DRAFT 2/5/98
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 Associates, Inc. Annual Meeting of Stockholders.
[CORPORATE LOGO]
T. ROWE PRICE ASSOCIATES, INC.
100 East Pratt Street
Baltimore, Maryland 21202
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
April 16, 1998
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of T. Rowe Price Associates, Inc. (the "Company") will be held at 100
East Pratt Street, 12th floor, Baltimore, Maryland, 21202, on Thursday, April
16, 1998, at 10:00 a.m. for the following purposes:
(1) To elect 14 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 of the Company;
(3) To consider and act upon the proposed 1998 Director Stock Option Plan;
and
(4) To consider and act upon such other business as may properly come
before the Meeting or any adjournments or postponements thereof.
February 13, 1998 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 or postponements thereof.
BY ORDER OF THE BOARD OF DIRECTORS
Alvin M. Younger, Jr.
Secretary
Baltimore, Maryland
March , 1998
<PAGE>
DRAFT 2/5/98
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 (the "Meeting") described in the
accompanying notice and at any adjournments or postponements 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 a
proportional increase in the authorized Common Stock of the Company, to consider
and act upon the proposed 1998 Director Stock Option Plan, and to consider and
act upon such other business as may properly come before the Meeting or any
adjournments or postponements thereof. This proxy statement and the accompanying
notice of annual meeting and proxy and the Company's annual report to
stockholders containing the Company's financial statements for the year ended
December 31, 1997 are first being sent to stockholders on or about March ____,
1998.
The record of stockholders entitled to notice of and to vote at the Meeting
was taken as of the close of business on February 13, 1998. At that date there
were outstanding and entitled to vote _______ shares of Common Stock, par value
$.20 per share, held by approximately _______ 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. 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. For any matter coming before
the meeting other than the election of directors, each share is entitled to one
vote. Approval of the proposed charter amendment requires the affirmative vote
of a majority of the total number of shares of Common Stock outstanding;
approval of the proposed 1998 Director Stock Option Plan requires the
affirmative vote of a majority of the votes cast. The foregoing notwithstanding,
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 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 $6,000
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
1
<PAGE>
DRAFT 2/5/98
reimburse them for their reasonable out-of-pocket expenses in forwarding such
solicitation material. In addition to the 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 James S. Riepe, George A. Roche and M.
David Testa to act as proxies with full power of substitution. Any stockholder
executing a proxy has the power to revoke the proxy at any time before it is
voted by delivering to the Secretary of the Company a notice of revocation or a
duly executed proxy bearing a later date. 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, as long as the stockholder has filed a written notice
of revocation with the Secretary. All notices of revocation should be sent to
the attention of the Company Secretary: Alvin M. Younger, Jr., T. Rowe Price
Associates, Inc., 100 East Pratt Street, Baltimore, MD 21202.
ELECTION OF DIRECTORS
Effective at the time of the Meeting, the number of directors will be
decreased to 14 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. The 14 nominees currently
serve as directors of the Company.
George J. Collins, a director of the Company since 1980 and chief executive
officer from 1984 to 1997, will retire as a director at the time of the Meeting.
The Board of Directors, on behalf of the Company, wishes to express its
appreciation for his contributions during his 28 years of service.
It is intended that all properly executed proxies received in time to be
duly presented at the Meeting, 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 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. Unless
otherwise indicated, the nominees have been officers of the organizations named
2
<PAGE>
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.
Age, principal occupation, directorships with public
companies, and beneficial ownership of Common Stock
Name of Nominee (percent of class)
- --------------- ----------------------------------------------------
JamesE. Halbkat, Jr. Mr. Halbkat is 63 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. (1)(3)(5)
_______ shares * (6)
Henry H. Hopkins Mr. Hopkins is 55 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 ( %) (7)
James A.C. Kennedy Mr. Kennedy is 44 years old, has been a director of
the Company since 1996, director of the 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 1978. He is a director or trustee of 14
equity funds within the Price Funds and is president
of the Media & Telecommunications Fund.
_______ shares ( %) (8)
John H. Laporte Mr. Laporte is 52 years old, has been a director of
the Company since 1996, a managing director of the
Company since 1989, a vice president between 1978
and 1989, and an employee since 1976. He is a
director or trustee of ten equity funds within the
Price Funds. He serves as chairman of four funds
and president of four funds.
_______ shares ( %) (9)
Richard L. Menschel Mr. Menschel is 64 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. (3)
_______ shares * (10)
(see footnotes on page _____)
3
<PAGE>
DRAFT 2/5/98
William T. Reynolds Mr. Reynolds is 49 years old, has been a director of
the Company since 1996, director of the 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 20 fixed income funds within
the Price Funds. He serves as chairman of 15 of
these funds.
_______ shares * (11)
James S. Riepe Mr. Riepe is 54 years old and has been a director of
the Company since 1981, vice chairman since 1997, 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 six of the 46 Price Funds on which he
serves as a director or trustee and is president of
the Tax-Efficent Balanced Fund. (2)(4)
_______ shares ( %) (12)
George A. Roche Mr. Roche is 56 years old and has been a director of
the Company since 1980, chairman and president since
1997, a managing director since 1989, a vice
president between 1973 and 1989, and an employee
since 1968. (2)(4)(5)
_______ shares ( %) (13)
Brian C. Rogers Mr. Rogers is 42 years old and has been a director
of the Company since 1997, a managing director since
1991, a vice president between 1985 and 1991, and
an employee since 1982. He is president of the
Equity Income Fund and the Value Fund.
_______ shares * (14)
John W. Rosenblum Mr. Rosenblum is 54 years old and has been a
director of the Company since 1991. He is Dean of
the Jepson School of Leadership Studies at the
University of Richmond. From 1993 to 1996, he was
the Tayloe Murphy Professor at the Darden Graduate
School of Business Administration (the "Darden
School"), University of Virginia. Mr. Rosenblum is
also a director of Comdial Corp., a manufacturer of
telephone systems for businesses; Cone Mills
Corporation, a textiles producer; and Providence
Journal Company, a publisher of newspapers and
owner of broadcast television stations. (1)(3)
_______ shares * (15)
(see footnotes on page _____)
4
<PAGE>
DRAFT 2/5/98
Robert L. Strickland Mr. Strickland is 66 years old and has been a
director of the Company since 1991. He retired as
chairman of Lowe's Companies, Inc., a retailer of
specialty home supplies, on January 31, 1998, but
continues to serve as a director. Mr. Strickland
also is a director of Hannaford Bros. Co., a food
retailer. (2)(3)
_______ shares * (16)
M. David Testa Mr. Testa is 53 years old and has been a director of
the Company since 1981, a vice chairman and the
chief investment officer since 1997, 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 1982. He is a director or
trustee of 48 equity or fixed income funds within
the Price Funds. He serves as chairman of seven of
these Funds and president of two. (2)(4)(5)
_______ shares ( %) (17)
Philip C. Walsh Mr. Walsh is 76 years old and has been a director of
the Company since 1987. He is a retired mining
industry executive. (3)(5)
_______ shares * (18)
Anne Marie Whittemore Mrs. Whittemore is 51 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.
(1)(3)
_______ shares * (19)
(see footnotes on page _____)
5
<PAGE>
DRAFT 2/5/98
Beneficial ownership
of Common Stock by all
directors and executive
officers as a group
(19 persons) _______ shares (_______%) (20)
- --------------------------------------------------------------------------------
* Indicates holdings of less than 1 percent.
(1) Member of the Audit Committee of the Board of Directors.
(2) Member of the Executive Committee of the Board of Directors.
(3) Member of the Executive Compensation Committee of the Board of Directors.
(4) Member of the Management Committee of the Board of Directors.
(5) Member of the Nominating Committee of the Board of Directors.
(6) Includes _______ shares which may be acquired by Mr. Halbkat within 60 days
upon the exercise of stock options.
(7) Includes _______ shares which may be acquired by Mr. Hopkins within 60 days
upon the exercise of stock options.
(8) Includes _______ shares which may be acquired by Mr. Kennedy within 60 days
upon the exercise of stock options.
(9) Includes _______ shares which may be acquired by Mr. Laporte within 60 days
upon the exercise of stock options. Also includes 100,000 shares owned by a
member of Mr. Laporte's family and 76,992 shares held in trusts for members
of Mr. Laporte's family, as to which Mr. Laporte disclaims beneficial
ownership.
(10) Includes _______ shares which may be acquired by Mr. Menschel within 60
days upon the exercise of stock options.
(11) Includes _______ shares which may be acquired by Mr. Reynolds within 60
days upon the exercise of stock options. Also includes 10,550 shares owned
by members of Mr. Reynolds' family, as to which Mr. Reynolds disclaims
beneficial ownership.
(12) Includes _______ shares which may be acquired by Mr. Riepe within 60 days
upon the exercise of stock options. Also includes 180,000 shares held by or
in trusts for members of Mr. Riepe's family, as to which Mr. Riepe
disclaims beneficial ownership, and shares held in a charitable foundation
for which Mr. Riepe has voting and disposition power.
(13) Includes _______ shares which may be acquired by Mr. Roche within 60 days
upon the exercise of stock options, and 400,000 shares held by or in trusts
for members of Mr. Roche's family and as to which Mr. Roche disclaims
beneficial ownership.
(see footnotes on page _____)
6
<PAGE>
DRAFT 2/5/98
(14) Includes _______ shares which may be acquired by Mr. Rogers within 60 days
upon the exercise of stock options.
(15) Includes _______ shares which may be acquired by Mr. Rosenblum within 60
days upon the exercise of stock options.
(16) Includes _______ shares which may be acquired by Mr. Strickland within 60
days upon the exercise of stock options.
(17) Includes _______ shares which may be acquired by Mr. Testa within 60 days
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 be acquired by Mr. Walsh within 60 days
upon the exercise of stock options.
(19) Includes _______ shares which may be acquired by Mrs. Whittemore within 60
days upon the exercise of stock options.
(21) Includes _______ shares which may be acquired by all directors and
executive officers as a group within 60 days upon the exercise of stock
options.
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 Its Committees
During 1997, there were six meetings of the Board of Directors of the
Company. Each director attended at least 75% of the combined total number of
meetings of the Board and Board committees of which he or she was a member. The
Board of Directors of the Company has an Audit Committee, Executive 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 (1) on the previous page are members of the
Audit Committee, which met four times during 1997.
The Executive Committee functions in the interval between meetings of the
Board of Directors to approve matters requiring formal action by or on behalf of
the Board of Directors, which actions are thereafter reported to the entire
Board for ratification. The Executive Committee also possesses the authority to
7
<PAGE>
DRAFT 2/5/98
exercise all of the powers of the Board of Directors in the interval between
meetings, except as limited by law. The directors designated in note (2) on page
_____ are members of the Executive Committee, which approved one matter by
unanimous written consent in lieu of a meeting during 1997.
As described in the report of the Executive Compensation Committee, the
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 (3) on _____ page are members of the Executive Compensation
Committee which met _____ times during 1997.
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 page _____ are members of the Nominating
Committee which met on one occasion in 1997. 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 Committee Interlocks and Insider Participation
During 1997, Robert L. Strickland (Chairman), James E. Halbkat, Jr.,
Richard L. Menschel, John W. Rosenblum, Philip C. Walsh, and Anne Marie
Whittemore served as members of the Executive Compensation Committee. None of
these directors are officers or employees of the Company. No 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 of the Company or
board committee member.
Mr. Menschel is a limited partner of The Goldman Sachs Group, L.P., an
investment banking firm. During 1997, Goldman, Sachs & Co. performed services
for the Company, including securities brokerage services. Mr. Menschel did not
share in any payment for these services.
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 1997.
8
<PAGE>
DRAFT 2/5/98
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term All Other
Annual Compensation (1) Compensation Awards Compensation(3)
- -----------------------------------------------------------------------------------------------------------
Name and Securities Underlying
Principal Position Year Salary Bonus (2) Options Granted (#)
- ------------------ ---- ------ --------- -------------------
<S> <C> <C> <C> <C> <C>
George A. Roche 1997 $ $ -0- $
Chairman and 1996 275,000 1,500,000 -0- 24,000
President (4) 1995 275,000 1,300,000 200,000 24,000
James S. Riepe 1997 -0-
Vice Chairman 1996 275,000 1,500,000 -0- 22,500
(4) 1995 275,000 1,300,000 200,000 22,500
M. David Testa 1997 -0-
Vice Chairman 1996 275,000 1,500,000 -0- 26,625
(4) 1995 275,000 1,300,000 -0- 26,625
James A.C. Kennedy 1997 (5)
Managing Director 1996 250,000 1,200,000 50,000 26,625
1995 250,000 900,000 50,000 26,625
William T. Reynolds 1997 (5)
Managing Director 1996
1995
George J. Collins 1997 -0-
President and 1996 325,000 1,500,000 -0- 24,000
Chief Executive 1995 325,000 1,300,000 -0- 24,000
Officer (4)
</TABLE>
(1) No officer named in the Summary Compensation Table received any perquisites
and other personal benefits, securities or property, the aggregate amount
of which exceeded the lesser of either $50,000 or 10% of the total annual
salary and bonus reported for 1997 in the Summary Compensation Table,
except as described in Note 5.
(2) Bonuses for 1997, 1996 and 1995 were paid pursuant to the Company's
Executive Incentive Compensation Plan. Bonuses may vary significantly from
year to year and among eligible employees. See "Report of the Executive
Compensation Committee."
(3) Included in other compensation are _____, _____, _____, _____, _____, and
_____ in Company matching contributions under its Basic Retirement and
401(k) Plus retirement plan for each of Messrs. Roche, Riepe, Testa,
Kennedy, Reynolds, and Collins, respectively, and a $22,500 contribution
for each of 1996 and 1995 for each of these individuals to the Company's
tax-qualified profit sharing plan, which provided retirement benefits based
on the investment performance of each participant's account under the plan.
This plan was merged with __________ on ___________. Also includes $1,500
9
<PAGE>
DRAFT 2/5/98
in directors fees paid by a wholly owned subsidiary of the Company to each
of Mr. Collins, Mr. Roche and Mr. Reynolds in each year; $_____ in employer
matching contributions under the Company's 1986 Employee Stock Purchase
Plan for Mr. Testa for each of 1997, 1996 and 1995; $ _____ in employer
matching contributions under the Company's 1986 Employee Stock Purchase
Plan for Mr. Kennedy for 1997, 1996 and 1995; and $_____ in employer
matching contributions under the Company's 1986 Employee Stock Purchase
Plan for Mr. Reynolds for 1997, 1996 and 1995.
(4) Mr. Collins retired as President and Chief Executive Officer on April 17,
1997. At that time, Mr. Roche was elected Chairman and President and each
of Mr. Riepe and Mr. Testa was elected Vice Chairman.
(5) Includes the appraised fair market value ($32,550) of each individual's
interest in a limited liability company (the "LLC") formed by the Company
to hold certain venture capital fund investments and distributed on January
22, 1998 as incentive compensation with respect to 1997 performance to
certain of the Company's officers and key employees. The distribution to
each of Messrs. Kennedy and Reynolds represented 4% of the aggregate amount
distributed. The interests are subject to potential repurchase by the LLC
over the first five years following distribution upon the occurrence of
certain events, including termination of the participant's employment. See
"Report of Executive Compensation Committee."
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 on the first through fifth anniversaries of
the date of grant, with the exception of the 1995 option awards to Mr. Roche and
Mr. Riepe, which become exercisable on the third through fifth anniversaries of
the date of grant. All existing option agreements under the Company's 1986, 1990
and 1993 Stock Incentive Plans provide that such options and any options granted
in the future to 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.
In November 1997, the Committee took various actions with respect to the
Company's option plans, including (i) making non-qualified stock options held by
Managing Directors transferable to family members, trusts and partnerships for
estate planning purposes; and (ii) adding option replenishment features to all
existing non-qualified stock options as well as to non-qualified stock options
granted in the future. The option replenishment feature provides for the
issuance of additional options upon the exercise of options by surrender of
shares. The number of shares subject to a replenishment option would be the
number of shares surrendered to exercise the option. See "Report of Executive
Compensation Committee."
10
<PAGE>
DRAFT 2/5/98
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
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 5% 10%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
George J. Roche 0 0% N/A N/A $0 $0
James S. Riepe 0 0% N/A N/A 0 0
M. David Testa 0 0% N/A N/A 0 0
James A.C. Kennedy 30,000(3) 2.31% $62.75 1/17/07 1,183,800 3,000,300
William T. Reynolds 30,000(3) 2.31% $62.75 1/17/07 1,183,800 3,000,300
George J. Collins 0 0% N/A N/A 0 0
</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 18, 1997 (the date of grant of the 1997 option awards) to November
17, 2007 (the date of expiration of such options) of 5% and 10%, the
assumed rates required under the rules of the Securities and Exchange
Commission. Based on these assumed annual rates of stock price appreciation
of 5% and 10%, the Company's stock price at November 17, 2007 is projected
to be $102.21 and $162.76, 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) These options contain option replenishment features, which provide that
upon an exercise of a non-qualified stock option by delivery of stock only,
the optionee will receive additional options to purchase, at the fair
market value on the date of exercise and exercisable until the later of the
expiration date of the related option, a number of shares equal to the
number of shares surrendered. Replenishment options would be exercisable
immediately. See "Report of the Executive Compensation Committee" for
further information concerning these option replenishment features
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 1997 for the executive officers whose compensation is reported in
the Summary Compensation Table. Value is considered to be, in the case of
11
<PAGE>
DRAFT 2/5/98
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, 1997.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<CAPTION>
Number of Secur-
ities Underlying Value of Unexercised
Unexercised Options "In-the-Money" Options
at December 31, 1997 at December 31, 1997
Shares Acquired Value (Exercisable/ (Exercisable/
Name Upon Exercise Realized Unexercisable) Unexercisable) (1)
<S> <C> <C> <C>
George A. Roche $ / $ /$
James S. Riepe / /
M. David Testa / /
James A.C. Kennedy / /
William T. Reynolds / /
George J. Collins / /
</TABLE>
(1) 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, 1997, and
all of the value shown reflects stock price appreciation since the granting
of the option. The closing market price of the Common Stock was $62.875 per
share on December 31, 1997.
Compensation of Directors. Directors who are also officers do not receive
directors' fees. Each independent director received a $50,000 retainer for 1997
services as a director and board committee member.
Pursuant to the 1995 Director Stock Option Plan approved by stockholders on
April 6, 1995, each of Messrs. Halbkat, Menschel, Rosenblum, Strickland and
Walsh and Mrs. Whittemore received options to purchase 4,000 shares of Common
Stock at $39.75 per share, the last reported sale price on April 24, 1997. On
December 17, 1997, the Board of Directors, including a majority of the directors
who are not participants in the Director Stock Option Plan, amended the Plan to
provide, on the same terms as are currently applicable to managing directors
under the Company's 1993 and 1996 Stock Incentive Plans: (i) a replenishment
feature with respect to options exercised with stock; (ii) the ability to
transfer options within the family for estate planning purposes; and (iii) a
12
<PAGE>
DRAFT 2/5/98
provision making options exercisable in full upon the 9ccurrence of a
"change-in-control." See "Report of Executive Compensation Committee." At that
time, the Board of Directors, including a majority of the directors who are not
participants in the Director Stock Option Plan, approved, subject to stockholder
approval, the proposed 1998 Director Stock Option Plan. See "Proposed 1998
Director Stock Option Plan."
Report of the Executive Compensation Committee
The Executive Compensation Committee of the Board of Directors (the
"Committee"), composed during 1997 of all of the Company's independent
directors, 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") as well as any other
officers who are also members of the Company's Board of Directors; (ii)
administration of the Company's Executive Incentive Compensation Plan (the
"Incentive Plan"); (iii) administration of the Company's stock incentive plans;
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 has acknowledged since its inception 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
provide for the long-term success of the Company.
The Committee believes that competitive levels of cash compensation,
together with equity and other 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 1997, base salaries for each of the individuals named in the table
on page __ (the "Named Officers") were unchanged from the prior year. 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.
13
<PAGE>
DRAFT 2/5/98
The Incentive Plan, recommended by the Board of Directors and approved by
stockholders in 1995, 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 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 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 1997
designated six executive officers (the retiring chief executive officer, the
Chairman and President, the two Vice Chairmen and the two other managing
directors who are Named Officers) as eligible to participate in the Plan for
1997. The Committee also determined that each particular participant would be
eligible to receive a specified maximum percentage of the available Incentive
Pool, which percentages varied among the participants. 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 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 1997 performance
similarly will be deductible.
The Committee determined to award each of Mr. Roche, Mr. Riepe, and Mr.
Testa incentive compensation in an amount less than the maximum amount that
would be permitted to be paid under the Incentive Plan for 1997. 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 investment performance, marketing
effectiveness, customer service, technology deployment, management of corporate
14
<PAGE>
DRAFT 2/5/98
assets, financial performance, and corporate infrastructure development. The
Committee determined that the Senior Executive Officers each had demonstrated
superior long-term management performance in these areas. In making its decision
to award payments under the Incentive Plan that are less than the maximum
amounts permitted, the Committee took into consideration the Company's
historical compensation policies as well as financial industry compensation
trends.
In establishing the compensation of the Named Officers, the Committee took
into account the fact that the Mr. Roche, Mr. Riepe and Mr. Testa during 1997
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 and was viewed as making generally equivalent
Company-wide contributions to 1997 performance. In the case of Mr. Kennedy and
Mr. Reynolds, the Committee took into consideration their respective
contributions as heads of the Company's Equity Research Division and Fixed
Income Division, each of which had [very favorable results] in 1997 The
Committee noted that many investment professionals, including certain senior
portfolio managers who were not designated as participants in the Plan for 1997
and are compensated under other incentive compensation programs and
arrangements, also were significant contributors to this performance. Mr.
Kennedy and Mr. Reynolds also were designated as participants in a distribution
of interests in a limited liability company (the "LLC") formed by the Company to
hold certain venture capital investments and distributed to certain of the
Company's officers and key employees, as described in footnote (6) to the
Summary Compensation Table. The Committee believes that distribution of
interests in the LLC to Messrs. Kennedy and Reynolds will aid the Company in
retaining the service of the participants and is an appropriate means of
long-term incentive compensation not tied to performance of the Company's stock.
The Committee also noted, as it has done in the past, that it could determine to
award payment of a greater portion or all of the incentive pool in a year when
the Company's financial performance might not be as strong as it has been in
1997 and recent years in order to maintain a competitive compensation structure
and thus retain key personnel.
In 1997, the Committee determined not to award any options to Messrs.
Roche, Riepe, and Testa so that the full amount of the 1997 option grants could
be made to other officers who do not have as substantial ownership or potential
interests in the Company's common stock. Messrs. Kennedy and Reynolds each
received options to purchase 30,000 shares of Common Stock at an exercise price
of $62.75 per share. In addition, during 1997, the Committee took various
actions with respect to its stock option programs. These actions, in the
Committee's view, further align the interests of the option holders and the
stockholders by, among other things, promoting more rapid option exercise and
greater certainty of holding the stock after exercise and providing more
incentive to reduce the shares subject to options through early exercise. These
actions include (i) making non-qualified stock options held by Managing
Directors transferable to family members, trusts and partnerships for estate
15
<PAGE>
planning purposes; and (ii) providing an option replenishment feature providing
for the grant of a new option upon exercise of existing non-qualified stock
options by the surrender of the Company's Common Stock.
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 has 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 which
follows. 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 capitalization 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 executive
compensation and policies of the Company with those of other public companies,
including companies which compete with the Company for talent. The Committee's
goal is to maintain compensation programs which are competitive within the
financial services industry.
The Executive Compensation Committee believes that 1997 compensation levels
disclosed in this proxy statement are reasonable and appropriate in light of the
Company's strong performance.
Robert L. Strickland, Chairman
James E. Halbkat, Jr.
Richard L. Menschel
John W. Rosenblum
Philip C. Walsh
Anne Marie Whittemore
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, 1997 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, the S&P 500 Index, and the S&P Mid-Cap Index.
16
<PAGE>
DRAFT 2/5/98
The comparison assumes $100 was invested on December 31, 1992 in the Company's
Common Stock and in each of the foregoing indices and that all dividends were
reinvested.
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 - GRAPH PLOT POINTS
================================================================================
1992 1993 1994 1995 1996 1997
- --------------------------------------------------------------------------------
T. Rowe Price $100 $ $ $ $ $
Associates, Inc.
- --------------------------------------------------------------------------------
CRSP Total Return 100 115 112 159 195 240
Index for the Nasdaq
Stock Market (US
Companies) (1)
- --------------------------------------------------------------------------------
CRSP Total Return 100 116 117 170 217 334
Index for Nasdaq
Financial Stocks (1)
- --------------------------------------------------------------------------------
S&P 500 Index (2) 100 110 112 153 189 252
- --------------------------------------------------------------------------------
S&P Mid-Cap Index 100 114 110 144 172 227
(3)
================================================================================
(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(R) and the Nasdaq SmallCap Marketsm. 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(R) and the Nasdaq
SmallCap Marketsm, 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.
(3) Total return performance for the S&P Mid-Cap Index provided by Standard &
Poor's.
17
<PAGE>
DRAFT 2/5/98
PROPOSED CHARTER AMENDMENT TO EFFECT A
TWO-FOR-ONE STOCK SPLIT AND AN 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 an increase in the authorized shares of
Common Stock from 200,000,000 to 500,000,000 shares. 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.
If the amendment is adopted, the split will become effective as of the
close of business on April 16, 1998 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, 1998. 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 16 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(R) will be reduced to approximately one-half of the
trading price immediately before the stock split and that this will occur upon
the close of business 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 post-split Common Stock approximating ___,___,___ shares and the
approximately _________ post-split shares reserved for issuance under the
Company's various existing and proposed employee benefit plans. At the present
time, there are no agreements, understandings, or arrangements for the
authorized but unissued Common Stock, other than the existing and proposed
employee stock plans (see the proposed 1998 Director Stock Option Plan
description beginning on page ___).
18
<PAGE>
DRAFT 2/5/98
The amendment changes 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 considers possible
acquisitions and periodically engages in discussions regarding possible
acquisitions; but it is not currently a party to any agreements or
understandings regarding any acquisitions. In addition, acquisitions involving
stock issuances above certain enumerated thresholds would require stockholder
approval under applicable rules of the Nasdaq National Market(R) 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 an increase in the authorized shares of
Common Stock from 200,000,000 to 500,000,000 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.
19
<PAGE>
DRAFT 2/5/98
PROPOSED 1998 DIRECTOR STOCK OPTION PLAN
The Company's 1998 Director Stock Option Plan (the "Director Plan") was
approved by the Board of Directors on December 17, 1997, subject to stockholder
approval. A copy of the Director Plan is attached hereto as Exhibit B, and the
following summary description is qualified by reference to the Director Plan.
The purpose of the Director Plan is to provide Non-Employee Directors with an
equity interest in the Company in order to attract and retain well-qualified
individuals to serve as Non-Employee Directors and to further align the
interests of Non-Employee Directors of the Company with those of the
stockholders of the Company.
Number of Shares
The Director Plan provides that 200,000 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 at the times contemplated by the
Director Plan to Non-Employee Directors of the Company. If an option expires
before its exercise, the shares may again be subject to options. Shares tendered
as consideration for the exercise of any option and shares subject to the
unexercised portion of any outstanding option which expires, is canceled, or is
terminated for any reason may again be subject to awards under the Director
Plan.
Administration; Eligibility
The Director Plan shall be administered by the Board of Directors of the
Company; provided that any decision regarding the price, timing, or amount of
options to be granted hereunder shall require the affirmative vote of a majority
of the members of the Board of Directors who are not participants in the
Director Plan. Such disinterested majority shall also have the right to make
discretionary awards of options in addition to the grants specified in Section
5(b).
Stock Options
The stock options to be granted under the Director Plan are not qualified
under any section of the Code ("non-qualified options") and will be granted at
100% of the fair market value of the underlying Common Stock on the date of
grant.
[To the extent shares are not available under the 1995 Director Plan], each
Non- Employee Director in office on December 1, 1997 shall continue to have the
option to purchase up to 4,000 shares of Common Stock per year at the time
provided for under that plan for award of options in 1998 (subject to the annual
plan limit of 20,000 shares per director) and in any subsequent year in which a
20
<PAGE>
DRAFT 2/5/98
grant of otions is provided for under the 1995 Director Plan. Once the grants
provided by the 1995 Plan have been satisfied, a director shall receive 1,500
shares of Common Stock at the close of business on the last Thursday in April in
each of the next five years.
Any Non-Employee Director initially elected as a director after December 1,
1997, shall be granted an option to purchase 3,000 shares of Common Stock as of
the close of business on the date of the first regular meeting of directors held
on or after the date the participant's initial election as a director and an
option to purchase 1,500 shares of Common Stock at the close of business on the
last Thursday in April during each of the next four succeeding calendar years,
subject to a maximum individual award of options to purchase 9,000 shares of
Common Stock.
Each option granted under the Plan shall become exercisable in full one
year after the initial grant, but shall not be exercisable as to any shares
prior thereto. Upon exercise, the option price is to be paid in full in cash, in
shares of the Company's Common Stock previously owned by the option holder or
acquired upon option exercises having a market value on the date of exercise
equal to the aggregate option price, or in a combination thereof. No stock
option may be exercised after the earlier to occur of: (i) the expiration of 10
years after the date such option was granted; or (ii) five years after a
Non-Employee Director ceases to be a director for any reason, during which
period any installments of options which first become exercisable may thereafter
be exercised. In the case of death, the option may be exercised by a deceased
director's estate or heirs for such five year period.
In the event that a Non-Employee Director exercises all or any part of a
stock option granted under the Plan (or under the 1995 Director Stock Option
Plan) through the surrender of shares of Common Stock in full or partial payment
of the exercise price hereunder, the director automatically will receive an
option (a "replenishment option") to purchase a number of shares equal to the
number of shares surrendered priced at the closing price of the Company's Common
Stock on the date of exercise and exercisable in full until the date of
termination of the related option. Upon the exercise of a replenishment option
with stock, the director will not become entitled to receive an additional
replenishment option. Options are transferable within the family for estate
planning purposes and, upon certain events involving an actual or potential
change of control of the Company, shall be exercisable in full.
Amendments; Term of Plan
This Director Plan may be amended, suspended, terminated or reinstated, in
whole or in part, at any time by the Board of Directors; provided, however, that
any provisions of this Director Plan regarding the amount and price of options
to be awarded to Non-Employee Directors and the timing of awards, or that may be
deemed to set forth a formula that determines the amount, price, and timing of
awards, may not be amended more than once every six months, other than to
21
<PAGE>
DRAFT 2/5/98
comport with any changes in the Code, the Employee Retirement Income Security
Act of 1974, as amended, or the rules under such statutes; and, provided
further, however, that no such amendment shall become effective without the
approval of the stockholders of the Company to the extent stockholder approval
is required in order to comply with Rule 16b-3 of the Securities Exchange Act of
1934, as amended. No option may be granted under the Plan after December 31,
2007.
Federal Income Tax Consequences
The following is a general summary of the current Federal income tax
treatment of the non-qualified stock options to be granted under the Director
Plan based upon the current provisions of the Code and regulations promulgated
thereunder. 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 sale amount. The option holder's basis in such shares will be the
fair market value on the date exercised and, upon disposition of the shares, the
option holder will recognize capital gain or loss, either long-term or
short-term, depending on the holding period of the shares.
Recommendation of the Board of Directors; Vote Required
The Board of Directors recommends a vote "FOR" approval of the Director
Plan. The affirmative vote of a majority of the votes cast at the meeting will
be required to approve the Director 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.
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 outstanding Common Stock of
the Company.
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Under Federal securities laws, the Company's directors, executive officers,
and persons holding more than 10% of any class of the Company's Common Stock are
required to report, within certain periods, their ownership of and any
transactions in any shares of any class of the Company's equity securities. To
the Company's knowledge, all such individuals have satisfied such filing
22
<PAGE>
DRAFT 2/5/98
requirements in full, except for Mr. Laporte, a director and officer of the
Company, who inadvertently filed one monthly report relating to one transaction
shortly after the due date.
SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors, pursuant to the recommendation of its Audit
Committee, has selected Price Waterhouse LLP, independent accountants, to
examine the financial statements of the Company for the 1998 fiscal year. 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 1997, Price Waterhouse performed various professional services for the
Company, including completion of the examination of financial statements of the
Company for 1996, preliminary work on the examination for 1997, and preparation
of corporate tax returns. Price Waterhouse also examines the financial
statements of approximately 46% 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 that there was no material effect upon the
firm's independence.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1998 annual meeting
must be received by the Company for inclusion in the Company's proxy statement
and proxy relating to that meeting by November , 1998.
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,
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.
23
<PAGE>
DRAFT 2/5/98
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 520,000,000 shares of capital
stock (par value $.20 per share) amounting in aggregate par value to
$104,000,000, of which 500,000,000 shares (par value $.20 per share)
amounting in aggregate par value to $100,000,000 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
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).
(b) As amended the total number of shares of stock of all classes which the
Corporation has authority to issue is 520,000,000 shares, of which 20,000,000
A-1
<PAGE>
shares are Preferred Stock (par value $.20 per share) and 500,000,000 shares are
Common Stock (par value $.20 per share).
(c) The aggregate par value of all shares having a par value is $44,000,000
before the amendment and $104,000,000 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.
A-2
<PAGE>
DRAFT 2/5/98
Exhibit B
T. ROWE PRICE ASSOCIATES, INC.
PROPOSED
1998 DIRECTOR STOCK OPTION PLAN
1. PURPOSES OF THE DIRECTOR PLAN:
T. Rowe Price Associates, Inc. (the "Company") has adopted the 1998
Director Stock Option Plan for Non-Employee Directors (the "Director Plan") to
provide for the issuance of options to purchase shares of the Company's Common
Stock, par value $.20 per share (the "Stock") as a means of long-term
compensation for members of the Board of Directors of the Company in order to
provide Non-Employee Directors with an equity interest in the Company in order
to attract and retain well-qualified individuals to serve as Non-Employee
Directors and to further align the interests of Non-Employee Directors of the
Company with those of the Stockholders of the Company. For purposes of this
Plan, Non-Employee Directors are persons who are not employees of the Company or
any of its affiliates or subsidiaries.
2. ADMINISTRATION:
The Director Plan shall be administered by the Board of Directors of the
Company; provided that any decision regarding the price, timing, or amount of
options to be granted hereunder shall require the affirmative vote of a majority
of the members of the Board of Directors who are not participants in the
Director Plan. Such disinterested majority shall also have the right to make
discretionary awards of options in addition to the grants specified in Section
5(b).
3. STOCK SUBJECT TO OPTION:
The Company will reserve 200,000 authorized but unissued shares of Stock
for issuance and delivery under the Director Plan, subject to adjustment as
provided under this Director Plan or the 1995 Director Stock Option Plan (the
"1995 Director Plan") in paragraph 6 hereof; provided that, shares tendered as
consideration for the exercise of any option and shares subject to the
unexercised portion of any outstanding option which expires, is canceled, or is
terminated for any reason may again be subject to awards under the Director
Plan.
B-1
<PAGE>
DRAFT 2/5/98
4. ELIGIBILITY:
The individuals who shall be eligible to participate in the Director Plan
shall be all Non- Employee Directors of the Company.
5. TERMS AND CONDITIONS OF OPTIONS:
Options under the Director Plan are intended to be non-statutory stock
options not qualifying under any section of the Internal Revenue Code of 1986,
as amended (the "Code"). All stock options granted under the Director Plan shall
be subject to the following provisions:
(a) Option Price. The exercise price per share with respect to
each option shall be 100% of the fair market value of the Stock on the
date the option is granted. For purposes hereof, fair market value
shall be the last reported sale price in the Nasdaq National Market (or
any other recognized securities market on which the stock is traded if
not then traded on the Nasdaq National Market) on the date of grant, or
the next succeeding business day on which the Nasdaq National Market
(or such other market) is open for business and reports an actual
transaction in the Company's common stock. If the Stock is not then
traded on any recognized market, fair market value shall be as
determined by the Board of Directors in accordance with applicable
federal income tax and securities regulations.
(b) Option Grants.
(i) Each Non-Employee Director in office on December 1, 1997
shall continue to have the option to purchase, to the extent shares are
not available under the 1995 Director Plan, 4,000 shares of Common
Stock at the time provided for under that plan for award of options in
1998 and in any applicable year thereafter, and thereafter 1,500 shares
of Common Stock at the close of business on the last Thursday in April
in each of the next five years succeeding the last grant originally
made under the 1995 Director Plan.
(ii) Each Non-Employee Director initially elected as a
director after December 1, 1997, shall be granted an option to purchase
3,000 shares of Common Stock as of the close of business on the date of
the first regular meeting of directors held on or after the date the
participant's initial election as a director and an option to purchase
1,500 shares of Common Stock at the close of business on the last
Thursday in April during each of the next four succeeding calendar
years, subject to a maximum individual award of options to purchase
9,000 shares of Common Stock.
B-2
<PAGE>
DRAFT 2/5/98
(c) Exercise of Options.
(i) Each option granted under this Plan shall become
exercisable in full one year after the initial grant, but shall not be
exercisable as to any shares prior thereto. Except as provided in
paragraph (ii) below, full payment for shares acquired shall be made in
cash or by certified check at or prior to the time that an option, or
any part thereof, is exercised. The participant will have no rights as
a stockholder until the certificate for those shares as to which the
option has been exercised is issued by the Company.
(ii) Shares of the Company's Common Stock with a value equal
to the exercise price or a combination of cash and Stock with a value
equal to the exercise price may be used as payment for shares acquired.
(iii) Until further action by the Board of Directors
suspending or limiting the issuance of replenishment options (as herein
referred to), in the event that Director exercises all or any part of a
stock option granted hereunder or under the 1995 Director Stock Option
Plan through the surrender of shares of Common Stock in full or partial
payment of the exercise price hereunder, the Director automatically
will receive an option (a "replenishment option") to purchase a number
of shares equal to the number of shares surrendered priced at the
closing price of the Company's Common Stock on the date of exercise and
exercisable in full until the date of termination provided for herein.
Upon the exercise of a replenishment option with stock, the Director
will not become entitled to receive an additional replenishment option.
(d) Term of Option. No stock option may be exercised after the
earlier to occur of: (i) the expiration of ten (10) years after the
date such option was granted; or, (ii) five (5) years after the
Non-Employee Director ceases to be a director for any reason, during
which period any installments which first become exercisable may
thereafter be exercised.
(e) Options Nonassignable and Nontransferable. Options granted
under the Director Plan are not transferable by the Director otherwise
than by will or the laws of descent and distribution and are
exercisable during the Director's lifetime only by the Director; except
that with the consent of the Board of Directors, this Option may be
transferred to a family member or a trust, partnership or the like for
the benefit of the Director or such family members No assignment or
transfer of this option, or of the rights represented thereby, whether
voluntary or involuntary, by operation of law or otherwise, except by
will or the laws of descent and distribution, shall vest in the
assignee or transferee any interest or
B-3
<PAGE>
DRAFT 2/5/98
right herein whatsoever, but immediately upon any attempt to assign or
transfer this option the same shall terminate and be of no force or
effect.
6. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION:
The aggregate number of shares of stock on which option awards under the
Director Plan may be granted to persons participating under the Director 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 be proportionately adjusted for any increase or decrease in the number of
issued shares of 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 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 Board of Directors as necessary or appropriate to reflect the
transaction and as permitted under applicable securities and tax laws.
If the Company shall be the surviving or resulting corporation in any
merger or consolidation, any award granted shall pertain to and apply to the
securities to which a holder of the number of shares of 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, but as to the number of shares and otherwise, which
shall substantially preserve the rights and benefits of any award then
outstanding hereunder.
7. EFFECTIVE DATE OF THE DIRECTOR PLAN:
The Director Plan shall become effective upon its adoption by the Board of
Directors and subsequent approval by a majority of the votes cast in person or
by proxy at a meeting of the stockholders of the Company held within 12 months
of the action of the Board of Directors described above.
8. TERMINATION DATE:
No options may be granted under the Director Plan after December 31, 2007.
Subject to paragraph 5(d), options granted before December 31, 2007 under the
Director Plan may be exercised after that date in accordance with their terms.
B-4
<PAGE>
DRAFT 2/5/98
9. AMENDMENT:
This Director Plan may be amended, suspended, terminated or restated, in
whole or in part, at any time by the Board of Directors; provided, however, that
any provisions of this Plan regarding the amount and price of options to be
awarded to Non-Employee Directors and the timing of awards, or that which may be
deemed to set forth a formula that determines the amount, price, and timing of
awards may not be amended more than once every six months, other than to comport
with any changes in the Code, the Employee Retirement Income Security Act of
1974, as amended, or the rules under such statutes; and, provided further,
however, that no such amendment shall become effective without the approval of
the stockholders of the Company to the extent stockholder approval is required
in order to comply with Rule 16b-3 of the Securities Exchange Act of 1934.
10. COMPLIANCE WITH LAWS AND REGULATIONS:
The grant, holding and vesting of all options under the Director Plan shall
be subject to any and all requirements and restrictions that may, in the opinion
of the Board, be necessary or advisable for the purposes of complying with any
statute, rule or regulation of any governmental authority, or any agreement,
policy or rule of any stock exchange or other regulatory organization governing
any market on which the Stock is traded.
11. MISCELLANEOUS:
(a) Expenses. The Company shall bear all expenses and costs in connection
with the administration of the Director Plan.
(b) Applicable Law. The validity, interpretation and administration of this
Plan and any rules, regulations, determinations or decisions made hereunder, and
the rights of any and all persons having or claiming to have any interest herein
or hereunder, shall be determined exclusively in accordance with the laws of the
State of Maryland, without regard to the choice of laws provisions thereof.
(3) Headings. The headings herein are for reference purposes only and shall
not affect the meaning or interpretation of the Director Plan.
(4) Notices. All notices or other communications made or given pursuant to
this Director Plan shall be in writing and shall be sufficiently made or given
if hand-delivered or mailed by certified mail, addressed to any Non-Employee
Director at the address contained in the records of the Company or to the
Company at its principal office.
B-5
<PAGE>
DRAFT 2/5/98
(5) Federal Securities Law Requirement. Awards granted hereunder shall be
subject to all conditions required under Rule 16b-3 to qualify the award for any
exception from the provisions of Section 16(b) of the Securities Exchange Act of
1934 available under that Rule.
B-6
<PAGE>
DRAFT 2/5/98
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 James S. Riepe, George A. Roche and M. David Testa 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 Thursday, April 16, 1998, at 10:00 a.m., at 100 E. Pratt Street,
12th Floor, Baltimore, Maryland 21202, and at any and all adjournments and
postponements 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
___, 1998, 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 AND, IN THE
DISCRETION OF THE PROXY HOLDER, ON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING AND AT ANY ADJOURNMENTS AND POSTPONEMENTS THEREOF.
(continued and to be dated and signed on the reverse side)
<PAGE>
DRAFT 2/5/98
(continued from reverse side)
(1) ELECTION OF DIRECTORS
[ ] FOR the election of all nominees listed below
[ ] WITHHOLD authority to vote for all nominees listed below
[ ] EXCEPTIONS (To withhold authority for any individual nominee listed
below, mark the "Exceptions" box and strike a line through that
nominee's name.)
Nominees: 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, Brian C. Rogers, John W. Rosenblum, Robert L.
Strickland, M. David Testa, Philip C. Walsh and Anne Marie Whittemore
(2) TO APPROVE AN AMENDMENT TO THE COMPANY'S CHARTER TO EFFECT A TWO-FOR-ONE
STOCK SPLIT AND EFFECT AN INCREASE IN THE AUTHORIZED COMMON STOCK.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) TO APPROVE THE PROPOSED 1998 DIRECTOR STOCK OPTION 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 and at any adjournments
and postponements 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
PLEASE PROMPTLY SIGN, DATE, AND RETURN THE PROXY CARD IN THE
ENCLOSED ENVELOPE.
