<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
MELLON BANK CORPORATION
________________________________________
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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LOGO
OF MELLON BANK CORPORATION
MELLON BANK CORPORATION Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, PA 15258-0001
March 10, 1998
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Mellon Bank Corporation in Pittsburgh on Tuesday, April 21, 1998, at 10:00 A.M.
Further information about the meeting and the matters to be considered is
contained in the formal Notice of Annual Meeting and Proxy Statement on the
following pages.
It is important that your shares be represented at this meeting. Whether or not
you plan to attend, we hope that you will sign, date and return your Proxy
promptly in the enclosed envelope. Completing and returning the enclosed Proxy
will not limit your right to vote in person or to attend the meeting.
Sincerely,
LOGO
/s/ Frank V. Cahouet
Frank V. Cahouet
Chairman, President and
Chief Executive Officer
<PAGE>
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LOGO
OF MELLON BANK CORPORATION
MELLON BANK CORPORATION
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258-0001
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders:
Notice is hereby given that the Annual Meeting of Shareholders of Mellon Bank
Corporation (the "Corporation") will be held on the 10th Floor of the Union
Trust Building, 501 Grant Street, Pittsburgh, Pennsylvania, on Tuesday, April
21, 1998, at 10:00 A.M., for the purpose of considering and acting upon the
following:
1. the election of directors;
2. a proposal to amend the Corporation's Restated Articles of Incorporation to
increase the authorized number of shares of Common Stock;
3. the ratification of the appointment of KPMG Peat Marwick LLP as independent
public accountants of the Corporation for the year 1998; and
4. such other matters as may properly come before the meeting.
The Board of Directors has fixed the close of business on Thursday, February
12, 1998, as the record date for the determination of shareholders entitled to
notice of and to vote at the meeting or any adjournment thereof.
Enclosed are a Proxy Statement, a form of Proxy, an addressed return envelope
and the Corporation's 1997 Annual Report. All shareholders, whether or not they
expect to be present at the meeting, are requested to sign and date the Proxy
and to return it in the addressed envelope promptly. Shareholders who plan to
attend the meeting in person are also requested to complete and return the
reservation form which appears at the end of the Proxy Statement. Shareholders
who attend the meeting may, if they wish, vote in person even though they have
previously submitted a Proxy.
By Order of the Board of Directors
LOGO
/s/ Carl Krasik
Carl Krasik
Secretary
March 10, 1998
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LOGO
OF MELLON BANK CORPORATION
MELLON BANK CORPORATION
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258-0001
PROXY STATEMENT
March 10, 1998
The accompanying Proxy is solicited by the Board of Directors of Mellon Bank
Corporation (the "Corporation") for the Annual Meeting of Shareholders of the
Corporation scheduled to be held on Tuesday, April 21, 1998. Proxies are being
solicited from holders of the Corporation's common stock, par value $0.50 per
share (the "Common Stock"). If the Proxy is properly signed and returned, the
shares it covers will be voted as directed by the shareholder. The Proxy may be
revoked by written notice to the Secretary of the Corporation at any time prior
to the annual meeting. Shareholders who attend the annual meeting may vote in
person even though they have submitted a Proxy, in which case, their Proxy will
be deemed to have been revoked.
Unless a Proxy is revoked or contains other directions, the shares it covers
will be voted at the meeting FOR the election as directors of the nominees of
the Board of Directors set forth below (Proxy Item 1), FOR the proposal to
amend the Corporation's Restated Articles of Incorporation to increase the
authorized number of shares of Common Stock (Proxy Item 2) and FOR ratification
of the appointment of KPMG Peat Marwick LLP as independent public accountants
of the Corporation for the year 1998 (Proxy Item 3). However, if a broker or
nominee voting a Proxy limits the number of shares which are voted on a
proposal or indicates that shares are not voted on a proposal, such "non-votes"
will not be voted on the proposal and will not be counted in determining the
number of affirmative votes required for approval. Unless otherwise instructed
on a Proxy, the persons appointed in the Proxy to vote at the annual meeting
may vote or act in accordance with their judgment on any other matters properly
presented for action at the meeting. At the annual meeting, holders of Common
Stock will be entitled to one vote for each share held and will not be entitled
to cumulative voting.
The close of business on Thursday, February 12, 1998, has been set by the Board
of Directors as the record date for the determination of shareholders entitled
to notice of and to vote at the annual meeting or any adjournment thereof. As
of that date, the Corporation had outstanding 259,517,797 shares of Common
Stock. Proxies, ballots and voting tabulations that identify individual holders
of Common Stock will be held in confidence by the Corporation's transfer agent.
Individual votes will not be disclosed except as may be necessary to meet legal
requirements, in the case of a contested proxy solicitation or as may be
requested by the particular shareholder. The distribution of these proxy
materials, consisting of the Notice of Annual Meeting, the Proxy Statement and
the Proxy, together with the Corporation's 1997 Annual Report, is expected to
commence on or about March 10, 1998.
ELECTION OF DIRECTORS (PROXY ITEM 1)
The By-Laws of the Corporation provide that the directors will serve in three
classes, as nearly equal in number as possible, with such classes of directors
serving staggered, three-year terms of office. At each annual meeting of
shareholders, a class consisting of approximately one-third of the
Corporation's directors is elected to hold office for a term expiring at the
annual meeting of shareholders held in the third year following the year of
their election and until their successors have been duly elected and qualified.
The By-Laws also provide that the Corporation's Board of Directors shall
consist of such number of directors as shall be fixed from time to time by a
majority vote of the full Board of Directors. The Board of Directors has fixed
the number of directors at 22, and at this year's annual meeting of
shareholders seven directors will be elected to the class of directors whose
terms end in 2001. Ira J. Gumberg, Edward J. McAniff, Martin G. McGuinn, David
S. Shapira, W. Keith Smith, Joab L. Thomas and William J. Young, all of whom
are presently serving as
2
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directors of the Corporation, have been nominated for election at this year's
annual meeting to the term ending in 2001.
Any vacancies in the Board of Directors resulting from death, retirement,
resignation, disqualification, removal from office or other cause, as well as
any vacancy resulting from an increase in the number of directors that occurs
between annual meetings of shareholders, will be filled by a majority vote of
the remaining directors then in office. Directors so chosen to fill vacancies
will hold office until the expiration of the term of the class to which they
have been elected.
The shares of Common Stock represented by the enclosed Proxy will be voted FOR
the election of the nominees named below, unless authority to vote for one or
more of the nominees is withheld. In the event that one or more of the nominees
is unable or unwilling to serve as a director, the persons named in the Proxy
will vote for the election of such substitute nominee, if any, as shall be
named by the Nominating Committee of the Board of Directors. The Board of
Directors has no reason to believe that any of the nominees will be unable or
unwilling to serve as a director, as each of the nominees has expressed a
willingness to serve if elected. In connection with the management succession
plan referenced below, Mr. Smith has announced his expected retirement from the
Corporation and his intention to serve as a member of the Board through
December of 1998.
BIOGRAPHICAL SUMMARIES OF NOMINEES AND CONTINUING DIRECTORS
Information regarding the nominees for election at this year's annual meeting,
as well as information regarding the continuing directors whose terms expire in
1999 and 2000, is set forth below. Each of the nominees other than Mr. McGuinn
was previously elected by the shareholders at the Corporation's 1995 annual
meeting of shareholders. Mr. McGuinn was elected by the Board of Directors in
January 1998. The Board of Directors has approved a management succession plan
that designates Mr. McGuinn to succeed Mr. Cahouet as Chairman and Chief
Executive Officer of the Corporation following Mr. Cahouet's retirement. The
succession plan also designates Mr. Condron as President and Chief Operating
Officer of the Corporation following Mr. Cahouet's retirement.
NOMINEES FOR DIRECTOR--TERM EXPIRES 2001
Ira J. Gumberg Director Since 1989 Age 44
LOGO
President, Chief Executive Officer and
director, J.J. Gumberg Co. (real estate
management and development). Mr. Gumberg is
also a director of Fabri-Centers of America.
He serves on the Corporation's Executive
Committee, Audit Committee and Trust and
Investment Committee (Chairman).
Edward J. McAniff Director Since 1994 Age 63
LOGO
Partner, O'Melveny & Myers (full service law
firm). Mr. McAniff serves on the Corporation's
Community Responsibility Committee and Trust
and Investment Committee.
Martin G. McGuinn Director Since 1998 Age 55
Chairman and Chief Executive Officer of Mellon
Bank, N.A. ("Mellon Bank") (1998) and Vice
Chairman of the Corporation. Mr. McGuinn is
also a director of General Re Corporation. He
serves on the Corporation's Executive
Committee.
LOGO
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David S. Shapira Director Since 1986 Age 56
Chairman, Chief Executive Officer and
director, Giant Eagle, Inc. (retail grocery
LOGO store chain). Mr. Shapira is also a director
of Action Industries, Inc. and Equitable
Resources, Inc. He serves on the Corporation's
Executive Committee, Audit Committee (Vice
Chairman), Trust and Investment Committee and
Technology Committee.
W. Keith Smith Director Since 1987 Age 63
LOGO
Vice Chairman of the Corporation and Senior
Vice Chairman of Mellon Bank (1998). Mr. Smith
is also a director of Dentsply International,
Inc. He serves on the Corporation's Executive
Committee.
Joab L. Thomas Director Since 1993 Age 65
LOGO
President Emeritus (1995), The Pennsylvania
State University (major public research
university). Dr. Thomas is also a director of
Lukens, Inc. He serves on the Corporation's
Human Resources Committee and Technology
Committee.
William J. Young Director Since 1964* Age 69
LOGO
Retired President, Portland Cement Association
(trade association for the Portland Cement
Industry). He serves on the Corporation's
Human Resources Committee, Trust and
Investment Committee (Vice Chairman) and
Community Responsibility Committee.
CONTINUING DIRECTORS--TERM EXPIRES 1999
Dwight L. Allison, Jr. Director Since 1996** Age 68
Retired Chairman, President and Chief
Executive Officer, The Boston Company. Mr.
Allison is also a director of Avery Dennison
Corporation. He serves on the Corporation's
Community Responsibility Committee and Trust
and Investment Committee.
LOGO
* Served as a director of The Girard Company from the date indicated until its
merger with the Corporation in 1983.
** Has served as a director of The Boston Company since 1972.
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J. W. Connolly Director Since 1989 Age 64
Retired (1993) Senior Vice President, H. J.
Heinz Company (food manufacturer). Mr.
LOGO Connolly is also a director of Consolidated
Natural Gas Company. He serves on the
Corporation's Executive Committee, Audit
Committee and Human Resources Committee (Vice
Chairman).
Charles A. Corry Director Since 1991 Age 66
LOGO
Retired (1995) Chairman and Chief Executive
Officer, USX Corporation (energy and steel).
Mr. Corry is also a director of USX
Corporation and GenCorp. He serves on the
Corporation's Executive Committee, Audit
Committee, Nominating Committee (Chairman) and
Human Resources Committee.
Pemberton Hutchinson Director Since 1989 Age 66
LOGO
Retired (1993) Chief Executive Officer,
Westmoreland Coal Company (coal mining
company). Mr. Hutchinson is also a director of
Westmoreland Coal Company and Teleflex
Incorporated. He serves on the Corporation's
Nominating Committee, Trust and Investment
Committee and Community Responsibility
Committee.
Rotan E. Lee, Esquire Director Since 1993 Age 48
LOGO
Chairman, Talleyrand Atlantic, LLC (strategic
planning company-information technology). From
1996 to 1997, Mr. Lee was a partner with
Sherr, Joffe & Zuckerman, P.C. (full service
law firm). From 1994 to 1996, Mr. Lee served
as Chief Operating Officer of RMS
Technologies, Inc. (information technology).
Prior to 1994, he was a partner with Fox,
Rothschild, O'Brien & Frankel (full service
law firm). Mr. Lee serves on the Corporation's
Trust and Investment Committee and Community
Responsibility Committee.
Robert Mehrabian Director Since 1994 Age 56
LOGO
Senior Vice President and Segment Executive,
Aerospace and Electronics, of Allegheny
Teledyne Incorporated (specialty metals and
diversified businesses). Prior to 1997, Dr.
Mehrabian served as President of Carnegie
Mellon University (private co-educational
research institution). Dr. Mehrabian is also a
director of Allegheny Teledyne Incorporated,
BEI Technologies, Inc. and PPG Industries,
Inc. He serves on the Corporation's Executive
Committee, Audit Committee and Technology
Committee (Chairman).
Wesley W. von Schack Director Since 1989 Age 53
Chairman, President, Chief Executive Officer
and Director, New York State Electric and Gas
Corporation (energy services company). Prior
to 1996, Mr. von Schack served as Chairman,
President and Chief Executive Officer of DQE
(energy services company). Mr. von Schack is
also a director of RMI Titanium Company. He
serves on the Corporation's Executive
Committee, Nominating Committee, Human
Resources Committee, Technology Committee and
Community Responsibility Committee (Chairman).
LOGO
5
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CONTINUING DIRECTORS--TERM EXPIRES 2000
Burton C. Borgelt Director Since 1991 Age 65
LOGO
Retired (1996) Chairman and Chief Executive
Officer, Dentsply International, Inc.
(manufacturer of artificial teeth and
consumable dental products). Mr. Borgelt is
also a director of Dentsply International,
Inc. and DeVlieg-Bullard, Inc. He serves on
the Corporation's Trust and Investment
Committee and Community Responsibility
Committee.
Carol R. Brown Director Since 1992 Age 64
LOGO
President, The Pittsburgh Cultural Trust
(cultural and economic growth organization).
Mrs. Brown serves on the Corporation's Audit
Committee and Community Responsibility
Committee.
Frank V. Cahouet Director Since 1987 Age 65
LOGO
Chairman, President and Chief Executive
Officer of the Corporation. Mr. Cahouet is
also a director of Avery Dennison Corporation,
Saint-Gobain Corporation and Allegheny
Teledyne Incorporated. He serves as Chairman
of the Corporation's Executive Committee.
Christopher M. Condron Director Since 1998 Age 50
LOGO
President and Chief Operating Officer of
Mellon Bank (1998) and Vice Chairman of the
Corporation. Prior to 1994, Mr. Condron was
President of Boston Safe Deposit and Trust
Company and Executive Vice President of The
Boston Company. He serves on the Corporation's
Executive Committee.
C. Frederick Fetterolf Director Since 1984 Age 69
LOGO
Retired President and Chief Operating Officer,
Aluminum Company of America (aluminum and
chemicals). Mr. Fetterolf is also a director
of Allegheny Teledyne Incorporated,
Commonwealth Aluminum Company, Dentsply
International, Inc., Praxair, Quaker State
Corporation and Union Carbide Corporation. He
serves on the Corporation's Executive
Committee, Audit Committee (Chairman), Trust
and Investment Committee and Community
Responsibility Committee (Vice Chairman).
George W. Johnstone Director Since 1996 Age 59
Retired (1997) President and Chief Executive
Officer, American Water Works Company, Inc.
(water services company). Mr. Johnstone serves
on the Corporation's Trust and Investment
Committee.
LOGO
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Andrew W. Mathieson Director Since 1981 Age 69
Vice Chairman, Richard King Mellon Foundation
(philanthropy). From 1992 to 1997, Mr.
LOGO Mathieson also served as Executive Vice
President, Richard K. Mellon and Sons
(investments). He is a director of General Re
Corporation. Mr. Mathieson serves on the
Corporation's Executive Committee, Nominating
Committee (Vice Chairman) and Human Resources
Committee (Chairman).
Seward Prosser Mellon Director Since 1972 Age 55
LOGO
President and Chief Executive Officer, Richard
K. Mellon and Sons (investments) and Richard
King Mellon Foundation (philanthropy).
ACTION BY SHAREHOLDERS
The seven nominees receiving the highest number of votes cast at the annual
meeting by all holders of shares of Common Stock will be elected as directors
for terms expiring in 2001. A vote indicated as withheld from a nominee will
not be cast for such nominee but will be counted in determining the presence of
a quorum.
WITH RESPECT TO THE ELECTION OF DIRECTORS (PROXY ITEM 1), THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES.
THE BOARD AND ITS COMMITTEES; DIRECTORS' COMPENSATION
The Board of Directors held 12 regular meetings during 1997. Each incumbent
director attended at least 75 percent of the aggregate number of meetings of
the Board and of the committees of which he or she was a member during the
period served in 1997. With the exception of the Executive Committee, all Board
committees are composed of directors who are not officers of the Corporation.
The committees of the Board of Directors and a general description of their
respective duties follow:
EXECUTIVE COMMITTEE
The Executive Committee has the power and authority of the Board of Directors
to manage the affairs of the Corporation between meetings of the Board. The
Committee also regularly reviews significant corporate matters and recommends
action as appropriate to the Board. The Executive Committee met 14 times during
1997.
AUDIT COMMITTEE
The Audit Committee oversees the credit policies, accounting practices,
auditing policies, controls and other material financial matters of the
Corporation and its subsidiaries. It provides a channel, independent of
management, through which reports are made to the Board with respect to
auditing and all related matters. The Head of the Corporation's Auditing
Department meets with the Committee at each meeting of the Committee and the
Corporation's independent public accountants meet with the Committee at least
quarterly, with and without representatives of management present, to review
accounting, auditing and financial reporting matters, including the review of
audit plans. The Committee is also responsible for receiving and reviewing the
examination reports of the Corporation by federal bank regulatory authorities,
other than those reports which are reviewed by the Trust and Investment
Committee or the Community Responsibility Committee. The Corporation's
independent public accountants are appointed by the Board of Directors upon the
Committee's recommendation and ratified by the shareholders. The Audit
Committee met eight times during 1997.
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NOMINATING COMMITTEE
The Nominating Committee recommends to the Corporation's Board and to the
Boards of its various significant subsidiaries such as Mellon Bank, Mellon Bank
(DE) National Association, Mellon Bank (MD) National Association, Boston Safe
Deposit and Trust Company, Mellon Bank, F.S.B. (collectively the "Banks"), The
Boston Company, The Dreyfus Corporation and Buck Consultants, Inc., candidates
for nomination for election as directors of the Corporation and of those
respective entities.
The Committee considers nominees recommended by shareholders for election as
directors of the Corporation. To make such a recommendation, a shareholder
should submit in writing the name, address and qualifications of the proposed
nominee to the Secretary of the Corporation, One Mellon Bank Center, Room 4826,
Pittsburgh, Pennsylvania 15258-0001. In addition, the By-Laws of the
Corporation set forth specific procedures that, if followed, enable any
shareholder entitled to vote in the election of directors to make nominations
directly at a meeting of shareholders. Those procedures include a requirement
for written notice to the Corporation at least 90 days prior to the anniversary
date of the previous year's annual meeting of shareholders.
The Committee also reviews and recommends to the Corporation's Board and the
Boards of its various significant subsidiaries policies relating to (a)
practices and responsibilities of the Boards and their various committees and
(b) the components of directors' compensation. The Nominating Committee met one
time during 1997.
HUMAN RESOURCES COMMITTEE
The Human Resources Committee establishes the compensation and benefits of the
Chairman, Chief Executive Officer, President and Chief Operating Officer and
such other senior officers of the Corporation and its subsidiaries as it
determines. The Committee also generally advises and assists management in
implementing programs designed to assure the selection and development of key
personnel and reviews reports regarding the operation and administration of the
Corporation's employee benefits plans. The Committee administers the
Corporation's Profit Bonus Plan, Long-Term Profit Incentive Plan (1996) and
Phantom Stock Unit Plan (1995), including the making of awards thereunder. The
Committee met seven times during 1997.
TRUST AND INVESTMENT COMMITTEE
The Trust and Investment Committee, with general oversight of the trust and
investment activities of the Corporation's subsidiaries, ensures that assets
held in a fiduciary capacity are being administered in accordance with
applicable law and regulations. It acts as a channel independent of management
through which auditing and bank examination reports regarding trust and
investment activities are presented to the Banks' Boards of Directors and is
also responsible for overseeing the administration of fiduciary
responsibilities for the non-bank subsidiaries of the Corporation. It also has
general oversight responsibilities for the trust departments of the Banks. The
Committee met eight times during 1997.
COMMUNITY RESPONSIBILITY COMMITTEE
The Community Responsibility Committee has general oversight responsibility for
the Corporation's policy concerning overall compliance with the Community
Reinvestment Act ("CRA") and Fair Lending laws. In addition, the Committee has
specific responsibilities for reviewing the Corporation's overall policy and
goals concerning CRA and Fair Lending activities, monitoring each Bank's
compliance and reviewing the report of the Corporation's contributions program.
The Committee reviews the examination reports of the Corporation and the Banks
by regulatory authorities concerning CRA and Fair Lending compliance and
renders a report to the Board with respect to these matters. The Committee met
four times during 1997.
TECHNOLOGY COMMITTEE
The Technology Committee has general oversight responsibility for the role of
technology and its use throughout the Corporation. It advises and assists
management in the formulation and implementation of operating and strategic
plans designed to take full advantage of existing and emerging technology. It
monitors the performance of technology throughout the Corporation. The
Committee met six times during 1997.
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DIRECTORS' COMPENSATION
Each director of the Corporation who does not receive a salary from the
Corporation or one of its subsidiaries currently receives a monthly retainer of
$2,292 and, in addition, a per meeting fee of $1,000 for each meeting at which
such director renders services to the Corporation, including meetings of
shareholders, the Board of Directors or any committee of the Board on which he
or she serves, and separate meetings (if any) with senior management of the
Corporation at which services are rendered. In addition, each director who
serves as a Committee chairman receives a quarterly retainer ranging from $750
to $875, depending upon the Committee. The directors also serve as the Board of
Directors of Mellon Bank and are paid a per meeting fee of $700 for attending
meetings of that Board on a day when the Corporation's Board of Directors does
not meet. In 1997, Mr. Connolly received approximately $28,000 in additional
compensation. Non-employee directors may defer all or a portion of their fees
pursuant to the terms of the Corporation's 1990 Elective Deferred Compensation
Plan for Directors and Members of the Advisory Board, which pays interest at a
rate based on the 120 month moving average rates on 10-year Treasury Notes,
plus a premium based on years of service.
In addition, non-employee directors receive stock option grants under the
Corporation's Stock Option Plan for Outside Directors (1989) (the "Directors
Option Plan"), a formula plan under which options to purchase Common Stock are
granted each year on the third business day following the Corporation's annual
meeting of shareholders. Directors (if any) elected between annual meetings
receive an option grant covering a prorated number of shares but with all other
terms identical to those options granted on the regular grant date. All options
have a term of 10 years, become fully exercisable one year from the regular
grant date, and have an exercise price equal to the closing price of the Common
Stock on the New York Stock Exchange on the regular grant date. If the
director's service ceases for any reason other than death, disability or
completion of term of service, options that have not become exercisable are
forfeited. Options that have become exercisable remain exercisable throughout
their 10-year term, regardless of whether the optionee is a director at the
time of exercise. In April 1997, each director, except Messrs. Cahouet,
Condron, McGuinn and Smith, was granted an option covering 4,456 shares of
Common Stock at an exercise price of $38.625 per share (numbers have been
adjusted pursuant to the terms of the Directors Option Plan to reflect the
Corporation's two for one Common Stock split declared in April 1997 (the
"Common Stock Split")).
Non-employee directors who have served on the Board for five years also
participate in the Directors' Retirement Plan, which is intended to assure that
compensation arrangements for directors of the Corporation are adequate to
attract and retain highly qualified individuals. Eligible directors receive
monthly benefits equal to the monthly retainer in effect at his or her time of
retirement from the Board for a period equal to his or her total months of
service on the Board but no longer than 120 months. As a result of informal
life insurance funding, the program is not expected to result in any material
cost to the Corporation.
As part of its overall program to promote charitable giving, the Corporation
has established a Directors' Charitable Giving Program which is informally
funded by Corporation-owned life insurance policies on the directors. Under the
program, upon a director's death the Corporation will donate up to an aggregate
of $250,000 over a 10-year period to one or more qualifying charitable
organizations designated by the director. A director must have served on the
Board for three years to be eligible to participate. As a result of the
informal life insurance funding, the program is not expected to result in any
material cost to the Corporation.
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ADVISORY BOARD
The Corporation also enjoys the services of the Advisory Board, whose current
members are profiled below. The Advisory Board provides to the Board and
management of the Corporation, as requested, general policy advice and
assistance on various business matters. Any person who has been a member of the
Corporation's Board of Directors or who otherwise demonstrates the abilities
required on the Advisory Board, and who has not yet attained the age of 72, is
eligible for annual election by the Board of Directors to the Advisory Board.
Members of the Advisory Board have demonstrated the experience, ability and
willingness to be able to provide valuable advice and assistance to the
Corporation. They are regularly invited to participate in meetings and other
activities of the Board of Directors but are not entitled to vote or take part
in any formal action by the Board. Policies of the Board of Directors provide
that persons who have attained age 70 are not eligible for election or
reelection to the Board of Directors.
Howard O. Beaver, Jr. Advisory Board Since 1990
LOGO
Retired Chairman and Chief Executive Officer,
Carpenter Technology Corporation (wrought
specialty steel producer). Mr. Beaver served
on the Corporation's Board of Directors from
1983 through 1990. Mr. Beaver served as a
director of The Girard Company from 1971 until
its merger with the Corporation in 1983.
John C. Marous Advisory Board Since 1994
LOGO
Retired Chairman and Chief Executive Officer,
Westinghouse Electric Corporation (electronic
products and services). Mr. Marous served on
the Corporation's Board of Directors from 1987
through 1994.
Masaaki Morita Advisory Board Since 1992
LOGO
Chairman, Sony USA Foundation. Mr. Morita
served on the Corporation's Board of Directors
from 1991 through 1992.
Nathan W. Pearson Advisory Board Since 1991
Financial Advisor, Paul Mellon Family
Interests. Mr. Pearson served on the
Corporation's Board of Directors from 1972
through 1991. Mr. Pearson also served as
Chairman of the Board of Directors in 1987.
LOGO
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H. Robert Sharbaugh Advisory Board Since 1995
Retired Chairman, Sun Company, Inc. (energy
services). Mr. Sharbaugh served on the
LOGO Corporation's Board of Directors from 1983
through 1995. Mr. Sharbaugh served as a
director of The Girard Company from 1972 until
its merger with the Corporation in 1983.
Richard M. Smith Advisory Board Since 1994
LOGO
Retired Vice Chairman, Bethlehem Steel
Corporation (integrated steel producer). Mr.
Smith served on the Corporation's Board of
Directors from 1983 through 1994. Mr. Smith
served as a director of The Girard Company
from 1974 until its merger with the
Corporation in 1983.
BUSINESS RELATIONSHIPS AND RELATED TRANSACTIONS
Certain directors, executive officers and principal shareholders of the
Corporation and their associates were customers of and had transactions with
one or more of the Banks or other subsidiaries of the Corporation in the
ordinary course of business during 1997. Similar transactions may be expected
to take place in the future. Loans and commitments included in such
transactions were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with other persons and did not involve more than the normal risk
of collectibility, nor did they present other unfavorable features. The Banks,
in the ordinary course of business, also engage in purchases and sales of
government and municipal securities and in other money market transactions with
certain directors, executive officers and principal shareholders of the
Corporation and their associates. In addition, the Banks act as fiduciaries
under various employee benefit plans of certain customers, the officers of
which are directors of the Corporation and of Mellon Bank.
During 1997, the purchase of goods and services, or the lease of property, by
the Corporation, the Banks or other subsidiaries of the Corporation in the
ordinary course of business included transactions with various director-related
companies of the Corporation. The amounts involved in these transactions were
in no case material in relation to the business of the Corporation, any of the
Banks or any of the other subsidiaries of the Corporation. It is also believed
that the amounts involved in such transactions, as well as the transactions
themselves, were not material in relation to the business of any such director-
related company and that no director had a material interest in any such
transaction. The law firm of O'Melveny & Myers performed legal services for the
Corporation during 1997. Edward J. McAniff, a director of the Corporation, is a
partner of O'Melveny & Myers. The amounts paid by the Corporation to O'Melveny
& Myers were not material to the Corporation or, it is believed, to O'Melveny &
Myers.
CERTAIN LEGAL PROCEEDINGS
Westmoreland Coal Company ("Westmoreland") filed a voluntary petition under
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the
District of Delaware on November 8, 1994. On December 22, 1994, the plan of
reorganization was confirmed. Pemberton Hutchinson, a director of the
Corporation, served as an executive officer of Westmoreland until his
retirement as Chief Executive Officer in June of 1993.
11
<PAGE>
- --------------------------------------------------------------------------------
BENEFICIAL OWNERSHIP OF STOCK
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following table sets forth, as of February 12, 1998, the amount of the
Corporation's stock beneficially owned by each incumbent director, each nominee
and each executive officer named in the Summary Compensation Table appearing on
page 14 and by all incumbent directors, nominees and executive officers of the
Corporation as a group. Except as otherwise indicated, sole voting power and
sole investment power with respect to the shares shown in the table are held
either by the individual alone or by the individual together with their spouse.
<TABLE>
<CAPTION>
Common Stock Owned
Name Beneficially (1) (2) (3)
- -------------------------------------------------------------------------------
<S> <C>
Dwight L. Allison, Jr................................. 11,924
Burton C. Borgelt..................................... 35,860
Carol R. Brown........................................ 19,054
Frank V. Cahouet...................................... 1,902,466(4)
Christopher M. Condron................................ 87,180(5)
J.W. Connolly......................................... 43,476
Charles A. Corry...................................... 31,974(6)
Steven G. Elliott..................................... 308,098
C. Frederick Fetterolf................................ 41,264(7)
Ira J. Gumberg........................................ 100,312
Pemberton Hutchinson.................................. 7,450
George W. Johnstone................................... 2,359
Rotan E. Lee.......................................... 14,182
Andrew W. Mathieson................................... 57,791(8)
Edward J. McAniff..................................... 14,011
Martin G. McGuinn..................................... 334,618(9)
Robert Mehrabian...................................... 16,362
Seward Prosser Mellon................................. 235,072
David S. Shapira...................................... 42,834
W. Keith Smith........................................ 530,761(10)
Joab L. Thomas........................................ 27,314
Wesley W. von Schack.................................. 55,834(11)
William J. Young...................................... 33,534
Directors, Nominees and Executive Officers as a group
(29 persons)......................................... 4,416,625
</TABLE>
- ------
(1) On February 12, 1998, none of the individuals named in the above table
beneficially owned more than 1% of the Corporation's outstanding shares of
Common Stock. On that date, all the directors, nominees and executive
officers as a group owned beneficially approximately 1.7% of the
Corporation's outstanding Common Stock.
(2) The amounts shown include the following amounts of Common Stock which the
indicated individuals and group have the right to acquire within 60 days of
February 12, 1998, through the exercise of stock options granted pursuant
to the Corporation's stock option plans: Mr. Allison, 3,424; Mr. Borgelt,
29,560; Ms. Brown, 12,150; Mr. Cahouet, 691,171; Mr. Condron, 8,756; Mr.
Connolly, 38,976; Mr. Corry, 26,974; Mr. Elliott, 119,609; Mr. Fetterolf,
36,534; Mr. Gumberg, 24,534; Mr. Hutchinson, -0-; Mr. Johnstone; 1,354, Mr.
Lee, 13,882; Mr. McAniff, 10,764; Mr. McGuinn, 113,496; Dr. Mehrabian,
13,362; Mr. Smith, 313,467; Dr. Thomas, 14,514; Mr. Young, 30,534; all
other directors 42,534 shares each; and all directors, nominees and
executive officers as a group, 1,854,945 shares. Shares held in accounts
under the Corporation's Retirement Savings Plan, a 401(k) plan, as to which
the holders have voting power but not investment power, are also included
as follows: Mr. Cahouet, 4,020 shares; Mr. Condron, 606 shares; Mr.
Elliott, 3,162 shares; Mr. McGuinn, 3,497 shares; Mr. Smith, 3,449 shares;
and all executive officers as a group, 25,871 shares.
(3) Certain of the directors, nominees and executive officers named above also
own shares of the 10% Cumulative Non-Convertible Preferred Stock (the "10%
Preferred") of Mellon Preferred Capital
(footnotes continued on next page)
12
<PAGE>
- --------------------------------------------------------------------------------
Corporation, a real estate investment trust subsidiary of the Corporation.
Each of Mrs. Brown, Mr. Gumberg, Mr. Johnstone, Dr. Mehrabian, Mr. Mellon and
Mr. Shapira owns one share of the 10% Preferred, each representing less than
1% of such outstanding shares. Mr. Cahouet, Mr. Condron, Mr. Corry, Mr.
Elliott, Mr. Fetterolf, Mr. Hutchinson, Mr. Mathieson, Mr. McAniff, Mr.
McGuinn, Mr. Smith, Mr. von Schack and Mr. Young each owns one share and the
spouse of each of them also owns one share of the 10% Preferred. Thus,
together with their respective spouses, each of such persons may be
considered to beneficially own 1.6% of the outstanding shares of the 10%
Preferred. Such persons disclaim beneficial ownership of the shares held by
their respective spouses. All the directors, nominees and executive officers
as a group own beneficially approximately 30% of the 123 outstanding shares
of 10% Preferred.
(4) Of these shares, 527,920 are held in trust for Mr. Cahouet's wife and
58,300 are held in the Cahouet Charitable Trust. Mellon Bank is the sole
trustee for Mrs. Cahouet's trust, and Mr. Cahouet has no voting or
investment control over such shares. Mr. Cahouet is a co-trustee with
others and shares voting and investment control over the shares held by the
Cahouet Charitable Trust. Mr. Cahouet disclaims beneficial ownership of all
such shares.
(5) Of these shares, 3,138 are held by Mr. Condron's wife. Mr. Condron
disclaims beneficial ownership of such shares.
(6) On February 12, 1998, Mr. Corry held 6,200 shares of Series K Preferred
Stock of the Corporation. These holdings represented less than 1% of the
Corporation's outstanding shares of Series K Preferred Stock. The Series K
Preferred Stock was redeemed on February 17, 1998.
(7) Of these shares, 2,200 are held by the Fetterolf Family Foundation, as to
which Mr. Fetterolf shares voting and investment power. Mr. Fetterolf
disclaims beneficial ownership of such shares.
(8) Mr. Mathieson is a co-trustee with others, including Mellon Bank, and
shares voting and investment control for trusts which hold an aggregate of
233,428 shares of Common Stock, not shown in the table. Mr. Mathieson
disclaims beneficial ownership of all such shares.
(9) Of these shares, 14,000 are held by Mr. McGuinn's wife. Mr. McGuinn
disclaims beneficial ownership of such shares.
(10) Of these shares, 36,000 are held by Mr. Smith's wife. Mr. Smith disclaims
beneficial ownership of such shares.
(11) Of these shares, 578 are held by Mr. von Schack's wife. Mr. von Schack
disclaims beneficial ownership of such shares.
13
<PAGE>
- --------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows the compensation for the past three years of each of
the Corporation's five most highly compensated officers, including the chief
executive officer (the "named executive officers").
<TABLE>
<CAPTION>
Long Term Compensation
-----------------------------------
Annual Compensation Awards Payouts
------------------------------------------ ------------------------ ----------
Other Annual Restricted Securities LTIP All Other
Name and Compensation Stock Awards Underlying Payouts Compensation
Principal Position (1) Year Salary ($) Bonus (2) ($) ($) ($) (3) (4) Options (5) ($) (6) ($) (7)
- ---------------------- ---- ---------- ------------- ------------ ------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Frank V. Cahouet....... 1997 $960,000 $1,500,000 $17,600 $625,000 1,936 $1,944,377 $237,833
Chairman, President 1996 926,667 1,080,000 16,900 452,163 495,228 1,944,377 272,650
and Chief Executive 1995 860,000 645,000 11,100 268,650 346,892 1,613,127 244,905
Officer
Martin G. McGuinn...... 1997 404,167 487,500 1,800 1,020,188 28,257 482,219 23,641
Chairman and 1996 358,333 350,000 1,500 114,894 69,938 434,016 25,557
Chief Executive
Officer, 1995 285,833 168,000 3,600 69,650 30,352 304,000 20,858
Mellon Bank
Christopher M. Condron. 1997 500,000 487,500 5,400 1,020,188 26,000 486,203 17,104
President and 1996 500,000 375,000 5,200 159,369 51,394 312,516 17,721
Chief Operating
Officer, 1995 313,750 588,000 5,300 134,320 104,700 123,008 19,852
Mellon Bank
W. Keith Smith......... 1997 500,000 487,500 13,400 1,020,188 -0- 783,094 29,296
Senior Vice Chairman, 1996 500,000 310,000 9,500 129,719 68,000 704,818 32,579
Mellon Bank 1995 408,333 240,000 15,000 99,500 -0- 493,126 36,149
Steven G. Elliott...... 1997 400,000 450,000 2,100 1,004,563 812 482,219 23,269
Senior Vice Chairman, 1996 358,333 350,000 2,500 114,894 82,888 554,989 18,108
Mellon Bank 1995 285,833 183,750 5,300 77,113 29,414 334,330 11,495
</TABLE>
- ------
(1) The principal positions for the named executive officers are given as of
the date of the Proxy Statement for Mr. Cahouet and as of April 1, 1998 for
each of the other officers. During 1997, the principal position for each of
Messrs. McGuinn, Condron and Smith was that of Vice Chairman of the
Corporation, and Mr. Elliott's principal position was Vice Chairman and
Chief Financial Officer of the Corporation.
(2) Bonus awards are generally payable 75% in cash and 25% in restricted shares
of the Corporation's Common Stock or phantom stock units equivalent to
restricted shares. In calculating the number of restricted shares or
phantom stock units to be awarded as the non-cash portion of the bonus
awards, the value of the non-cash portion of the award was divided by the
per share fair market value of the Common Stock on the grant date with the
result multiplied by 125% to take into account the financial impact of the
restrictions placed on the stock or phantom stock units. The restrictions
generally prevent transfer or sale of the stock for a three year period and
subject the shares to forfeiture in the event the executive terminates his
employment with the Corporation during that three year period. Similarly,
phantom stock units would become payable in cash at the end of three years
and are subject to forfeiture upon earlier termination of employment.
During the restriction period, the executive has full voting rights with
respect to restricted shares and receives dividends, or dividend
equivalents with respect to phantom stock units, at the same rate as other
holders of the Corporation's Common Stock. The aggregate market value of
such restricted stock or phantom stock units on the award date is disclosed
as Long Term Compensation under "Restricted Stock Awards". No phantom stock
units were granted for 1996 or 1997. Also included under "Bonus" are
additional cash bonus amounts paid for 1996 in recognition of the
assumption of additional responsibility and for outstanding service.
(3) Messrs. McGuinn, Condron, Smith and Elliott each received a grant of 17,000
shares of Common Stock pursuant to Transitional Restricted Stock Agreements
in 1997. The shares are restricted against transfer and will be earned only
if two triggers are met: (i) the attainment of performance goals
established by the Human Resources Committee of the Board of Directors in
compliance with Section 162(m) of the Internal Revenue Code and (ii) the
continued employment of the executive through the derestriction dates. The
performance goals require that for 1998 both (i)
(footnotes continued on next page)
14
<PAGE>
- --------------------------------------------------------------------------------
earnings per share and (ii) either (x) return on common equity or (y)
efficiency ratio targets are met. The number of shares that may be earned, if
any, will vary, but not in excess of 17,000, according to the level at which
the earnings per share performance goal is met. The continued employment
requirement provides that 60% of the earned shares will derestrict on January
1, 2000 and 40% of the earned shares will derestrict on January 1, 2001,
following the executive's continuous employment through December 31, 1999 and
December 31, 2000, respectively. All dividends with respect to the restricted
stock will be withheld by the Corporation during the period the restrictions
are in effect and paid to the executive upon derestriction of the shares. The
executive has full voting rights with respect to the shares, and dividends
are payable at the same rate as that paid to other holders of the
Corporation's Common Stock.
(4) The number and value of the aggregate restricted stock and phantom stock
unit holdings of each of the named officers at the end of 1997 were as
follows: Mr. Cahouet--30,000/$1,818,750; Mr. McGuinn--26,100/$1,582,313;
Mr. Condron--28,300/$1,715,688; Mr. Smith--26,800/$1,624,751; Mr. Elliott--
26,400/$1,600,500. The preceding restricted stock and phantom stock units
were valued using the Common Stock's December 31, 1997 closing price of
$60.625 per share on the New York Stock Exchange.
(5) Numbers have been adjusted to reflect the Common Stock Split.
(6) Long Term Incentive Plan Payouts, in the form of deferred cash incentive
awards, were also paid in January of 1998 in connection with the exercise
of accelerated stock options, including payments to Messrs. Cahouet,
McGuinn, Condron, Smith and Elliott, of $2,056,876, $528,632, $619,510,
$659,280 and $504,157, respectively. These January, 1998 payments will be
recorded as 1998 LTIP Payouts in the Summary Compensation Table included in
next year's Proxy Statement.
(7) Includes for 1997 for Messrs. Cahouet, McGuinn, Condron, Smith and Elliott,
respectively, the following compensation amounts: (i) the portion of
interest accrued (but not currently paid or payable) on deferred
compensation above 120% of the applicable federal long-term rate at the
maximum rate payable under the Corporation's Elective Deferred Compensation
Plan for Senior Officers, $137,020, $17,534, $5,915, $1,145, $15,147; (ii)
matching contributions under the Corporation's Retirement Savings Plan, a
401(k) plan, $3,000, $3,000, $3,000, $3,000, $3,000; (iii) the present
value of the economic benefit to the executive from corporate premiums paid
to purchase split dollar life insurance contracts under the Mellon Bank
Senior Executive and Optional Life Insurance Plans, $88,555, $1,787,
$6,935, $21,445, $4,072; and (iv) cash paid to the executive equal to his
imputed income under the Mellon Bank Senior Executive Life Insurance Plan,
$9,258, $1,320, $1,254, $3,706, $1,050.
15
<PAGE>
- --------------------------------------------------------------------------------
OPTION GRANTS IN 1997
Shown below is information on grants of stock options pursuant to the
Corporation's Long-Term Profit Incentive Plan (1996) (the "Option Plan") during
the year ended December 31, 1997. The Option Plan is administered by the Human
Resources Committee of the Board of Directors, which has authority to determine
the individuals to whom options are granted and the terms of all grants
thereunder. No stock appreciation rights were granted under the Option Plan in
1997. In the event of a change of control of the Corporation, as defined in the
Option Plan, all the option grants shown below would become immediately
exercisable.
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------
Number of Percent of
Securities Total Options Exercise
Underlying Granted to Price (per Grant Date
Options Employees share) Expiration Present
Name Granted (1) in 1997 ($) (1) Date Value ($) (4)
- ---- ----------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Frank V. Cahouet........ 1,936(2) .1% $38.0625 1/21/07 $ 17,121
Martin G. McGuinn....... 19,842(3) 1.2% 52.0000 10/20/04 264,418
8,415(3) .5% 52.0000 10/17/06 121,760
Christopher Condron..... 1,034(2) * 38.0625 1/21/07 9,144
10,862(3) .7% 37.3125 11/20/05 87,833
9,750(3) .6% 51.3750 10/20/04 128,221
4,354(3) .3% 51.3750 10/17/06 62,198
Steven G. Elliott....... 812(2) * 38.0625 1/21/07 7,181
</TABLE>
- ------
* Less than .1%
(1) Numbers have been adjusted pursuant to the terms of the Option Plan to
reflect the Common Stock Split.
(2) Option is exercisable annually in thirds beginning on 1/21/98.
(3) Reload options granted in 1997 become exercisable three years after their
grant date; provided, however, that if the option holder sells any of the
shares acquired on exercise of the underlying option before such date, the
entire reload option will expire. The reload option grants shown above
would become exercisable as follows: Mr. McGuinn--10/21/00, 10/21/00, Mr.
Condron--1/23/00, 10/29/00, 10/29/00.
(4) Based on the Black-Scholes model adapted for use in valuing executive stock
options. There is no assurance the value realized by an executive will be
at or near the value estimated by the Black-Scholes model. The actual
value, if any, an executive may realize will depend on the excess of the
stock price over the exercise price on the date the option is exercised. In
determining the Black-Scholes value, the following underlying assumptions
were used: (i) stock price volatility represents the standard deviation of
the Common Stock over the three year period prior to grant of the option
(i.e., from 22.07% to 25.40%); (ii) dividend yield represents the
cumulative dividends per share for the 12-month period prior to grant of
the option, divided by the average monthly price of the Common Stock over
the same period (i.e., from 2.97% to 3.95%); (iii) the risk-free rate of
return represents the average weekly yield on 10-year Treasury Notes over
the 52 week period prior to grant of the option as derived from the
Compuserve Public Data Base (i.e., from 6.41% to 6.61%); (iv) option term
represents the period from the date of grant of each option to the
expiration of the term of the option; (v) vesting restrictions are
reflected by reducing the value of the option determined by the Black-
Scholes model by 4% for each full year of vesting restrictions (i.e., by
12% for each of the options being valued); (vi) reload options are valued
assuming that the option holder does not sell any of the shares acquired on
exercise of the underlying option before the vesting date of the reload
option.
16
<PAGE>
- --------------------------------------------------------------------------------
AGGREGATED OPTION/SAR EXERCISES IN 1997 AND YEAR-END OPTION VALUES
The following table shows information with respect to the exercise of stock
options during 1997 by each of the named executive officers and the value of
unexercised options on December 31, 1997. No SARs are currently outstanding
under the Option Plan.
<TABLE>
<CAPTION>
Shares Value Number of Securities Value of Unexercised
Acquired on Realized Underlying Unexercised In-the-Money Options
Exercise ($) (1) Options at Year-End at Year-End ($) (2)
----------- ----------- ------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Frank V. Cahouet........ 496,756 $12,439,788 685,209 802,907 $27,719,933 $27,664,368
Martin G. McGuinn....... 74,583 1,999,603 112,850 144,992 4,726,215 4,226,872
Christopher M. Condron.. 56,474 1,100,906 21,464 151,256 792,233 4,592,936
W. Keith Smith.......... 145,844 3,120,266 313,467 98,965 13,357,038 3,445,113
Steven G. Elliott....... 69,492 1,519,368 118,490 126,432 4,843,917 4,186,204
</TABLE>
- ------
(1) The "Value Realized" is equal to the difference between the option exercise
price and the fair market value of the Common Stock on the New York Stock
Exchange on the date of exercise.
(2) The "Value of Unexercised In-the-Money Options at Year-End" is equal to the
difference between the option exercise price and the Common Stock's
December 31, 1997 closing price of $60.625 per share on the New York Stock
Exchange.
PENSION PLAN TABLE
The following table sets forth the estimated annual benefits payable on a
single-life annuity basis on retirement at age 65 pursuant to the retirement
plans of the Corporation and Mellon Bank to participating employees, including
officers, in specified compensation and years-of-service classifications. The
credited years of service for Messrs. Cahouet, McGuinn, Condron, Smith and
Elliott are, 11, 17, 20, 11 and 11, respectively. Benefits are determined based
upon average base salary for the five years of highest compensation during the
10 years preceding retirement.
<TABLE>
<CAPTION>
Estimated Annual Pension for Representative Years of Credited Service
Average Annual -----------------------------------------------------------------------
Base Salary 10 15 20 25 30 35
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 200,000 $ 28,500 $ 42,500 $ 57,000 $ 71,000 $ 85,500 $ 99,500
300,000 43,500 65,000 87,000 108,500 130,500 152,000
400,000 58,500 87,500 117,000 146,000 175,500 204,500
500,000 73,500 110,000 147,000 183,500 220,500 257,000
600,000 88,500 132,500 177,000 221,000 265,500 309,500
700,000 103,500 155,000 207,000 258,500 310,500 362,000
800,000 118,500 177,500 237,000 296,000 355,500 414,500
900,000 133,500 200,000 267,000 333,500 400,500 467,000
1,000,000 148,500 222,500 297,000 371,000 445,500 519,500
1,100,000 163,500 245,000 327,000 408,500 490,500 572,000
1,200,000 178,500 267,500 357,000 446,000 535,500 624,500
</TABLE>
Payment of the amounts shown in the table is subject to annual limitations
imposed by the Internal Revenue Code on tax-qualified plans. To the extent the
benefits set forth above exceed these limitations, benefits will be paid
pursuant to nonqualified supplemental plans maintained by the Corporation and
Mellon Bank.
SUPPLEMENTAL RETIREMENT AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
In order to attract and motivate senior executives and to encourage such
executives to remain with the Corporation and its affiliates, the Corporation
has provided certain of the named executive officers with retirement and/or
death benefits, as described below, supplementing those available under the
retirement plans described above.
17
<PAGE>
- --------------------------------------------------------------------------------
Mr. Cahouet
Under the terms of his employment agreement (discussed below), Mr. Cahouet will
be entitled to receive an unfunded supplemental retirement benefit. The
supplemental benefit is calculated on an unreduced 50% joint and survivor basis
and would be a monthly amount equal to Mr. Cahouet's Final Average Compensation
(defined below) multiplied by a Compensation Percentage (defined below) and
reduced by the total monthly amount of benefits provided to him under all
retirement plans maintained by the Corporation and Mellon Bank. "Final Average
Compensation" means the average monthly amount of Mr. Cahouet's base salary and
any bonus award for the 36 consecutive months within the term of his employment
agreements that produce the highest average amount. "Compensation Percentage"
means 50% plus 2.5% for each full year of employment which Mr. Cahouet has
completed under his current employment agreement (discussed below). If Mr.
Cahouet's termination of employment with the Corporation were due to his death
prior to the commencement of the payment of the supplemental benefits under his
employment agreement, his spouse would be entitled to a pre-retirement death
benefit, payable in the form of a lifetime annuity, equal to the benefit that
would have been payable had he retired immediately prior to death assuming
election of an unreduced 50% joint and survivor annuity. If Mr. Cahouet retires
after age 65, he will be entitled for the period after he attains age 65 until
his actual retirement date to receive both (A) an actuarial increase in the
gross supplemental retirement benefit which would have been payable to him if
he had retired when he attained age 65 and (B) an additional incremental gross
supplemental retirement benefit, without actuarial increase, based on his
additional service and increase, if any, in his Final Average Compensation
subsequent to attaining age 65. For purposes of determining the benefit
described in clause (A), Final Average Compensation may be determined based on
Base Salary for the 36 consecutive months from June 1, 1994 to May 31, 1997 and
bonus awards paid to Mr. Cahouet for work performed in the 36-month period from
January 1, 1995 to December 31, 1997, if such base salary and bonus awards
result in a higher Final Average Compensation. Based on his 1997 compensation
and assuming retirement at the end of the term of his employment agreement,
supplemental retirement benefits payable to Mr. Cahouet under the agreement are
estimated at approximately $1,966,000 per year.
Mr. Smith
Mr. Smith is entitled to receive an unfunded supplemental retirement benefit
equal to the difference between the amounts to which he is entitled under the
retirement plans included in the above Pension Table (the "Corporation
Retirement Benefits") and the amount of Corporation Retirement Benefits he
would receive if he were credited with 8 years of additional service to the
Corporation and his final average compensation under the retirement plans were
to include base salary and any bonuses awarded to him by the Corporation in the
relevant years. Mr. Smith may also earn additional credit for up to five years
of service based on, and in addition to, his actual service with the
Corporation and its subsidiaries after August 1, 1994 through his retirement
date. Currently, Mr. Smith is deemed to have 21 years of service for purposes
of calculating his benefits under the retirement plans and his supplemental
retirement agreement.
EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
Mr. Cahouet
In connection with Mr. Cahouet's appointment in June 1987 as the Chairman and
Chief Executive Officer and a director of the Corporation and Mellon Bank, Mr.
Cahouet entered into an employment agreement which had a term lasting until
July 25, 1993. In July of 1993, Mr. Cahouet entered into a new employment
agreement with a termination date of May 31, 1997, and in 1995 this termination
date was extended to December 31, 1998. The current employment agreement
provides, among other things, for an annual base salary of $760,000, subject to
periodic increases which must take into consideration the salaries of the chief
executive officers of the 10 largest bank holding companies in the United
States, life insurance in the amount of twice his annual salary, perquisites
appropriate to his position, including club memberships, physical examinations
and personal financial planning services, and the supplemental retirement
benefits described above. The employment agreement was amended in 1995 to
provide Mr. Cahouet with certain additional supplemental retirement benefits,
described above, which become payable if he retires after age 65. The bank
holding companies against whose chief executive officers Mr. Cahouet's salary
is measured are included in both the Standard &
18
<PAGE>
- --------------------------------------------------------------------------------
Poor's 500 Stock Index and the KBW 50 Index used to prepare the Corporation's
Performance Graph shown on page 21. The agreement also provides that, if Mr.
Cahouet's employment is terminated other than for cause, he will receive full
salary and benefits until the expiration of its term and a pro-rated portion of
any bonuses for the year of termination. If Mr. Cahouet's employment is
terminated for cause or Mr. Cahouet terminates his employment for reasons other
than a constructive discharge, permanent disability or retirement, he will
receive any benefits that may have vested prior to such termination under the
supplemental retirement provisions of his employment agreement or under the
terms of the Corporation's generally applicable employee benefit plans.
Mr. McGuinn
In connection with Mr. McGuinn's recent appointment as the Chairman and Chief
Executive Officer of Mellon Bank and a director of Mellon Bank and the
Corporation, it is proposed that Mr. McGuinn will enter into an employment
agreement with a term lasting until January 31, 2001. The employment agreement
anticipates that Mr. McGuinn will become the Chairman and Chief Executive
Officer of the Corporation effective January 1, 1999. The employment agreement
also provides for an annual base salary of $700,000, subject to periodic
increases, participation in all of Mellon Bank's and the Corporation's
executive compensation and other benefit programs and perquisites appropriate
to Mr. McGuinn's position.
Mr. Condron
In connection with Mr. Condron's recent appointment as the President and Chief
Operating Officer of Mellon Bank and a director of Mellon Bank and the
Corporation, it is proposed that Mr. Condron will enter into an employment
agreement with a term lasting until January 31, 2001. The employment agreement
anticipates that Mr. Condron will become the President and Chief Operating
Officer of the Corporation effective January 1, 1999. The employment agreement
also provides for an annual base salary of $650,000, subject to periodic
increases, participation in all of Mellon Bank's and the Corporation's
executive compensation and other benefit programs and perquisites appropriate
to Mr. Condron's position.
Mr. Elliott
In connection with Mr. Elliott's recent appointment as Senior Vice Chairman of
Mellon Bank, it is proposed that Mr. Elliott will enter into an employment
agreement with a term lasting until January 31, 2001. The employment agreement
anticipates that Mr. Elliott will become Senior Vice Chairman of the
Corporation effective January 1, 1999. The employment agreement also provides
for an annual base salary of $450,000, subject to periodic increases,
participation in all of Mellon Bank's and the Corporation's executive
compensation and other benefit programs and perquisites appropriate to Mr.
Elliott's position.
OTHER COMPENSATION
Displacement Policy
Under the Corporation's Employee Displacement Program, employees of the
Corporation may receive certain benefits if their employment with the
Corporation is terminated due to technological changes or other business
reasons not related to individual performance. Such benefits may include
temporary assignments, placement assistance, benefits continuation and/or
severance payments based upon years of service. The program is subject to
revision or termination at the Corporation's discretion at any time.
Change in Control Arrangements
In addition to the benefits available to employees under the Employee
Displacement Program, all employees are entitled to 12 months of base salary
and benefit continuation if they are terminated, other than for good cause,
within three years after a change in control (as defined in the adopting
resolution) of the Corporation. In addition, if a change in control of the
Corporation occurs, employees will have a nonforfeitable right to their accrued
benefits under Mellon Bank's tax-qualified retirement plan and will be entitled
to certain increased retirement benefits if the retirement plan's assets exceed
its liabilities at the time the change in control occurs. A change in control
will generally not
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occur for purposes of these rights to salary and benefit continuation and
increased retirement benefits if the Corporation's Board of Directors has
recommended that shareholders vote for approval of a merger or consolidation
transaction. These rights may not be amended after the occurrence of a change
in control.
Change in Control Severance Agreements--Senior Officers
The Corporation has entered into change in control severance agreements (the
"Agreements") with the Chairman, each of the other named executive officers and
certain other senior officers of the Corporation. The purpose of the Agreements
is to secure the continued service and dedication of the executives in the
event of an actual or threatened Change in Control (as defined in the
Agreements). Each Agreement becomes operative only upon both a Change in
Control and the subsequent termination of employment of the executive in
accordance with the terms of the Agreement. Payments under the Agreements are
in full settlement of all other severance payments which may otherwise be
payable to the executive under any other severance plan or agreement of the
Corporation, including the programs mentioned above. The following discussion
summarizes the key provisions of the Agreements covering the Chairman and each
other named executive officer. If the employment of any of the named executive
officers is terminated during the three-year period following a Change in
Control of the Corporation, either by the Corporation other than for Cause (as
defined in the Agreements) or by the executive for Good Reason (as defined in
the Agreements, including the termination of employment by the executive for
any reason during the 30-day period commencing one year after the date of such
Change in Control), the executive will be entitled to receive: (a) a lump sum
cash amount equal to such executive's unpaid salary and bonus amounts which
have become payable and have not been deferred, plus a pro-rata portion of such
executive's annual bonus for the fiscal year of termination of employment; (b)
severance pay in a lump sum cash amount equal to three times the sum of (i) the
executive's highest annual rate of base salary during the 12-month period
immediately prior to his termination of employment and (ii) the executive's
highest annual incentive bonus earned during the last three completed fiscal
years of the Corporation; (c) continuation of medical, dental, accident,
disability and life insurance benefits for the executive and his dependents for
a period of three years following the executive's date of termination of
employment; and (d) three additional years of service credit under all non-
qualified retirement plans and excess benefit plans in which the executive
participated as of his date of termination. If the executive's date of
termination is within three years of the earliest date on which such
termination could be considered a Retirement (as defined in the Agreements),
the benefits described in (b), (c) and (d) in the preceding sentence will be
reduced accordingly. Payments to the Chairman will also be reduced by the
amount of severance payments made pursuant to his employment agreement
(discussed above). In the event that payments related to a Change in Control of
the Corporation to any executive under the Agreements or otherwise are subject
to the excise tax under Section 4999 of the Internal Revenue Code, the
Corporation will generally provide the executive with an additional amount
sufficient to enable the executive to retain the full amount of his Change in
Control benefits as if the excise tax had not applied, unless a reduction in
such Change in Control related payments by less than 5% would result in the
excise tax not being imposed on such executive, in which case payments under
the Agreement shall be reduced (but not below zero) to the amount that could be
paid to such executive without giving rise to such excise tax.
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PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total shareholder
return on the Corporation's Common Stock, based on the market price of the
Common Stock and assuming reinvestment of dividends, with the cumulative total
return of companies on the Standard & Poor's 500 Stock Index and the KBW 50
Index. The KBW 50 Index, available from Keefe, Bruyette & Woods, Inc., is a
market-capitalization-weighted bank-stock index made up of 50 of the nation's
most important banking companies including all money-center and most major
regional banks. The Corporation is included in the KBW 50 Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
Among S&P 500 Index, KBW 50 Index and Mellon Bank Corporation.
LOGO
CHART APPEARS HERE
<TABLE>
<CAPTION>
December 31,
-----------------------------
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Mellon Bank Corporation........................... 100 103 93 171 234 411
KBW 50 Index...................................... 100 106 100 160 227 332
S&P 500 Index..................................... 100 110 112 153 189 252
</TABLE>
- ------
* Assumes that the value of the investment in the Corporation's Common Stock
and each index was $100 on December 31, 1992 and that all dividends were
reinvested.
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COMPENSATION COMMITTEE REPORT
INTRODUCTION
The Corporation's Human Resources Committee (the "Committee") is composed
entirely of independent outside directors. The Committee has among its duties
the responsibility for establishing and reviewing the compensation and benefits
of the senior managers of the Corporation and its subsidiaries, including the
compensation of the Chairman and the other named executive officers. The
Committee actively advises and assists management in formulating and
implementing policies designed to assure the selection, development and
retention of key personnel.
Under the guidance of the Committee, the Corporation's compensation policies
are designed to accomplish the larger goal of managing the Corporation towards
increased profitability and shareholder value. Accordingly, two principles
underlying the Corporation's compensation policy for all senior managers,
including the Chairman and the other named executive officers, are (i) aligning
the financial interests of senior managers with those of the Corporation's
shareholders and (ii) paying for corporate and individual performance. These
principles are reflected in the structure of the Corporation's compensation
program for senior managers, which consists of three basic components: base
salary, annual awards under the Profit Bonus Plan (the "Bonus Plan") and awards
under the Long-Term Profit Incentive Plan (1996) (the "Option Plan"). Through
this structure, the Committee places emphasis on the "at risk" elements of
compensation for senior managers. Base salaries are generally set somewhat
below the market, and the incentive components of the Bonus Plan and the Option
Plan are relied on to achieve a competitive compensation package. There was no
change in 1997 in the Corporation's overall compensation policy for senior
managers.
Awards under the Corporation's incentive plans are tied to corporate, business
unit and individual performance. The accomplishment of the goals and objectives
of the Corporation's operating and strategic plans are the basis for making
awards under the Bonus Plan and the Option Plan and, except where performance
goals have been set under the Option Plan, there is no formal weighting of
various factors. Together, the plans provide the Committee with the flexibility
to grant awards in a manner that is believed by the Committee to encourage
managers to continually focus on building high quality profitability and long-
term shareholder value. Under the Option Plan, deferred cash incentive awards
payable in the amount of an option's exercise price may be awarded in
connection with an option grant. In the event the exercisability of the related
option is accelerated, the deferred cash incentive award becomes operative and
must be used by the executive to pay the option's exercise price upon exercise;
provided however, that such award will only be payable if the Corporation
achieves certain pre-established performance goals. Performance goals are based
on maintenance of or changes in one or more of the following objective business
criteria: earnings or earnings per share; return on equity, assets or
investment; revenues; expenses; stock price; market share; charge-offs; or non-
performing assets. The Committee may apply its discretion, where the goals have
been met, only to decrease the preestablished amount of the award. These
requirements have been imposed so that the amounts paid to executive officers
under such awards will qualify for the "performance based compensation"
exception to the cap on deductibility of executive compensation set forth in
the regulations adopted under Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code").
BASE SALARY
In 1997, base salaries were increased for a number of the Corporation's senior
managers. In considering recommendations for increases in the base salaries of
these senior managers, the Committee reviewed the performance of each officer
against various objectives, including performance against the business plans to
date for 1997 for those lines of business for which he was responsible. The
Corporation's business plans and the elements thereof applicable to its various
lines of business include financial performance targets such as: income,
expenses, asset quality, operating margin, return on assets and return on
capital. In addition to such evaluations, the Committee compared the
recommended increases to compensation data based on an independent survey of
comparable executive officers of 16 other financial institutions similar to the
Corporation in terms of size, and/or the mix of its lines of business. These
comparative financial institutions are included within the KBW 50 Index used
for the Performance Graph on page 21.
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The Chairman's base salary is established pursuant to his employment contract
and prior to January 1998 was last increased in May 1996. (See "Employment
Agreements with Named Executive Officers" on page 18). The contract requires
that the Committee consider the salaries of the chief executive officers of the
ten largest bank holding companies in the United States when setting the
Chairman's salary. These institutions are included within the KBW 50 Index. In
January 1998, the Committee considered the Corporation's performance against
its business plan for 1996 and 1997, the Corporation's achievement of strategic
goals and the Corporation's total returns to shareholders in terms of share
price appreciation and dividends. The Committee then reviewed 1996 base salary
and total compensation data for the relevant chief executive officer peer
group. Based upon the results of such evaluation and review, the Chairman's
base salary was set at $1,000,000, approximately the seventy-fifth percentile
of the base salaries of the relevant peer group of chief executive officers.
OPTION PLAN AWARDS
In 1997, the Committee reviewed the long-term incentive component of total
compensation for the Corporation's senior managers, including the Chairman and
the other named executive officers, and awarded additional options. In
conducting its review the Committee considered the comparative compensation
data mentioned above. The number of options previously granted to each officer
was considered in determining the number of shares covered by each award.
The Committee reviews the performance of senior managers annually and within
its discretion considers whether the exercise date for certain previously
granted options should be accelerated. As provided for in the Option Plan, the
exercise of these accelerated options is intended to include the payout of a
deferred cash incentive award to the optionee in an amount equal to the
exercise price for such options. The optionee must use the cash award to pay
the option exercise price of such accelerated options. Such acceleration, and
payment of the attendant deferred cash incentive awards, are a significant
element of the incentive component of total compensation for the Corporation's
senior managers. As discussed above, the payment of deferred cash incentive
awards is tied to the achievement of preestablished corporate level performance
goals. Accordingly, in February of 1996, the Committee adopted performance
goals applicable to the calendar year 1996 which required certain levels of
core net income available to Common Stock, earnings per share of Common Stock
or core return on common equity to be achieved in order for a set percentage of
the outstanding deferred cash incentive awards to be earned. In January of 1997
the Committee certified the achievement of the performance goals for 1996. As a
result, deferred cash incentive awards were paid to the Chairman and each of
the other named executive officers in an amount not exceeding one-fourth of his
outstanding deferred cash incentive awards. These awards are disclosed in the
LTIP Payouts column on the "Summary Compensation Table" on page 14. Similarly,
in February of 1997, the Committee adopted performance goals applicable to the
calendar year 1997 which required the achievement of certain levels of net
income available to Common Stock, earnings per share of Common Stock or return
on common equity. In January of 1998, the Committee certified the performance
goals for 1997 to have been achieved. As a result, deferred cash incentive
awards were paid to the Chairman and each of the other named executive officers
in an amount not exceeding one-fourth of his outstanding deferred cash
incentive awards.
TRANSITIONAL RESTRICTED STOCK
In 1997, the Committee approved grants to the Corporation's senior managers,
other than the Chairman, of shares of Common Stock pursuant to Transitional
Restricted Stock Agreements. These awards were designed to give senior
management additional incentive to remain focused on meeting performance goals
and to serve as retention incentive during the transition to the Corporation's
new Chairman. The shares are restricted against transfer and will be earned
only if two triggers are met: (i) the attainment of performance goals
established by the Committee in compliance with Section 162(m) of the Code and
(ii) the continued employment of the executive through the derestriction dates.
The performance goals require that for 1998 both (i) earnings per share and
(ii) either (x) return on common equity or (y) efficiency ratio targets are
met. The number of shares that may be earned, if any, will vary according to
the level at which the earnings per share performance goal is met. The
continued employment requirement provides that 60% of the earned shares will
derestrict on January 1, 2000 and 40% of the earned shares will derestrict on
January 1, 2001, following the executive's continuous employment through
December 31, 1999 and December 31, 2000, respectively.
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Shares will derestrict on a prorated basis on January 1, 2000 and January 1,
2001 in the case of earlier death, disability or retirement of the executive.
All dividends with respect to the restricted stock will be withheld by the
Corporation during the period the restrictions are in effect and paid to the
executive only upon derestriction of the shares. The executive has full voting
rights with respect to the shares, and all dividends are payable at the same
rate as that paid to other holders of the Corporation's Common Stock.
BONUS PLAN AWARDS
The Committee considered and approved bonus awards for 1997 for the
Corporation's senior managers, including the Chairman and the other named
executive officers, which were generally payable 75% with cash and 25% with
restricted shares of the Corporation's Common Stock. In connection with making
awards under the Corporation's Bonus Plan for 1997, the Committee again
examined the performance of its senior managers. This review focused on the
individual performance of each officer for full year 1997 and on the
Corporation's overall performance in achieving the objectives of its 1997
operating plan and taking significant steps in the execution of its strategic
plan. Each officer was evaluated based in significant measure upon performance
against the 1997 business plan of the lines of business for which he was
responsible, including the achievement of financial targets such as income,
expenses, asset growth, operating margin and return on capital. In determining
the Chairman's Bonus Plan award for 1997, the Committee evaluated the Chairman
within the context of the year experienced by the Corporation in terms of
achieving the objectives of its 1997 operating plan, as well as the Chairman's
leadership in planning and implementing strategic and operating initiatives
designed to increase the long-term value of the Corporation's franchise. The
results of each officer's evaluation was then applied to a matrix correlating
the numerical rating from his performance evaluation and his office or position
to yield a Bonus Plan award ranging from zero percent to 150% of base salary
for the Vice Chairmen and 200% of base salary for the Chairman. In recognition
of the Chairman's leadership during 1997, a year that saw the Corporation
report record earnings, the Chairman received the maximum Bonus Plan award of
200% of his new base salary.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
As part of the Omnibus Budget Reconciliation Act of 1993 (the "Act"), Section
162(m) limiting the deductibility of executive compensation for officers of
public companies was added to the Code. In December 1995, the Internal Revenue
Service issued final regulations defining the "performance-based compensation"
exception to Section 162(m)'s general disallowance of the ordinary business
expense deduction for compensation in excess of $1 million paid to a company's
chief executive officer and each of the next four most highly compensated
executive officers. As discussed above, the Option Plan has been designed to
allow the Committee, in its discretion, to grant incentive compensation awards
that comply with the final regulations. Based upon the Committee's actions in
granting performance based awards and the level of income deferrals elected by
the named executive officers, the Corporation does not expect to lose any
deductions for 1997.
The Corporation and the Committee will continue to examine the issue of
deductibility of executive compensation within the context of the overall
operation of the Corporation's compensation plans and will consider what
additional actions should be taken, if any, to operate the compensation plans
in a tax effective manner. The Committee will examine particularly carefully
any compensation proposal or program if there is a reasonable likelihood that
the Corporation would lose a deduction as a consequence of its adoption.
The foregoing report is presented by the Human Resources Committee of the Board
of Directors.
Andrew W. Mathieson, Chairman Joab L. Thomas
J. W. Connolly, Vice Chairman Wesley W. von Schack
Charles A. Corry William J. Young
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PROPOSAL TO AMEND THE CORPORATION'S RESTATED ARTICLES OF INCORPORATION TO
INCREASE THE AUTHORIZED COMMON STOCK (PROXY ITEM 2)
PROPOSED AMENDMENT
The Board of Directors proposes that the shareholders consider and adopt an
amendment to Article Fifth of the Corporation's Restated Articles of
Incorporation (the "Restated Articles") to (i) increase the total authorized
number of shares from 450 million to 850 million and (ii) increase the
authorized number of shares of Common Stock from 400 million to 800 million.
For the wording of the proposed amendment, see Annex A attached hereto.
REASONS FOR AMENDMENT
Pursuant to Article Fifth of the Restated Articles, the Board of Directors is
authorized to issue Common Stock and Preferred Stock from time to time. As of
February 12, 1998, approximately 287.4 million shares of Common Stock were
issued and outstanding or reserved or designated for specific issuance. This
leaves approximately 112.6 million shares of Common Stock available for future
issuance. Approval of the proposed increase would give the Corporation
approximately 512.6 million shares of Common Stock available for future
issuance.
The Corporation also has 50 million shares of authorized preferred stock, par
value $1.00 per share (the "Preferred Stock"), of which 8,000,000 shares of
Series K Preferred Stock were outstanding on February 12, 1998. The Series K
Preferred Stock was redeemed on February 17, 1998. No increase in the
authorized number of shares of Preferred Stock is requested.
The proposed additional shares of Common Stock could be issued for any proper
corporate purpose, including stock splits, the payment of stock dividends or
other distributions in shares of stock, the acquisition of other businesses,
the raising of additional capital for use in the Corporation's business, or in
connection with employee stock incentive programs. While the Corporation
currently has no arrangements, understandings or commitments with respect to
the issuance of the additional shares of Common Stock, it is considered
advisable to have the authorization to issue such shares in order to enable the
Corporation, as the need may arise, to move promptly to take advantage of
market conditions and the availability of other favorable opportunities without
the delay and expense involved in calling a special shareholders meeting for
such purpose.
The authorization of additional shares of Common Stock will not, by itself,
have any effect on the rights of holders of existing Preferred Stock and Common
Stock. Depending on the circumstances, any issuance of additional shares of
Common Stock may dilute the present equity ownership of current shareholders.
Holders of Preferred Stock and Common Stock have no preemptive rights to
participate in any such issuance.
If the proposed amendment to the Restated Articles is approved, the Board of
Directors will have the authority to issue the additional authorized shares or
any part thereof to such persons and for such consideration as it may determine
without further action by the shareholders except as required by law, the
Restated Articles or the rules of any stock exchange on which the Corporation's
securities may then be listed. The New York Stock Exchange, on which the issued
shares of Common Stock are listed, currently requires specific shareholder
approval as a prerequisite to listing shares in certain limited circumstances.
Although the proposed amendment is not intended to be an anti-takeover measure,
shareholders should note that, under certain circumstances, the additional
shares of Common Stock could be used to make any attempt to gain control of the
Corporation or the Board of Directors more difficult or time-consuming. Any of
the additional shares of Common Stock could be privately placed with purchasers
who might side with the Board in opposing a hostile takeover bid. It is
possible that such shares could be sold with or without an option, on the part
of the Corporation, to repurchase such shares, or on the part of the purchaser,
to put such shares to the Corporation.
The amendment to increase the authorized Common Stock might be considered to
have the effect of discouraging an attempt by another person or entity, through
the acquisition of a substantial number of shares of the Corporation's stock,
to acquire control of the Corporation, since the issuance of the additional
shares of Common Stock could be used to dilute the stock ownership of a person
or entity seeking to obtain control and to increase the cost to a person or
entity seeking to acquire a majority of
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the voting power of the Corporation. If so used, the effect of the additional
authorized shares of Common Stock might be (i) to deprive shareholders of an
opportunity to sell their stock at a temporarily higher price as a result of a
tender offer or the purchase of shares by a person seeking to obtain control of
the Corporation or (ii) to assist incumbent management in retaining its present
position.
ACTION BY SHAREHOLDERS
The Board of Directors believes that adoption of the proposed Amendment to
Article Fifth of the Corporation's Restated Articles is in the best interests
of the Corporation and its shareholders. Approval of this proposal requires a
favorable vote of the holders of a majority of the votes cast by all holders of
the outstanding shares of Common Stock. The Pennsylvania Business Corporation
Law provides that an abstention is not a vote cast. Therefore, in a case like
this where a favorable vote of the holders of a majority of the votes cast at
the annual meeting is required, an abstention will not have the effect of a
vote for or against the proposal and will not be counted in determining the
number of votes required for approval, though it will be counted in determining
the presence of a quorum.
WITH RESPECT TO PROXY ITEM 2, THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS VOTE FOR THE PROPOSED AMENDMENT TO ARTICLE FIFTH OF THE
CORPORATION'S RESTATED ARTICLES TO (I) INCREASE THE TOTAL AUTHORIZED NUMBER OF
SHARES FROM 450 MILLION TO 850 MILLION AND (II) INCREASE THE AUTHORIZED NUMBER
OF SHARES OF COMMON STOCK FROM 400 MILLION TO 800 MILLION.
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS (PROXY ITEM 3)
The Board of Directors, at its February 17, 1998 meeting, appointed KPMG Peat
Marwick LLP as independent public accountants of the Corporation for the year
ending December 31, 1998. KPMG Peat Marwick LLP served as the Corporation's
independent public accountants for the year ended December 31, 1997. Although
the appointment of independent public accountants is not required to be
approved by shareholders, the Board of Directors believes shareholders should
participate in such selection through ratification. If the shareholders fail to
ratify KPMG Peat Marwick LLP as the independent public accountants, the Board
of Directors will reconsider its selection. Representatives of KPMG Peat
Marwick LLP will be present at the annual meeting with an opportunity to make a
statement if they so desire and will be available to respond to appropriate
questions.
ACTION BY SHAREHOLDERS
Adoption of the proposal requires the approval of a majority of the votes cast
at the annual meeting by all holders of Common Stock. The Pennsylvania Business
Corporation Law provides that an abstention is not a vote cast. Therefore, in a
case like this where the favorable vote of the holders of a majority of the
votes cast at the annual meeting is required, an abstention will not have the
effect of a vote for or against the proposal and will not be counted in
determining the number of votes required for approval, though it will be
counted in determining the presence of a quorum.
WITH RESPECT TO THE RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS (PROXY ITEM
3), THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT PUBLIC ACCOUNTANTS OF THE
CORPORATION FOR THE YEAR ENDING DECEMBER 31, 1998.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Corporation's executive officers and directors, and persons who own more than
10% of a registered class of the Corporation's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission (the "SEC") and the New York Stock Exchange. Executive officers,
directors and greater than 10% shareholders are required by SEC regulation to
furnish the Corporation with copies of all Section 16(a) forms they file. Based
solely on its review of the copies of such forms received by the Corporation,
or written representations from certain reporting persons that no Form 5's were
required for those persons, the Corporation believes that, for 1997, all such
filing requirements were complied with.
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ADDITIONAL INFORMATION; SHAREHOLDER PROPOSALS
The Board of Directors does not know of any other business that may be
presented for consideration at the annual meeting, other than one shareholder
proposal submitted by two shareholders that has been omitted from this Proxy
Statement in accordance with the rules of the Securities and Exchange
Commission. If such shareholder proposals or any other business should properly
come before the meeting, it is the intention of those named in the Proxies
solicited hereby to vote the shares represented by such Proxies in accordance
with their judgment on such matters. Proposals of shareholders intended to be
presented at the Corporation's annual meeting to be held in 1999 must be
received by the Corporation no later than November 10, 1998 to be considered
for inclusion in the Proxy Statement and form of Proxy relating to the 1999
annual meeting.
The cost of solicitation of proxies for the 1998 annual meeting will be borne
by the Corporation. In addition to solicitation by mail, regular employees of
the Corporation may solicit proxies by telephone or personal interview.
Brokerage houses and other custodians, nominees and fiduciaries will be
requested to forward soliciting material to the beneficial owners of Common
Stock held of record by such persons and will be reimbursed by the Corporation
for their expenses. In addition, the Corporation has retained D. F. King & Co.,
Inc., 77 Water Street, New York, New York 10005 to aid in the solicitation of
proxies from brokers, banks, other nominees and institutional holders at an
estimated fee of $7,000 plus expenses.
By Order of the Board of Directors
Carl Krasik
Secretary
March 10, 1998
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ANNEX A
RESOLVED, That the first paragraph of Article Fifth of Mellon Bank
Corporation's Restated Articles of Incorporation shall be amended as follows:
Fifth: The aggregate number of shares which the Corporation shall have
authority to issue is 850,000,000 [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 800,000,000 [400,000,000] shares shall be Common Stock, par value
$0.50 per share.
(Language to be inserted is underlined and language to be deleted is enclosed
in brackets.)
A-1
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- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
RESERVATION FORM FOR MELLON BANK CORPORATION ANNUAL MEETING OF SHAREHOLDERS
Admission cards will be forwarded to shareholders whose reservation forms are
received by April 8, 1998. All other admission cards will be provided at the
check-in desk at the meeting.
I expect to attend the Annual Meeting at 10:00 A.M., on April 21, 1998, in
Pittsburgh, PA.
Name ............................
(Please Print)
Address
............................
(Please Print)
..................................
(PLEASE COMPLETE AND RETURN IN THE ENCLOSED ENVELOPE IF YOU PLAN TO ATTEND THE
ANNUAL MEETING)
<PAGE>
[LOGO OF MELLON BANK CORPORATION]
This Proxy is solicited on behalf of the Board of Directors of the Corporation.
The undersigned hereby appoints Carl Krasik, William E. Marquis and Ann M.
Sawchuck, or any of them, each with full power of substitution as attorneys
and proxies of the undersigned to vote all Mellon Bank Corporation Common
Stock of the undersigned at the Annual Meeting of Shareholders of the
Corporation to be held on Tuesday, April 21, 1998, at 10:00 A.M., on the
10th floor of the Union Trust Building, 501 Grant Street, Pittsburgh,
Pennsylvania, and at any adjournment of such meeting, as fully and effectually
as the undersigned could do if personally present, and hereby revokes all
previous proxies for said meeting. Where a vote is not specified, the proxies
will vote the shares represented by this Proxy FOR the election of all nominees
for director, FOR Proxy Item 2 and FOR Proxy Item 3 and will vote in their
discretion on such other matters that may properly come before the meeting.
This Proxy is solicited on behalf of the Board of Directors of the Corporation,
and may be revoked prior to its exercise. The Board of Directors recommends
votes FOR the election of all nominees for director, FOR Proxy Item 2 and
FOR Proxy Item 3.
(Continued and to be signed and dated, on reverse side)
<PAGE>
FOLD AND DETACH HERE
Where a vote is not specified, the proxies will vote shares represented
by this Proxy FOR the election of directors, FOR Proxy Item 2 and FOR Proxy
Item 3 and will vote in their discretion on such other matters that may
properly come before the meeting.
Please mark
your votes as [X]
indicated in
this example.
Proxy Item 1--
The election of directors
FOR WITHHOLD
all nominees AUTHORITY
listed herein to vote for all
(except as withheld nominees
in space provided) listed herein
[ ] [ ]
Nominees: Ira J. Gumberg, Edward J. McAniff, Martin G. McGuinn,
David S. Shapira, W. Keith Smith, Joab L. Thomas and William J. Young.
(Instructions: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
___________________________________________________________________________
Note: A vote FOR the election of directors includes discretionary authority
to vote for a substitute if any nominee is unable to serve or for good cause
will not serve.
Proxy Item 2--Proposal to amend the Corporation's Restated Articles of
Incorporation to increase the authorized number of shares of Common Stock.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Proxy Item 3--Ratification of appointment of KPMG
Peat Marwick LLP as independent public accountants.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please date and sign exactly as name appears hereon. When signing as attorney,
executor, administrator, trustee, guardian, etc., full title as such should be
shown. For joint accounts, each joint owner should sign. If more than one
trustee is listed, all trustees should sign, unless one trustee has power to
sign for all.
___________________________________________________________________________
(Signature of Shareholder)
___________________________________________________________________________
(Signature of Shareholder)
Dated:_______________________________________________________________, 1998
FOLD AND DETACH HERE
