the director has breached or failed to perform the duties of his office under
the standard of care and justifiable reliance specified in the PBCL and (ii) the
breach or failure to perform constitutes self-dealing, willful misconduct or
recklessness. These provisions do not apply to (i) responsibility or liability
of a director pursuant to any criminal statute or (ii) the liability of a
director for payment of taxes.
II-2
<PAGE>
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits. An Exhibit Index, containing a list of all exhibits
filed with this Registration Statement, is included on page II-6.
(b) Financial Statement Schedules. All financial statement schedules
have been omitted because they are not applicable or the required information is
shown in the financial statements or related notes thereto incorporated by
reference in the Prospectus/Proxy Statement.
(c) Report, Opinion or Appraisal. The opinions of Benedetto, Gartland &
Greene, Inc. are furnished as Annex B to the Prospectus/Proxy Statement.
Item 22. Undertakings.
The undersigned Registrant hereby undertakes as follows:
(1) that, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934 that is incorporated by reference in the Registration
Statement shall be deemed to be a new Registration Statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(2) to deliver or cause to be delivered with the prospectus, to
each person to whom the prospectus is sent or given, the latest annual
report to security holders that is incorporated by reference in the
prospectus and furnished pursuant to and meeting the requirements of
Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934;
and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to
deliver, or cause to be delivered to each person to whom the prospectus
is sent or given, the latest quarterly report that is specifically
incorporated by reference in the prospectus to provide such interim
financial information.
(3) that prior to any public reoffering of the securities
registered hereunder through the use of a prospectus which is a part of
this Registration Statement, by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c), such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be
deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(4) that every prospectus (i) that is filed pursuant to paragraph
(3) immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act of 1933, as
amended, and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to the
Registration Statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(5) that insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions
described under Item 20 above, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a
II-3
<PAGE>
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(6) to respond to requests for information that is incorporated by
reference into the Prospectus/Proxy Statement pursuant to Items 4,
10(b), 11 or 13 of Form S-4, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the Registration
Statement through the date of responding to the request.
(7) to supply by means of a post-effective amendment all
information concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included in the
Registration Statement when it became effective.
II-4
<PAGE>
SIGNATURES
MELLON BANK CORPORATION
Pursuant to the requirements of the Securities Act of 1933, Mellon
Bank Corporation has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Pittsburgh,
Commonwealth of Pennsylvania, on the 28th day of May, 1997.
MELLON BANK CORPORATION
By: /s/ STEVEN G. ELLIOTT
-----------------------------------
Steven G. Elliott
Vice Chairman, Chief Financial
Officer and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 28th day of May, 1997.
By: /s/ STEVEN G. ELLIOTT
-----------------------------------
Steven G. Elliott
Principal Financial Officer
and Principal Accounting
Officer
DWIGHT L. ALLISON, JR., Director; BURTON C. BORGELT, Director; CAROL R. BROWN,
Director; FRANK V. CAHOUET, Director and Principal Executive Officer; J. W.
CONNOLLY, Director; CHARLES A. CORRY, Director; C. FREDERICK FETTEROLF,
Director; IRA J. GUMBERG, Director; PEMBERTON HUTCHINSON, Director; GEORGE W.
JOHNSTONE, Director; ROTAN E. LEE, Director; ANDREW W. MATHIESON, Director;
EDWARD J. McANIFF, Director; ROBERT MEHRABIAN, Director; SEWARD PROSSER MELLON,
Director; DAVID S. SHAPIRA, Director; W. KEITH SMITH, Director; JOAB L. THOMAS,
Director; WESLEY W. von SCHACK, Director; WILLIAM J. YOUNG, Director.
By: /s/ Carl Krasik
-----------------------------------
Carl Krasik
Attorney-in-fact
II-5
<PAGE>
MELLON BANK CORPORATION
FORM S-4
REGISTRATION STATEMENT
INDEX TO EXHIBITS
(Pursuant to Item 601 of Regulation S-K)
Form S-4
Exhibit
No. Description and Method of Filing
-------- -------------------------------------------------------------------
2.1 Agreement and Plan of Reorganization dated as of March 17, 1997
between Mellon Bank Corporation and Buck Consultants, Inc.
(included as Annex A to the Prospectus/Proxy Statement).
3.1 Mellon Bank Corporation's Restated Articles of Incorporation, as
amended and restated as of September 2, 1993, previously filed as
Exhibit 3.1 to Annual Report on Form 10-K for the year ended
December 31, 1993 and incorporated herein by reference.
3.2 Amendment of April 16, 1997 to Mellon Bank Corporation's Restated
Articles of Incorporation.
3.3 Mellon Bank Corporation's By-Laws, as amended, effective July 17,
1990, previously filed as Exhibit 3.2 to Annual Report on Form 10-K
for the year ended December 31, 1990, and incorporated herein by
reference. Mellon Bank Corporation agrees to provide to the
Commission, upon request, copies of any agreement defining rights
of long-term debt holders.
4.1 Mellon Bank Corporation's Shareholder Protection Rights Plan,
previously filed as Exhibit 1 to Form 8-A Registration Statement
(File No. 1-7410) dated October 29, 1996, and incorporated herein
by reference.
4.2 Form of Common Stock Certificate, previously filed as Exhibit 4.3
to Registration Statement on Form S-3 (No. 33-56228) dated
December 22, 1992, and incorporated herein by reference.
5.1 Opinion of Reed Smith Shaw & McClay regarding the legality of the
shares of Common Stock being registered, filed herewith.
8.1 Opinion of Reed Smith Shaw & McClay as to certain tax matters,
filed herewith.
8.2 Opinion of O'Sullivan Graev & Karabell, LLP as to certain tax
matters, filed herewith.
23.1 Consent of Reed Smith Shaw & McClay (included in Exhibit 5.1).
23.2 Consent of Reed Smith Shaw & McClay (included in Exhibit 8.1).
23.3 Consent of O'Sullivan Graev & Karabell, LLP (included in
Exhibit 8.2).
23.4 Consent of KPMG Peat Marwick, LLP filed herewith.
23.5 Consent of Grant Thornton, filed herewith.
24.1 Power of Attorney, filed herewith.
II-6
<PAGE>
Form S-4
Exhibit
No. Description and Method of Filing
-------- -------------------------------------------------------------------
99.1 Opinions of Benedetto, Gartland & Greene (included as Annex B to
the Prospectus/Proxy Statement)
99.2 Letter to stockholders of Buck Consultants, Inc., filed herewith.
99.3 Notice of Special Meeting of Stockholders of Buck Consultants,
Inc., filed herewith.
99.4 Form of Proxy, for use by stockholders of Buck Consultants, Inc.,
filed herewith.
99.5 Form of Election/Letter of Transmittal for use by stockholders of
Buck Consultants, Inc.
99.6 Buck Key Performers Supplemental Payment Plan, filed as Annex D to
the Prospectus/Proxy Statement.
II-7
<PAGE>
Exhibit 3.2
The first paragraph of Article Fifth of the Corporation's Restated Articles of
Incorporation, as amended, shall read as follows:
Fifth: the aggregate number of shares which the
Corporation shall have authority to issue is 450,000,000
of which 50,000,000 shares shall be Preferred Stock, par
value $1.00 per share, issuable in one or more series, and
400,000,000 shares shall be Common Stock, par value
$0.50 per share.
<PAGE>
Exhibits 5.1 and 23.1
MAILING ADDRESS Reed Smith Shaw & McClay HARRISBURG, PA
P.O. BOX 2009 McLEAN, VA
PITTSBURGH, PA 15230-2009 435 SIXTH AVENUE NEW YORK, NY
NEWARK, NJ
PITTSBURGH, PENNSYLVANIA 15219-1886 PHILADELPHIA, PA
WRITER'S DIRECT NUMBERS: PRINCETON, NJ
PHONE 412-288-3126 412-288-3131 WASHINGTON, DC
FAX 412-288-3063
INTERNET [email protected] FAX 412-288-3063
May 28, 1997
Mellon Bank Corporation
500 Grant Street
Pittsburgh, PA 15258
Dear Sirs:
We have acted as counsel for Mellon Bank Corporation, a Pennsylvania
corporation (the "Corporation") in connection with the preparation of a
Registration Statement on Form S-4 (the "Registration Statement") relating to
the registration of the shares of the Corporation's Common Stock, par value $.50
per share (the "Common Stock") to be issued pursuant to the Agreement and Plan
of Reorganization dated as of March 17, 1997 between the Corporation and Buck
Consultants, Inc. (the "Merger Agreement"). This opinion is being furnished
pursuant to the requirements of Form S-4 and Item 601 of Regulation S-K under
the Securities Act of 1933, as amended (the "Act").
In furnishing this opinion, we have examined the Registration Statement,
as well as the Prospectus/Proxy Statement included therein (the
"Prospectus/Proxy Statement"), to be filed with the Securities and Exchange
Commission, in connection with which this opinion is to be filed as an Exhibit.
In addition, we have examined such other documents, legal opinions and
precedents, corporate and other records of the Corporation and certificates of
public officials and officers of the Corporation as we have deemed necessary or
appropriate to provide a basis for the opinions set forth herein. In such
examination, we have assumed the genuineness of all signatures, the authenticity
of all documents submitted to us as originals and the conformity to original
documents of all documents submitted to us as certified or photostatic copies.
Based upon the foregoing, we are of the opinion that:
1. The Corporation has been duly incorporated and is validly existing
as a corporation under the laws of the Commonwealth of Pennsylvania;
<PAGE>
[LOGO OF REED SMITH SHAW 7 MCCLAY]
Mellon Bank Corporation -2- May 28, 1977
2. The Registration Statement has been duly authorized by all necessary
corporate action of the Corporation; and
3. When the Registration Statement has become effective under the Act
and the shares of Common Stock have been issued and delivered pursuant
to the terms of the Merger Agreement, the shares of Common Stock will be
validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the Prospectus/Proxy
Statement under the heading "Legal Opinions." By giving such consent, we do
not hereby admit that we are within the category of persons whose consents are
required under Section 7 of the Act.
We do not purport to be experts on the laws of any jurisdiction other
than the laws of the Commonwealth of Pennsylvania and we express no opinion
herein as to the effect of any other laws.
This opinion is being rendered solely for your benefit in connection
with the Registration Statement. You may not rely on this opinion for any other
purpose without our express written consent. This opinion is rendered as of the
date hereof, and we are under no obligation to update it or to advise you of any
subsequent event which could affect it. This opinion may not be assigned, quoted
or used without our express written consent.
Very truly yours,
/s/ Reed Smith Shaw & McClay
REED SMITH SHAW & McCLAY
<PAGE>
Exhibits 8.1 and 23.2
REED SMITH SHAW & McCLAY
<TABLE>
<S> <C> <C>
MAILING ADDRESS 435 SIXTH AVENUE HARRISBURG, PA
P.O. BOX 2009 McLEAN, VA
PITTSBURGH, PA 15230-2009 PITTSBURGH, PENNSYLVANIA 15219-1886 NEW YORK, NY
NEWARK, NJ
412-288-3131 PHILADELPHIA, PA
PRINCETON, NJ
FAX 412-288-3063 WASHINGTON, DC
</TABLE>
May 28, 1997
Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, PA 15258
Re: Merger of Buck Consultants, Inc. with
and into Buck Acquisition Corporation
--------------------------------------
Dear Sirs:
You have requested our opinion as to certain federal income tax
consequences resulting from the merger of Buck Consultants, Inc., a Delaware
corporation ("Buck"), with and into Buck Acquisition Corp. ("Sub"), a Delaware
corporation that is a directly and wholly owned subsidiary of Mellon Bank
Corporation ("Mellon"), a Pennsylvania corporation, pursuant to the Agreement
and Plan of Reorganization, between Mellon and Buck (the "Agreement"), dated
March 17, 1997. We understand that this opinion will be incorporated into a
registration statement to be filed with the Securities and Exchange Commission
on May 28, 1997 which includes a Prospectus/Proxy Statement (the "Registration
Statement"). Under the terms of the Agreement, Buck will merge with and into Sub
(the "Merger"). Capitalized terms not defined in this opinion letter have the
meanings given them in the Agreement.
In rendering this opinion, we have reviewed originals or copies, certified
or otherwise identified to our satisfaction, of the following:
(i) the Agreement;
(ii) the Registration Statement dated May 28, 1997;
(iii) the Officer's Certificate dated May 27, 1997 addressed to this firm
by Mellon and attached hereto as "Exhibit A";
(iv) the Officer's Certificate dated May 27, 1997 addressed to this firm
by Buck and attached hereto as "Exhibit B"; and
<PAGE>
REED SMITH SHAW & McCLAY
Mellon Bank Corporation -2- May 28, 1997
(v) the Stockholders' Certificates addressed to this firm
by the stockholders of Buck and attached hereto as
"Exhibit C".
In our review of the foregoing documents, we have assumed the accuracy of all
information set forth in such documents, the genuineness of all signatures on
the documents which we have reviewed and the conformity with the originals (and
the authenticity of such originals) of all documents submitted to us as copies.
In the case of the Stockholders' Certificates, which have not been received in
executed form as of the date hereof, this opinion is subject to the receipt of
such Certificates prior to the date of the Merger. In addition, we examined such
other documents and information as we deemed to be necessary or appropriate in
order to render the opinions set forth herein.
We have made the following assumptions in rendering the opinions set forth
below:
(i) the Merger will be consummated in the manner described in
the Agreement;
(ii) the statements made in the Mellon Officer's Certificate
are true and complete as of the date thereof and as of
the Effective Time; and
(iii) the representations made in the Buck Officer's
Certificate and the Buck Stockholders' Certificate
are true and complete as of the date thereof and as
of the Effective Time.
Based upon and subject to the foregoing, we are of the opinion that the
merger of Buck with and into Sub will qualify as a reorganization within the
meaning of Section 368(a)(1)(A) of the Internal Revenue Code of 1986 (the
"Code") and as a forward triangular merger under Section 368(a)(2)(D) of the
Code. At your request, we have reviewed the discussion of the federal income tax
issues in the Registration Statement. We believe that such discussion fairly
presents the current federal income tax law applicable to the Merger and the
material federal income tax consequences to Mellon, Sub, Buck, and the Buck
stockholders.
Our opinion is limited to the foregoing federal income tax consequences of
the Merger. Further, our opinion is based on the Code, Treasury Regulations,
case law, and Internal Revenue Service announcements and rulings as of the date
of this opinion. All such authorities are subject to change, which change may be
retroactive and may affect the conclusions rendered in this opinion.
<PAGE>
REED SMITH SHAW & McCLAY
Mellon Bank Corporation -3- May 28, 1997
This opinion is being delivered solely for the purpose of being included as
an exhibit to the Registration Statement; it may not be relied upon or utilized
for any other purpose or by any other person or entity, and may not be made
available to any other person or entity, without our prior written consent. We
consent to the use of our name in the Registration Statement.
Very truly yours,
/s/ Reed Smith Shaw & McClay
REED SMITH SHAW & McCLAY
<PAGE>
Exhibits 8.2 and 23.3
May 28, 1997
Buck Consultants, Inc.
Two Pennsylvania Plaza
New York, NY 10121
Merger of Buck Consultants, Inc. with and into Mellon Bank
Corporation's wholly owned subsidiary, Buck Acquisition
Corporation, with Buck Acquisition Corporation surviving
--------------------------------------------------------
Ladies and Gentlemen:
We have been requested to render this opinion concerning certain matters of
federal income tax law in connection with the proposed merger of Buck
Consultants, Inc., a corporation organized and existing under the laws of the
State of Delaware ("Buck"), with and into a newly formed corporation, Buck
Acquisition Corp., a corporation organized and existing under the laws of the
State of Delaware ("Sub") and a directly and wholly owned subsidiary of Mellon
Bank Corporation, a corporation organized and existing under the laws of the
State of Pennsylvania ("Mellon"), with Buck Acquisition Corporation surviving
the merger and becoming a wholly owned subsidiary of Mellon, pursuant to the
applicable corporate laws of the State of Delaware (the "Merger"), and in
accordance with that certain Agreement and Plan of Reorganization between Mellon
and Buck, dated March 17, 1997 (the "Agreement"). Our opinion has been requested
in connection with the filing of a registration statement with the Securities
and Exchange Commission on May 28, 1997, on Form S-4, which includes therein a
Prospectus/Proxy Statement, in connection with the Merger (as thereafter amended
at any time to and including the date hereof, the "Registration Statement"). All
capitalized terms not defined herein have the definitions assigned to them in
the Agreement.
To render this opinion, we have examined and are relying upon (without any
independent investigation or review thereof) the truth and accuracy at all
relevant times of the statements, covenants, representations and warranties
contained in the following documents, and, in the case of the Stockholders'
Certificates (Item 4 below, which have not yet been received as
<PAGE>
Buck Consultants, Inc.
May 28, 1997
Page 2
of the date hereof), this opinion is subject to the receipt of such Certificates
prior to the date of the Merger:
1. the Agreement (including the exhibits thereto);
2. the Officer's Certificate dated May 27, 1997, addressed to us, signed
by an authorized officer of Mellon, and delivered to us from Mellon in the form
attached hereto as "Exhibit A", and incorporated herein by reference;
---------
3. the Officer's Certificate dated May 28, 1997, addressed to us, signed by
an authorized officer of Buck, and delivered to us from Buck in the form
attached hereto as "Exhibit B", and incorporated herein by reference;
---------
4. the Stockholders' Certificates, addressed to us, signed by certain of
the stockholders of Buck, and delivered to us from Buck in the form attached
hereto as "Exhibit C", and incorporated herein by reference;
---------
5. the Registration Statement; and
6. such other instruments and documents related to the formation,
organization, and operation of Mellon, Buck, and Sub or the consummation of the
Merger and the transactions contemplated thereby as we have deemed necessary or
appropriate.
In connection with rendering this opinion, we have assumed or obtained
representations (and are relying thereon, without any independent investigation
or review thereof) that:
(1) original documents (including signatures) are authentic, documents
submitted to us as copies conform to the original documents and there has been
(or will be by the Effective Time of the Merger) due execution and delivery of
all documents where due execution and delivery are prerequisites to the
effectiveness thereof;
(2) any representation or statement referred to above made "to the best
knowledge of" or otherwise similarly qualified is correct without such
qualification;
(3) the Merger will be consummated pursuant to the Agreement and will be
effective under applicable state law;
(4) there is no plan or intention on the part of the Buck stockholders (a
"Plan") to sell, exchange, transfer,
<PAGE>
Buck Consultants, Inc.
May 28, 1997
Page 3
distribute, pledge or otherwise dispose of (a "Sale") shares of Mellon Common
Stock to be issued to Buck stockholders in the Merger, which shares would have
an aggregate fair market value, as of the Effective Time of the Merger, in
excess of fifty percent (50%) of the aggregate consideration to be received in
exchange for Buck Common Stock in the Merger. For purposes of this assumption,
shares of Buck Common Stock (or the portion thereof) (i) with respect to which a
Buck stockholder receives consideration in the Merger other than Mellon Common
Stock (including, without limitation, cash received pursuant to the exercise of
dissenters' rights, if any, or in lieu of fractional shares of Mellon Common
Stock) and/or (ii) with respect to which a Sale occurs during the period ending
at the Effective Time and beginning with the commencement of negotiations
(whether formal or informal) between Buck and Mellon regarding the Merger shall
be considered shares of outstanding Buck Common Stock exchanged for Mellon
Common Stock in the Merger and then disposed of pursuant to a Plan;
(5) following the Merger, Sub will continue the historic business of Buck
or use a significant portion of Buck's historic business assets in a business;
(6) no outstanding indebtedness of Mellon, Buck, or Sub has or will
represent equity for tax purposes; no outstanding equity of Mellon, Buck, or Sub
has represented or will represent indebtedness for tax purposes; no outstanding
security, instrument, agreement, or arrangement that provides for, contains, or
represents either a right to acquire Buck stock or to share in the appreciation
thereof constitutes or will constitute "stock" for purposes of Section 368(c) of
the Internal Revenue Code ("Code"); payments to employees under the Buck Key
Performers Supplemental Payment Plan are compensation; and
(7) none of Mellon, Buck, or Sub is, or will be a the time of the Merger,
(a) an "investment company" within the meaning of Section 368(a)(2)(F) of the
Code; or (b) under the jurisdiction of a court in a Title 11 or similar case
within the meaning of Section 368(a)(3)(A) of the Code.
Capitalized terms used herein and not otherwise defined are used as defined
in the Agreement.
Based on the foregoing documents, materials, assumptions and information,
and subject to the qualifications and assumptions set forth herein, we are of
the opinion that, if the Merger is consummated in accordance with the provisions
of
<PAGE>
Buck Consultants, Inc.
May 28, 1997
Page 4
the Agreement and the exhibits thereto, the Merger of Buck with and into Sub,
with Sub surviving the Merger and continuing as a wholly owned subsidiary of
Mellon, will qualify as a reorganization, for federal income tax purposes,
within the meaning of Section 368(a)(1)(A) of the Code by virtue of Section
368(a)(2)(D) of the Code.
In addition to your request for our opinion on this specific matter of
federal income tax law, you have asked us to review the discussion of federal
income tax issues contained in the Registration Statement. We have reviewed the
discussion entitled "Certain Federal Income Tax Consequences" contained in the
Registration Statement and believe that such information fairly presents the
current federal income tax law applicable to the Merger, and the material
federal income tax consequences to Mellon, Buck, Sub, and the Buck
stockholders.
Our opinion set forth above is based upon the existing provisions of the
Code, Treasury Regulations (including Temporary and Proposed Treasury
Regulations) promulgated under the Code, published Revenue Rulings, Revenue
Procedures and other announcements of the Internal Revenue Service (the
"Service") and existing court decisions, any of which could change at any time.
Any such changes might be retroactive with respect to transactions entered into
prior to the date of such changes and could significantly modify the opinion set
forth above. Nevertheless, we undertake no responsibility to advise you of any
subsequent developments in the application, operation, or interpretation of the
federal income tax laws.
Our opinion concerning certain of the federal tax consequences of the
Merger is limited to the specific federal tax consequences presented above. No
opinion is expressed as to any transaction other than the Merger, including any
transaction undertaken in connection with the Merger. In addition, this opinion
does not address any estate, gift, state, local, or foreign tax consequences
that may result from the Merger. In particular, we express no opinion regarding:
(i) the amount, existence or availability after the Merger of any of the federal
income tax attributes of Buck or Mellon (including, without limitation, foreign
tax credits or net operating loss carryforwards, if any, of Buck or Mellon);
(ii) the application of Section 83 of the Code to the receipt of consideration
in the Merger by the holders of Buck Common Stock; (iii) the effects of the
Merger on any pension or other employee benefit plan maintained by Mellon or
Buck and (iv) the payments to Buck
<PAGE>
Buck Consultants, Inc.
May 28, 1997
Page 5
retirees with respect to Buck Common Stock previously sold to Buck.
No ruling has been or will be requested from the Service concerning the
federal income tax consequences of the Merger. In reviewing this opinion, you
should be aware that the opinion set forth above represents our conclusions
regarding the application of existing federal income tax law to the instant
transaction. If the facts vary from those relied upon (including if any
representation, covenant, warranty, or assumption upon which we have relied is
inaccurate, incomplete, breached, or ineffective), our opinion contained herein
could be inapplicable. You should be aware that an opinion of counsel represents
only counsel's best legal judgment, and has no binding effect or official status
of any kind, and that no assurance can be given that contrary positions will not
be taken by the Service or that a court considering the issues would not hold
otherwise.
This opinion is being delivered solely for the purpose of being included as
an exhibit to the Registration Statement; it may not be relied upon or utilized
for any other purpose (including, without limitation, satisfying any conditions
in the Agreement) or by any other person or entity, and may not be made
available to any other person or entity, without our prior written consent. We
do, however, consent to the use of our name in the Registration Statement
wherever it appears.
Very truly yours,
/s/ O'Sullivan Graev & Karabell, LLP
O'Sullivan Graev & Karabell, LLP
<PAGE>
Exhibit 23.4
The Board of Directors
Mellon Bank Corporation
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Expert" in this Registration
Statement on Form S-4.
/s/ KMPG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Pittsburgh, Pennsylvania
May 28, 1997
<PAGE>
EXHIBIT 23.5
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement on Form S-4 of Mellon
Bank Corporation of our report dated May 21, 1997, appearing in the Prospectus
which is a part of such Registration Statement. We also consent to the reference
to us under the headings "Summary--Selected Financial Information" and "Experts"
in such Prospectus.
/s/ Grant Thorton LLP
GRANT THORNTON LLP
New York, New York
May 28, 1997
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
MELLON BANK CORPORATION
Know all men by these presents, that each person whose signature appears below
constitutes and appoints Carl Krasik and William E. Marquis, and each of them,
such person's true and lawful attorney-in-fact and agent, with full power of
substitution and revocation, for such person and in such person's name, place
and stead, in any and all capacities, to sign one or more Registration
Statements on Form S-4 or any other appropriate form or forms or to amend any
currently filed registration statement or statements, all pursuant to the
Securities Act of 1933, as amended, with respect to the registration of the
maximum number of shares of Mellon Bank Corporation's Common Stock to be issued
pursuant to the Agreement and Plan or Reorganization dated as of March 17, 1997
by and between Mellon Bank Corporation and Buck Consultants, Inc. and any and
all amendments (including post-effective amendments) thereto, and to file the
same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in connection
with any of the above, as fully to all intents and purposes as such person might
or could do in person, hereby ratifying and conforming all that said attorneys-
in-fact and agents and each of them, or their or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
This power of attorney shall be effective as of April 15, 1997 and shall
continue in full force and effect until revoked by the undersigned in a writing
filed with the Secretary of the Corporation.
/s/ Frank V. Cahouet /s/ Rotan E. Lee
- ------------------------------------- --------------------------------
Frank V. Cahouet, Director and Rotan E. Lee, Director
Principal Executive Officer
/s/ Dwight L. Allison, Jr. /s/ Andew W. Mathieson
- ------------------------------------- --------------------------------
Dwight L. Allison, Jr. Director Andrew W. Mathieson, Director
/s/ Burton C. Borgelt /s/ Edward J. McAniff
- ------------------------------------- --------------------------------
Burton C. Borgelt, Director Edward J. McAniff, Director
<PAGE>
/s/ Carol R. Brown /s/ Robert Mehrabian
- -------------------------------------- ----------------------------------
Carol R. Brown, Director Robert Mehrabian, Director
/s/ J. W. Connolly /s/ Seward Prosser Mellon
- -------------------------------------- ----------------------------------
J. W. Connolly, Director Seward Prosser Mellon, Director
/s/ Charles A. Corry /s/ David S. Shapira
- -------------------------------------- ----------------------------------
Charles A. Corry, Director David S. Shapira, Director
/s/ C. Frederick Fetterolf /s/ W. Keith Smith
- -------------------------------------- ----------------------------------
C. Frederick Fetterolf, Director W. Keith Smith, Director
/s/ Ira J. Gumberg /s/ Joab L. Thomas
- -------------------------------------- ----------------------------------
Ira J. Gumberg, Director Joab L. Thomas, Director
/s/ Pemberton Hutchinson /s/ Wesley W. von Schack
- -------------------------------------- ----------------------------------
Pemberton Hutchinson, Director Wesley W. von Schack, Director
/s/ George W. Johnstone /s/ William J. Young
- -------------------------------------- ----------------------------------
George W. Johnstone, Director William J. Young, Director
-2-
<PAGE>
Exhibit 99.5
FORM OF ELECTION/LETTER OF TRANSMITTAL
MERGER OF
BUCK CONSULTANTS, INC.
WITH AND INTO A WHOLLY OWNED SUBSIDIARY OF
MELLON BANK CORPORATION
This Form of Election/Letter of Transmittal is to be completed by
stockholders of Buck Consultants, Inc., a Delaware corporation ("Buck"), and
stock certificates (the "Share Certificates") for shares of Buck's Class A
common stock, $5.459 par value per share (the "Class A Stock") and Class B
common stock, $1.00 par value per share (the "Class B Stock," together with the
Class A Stock, the "Buck Common Stock" or the "Shares of Buck"), are to be
forwarded herewith to the Assistant Secretary, in order to effect an Election
(as defined herein) in connection with the proposed merger of Buck with and into
a wholly owned subsidiary of Mellon Bank Corporation, a Pennsylvania corporation
("Mellon").
The Assistant Secretary is:
Karl W. Lohwater, Esq.
Buck Consultants, Inc.
500 Plaza Drive
Secaucus, NJ 07096-1533
Telephone: (201) 902-2392
Facsimile: (201) 902-2420
DELIVERY OF THIS FORM OF ELECTION/LETTER OF TRANSMITTAL TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN
THIS FORM OF ELECTION/LETTER OF TRANSMITTAL WHERE INDICATED BELOW AND COMPLETE
THE SUBSTITUTE FORM W-9 (FORM W-8 FOR NON-U.S. RESIDENTS) PROVIDED BELOW.
The instructions accompanying this FORM OF ELECTION/LETTER OF TRANSMITTAL
should be read carefully before this Form of Election/Letter of Transmittal is
completed.
THE DEADLINE FOR SUBMITTING THIS FORM OF ELECTION/LETTER OF TRANSMITTAL,
TOGETHER WITH YOUR SHARE CERTIFICATES, IS 5:00 P.M., NEW YORK CITY TIME, ON JUNE
20, 1997, UNLESS EXTENDED (THE "ELECTION DEADLINE").
Buck stockholders whose Share Certificates are not immediately available
should contact the Assistant Secretary as soon as possible to arrange for the
proper documentation to be prepared.
BUCK STOCKHOLDERS MAY CHOOSE TO MAKE A STOCK ELECTION AND/OR A CASH
ELECTION WITH RESPECT TO ALL OR CERTAIN PORTIONS OF THE SHARES HELD BY SUCH
HOLDERS.
-1-
<PAGE>
<TABLE>
<CAPTION>
PLEASE COMPLETE THE FOLLOWING:
TYPE OF ELECTION (See Instructions B1, B2 and B3)
- ----------------------------------------------------------------------------------------------------------------------------------
Shares Submitted (Attach separate signed list if necessary)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Total
Number
of Shares
Represented
Certificate by
Name(s) and Address(es) of Registered Holder(s) Number Certificate
- ----------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Total Number of Shares
==================================================================================================================================
Election Cash Stock
Election Election
(Must be made in 10% (Must be made in 10%
increments; 0% to 100%) increments; 0% to 100%)
---------------------------------------------------------------------------
% %
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE>
Each Buck stockholder hereby elects, subject to the proration and other
limitations set forth below, (i) to have each share of the Class A Stock
represented by applicable Share Certificates converted into approximately $281
of value (the "Class A Consideration") consisting of (a) shares (the "Class A
Stock Consideration") of Mellon's common stock, par value $.50 per share (the
"Mellon Common Stock"), and (b) cash (the "Class A Cash Consideration"), or
certain combinations thereof (the "Class A Mixed Payment Consideration") and
(ii) to have each share of the Class B Stock represented by applicable Share
Certificates converted into approximately $267 of value (the "Class B
Consideration," and together with the Class A Consideration, the "Total
Consideration") consisting of (a) shares (the "Class B Stock Consideration," and
together with the Class A Stock Consideration, the "Total Stock Consideration")
of Mellon Common Stock and (b) cash (the "Class B Cash Consideration," and
together with the Class A Cash Consideration, the "Total Cash Consideration"),
or certain combinations thereof (the "Class B Mixed Payment Consideration," and
together with the Class A Mixed Payment Consideration, the "Total Mixed Payment
Consideration"), provided that the aggregate market value, on the day prior to
the Effective Time, of the Mellon Common Stock to be issued pursuant to the
Total Stock Consideration is at least equal to 55.6% of the $225,000,000 to be
paid in the Merger to (a) the Buck stockholders and (b) certain retired
stockholders under Buck's Retiree Protection Plan. In the event that this
limitation may be violated, the Total Cash Consideration and the Total Mixed
Payment Consideration will automatically be converted to increase the Total
Stock Election and the stock portions of the Total Mixed Payment Consideration
to the extent necessary to satisfy the limitation. Any such conversion will be
done equitably to treat all Buck stockholders who have elected cash equally
based on the amount of cash elected to be received.
It is understood that the following election is subject to (i) the terms,
conditions and limitations set forth in the Prospectus/Proxy Statement, dated
May 30, 1997, relating to the Merger (the "Prospectus/Proxy Statement"), receipt
of which is hereby acknowledged by the undersigned, (ii) the terms of the
Agreement and Plan of Merger, dated as of March 17, 1997 (the "Merger
Agreement"), attached as Annex I to the Prospectus/Proxy Statement and (iii) the
accompanying instructions. Mellon's acceptance of Shares delivered pursuant to
this Form of Election/Letter of Transmittal will constitute a binding agreement
between the undersigned and Mellon upon the terms and subject to the conditions
of (i), (ii) and (iii) listed above.
ALTHOUGH THERE CAN BE NO ASSURANCE THAT A HOLDER OF SHARES OF BUCK COMMON
STOCK WHO DESIRES TO RECEIVE THE CLASS A CASH CONSIDERATION OR CLASS B CASH
CONSIDERATION, AS APPLICABLE, WILL RECEIVE SUCH CONSIDERATION AS TO ALL OF HIS
SHARES, A HOLDER OF SHARES OF BUCK COMMON STOCK HAVING A PREFERENCE FOR CLASS A
CASH CONSIDERATION OR CLASS B CASH CONSIDERATION, AS APPLICABLE, SHOULD MAKE AN
ELECTION BECAUSE SHARES AS TO WHICH AN ELECTION HAS NOT BEEN MADE WILL RECEIVE
THE CLASS A STOCK CONSIDERATION OR THE CLASS B STOCK CONSIDERATION, AS
APPLICABLE, IN THE MERGER. NONE OF MELLON, BUCK, THE MELLON BOARD OF DIRECTORS
OR THE BUCK BOARD OF DIRECTORS MAKES ANY RECOMMENDATION AS TO WHETHER
STOCKHOLDERS SHOULD ELECT TO RECEIVE THE CLASS A CASH CONSIDERATION OR CLASS B
CASH CONSIDERATION, AS APPLICABLE, OR THE CLASS A STOCK CONSIDERATION OR CLASS
B STOCK CONSIDERATION, AS APPLICABLE, IN THE MERGER. EACH STOCKHOLDER MUST MAKE
HIS OR HER OWN DECISION WITH RESPECT TO SUCH ELECTION.
Failure of a holder of Shares to complete properly and to return this Form
of Election/Letter of Transmittal, together with his or her Share Certificates,
to the Assistant Secretary by the Election Deadline or a holder of Shares who
fails to comply with the election procedures described in the Prospectus/Proxy
Statement and this Form of Election/Letter of Transmittal (including the
instructions hereto) will cause such holder's Shares to be converted into the
right to receive the Class A Stock Consideration or Class B Stock Consideration,
as applicable, without regard to the preference of such holder of Shares.
The undersigned authorizes and instructs you, as Assistant Secretary, to
deliver the Share Certificates listed above and to receive on behalf of the
undersigned, in exchange for the Shares represented thereby, any check for the
cash or any certificate for the shares of Mellon Common Stock issuable in the
Merger.
-3-
<PAGE>
The undersigned represents and warrants that the undersigned has full power
and authority to surrender the Share Certificate(s) surrendered herewith free
and clear of any liens, claims, charges or encumbrances whatsoever. The
undersigned understands and acknowledges that the method of delivery of the
Share Certificate(s) and all other required documents is at the option and risk
of the undersigned and that the risk of loss of such Share Certificate(s) shall
pass only after the Assistant Secretary has actually received the Share
Certificate(s). All questions as to the validity, form and eligibility of any
Election and surrender of Share Certificates hereunder shall be determined by
Mellon (which may delegate power in whole or in part to the Assistant
Secretary), and such determination shall be final and binding. The undersigned,
upon request, shall execute and deliver all additional documents deemed by the
Assistant Secretary or Mellon to be necessary or desirable to complete the sale,
assignment, transfer, cancellation and retirement of the Shares delivered
herewith. No authority hereby conferred or agreed to be conferred hereby shall
be affected by, and all such authority shall survive, the death or incapacity of
the undersigned. All obligations of the undersigned hereunder shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned.
The undersigned understands that the purpose of the election procedure is
to permit holders of Shares to express their preferences for the type of
consideration they wish to receive in the Merger, provided that the aggregate
market value, on the day prior to the Effective Time, of the Mellon Common Stock
to be issued pursuant to the Total Stock Consideration is at least equal to
55.6% of the $225,000,000 to be paid in the Merger to (a) the Buck stockholders
and (b) certain retired stockholders under Buck's Retiree Protection Plan.
Subject to the proration and the limitations described below and in the Merger
Agreement, the Assistant Secretary will honor the properly made stock elections
and cash elections made by holders of Shares when it issues shares of Mellon
Common Stock and the Total Cash Consideration (or as adjusted as provided above)
after the Effective Time (as defined in the Prospectus/Proxy Statement).
The undersigned understands that in lieu of any fractional share of Mellon
Common Stock, Mellon will pay to each former stockholder of Buck who otherwise
would be entitled to receive a fractional share of Mellon Common Stock an amount
in cash determined by multiplying (i) the Transaction Share Price (as defined in
the Merger Agreement) on the date on which the Effective Time occurs by (ii) the
fractional interest in a share of Mellon Common Stock to which such holder would
otherwise be entitled.
Unless otherwise indicated in the box entitled "Special Payment
Instructions," please issue any check and register any certificate for shares of
Mellon Common Stock in the name of the registered holder(s) of the Shares
appearing above under "Type of Election." Similarly, unless otherwise indicated
in the box entitled "Special Delivery Instructions," please mail any shares of
Mellon Common Stock to the address of the registered holder(s) of the Shares
appearing above under "Type of Election ."
-4-
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions A1 and C3) (See Instructions A1 and C3)
To be completed ONLY if the To be completed ONLY if the check
check is to be made payable or the certificates for shares of
to, or the certificates for Mellon Common Stock are to be
shares of Mellon Common Stock mailed to someone other than
are to be registered in the the undersigned or to the
name of, someone other than undersigned at an address other
the undersigned. than that shown under
"Type of Election."
Name: Mail check and/or certificates to:
--------------------------------
(Please Print)
Address: Name:
----------------------------- -------------------------------
(Please Print)
------------------------------------
(Zip Code) Address:
----------------------------
------------------------------------
(Zip Code)
------------------------------------
(Taxpayer Identification or Social ------------------------------------
Security Number) (See Substitute (Account Number)
Form W--9 Below)
- -------------------------------------
ALL BUCK STOCKHOLDERS MUST SIGN BELOW
SIGN HERE
IMPORTANT: COMPLETE AND SIGN THE SUBSTITUTE FORM W-9 (OR FORM W-8) BELOW
Name(s):
- ---------------------------------- -------------------------------
(Signature(s) of Owner(s)) (Please Print)
Capacity
(full title):
--------------------------
- ------------------------------------- Address:
Must be signed by registered owner(s) --------------------------------
exactly as name(s) appear(s) on stock
certificate(s) or by person(s) ----------------------------------------
authorized to become registered (Zip Code)
holder(s) by certificates and
documents transmitted herewith. ----------------------------------------
If signature is by attorney, executor, (Area Code and Telephone Number)
administrator, trustee or guardian or
others acting in a fiduciary capacity, ----------------------------------------
set forth full title and see (Taxpayer Identification or
Instruction C2. Social Security Number)
Dated:
----------------------------------
-5-
<PAGE>
In order to ensure compliance with federal income tax requirements, each
holder of Shares is requested to provide the Assistant Secretary with his or her
correct Taxpayer Identification Number and to certify whether he or she is
subject to backup federal income tax withholding by completing and signing the
Substitute Form W-9 below. See Instruction C6 and accompanying Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that stockholder must submit an IRS Form W-8, signed under penalties
of perjury, attesting to that individual's exempt status. A Form W-8 is
enclosed herewith. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.
Part 1--PLEASE Social Security Number
PROVIDE YOUR TIN IN or Taxpayer Identification
SUBSTITUTE THE BOX AT RIGHT AND Number
Form W-9 CERTIFY BY SIGNING
AND DATING BELOW.
-----------------------------------------------------
Part 2--Awaiting TIN [ ]
-----------------------------------------------------
Department of the CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I
Treasury CERTIFY THAT (1) the number shown on this form is
Internal Revenue Service my correct taxpayer identification number (or I am
waiting for a number to be issued to me) and (2) I
am not subject to backu withholding either because
Payor's Request for (a) I am exempt from backup withholding, (b) I
Taxpayer Identification have not been notified by the Internal Revenue
Number (TIN) Service that I am subject to backup withholding as
a result of the failure to report all interest or
dividends, or (c) the Internal Reenue Service has
notified me that I am no longer subject to backup
withholding.
-----------------------------------------------------
Signature Date:
----------------------- --------------
-----------------------------------------------------
You must cross out item (2) above if you have been
notified by the Internal Revenue Service that you
are currently subject to backup withholding
because of under reporting interest or dividends
on your tax return. However, if after being
notifid by the IRS that you were subject to backup
withholding, you receive another notification from
the IRS that you are no longer subject to backup
withholding, do not cross out such item (2).
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY
IMPOSED BY THE INTERNAL REVENUE SERVICE AND BACKUP WITHHOLDING OF 31% OF
ANY CASH PAYMENTS MADE TO YOU PURSUANT TO THE MERGER. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF
THE SUBSTITUTE FORM W-9.
CERTIFICATION OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification Number has
not been issued to me, and either that (i) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Ceter or Social Security Administration Office or (ii)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a Taxpayer Identification Number by the time of payment, 31%
of all reportable payments made to me wil be withheld, but that such amounts
will be refunded to me if I then provide a Taxpayer Identification Number within
sixty (60) days.
Signature Date
------------------------- -------------------
-6-
<PAGE>
INSTRUCTIONS
A. General
1. If a Share Certificate is registered in the name of a person other
than the signer of this Form of Election/Letter of Transmittal, then the Share
Certificate must be endorsed or accompanied by appropriate stock powers, and
signed exactly as the name(s) of the registered holder(s) appear(s) on the Share
Certificate, with the signature(s) on such Share Certificate or stock powers
guaranteed as described above. See Instruction C2.
2. Delivery of Form of Election/Letter of Transmittal and Share
Certificates. This Form of Election/Letter of Transmittal is to be used if Share
Certificates are to be forwarded herewith. Share Certificates evidencing all
delivered Shares together with a properly completed and duly executed Form of
Election/Letter of Transmittal (or facsimile thereof) and any other documents
required by this Form of Election/Letter of Transmittal (or facsimile thereof)
and any other documents required by this Form of Election/Letter of Transmittal,
must be received by the Assistant Secretary at his address (as provided above)
prior to the Election Deadline. If Share Certificates are forwarded to the
Assistant Secretary in multiple deliveries, a properly completed and duly
executed Form of Election/Letter of Transmittal must accompany each such
delivery.
Buck stockholders whose Forms of Election/Letters of Transmittal and Share
Certificates are not received prior to the Election Deadline will not be
entitled to specify their preference(s) and will receive shares of Mellon Common
Stock in the Merger. Therefore, in all cases, sufficient time should be allowed
to ensure timely delivery.
3. Inadequate Space. If the space provided herein under "Type of
Election" is inadequate, the Share Certificate numbers, the number of Shares
evidenced by such Share Certificates and the number of Shares delivered should
be listed on a separate signed schedule and attached hereto.
4. Change or Revocation of Election. Any holder of Share Certificates
may, at any time prior to the Election Deadline, change his or her Election by
submitting to the Assistant Secretary a properly completed and signed revised
Form of Election/Letter of Transmittal and all required additional documents,
provided that the Assistant Secretary receives such revised Form of
Election/Letter of Transmittal and other necessary documents prior to the
Election Deadline. Any holder of Shares may, at any time prior to the Election
Deadline, revoke his or her prior valid Election by written notice received by
the Assistant Secretary prior to the Election Deadline or by written withdrawal
prior to the Election Deadline of his or her Share Certificates previously
deposited with the Assistant Secretary.
5. Automatic Revocations of Elections. All Elections will be revoked
automatically if the Assistant Secretary is notified in writing by Mellon that
the Merger Agreement has been terminated, and Share Certificates will be
promptly returned to the persons who have submitted them.
B. Election and Allocation Procedures
1. Elections. By completing the appropriate box above and completing
this Form of Election/Letter of Transmittal in accordance with the instructions
hereto, a Buck stockholder will be permitted to make a stock election and/or a
cash election (each, an "Election") in 10% increments with respect to all or any
portion of the Shares held by such holder, provided that the aggregate market
value, on the day prior to the Effective Time, of the Mellon Common Stock to be
issued pursuant to the Total Stock Consideration is at least equal to 55.6% of
the $225,000,000 to be paid in the Merger to (a) the Buck stockholders and (b)
certain retirees of Buck to whom Buck has certain outstanding contractual
obligations.
Each Buck stockholder should consult his or her own financial advisor and
tax advisor as to the specific consequences of the Merger and the Election to
such stockholder.
No alternative, conditional or contingent Elections will be accepted.
-7-
<PAGE>
2. Allocations. Each Buck stockholder, as applicable, will receive,
the full amount of the Class A Stock Consideration, the Class A Cash
Consideration, the Class B Stock Consideration, the Class B Cash Consideration
or the combinations thereof to the extent such forms of consideration were
properly elected by such stockholder; provided that the aggregate market value,
on the day prior to the Effective Time, of the Mellon Common Stock to be issued
pursuant to the Total Stock Consideration is at least equal to 55.6% of the
$225,000,000 to be paid in the Merger to (a) the Buck stockholders and (b)
certain retired stockholders under Buck's Retiree Protection Plan. In the event
that this limitation may be violated, the Total Cash Consideration and the Total
Mixed Payment Consideration will automatically be converted to increase the
Total Stock Election and the stock portions of the Total Mixed Payment
Consideration to the extent necessary to satisfy the limitation. Any such
conversion will be done equitably to treat all Buck stockholders who have
elected cash equally based on the amount of cash elected to be received.
3. Treatment of Non-Electing Shares. Each Non-Electing Share will be
converted into the Class A Stock Consideration or Class B Stock Consideration,
as applicable, without regard to the preference of such holder of Shares.
4. Election Deadline. The Election Deadline for submitting this Form of
Election/Letter of Transmittal to the Assistant Secretary is 5:00 p.m., New York
City time, on June 20, 1997, unless extended.
Failure of a holder of Shares to complete properly and to return this Form
of Election/Letter of Transmittal together with his or her Share Certificates to
the Assistant Secretary by the Election Deadline or a holder who fails to comply
with the election procedures described in the Prospectus/Proxy Statement and
this Form of Election/Letter of Transmittal (including the instructions hereto)
will cause each of such holder's Shares to be treated as a "Non-Electing Share"
in the Merger and converted into the right to receive the Class A Stock
Consideration or the Class B Stock Consideration, as applicable, without regard
to the preference of such holder of Shares.
In connection with making an Election, a Buck stockholder should read
carefully, among other matters, the description and statement of the information
contained in the Prospectus/Proxy Statement under "The Merger--Certain Federal
Income Tax Consequences of the Merger to Buck Stockholders."
C. Receipt of Merger Consideration, Signatures, Special Instructions, Taxes
and Additional Copies
1. Receipt of Merger Consideration. As soon as practicable after the
Effective Time, checks and certificates representing shares of Mellon Common
Stock will be distributed to those holders who are entitled thereto and who have
surrendered their Share Certificates to the Assistant Secretary for
cancellation.
2. Signatures on Form of Election/Letter of Transmittal; Stock Powers
and Endorsements.
(a) If this Form of Election/Letter of Transmittal is signed by the
registered holder(s) of the Shares delivered herewith, the signature(s) must
correspond with the name(s) as written on the face of the Share Certificates
evidencing such Shares without alteration, enlargement or any other change
whatsoever.
(b) If any Share delivered herewith is owned of record by two or more
persons, all such persons must sign this Form of Election/Letter of Transmittal.
(c) If any of the Shares delivered herewith are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Forms of Election/Letters of Transmittal as there are different
registrations of such Shares.
(d) If this Form of Election/Letter of Transmittal is signed by the
registered holder(s) of the Shares delivered herewith, no endorsements of Share
Certificates or separate stock powers are required, unless checks are to be
payable to the order of, or certificates evidencing shares of Mellon Common
Stock are to be registered in the
-8-
<PAGE>
name of, a person other than the registered holder(s), in which case, the Share
Certificate(s) evidencing the Shares delivered herewith must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on such Share Certificate(s).
(e) If this Form of Election/Letter of Transmittal is signed by a person
other than the registered holder(s) of the Shares delivered herewith, the Share
Certificate(s) evidencing the Shares delivered herewith must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on such Share Certificate(s).
(f) If this Form of Election/Letter of Transmittal or any Share
Certificate or stock power is signed by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, such person should so indicate when
signing, and proper evidence satisfactory to Buck of such person's authority so
to act must be submitted.
3. Special Payment and Delivery Instructions. If any check or
certificates evidencing shares of Mellon Common Stock are to be payable to the
order of, or registered in the name of, a person other than the person(s)
signing this Form of Election/Letter of Transmittal or if such checks or such
certificates are to be sent to someone other than the person(s) signing this
Form of Election/Letter of Transmittal or to the person(s) signing this Form of
Election/Letter of Transmittal but at an address other than that shown in the
box entitled "Type of Election," the appropriate boxes on this Form of
Election/Letter of Transmittal must be completed.
4. Stock Transfer Taxes. Mellon will bear the liability for any state
stock transfer taxes applicable to the issuance and delivery of checks and
certificates in connection with the Merger, provided, however, that if any such
check or certificate is to be issued in a name other than that in which the
Share Certificates surrendered in exchange therefor are registered, it shall be
a condition of such exchange, and the issuance of any check or certificate, that
the person requesting such exchange shall either (i) pay to the Assistant
Secretary the amount of any stock transfer taxes (whether imposed on the
registered holder or such person), payable on account of the transfer to such
person, or (ii) provide the Assistant Secretary with satisfactory evidence of
the payment of such taxes or exemption therefrom.
Except as provided in this instruction C4, it will not be necessary for
transfer tax stamps to be affixed to the Share Certificates evidencing the
Shares delivered herewith.
5. Requests for Assistance or Additional Copies. Requests for
assistance, additional copies of the Prospectus/Proxy Statement, this Form of
Election/Letter of Transmittal and the Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 may be directed to or obtained from
the Assistant Secretary at his telephone number set forth above.
The failure of a Buck stockholder to complete and return Substitute Form
W-9 may result in such stockholder being subject to a $50 penalty imposed by the
Internal Revenue Service. In addition, payments of Total Cash Consideration
that are made to such stockholder with respect to Shares purchased pursuant to
the Merger may be subject to backup withholding of 31%. Certain stockholders
(including, among others, all corporations and certain foreign individuals) are
not subject to these backup withholding and reporting requirements. In order
for a foreign individual to qualify as an exempt recipient, such individual must
submit an IRS Form W-8, signed under penalties of perjury, attesting to such
individual's exempt status. A Form W-8 is enclosed herewith. See the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional instructions. If backup withholding applies with
respect to a stockholder, the Assistant Secretary is required to withhold 31% of
any cash payments made to such stockholder. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
To prevent backup withholding on payments of Total Cash Consideration that
are made to a stockholder with respect to Shares delivered herewith, the
stockholder is required to notify the Assistant Secretary of such stockholder's
correct TIN by completing the form below certifying (a) that the TIN provided on
Substitute Form
-9-
<PAGE>
W-9 is correct (or that such stockholder is awaiting a TIN) and (b) that (i)
such stockholder has not been notified by the Internal Revenue Service that such
stockholder is subject to backup withholding as a result of a failure to report
all interest or dividends or (ii) the Internal Revenue Service has notified such
stockholder that such stockholder is no longer subject to backup withholding.
Each Buck stockholder is required to give the Assistant Secretary the TIN
of the record holder of the Shares tendered hereby. If the Shares are in more
than one name or are not in the name of the actual owner, consult the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional guidance on which TIN to report. If the Buck
stockholder has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future, the Buck stockholder should check the box in
Part 2, sign and date the Substitute Form W-9 and complete the Certification of
Awaiting Taxpayer Identification Number. Notwithstanding that the box in Part 2
is checked and the Certification of Awaiting Taxpayer Identification Number is
completed, the Assistant Secretary will withhold 31% of all payments of Total
Cash Consideration to such Buck stockholder until a properly certified TIN is
provided to the Assistant Secretary. However, such amounts will be refunded to
such stockholder if a TIN is provided to the Assistant Secretary within 60 days.
7. Lost, Destroyed or Stolen Share Certificates. If any Share
Certificate(s) representing Shares has been lost, destroyed or stolen prior to
the Effective Time, the Buck stockholder should promptly notify the Assistant
Secretary at his address or telephone number set forth above. The Buck
stockholder will then be instructed as to the steps that must be taken in order
to replace the Share Certificate(s). This Form of Election/Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost or destroyed Share Certificates have been followed. Following
the Effective Time, if any Share Certificate(s) representing Shares has been
lost, destroyed or stolen, the stockholder should promptly notify the Assistant
Secretary.
-10-
