~BALT01A:43427:1:|02/28/95
4807-400024
                          SCHEDULE 14A
                         (Rule 14a-101)PRELIMINARY COPY -- FOR THE INFORMATION REQUIRED IN PROXY STATEMENT

                    SCHEDULE 14A INFORMATION

   Proxy Statement Pursuant to Section 14(a) of the Securities
               Exchange Act of 1934 (Amendment No. 2  )    

Filed by the registrant |X |

Filed by a party other than the registrant |  |

Check the appropriate box:

|  |  Preliminary proxy statement
   
| X|  Definitive proxy statement    

|  |  Definitive additional materials

|  |  Soliciting material pursuant to Rule 14a-11(c) or Rule
14a-12

                                    T. ROWE PRICE ASSOCIATES,
                              INC.
          (Name of Registrant as Specified in Charter)

                              Alvin M. Younger, Jr.,
                            Secretary
           (Name of Person(s) Filing Proxy Statement)

Payment of filing fee (Check the appropriate box):

|X  |     $125  per Exchange Act Rule 0-11(c)(1)(ii),  14a-
6(i)(1), or 14a-6(i)(2).

|  |  $500  per  each party to the controversy pursuant  to
    Exchange Act Rule 14a-6(i)(3).

|  | Fee computed on the table below per Exchange Act Rules
    14a-6(i)(4) and 0-11.

     (1)  Title  of  each  class  of  securities  to  which
transaction applies:
                                
                                

    (2) Aggregate number of securities to which transaction
applies:
                                
                                

     (3)  Per  unit  price  or other  underlying  value  of
transaction computed pursuant to Exchange Act Rule 0-11:
                                
                                

    (4) Proposed maximum aggregate value of transaction:
                                
                                

|  | Check box if any part of the fee is offset as provided
    by Exchange Act Rule 0-11(a)(2) and identify the filing
    for  which  the  offsetting fee  was  paid  previously.
    Identify  the previous filing by registration statement
    number,  or  the form or schedule and the date  of  its
    filing.

    (1) Amount previously paid:
                                
                                

    (2) Form, schedule or registration statement no.:
                                
                                

    (3) Filing party:
                                
                                

    (4) Date filed: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 StockholdersNOTICE OF ANNUAL MEETING OF STOCKHOLDERS
                                 April 6, 199512, 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 6, 1995,12,  1996,  at 10:00 a.m.  for the
following purposes:

     (1)  To elect elevenfourteen 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;common stock;
     (3)  To consider and act upon athe proposed charter amendment
to authorize a class of undesignated Preferred Stock;
     
     (4)   To consider and act upon a proposed performance-linked
Executive1996 Stock Incentive Compensation Plan;
     
     (5)  To consider and act upon a proposed 1995 Director Stock
Option Plan; and
     (6)(4)  To  consider  and act upon such other  business as may  properly  come
          before the meeting.

         February  6, 199512,  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 1, 1995___________, 1996








                                 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 amendmentsa proposed charter  amendment to effect a
two-for-one stock split and to effect a proportional increase in the Company's charter to increase the authorized Common Stockoutstanding
common  stock of the Company, and to authorize an undesignated class of  Preferred
Stock,  to consider and act upon athe proposed  performance-linked
Executive1996 Stock
Incentive Compensation Plan, to consider and act upon a
proposed 1995 Director Stock Option 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 1, 1995.___________ , 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 6,  1995.12, 1996. At that date
there were  outstanding and entitled to vote  28,620,239________________  shares of Common
Stock,  par value $.20 per share.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. TheApproval
of the proposed charter amendments requireamendment requires the affirmative vote of a majority of
the total number of shares of Common Stock outstanding, and approval of the proposed compensation  plans  require1996
Stock Incentive Plan requires the affirmative  vote of athe majority of the votes
cast.cast at the meeting.  In the discussion of each of thesethe 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 19951996 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 $8,000$7,000
plus  reimbursement  for out-of-pocket  expenses.  In  addition,   theThe 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

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.


                              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 2, 1995.    
                                
                                
                      ELECTION OF DIRECTORS

     TheEffective at the time of the annual  meeting,  the number of directors will
be increased  to fourteen  persons,  and the entire  Board of Directors of the Company  will be
elected to hold office until the next annual meeting of  stockholders  and until
their  respective  successors  are  elected  and have  qualified.  All elevenEleven 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
Age, principal occupation, directorships with public
                         companies, Name of Nominee     and beneficial ownership of Common Stock
Name of Nominee          (percent of class)
Thomas H. Broadus, Jr.   Mr. Broadus is 57 years old and has
been  a  director of the Company since 1979, a managing  director
since  1989,  a  vice president between 1971  and  1989,  and  an
employee  since 1966. He is president and a director of the  Blue
Chip Growth Fund and a trustee of the Equity Income Fund.
        
     341,702 shares (1.17%) (6)- ---------------          ------------------------------------------------------

George J. Collins        Mr.  Collins is 5455 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 1920 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)
                         905,460____ shares (3.09%(____%) (7)(6)
                   

James E. Halbkat, Jr.    Mr.  Halbkat is 6061 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)
                         12,000_____ shares * Carter O. Hoffman   Mr. Hoffman is 67 years old and has been
a  director of the Company since 1973, a managing director  since
1989,  a  senior  vice president between 1980 and  1989,  a  vice
president between 1966 and 1980, and an employee since  1961.  He
is chairman of the Prime Reserve Fund and a director of two other
Price Funds.
     
     213,600 shares * (8)(7)

Henry H. Hopkins         Mr.  Hopkins is 5253 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.
                         310,884_____ shares (1.06%(_____%) (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 notesfootnotes on page 4)page____ )

                                       3


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 5152 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 3739 Price Funds on
                         which  he  serves  as a  director  or  trustee  and  is
                         chairman  of New Age  Media  Fund,  Inc., and
is president and a director of CUNA Mutual Funds, Inc.  He is also a
                         director    of    Rhone-Poulenc    Rorer,    Inc.,    a
                         pharmaceuticals   company.  (1)(2)
                         684,139_____ shares  (2.34%(_____%)  (10)(13)
                         

George A. Roche          Mr.  Roche is 5354 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)
                         702,396_____ shares (2.40%(_____%) (11)(14)

John W. Rosenblum        Mr.  Rosenblum  is 5152 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(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;   and Cone  Mills
                         Corporation,   a  textiles  producer.producer;   and  Providence
                         Journal  Company,   an  owner  and  operator  of  cable
                         television systems. (3)(4)
                         1,000_____ shares  * (15)



                                       4


Robert L. Strickland     Mr.  Strickland is 6364 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)
                         2,000_____ shares * (16)

M. David Testa           Mr.  Testa is 5051 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 1314 other  Price  Funds.  He
                         serves as  chairman of five of these  Funds.  (1)(2)(5)
                         369,697_____ shares (1.26%(_____%) (12)(17) 

Philip C. Walsh          Mr.  Walsh is 7374 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)
                         2,000_____ 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
(22(27 persons) 5,782,641__________ shares (19.74%(_____%) (13)(19)

* Indicates holdings of less than 1 percent.



                                       (see notes on page 4)5


(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  20,800 shares which may currently be acquired
by  Mr. Broadus upon the exercise of stock options. Also includes
20,000  shares  held  by  a charitable foundation  of  which  Mr.
Broadus  is an executive officer, 75,904 shares owned  by  family
members,  and  24,000 shares held in trusts for  members  of  Mr.
Broadus's  immediate  family. Does not include  an  aggregate  of
140,000  shares held in trusts for family members  of  two  other
directors  of  the  Company of which  trusts  Mr.  Broadus  is  a
co-trustee.  Mr.  Broadus disclaims beneficial ownership  of  all
shares held in trusts.
     
     (7)   Includes 39,800_____ shares which may currently be acquired by Mr.  Collins upon
     the exercise of stock options. Also includes 67,602_____ 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  14,000 shares owned by a family member and  as
to which Mr. Hoffman disclaims beneficial ownership.
        
     (9)   Includes 45,400_____ 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  27,600_____ 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 20,000_____ shares owned by a member
     of Mr.  Riepe's  family and 70,000______ shares held in trusts for members of Mr.
     Riepe's family, as to which Mr. Riepe disclaims beneficial ownership.  Also
     includes 42,000 shares_____shares held in a charitable  foundation of which Mr. Riepe is
     a trustee and as to which Mr. Riepe has voting and disposition power.
(11)(14) Includes 19,200_____ shares which may currently be acquired by Mr. Roche upon the
     exercise  of stock  options,  and 200,000_____  shares  held by or in  trusts  for
     members  of  Mr.  Roche's  family  and  as to  which  Mr.  Roche  disclaims
     beneficial ownership.
(12)(15)  Includes 27,300_____ 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 80,000_____ shares held in trusts for members of
     Mr.  Testa's  family  and  as  to  which  Mr.  Testa  disclaims  beneficial
     ownership.
(13)(18) Includes 678,492_____ 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


     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  1994,1995,  there were sixseven  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.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 optionincentive and stock purchase plans.plans and the Company's  Executive  Incentive
Compensation  Plan.  The  directors  designated in note (4) above are members of
this Committee and met five times.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  and
met   on  two  occasions.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 1994.1995.




                                       7


                           SUMMARY COMPENSATION TABLE
Long-Term All Other
     
             Annual Compensation(1)  Compensation Awards  Compensation (4)
     
Name and                 Securities Underlying
     
Principal Position  Year Salary Bonus (2)  Options Granted(#)(3)
        
________________    _____   ______        ________  ___________________    
     
George  J.  Collins  1994  $325,000   $1,250,000    -0-  $22,500
        
President,  Chief  Exec-   1993 290,008    750,000    35,000  30,000
     
utive Officer and    1992  265,000    500,000     12,000  30,000    
     
Managing Director
     
James S. Riepe       1994  275,000      1,250,000    -0-   22,500     
    
Managing Director    1993  248,750        750,000   30,000 30,000
     
1992     230,000     500,000   24,000     30,000
     
George A. Roche      1994  275,000      1,250,000    -0-   22,500
     
Chief Financial Officer  1993 248,750     750,000   30,000 30,000
     
and Managing Director 1992  230,000       500,000   24,000 30,000
     
M. David Testa        1994  275,000     1,250,000  300,000 26,625
     
Managing Director     1993  248,750       750,000   30,000 33,731
     
1992 230,000   500,000   24,000     33,450
     
Brian C. Rogers      1994  250,000    810,000    25,000  26,250
     
Managing   Director  1993  220,833     400,000
Long-Term All Other Annual Compensation (1) Compensation Awards Compensation(4) Name and Securities Underlying Principal Position Year Salary Bonus (2) Options Granted (#)(3) - ------------------ ---- ------ --------- ---------------------- 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 1992 190,000 350,000 30,000 32,850
(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 19941995 in the Summary Compensation Table. (2) Bonuses are generallyfor 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 and are allocated and paid at year end.performance. Bonuses are discretionary and vary significantly from year to year and among eligible employees. In recent years, bonuses have comprised a significant portion of compensation. Payment of the portion of the 1994 cash bonus payable to each person named in the Summary Compensation Table that would not be deductible in 1994 has been deferred until such time as these payments are fully deductible for federal income tax purposes or the Executive Compensation Committee otherwise determines to effect these payments. 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, $30,000$22,500 and $30,000 contribution for 1995, 1994 1993 and 1992,1993, respectively, for each of the named individuals to the Company's tax-qualified profit sharing plan, which 8 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, $3,731$4,125 and $3,450$3,731 in employer matching contributions under the Company's 1986 Employee Stock Purchase Plan for Mr. Testa for 1995, 1994 1993 and 1992,1993, respectively, and $3,750, $3,312$3,750, and $2,850$3,312 in employer matching contributions under the Company's 1986 Employee Stock Purchase Plan for Mr. RogersLaporte for 1995, 1994 1993 and 1992,1993, 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. TheIn 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 provideproviding that such options and any options granted in the rightfuture to exercise options may be acceleratedthe 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 Company. Any decisionBoard 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 options held by executive officers will be made in the sole discretionexercisability of the Executive Compensation Committee on such terms and conditions as this Committee determines to be appropriate under the circumstances.options. 9 OPTION GRANTS IN LAST FISCAL YEAR Individual Grants Number of Potential Realizable Value at Securities Percent of Assumed Annual Rates of Stock Price Underlying Total Options Exercise or Appreciation for Option Term (2) ____________________________________ Options Granted in Base Price Expiration Name Granted (#) Fiscal Year (Per Share)(1) Date 0%(3) 5% 10% George J. Collins 0 0 N/A N/A $0 $ 0 $ 0 James S. Riepe 0 0 N/A N/A 0 0 0 George A. Roche 0 0 N/A N/A 0 0 0 M. David Testa 300,000 24.4 $32.25 11/10/04 0 6,084,600 15,419,400 Brian C. Rogers 25,000 2.0 32.25 11/10/04 0 507,050 1,284,950
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% 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
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. Number of Potential Realizable Value at Securities Percent of Assumed Annual Rates of Stock Price Underlying Total Options Exercise or Appreciation for Option Term (2) ___________________________________ Options Granted in Base Price Expiration Name Granted (#) Fiscal Year (Per Share)(1) Date 0%(3) 5% 10% All Stockholders(4) N/A N/A N/A N/A 0 $582,319,443 $1,475,695,431 Potential Gain to Named Executives as a Percentage of Potential All Stockholders Gain N/A N/A N/A N/A N/A 1.13% 1.13%
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% 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%
(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 11, 19941, 1995 (the date of grant of the 19941995 option awards) to November 10, 2004October 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 November 10, 2004October 31, 2005 is projected to be $32.25, $52.532,$52.25, $85.11, and $83.648,$135.52, 10 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 19941995 option grants without a stock price appreciation which will benefit all stockholders. (4) The number of shares subject to options granted in 19941995 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 19941995 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, 1994.1995. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES Number of Secur- ities Underlying Value of Unexercised Unexercised Options "In-the-Money" Options at December 31, 1994 at December 31, 1994 Shares Acquired Value (Exercisable/ (Exercisable/ Name on Exercise (1) Realized Unexercisable) (1) Unexercisable) (2) George J. Collins N/A N/A 39,800/47,200 $627,725/$360,150 James S. Riepe 4,800 $110,700 27,600/56,000 275,250/530,000 George A. Roche 8,600 153,525 19,200/56,000 166,050/530,000 M. David Testa 11,100 250,219 27,300/356,000 295,881/530,000 Brian C. Rogers 11,000 222,375 94,800/88,000 1,553,438/709,312
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) 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
11 (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, 1994,1995, 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 his 19941995 services as a director and memberboard committee member. The retainer paid to each Mr. Menschel and Mrs. Whittemore, who served on the Board of Directors for part of the various committees on which he serves. Executive Compensation Committee Interlocks and Insider Participationyear, was prorated at $25,000. During 1994,1995, 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 COMMITTEEReport 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") as well as the other officers; (ii) administration of the Company who are also directors; (ii)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;1934 as amended; and (iii)(iv) review and approval of the compensation policies and general levels of compensation for the Company's remaining managing directors and other key-employees,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 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 1994,1995, base salaries for each of the individuals named in the table on page 5_____ (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. The annual discretionary cash bonus has been the principal means of rewarding the Named Officers for individual and group performance and, in recent years, has beencompensation with the major componentportion of cash compensation. Atcompensation 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 1994,1995 designated seven executive officers (the chief executive officer, the Company's Boardthree 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 Directors13 the available Incentive Pool. In accordance with the Incentive Plan, the Committee reviewed the requirements established a specific earnings target relative to three years average growth ratesby the Plan for determining incentive awards and a corresponding target bonus pool available foralso determined and certified that each of the Plan's performance goals had been satisfied before it approved and permitted payment of bonuses pursuant to a significant numberthe 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 Company's professional staff. AtInternal Revenue Code of 1986, as amended, and all other compensation payable to the endNamed Executive Officers for 1995 performance will similarly be fully deductible. The Committee determined to award each of the year, theSenior Executive Officers incentive compensation in each case in an amount of the aggregate bonus pool was substantially increased above the initial target bonus pool to reflect the fact that the Company's performance during the year substantially exceeded the initial earnings target. The Executive Compensation Committee first determined the portion of the aggregate bonus pool to be made available to the persons (otherless than the Named Officers) eligible to receive awards from the aggregate bonus pool. The Committee then determined individual bonus awards for the Named Officersfull amount that would be made available frompermitted to be paid under the remainderIncentive 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 aggregate bonus pool. In making bonus awards to all participants, the Company and theThreshold ROE. The Committee recognized that market and competitive forces require compensation levels for a significant percentage of the Company's investment and other professional staff sufficient to prevent loss of promising personnel to direct competitors or other participants in the investment and financial services markets. In addition to its primary consideration of the quantitative factors described above, the Executive Compensation Committeealso gave significant consideration to a series of specific, qualitative performance factors, that it believed reflected the NamedSenior Executive Officers' performance but were not capable of precise measurement. The qualitative factors were considered for purposes of determining both the aggregate amount of the bonus pool to be made available as well as individual bonus awards. For 1994, the principal qualitative factors which the Committee assessed in determining the incentive compensation of the Senior Executive Officers includedmeasurement, including: relative investment performance, marketing effectiveness, management of corporate assets, expense control, and corporate infrastructure development. These qualitative factors were not accorded specific weightings, and were applied by the Executive Compensation Committee as appropriate to take into account the responsibilities of the Senior Executive Officers. The Committee determined that the Senior Executive Officers as a teameach had demonstrated outstandingsuperior long-term management performance in each of these areas. In the view of the Committee, this performance could have justified a significant further increaseHowever, in the bonus pool over and above the amount previously determined duedetermining executive officer compensation relative to the strong quantitative performance, butCompany's compensation policies in general as well as general industry compensation trends, the Committee determined to make no further upward adjustments.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. Rogers,Laporte, the principal factor weighed was the superior investment performanceNamed Officer who is not one of the portfoliosSenior 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. Rogers wasLaporte is responsible. In light of the decision to recommend for stockholder approval a performance-based incentive plan for years beginning in 1995, as described on pages 13 to 15, the Committee determined to defer payment of the portion of the cash bonus payable to each of the Named Officers that would be non-deductible in 1994 until such time as these payments are fully deductible or the Committee otherwise determines to effect the payments. Assuming stockholder ratification of this incentive plan, the deferred portion of the 1994 bonus will be paid in 1995. Thus, no portion of compensation payable to the Named Executive Officers for 1994 performance is expected to be non-deductible. 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 19941995 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. The levels of 1994 bonus compensation reflected attainment by the Company of record operating income and earnings per share, in each case substantially in excess of initial targets, as well as consistently favorable performance relative to specific qualitative performance factors discussed above. Subject to the considerations regarding the long-term contributions of Mr. Testastock option awards described below, the four Senior Executive Officers were viewed as making generally equivalent contributions to 19941995 performance. In the case of Mr. Rogers,Laporte, the Executive Compensation Committee took into consideration the strong investment performance and growth in assets 14 under management of the Company's Equity Income Fund, ofsmall company equity management operation, for which Mr. RogersLaporte is the chief portfolio manager,in charge, and the fact that this fund is one of the largest of the Price Funds and an important contributorfunds under Mr. Laporte's general supervision are major contributors to Company revenues. In recent years, equity incentive awards in1995, the form ofCommittee determined to make stock option grants have been directed primarily to officers including certain managing directors other than the Senior Executive Officers. Individual awards have been based on evaluation of the same individual and group performance goals that form the basis of bonus awards. Preliminary option determinations for key employees other than managing directors are made by a management-level compensation committee, subject to review and approval by the Executive Compensation Committee. In 1994, the Executive Compensation Committee made a stock option award to Mr. TestaRiepe and Mr. Roche each covering 300,000100,000 shares of Common Stock at the closing Nasdaq price on the date of grant ($32.25$52.25 per share). Thisshare. These option award wasawards were significantly greater than prior 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 was made, onstock ownership among the basis of past performance,Senior Executive Officers and to provide Mr. Testa with a strong incentive to continue to provide the Company with similar contributions for the foreseeable future. In making this award, the Executive Compensation Committee specifically recognizedrecognize the unique contributionlong-term contributions of Mr. Testa over a long number of years to the creation, growth, and leadership of the Company's international investment management business, which was a major contributorRoche to the Company's investmentfinancial management asset and revenue growth in 1994equity portfolio management functions and a very significant contributor in recent prior years. The Committee also consideredof Mr. Testa's significant contributionsRiepe to leadership in restructuring the Company's equity management function, which has enjoyed consistently favorable investment performance recently. Inmutual fund business. Consistent with this objective and in order to minimize the dilutive effect of option awards, the Executive Compensation Committee made nodetermined not to make stock option awards during 1994in 1995 to the other Senior Executive Officers. In making this option award, the Committee's intention, in recognizing superior past long-term performance, was to provide an additional incentive toeither Mr. Testa to continue this performance for a significant period in the future and to reinforce the Company's policies to base compensation awards to its executive officers largely on performance.Collins or Mr. Testa. To solidify the link of the award to Mr. Testathese considerable awards to long-term future performance, the option awards to Mr. Testa's option award,Riepe and Mr. Roche, which expires in November 2004, becomesexpire on October 31, 2005, become exercisable in three equal annual installments commencing in November 1997.1998. This three-year delay before initial vesting commences is longer than the vesting period established for otherin stock option grants awarded to other key employees in recent years.1995. In determining option awards,administering the Executive CompensationCompany'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. As noted above, the Executive Compensation Committee determined during 1994 to design a bonus plan for years commencing January 1, 1995 that is intended to permit full deductibility of compensation to Named Officers. As a result, the Company's proposed Executive Incentive Compensation Plan, included on pages 13 to 15 of this proxy statement, has been recommended to stockholders for approval at the 1995 annual meeting. The Executive Compensation 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 which follows this report.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 Executive Compensation Committee is to review available compensation data from a large universe of financial services companies. The Executive Compensation Committee receives the assistance of an independent compensation consulting firm in reviewing and analyzing this datacomparing and determining executive compensation and policies. TheIn reviewing this data, the Committee's goal is to maintain compensation programs which are competitive and, where performance justifies, abovewith averages within the financial services industry, compensationbut are neither significantly higher nor lower than these averages. 15 The Executive Compensation Committee believes that 19941995 compensation levels disclosed in this proxy statement are reasonable and appropriate in light of the Company's very strong results relative to the Company's financial and qualitative performance targets.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, 19941995 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, 19891990 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 with TABLE16 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 AMENDMENTSAMENDMENT TO EFFECT A TWO-FOR-ONE STOCK SPLIT AND A PROPORTIONAL INCREASE IN THE AUTHORIZED COMMON STOCK AND CREATE A CLASSSHARES OF UNDESIGNATED PREFERREDCOMMON STOCK The Board of Directors of the Company has adopted resolutions declaring advisable and recommending to the Company's stockholders for their approval two separate amendmentsan amendment to the Company's charter. The first amendment provides forcharter effecting a two-for-one split of the Company's outstanding Common Stock and a proportional increase ofin the authorized shares of Common Stock from 48,000,000100,000,000 shares to 100,000,000 shares. The second amendment provides for the creation of a class of 20,000,000 shares of undesignated Preferred Stock which would be subject to classification and reclassification by the Board of Directors without stockholder approval.200,000,000. The text of the proposed amendmentsamendment is included in the form of Articles of Amendment attached hereto as Exhibit A. The termsBoard 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. 17 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 class of Preferred Stock provides that the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption thereof (collectively, the "Limitations and Restrictions") may be determined by the Board of Directors of the Company prior to the issuance of such stock. As such, the Board of Directors of the Company will, in the event of the approval of this proposal by the Company's stockholders, be entitled to authorize the creation and issuance of 20,000,000 shares of Preferred Stock in one or more series with such Limitations and Restrictions as may be determined in the Board's sole discretion, with no further authorization by stockholders required for the creation and issuance thereof. The additionalamendment, approximately _____ shares of Common Stock will be available for issuance in excess of outstanding Common Stock (approximately _____ shares post-split) and Preferredthe 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 splitssplit-ups and recapitalizations of the Company's capital structure.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 18 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 amendments.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 or Preferred 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 or Preferred Stock that could depending on the terms of such series, 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 interestinterests 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 Board of Directors could also authorize holders of a series of Preferred Stock to vote either separately as a class or with the holders of the Company's Common Stock on any merger, sale or exchange of assets by the Company or any other extraordinary corporate transaction. 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. In addition, the shares of Preferred Stock could be issued if the Board of Directors were to adopt a stockholder rights plan in order to protect stockholders in the event of an unsolicited attempt to acquire the Company which the Board of Directors does not believe to be in the best interests of the Company's stockholders. The Company has no present plans to issue shares of Preferred Stock or to adopt a stockholder rights plan. Accordingly, the terms of any Preferred Stock subject to this proposal cannot be stated or estimated with respect to any or all of the Preferred Stock authorized. Recommendation of the Board of Directors; Vote Required The Board of Directors believes the increase in the authorized Common Stock and the creation of the Preferred Stock are in the best interests of the Company and its stockholders and has declared the amendments advisable. Stockholders are required under Securitiesadvisable and Exchange Commission rules to consider the two amendments separately. The Board of Directors recommends a vote "FOR" thean amendment to the Company's charter to increase from 48,000,000 to 100,000,000 shareseffecting a two-for-one split of the authorizedCompany's outstanding Common Stock and "FOR"a proportional increase in the amendment to the Company's charter to authorize 20,000,000authorized shares of a new class of undesignated Preferred Stock.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 each of the two amendments. Abstentionsamendment. Accordingly, abstentions and broker non-votes will have the same effect ofas a vote against each of the amendments. The proposals are independent such that failure to adopt one proposal will not affect adoption of the other proposal. PROPOSED EXECUTIVE INCENTIVE COMPENSATION PLAN On February 13, 1995, the Executive Compensation Committee recommended toamendment. Proxies solicited by the Board of Directors adoptionwill be voted in favor of the Executiveamendment unless stockholders specify otherwise. PROPOSED 1996 STOCK INCENTIVE PLAN The Company's 1996 Stock Incentive Compensation Plan (the "Incentive Plan"). The Board of Directors adopted the Incentive Plan on February 13, 1995, subject to stockholder approval. The following is the text of the Incentive Plan: Purpose and Effects of Incentive Plan. The Incentive Plan is intended to assure that the cash compensation of the chief executive officer ("CEO""Plan") and the other executive officers whose compensation is required to be reported in the Company's annual proxy statement will be fully deductible for federal income tax purposes, notwithstanding the $1,000,000 annual limitation on certain types of compensation imposed by Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). The Incentive Plan ties directly the incentive compensation payable to the CEO and certain other executive officers to attainment of specific financial performance targets. Thus, incentive compensation payments will be further aligned with the interests of all stockholders. Participation. The Participants in the Incentive Plan shall be the CEO, the members of the Company's Management Committee, and certain other executive officers of the Company designated at the outset of the fiscal yearwas recommended by the Executive Compensation Committee of the Board of Directors (the "Committee"), which Committee is comprised solely of independent directors. At February 13, 1995, the Company had 18 managing directors, seven (7) of whom have been designated by the Executive Compensation Committee to be Participants. Amounts payable from the Incentive Pool (computed in accordance with the following paragraph) established under the Incentive Plan are in addition to, and not in substitution for, base salaries, which are reviewed by the Committee annually at approximately mid-year. Unless otherwise determined by the Executive Compensation Committee in its sole discretion (which may be made on a case-by-case basis), the CEO and each member of the Management Committee are eligible to receive annual bonuses from the Incentive Pool only. Other Participants will be eligible for other incentive compensation based upon the operating performance and enumerated qualitative factors, as evaluated by the Executive Compensation Committee with the input of management, of the business unit for which such Participant is responsible, in addition to amounts payable from the Incentive Pool. Establishment of Incentive Pool under the Incentive Plan. The Incentive Plan establishes a maximum Incentive Pool payable to the Participants under the Incentive Plan in the aggregate for any fiscal year of the Company. The Incentive Pool is determined under the formula described below which relates incentives to the Company's annual 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 for the fiscal year (the "Threshold ROE") is attained. The Incentive Pool, subject to reduction if required by the next paragraph, will be computed on a cumulative basis as follows: (1) for Adjusted Earnings up to $25 million, 5% of Adjusted Earnings will be available under the Incentive Pool, establishing a maximum Incentive Pool of $1,250,000; (2) for Adjusted Earnings above $25 million to $50 million, an additional 7% of Adjusted Earnings will be available under the Incentive Pool, establishing a maximum cumulative Incentive Pool of $3,000,000; and (3) for Adjusted Earnings above $50 million, an additional 8% of Adjusted Earnings will be available under the Incentive Pool, establishing a maximum cumulative Incentive Pool of $3,000,000 plus 8% of Adjusted Earnings over $50 million. The ROE is defined under the Incentive Plan as 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 ROE for the fiscal year 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. Thus, if the ROE is 15%, three-quarters (75%) of the maximum cumulative Incentive Pool shall be payable, and if the ROE is 10%, one-half (50%) of the maximum cumulative Incentive Pool shall be payable. If the Company's ROE falls below 10% for any fiscal year, there shall be no Incentive Pool and no bonus payment will be made from the Incentive Pool for that fiscal year. Payments under the Incentive Plan. The maximum share of the Incentive Pool payable to any Participant is limited to 40%. The actual amount paid from the Incentive Pool for any fiscal year may be less but not greater than the maximum amount available for payment from the Incentive Pool, based on the formula for that year, and the Executive Compensation Committee shall have sole and exclusive discretion to reduce the share or amount payable to any Participant from the Incentive Pool. Prior to the payment of any amounts from the Incentive Pool for any fiscal year, the Executive Compensation Committee shall certify in writing (to the extent required by, and as defined in, any applicable IRS Regulations) that the Threshold ROE and Adjusted Earnings goals and any other material terms used to determine amounts payable from the Incentive Pool were in fact satisfied. For this purpose, approved minutes of the Executive Compensation Committee shall be treated as a written certification and no other separate written certification shall be required. All amounts payable from the Incentive Pool shall be paid in cash as soon as practicable after such certification. The Incentive Plan permits the Executive Compensation Committee to make a determination that the Threshold ROE and Adjusted Earnings have been attained so as to permit payment of awards under the Incentive Plan, in whole or in part, prior to the conclusion of the year. For these purposes, the Executive Compensation Committee is permitted to rely on the Company's most recently available internal interim financial statements (containing such adjustments and accruals as are required under generally accepted accounting principles), which may be adjusted, if and to the extent permitted by applicable law, regulations and interpretations, to take into account the Company's projected results of operations for the remainder of the year based on available data concerning assets under management in mutual fund and investment advisory accounts and other appropriate adjustments. The actual amounts that will be paid to Participants from the Incentive Pool for 1995 and future years are not currently determinable, as such amounts will depend upon the Company's results of operations and return on average equity and the Executive Compensation Committee's determination of the share or amount of the maximum cumulative Incentive Pool to be paid to each Participant. Similarly, since the Incentive Plan was not in effect for 1994 or prior years, it is not possible to determine the amounts under the Incentive Plan which would have been received by the Participants from a hypothetical Incentive Pool for 1994 or prior years. For 1994, the maximum amount payable to any single Participant would have been approximately $3.5 million and the amount payable to each Participant, assuming equal incentive awards utilizing the entire Incentive Pool to five participants, would have been approximately $1.7 million. The bonus awards for 1994 performance and prior years since the Company's initial public offering have been considerably less than the amounts payable had the Incentive Plan been in place for those years. Amendments or Termination. The Incentive Plan may be amended or terminated at any time at the sole discretion of the Board of Directors. No amendment of the Incentive Plan may increase the amount available under the Incentive Pool or increase the allocation of benefits between Participants from the Incentive Pool without the requirement of a vote of the stockholders. The Incentive Plan will automatically terminate in the event of the repeal of Section 162(m) of the Code or other change in the law that would eliminate the requirement for a written, performance-based plan to provide full deductibility of incentive payments for federal income tax purposes. Recommendation of the Board of Directors; Vote Required The Board of Directors recommends a vote "FOR" approval of the Incentive Plan. The affirmative vote of a majority of the votes cast at the meeting will be required to approve the Incentive 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. PROPOSED 1995 DIRECTOR STOCK OPTION PLAN The Company's 1995 Director Stock Option Plan (the "Director Plan") was approved by the Board of Directors on February 13, 1995, subject to stockholder approval.7, 1996. 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 equityincentive to employees and to encourage capital accumulation and stock ownership by key employees in order to increase their proprietary interest in the CompanyCompany's success. 19 No options or awards have been granted or made under the Plan in order1996. For information concerning 1995 grants under the Company's 1990 and 1993 Stock Incentive Plans, which are similar to attractthe proposed Plan, see the Option Grants Table above. The Committee has not considered what awards will be made under the Plan, and, retain well-qualified individualsconsequently, the number of shares that will be covered by any such awards or the persons to servewhom 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 Non-Employee Directors and to further alignwhich options or stock appreciation rights have not been granted. Authority to make awards under the interests of Non-Employee Directors1990 Plan will be terminated upon shareholder approval of the Company with those1996 Plan; authority to make awards under the 1993 Plan will continue in effect following shareholder approval of the stockholders1996 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 the Company.April 12, 1996, subject to stockholder approval, and will remain in effect until February 6, 2006. Number of Shares The Director Plan provides that 70,0004,000,000 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 times contemplated byannual meeting, the Director Plan to Non-Employee Directorswould then cover 8,000,000 shares of the Company.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 options.awards. Administration; Eligibility The Directorselection of the participants in the Plan shalland the term of awards granted to each participant will be administereddetermined by the Board of Directors of the Company; provided that, in administering the Director Plan, the Board of Directors shall have no discretion regarding the price, timing, or amount of optionsCommittee, which may delegate authority to be granted under the Director Plan. Onlymake 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 or any ofand its affiliates or subsidiaries, ("Non-Employee Directors") are eligible to participate inbe selected to receive awards under the Director Plan. 20 Stock Options The Committee may grant either incentive stock options qualified with respect to be granted underSection 422 of the Director Plan areInternal Revenue Code of 1986, as amended (the "Code"), or options not qualified under any section of the Code ("non-qualified options") and will. Incentive stock options may be granted at not less than 100% of the fair market value of the underlying Common Stock, onand non-qualified stock options may be granted at not less than 75% of the datefair market value of grant. Asthe underlying Common Stock. The Committee's practice has been to each Non-Employee Director in office asaward all options at not less than 100% of April 6, 1995, the Director Plan provides forfair market value of the grant of an option to purchase 4,000 shares ofunderlying Common Stock at the closetime of business on April 6, 1995 and an option to purchase 2,000 shares of Common Stock at the close of business on the last Thursday of the month during each succeeding year in which the annual meeting of stockholders is held, subject to a maximum individual award of options to purchase 10,000 shares of Common Stock. All current directors have been in office for at least three years, and this initial award recognizes, in part, prior service and contributions. As to each subsequently elected Non-Employee Director, the Director Plan provides for the grant of an option to purchase 2,000 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 Director's initial election, and an option to purchase 2,000 shares of Common Stock at the close of business on the last Thursday of the month during each succeeding year in which the annual meeting of stockholders is held, subject to a maximum individual award of options to purchase 10,000 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.issuance. Upon exercise, the option price is to be paid in full in cash, or, at the discretion of the Committee, in shares of the Company's Common Stock previously owned by the option holder or acquired upon the option exercisesexercise 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 afterExercise; Employment Options granted under 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 whichPlan shall first become exercisable may thereafter be exercised. Inat least one year after grant and shall expire not more than ten years from the case of death,date the option is granted. The Committee may in its discretion provide that an option may not be exercised by a deceased Director's estate or heirs for such five year period. Amendments; Term of Plan This Director Plan may be amended, suspended, terminated or reinstated, 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 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 byand from time to time, may alter, amend, suspend or discontinue the Board of Directors; provided, however, thatPlan or alter or amend any provisions of this Director Plan regardingand all options, stock appreciation rights, and stock awards under the amount and price of options to be awarded to Non-Employee Directors and the timing of awards, or thatPlan. In addition, no such action may be deemed to set forthtaken which adversely affects the rights of a formulaparticipant in any option, stock, or right 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, as amended. No option may behas been granted under the Plan after April 30, 2002.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 current 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 Director 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 22 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 salesame amount. The option holder's basis in such shares will be the fair market value on the date exercised, and upon dispositionwhen he disposes of the shares the option holderhe 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 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. Proxies solicited by the Board of Directors will be voted in favor of the amendment unless stockholders specify otherwise. 23 CERTAIN OWNERSHIP OF THE COMPANY'S COMMON STOCK A Schedule 13G dated February 8, 1995 states that Ariel Capital Management, Inc. ("Ariel"), an investment advisor registered under the Investment Advisers ActThe Company has no knowledge at this time of 1940,any individual or entity owning, beneficially owns 1,640,340 sharesor otherwise, 5% or more of the Company's Common Stock, or approximately 5.74% of the shares outstanding on that date. The Schedule states that these shares are owned by various investment advisory clients of Ariel and were acquired in the ordinary course of business and not for the purpose of changing or influencing control of the Company. The address of Ariel is 307 North Michigan Avenue, Chicago, Illinois 60601. COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934 Mr. Peter Van Dyke, a Managing Director of the Company, acquired indirect beneficial ownership of 4,000 shares of Common Stock on February 4, 1994 as a result of his appointment as co-trustee of a revocable trust for the benefit of his mother. Through inadvertence, this event was not reported on a Form 3 until October 11, 1994.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 1995.1996. 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 1994,1995, Price Waterhouse performed various professional services for the Company, including completion of the examination of financial statements of the Company for 1993,1994, preliminary work on the examination for 1994,1995, and preparation of corporate tax returns. Price Waterhouse also examines the financial statements of approximately 46%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, 24 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 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 120,000,000220,000,000 shares of capital stock (par value $.20 per share), amounting in aggregate par value to $24,000,000,$44,000,000, of which 100,000,000200,000,000 shares (par value $.20 per share), amounting in aggregate par value to $20,000,000$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." (b) The following is a description of the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption of the Common Stock and the Preferred Stock of the Corporation: COMMON STOCK (1) The Common Stock shall not be subject to classification or reclassification by the Board of Directors, and shall have the rights and terms hereinafter specified, subject to the terms of any other stock provided in the charter pursuant to classification or reclassification by the Board of Directors or otherwise in accordance with law. (2) Subject to the provisions of Article EIGHTH Section (3) of the charter of the Corporation, each share of Common Stock shall have one vote, and, except as otherwise provided in respect of any Preferred Stock, the exclusive voting power for all purposes shall be vested in the holders of the Common Stock. (3) Subject to the provisions of law and any preferences of any Preferred Stock, dividends, including dividends payable in shares of another class of the Corporation's stock, may be paid on the Common Stock of the Corporation at such time and in such amounts as the Board of Directors may deem advisable. (4) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the Common Stock shall be entitled, after payment or provision for payment of the debts and other liabilities of the Corporation and the amount to which the holders of any Preferred Stock shall be entitled, to share ratably in the remaining net assets of the Corporation. PREFERRED STOCK (5) The Board of Directors shall have authority to classify and reclassify any unissued shares of Preferred Stock by fixing or altering in any one or more respects from time to time before issuance the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of such shares of stock; provided, that the Board of Directors shall not classify or reclassify any of such shares into shares of the Common Stock, or into any class or series of stock (i) which is not prior to the Common Stock either as to dividends or upon liquidation and (ii) which is not limited in some respect either as to dividends or upon liquidation. Subject to the foregoing, the power of the Board of Directors to classify and reclassify any of the shares of Preferred Stock shall include, without limitation, subject to the provisions of the charter, authority to classify or reclassify any unissued shares of such stock into a class or classes of preferred stock, preference stock, special stock or other stock, and to divide and classic shares of any class into one or more series of such class, by determining, fixing, or altering one or more of the following: (a) The distinctive designation of such class or series and the number of shares to constitute such class or series; provided that, unless otherwise prohibited by the terms of such or any other class or series, the number of shares of any class or series may be decreased by the Board of Directors in connection with any classification or reclassification of unissued shares and the number of shares of such class or series may be increased by the Board of Directors in connection with any such classification or reclassification, and any shares of any class or series which have been redeemed, purchased, otherwise acquired or converted into shares of Common Stock or any other class or series shall become part of the authorized capital stock and be subject to classification and reclassification as provided in this Section. (b) Whether or not and, if so, the rates, amounts and times at which, and the conditions under which, dividends shall be payable on shares of such class or series, whether any such dividends shall rank senior or junior to or on a parity with the dividends payable on any other class or series of Preferred Stock, and the status of any such dividends as cumulative, cumulative to a limited extent or non-cumulative and as participating or non-participating. (c) Whether or not shares of such class or series shall have voting rights, in addition to any voting rights provided by law and, if so, the terms of such voting rights. (d) Whether or not shares of such class or series shall have conversion or exchange privileges and, if so, the terms and conditions thereof, including provision for adjustment of the conversion or exchange rate in such events or at such times as the Board of Directors shall determine. (e) Whether or not shares of such class or series shall be subject to redemption and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; and whether or not there shall be any sinking fund or purchase account in respect thereof, and if so, the terms thereof. (f) The rights of the holders of shares of such class or series upon the liquidation, dissolution or winding up of the affairs of, or upon any distribution of the assets of, the Corporation, which rights may vary depending upon whether such liquidation, dissolution or winding up is voluntary or involuntary and, if voluntary, may vary at different dates, and whether such rights shall rank senior or junior to or on a parity with such rights of any other class or series of stock. (g) Whether or not there shall be any limitations applicable, while shares of such class or series are outstanding, upon the payment of dividends or making of distributions on, or the acquisition of, or the use of moneys for purchase or redemption of, any stock of the Corporation, or upon any other action of the Corporation, including action under this Section, and, if so, the terms and conditions thereof. (h) Any other preferences, rights, restrictions, including restrictions on transferability, and qualifications of shares of such class or series, not inconsistent with law and the charter of the Corporation. (6) For the purposes hereof and of any articles supplementary to the charter providing for the classification or reclassification of any shares of Preferred Stock or of any other charter document of the Corporation (unless otherwise provided in any such articles or document), any class or series of stock of the Corporation shall be deemed to rank: (a) prior to another class or series either as to dividends or upon liquidation, if the holders of such class or series shall be entitled to the receipt of dividends or of amounts distributable on liquidation, dissolution or winding up, as the case may be, in preference or priority to holders of such other class or series; (b) on a parity with another class or series either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation price per share thereof be different from those of such others, if the holders of such class or series of stock shall be entitled to receipt of dividends or amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or redemption or liquidation prices, without preference or priority over the holders of such other class or series; and (c) junior to another class or series either as to dividends or upon liquidation, if the rights of the holders of such class or series shall be subject or subordinate to the rights of the holders of such other class or series in respect of the receipt of dividends or the amounts distributable upon liquidation, dissolution or winding up, as the case may be. SECOND: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 48,000,000 shares, of which no shares are Preferred Stock (par value $.20 per share) and 48,000,000 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 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 (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 $9,600,000$24,000,000 before the amendment and $24,000,000$44,000,000 as amended. (d) The shares of stock of the Corporation are divided into classes, and the description, as amended, of each class, including the preferences, conversion andor other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption is set forth above in Article FIRST. ___________of each class of capital stock of the Corporation has not been changed by this Amendment. B-2 Exhibit B T. ROWE PRICE ASSOCIATES, INC. PROPOSED 1995 DIRECTOR1996 STOCK OPTIONINCENTIVE PLAN 1. PURPOSES OF THE DIRECTOR PLAN: T. Rowe Price Associates, Inc.PURPOSE: This 1996 Stock Incentive Plan (the "Company""Plan") has adopted the 1995 Director Stock Option Plan for Non-Employee Directors (the "Director Plan") to provide for the issuanceis intended as an employment incentive and an encouragement of options to purchase sharescapital 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 Common Stock, par value $.20 per sharesuccess. 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 "Stock""Code"), asor 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 means of long-term compensation for members ofcommittee appointed by the Board of Directors of the Company in order to provide Non-Employee Directors with(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 equity interest in the Company, to attract and retain well-qualified individuals to serve as Non-Employee Directors, and to further align the interests of Non-Employee Directorsofficer or employee of the Company with thoseshall 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 the stockholders of the Company. For purposes of this Plan, Non-Employee Directors are persons who are not employeesofficers 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 its affiliatesthe Plan or subsidiaries. 2. ADMINISTRATION: The Director Planany such agreement shall be administered byfinal 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. B-3 With respect to persons subject to Section 16 of the Company; provided that, in administering1934 Act, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Director Plan,1934 Act. To the Board of Directors shall have no discretion regarding the price, timing, or amount of options to be granted hereunder. 3. STOCK SUBJECT TO OPTION: The Company will reserve 70,000 authorized but unissued sharesextent any provision of the Stock for issuancePlan or action by the Committee fails to so comply, it shall be deemed null and delivery undervoid, to the Director Plan, subject to adjustment as provided in paragraph 6 hereof. If any unexercised option terminates for any reason, shares ofextent permitted by law and deemed advisable by the Stock covered thereby shall become available for grant again. 4.Committee. 3. ELIGIBILITY: The individuals who shall be eligible to participate in the DirectorPlan 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 B-4 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 all Non-Employee Directorsshares of the Company. 5. TERMS AND CONDITIONS OF OPTIONS: OptionsCompany'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 Director Plan are intendedshall not exceed 4,000,000 shares of Common Stock (prior to be non-statutorygiving effect to the stock options not qualifying undersplit presented for action at the Company's 1996 annual meeting of stockholders); provided that shares tendered as consideration for the exercise of any sectionoption or other award (by persons other than persons subject to Section 16 of the Internal Revenue Code1934 Act) shall again be available for grant or award to persons other than persons subject to Section 16 of 1986, as amended (the "Code"). Allthe 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 DirectorPlan. 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. B-5 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 provisions:terms and conditions, to the extent applicable: (a) Option Price. TheMedium 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 per share with respectmay, 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 eachoptionees 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 optionaward is granted. For purposes hereof, fair market value shall begranted, 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 inon such exchange on the date on which B-6 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 (or any other recognizedSystem or listed on a national securities market on whichexchange, the Stock is traded if not then traded onmean between the Nasdaq National Market)bid and asked prices in the over-the-counter market on the date of grant,the award, 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 Stock. Ifabsence of such quotations or if the Common Stock is not thenpublicly 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 any recognized market,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 accordancethe opinion of the Board of Directors, after consultation with applicable federal income taxthe Company's independent accountants, changes in the Company's accounting policies, acquisitions, or other unusual or extraordinary items have disproportionately and securities regulations. (b)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. B-7 (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 Grants. (i) Each Non-Employee Director in office on April 6, 1995Plan, 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 granted antreated 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 purchase 4,000 shares of Stock atprovide, for the close of business on April 6, 1995 and an option to purchase 2,000 shares of Stock at the close of business on the last Thursday of the month during each succeeding year in which the annual meeting of stockholders is held, subject to a maximum individual award of options to purchase 10,000 shares of Common Stock. (ii) Each Non-Employee Director initially elected as a director after April 6, 1995 shall be granted annew option to purchase 2,000when the exercise price has been paid by tendering shares of Common Stock asto 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 close1934 Act. Any new option grant, which would automatically occur without any further corporate action, would cover not more than the number of business onshares tendered with the dateexercise price set at the then fair market value of such shares. (g) Acceleration or Waiver: In the first regular meetingcase of directors held on or after the date of the participant's initial election as a director and an option to purchase 2,000 shares of Stock as of the close of business on the last Thursday of the month during each succeeding year in which the annual meeting of stockholders is held, subject to a maximum individual award of options to purchase 10,000 shares of Stock. (c) Exercise of Options. (i) Each option granted under this Plan shall becomeor stock appreciation right not immediately exercisable in full one year after the initial grant, but shall not be exercisable asor any stock award subject to any shares prior thereto. Except as providedrestriction, the Committee may in paragraph (ii) below, full payment for shares acquired shall be made in cash or by certified check at or prior toits discretion accelerate the time that an option, or any part thereof, is exercised. The participant will have no rights as a stockholder until the shares as toat which the option has been exercised are issued by the Company. (ii) Shares of the Company's 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. (d) Term of Option. No stock optionappreciation right granted hereunder 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 the Non-Employee Director ceases to be a director forwaive, in whole or in part, any reason, during which period any installments which first become exercisable may thereafter be exercised. (e) Options Nonassignable and Nontransferable. Each option and all rights thereunder shall not be assignablerestriction or transferable during the Director's life, but may be transferred by will or pursuantcondition with respect to the laws of descent and distribution to the extent permitted under applicable federal securities and tax laws. 6. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION:award. (h) Recapitalization: The aggregate number of shares of stockOrdinary Shares and Book Value Shares 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 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 B-8 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 DirectorsCommittee as necessary or appropriate to reflect the transaction and as permitted under applicable securities and tax laws.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. 7. EFFECTIVE DATEIn 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 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 THE DIRECTOR PLAN: The Director Plan shall become effective upon its adoptionon the date it receives approval by the Boardaffirmative votes of Directors and subsequent approval bythe holders of a majority of the votes cast in personsecurities of the Company present, or by proxyrepresented, 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 stockholdersSecurities 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 held within 12 monthsfrom the sale of Common Stock pursuant to awards under the actionPlan 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 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 described above. 8. TERMINATION DATE: No options may be granted under------------------------------------------------------------- THE UNDERSIGNED STOCKHOLDER of T. Rowe Price Associates, Inc. hereby appoints George J. Collins and George A. Roche the Director Plan after April 30, 2002. Subjectlawful attorneys and proxies of the undersigned with full power of substitution to paragraph 5(d), options granted before April 30, 2002 undervote, as designated on the Director Plan may be exercised after that date in accordance with their terms. 9. AMENDMENT: This Director Plan may be amended, suspended, terminated or restated, in whole or in part,reverse side, all shares of Common Stock of the Corporation which the undersigned is entitled to vote at any time by the BoardAnnual Meeting of Directors; provided, however, that any provisions of this Plan regarding the amount and price of optionsStockholders to be awarded to Non-Employee Directorsheld on Friday, April 12, 1996, at 10:00 a.m., at 100 East Pratt Street, Baltimore, Maryland 21202, 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 toat any and all requirementsadjournments thereof with respect to the matters set forth on the reverse side and restrictions that may,described in the opinionNotice 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 Board,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 necessarydated 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. (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 advisable for the purposes of complying withat 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 expensesadjournment thereof. Please date 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 regardsign exactly as your name appears to the choice of laws provisions thereof. (c) Headings. The headings herein are for reference purposes onlyleft. 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 shall not affect the meaningreturn all cards received. Dated:_________________________________________ _______________________________________________ Signature _______________________________________________ Signature if held jointly Votes MUST be indicated (x) in Black or interpretation of the Director Plan. (d) 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. (e) 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. ___________Blue ink. PLEASE SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.