<PAGE>
ALEX. BROWN INCORPORATED
135 East Baltimore Street
Baltimore, Maryland 21202
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Alex. Brown Incorporated will be
held on Monday, April 25, 1994, at 4:30 p.m. at the Harbor Court Hotel, 550
Light Street, Baltimore, Maryland, for the following purposes:
(a) Election of directors to hold office until the next Annual Meeting of
Stockholders or until their respective successors are duly elected and
qualified;
(b) Consideration of a proposal to amend the Alex. Brown Incorporated 1991
Equity Incentive Plan;
(c) Consideration of a proposal to approve the Alex. Brown Incorporated
Management Compensation Plan; and
(d) Consideration of such other business as may properly come before the
meeting.
Holders of the Company's Common Stock as of the close of business on March
11, 1994 are entitled to notice of and to vote at the meeting.
For your convenience, a form of proxy is enclosed. You are urged to
complete and return the proxy.
By Order of the Board of Directors
Robert F. Price
Secretary
March 25, 1994
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
ALEX. BROWN INCORPORATED
135 East Baltimore Street
Baltimore, Maryland 21202
PROXY STATEMENT
(First Mailed to Stockholders on March 25, 1994)
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Alex. Brown Incorporated (the
"Company") to be voted at the Annual Meeting of Stockholders (the "Meeting")
scheduled to be held on Monday, April 25, 1994 at the Harbor Court Hotel, 550
Light Street, Baltimore, Maryland and at any adjournment or adjournments
thereof. The solicitation of proxies generally will be by mail and by
directors and officers of the Company. In some instances, solicitations may be
made by telephone, telegraph or other means.
All costs incurred in connection with the solicitation of proxies will be
borne by the Company. No compensation will be paid by the Company in
connection with the solicitation of proxies, but custodians, nominees and
fiduciaries will be requested to send proxies and proxy material to their
principals, and the Company will reimburse them for reasonable out-of-pocket
and clerical expenses.
Any stockholder giving a proxy pursuant to this solicitation may revoke it
at any time prior to exercise of the proxy by giving written notice of such
revocation to the Secretary of the Company at 135 East Baltimore Street,
Baltimore, Maryland 21202, or by attending the Meeting and voting in person.
The presence in person or by proxy of stockholders entitled to cast a
majority of all the votes entitled to be cast at the Meeting will constitute a
quorum for the Meeting. Abstentions and withhold-authority votes will count
for the purpose of determining a quorum. On March 11, 1994, the record date
for the determination of stockholders entitled to notice of and to vote at the
Meeting, the Company had outstanding and entitled to vote 15,474,631 shares of
common stock, par value $.10 per share (the "Common Stock"). The Common Stock
has no cumulative voting rights, and each issued and outstanding share of
Common Stock is entitled to one vote at the Meeting or any adjournment or
adjournments thereof.
Each properly executed proxy will be voted in accordance with the
instructions marked on it. With regard to the election of directors, votes may
be cast "FOR" or "WITHHELD." With regard to the proposals to amend the Alex.
Brown Incorporated 1991 Equity Incentive Plan and to approve the Alex. Brown
Incorporated Management Compensation Plan, votes may be cast "FOR," "AGAINST"
or "ABSTAIN." In the absence of specific instructions, a proxy will be voted
FOR the election, as directors of the Company, of the nominees identified in
this Proxy Statement, FOR the amendment of the Alex. Brown Incorporated 1991
Equity Incentive Plan, FOR the approval of the Alex. Brown Incorporated
Management Compensation Plan and in the sole discretion of the proxy holders
as to any other matters. The affirmative vote of a plurality of all votes cast
at the Meeting is required for the election of directors. All other matters
require the affirmative vote of a majority of all votes cast. Shares voted
include votes FOR or AGAINST a proposal but do not include broker non-votes,
abstentions or withhold-authority votes.
<PAGE>
ELECTION OF DIRECTORS AND RELATED MATTERS
It is proposed that ten directors, constituting all of the current members
of the Company's Board of Directors (the "Board"), be elected at the Meeting,
each to serve until the next annual meeting of stockholders or until his
successor is duly elected and qualified. There is no family relationship
between any of the director-nominees or between any of such nominees and any
executive officer of the Company.
Each of the nominees has agreed to serve, if elected. If one or more of
the nominees is unable to serve for any reason, the holders of proxies
solicited hereby reserve the right to nominate and vote for any other person
or persons of their choice. Certain pertinent information regarding each of
the nominees follows:
LEE A. AULT III
Mr. Ault, who is 57 years of age, has been a private investor since 1992.
Previously, Mr. Ault was Chairman and Chief Executive Officer of Telecredit,
Inc., a supplier of payment services. Mr. Ault has been a member of the Board
since 1992, and he currently serves on its Audit Committee, of which he is
Chairman, as well as on its Compensation Committee. Mr. Ault is also a
director of Equifax Inc., Sunrise Medical Inc. and Viking Office Products,
Inc.
THOMAS C. BARRY
Since December 1993, Mr. Barry, who is 50 years of age, has been President
and Chief Executive Officer of Marlboro, Ltd., a financial consulting and
investment management firm. Previously, Mr. Barry was President and Chief
Executive Officer of Rockefeller & Co., Inc., a registered investment advisor.
Mr. Barry has been a member of the Board since 1987, and he currently serves
on its Audit Committee, as well as on its Compensation Committee, of which he
is Chairman. Mr. Barry is also a director of The France Growth Fund, Inc.
ANDR~E W. BREWSTER
Mr. Brewster, who is 68 years of age, has been a partner of the law firm
of Piper & Marbury since 1958. Mr. Brewster has been a member of the Board
since 1987, and he currently serves on its Organization Committee. Mr.
Brewster is also the Chairman of the Board of Directors of The Ryland Group,
Inc.
BENJAMIN H. GRISWOLD IV
Mr. Griswold, who is 53 years of age, has been the Chairman of the Board
of the Company since 1987 and a member of the Board since 1986. Mr. Griswold
is also a director of The Baltimore Life Insurance Company and Life of
Maryland, Inc.
DONALD B. HEBB, JR.
Mr. Hebb, who is 51 years of age, is a Managing Director of Alex. Brown &
Sons Incorporated ("Alex. Brown"), the Company's principal subsidiary, and a
general partner of ABS Partners, which acts as the general partner of ABS
Capital Partners, L.P., a merchant banking investment fund organized by the
Company. Prior to February, 1991, Mr. Hebb was President and Chief Executive
Officer of the Company. Mr. Hebb has been a member of the Board since 1986.
A. B. KRONGARD
Mr. Krongard, who is 57 years of age, has been Vice Chairman and Chief
Executive Officer of the Company since July, 1991. From May, 1989 to July,
1991, Mr. Krongard was Chief Operating Officer of the Company. Previously, Mr.
Krongard was a Managing Director of Alex. Brown. Mr. Krongard has been a
member of the Board since 1989.
<PAGE>
STEVEN MULLER, PH.D.
Dr. Muller, who is 66 years of age, is President Emeritus of The Johns
Hopkins University. Since 1990, Dr. Muller has been Chairman of the 21st
Century Foundation, an educational initiative to provide unity among
democratic nations. Dr. Muller is also Co-Chairman of the American Institute
for Contemporary German Studies. Dr. Muller has been a member of the Board
since 1987, and he currently serves on its Audit Committee, as well as on its
Organization Committee, of which he is Chairman. Dr. Muller is also a director
of Beneficial Corporation, Millipore Corporation, American Capital Closed End
and Common Sense Funds and The Law Companies Group, Inc.
DAVID M. NORMAN
Since 1987, Mr. Norman, who is 53 years of age, has been Chairman and
Chief Executive Officer of BNB Resources PLC (U.K.), an executive search,
recruitment and human resource training firm. Mr. Norman has been a member of
the Board since 1992, and he currently serves on its Audit and Compensation
Committees.
FRANK E. RICHARDSON
Mr. Richardson, who is 54 years of age, is President of Wesray Capital
Corporation, a merchant banking firm. Mr. Richardson has been a member of the
Board since 1991, and he currently serves on its Organization Committee. Mr.
Richardson is also a director of Outlet Communications, Inc., Sonic Corp.,
Dyersburg Fabrics Inc. and TLC Beatrice International.
MAYO A. SHATTUCK III
Mr. Shattuck, who is 39 years of age, has been President and Chief
Operating Officer of the Company since July, 1991. Previously, Mr. Shattuck
was a Managing Director of Alex. Brown. Mr. Shattuck has been a member of the
Board since 1991.
OTHER INFORMATION REGARDING THE BOARD OF DIRECTORS
Mr. Griswold has notified the Board that he does not wish to be considered
for reelection as Chairman of the Board. Upon the unanimous recommendation of
the Board's Organization Committee, the nominees for directors, all of whom
currently constitute the Board, have expressed their intention to elect Mr.
Krongard as the Chairman of the Board at the next meeting of the Board
following the Meeting and to bestow upon Mr. Griswold the title of "Chairman
Emeritus."
BOARD COMMITTEES
During 1993, the Board had three standing committees--the Audit Committee,
the Compensation Committee and the Organization Committee.
The Audit Committee oversees the financial reporting of the Company and
its subsidiaries and the related financial and accounting control systems of
the Company and its subsidiaries. The Audit Committee also recommends to the
Board the appointment of the Company's independent auditors.
The Compensation Committee reviews and approves cash compensation and
grants under the Company's equity incentive plans and supervises the
administration of the Company's other compensation plans. The Compensation
Committee Report on Executive Compensation is included beginning on page 15 of
this Proxy Statement.
<PAGE>
The Organization Committee provides guidance and assistance to the Board
in discharging its organizational overview and corporate governance
responsibilities and serves as the nominating committee for the Board.
ATTENDANCE AT MEETINGS
During the year ended December 31, 1993, the Board held eight meetings,
the Audit Committee held four meetings, the Compensation Committee held five
meetings, and the Organization Committee held five meetings. All of the
Company's directors attended 75% or more of the aggregate of all Board
meetings and all meetings of committees of which they were members.
DIRECTORS' FEES
Directors who are employed by the Company receive no additional
compensation for serving on the Board. Each Director who is not an employee of
the Company ("Non-Employee Directors") receives an annual retainer of $20,000
plus $1,000 per Board meeting or committee meeting attended and reasonable
travel expenses incurred in connection with attendance at such meetings. A
portion of the annual retainer is paid in Common Stock pursuant to the 1991
Non-Employee Director Equity Plan (the "Director Plan") described below. In
addition, chairmen of committees of the Board are paid an annual stipend of
$2,500 in cash for each committee which they chair.
1991 NON-EMPLOYEE DIRECTOR EQUITY PLAN
The Director Plan, which was approved by the Company's stockholders in
May, 1991, provides Non-Employee Directors with incentives to improve the
Company's performance by increasing their level of stock ownership and
provides an additional means of attracting and retaining Non-Employee
Directors through the issuance of the Company's Common Stock and the granting
of Stock Options. Participation in the Director Plan by Non-Employee Directors
is mandatory.
The Director Plan provides that, immediately following the date of the
annual meeting of stockholders, each Non-Employee Director will receive a
portion of his or her annual retainer in Common Stock and will also receive a
stock option to purchase 1,500 shares of Common Stock. The number of shares of
Common Stock to be issued to each Non-Employee Director is determined by
dividing 90% of the average of the daily closing prices for the ten
consecutive business days preceding the date of the annual meeting of
stockholders of the Company (the "Market Price") into the annual retainer
payable to each participant, and multiplying that number by a designated
percentage determined by the Board. The designated percentage is currently
50%. The purchase price for the Common Stock subject to the stock option is
the Market Price. The maximum aggregate number of shares of Common Stock that
may be issued under the Director Plan is 300,000, which may be appropriately
adjusted in the event of any extraordinary dividend, recapitalization,
reorganization, merger, spin-off, or similar change affecting the Common
Stock.
In 1993, pursuant to the Director Plan, the Company issued a total of
3,186 shares of Common Stock and options to purchase 9,000 shares of Common
Stock to the six Non-Employee Directors. The Director Plan will terminate on
May 15, 2001.
THE BOARD RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE NOMINEES.
<PAGE>
PROPOSAL TO AMEND THE ALEX. BROWN
INCORPORATED 1991 EQUITY INCENTIVE PLAN
On May 15, 1991, the stockholders approved the 1991 Equity Incentive Plan
(the "1991 Plan"). It is proposed that the 1991 Plan be amended, to the extent
discussed below, in order to provide for Awards with respect of up to an
additional 1,056,000 shares of Common Stock and the partial forgiveness of
loans associated with such Awards, as well as to conform the 1991 Plan to new
Federal income tax regulations regarding deductibility of compensation and
various requirements of the Federal securities laws. The full text of the
original 1991 Plan is set forth as Exhibit A to this Proxy Statement, and
reference is made thereto for a complete statement of its terms and
provisions.
In furtherance of the objectives of the 1991 Plan, on July 26, 1993, the
Board approved the Equity Partnership Plan (the "Partnership Plan") as a
component of the 1991 Plan to enable selected Managing Directors and
Principals of Alex. Brown to purchase significant positions in the Company's
Common Stock and debentures convertible into Common Stock.
Under the Partnership Plan, 544,000 shares of Common Stock and debentures
convertible into 1,056,000 shares of Common Stock were sold in various amounts
to 75 Alex. Brown Managing Directors and Principals recommended by the
Compensation Committee to the Board.
The Company financed the purchase of the Common Stock sold to recipients
pursuant to 10 year recourse loans with an initial interest rate of 6.36%
(subject every 3 years to reset, not to exceed 200 basis points over the then
prevailing broker call rate). Those loans are subject to performance-based
forgiveness of up to $3.71 per share (15.6% of the principal amount of the
loan) over the 10 year life of the loans. The amount of possible loan
forgiveness represents the difference between the book value ($20.04) and the
market value ($23.75) of the Common Stock on the date of issuance.
The debentures have an 8 year term and, as to the conversion feature, are
50% vested after four years, 75% vested after five years and fully vested
after six years. The debentures bear a stated interest rate of 5.32% and are
convertible into Common Stock at $23.75 per share. Subject to shareholder
approval, the debentures under the Partnership Plan are being financed
pursuant to 6 year recourse loans with a fixed interest rate of 5.32%, subject
to performance-based forgiveness of up to 15.6% of the principal amount of the
loans (calculated as above) over the 6 year life of the loans.
The purchases of the convertible debentures, and the authorization of
loans with respect thereto (but not the purchases of Common Stock and the
authorization of the related loans) are subject to and conditioned upon
stockholder approval of the proposed amendments to the 1991 Plan. The
Compensation Committee of the Board believes that if the proposed amendments
are approved, compensation paid under the 1991 Plan can be structured so as to
be tax deductible, upon certification by the Compensation Committee that
performance goals and any other material terms have been satisfied. See
Exhibit B for a discussion of the Federal income tax consequences of Awards
made under the 1991 Plan, as proposed to be amended.
The proposed amendments to the 1991 Plan are as follows:
1. Section 5(a) shall be amended to read as follows:
Subject to adjustment under subsection (b), Awards may be made under the
Plan in each calendar year during any part of which the Plan is effective
in respect of a maximum of seven and one-half percent (7.5%) of the total
shares of Common Stock outstanding on the first day of such year, provided
that Awards with respect to up to an additional 1,056,000 shares of Common
Stock may be made under Section 10 of the Plan during the period August 4,
1993 through December 31, 1993. If any award in respect of shares of Common
Stock expires or is terminated unexercised or is forfeited for any reason,
the shares subject to such Award, to the extent of such expiration,
termination or forfeiture shall again be available for Award under the
Plan. Common Stock issued through the assumption or substitution of
outstanding grants from any acquired company shall not reduce the shares
available for Awards under the Plan.
<PAGE>
2.Section 12(h) shall be amended to read as follows:
(h) Loans. The Committee may authorize the making of loans or cash
payments to Participants in connection with any Award under the Plan.
Such loans may be secured by any security, including Common Stock,
underlying or related to such Award (provided that such loan shall not
exceed the Fair Market Value of the security subject to such Award).
Certain loans, or any portion thereof, will be forgiven under the terms
of the loans if the Company's return on equity for subsequent annual
periods, or its cumulative return on equity for subsequent three year
periods, exceeds targets predetermined by the Committee. The maximum
amount of such loans to any Participant is limited to the Fair Market
Value of the maximum number of shares in respect of which Awards may be
made pursuant to Section 12(1). Other loans may be forgiven upon such
terms and conditions as the Committee may establish at the time of such
loans or at anytime thereafter.
3.A new Section 12(l) is added to read as follows:
Notwithstanding any other provisions of the Plan, the Committee may not
grant to any one Participant Awards under the Plan in respect of more
than 250,000 shares of Common Stock in any calendar year during any
part of which the Plan is effective.
During 1993, the following individuals and groups made the indicated
purchases, and received the indicated amount of loan forgiveness, under the
Partnership Plan.
NEW PLAN BENEFITS
NAME AND POSITION LOAN
FORGIVENESS
NUMBER OF UNITS DURING 1993
SHARES OF
COMMON STOCK
REPRESENTED
BY
CONVERTIBLE
COMMON STOCK DEBENTURES
- ---------------------------------------------------------------
A.B. Krongard 34,000 66,000 $200,000
Chief Executive
Officer and Director
Mayo A. Shattuck III 25,500 49,500 $150,000
President, Chief
Operating Officer
and Director
W. Gar Richlin 15,300 29,700 $90,000
Managing Director,
Alex. Brown &
Sons Incorporated
All current executive 103,700 201,300 $610,000
officers as a group
(13 persons)
All employees, 440,300 854,700 $2,590,000
including all
current officers who
are not executive
officers, as a group
THE BOARD RECOMMENDS A VOTE "FOR" APPROVAL OF THE PROPOSED AMENDMENTS TO
THE 1991 PLAN.
<PAGE>
PROPOSAL TO APPROVE THE MANAGEMENT COMPENSATION PLAN
On March 1, 1994, the Board adopted the Management Compensation Plan (the
"Plan"), subject to stockholder approval. The following constitutes the Plan.
THE MANAGEMENT COMPENSATION PLAN
Each of the Chief Executive Officer (the "CEO"), the Chief Operating
Officer and the other members of the Company's Operating Committee (currently
11 individuals) is eligible to participate in the Plan (the "Participants.")
Each Participant will receive a base salary. The base salary for each
Participant is currently $200,000 per annum, except for one Participant who
receives a base salary of $300,000 per annum. In future years, base salaries
may vary at the discretion of the Compensation Committee. The CEO is eligible
to receive incentives generated only by the Plan and is not eligible to
receive incentives from division incentive pools. The other Participants are
eligible to receive incentives generated by the Plan and may also receive
incentive compensation from division incentive pools.
The Maximum Cumulative Incentive Amount payable under the Plan will be
determined by a formula established by the Compensation Committee which
relates incentives to the Company's Adjusted Annual Earnings Before Income
Taxes ("Adjusted Earnings"). Adjusted Earnings are earnings before income
taxes as reported in the Company's Consolidated Statement of Earnings for the
applicable year, after deducting the base salaries of Participants and their
incentives, if any, received from division pools, but before deducting any
incentive payments under the Plan. The actual amount paid may be less than the
Maximum Cumulative Incentive Amount.
Under the terms of the Plan, no Participant may be allocated more than 75%
of the Maximum Cumulative Incentive Amount in any year. The percentage
allocations to Participants for 1994 were determined by the Compensation
Committee in February, 1994. In future years, the percentage allocations will
be determined by the Compensation Committee before the beginning of each year.
The share of the Maximum Cumulative Incentive Amount to be paid to each
Participant is determined by the Compensation Committee upon its review of the
CEO's assessment of the Participant's compensation versus performance and, in
the case of the CEO, an assessment by the Compensation Committee of his
performance compared to predetermined objectives.
The Maximum Cumulative Incentive Amount will be calculated by taking the
incremental amount of Adjusted Earnings shown in the table below times the
percentage for each increment and summing the amounts derived for all
increments:
ADJUSTED PERCENT MAXIMUM POTENTIAL MAXIMUM CUMULATIVE
EARNINGS APPLIED INCREMENTAL AMOUNT INCENTIVE AMOUNT
- ----------------- -------- --------------------- ---------------------
Up to $25 million 5% $1.25 million $1.25 million
From $25 million 10% $2.50 million $3.75 million
to $50 million
Above $50 million 13% 13% of incremental $3.75 million plus
amount in excess of 13% of incremental
$50 million amount in excess of
$50 million
The Compensation Committee believes that, upon approval of the Plan by the
stockholders and certification by the Committee that performance goals and any
other material terms have been satisfied, compensation paid under the Plan
will be tax deductible. The approval of the Plan by the stockholders and the
previously mentioned certification by the Compensation Committee will be
conditions to the receipt by Participants of any payments under the Plan.
<PAGE>
PAYMENTS UNDER THE PLAN
The actual amounts that will be paid to Participants under the Plan for
1994 performance are not currently determinable, as such amounts will depend
upon the Company's results of operations and the Compensation Committee's
determination of the share of the Maximum Cumulative Incentive Amount to be
paid to each Participant (subject to the maximum percentage allocations
established by the Compensation Committee in February 1994.) Similarly, since
the Plan was not in effect for 1993 and the Compensation Committee's
consideration of each Participant's compensation from base salary and
incentive pools for the year was completed without regard to any amounts which
might be allocated under the Plan, it is not possible to determine the amounts
under the Plan which would have been received by the Participants had the Plan
been in effect for such year.
THE BOARD RECOMMENDS A VOTE "FOR" APPROVAL OF THE MANAGEMENT COMPENSATION
PLAN.
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information, as of March 11, 1994 with
respect to the beneficial ownership of the Company's Common Stock by each
person who is known by the Company to own more than 5% of the outstanding
shares of Common Stock, by each director and nominee for election as a
director of the Company, by the Company's Chief Executive Officer, by the
other four most highly compensated executive officers in 1993, and by all
directors and executive officers as a group:
NAME OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- ----------------------------- ------------------------ --------
Peter R. Kellogg ............ 1,549,000 (1) 10.0%
115 Broadway
New York, New York 10006
FMR Corp. ................... 782,100 (2) 5.1
82 Devonshire Street
Boston, Massachusetts 02109
Benjamin H. Griswold IV ..... 407,034 (3) (4) (5) 2.6
A. B. Krongard .............. 271,070 (3) (5) 1.8
Donald B. Hebb, Jr .......... 218,272 (3) (5) 1.4
Timothy T. Weglicki ......... 171,602 (3) (5) (6) 1.1
Mayo A. Shattuck III ........ 123,068 (3) (5) (7) *
Bruce H. Brandaleone ........ 88,973 (3) (5) *
Andr~e W. Brewster .......... 47,399 (5) (8) *
W. Gar Richlin .............. 34,939 (3) (5) *
Frank E. Richardson ......... 27,334 (5) *
Lee A. Ault III ............. 17,638 (5) *
Thomas C. Barry ............. 11,334 (5) *
Steven Muller ............... 6,334 (5) (9) *
David M. Norman ............. 4,238 (5) *
All directors and executive . 1,914,298 (3) (5) 12.4
officers as a group (21
persons)
- ---------------------------------------------------------------
*Indicates less than 1% beneficial ownership
(1) All information pertaining to Peter R. Kellogg and the number of shares
owned by Mr. Kellogg is based upon a Form 3 dated August 24, 1992 which
was provided to the Company by Mr. Kellogg and which reported information
as of August 15, 1992. According to that Form 3, Mr. Kellogg owns 741,500
shares directly and 700,000 shares indirectly through a corporation which
he owns. In addition, members of his immediate family own 107,500 shares.
(2) All information pertaining to FMR Corp. and the number of shares owned by
it is based upon Amendment No. 1 to Schedule 13G which reported information
as of February 11, 1994.
(3)Managing Directors and Principals of Alex. Brown & Sons Incorporated and
certain other persons are parties to the Company's First Amended and
Restated Stockholders' Agreement (the "Stockholders' Agreement") and as of
the record date hold in the aggregate approximately 4,075,237 shares of the
Company's Common Stock under the Stockholders' Agreement. The parties to
the Stockholders' Agreement are required to vote their shares of the
Company's Common Stock in accordance with the vote of the holders of a
majority of the shares subject to the Stockholders' Agreement. Subject to
certain limitations, parties to the Stockholders' Agreement retain
dispositive control of stock held subject to the terms of the Stockholders'
Agreement. The share number listed in the table excludes shares (other than
those of the designated individual or of those individuals included under
"All directors and executive officers as a group") subject to the
Stockholders' Agreement.
<PAGE>
(4)Included is an aggregate of 59,292 shares held in seven trusts of which Mr.
Griswold is a trustee for the benefit of certain family members. Mr.
Griswold disclaims beneficial ownership of such shares.
(5)Beneficial ownership shown for the following individuals and group also
includes the indicated number of shares of Common Stock that may be
purchased within the next sixty days upon the exercise of Stock Options as
well as shares of Common Stock which may be received upon conversion of
debentures within the next sixty days: Mr. Griswold--Options for 2,861
shares of Common Stock and debentures convertible into 12,478 shares of
Common Stock; Mr. Krongard--debentures convertible into 24,957 shares of
Common Stock; Mr. Hebb--Options for 2,861 shares of Common Stock and
debentures convertible into 21,071 shares of Common Stock; Mr.
Weglicki--Options for 5,266 shares of Common Stock and debentures
convertible into 9,643 shares of Common Stock; Mr. Shattuck--Options for
24,480 shares of Common Stock and debentures convertible into 7,160 shares
of Common Stock; Mr. Brandaleone--Options for 18,136 shares of Common Stock
and debentures convertible into 14,854 shares of Common Stock; Mr.
Brewster--Options for 4,500 shares of Common Stock; Mr. Richlin--Options
for 3,250 shares of Common Stock and debentures convertible into 9,638
shares of Common Stock; Mr. Richardson--Options for 4,500 shares of Common
Stock; Mr. Ault--Options for 3,000 shares of Common Stock; Mr.
Barry--Options for 4,500 shares of Common Stock; Dr. Muller--Options for
4,500 shares of Common Stock; Mr. Norman--Options for 3,000 shares of
Common Stock; and all other executive officers as a group--Options for
133,356 shares of Common Stock and debentures convertible into 125,806
shares of Common Stock.
(6)In a Form 5 dated May 21, 1993, Mr. Weglicki reported that on October 15,
1991, his wife acquired 2,308 shares of Common Stock upon the exercise of
stock options, which acquisition was not previously reported on a Form 4 or
5.
(7)In a Form 5 dated March 8, 1994, Mr. Shattuck corrected information
reflected in a Form 4 filed in January, 1992. Mr. Shattuck previously
reported ownership of debentures convertible into 16,275 shares of Common
Stock; the correct number was 14,314 shares of Common Stock.
(8)Included are 16,065 shares owned by a trust of which Mr. Brewster is a
co-trustee. Mr. Brewster disclaims beneficial ownership of these shares.
(9)In a Form 5 dated March 9, 1994, Dr. Muller reported the sale of 300 shares
of Common Stock on December 21, 1993. The shares were sold on behalf of a
trust in which Dr. Muller was a beneficiary. Dr. Muller was not aware of
the sale at the time it occurred.
<PAGE>
EXECUTIVE COMPENSATION
AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the prior three fiscal years, the cash
compensation paid by the Company, as well as certain other compensation paid
or accrued for those years, to the Chief Executive Officer and each of the
other four most highly compensated executive officers of the Company for 1993
in all capacities in which they served:
<TABLE>
SUMMARY COMPENSATION TABLE (1)
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION
- ------------------------------------------------------------------------------ ----------------------------------
AWARDS PAYOUTS
------------------------ ---------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
OTHER
ANNUAL RESTRICTED SECURITIES ALL OTHER
COMPEN- STOCK UNDERLYING LTIP COMPEN-
SALARY BONUS SATION AWARD(S) OPTIONS PAYOUTS SATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(5) ($)(2) (#) ($)(3) ($)(4)(5)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A. B. Krongard 1993 200,000 2,723,354 0 0 0 114,685 208,713
Vice Chairman & 1992 200,000 1,613,676 0 0 0 0 6,647
Chief Executive Officer 1991 200,000 1,250,000 -- 122,579 50,000 0 --
Mayo A. Shattuck III 1993 200,000 2,329,826 0 0 0 32,902 158,674
President & 1992 200,000 1,320,026 0 0 0 0 18,085
Chief Operating Officer 1991 200,000 1,000,000 -- 98,048 50,000 0 --
Timothy T. Weglicki 1993 200,000 1,421,897 0 0 0 44,313 8,697
Managing Director, 1992 200,000 714,734 0 0 4,000 0 6,647
Alex. Brown & Sons Incorporated 1991 200,000 800,000 -- 61,277 10,000 0 --
W. Gar Richlin 1993 200,000 1,220,132 0 0 0 44,290 96,485
Managing Director, 1992 200,000 689,513 0 0 7,500 0 4,465
Alex. Brown & Sons Incorporated 1991 200,000 550,000 -- 24,531 5,000 0 --
Bruce H. Brandaleone 1993 200,000 1,169,691 0 0 0 68,259 8,781
Managing Director, 1992 200,000 714,734 0 0 5,000 0 4,465
Alex. Brown & Sons Incorporated 1991 200,000 750,000 -- 49,011 10,000 0 --
- -----------------------------------------------------------------------------------------------------------------------------
<FN>
NOTES:
(1) Cash compensation and equity awards are reported for the year in which
earned, regardless of when paid or granted.
(2) Restricted stock awards shown in the above table are valued at market
price on award date. The total number of unvested shares of restricted
stock and the value of these shares at year-end 1993 were as follows: Mr.
Krongard held 4,807, shares, valued at $119,574; Mr. Shattuck held 4,245
shares, valued at $105,594; Mr. Weglicki held 2,803 shares, valued at
$69,725; Mr. Richlin held 1,162 shares valued at $28,905; and Mr.
Brandaleone held 1,922 shares, valued at $47,810. Dividends are paid on
vested and unvested restricted stock.
(3) Consists of loan forgiveness (and related interest forgiven) on one-half
of loans to purchase 1990 debentures based upon achievement of ROE
objectives in years 1991\-1993.
(4) Consists of the Company's matching contributions to its 401(k) Plan and
Profit Sharing Plan (Mr. Krongard--$8,559; Mr. Shattuck--$8,559; Mr.
Weglicki--$8,559; Mr. Richlin--$6,311; and Mr. Bandaleone--$8,559), as
well as forgiveness in 1993 of a portion of loans made pursuant to the
purchase of securities pursuant to the Equity Partnership Plan (Mr.
Krongard--$200,000; Mr. Shattuck--$150,000; and Mr. Richlin--$90,000) and
the "current dollar value" of the benefit from split dollar life insurance
premiums paid by the Company (Mr. Krongard--$154; Mr. Shattuck--$115; Mr.
Weglicki--$136; Mr. Richlin--$174; and Mr. Bandaleone--$222.)
(5) Amounts of Other Annual Compensation and All Other Compensation are
excluded for 1991 in accordance with transitional provisions set forth in
the proxy rules of the Securities and Exchange Commission.
</TABLE>
<PAGE>
OPTION EXERCISES
The following table sets forth information with respect to the exercise of
options during the last fiscal year by the Chief Executive Officer and the
other four most highly compensated executive officers of the Company for 1993,
as well as information concerning unexercised options held by those
individuals at the end of 1993:
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUE
<CAPTION>
- ----------------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E)
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE OPTIONS AT FY-END (#)(1) AT FY-END ($)
EXERCISE REALIZED -------------------------- --------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A. B. Krongard 16,861 162,499 0 39,722 0 343,848
Mayo A. Shattuck III 0 0 29,480 41,960 270,985 375,345
Timothy T. Weglicki 19,000 277,650 4,666 22,334 0 201,025
W. Gar Richlin 14,537 238,418 3,250 15,608 0 100,612
Bruce H. Brandaleone 4,000 53,400 16,436 21,570 186,499 178,374
- ----------------------------------------------------------------------------------------------------
<FN>
NOTE:
(1) Equity awards relate to the year in which earned, regardless of when
granted.
</TABLE>
<PAGE>
LONG-TERM INCENTIVE PLANS
The following table provides information concerning awards made to the
Chief Executive Officer and the other four most highly compensated executive
officers of the Company for 1993 under the Company's Long-Term Incentive Plan:
<TABLE>
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR (1)
<CAPTION>
- ------------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E) (F)
NUMBER OF PERFORMANCE OR ESTIMATED FUTURE PAYOUTS UNDER
SHARES, UNITS OTHER PERIOD NON-STOCK PRICE BASED PLANS
OR OTHER UNTIL -----------------------------------
RIGHTS MATURATION THRESHOLD
NAME (#) OR PAYOUT ($ OR #)(3)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
A. B. Krongard NA 6 years NA $950,000 NA
Mayo A. Shattuck III NA 6 years NA $750,000 NA
Timothy T. Weglicki NA 6 years NA $200,000 NA
W. Gar Richlin NA 6 years NA $250,000 NA
Bruce H. Brandaleone NA 6 years NA $200,000 NA
- ------------------------------------------------------------------------------------------------
<FN>
NOTES:
(1) Awards relate to the year in which earned, regardless of when granted.
(2) 1993 debentures were purchased by executives in January 1994. The
debentures bear interest at 5 3/8% per year and mature in June, 2000. The
debentures are convertible into the Company's Common Stock at a price of
$28.63 per share beginning in January, 1997; this conversion feature will
vest to the employee if he is an employee in January, 1997. To finance
such purchases, the Company loaned executives an amount equal to the
debentures' purchase price which amount is set forth in column (e) above.
The interest charged on the loan is
5 3/8% per year.
(3) The Company has agreed to forgive one-sixth of the loan at the end of each
of the three years from 1994 through 1996, if the Company's ROE exceeds an
annual target of 15% which has been set by the Compensation Committee for
the three-year period ending December 31, 1996 or one-half of the loan if
the Company's ROE exceeds a cumulative target of 17% for that three-year
period. Annual and cumulative loan forgiveness targets for 1997\-1999 for
the remaining one-half of the original loan balance will be set by the
Compensation Committee in late 1996 or early 1997.
</TABLE>
<PAGE>
STOCK PERFORMANCE CHART
The following chart and table compare the five year cumulative total
return on shares of the Company's Common Stock against the cumulative total
return of the S&P 500 Stock Index and the cumulative total return of certain
comparable publicly traded investment banking companies. The investment
banking companies used for comparison purposes below include publicly traded
companies which have market capitalization generally in excess of $100 million
and which operate in areas of the securities industry similar to those of the
Company. The chart and table assume that $100 was invested on 12/31/88 in the
Company's Common Stock, the comparable publicly traded investment banking
companies and the S&P 500, and that all dividends were reinvested over the 5
year period.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN OF
ALEX. BROWN VS. COMPARABLE INVESTMENT BANKING
COMPANIES AND S&P 500
COMPARABLE INVESTMENT
ALEX. BROWN BANKING COMPANIES (1) S&P 500
------ ------- ----
(1) Comparable Investment Banking Companies include:
The Advest Group, Inc. Morgan Stanley Group Inc.
The Bear Stearns Companies Inc. Paine Webber Group Inc.
A. G. Edwards, Inc. Piper Jaffray Companies
Inter-Regional Financial Group Raymond James Financial, Inc.
Legg Mason, Inc. Salomon Inc.
Merrill Lynch & Co., Inc.
COMPARABLE INVESTMENT
ALEX. BROWN BANKING COMPANIES S&P 500
----------- --------------------- -----------
1988 100 100 100
1989 105.2 111.4 131.6
1990 84.1 102.4 127.5
1991 230.2 221.9 166.2
1992 209.6 230.6 178.8
1993 266.5 305.7 196.7
<PAGE>
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The following report is submitted by the Compensation Committee of the
Board (the "Committee"),of which all members are outside directors. This
report, as well as other Committee reports and decisions, have been reviewed
by the Board. The report addresses the Company's compensation policies for
1993, generally addresses the rationale for the compensation of the five
executive officers who for 1993 were the Company's five most highly paid
executives (collectively, the "Senior Executives"), and specifically reviews
the basis for the compensation of the Chief Executive Officer ("CEO.") The
Committee determined compensation for Mr. Krongard and accepted Mr. Krongard's
recommendations regarding the compensation of the other Senior Executives.
GENERAL
The Company's compensation plans are intended to reward the accomplishment
of specific objectives that have been designed to result in the creation of
stockholder value. Incentive plans provide the opportunity for employees at
all levels to earn competitive rates of total compensation by reaching goals
expressed in financial and strategic terms.
Cash compensation is heavily based on performance. As a general matter,
base salaries for executive officers are $200,000 per annum, and the base
salary for each of the Senior Executives was $200,000 in 1993. For executive
officers, a substantial portion of aggregate cash compensation is at risk and
is based on return on stockholders' equity, other financial and operating
results measured against predetermined objectives and a subjective evaluation
of individual contribution to overall results.
Since the Committee believes that compensation for executive officers
should be closely aligned to stockholder interests, the Company has adopted
several forms of incentive compensation based on stock ownership and
appreciation.
INCENTIVE BONUSES
The Company's annual incentive bonuses for its executive officers,
including bonuses paid to Senior Executives as reported in column (d) of the
Summary Compensation Table, are based on both objective and subjective
performance criteria and typically constitute a substantial portion of an
individual's total compensation. Objective criteria include actual versus
target operating performance and performance versus specific financial and
strategic objectives for both the Company as a whole and the executive's
operating unit. Subjective criteria encompass evaluation of the executive's
initiative, ability, attitude and contribution to overall unit and corporate
performance.
EQUITY COMPENSATION PLAN
In 1992 the Committee instituted the Company's Equity Compensation Plan
whereby 10% of total earned cash compensation above a specified amount was
withheld from the compensation of Managing Directors of Alex. Brown & Sons
Incorporated ("Alex. Brown.") Fifty percent of the withheld amount is paid in
the Company's Common Stock (calculated at a 15% discount from market), and the
individual is allowed to invest the remaining 50% of the withheld amount
either in additional shares of the Company's Common Stock at market or in
certain investment vehicles sponsored by the Company. The stock and
investments are not available to the individual for three years (five years in
the event the individual leaves the Company). In 1993 participation in the
Equity Compensation Plan was expanded to include Managing Directors and
Principals of Alex. Brown, and $8,728,714 of cash compensation was withheld on
a tax deferred basis pursuant to the Equity Compensation Plan and replaced by
shares of the Company's Common Stock and investments in Company-sponsored
investment vehicles.
<PAGE>
The Committee believes that the increase in stock ownership pursuant to
the Equity Compensation Plan is beneficial in aligning management's and
stockholders' interests and, over the long-term, increasing stockholder value.
EQUITY INCENTIVE PLAN
The other long-term incentive components of executive officers' 1993
compensation arose under the Company's 1991 Equity Incentive Plan. Awards of
stock options and rights to purchase securities under the 1991 Equity
Incentive Plan are designed to promote the identity of long-term interests
between the Company's key employees and its stockholders.
At the end of 1993, options were issued at a 25% premium over the average
stock price for the 30 days prior to the award date. The options have a
ten-year term and vest pro-rata over the first six years. Options are granted
annually and are awarded to new Managing Directors, Principals and Vice
Presidents of Alex. Brown in share amounts which in 1993 were approximately
the same as in the past several years. Awards other than to newly promoted
officers are made on a subjective basis. None of the Senior Executives
received options in 1993.
At the end of 1993, executive officers were awarded the right to buy a
total of $3,975,000 of 5 3/8% Convertible Subordinated Debentures, including
$2,350,000 for the Senior Executives. The debentures are convertible into
Common Stock at $28.83 per share, a 15% premium over the average stock price
for the 30 days prior to the award date, after vesting at the end of a
three-year period. The purchase of the debentures was financed by loans which
the Company granted to the recipients at an annual interest rate of 5 3/8%.
These loans are subject to forgiveness over a six-year period based upon
annual or cumulative return on stockholders' equity objectives which are set
by the Committee every three years. In determining the amount of debentures to
be purchased by executive officers, the Committee reviewed such amount
relative to cash compensation for each executive officer, although no specific
percentage relationships were employed. In general, the Committee's policies
call for the amount of convertible debentures sold to the CEO and other
executive officers to be significant relative to their total compensation,
although no specific percentage relationships are utilized. The CEO
establishes the amounts to be purchased by the other executive officers,
subject to the review and approval of the Committee.
During 1993, pursuant to the Equity Partnership Plan, the Company also
sold 544,000 shares of Common Stock and $25,080,000 of 5.32% Convertible
Subordinated Debentures at market to certain Managing Directors and Principals
of Alex. Brown, including 145,200 shares and $3,448,500 of debentures to the
Senior Executives. The sale of the debentures, which are convertible into
1,056,000 shares of Common Stock, was made under an amendment to the 1991
Equity Incentive Plan which is subject to approval by stockholders. The sale
price of the Common Stock and the conversion price of the debentures was
$23.75, the market price of the Common Stock at the time the sale was made.
The debentures are convertible into Common Stock in stages beginning in 1997,
and conversion is contingent upon continued employment by the Company. The
purchases of both securities were financed by recourse loans from the Company.
The Company may forgive a portion of the principal amount of such loans
provided that the aggregate amount of loan forgiveness shall not exceed 15.6%
of the initial principal amount of such loans. In 1993, the Company forgave
8.4% of the initial principal amount of such loans. The timing and extent of
any future loan forgiveness will be at the discretion of the Committee, based
on Company and individual performance.
<PAGE>
OTHER COMPENSATION PLANS
At various times in the past, the Company has adopted certain employee
benefit plans in which executive officers are permitted to participate on the
same terms as other employees who meet applicable eligibility criteria,
subject to any legal limitations on the amounts that may be contributed or the
benefits that may be payable under the plans. The Company provides 401(k)
matching contributions and contributions to a profit sharing plan in amounts
determined annually based upon Company performance. In 1993 these amounts
totalled 4% of the salaries of the Senior Executives. Managing Directors of
Alex. Brown, including the Senior Executives, and Non-Employee Directors of
the Company also participate in split dollar life insurance arrangements.
MR. KRONGARD'S 1993 COMPENSATION
Mr. Krongard's annual and long-term incentive compensation was earned
under the same plans available to executive officers and other key employees,
with annual bonus and long-term incentive compensation based predominantly on
the Company's return on stockholders' equity and other financial ratios,
operating results and achievement of specified goals.
In early 1993, the Board accepted the Company's three-year plan which set
the Company's financial and operating objectives for 1993\-1995. In turn, the
Committee, in conjunction with the Board's Organization Committee, approved
specific standards, goals and objectives for Mr. Krongard.
In establishing Mr. Krongard's 1993 annual compensation and long-term
incentives, the Committee reviewed his performance relative to the standards,
goals and objectives established early in the year although no formal or
absolute weighting of these factors was utilized. Specifically, in determining
Mr. Krongard's compensation for 1993, the factors considered by the Committee
included the following:
* 1993 was the third consecutive record year for the Company in terms of
both revenues and net income;
* Book value per share increased to $22.51, a 25% increase from the prior
year;
* Return on average equity for the year was 28.8%, compared to 23.6% in
the prior year;
* Pre-tax income as a percentage of revenues was 23.6%, compared to 20.9%
in the prior year; and
* Strategic extensions of the Company's business were achieved.
Pursuant to the previously described Equity Compensation Plan, Mr.
Krongard had $265,000 withheld from his cash compensation for investment in
the Company's Common Stock and certain Company-sponsored investment vehicles.
<PAGE>
PROPOSED MANAGEMENT COMPENSATION PLAN
The Committee has recommended to the Board and the Board has submitted to
the stockholders for approval a Management Compensation Plan (see page 7 of
this Proxy Statement). The Committee believes that compensation paid pursuant
to the Management Compensation Plan will be tax deductible pursuant to section
162(m) of the Internal Revenue Code. In structuring the Management
Compensation Plan and determining compensation thereunder, the primary
consideration will be achievement of the Company's strategic goals, taking
into consideration competitive practices, market conditions and other factors.
To the extent that fulfilling these goals is consistent with obtaining tax
deductions, the Company is committed to making compensation awards that will
qualify for tax deductions.
SUBMITTED BY THE COMPENSATION COMMITTEE
OF THE COMPANY'S BOARD OF DIRECTORS:
Thomas C. Barry, Chairman Lee A. Ault III David M. Norman
<PAGE>
CERTAIN TRANSACTIONS
NAME AGREEMENT
In an agreement made as of December 22, 1993, Benjamin H. Griswold IV, the
Chairman of the Board, and Jack S. Griswold, his brother, who together
controlled the use of the name "Alex. Brown" (the "Name"), agreed to sell to
the Company all right, title and interest in and to the Name for $10,500,000
(the "Purchase Price"). That agreement was consummated on January 3, 1994. The
Purchase Price will be amortized for accounting purposes as an expense of the
Company over 40 years.
Previously, the Messrs. Griswold had granted to the Company the right to
use the Name pursuant to Use of Name Agreements dated February 28, 1986 and
March 21, 1991. The Purchase Price was negotiated between representatives of
the Company on the one hand and of the Messrs. Griswold on the other, and was
thereafter approved by the Board. In approving the transaction, the Board
considered such relevant factors as the tangible and intangible values
associated with the Company's permanent identification with the Name, as well
as the costs and competitive impact of changing the name of the Company.
REAL ESTATE LEASES
The Company leases approximately 15,000 square feet of office space at 135
East Baltimore Street in Baltimore, Maryland, from Brown Realty Limited
Partnership, all but one of the owners of which are members of the family of
Benjamin H. Griswold IV, the Chairman of the Board. The lease, which expires
on March 31, 1997, calls for rental payments of $125,750 per year during the
lease term. The lease is a net lease, and accordingly, the Company is
responsible for all taxes, utilities, insurance and maintenance charges during
the lease term. The Company believes that the lease terms are no less
favorable than those which could have been obtained in arm's length dealings
with an unaffiliated third party.
The Company also leases approximately 36,000 square feet of office space
at 119\-131 East Baltimore Street in Baltimore, Maryland from Alex. Brown
Partners, a Maryland Limited Partnership, the partners of which include
certain directors of the Company and other Managing Directors and Principals
of Alex. Brown. The lease, which expires on March 31, 1997, calls for rental
payments of $262,500 per year during the lease term. The lease is a net lease,
and accordingly, the Company is responsible for all taxes, utilities,
insurance and maintenance charges during the lease term. The Company believes
that the lease terms are no less favorable than those which could have been
obtained in arm's length dealings with an unaffiliated third party.
MARGIN ACCOUNTS
Certain directors and executive officers maintain margin accounts with the
Company. Such extensions of credit have been made in the ordinary course of
the Company's business and are on the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
non-affiliated persons, and do not involve more than the normal risk of
collectibility or present other unfavorable features.
PROFESSIONAL SERVICES
Andr~e Brewster, a member of the Board, is a partner in the law firm of
Piper & Marbury, which from time to time performed legal services for the
Company in 1993.
<PAGE>
EMPLOYMENT AGREEMENTS
During 1991, the Company entered into employment agreements with Messrs.
Shattuck and Hebb which provided for their employment until December 31, 1993.
Mr. Shattuck's agreement provided for certain minimum compensation during the
employment period as well as for reimbursement of expenses related to his
relocation to Baltimore. Both agreements provided for certain benefits in the
event either Mr. Shattuck or Mr. Hebb had ceased employment during the
employment period.
During 1993, the Company entered into an employment agreement with Mr.
Griswold which provides for his employment until December 31, 1996. Under his
agreement, Mr. Griswold will be compensated during the employment period at an
annual rate which shall be determined by the Compensation Committee of the
Board but shall not be less than $500,000. If Mr. Griswold ceases to be
employed by the Company during the employment period for any reason other than
the termination of his employment for cause and is not in breach of his
agreement, the Company has agreed to immediately vest and extend the term of
all outstanding stock options or other similar employment related benefits
held by Mr. Griswold. The agreement further provides that in connection with
the annual meeting of stockholders for 1994, 1995 and 1996, the Board will
nominate Mr. Griswold for election as a director of the Company. Additionally,
Mr. Griswold may not engage in any activity competitive with the business of
the Company during the employment period.
EMPLOYEE PARTICIPATION IN PRIVATE INVESTMENTS
In connection with the establishment and management of certain private
investments and investment funds, certain key employees, including Senior
Executives, receive interests in the appreciation of investment assets,
including merchant banking investments. These interests generally have little
or no value at the time of grant and, accordingly, do not result in
compensation expense to the Company. The ultimate amount, if any, received by
such participants will depend on the performance of the particular
investments. Certain key employees, including Senior Executives, may also
receive interests in any gains realized on certain equity instruments received
in connection with the Company's investment banking activities.
<PAGE>
OTHER PERTINENT INFORMATION
ACCOUNTING MATTERS
KPMG Peat Marwick ("KPMG") has served as auditor for the Company and its
predecessors since 1977 and has been selected by the Board to continue as the
Company's auditor for the next fiscal year. The audit services rendered by
KPMG for the fiscal year ended December 31, 1993 included: audit of the
financial statements of the Company, review of unaudited quarterly financial
information, consultation in connection with the preparation of the annual
report to stockholders and the filing of the Annual Report on Form 10\-K with
the Securities and Exchange Commission and consultation with, and assistance
to, Company personnel on accounting and related matters.
Representatives of KPMG will attend the Meeting, will have an opportunity
to make a statement if they desire to do so and will be available to respond
to appropriate questions by stockholders.
STOCKHOLDER PROPOSALS
The Company provides all stockholders with the opportunity, under certain
circumstances, to participate in the governance of the Company by submitting
proposals that they believe merit consideration at the next annual meeting of
stockholders, to be held in April 1995. Stockholders may also submit the names
of individuals that they wish to be considered by the Organization Committee
of the Board as nominees for directors. To enable management to analyze and
respond adequately to proposals and to prepare appropriate proposals for
presentation in the Company's Proxy Statement for the next annual meeting of
stockholders, any such proposal must be received by the Company no later than
November 25, 1994, and should be addressed to the attention of its Secretary
at its principal place of business in Baltimore, Maryland.
OTHER MATTERS
Management is not aware of any other matters that may be brought before
the meeting. If any matters properly come before the meeting, the persons
named in the proxy will vote in accordance with their judgment as to the best
interests of the Company with respect to such matters.
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
EXHIBIT A
ALEX. BROWN INCORPORATED
1991 EQUITY INCENTIVE PLAN
Section 1. Purpose
The purpose of the Alex. Brown Incorporated 1991 Equity Incentive Plan
(the "Plan") is to attract and retain key employees, to provide an incentive
for them to assist the Company achieve long-range performance goals, and to
enable such key employees to participate in the long-term growth of the
Company.
Section 2. Definitions
"Affiliate" means any business entity in which the Company owns directly
or indirectly 50% or more of the total combined voting power or has a
significant financial interest as determined by the Committee.
"Award" means any Option, Stock Appreciation Right, Performance Share,
Restricted Stock, Other Stock-Based Award or Stock Unit awarded under the
Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time and any successor to such Code.
"Committee" means a committee of not less than three members of the Board
appointed by the Board to administer the Plan, each of whom is a
"disinterested person" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, or any successor provision, as applicable to the Plan at
the time of determination.
"Common Stock" or "Stock" means the Common Stock, $.10 par value, of the
Company.
"Company" means Alex. Brown Incorporated.
"Designated Beneficiary" means the beneficiary designated by a
Participant, in a manner and to the extent determined by the Committee, to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death. In the absence of an effective designation by a
Participant, Designated Beneficiary shall mean the Participant's estate.
"Fair Market Value" means, with respect to Common Stock or any other
property, the fair market value of such property as determined by the
Committee in good faith or in the manner established by the Committee from
time to time.
"Incentive Stock Option" means an option to purchase shares of Common
Stock awarded to a Participant under Section 6 which is intended to meet the
requirements of Section 422 of the Code or any successor provision.
"Nonstatutory Stock Option" means an option to purchase shares of Common
Stock awarded to a Participant under Section 6 which is not intended to be an
Incentive Stock Option.
"Option" means an Incentive Stock Option or a Nonstatutory Stock Option.
"Other Stock-Based Award" means Awards, other than Options, Stock
Appreciation Rights, Performance Shares, Restricted Stock or Stock Units,
having a Common Stock element and awarded to a Participant under Section 10.
<PAGE>
"Participant" means a person selected by the Committee to receive an Award
under the Plan.
"Performance Cycle" or "Cycle" means the period of time selected by the
Committee during which performance is measured for the purpose of determining
the extent to which an award of Performance Shares, or any other Award
requiring measurement of performance, has been earned.
"Performance Shares" mean shares of Common Stock which may be earned by
the achievement of performance goals awarded to a Participant under Section 8.
"Reporting Person" means a person subject to Section 16 of the Securities
Exchange Act of 1934 or any successor provision.
"Restricted Period" means the period during which any Award may be
forfeited to the Company pursuant to the terms and conditions of such Award.
"Restricted Stock" means shares of Common Stock subject to forfeiture
awarded to a Participant under Section 9.
"Stock Appreciation Right" or "SAR" means a right to receive any excess in
value of shares of Common Stock over the exercise price awarded to a
Participant under Section 7.
"Stock Unit" means an award of Common Stock or units that are valued in
whole or in part by reference to, or otherwise based on, the value of Common
Stock, awarded to a Participant under Section 11.
Section 3. Administration
The Plan shall be administered by the Committee. The Committee shall have
authority to adopt, alter and repeal such administrative rules, guidelines and
practices governing the operation of the Plan as it shall from time to time
consider advisable, and to interpret the provisions of the Plan. The
Committee's decisions shall be final and binding. To the extent permitted by
applicable law, the Committee may delegate to one or more executive officers
of the Company the power to make Awards to Participants who are not Reporting
Persons and all determinations under the Plan with respect thereto, provided
that the Committee shall fix the maximum amount of such Awards for the group
and a maximum for any one Participant.
Section 4. Eligibility
All employees of the Company or any Affiliate capable, in the sole
judgment of the Committee, of contributing significantly to the successful
performance of the Company, other than a person who has irrevocably elected
not to be eligible, are eligible to be Participants in the Plan. Incentive
Stock Options may be awarded only to persons eligible to receive such Options
under the Code.
Section 5. Stock Available for Awards
(a) Subject to adjustment under subsection (b), Awards may be made under
the Plan in each calendar year during any part of which the Plan is effective
in respect of a maximum of seven and one-half percent (7.5%) of the total
shares of Common Stock outstanding on the first day of such year, provided
that the maximum number of shares of Common Stock in respect of which Awards
may be granted for 1991 is 350,000. If any Award in respect of shares of
Common Stock expires or is terminated unexercised or is forfeited for any
reason or settled in a manner that results in fewer shares outstanding than
were initially awarded, including without limitation the surrender of shares
in payment of the Award or any tax obligation thereon, the shares subject to
such Award, to the extent of such expiration, termination, forfeiture or
decrease, shall again be available for award under the Plan. Common Stock
issued through the assumption or substitution of outstanding grants from any
acquired company shall not reduce the shares available for Awards under the
Plan.
<PAGE>
(b) In the event that the Committee determines that any stock dividend,
extraordinary cash dividend, creation of a class of equity securities,
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase
Common Stock at a price substantially below fair market value, or other
similar transaction affects the Common Stock such that an adjustment is
required in order to preserve the benefits or potential benefits intended to
be made available under the Plan, then the Committee, subject, in the case of
Incentive Stock Options, to any limitation required under the Code, shall
equitably adjust any or all of (i) the number and kind of shares in respect of
which Awards may be made under the Plan, (ii) the number and kind of shares
subject to outstanding Awards, and (iii) the award, exercise or conversion
price with respect to any of the foregoing, and if considered appropriate, the
Committee may make provisions for a cash payment with respect to an
outstanding Award, provided that the number of shares subject to any Award
shall always be a whole number.
(c) Notwithstanding any other provision of the Plan, no more than
1,000,000 shares of Common Stock shall be cumulatively available for the award
of Incentive Stock Options; provided that to the extent an Incentive Stock
Option expires or is terminated unexercised or is forfeited for any reason the
shares which were subject to such Option may again be awarded as Incentive
Stock Options.
Section 6. Stock Options
(a) Subject to the provisions of the Plan, the Committee may award
Incentive Stock Options and Nonstatutory Stock Options and determine the
number of shares to be covered by each Option, the option price therefor and
the conditions and limitations applicable to the exercise of the Option. The
terms and conditions of Incentive Stock Options shall be subject to and comply
with Section 422 of the Code, or any successor provision, and any regulations
thereunder.
(b) The Committee shall establish the option price at the time each
Option is awarded, which price shall not be less than 100% of the Fair Market
Value of the Common Stock on the date of award with respect to Incentive Stock
Options and not less than 50% of the Fair Market Value of the Common Stock on
the date of award with respect to Nonstatutory Stock Options.
(c) Each Option shall be exercisable at such times and subject to such
terms and conditions as the Committee may specify in the applicable Award or
thereafter. The Committee may impose such conditions with respect to the
exercise of Options, including conditions relating to applicable federal or
state securities laws, as it considers necessary or advisable.
(d) No shares shall be delivered pursuant to any exercise of an Option
until payment in full of the option price therefor is received by the Company.
Such payment may be made in whole or in part in cash or, to the extent
permitted by the Committee at or after the award of the Option, by delivery of
a note or shares of Common Stock owned by the optionee, including Restricted
Stock valued at its Fair Market Value on the date of delivery, or such other
lawful consideration as the Committee may determine.
(e) The Committee may provide for the automatic award of an Option upon
the delivery of shares to the Company in payment of an Option for up to the
number of shares so delivered.
Section 7. Stock Appreciation Rights
(a) Subject to the provisions of the Plan, the Committee may award SARs in
tandem with an Option (at or after the award of the Option), or alone and
unrelated to an Option. SARs in tandem with an Option shall terminate to the
extent that the tandem Option is exercised. SARs shall have an exercise price
of not less than 50% of the Fair Market Value of the Common Stock on the date
of award, or in the case of SARs in tandem with Options, the exercise price of
the related Option.
<PAGE>
(b) An SAR related to an Option which can only be exercised during
limited periods following a change in control of the Company, may entitle the
Participant to receive an amount based upon the highest price paid or offered
for Common Stock in any transaction relating to the change in control or paid
during the thirty-day period immediately preceding the occurrence of the
change in control in any transaction reported in the market in which the
Common Stock is normally traded.
Section 8. Performance Shares
(a) Subject to the provisions of the Plan, the Committee may award
Performance Shares and determine the number of such shares for each
Performance Cycle and the duration of each Performance Cycle. There may be
more than one Performance Cycle in existence at any one time, and the duration
of Performance Cycles may differ from each other. The payment value of
Performance Shares shall be equal to the Fair Market Value of the Common Stock
on the date the Performance Shares are earned or, in the discretion of the
Committee, on the date the Committee determines that the Performance Shares
have been earned.
(b) The Committee shall establish performance goals for each Cycle, for
the purposes of determining the extent to which Performance Shares awarded for
such Cycle are earned and of accomplishing such objectives as the Committee
may from time to time select. During any Cycle, the Committee may adjust the
performance goals for such Cycle as it deems equitable in recognition of
unusual or non-recurring events affecting the Company, changes in applicable
tax laws or accounting principles, or such other factors as the Committee may
determine.
(c) As soon as practicable after the end of a Performance Cycle, the
Committee shall determine the number of Performance Shares which have been
earned on the basis of performance in relation to the established performance
goals. The payment values of earned Performance shares shall be distributed to
the Participant or, if the Participant has died, to the Participant's
Designated Beneficiary, as soon as practicable thereafter. The Committee shall
determine, at or after the time of award, whether payment values will be
settled in whole or in part in cash or other property, including Common Stock
or Awards.
Section 9. Restricted Stock
(a) Subject to the provisions of the Plan, the Committee may award shares
of Restricted Stock and determine the duration of the Restricted Period, and
the conditions under which, the shares may be forfeited to the Company and the
other terms and conditions of such Awards. Shares of Restricted Stock shall be
issued for no cash consideration or such minimum consideration as may be
required by applicable law.
(b) Shares of Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered, except as permitted by the Committee, during
the Restricted Period. Shares of Restricted Stock shall be evidenced in such
manner as the Committee may determine. Any certificates issued in respect of
shares of Restricted Stock shall be registered in the name of the Participant
and unless otherwise determined by the Committee, deposited by the
Participant, together with a stock power endorsed in blank, with the Company.
At the expiration of the Restricted Period, the Company shall deliver such
certificates to the Participant or if the Participant has died, to the
Participant's Designated Beneficiary.
<PAGE>
Section 10. Other Stock-Based Awards
(a) Subject to the provisions of the Plan, the Committee may make other
awards of Common Stock and other awards that are valued in whole or in part by
reference to, or are otherwise based on, Common Stock, including, without
limitation, convertible preferred stock, convertible debentures, exchangeable
securities and Common Stock awards or options. Other Stock-Based Awards may be
granted either alone or in addition to or in tandem with Options, SARs,
Performance Shares, Restricted Stock or Stock Units granted under the Plan
and/or cash awards made outside of the Plan.
(b) The Committee may establish performance goals, which may be based on
performance goals related to book value, subsidiary performance or such other
criteria as the Committee may establish, Restricted Periods, Performance
Cycles, conversion prices (provided no conversion price shall be less than 50%
of the Fair Market Value of the Common Stock on the date of award of any Other
Stock-Based Award), maturities and security, if any, for any Other Stock-Based
Award. Other Stock-Based Awards may be sold to Participants at the face value
thereof or any discount therefrom (up to 50%) or awarded for no consideration
or minimum consideration as may be required by applicable law.
Section 11. Stock Units
(a) Subject to the provisions of the Plan, the Committee may award Stock
Units subject to such terms, restrictions, conditions, performance goals,
Restricted Periods, vesting requirements and payment rules as the Committee
shall determine.
(b) Shares of Common Stock awarded in connection with a Stock Unit Award
shall be issued for no cash consideration or such minimum consideration as may
be required by applicable law.
Section 12. General Provisions Applicable to Awards
(a) Transferability of Awards and Holding Period. No Participant shall
have the right to assign any Award or the right to receive any Award or any
other right or interest under the Plan, contingent or otherwise, or to cause
or permit any encumbrance, pledge or charge of any nature to be imposed on any
such Award or right to receive any Award or any such right or interest, other
than by will or the laws of descent and distribution. Awards shall be
exercisable or convertible (as the case may be) during the Participant's
lifetime only by the Participant or the Participant's guardian or legal
representative.
(b) Documentation. Each Award under the Plan shall be evidenced by a
writing delivered to the Participant specifying the terms and conditions
thereof and containing such other terms and conditions not inconsistent with
the provisions of the Plan as the Committee considers necessary or advisable
to achieve the purposes of the Plan or comply with applicable tax and
regulatory laws and accounting principles.
(c) Committee Discretion. Each type of Award may be made alone, in
addition to or in relation to any other type of Award. The terms of each type
of Award need not be identical, and the Committee need not treat Participants
uniformly. Except as otherwise provided by the Plan or a particular Award, any
determination with respect to an Award may be made by the Committee at the
time of award or at any time thereafter.
(d) Settlement. The Committee shall determine whether Awards are settled
in whole or in part in cash, Common Stock, other securities of the Company,
Awards or other property. The Committee may permit a Participant to defer all
or any portion of a payment under the Plan, including the crediting of
interest on deferred amounts denominated in cash and dividend equivalents on
amounts denominated in Common Stock.
(e) Dividends and Cash Awards. In the discretion of the Committee, any
Award under the Plan may provide the Participant with (i) dividends or
dividend equivalents payable currently or deferred with or without interest,
and (ii) cash payments in lieu of or in addition to an Award.
(f) Termination of Employment. The Committee shall determine the effect
on an Award of the disability, death, retirement or other termination of
employment of a Participant and the extent to which, and the period during
which, the Participant's legal representative, guardian or Designated
Beneficiary may receive payment of an Award or exercise rights thereunder.
<PAGE>
(g) Change in Control. In order to preserve a Participant's rights under
an Award in the event of a change in control of the Company, the Committee in
its discretion may, at the time an Award is made or at any time thereafter,
take one or more of the following actions: (i) provide for the acceleration of
any time period relating to the exercise or realization of the Award, (ii)
provide for the purchase of the Award upon the Participant's request for an
amount of cash or other property that could have been received upon the
exercise or realization of the Award had the Award been currently exercisable
or payable, (iii) adjust the terms of the Award in a manner determined by the
Committee to reflect the change in control, (iv) cause the Award to be
assumed, or new rights substituted therefor, by another entity, or (v) make
such other provision as the Committee may consider equitable and in the best
interests of the Company.
(h) Loans. The Committee may authorize the making of loans or cash
payments to Participants in connection with any Award under the Plan, which
may be secured by any security, including Common Stock, underlying or related
to such Award (provided that such Loan shall not exceed the Fair Market Value
of the security subject to such Award), and which may be forgiven upon such
terms and conditions as the Committee may establish at the time of such loan
or at any time thereafter.
(i) Withholding. The Participant shall pay to the Company, or make
provision satisfactory to the Committee for payment of, any taxes required by
law to be withheld in respect of Awards under the Plan no later than the date
of the event creating the tax liability. In the Committee's discretion, such
tax obligations may be paid in whole or in part in shares of Common Stock,
including shares retained from the Award creating the tax obligation, valued
at their Fair Market Value on the date of delivery. The Company and its
Affiliates may, to the extent permitted by law, deduct any such tax
obligations from any payment of any kind otherwise due to the Participant.
(j) Foreign Nationals. Awards may be made to Participants who are foreign
nationals or employed outside the United States on such terms and conditions
different from those specified in the Plan as the Committee considers
necessary or advisable to achieve the purposes of the Plan or comply with
applicable laws.
(k) Amendment of Award. The Committee may amend, modify or terminate any
outstanding Award, including, without limitation, substituting therefor
another Award of the same or a different type, changing the option price, date
of exercise or realization, modifying performance goals, Restricted Periods,
Performance Cycles, or vesting requirements, and converting an Incentive Stock
Option to a Nonstatutory Stock Option, provided that the Participant's consent
to such action shall be required unless the Committee determines that the
action, taking into account any related action, would not materially and
adversely affect the Participant's interest in the Award.
Section 13. Miscellaneous
(a) No Right to Employment. No person shall have any claim or right to be
granted an Award, and the grant of an Award shall not be construed as giving a
Participant the right to continued employment. The Company expressly reserves
the right at any time to dismiss a Participant free from any liability or
claim under the Plan, except as expressly provided in the applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed under
the Plan until he or she becomes the holder thereof. A Participant to whom
Common Stock is awarded shall be considered the holder of the Stock at the
time of the Award except as otherwise provided in the applicable Award.
<PAGE>
(c) Effective Date. Subject to the approval of the shareholders of the
Company, the Plan shall be effective as of January 10, 1991. Prior to such
approval, Awards may be made under the Plan expressly subject to such
approval.
(d) Term of Plan. No Award shall be granted pursuant to the Plan on or
after the tenth anniversary of the date of stockholder approval, but Awards
granted prior to such tenth anniversary may extend beyond that date.
(e) Applicability to Other Plans. Subject to stockholder approval of the
Plan, no further stock options shall be granted under the Alex. Brown
Incorporated 1986, 1987 and 1990 Stock Option Plans and no further restricted
stock grants shall be made under the Alex. Brown Incorporated 1987 Restricted
Stock Plan. Existing and outstanding stock options and restricted stock awards
under such plans shall remain in effect pursuant to the terms of the
agreements governing such options and grants and shall continue to be governed
by such plans to the extent applicable.
(f) Amendment of Plan. The Board may amend, suspend or terminate the Plan
or any portion thereof at any time, provided that no amendment shall be made
without stockholder approval if such approval is necessary to comply with any
applicable tax or regulatory requirement, including any requirement for
exemptive relief under Section 16(b) of the Securities Exchange Act of 1934,
or any successor provision.
(g) Governing Law. The provisions of the Plan shall be governed by and
interpreted in accordance with the laws of the State of Maryland.
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
EXHIBIT B
FEDERAL INCOME TAX CONSEQUENCES OF THE ALEX. BROWN INCORPORATED 1991 EQUITY
INCENTIVE PLAN AS PROPOSED TO BE AMENDED
Incentive Stock Options. An optionee will not recognize taxable income
upon the grant or exercise of an ISO under the 1991 Equity Incentive Plan. If
no disposition of shares issued to an optionee pursuant to the exercise of an
ISO is made by the optionee within two years from the date of grant or within
one year from the transfer of such shares to the optionee, then (a) upon sale
of such shares, any amount realized in excess of the option price (the amount
paid for the shares) will be taxed to the optionee as a long-term capital gain
and any loss sustained will be a long-term capital loss and (b) no deduction
will be allowed to the Company for Federal income tax purposes. The exercise
of ISOs will give rise to a positive adjustment to alternative minimum taxable
income that may result in alternative minimum tax liability for the optionee.
If an SAR is granted with respect to an outstanding ISO, the ISO may be
disqualified and converted to a nonstatutory stock option.
If shares of Common Stock acquired upon the exercise of an ISO are
disposed of prior to the expiration of the two-year and one-year holding
periods described above (a "disqualifying disposition") generally (a) the
optionee will recognize ordinary income in the year of disposition in an
amount equal to the excess (if any) of the fair market value of the shares at
exercise (or, if less, the amount realized on a sale of such shares) over the
option price thereof, and (b) the Company will be entitled to deduct such
amount, subject to applicable withholding requirements. Any further gain
realized will be taxed as short-term or long-term capital gain and will not
result in any deduction by the Company. Special rules apply where the optionee
is subject to Section 16(b) of the Exchange Act or where all or a portion of
the exercise price of the ISO is paid by tendering shares of Common Stock. A
disqualifying disposition will reverse the alternative minimum taxable income
adjustment associated with the exercise of the ISO.
Nonstatutory Stock Options. No income is recognized by the optionee at the
time the option is granted. Generally, (a) at exercise, ordinary income is
recognized by the optionee in an amount equal to the difference between the
option price and the fair market value of the shares on the date of exercise,
and the Company receives a tax deduction for the same amount, subject to
applicable withholding requirements, and (b) at disposition, appreciation or
depreciation after the date of exercise is treated as either short-term or
long-term capital gain or loss depending on how long the shares have been
held.
Generally, persons subject to Section 16(b) of the Exchange Act are not
taxed until the later of (i) six months after grant of the option or (ii)
exercise of the option, with the excess of the fair market value of the stock
at such time over the option price being taxed as ordinary income; the holding
period for determining whether subsequent gain or loss will be a short-term or
long-term capital gain or loss begins at the time of ordinary income
recognition. However, if exercise occurs within six months of the date of
grant of the option, an optionee may elect under Section 83(b) of the Code,
within 30 days after exercise, to be taxed at the time of exercise, in which
case his or her holding period for capital-gain purposes will begin upon
exercise.
Stock Appreciation Rights. A grantee will not recognize taxable income
upon the grant of an SAR. On the exercise of an SAR, in general, (a) any cash
received and the fair market value on the exercise date of any shares received
will constitute ordinary income to the grantee at the time of exercise, and
(b) the Company will be entitled to deduct such amount, subject to applicable
withholding requirements. If a grantee who is subject to the restrictions of
Section 16(b) of the Exchange Act receives shares by reason of the exercise of
an SAR (other than SARs subject to certain limitations specified in Rule 16b-3
under the Exchange Act), compensation income is recognized at the time of the
lapse of such restrictions (but no later than six months after exercise) with
the amount measured by the fair market value of the shares at that time unless
the grantee elects under Section 83(b) of the Code, within 30 days after
exercise, to be taxed at the time of exercise.
<PAGE>
Performance Shares. The fair market value of any shares received as
payment in respect of performance shares, less any amount paid by the grantee,
will constitute ordinary income to the grantee in the year in which paid, and
the Company will generally be entitled to deduct such amount, subject to
applicable withholding requirements.
Restricted Stock. A grantee normally will not recognize taxable income
upon a grant of restricted stock, and the Company will not be entitled to a
deduction, until termination of the restrictions. Upon termination of the
restrictions, in general, (a) the grantee will recognize ordinary income in an
amount equal to the fair market value of the shares at that time less any
amount paid by the grantee, and (b) the Company will be entitled to deduct
such amount, subject to applicable withholding requirements. However, if a
grantee elects under Section 83(b) of the Code, within 30 days after receipt
of the stock, the grantee's recognition of income and the Company's deduction
is determined at the time the restricted stock is granted.
Stock Units. In general, (a) the grantee must recognize ordinary income
equal to the fair market value of the shares received in connection with a
stock unit award, less any amount paid by the grantee, at the time the shares
become transferable or are not subject to a substantial risk of forfeiture,
whichever occurs earlier, and (b) the Company will be entitled to a deduction
in the same amount and at the same time as the grantee recognizes income.
However, a grantee may elect under Section 83(b) of the Code, within 30 days
after receipt of the shares, to be taxed at the time of receipt of the shares,
in which case the grantee's recognition of income and the Company's deduction
is determined at the time the shares are received.
Other Stock-Based Awards. In general, (a) the grantee must recognize
ordinary income equal to the amount of any cash received and the fair market
value of any shares or other property received in connection with other
stock-based awards, less any amount paid by the grantee, at the time of
receipt, in the case of cash, and, in the case of shares or other property, at
the time that such shares or other property become transferable or are not
subject to a substantial risk of forfeiture, whichever occurs earlier, and (b)
the Company will be entitled to a deduction in the same amount and at the same
time that the grantee recognizes income. However, a grantee may elect under
Section 83(b) of the Code, within 30 days after receipt of the shares or other
property, to be taxed at the time of receipt, in which case the grantee's
recognition of income and the Company's deduction will be determined at the
time the shares or other property are received.
An employee will not recognize taxable income or loss upon the conversion
of debentures into shares of the Company's Common Stock. The employee's tax
basis in the shares will be equal to the tax basis of the debentures converted
for such shares and the holding period of the shares will include the holding
period of the debentures. The employee will have capital gain or loss upon the
sale of the shares acquired pursuant to the conversion of the debentures. The
Company will have no tax deduction relating to the conversion of debentures or
any subsequent sale of the shares of the Company's Common Stock.
Loan Forgiveness. An employee will have ordinary income upon forgiveness
of a loan, or any portion thereof, and the Company will generally be entitled
to a deduction equal to the income recognized by the employee, subject to
applicable withholding requirements.
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
ALEX. BROWN INCORPORATED
PROXY FOR 1994 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby acknowledges receipt of the Annual Report to
Stockholders and the Notice of Annual Meeting and Proxy Statement relating to
the Annual Meeting of Stockholders of Alex. Brown Incorporated, called to
convene on April 25, 1994, and hereby constitutes and appoints A. B. KRONGARD
and MAYO A. SHATTUCK III, and either of them, the true and lawful attorneys
and Proxies of the undersigned with full power of substitution to each, to
vote all the shares of Common Stock of the corporation which the undersigned
is entitled to vote at the said meeting and at any adjournment thereof in
their discretion, on any matter which may properly come before this meeting
and as follows:
The shares represented by this proxy are to be voted in accordance with the
specific instructions above and, if no choice is indicated, are to be voted
FOR the election ofthe nominees listed and FOR Proposal II and For Proposal
III.
Please mark
your votes
as this
--------------------
COMMON STOCK
Proposal I: ELECTION OF DIRECTORS; as nominated by the Board.
FOR all nominees WITHHOLD Lee A. Ault III, Thomas C.
listed at right AUTHORITY for Barry, Andr~e W. Brewster,
(except those all Nominees Benjamin H. Griswold IV,
named below) listed at right Donald B. Hebb, Jr., A. B.
Kramgard, Steven Muller,
David M. Norman, Frank E.
Richardson and Mayo A.
Shattuck III.
(Instruction: To withhold authority to vote for any individual nominee write
that nominee's name on the line below.)
- ------------------------------------------------------------
Proposal II. To approve amendment of the FOR AGAINST ABSTAIN
Alex. Brown Incorporated
1991 Equity Incentive Plan,
as recommended by the Brown.
Proposal III. To approve the Alex. Brown FOR AGAINST ABSTAIN
Incorporated Management
Compensation Plan, as
recommended by the Board.
PLEASE SIGN, DATE AND RETURN THIS
PROXY PROMPTLY IN THE ENCLOSED
ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
--------------------------------------
--------------------------------------
SIGNATURE(S) OF STOCKHOLDERS(S)
(Signature(s) should conform with the
name(s) printed hereon. If stock is
held in joint names, all should sign.
When signing as attorney, as executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.)
Date: --------------------------- 1994
PLEASE DO NOT FOLD, STAPLE OR DAMAGE
