PRELIMINARY COPY -- FOR THE INFORMATION OF
THE SECURITIES AND EXCHANGE COMMISSION ONLY
YOUR VOTE IS IMPORTANT-Please execute and return the enclosed proxy promptly,
whether or not you plan to attend the T. Rowe Price Annual Meeting of
Stockholders.
T. ROWE PRICE
[CORPORATE LOGO]
T. ROWE PRICE ASSOCIATES, INC.
100 East Pratt Street
Baltimore, Maryland 21202
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
April 12, 1996
Notice is hereby given that the Annual Meeting of Stockholders of T. Rowe
Price Associates, Inc. (the "Company") will be held at 100 East Pratt Street,
12th Floor, Baltimore, Maryland, on April 12, 1996, at 10:00 a.m. for the
following purposes:
(1) To elect fourteen directors of the Company;
(2) To consider and act upon a proposed charter amendment to effect a
two-for- one stock split and a proportional increase in the authorized
common stock;
(3) To consider and act upon the proposed 1996 Stock Incentive Plan; and
(4) To consider and act upon such other business as may properly come
before the meeting.
February 12, 1996 was fixed by the Board of Directors as the record
date for determination of stockholders entitled to notice of and to vote at the
meeting or any adjournments thereof.
BY ORDER OF THE BOARD OF DIRECTORS
Alvin M. Younger, Jr.
Secretary
Baltimore, Maryland
March ___________, 1996
<PAGE>
PROXY STATEMENT
INTRODUCTION
This proxy statement and the accompanying proxy are furnished to
stockholders of T. Rowe Price Associates, Inc. (the "Company") in connection
with the solicitation of proxies by the Company's Board of Directors to be used
at the annual meeting of stockholders described in the accompanying notice and
at any adjournments thereof. The purpose of the meeting is to elect directors of
the Company, to consider and act upon a proposed charter amendment to effect a
two-for-one stock split and to effect a proportional increase in the outstanding
common stock of the Company, to consider and act upon the proposed 1996 Stock
Incentive Plan, and to consider and act upon such other business as may properly
come before the meeting. This proxy statement and the accompanying proxy are
first being sent to stockholders on or about March ___________ , 1996.
The record of stockholders entitled to notice of and to vote at the annual
meeting was taken as of the close of business on February 12, 1996. At that date
there were outstanding and entitled to vote ________________ shares of Common
Stock, par value $.20 per share, held by approximately 2,400 stockholders of
record. In the election of directors, each share is entitled to cast one vote
for each director to be elected; cumulative voting is not permitted. For all
matters except the election of directors, each share is entitled to one vote.
Directors are elected by a plurality of the votes cast by the holders of shares
of Common Stock at a meeting at which a quorum is present. For purposes of the
election of directors, abstentions and broker non-votes are not considered to be
votes cast and do not affect the plurality vote required for directors. Approval
of the proposed charter amendment requires the affirmative vote of a majority of
the total number of shares of Common Stock outstanding, and approval of the 1996
Stock Incentive Plan requires the affirmative vote of the majority of the votes
cast at the meeting. In the discussion of the proposals included in this proxy
statement, the effect of abstentions and broker non-votes is discussed. Article
EIGHTH, Section 3 of the charter of the Company limits the voting rights of
certain persons and groups owning in excess of 15% of the Company's Common
Stock. The Company does not believe that such provision will be applicable to
any stockholders at the 1996 annual meeting, but will apply such provision if
circumstances require.
The cost of soliciting proxies and preparing the proxy materials will be
borne by the Company. In order to ensure that sufficient shares of Common Stock
are represented at the meeting, the Company has retained the services of
Georgeson & Company, Inc. to assist it in soliciting proxies for a fee of $7,000
plus reimbursement for out-of-pocket expenses. The Company also will request
securities brokers, custodians, nominees, and fiduciaries to forward
solicitation material to the beneficial owners of stock held of record and will
reimburse them for their reasonable out-of-pocket expenses in forwarding such
solicitation material. In addition to solicitation of proxies by Georgeson &
Company, Inc., proxies may be solicited personally or by telephone or telegram
by directors, officers, and employees of the Company or its subsidiaries without
additional compensation to them.
The Board of Directors has selected George J. Collins and George A. Roche
to act as proxies with full power of substitution. Any stockholder executing a
<PAGE>
proxy has the power to revoke the proxy at any time before it is voted. This
right of revocation is not limited or subject to compliance with any formal
procedure. Any stockholder may attend the meeting and vote in person whether or
not the stockholder has previously given a proxy.
ELECTION OF DIRECTORS
Effective at the time of the annual meeting, the number of directors will
be increased to fourteen persons, and the entire Board of Directors will be
elected to hold office until the next annual meeting of stockholders and until
their respective successors are elected and have qualified. Eleven of the
fourteen nominees currently serve as directors of the Company. The three
nominees who are not directors currently serve as managing directors of the
Company.
Thomas H. Broadus, a director of the Company since 1979 and an employee
since 1966, and Carter O. Hoffman, a director of the Company since 1973 and an
employee since 1961, are not standing for re-election to the Board of Directors.
The Board of Directors, on behalf of the Company, wishes to express its
appreciation for their many contributions to the Company during their years of
service as directors and as employees and for their continued advice and
counsel.
It is intended that all proxies received, unless otherwise indicated, will
be voted for the election of the persons named in the following table, to serve
until the next annual meeting of stockholders and until their respective
successors are duly elected and have qualified. If any nominee should become
unable or unwilling to serve, the proxies will be voted for the election of such
person as may be designated by the Board of Directors to replace such nominee.
Information Concerning Nominees
The following table presents information concerning persons nominated by
the Board of Directors for election as directors of the Company. Except as
indicated, the nominees have been officers of the organizations named below as
their principal occupations or of affiliated organizations for more than five
years. Positions of the nominees as trustees, directors, or principal officers
of the T. Rowe Price Mutual Funds (including those Funds organized as trusts and
referred to herein as the "Price Funds") and of certain other affiliated
registered investment companies are also indicated. Stock ownership information
is reported as of the record date.
2
<PAGE>
Age, principal occupation, directorships with public
companies, and beneficial ownership of Common Stock
Name of Nominee (percent of class)
- --------------- ------------------------------------------------------
George J. Collins Mr. Collins is 55 years old and has been a director of
the Company since 1980, president and chief executive
officer since 1984, a managing director since 1989, a
vice president between 1975 and 1984, and an employee
since 1971. He is a director or trustee of 20 equity
and fixed income funds within the Price Funds. Of
these, he is chairman of 14 funds and president of one
fund. (1)(2)(5)
____ shares (____%)(6)
James E. Halbkat, Jr. Mr. Halbkat is 61 years old and has been a director of
the Company since 1979. He is President of U.S. Monitor
Corporation, a provider of public response systems.
(3)(4)(5)
_____ shares * (7)
Henry H. Hopkins Mr. Hopkins is 53 years old and has been a director of
the Company since 1987, a managing director since 1989,
a vice president between 1976 and 1989, and an employee
since 1972.
_____ shares (_____%) (8)
James A.C. Kennedy Mr. Kennedy is 42 years old, is a nominee for director,
and has been director of the Corporate Equity Research
Division of the Company since 1987, a managing director
of the Company since 1990, a vice president between
1981 and 1990, and an employee since 1972. He is a
director of the Mid-Cap Growth Fund.
_____ shares (_____%) (9)
John H. Laporte Mr. Laporte is 50 years old, is a nominee for director,
and has been a managing director of the Company since
1989, a vice president between 1978 and 1989, and an
employee since 1976. He is a director of nine equity
funds within the Price Funds. Of these, he is chairman
of three funds and president of four funds.
_____ shares (_____%) (10)
(see footnotes on page____ )
3
<PAGE>
Richard L. Menschel Mr. Menschel is 62 years old and has been a director of
the Company since 1995. He is a limited partner of The
Goldman Sachs Group, L.P., an investment banking firm.
_____ shares * (11)
William T. Reynolds Mr. Reynolds is 47 years old, is a nominee for
director, and has been director of the Corporate Fixed
Income Division since 1994, a managing director of the
Company since 1990, a vice president between 1983 and
1990, and an employee since 1981. He is a director or
trustee of ten fixed income funds within the Price
Funds. Of these, he is chairman of three funds and
president of six funds.
_____ shares (_____%) (12)
James S. Riepe Mr. Riepe is 52 years old and has been a director of
the Company since 1981, a managing director since 1989,
a vice-president between 1981 and 1989, and director of
the investment services division and an employee since
1981. He is chairman of four of the 39 Price Funds on
which he serves as a director or trustee and is
chairman of New Age Media Fund, Inc., He is also a
director of Rhone-Poulenc Rorer, Inc., a
pharmaceuticals company. (1)(2)
_____ shares (_____%) (13)
George A. Roche Mr. Roche is 54 years old and has been a director of
the Company since 1980, chief financial officer since
1984, a managing director since 1989, a vice president
between 1973 and 1989, and an employee since 1968. He
is president and a director of the New Era Fund and
serves as a director of two other Price funds. (1)(2)
_____ shares (_____%) (14)
John W. Rosenblum Mr. Rosenblum is 52 years old and has been a director
of the Company since 1991. He is the Tayloe Murphy
Professor at the Darden Graduate School of Business
Administration (the "Darden School"), University of
Virginia, and was Dean of the Darden School from 1983
to 1993. He is also a director of Chesapeake
Corporation, a manufacturer of paper products; Cadmus
Communications Corp., a provider of printing and
communication services; Comdial Corp., a manufacturer
of telephone systems for businesses; Cone Mills
Corporation, a textiles producer; and Providence
Journal Company, an owner and operator of cable
television systems. (3)(4)
_____ shares * (15)
4
<PAGE>
Robert L. Strickland Mr. Strickland is 64 years old and has been a director
of the Company since 1991. He is Chairman of Lowe's
Companies, Inc., a retailer of specialty home supplies,
and is a director of Hannaford Bros. Co., a food
retailer. (1)(3)(4)
_____ shares * (16)
M. David Testa Mr. Testa is 51 years old and has been a director of
the Company since 1981, a managing director since 1989,
a vice president between 1976 and 1989, and an employee
since 1972. Mr. Testa has also served as chairman of
Rowe Price-Fleming International, Inc. since 1979. He
is president and a director of the Equity Series and is
a director or trustee of 14 other Price Funds. He
serves as chairman of five of these Funds. (1)(2)(5)
_____ shares (_____%) (17)
Philip C. Walsh Mr. Walsh is 74 years old and has been a director of
the Company since 1987. He is a consultant to Cyprus
Amax Minerals Company, the successor by merger to
Cyprus Minerals Company. (3)(4)(5)
_____ shares * (18)
Anne Marie Whittemore Mrs. Whittemore is 49 years old and has been a director
of the Company since 1995. She is a partner in the law
firm of McGuire, Woods, Battle & Boothe, L.L.P. and
serves as a director of Owens & Minor, Inc., a
distributor of medical and surgical supplies; USF&G
Corporation, an insurance company; the James River
Corporation of Virginia, a manufacturer of paper
products; and Albemarle Corporation, a manufacturer of
specialty chemicals.
______ shares *
Beneficial ownership
of Common Stock by all
directors and executive
officers as a group
(27 persons) __________ shares (_____%) (19)
* Indicates holdings of less than 1 percent.
5
<PAGE>
(1) Member of the Executive Committee of the Board of Directors.
(2) Member of the Management Committee of the Board of Directors.
(3) Member of the Audit Committee of the Board of Directors.
(4) Member of the Executive Compensation Committee of the Board of Directors.
(5) Member of the Nominating Committee of the Board of Directors.
(6) Includes _____ shares which may currently be acquired by Mr. Collins upon
the exercise of stock options. Also includes _____ shares owned by a family
member and as to which Mr. Collins disclaims beneficial ownership.
(7) Includes _____ shares which may currently be acquired by Mr. Halbkat upon
the exercise of stock options.
(8) Includes _____ shares which may currently be acquired by Mr. Hopkins upon
the exercise of stock options.
(9) Includes _____ shares which may currently be acquired by Mr. Kennedy upon
the exercise of stock options.
(10) Includes _____ shares which may currently be acquired by Mr. Laporte upon
the exercise of stock options. Also includes _____ shares owned by a member
of Mr. Laporte's family and _____ shares held in trusts for members of Mr.
Laporte's family, as to which Mr. Laporte disclaims beneficial ownership.
(11) During 1995, Goldman, Sachs & Co. performed services for the Company,
including securities brokerage services. Mr. Menschel did not share in any
payment for these services.
(12) Includes _____ shares which may currently be acquired by Mr. Reynolds upon
the exercise of stock options. Also includes _____ shares owned by a member
of Mr. Reynolds' family, as to which Mr. Reynolds disclaims beneficial
ownership.
(13) Includes ______ shares which may currently be acquired by Mr. Riepe upon
the exercise of stock options. Also includes _____ shares owned by a member
of Mr. Riepe's family and ______ shares held in trusts for members of Mr.
Riepe's family, as to which Mr. Riepe disclaims beneficial ownership. Also
includes _____shares held in a charitable foundation of which Mr. Riepe is
a trustee and as to which Mr. Riepe has voting and disposition power.
(14) Includes _____ shares which may currently be acquired by Mr. Roche upon the
exercise of stock options, and _____ shares held by or in trusts for
members of Mr. Roche's family and as to which Mr. Roche disclaims
beneficial ownership.
(15) Includes _____ shares which may currently be acquired by Mr. Rosenblum
upon the exercise of stock options.
(16) Includes _____ shares which may currently be acquired by Mr. Strickland
upon the exercise of stock options.
(17) Includes _____ shares which may currently be acquired by Mr. Testa upon the
exercise of stock options, and _____ shares held in trusts for members of
Mr. Testa's family and as to which Mr. Testa disclaims beneficial
ownership.
(18) Includes _____ shares which may currently be acquired by Mr. Walsh upon the
exercise of stock options.
(19) Includes _____ shares which may currently be acquired by all directors and
executive officers as a group upon the exercise of stock options.
6
<PAGE>
Unless otherwise indicated in the foregoing notes, the individuals named
above have sole voting and disposition powers over the shares beneficially owned
by them.
Information Regarding the Board of Directors and Certain Committees
During 1995, there were seven meetings of the Board of Directors of the
Company. Each director who served for the entire year attended at least 75% of
the combined total number of meetings of the Board and Board committees of which
he was a member. The Board of Directors of the Company has an Audit Committee,
Executive Compensation Committee, and a Nominating Committee.
The Audit Committee meets with the Company's independent accountants to
review whether satisfactory accounting procedures are being followed by the
Company and whether internal accounting controls are adequate, to inform itself
with regard to non-audit services performed by the independent accountants, and
to review fees charged by the independent accountants. The Audit Committee also
recommends to the Board of Directors the selection of independent accountants.
The directors designated in note (3) above are members of the Audit Committee,
which met on four occasions during 1995.
As described in the report of the Executive Compensation Committee, the
Executive Compensation Committee establishes the compensation for certain
executive officers of the Company and generally reviews benefits and
compensation for all officers and employees. It also administers the Company's
stock incentive and stock purchase plans and the Company's Executive Incentive
Compensation Plan. The directors designated in note (4) above are members of
this Committee and met seven times during 1995.
The Nominating Committee advises the Board of Directors with respect to the
selection and nomination of individuals to serve as directors of the Company.
The directors designated in note (5) on the previous page are members of the
Nominating Committee which held one meeting in 1995. Nominations for director
which are presented to the Nominating Committee by stockholders are considered
in light of the needs of the Company, as well as the nominee's individual
knowledge, experience, and background.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Summary Compensation Table. The following table sets forth certain
information concerning the compensation for the last three completed fiscal
years of the chief executive officer and the four executive officers of the
Company who, in addition to the chief executive officer, received the highest
compensation during 1995.
7
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term All Other
Annual Compensation (1) Compensation Awards
Compensation(4)
Name and Securities Underlying
Principal Position Year Salary Bonus (2) Options Granted (#)(3)
- ------------------ ---- ------ --------- ----------------------
<S> <C> <C> <C> <C> <C>
George J. Collins 1995 $325,000 $1,300,000 -0- $24,000
President, Chief Exec- 1994 325,000 1,250,000 -0- 22,500
utive Officer and 1993 290,008 750,000 35,000 30,000
Managing Director
James S. Riepe 1995 275,000 1,300,000 100,000 22,500
Managing Director 1994 275,000 1,250,000 -0- 22,500
1993 248,750 750,000 30,000 30,000
George A. Roche 1995 275,000 1,300,000 100,000 24,000
Chief Financial Offic- 1994 275,000 1,250,000 -0- 22,500
er and Managing 1993 248,750 750,000 30,000 30,000
Director
M. David Testa 1995 275,000 1,300,000 -0- 26,625
Managing Director 1994 275,000 1,250,000 300,000 26,625
1993 248,750 750,000 30,000 33,731
John H. Laporte 1995 250,000 1,300,000 25,000 26,250
Managing Director 1994 250,008 800,000 20,000 26,250
1993 220,833 550,000 24,000 33,312
</TABLE>
(1) No officer named in the Summary Compensation Table received any perquisites
and other personal benefits the aggregate amount of which exceeded the
lesser of either $50,000 or 10% of the total annual salary and bonus
reported for 1995 in the Summary Compensation Table.
(2) Bonuses for 1995 were paid pursuant to the Company's Executive Incentive
Compensation Plan. For 1993 and 1994, bonuses were determined by the
Executive Compensation Committee based upon individual, group and corporate
performance. Bonuses vary significantly from year to year and among
eligible employees. See "Report of the Executive Compensation Committee."
(3) The number of shares subject to options have been adjusted in accordance
with the terms of the options for the two-for-one stock split effective at
the close of business on November 30, 1993.
(4) Included in other compensation is a $22,500, $22,500 and $30,000
contribution for 1995, 1994 and 1993, respectively, for each of the named
individuals to the Company's tax-qualified profit sharing plan, which
8
<PAGE>
provides retirement benefits based on the investment performance of each
participant's account under the plan. Also includes $1,500 in directors
fees paid by a wholly-owned subsidiary of the Company to each Mr. Collins
and Mr. Roche in 1995 and $4,125, $4,125 and $3,731 in employer matching
contributions under the Company's 1986 Employee Stock Purchase Plan for Mr.
Testa for 1995, 1994 and 1993, respectively, and $3,750, $3,750, and $3,312
in employer matching contributions under the Company's 1986 Employee Stock
Purchase Plan for Mr. Laporte for 1995, 1994 and 1993, respectively.
Option Grants Table. The following table sets forth certain information
relating to options granted to purchase shares of Common Stock of the Company.
Options generally become exercisable in the first through fifth anniversaries of
the date of grant, with the exception of the 1994 option award to Mr. Testa and
the 1995 option awards to Mr. Riepe and Mr. Roche, which become exercisable in
the third through fifth anniversaries of the date of grant. In December 1995,
the Executive Compensation Committee (the "Committee") adopted amendments to all
existing option agreements under the Company's 1986, 1990 and 1993 Stock
Incentive Plans providing that such options and any options granted in the
future to the current option holders will become exercisable in full for a
period of one year following certain specified changes in control of the Company
or approval by the Board of Directors of certain transactions leading to changes
in control, subject to the ability of the Committee to rescind such acceleration
of exercisability for a specified period following any triggering event. In
addition, the Company's stock option plans provide the Committee with broad
discretion to accelerate the exercisability of options.
9
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
Number of Percent of Potential Realizable Value at As-
Securities Total Options sumed Annual Rates of Stock Price
Underlying Granted to Exercise or Appreciation for Option Term (2)
Options Employees in Base Price Expiration
Name Granted (#) Fiscal Year (Per Share)(1) Date 0%(3) 5% 10%
<S> <C> <C> <C> <C> <C> <C> <C>
George J. Collins 0 0% N/A N/A $0 $0 $0
James S. Riepe 100,000 8.2% $52.25 10/31/05 0 3,286,000 8,327,000
George A. Roche 100,000 8.2% 52.25 10/31/05 0 3,286,000 8,327,000
M. David Testa 0 0% N/A N/A 0 0 0
John H. Laporte 25,000 2.0% 52.25 10/31/05 0 821,500 2,081,750
</TABLE>
The 5% and 10% assumed rates of stock price appreciation used to calculate
potential gains to optionees are mandated by the rules of the Securities and
Exchange Commission. To put these hypothetical gains into perspective, the
following additional information is being provided.
<TABLE>
<CAPTION>
Number of Percent of Potential Realizable Value at As-
Securities Total Options sumed Annual Rates of Stock Price
Underlying Granted to Exercise or Appreciation for Option Term (2)
Options Employees in Base Price Expiration
Name Granted (#) Fiscal Year (Per Share)(1) Date 0%(3) 5% 10%
<S> <C> <C> <C> <C> <C> <C> <C>
All Stockholders (4) N/A N/A N/A N/A 0 $940,135,542 $2,382,382,429
Potential Gain to
Named Executives as a
Percentage of Potential
All Stockholders Gain N/A N/A N/A N/A N/A 7.86% 7.86%
</TABLE>
(1) Options were granted at 100% of fair market value on the date of grant.
(2) The dollar amounts set forth under these columns are the result of
calculations of assumed annual rates of stock price appreciation from
November 1, 1995 (the date of grant of the 1995 option awards) to October
31, 2005 (the date of expiration of such options) of 0%, 5%, and 10%, the
latter two assumed rates being required under the rules of the Securities
and Exchange Commission. Based on these assumed annual rates of stock price
appreciation of 0%, 5%, and 10%, respectively, the Company's stock price at
October 31, 2005 is projected to be $52.25, $85.11, and $135.52,
10
<PAGE>
respectively. These assumptions are not intended to forecast future
appreciation of the Company's stock price. Indeed, the Company's stock
price may increase or decrease in value over the time period set forth
above. The potential realizable value computation does not take into
account federal or state income tax consequences of option exercises or
sales of appreciated stock.
(3) Optionees will not realize value under their 1995 option grants without a
stock price appreciation which will benefit all stockholders.
(4) The number of shares subject to options granted in 1995 is not included in
the number of shares outstanding used to calculate potential realizable
value at the assumed annual rates of stock price appreciation of 0%, 5%,
and 10%, respectively.
Aggregated Option Exercises and Fiscal Year-End Option Values Table. The
following table sets forth certain information concerning the exercise of stock
options, the number of unexercised options and the value of unexercised options
at the end of 1995 for the executive officers whose compensation is reported in
the Summary Compensation Table. Value is considered to be, in the case of
exercised options, the difference between the exercise price and the market
price on the date of exercise, and, in the case of unexercised options, the
difference between the exercise price and market price on December 31, 1995.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Secur-
ities Underlying Value of Unexercised
Unexercised Options "In-the-Money" Options
at December 31, 1995 at December 31, 1995
Shares Acquired Value (Exercisable/ (Exercisable/
Name on Exercise (1) Realized Unexercisable) (1) Unexercisable) (2)
<S> <C> <C> <C> <C>
George J. Collins N/A N/A 58,800/28,200 $1,995,200/$667,425
James S. Riepe 9,600 $460,200 42,400/131,600 1,208,700/802,050
George A. Roche 11,400 498,900 32,200/131,600 879,750/802,050
M. David Testa 17,700 636,856 34,000/331,600 937,800/5,902,050
John H. Laporte 20,000 774,375 75,800/68,200 2,459,438/975,000
</TABLE>
11
<PAGE>
(1) All share and per share figures have been adjusted in accordance with the
terms of the options for the two-for-one stock split effective at the close
of business on November 30, 1993.
(2) An "In-the-Money" option is an option for which the option price of the
underlying stock is less than the market price at December 31, 1995, and
all of the value shown reflects stock price appreciation since the granting
of the option.
Compensation of Directors. Directors who are also officers do not receive
directors' fees. Each independent director who served for the entire year
received a $50,000 retainer for 1995 services as a director and board committee
member. The retainer paid to each Mr. Menschel and Mrs. Whittemore, who served
on the Board of Directors for part of the year, was prorated at $25,000.
During 1995, Philip C. Walsh (Chairman), James E. Halbkat, Jr., John W.
Rosenblum, and Robert L. Strickland served as members of the Executive
Compensation Committee. No director or executive officer of the Company is a
director or executive officer of any other corporation that has a director or
executive officer who is also a director or board committee member of the
Company.
Report of the Executive Compensation Committee
The Executive Compensation Committee of the Board of Directors (the
"Committee"), comprised solely of the independent directors named below, is
responsible to the Board and by extension to the stockholders for: (i)
determination of the compensation of the chief executive officer and the other
managing directors who are also members of the Company's Management Committee
(collectively, the "Senior Executive Officers"); (ii) administration of the
Company's Executive Incentive Compensation Plan (the "Incentive Plan"); (iii)
administration of the Company's stock incentive plans as required by Rule 16b-3
under the Securities Exchange Act of 1934 as amended; and (iv) review and
approval of the compensation policies and general levels of compensation for the
Company's remaining managing directors and other key employees, for whom
individual compensation decisions are made by a management-level compensation
committee.
The Committee recognizes that the investment management and securities
industries are highly competitive, and that experienced professionals have
significant career mobility. Its members believe that the ability to attract,
retain and provide appropriate incentives for the highest quality professional
personnel is essential to retain the Company's competitive position in the
mutual fund and investment management industry, and thereby seek to provide for
the long-term success of the Company in the interests of its stockholders.
12
<PAGE>
The Committee believes that competitive levels of cash compensation,
together with equity incentive programs that are consistent with stockholder
interests, are necessary for the motivation and retention of the Company's
professional personnel. The Company's compensation programs are keyed to
achievement, as determined by the Committee, of short- and long-term performance
goals.
During 1995, base salaries for each of the individuals named in the table
on page _____ (the "Named Officers") were unchanged from the annual levels
established during 1993 (which levels, in the case of each of the Senior
Executive Officers, had not previously been changed since the Company's initial
public offering in 1986). Consistent with compensation practices generally
applied in the investment management and other financial services industries
with which the Company competes for talent, base salaries for the Named Officers
are intended to form a relatively low percentage (substantially below 50%) of
total cash compensation with the major portion of cash compensation intended to
be derived from payments made under the Incentive Plan provided, of course, that
the performance goals established under the Incentive Plan are met or exceeded.
In 1995, the Committee and the Board of Directors recommended, and the
stockholders approved, the Incentive Plan. The Incentive Plan establishes a pool
(the "Incentive Pool") which relates incentives to the Company's Income before
Income Taxes and Minority Interests for that year ("Adjusted Earnings"), subject
to a requirement that a threshold ratio of net (after-tax) income to average
stockholders' equity (the "Threshold ROE") is attained. The Incentive Pool,
subject to reduction based on the Threshold ROE target, is computed as follows:
(1) for Adjusted Earnings up to $25 million, 5% of Adjusted Earnings; (2) for
Adjusted Earnings above $25 million to $50 million, an additional 7% of Adjusted
Earnings; and (3) for Adjusted Earnings above $50 million, an additional 8% of
Adjusted Earnings. Thus, the Incentive Plan establishes a maximum cumulative
Incentive Pool of $3,000,000 plus 8% of Adjusted Earnings over $50 million. For
purposes of the Incentive Plan, Threshold ROE for the year is the ratio of
annual net income (excluding the effect of extraordinary items under generally
accepted accounting principles) to average stockholders' equity for the year.
The Threshold ROE that must be attained to permit the maximum cumulative
Incentive Pool to be fully payable under the Incentive Plan is 20%. If the
Company's Threshold ROE is less than 20% but at least 10%, for each full
percentage point shortfall the maximum cumulative Incentive Pool is reduced by
five percentage points. If the Company's Threshold ROE falls below 10%, there
shall be no Incentive Pool and no bonus payment will be made from the Incentive
Pool for that fiscal year.
As contemplated by the Incentive Plan, the Committee at the outset of 1995
designated seven executive officers (the chief executive officer, the three
other Senior Executive Officers, and three other managing directors) as eligible
to participate in the Plan for 1995. The Committee also determined that each
particular participant would be eligible to receive a specified percentage of
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the available Incentive Pool. In accordance with the Incentive Plan, the
Committee reviewed the requirements established by the Plan for determining
incentive awards and also determined and certified that each of the Plan's
performance goals had been satisfied before it approved and permitted payment of
bonuses pursuant to the Plan. Hence, the Committee expects that all payments
pursuant to the Incentive Plan will be fully deductible in accordance with
Section 162(m) of the Internal Revenue Code of 1986, as amended, and all other
compensation payable to the Named Executive Officers for 1995 performance will
similarly be fully deductible.
The Committee determined to award each of the Senior Executive Officers
incentive compensation in each case in an amount less than the full amount that
would be permitted to be paid under the Incentive Plan. In making its
determinations, the Committee noted that the Company had achieved record
revenues, earnings, and earnings per share and had attained a return on equity
substantially in excess of the Threshold ROE. The Committee also gave
consideration to a series of specific, qualitative performance factors, that it
believed reflected the Senior Executive Officers' performance but were not
capable of precise measurement, including: relative investment performance,
marketing effectiveness, management of corporate assets, expense control, and
corporate infrastructure development. The Committee determined that the Senior
Executive Officers each had demonstrated superior long-term management
performance in each of these areas. However, in determining executive officer
compensation relative to the Company's compensation policies in general as well
as general industry compensation trends, the Committee determined to award the
Senior Executive Officers incentive compensation less than the full amounts
payable under the Plan. In making these determinations, the Committee noted that
the Company may be required to pay out a greater portion or all of the incentive
pool in a year when financial performance might not be so strong in order to
maintain a competitive compensation structure and thus retain key personnel. In
the case of Mr. Laporte, the Named Officer who is not one of the Senior
Executive Officers, a portion of the incentive compensation reported in the
Summary Compensation Table represents payments other than from the Incentive
Pool (as contemplated by the Incentive Plan) and was based on the Committee's
evaluation of the operating performance and qualitative factors of the business
unit for which Mr. Laporte is responsible.
In establishing the compensation of the Named Officers, the Committee took
into account the fact that the four Senior Executive Officers constituted the
Company's senior management team during 1995 and thus had broad Company-wide
management responsibilities as well as line operating responsibilities. Each of
these individuals has been a member of the Company's Management Committee since
1984. A larger base salary for Mr. Collins reflected the additional
responsibilities inherent in his position as chief executive officer. Subject to
the considerations regarding the stock option awards described below, the four
Senior Executive Officers were viewed as making generally equivalent
contributions to 1995 performance. In the case of Mr. Laporte, the Committee
took into consideration the strong investment performance and growth in assets
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under management of the Company's small company equity management operation, for
which Mr. Laporte is in charge, and the fact that the funds under Mr. Laporte's
general supervision are major contributors to Company revenues.
In 1995, the Committee determined to make stock option awards to Mr. Riepe
and Mr. Roche each covering 100,000 shares of Common Stock at $52.25 per share.
These option awards were significantly greater than option awards that had been
made in the past, with the exception of one 1994 award. These awards were made
in an effort to balance the stock incentives and stock ownership among the
Senior Executive Officers and to recognize the unique long-term contributions of
Mr. Roche to the Company's financial management and equity portfolio management
functions and of Mr. Riepe to the Company's mutual fund business. Consistent
with this objective and in order to minimize the dilutive effect of option
awards, the Committee determined not to make stock option awards in 1995 to
either Mr. Collins or Mr. Testa. To solidify the link of these considerable
awards to long-term future performance, the option awards to Mr. Riepe and Mr.
Roche, which expire on October 31, 2005, become exercisable in three equal
annual installments commencing in 1998. This three-year delay before initial
vesting commences is longer than the vesting period established in stock option
grants awarded to other key employees in 1995.
In administering the Company's compensation programs for executive
officers, the Committee receives the advice of its independent compensation
consultants concerning option award practices of other public companies,
including companies which compete with the Company for talent.
The Committee has compared the Company's compensation levels to relevant
publicly available data for the investment management, securities and other
financial service industries and found the Company's compensation levels to be
competitive. Certain of these companies are included in the CRSP Total Return
Index for Nasdaq Financial Stocks shown in the Stock Performance Chart below.
The Company believes it competes for executive talent with a large number of
investment management, securities, and other financial services companies, some
of which are privately owned and others of which have significantly larger
market capitalizations than the Company. The practice of the Company and the
Committee is to review available compensation data from a large universe of
financial services companies. The Committee receives the assistance of an
independent compensation consulting firm in comparing and determining executive
compensation and policies. In reviewing this data, the Committee's goal is to
maintain compensation programs which are competitive with averages within the
financial services industry, but are neither significantly higher nor lower than
these averages.
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The Executive Compensation Committee believes that 1995 compensation levels
disclosed in this proxy statement are reasonable and appropriate in light of the
Company's very strong financial and investment performance.
Philip C. Walsh, Chairman
James E. Halbkat, Jr.
John W. Rosenblum
Robert L. Strickland
STOCK PERFORMANCE CHART
As part of the proxy statement disclosure requirements mandated by the
Securities and Exchange Commission, the Company is required to provide a
five-year comparison of the cumulative total stockholder return on its Common
Stock with that of a broad equity market index and either a published industry
index or a Company-constructed peer group index.
The following chart compares the yearly percentage change in the cumulative
total stockholder return on the Company's Common Stock during the five years
ended December 31, 1995 with the cumulative total return on the CRSP Total
Return Index for the Nasdaq Stock Market (US Companies), the CRSP Total Return
Index for Nasdaq Financial Stocks, and the S&P 500 Index. The comparison assumes
$100 was invested on December 31, 1990 in the Company's Common Stock and in each
of the foregoing indices and the reinvestment of dividends.
There can be no assurance as to future trends in the cumulative total
return of the Company's Common Stock or of the following indices. The Company
does not make or endorse any predictions as to future stock performance.
INSERT LINEGRAPH
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GRAPH PLOT POINTS
================================================================================
1990 1991 1992 1993 1994 1995
- --------------------------------------------------------------------------------
T. Rowe Price $100 $191 $197 $256 $270 $450
Associates, Inc.
- --------------------------------------------------------------------------------
CRSP Total Return 100 161 187 215 210 296
Index for the Nasdaq
Stock Market (US
Companies) (1)
CRSP Total Return 100 155 221 257 258 376
Index for Nasdaq
Financial Stocks (1)
S&P 500 Index (2) 100 130 140 155 157 215
================================================================================
(1) The CRSP Total Return Index for the Nasdaq Stock Market (US Companies) is
an index comprising all domestic common shares traded on the Nasdaq
National Market and the Nasdaq Small-Cap Market. The CRSP Total Return
Index for Nasdaq Financial Stocks is an index comprising all financial
company American Depository Receipts, domestic common shares and foreign
common shares traded on the Nasdaq National Market and the Nasdaq Small-Cap
Market, and represents SIC Codes 60 through 67. The Company will provide
the names of companies included in this index upon the written request of
any stockholder. Such request should be directed to the secretary of the
Company. These indices were prepared for Nasdaq by the Center for Research
in Securities Prices ("CRSP") at the University of Chicago and distributed
to Nasdaq-listed companies to assist them in complying with proxy rule
disclosure requirements. The Company has not independently verified the
computation of these total return indices.
(2) Total return performance for the S&P 500 Index provided by Standard &
Poor's.
PROPOSED CHARTER AMENDMENT TO EFFECT A TWO-FOR-ONE
STOCK SPLIT AND A PROPORTIONAL INCREASE IN
THE AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors of the Company has adopted resolutions declaring
advisable and recommending to the Company's stockholders for their approval an
amendment to the Company's charter effecting a two-for-one split of the
Company's outstanding Common Stock and a proportional increase in the authorized
shares of Common Stock from 100,000,000 shares to 200,000,000. The text of the
proposed amendment is included in the form of Articles of Amendment attached
hereto as Exhibit A. The Board of Directors believes that the stock split will
be beneficial to the trading market for the Company's Common Stock by reducing
the per share trading price and increasing the number of publicly traded shares.
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If the amendment is adopted, the split will become effective as of the
close of business on April 12, 1996 and stockholders of record as of that date
(the "record date") will receive one share of Common Stock for each share held
as of the record date. Certificates representing such shares will be distributed
on April 30, 1996. Participants in the Company's Employee Stock Purchase Plan
will be entitled to receive additional full and fractional shares for each full
and fractional share owned by them as of the April 12 record date, and options
outstanding under the Company's existing stock option and stock incentive plans
will be proportionally adjusted. Similarly, it is expected that the dividend
payable per share in subsequent quarters will be adjusted to reflect the effect
of the split.
It is likely that the per share trading price of the Common Stock on the
Nasdaq National Market will be reduced to approximately one-half of the trading
price immediately before the stock split and that this will occur on the [April
30 payment date]. The cost basis of pre-split shares shall be allocated pro-rata
among the pre-split shares and the split shares received in respect of those
particular pre-split shares. The new shares will be deemed to have been held for
the same period of time as the pre-split shares to which they relate. The
Company has been advised by counsel that, under current federal tax law, the
distribution of additional shares will not result in taxable income or loss.
Following stockholder adoption of the proposed amendment, approximately
_____ shares of Common Stock will be available for issuance in excess of
outstanding Common Stock (approximately _____ shares post-split) and the
approximately _____ post-split shares reserved for issuance under the Company's
various employee benefit plans. The proportion of shares available for possible
future issuance to total authorized capital stock will remain exactly the same
before and after the split. At the present time, there are no agreements,
understandings or arrangements for the authorized but unissued capital stock,
other than the existing and proposed (see the proposed 1996 Stock Incentive Plan
described beginning on page ______) employee stock plans.
The amendment does not change the proportion of the authorized Common Stock
to the shares of Common Stock outstanding or reserved for issuance, as described
above. The authorized shares of Common Stock in excess of the outstanding and
reserved shares could be issued, in many cases without stockholder approval, for
a variety of corporate purposes, including the raising of additional capital to
support expansion of the Company's growth, either through internally-generated
growth or through acquisitions, and stock issuances in connection with the
acquisition of other business organizations, employee incentive plans, and stock
split-ups and stock dividends. Management of the Company is cognizant of the
trends toward consolidation in the investment management industry and believes
there may be enhanced prospects for growth through acquisition in the future.
Consistent with these trends, the Company from time to time reviews various
acquisition prospects and periodically engages in discussions regarding such
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<PAGE>
possible acquisitions. Currently, the Company is not a party to any agreements
or understandings regarding any material acquisitions that would require
issuance of any shares authorized by the proposed charter amendment. In
addition, acquisitions involving stock issuances above certain enumerated
thresholds would require stockholder approval under applicable rules of the
Nasdaq Stock Market and in some circumstances Maryland law.
The Board of Directors is required to make any determination to issue
shares of Common Stock based on its judgment as to the best interests of the
stockholders and the Company. Although the Board of Directors has no present
intention of doing so, it could issue shares of Common Stock that could make
more difficult or discourage an attempt to obtain control of the Company by
means of merger, tender offer, proxy contest or other means. When, in the
judgment of the Board of Directors, this action will be in the best interests of
the stockholders and the Company, such shares could be used to create voting or
other impediments or to discourage persons seeking to gain control of the
Company. Such shares could be privately placed with purchasers favorable to the
Board of Directors in opposing such action. The issuance of new shares could
also be used to dilute the stock ownership of a person or entity seeking to
obtain control of the Company should the Board of Directors consider the action
of such entity or person not to be in the best interests of the stockholders and
the Company.
Recommendation of the Board of Directors; Vote Required
The Board of Directors has declared advisable and recommends a vote "FOR"
an amendment to the Company's charter effecting a two-for-one split of the
Company's outstanding Common Stock and a proportional increase in the authorized
shares of Common Stock from 100,000,000 to 200,000,000 shares. The affirmative
vote of a majority of the total number of shares of Common Stock outstanding
will be required for adoption of the amendment. Accordingly, abstentions and
broker non-votes will have the same effect as a vote against the amendment.
Proxies solicited by the Board of Directors will be voted in favor of the
amendment unless stockholders specify otherwise.
PROPOSED 1996 STOCK INCENTIVE PLAN
The Company's 1996 Stock Incentive Plan (the "Plan") was recommended by the
Executive Compensation Committee (the "Committee") and approved by the Board of
Directors on February 7, 1996. A copy of the Plan is attached hereto as Exhibit
B, and the following summary description is qualified by reference to the Plan.
The purpose of the Plan is to provide an incentive to employees and to encourage
capital accumulation and stock ownership by key employees in order to increase
their proprietary interest in the Company's success.
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No options or awards have been granted or made under the Plan in 1996. For
information concerning 1995 grants under the Company's 1990 and 1993 Stock
Incentive Plans, which are similar to the proposed Plan, see the Option Grants
Table above. The Committee has not considered what awards will be made under the
Plan, and, consequently, the number of shares that will be covered by any such
awards or the persons to whom awards will be made cannot be determined.
In addition, there are _______________ and _________________ shares of
Common Stock reserved for issuance under the Company's 1990 Stock Incentive Plan
(the "1990 Plan") and 1993 Stock Incentive Plan (the "1993 Plan"), respectively,
as to which options or stock appreciation rights have not been granted.
Authority to make awards under the 1990 Plan will be terminated upon shareholder
approval of the 1996 Plan; authority to make awards under the 1993 Plan will
continue in effect following shareholder approval of the 1996 Plan. Information
concerning outstanding grants under these and prior plans is contained in the
Company's Annual Report to Stockholders.
The Plan will be effective as of April 12, 1996, subject to stockholder
approval, and will remain in effect until February 6, 2006.
Number of Shares
The Plan provides that 4,000,000 shares of the Company's Common Stock,
which number is subject to adjustment to reflect certain subsequent stock
changes such as stock dividends, stock splits, and share exchanges, will be
available for the granting of stock options, stock appreciation rights, and
stock awards, from time to time, to key employees (including officers and
directors who are employees) of the Company and its subsidiaries. If the stock
split is approved at the annual meeting, the Plan would then cover 8,000,000
shares of the Company's Common Stock. If an option or stock appreciation right
expires before its exercise, a stock appreciation right is exercised for cash,
or a stock award is forfeited, and, in each case, the grantee received no
benefit of ownership of the stock, the shares may again be subject to awards.
Administration; Eligibility
The selection of the participants in the Plan and the term of awards
granted to each participant will be determined by the Committee, which may
delegate authority to make awards to persons who are not subject to Section 16
of the Securities Exchange Act of 1934 (the "1934 Act") to a committee of
officers. Key employees, including those who are officers and directors of the
Company and its subsidiaries, are eligible to be selected to receive awards
under the Plan.
20
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Stock Options
The Committee may grant either incentive stock options qualified with
respect to Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or options not qualified under any section of the Code ("non-qualified
options"). Incentive stock options may be granted at not less than 100% of the
fair market value of the underlying Common Stock, and non-qualified stock
options may be granted at not less than 75% of the fair market value of the
underlying Common Stock. The Committee's practice has been to award all options
at not less than 100% of the fair market value of the underlying Common Stock at
the time of issuance. Upon exercise, the option price is to be paid in full in
cash, or, at the discretion of the Committee, in the Company's Common Stock
previously owned by the option holder or acquired upon the option exercise
having a market value on the date of exercise equal to the aggregate option
price, or in a combination thereof.
Exercise; Employment
Options granted under the Plan shall first become exercisable at least one
year after grant and shall expire not more than ten years from the date the
option is granted. The Committee may in its discretion provide that an option
may not be exercised in whole or in part for any period or periods of time
specified and may accelerate the time at which an option may be exercised.
Stock Appreciation Rights
The Committee may grant stock appreciation rights which provide the grantee
the right to receive a payment (in cash, Common Stock, or a combination of both)
equal to the difference between the fair market value of a specific number of
shares of Common Stock on the grant date and the fair market value of such
shares on the date of exercise. Stock appreciation rights may, in the discretion
of the Committee, be granted separately or in tandem with options or other
awards under the Plan.
Stock Awards
Awards of shares of Common Stock may be issued with or without payment of
consideration by the participant. An award of stock may be denominated in shares
of stock, units of stock, or stock equivalent units and may be paid in cash,
Common Stock or a combination thereof. All or part of any stock award may be
subject to conditions and restrictions, which the Committee shall specify.
"Book Value" Shares
Incentive and non-qualified stock options, stock appreciation rights and
stock awards may also relate to "Book Value Shares." Book Value Shares are
21
<PAGE>
shares of Common Stock which have voting, dividend and liquidation rights but
are not transferable except to the Company and are subject to valuation and
adjustment in certain circumstances, as described in the Plan.
Amendments
The [Committee], at any time and from time to time, may alter, amend,
suspend or discontinue the Plan or alter or amend any and all options, stock
appreciation rights, and stock awards under the Plan. In addition, no such
action may be taken which adversely affects the rights of a participant in any
option, stock, or right that has been granted under the Plan without the
participant's consent. Under current rules of the Securities and Exchange
Commission applicable to persons who are subject to Section 16 of the 1934 Act,
no such action may be taken without stockholder approval which materially
increases the benefits to participants under the Plan, materially increases the
number of shares to be issued, materially extends the period for granting of
awards or materially modifies the requirements as to eligibility.
Federal Income Tax Consequences
The following is a general summary of the Federal income tax treatment of
the stock awards, incentive stock options, non-qualified stock options, stock
appreciation rights, and stock awards to be granted under the Plan based upon
the current provisions of the Code and regulations promulgated thereunder.
Incentive Stock Options. Incentive stock options under the Plan are
intended to meet the requirements of Section 422 of the Code. No tax
consequences result from the grant of the option. If an option holder acquires
stock upon the exercise, no income will be recognized by the option holder for
ordinary income tax purposes (although the difference between the option
exercise price and the fair market value of the stock subject to option may
result in alternative minimum tax liability to the option holder) and the
Company will be allowed no deduction as a result of such exercise, if the
following conditions are met: (a) at all times during the period beginning with
the date of the granting of the option and ending on the day three months before
the date of such exercise, the option holder is an employee of the Company or of
a subsidiary; and (b) the option holder makes no disposition of the stock within
two years from the date the option is granted nor within one year after the
stock is transferred to the option holder. In the event of a sale of such stock
by the option holder after compliance with these conditions, any gain realized
over the price paid for stock will ordinarily be treated as long-term capital
gain, and any loss will be treated as long-term capital loss, in the year of the
sale.
If the option holder fails to comply with the employment or holding period
requirements discussed above, the option holder will recognize ordinary income
in an amount equal to the lesser of (i) the excess of the fair market value of
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the stock on the date the option was exercised over the exercise price or (ii)
the excess of the amount realized upon such disposition over the exercise price.
If the option holder is treated as having received ordinary income because of
his failure to comply with either condition above, an equivalent deduction will
be allowed to the Company in the same year.
Non-Qualified Stock Options. No tax consequences result from the grant of
the option. An option holder who exercises a non-qualified stock option with
cash will generally realize compensation taxable as ordinary income 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 will be entitled to a
deduction from income in the same amount. The option holder's basis in such
shares will be the fair market value on the date exercised, and when he disposes
of the shares he will recognize capital gain or loss, either long-term or
short-term, depending on the holding period of the shares.
Stock Appreciation Rights. The grant of a stock appreciation right will not
result in tax consequences to the Company or to the grantee. A grantee who
exercises a stock appreciation right will realize compensation taxable as
ordinary income in an amount equal to the cash or the fair market value of the
shares received on the date of exercise, and the Company will be entitled to a
deduction in the same amount.
Stock Awards. Stock awards granted under the Plan and paid in Common Stock
will constitute ordinary income to the recipient, and a deductible expense to
the Company, in the year paid if the stock is not subject to forfeiture
restrictions or in the year in which restrictions lapse unless the participant
elects to recognize income in the year the award is made by making a timely
election under Section 83(b) of the Code. Unless such an election is made, the
amount of the taxable income and corresponding deduction will be equal to the
fair market value of the stock on the date the restrictions lapse. The Company
is also allowed a deduction for dividends paid to participants (provided they
have not elected to recognize income at the time of the award) on stock while
the restrictions remain in force. Stock awards structured as stock equivalent
units and payable in cash or in Common Stock will be treated for federal income
tax purposes in substantially the same manner as stock appreciation rights.
Recommendation of the Board of Directors; Vote Required
The Board of Directors recommends approval of the Plan. The affirmative
vote of a majority of the votes cast at the meeting will be required to approve
the Plan. Accordingly, abstentions and broker non-votes will not be considered
to be votes cast and will have no effect on the outcome of the matter. Proxies
solicited by the Board of Directors will be voted in favor of the amendment
unless stockholders specify otherwise.
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CERTAIN OWNERSHIP OF THE COMPANY'S COMMON STOCK
The Company has no knowledge at this time of any individual or entity
owning, beneficially or otherwise, 5% or more of the Company's Common Stock.
SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors, pursuant to the recommendation of its Audit
Committee, has selected Price Waterhouse, independent accountants, to examine
the financial statements of the Company for the year 1996. This firm has served
as independent accountants of the Company since 1985. A partner of the firm will
be present at the annual meeting and available to respond to appropriate
questions, and will have an opportunity to make a statement if he desires to do
so.
In 1995, Price Waterhouse performed various professional services for the
Company, including completion of the examination of financial statements of the
Company for 1994, preliminary work on the examination for 1995, and preparation
of corporate tax returns. Price Waterhouse also examines the financial
statements of approximately 47% of the Price Funds as well as other sponsored
investment products.
The Audit Committee of the Board of Directors of the Company approved the
audit services provided by Price Waterhouse and the related fees and took into
consideration the non-audit services provided by Price Waterhouse. The Committee
considered the possible effect of these non-audit services on the independence
of Price Waterhouse and concluded there was no material effect upon their
independence.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1996 annual meeting
must be received by the Company for inclusion in the Company's proxy statement
and proxy relating to that meeting by November ______ , 1996.
OTHER MATTERS
The Board of Directors of the Company knows of no other matters to be
presented for action at the meeting other than those mentioned above. However,
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if any other matters properly come before the meeting, it is intended that the
persons named in the accompanying proxy will vote on such other matters in
accordance with their judgment of the best interests of the Company.
25
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Exhibit A
T. ROWE PRICE ASSOCIATES, INC.
ARTICLES OF AMENDMENT
T. Rowe Price Associates, Inc., a Maryland corporation, having its
principal office in Baltimore City, Maryland (which is hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended by:
Changing and reclassifying each of the shares of Common Stock (par value
$.20 per share) of the Corporation, which is issued at the close of business on
the effective date of this amendment, into two shares of such Common Stock (par
value $.20 per share) and by transferring from the account designated "capital
in excess of par value" to the extent available and then from the account
designated "retained earnings" to the common stock account $.10 for each share
of Common Stock outstanding immediately after the change and reclassification,
such change and reclassification to be made as a two-for-one split of the issued
and outstanding shares and not as a stock dividend, and in connection therewith
there shall be issued one additional share of Common Stock for each such share
thereof which is issued and outstanding at such effective date.
SECOND: Article SIXTH, Paragraph (a) of the charter of the Corporation is
hereby amended to read in its entirety as follows:
SIXTH: (a) The total number of shares of stock of all classes which the
Corporation has authority to issue is 220,000,000 shares of capital stock (par
value $.20 per share) amounting in aggregate par value to $44,000,000, of which
200,000,000 shares (par value $.20 per share) amounting in aggregate par value
to $40,000,000 are classified as "Common Stock" and 20,000,000 shares (par value
$.20 per share) amounting in aggregate par value to $4,000,000 are classified as
"Preferred Stock."
THIRD: (a) As of immediately before the amendment the total number of
shares of stock of all classes which the Corporation has authority to issue is
120,000,000 shares, of which 20,000,000 shares are Preferred Stock (par value
$.20 per share) and 100,000,000 shares are Common Stock (par value $.20 per
share).
B-1
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(b) As amended the total number of shares of stock of all classes which the
Corporation has authority to issue is 220,000,000 shares, of which 20,000,000
shares are Preferred Stock (par value $.20 per share) and 200,000,000 shares are
Common Stock (par value $.20 per share).
(c) The aggregate par value of all shares having a par value is
$24,000,000 before the amendment and $44,000,000 as amended.
(d) The preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of each class of capital stock of the Corporation has
not been changed by this Amendment.
B-2
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Exhibit B
T. ROWE PRICE ASSOCIATES, INC.
PROPOSED
1996 STOCK INCENTIVE PLAN
1. PURPOSE:
This 1996 Stock Incentive Plan (the "Plan") is intended as an employment
incentive and an encouragement of capital accumulation and stock ownership by
key employees of the Company and of its Subsidiaries (as defined below) in order
to increase their proprietary interest in the Company's success. This Plan
authorizes options, stock appreciation rights, and stock awards (each referred
to as an "award"). Options may be either incentive stock options intended to
qualify as such under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or non-qualified stock options not intended to qualify
under any section of the Code. Awards may be granted separately or in tandem
with other awards.
2. ADMINISTRATION:
The Plan shall be administered by a committee appointed by the Board of
Directors of the Company (the "Committee") comprised of at least two directors
who are disinterested persons within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934 (the "1934 Act"), or any successor provisions.
No person who is also an officer or employee of the Company shall be eligible to
serve on the Committee. The Company's Executive Compensation Committee is hereby
initially designated as the Committee. The Committee may delegate to a committee
of officers of the Company any or all of its duties under the Plan pursuant to
such conditions or limitations as the Committee may establish, except only the
Committee may make any determination regarding employees who are subject to
Section 16 of the 1934 Act.
The interpretation and construction by the Committee of any provisions of
the Plan or any agreements with respect to awards issued under it and any
determination by the Committee pursuant to any provision of the Plan or any such
agreement shall be final and conclusive. No member of the Board of Directors or
the Committee shall be liable for any action or determination made in good
faith, nor for any matter as to which the Company's charter limits the liability
of directors. Such members shall be entitled to indemnification and
reimbursement in the manner provided in the Company's charter or by-laws, and
under any directors' and officers' liability insurance coverage which may be in
effect from time to time.
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With respect to persons subject to Section 16 of the 1934 Act, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the 1934 Act. To the extent any provision of the
Plan or action by the Committee fails to so comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the Committee.
3. ELIGIBILITY:
The individuals who shall be eligible to participate in the Plan shall, as
the Committee shall determine from time to time, be such key employees of the
Company, including officers who are also directors, or of any corporation (a
"Subsidiary") in which the Company has a proprietary interest by reason of stock
ownership or otherwise. No individual shall be eligible to receive awards under
the Plan for more than an aggregate of _____ shares of Common Stock over the
term of the Plan.
4. AWARD OF OPTIONS:
The Committee, at any time and from time to time, may authorize the
granting of options under this Plan to any individual eligible to receive the
same. Options shall be granted under this Plan at such times, for such number of
shares, and subject to such conditions as the Committee shall determine.
5. AWARD OF STOCK APPRECIATION RIGHTS:
The Committee, at any time and from time to time, may authorize the
granting of stock appreciation rights under this Plan. Stock appreciation rights
shall be granted under the Plan at such times, for such number of shares of
Common Stock, and subject to such conditions, including limitations as to the
amount which may be received upon exercise, as the Committee shall determine.
The term "stock appreciation right" shall mean the right to receive from the
Company, upon exercise thereof without payment to the Company, an amount up to
the difference between the fair market value on the exercise date of the total
number of Ordinary Shares, or the value (based on Book Value Per Share) on the
exercise date of the total number of Book Value Shares, for which the stock
appreciation right is exercised, less the exercise price of such stock
appreciation right. The amount payable by the Company upon exercise of a stock
appreciation right may be paid in cash, in stock or in any combination of cash
and stock. No fractional shares shall be issued under this section.
6. STOCK AWARDS:
The Committee, at any time and from time to time, may authorize the
issuance of stock at no cash cost, or for such payment as the Committee shall
determine, to any individual eligible to participate in the Plan. An award of
stock may be denominated in shares of stock, units of stock, or stock equivalent
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units, and may be paid in stock, in cash, or in a combination of stock and cash.
All or part of any stock award may be subject to conditions and restrictions
established by the Committee.
7. STOCK:
The stock subject to the options, stock appreciation rights, stock awards,
and other provisions of the Plan shall be shares of the Company's authorized but
unissued Common Stock. The term "Common Stock" may mean either Ordinary Shares
or Book Value Shares (as such terms are defined hereinafter). Subject to
adjustment in accordance with the provisions of Paragraph 8(h) hereof, the total
number of shares of Common Stock on which options or stock appreciation rights
may be granted or stock awards may be made under the Plan shall not exceed
4,000,000 shares of Common Stock (prior to giving effect to the stock split
presented for action at the Company's 1996 annual meeting of stockholders);
provided that shares tendered as consideration for the exercise of any option or
other award (by persons other than persons subject to Section 16 of the 1934
Act) shall again be available for grant or award to persons other than persons
subject to Section 16 of the 1934 Act; and, provided further that, to the extent
a stock appreciation right is settled in cash, the shares to which such stock
appreciation right related shall again be available for grant or award to
persons other than persons subject to Section of the 1934 Act.
In the event that any outstanding option or stock appreciation right under
the Plan for any reason expires, is canceled, or is terminated prior to the end
of the period during which options or stock appreciation rights may be
exercised, the shares of Common Stock allocable to the unexercised portion of
such option or stock appreciation right may again be subjected to awards under
the Plan. In the event a stock appreciation right or a stock award is exercised
and paid in cash, shares subject to such award shall again be subject to
issuance pursuant to awards granted under the Plan. In the event that shares
issued under a stock award are forfeited in accordance with the terms of the
related stock agreement, such shares may again be subjected to awards under the
Plan (but, in the case of a person subject to Section 16 of the 1934 Act, only
if the grantee received no benefits of ownership for such stock other than the
exercise of voting rights).
The terms "Ordinary Shares" and "Book Value Shares" shall have the
following meanings: "Ordinary Shares" means shares of the Company's Common Stock
for which there is a generally recognized trading market and which are freely
transferable. "Book Value Shares" means shares of the Company's Common Stock
which shall be authorized for issuance and which shall have the same voting,
dividend, and liquidation rights as Ordinary Shares, except that they shall not
be transferable (whether or not the stock option or stock appreciation rights
agreements are then in effect) except to the Company and except that they shall
be subject to the repurchase provisions set forth in the stock option
agreements.
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8. TERMS AND CONDITIONS OF AGREEMENTS:
All awards granted pursuant to the Plan shall be evidenced by agreements in
such form as the Committee shall, from time to time, approve. The Committee may,
from time to time, modify or amend any such agreement. Such agreements shall
comply with and be subject to the following terms and conditions, to the extent
applicable:
(a) Medium of Payment for Option:
Upon exercise of an option, the option price shall be payable either
(i) in United States dollars in cash or by certified check, bank draft or
money order payable to the order of the Company, (ii) in the discretion of
the Committee, through the delivery of shares of Common Stock of the
Company (which may be either Ordinary Shares or Book Value Shares, or a
combination of both) with a value equal to the total option price, (iii) by
a combination of the methods described in (i) and (ii), or (iv) through
such other means, acceptable to the Committee, as may be provided by an
independent third party to facilitate exercise or payment. Shares of Common
Stock delivered in payment of the option exercise price may, in the
discretion of the Committee, be previously acquired shares or shares
acquired upon exercise of the option. To the extent permitted by law, the
Company or a Subsidiary may make or guarantee loans to optionees to assist
in the payment of the exercise price.
(b) Number and Kind of Shares:
The agreement shall state the total number and kind of shares of
Common Stock to which it pertains. The agreement shall provide that Book
Value Shares shall be subject to repurchase by the Company, as described in
such agreement, and that such shares shall not be assignable or
transferable.
(c) Option Price:
The option price for Ordinary Shares covered by an incentive stock
option granted hereunder shall be not less than 100% of the fair market
value, as determined by the Committee, of such Shares on the date of the
granting of the incentive stock option. The option price for Ordinary
Shares covered by non-qualified stock options granted hereunder shall be
not less than 75% of the fair market value, as determined by the Committee,
of such Shares on the date of the granting of the non-qualified stock
option. The "fair market value" for Ordinary Shares for purposes of this
Plan shall be (i) the last reported sales price of the Common Stock on the
Nasdaq National Market System on the date the award is granted, or, if
none, for the preceding day for which there was a last reported sale price;
or (ii) if the Ordinary Shares are listed on a national securities
exchange, the last quoted sales price on such exchange on the date on which
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the award is granted, or, if none, for the next preceding day for which
there was a last quoted sales price; or (iii) if the Common Stock is not
quoted on the Nasdaq National Market System or listed on a national
securities exchange, the mean between the bid and asked prices in the
over-the-counter market on the date of the award, or, in the absence of
such quotations or if the Common Stock is not publicly traded, such other
price as shall be determined by the Committee to be the fair market value.
The option price for any Book Value Shares covered by an incentive
stock option shall be not less than the "Book Value Per Share" on the
"Fiscal Quarter Date" coincident with or immediately preceding the date of
the granting of the option, which the Committee believes in good faith to
be the fair market value of such Shares at the date of grant. The option
price for any Book Value Share covered by a non-qualified stock option
shall be not less than 75% of "Book Value Per Share" on the "Fiscal Quarter
Date" coincident with or immediately preceding the date of the granting of
the option. The term "Book Value Per Share" as of any given date means the
common stockholders' equity, as stated in the consolidated financial
statements of the Company, as at the Fiscal Quarter Date coincident with or
immediately preceding such given date, divided by the sum of the number of
shares of the Company's Common Stock outstanding and the number of common
stock equivalents as of such Fiscal Quarter Date (which calculation shall
be made before giving effect to the sale or repurchase of Book Value Shares
on such Fiscal Quarter Date); provided, however, that the Book Value Per
Share, for the purpose of calculating the repurchase price per share only,
may be adjusted to such an extent as may be determined by the Board of
Directors of the Company to preserve the benefit of the arrangement for the
participants and the Company, if in the opinion of the Board of Directors,
after consultation with the Company's independent accountants, changes in
the Company's accounting policies, acquisitions, or other unusual or
extraordinary items have disproportionately and materially affected the
number of shares of the Company's Common Stock outstanding or the Company's
common stockholders' equity. The term "Fiscal Quarter Date" means March 31,
June 30, September 30 or December 31 of any year or such other dates as the
Company may, from time to time, elect as the end dates of the fiscal
quarters of the Company.
(d) Term of Options and Stock Appreciation Rights:
No option or stock appreciation right may be exercised before the
first anniversary of the date on which it was granted. Each option and
stock appreciation right granted under the Plan shall expire not more than
10 years from the date it is granted.
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<PAGE>
(e) Limitation on Incentive Stock Options:
To the extent that the aggregate fair market value (determined at the
time the option is granted) of the Ordinary Shares or the Book Value Shares
with respect to which incentive stock options are exercisable for the first
time by an option holder during any calendar year (under this Plan, and to
the extent required by Section 422(d) of the Code, under all other plans of
the Company and its subsidiary corporations as defined in Section 424(f) of
the Code, including without limitation the 1981 Incentive Stock Option
Plan, the 1986 Stock Incentive Plan, the 1990 Stock Incentive Plan, and the
1993 Stock Incentive Plan), exceeds $100,000 (or such other limiation as
may be specified by the Code), such option shall be treated as a
non-qualified stock options.
(f) Replenishment of Options:
The terms of a stock option grant may provide, or may be amended by
the Committee to provide, for the award of a new option when the exercise
price has been paid by tendering shares of Common Stock to the Company,
provided that such replenishment feature shall be limited to any extent
required by rules, regulations, or interpretations under the 1934 Act with
respect to any particular grant in the case of an option holder who is or
becomes subject to Section 16 of the 1934 Act. Any new option grant, which
would automatically occur without any further corporate action, would cover
not more than the number of shares tendered with the exercise price set at
the then fair market value of such shares.
(g) Acceleration or Waiver:
In the case of an option or stock appreciation right not immediately
exercisable in full or any stock award subject to any restriction, the
Committee may in its discretion accelerate the time at which the option or
stock appreciation right granted hereunder may be exercised or waive, in
whole or in part, any restriction or condition with respect to the award.
(h) Recapitalization:
The aggregate number of Ordinary Shares and Book Value Shares on which
awards under the Plan may be granted to persons participating under the
Plan, the number of shares thereof covered by each award, the price per
share thereof in each award, and any numerical limitations contained herein
relating to awards shall all be proportionately adjusted for any increase
or decrease in the number of issued shares of Common Stock of the Company
resulting from a subdivision or consolidation of shares or other capital
adjustment, or the payment of a stock dividend or other increase or
decrease in such shares, effected without receipt of consideration by the
Company; provided, however, that any fractional shares resulting from any
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<PAGE>
such adjustment shall be eliminated. In the case of other changes in the
Company's capitalization, adjustments shall be made to the extent
determined by the Committee as necessary or appropriate to reflect the
transaction.
If the Company shall be the surviving or resulting corporation in any
merger or consolidation, any award granted hereunder shall pertain to and
apply to the securities to which a holder of the number of shares of Common
Stock subject to the award would have been entitled; but a dissolution or
liquidation of the Company, or a merger or consolidation in which the
Company is not the surviving or resulting corporation shall cause every
award outstanding hereunder to terminate, except that the surviving or
resulting corporation may, in its absolute and uncontrolled discretion,
tender awards with respect to its shares on terms and conditions, both as
to the number of shares and otherwise, which shall substantially preserve
the rights and benefits of any award then outstanding hereunder.
In the event of a change in the Company's Common Stock which is
limited to a change in the designation thereof to "Capital Stock" or other
similar designation, or to a change in the par value thereof, or from par
value to no par value, without increase in the number of issued shares, the
shares resulting from any such change shall be deemed to be Common Stock
within the meaning of the Plan.
(i) Assignability:
No award granted under this Plan shall be assignable or transferable
except by will or by the laws of descent and distribution or as otherwise
permitted under Rule 16b-3 under the 1934 Act. Notwithstanding this
limitation, if approved by the Committee, any award may be transferred to
one or more members of a participant's immediate family or a trust
primarily for the benefit of such person.
9. AWARDS IN SUBSTITUTION FOR STOCK OPTIONS GRANTED BY OTHER CORPORATIONS:
Awards may be granted under the Plan from time to time in substitution for
awards held by employees of corporations who become or are about to become key
employees of the Company or a Subsidiary as the result of a merger or
consolidation of the employing corporation with the Company or a Subsidiary, or
the acquisition by the Company or a Subsidiary of the assets of the employing
corporation, or the acquisition by the Company or a Subsidiary of stock of the
employing corporation as the result of which it becomes a Subsidiary. The terms
and conditions of the substitute awards so granted may vary from the terms and
B-9
<PAGE>
conditions set forth in this Plan to such extent as the Committee at the time of
grant may deem appropriate to conform, in whole or in part, to the provisions of
the awards in substitution for which they are granted.
10. TERM AND EFFECTIVENESS OF PLAN:
The Plan shall become effective on the date it receives approval by the
affirmative votes of the holders of a majority of the securities of the Company
present, or represented, and entitled to vote at a meeting duly held in
accordance with applicable law. No award shall be granted pursuant to this Plan
after February 6, 2006.
11. AMENDMENTS:
The Board of Directors, from time to time, may alter, amend, suspend, or
discontinue this Plan or alter or amend any and all awards granted or made
hereunder except as required under the Code wtih respect to incentive stock
options or under the Rules and Regulations of the Securities and Exchange
Commission with respect to persons subject to Section 16 under the 1934 Act; and
provided further that no action may be taken, without the consent of a
participant under the Plan who holds an award under this Plan, which adversely
affects the rights of such person in such award.
12. APPLICATION OF FUNDS:
The proceeds received by the Company from the sale of Common Stock pursuant
to awards under the Plan will be used for general corporate purposes.
13. CERTAIN TAX MATTERS:
Whenever under the Plan shares of Common Stock are to be delivered or becme
subject to tax, the Company may require as a condition of delivery or otherwise
that the grantee remit an amount sufficient to satisfy all federal, state, and
other governmental withholding tax requirements related thereto. The Company
may, to the extent specified by the Committee in the applicable agreement or
otherwise, withhold shares of Common Stock to be delivered with respect to a
stock award or upon exercise of an option or stock appreciation right to satisfy
such withholding tax requirements. In the event a disqualifying disposition is
made, the person making such disposition shall remit to the Company an amount
sufficient to satisfy all federal, state, and other withholding taxes thereby
incurred. In lieu of or in addition to the foregoing, the Company shall have the
right to withhold such sums from compensation otherwise due to the grantee.
B-10
<PAGE>
PRELIMINARY COPY -- FOR THE INFORMATION OF
THE SECURITIES AND EXCHANGE COMMISSION ONLY
T. ROWE PRICE ASSOCIATES INC.
-----------------------------
Revocable Proxy Solicited on Behalf of the Board of Directors
-------------------------------------------------------------
THE UNDERSIGNED STOCKHOLDER of T. Rowe Price Associates, Inc. hereby
appoints George J. Collins and George A. Roche the lawful attorneys and proxies
of the undersigned with full power of substitution to vote, as designated on the
reverse side, all shares of Common Stock of the Corporation which the
undersigned is entitled to vote at the Annual Meeting of Stockholders to be held
on Friday, April 12, 1996, at 10:00 a.m., at 100 East Pratt Street, Baltimore,
Maryland 21202, and at any and all adjournments thereof with respect to the
matters set forth on the reverse side and described in the Notice of Annual
Meeting and Proxy Statement dated March ______ , 1996, receipt of which is
hereby acknowledged.
This Proxy, when properly completed and returned, will be voted in the
manner directed herein by the undersigned stockholder, IF NO DIRECTION IS GIVEN,
THIS PROXY WILL BE VOTED "FOR" THE ITEMS LISTED ON THE REVERSE SIDE.
(Continued and to be dated and signed on the reverse side)
T. ROWE PRICE ASSOCIATES, INC.
P.O. BOX 11370
NEW YORK, NY 10203-0370
- --------------------------------------------------------------------------------
(Reverse side of proxy card)
(1) ELECTION OF DIRECTORS
[ ] FOR all nominees listed below
[ ] WITHHOLD authority to vote for all nominees listed
*EXCEPTIONS
George J. Collins, James E. Halbkat, Jr., Henry H. Hopkins, James A.C. Kennedy,
John H. Laporte, Richard L. Menschel, William T. Reynolds, James S. Riepe,
George A. Roche, John W. Rosenblum, Robert L. Strickland, M. David Testa, Philip
C. Walsh and Anne Marie Whittemore.
<PAGE>
(INSTRUCTION: To withhold authority for any individual nominee, mark the
"Exceptions" box and strike a line through that nominee's name.)
(2) TO APPROVE AN AMENDMENT TO THE COMPANY'S CHARTER TO EFFECT A
TWO-FOR-ONE STOCK SPLIT AND EFFECT A PROPORTIONAL INCREASE IN THE
AUTHORIZED COMMON STOCK.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
--- ------- -------
(3) TO APPROVE THE PROPOSED 1996 STOCK INCENTIVE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
--- ------- -------
(4) IN THEIR DISCRETION, the proxies are authorized to vote upon such
other business as may properly come before the meeting or at any
adjournment thereof.
Please date and sign exactly as your name
appears to the left. When signing as a
fiduciary, representative or corporate officer,
give full title as such. If you receive more
than one proxy card, please sign and return all
cards received.
Dated:_________________________________________
_______________________________________________
Signature
_______________________________________________
Signature if held jointly
Votes MUST be indicated (x) in Black or
Blue ink.
PLEASE SIGN, DATE, AND RETURN
THE PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.