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SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. DEF14A)
Filed by the Registrant [X] Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to 240.14a-12
T. Rowe Price Group, Inc.
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(Name of Registrant as Specified in its Charter)
T. Rowe Price Group, Inc.
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Barbara A. Van Horn
Secretary
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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YOUR VOTE IS IMPORTANT!
Please execute and return the enclosed proxy promptly whether or not you
plan to attend the T. Rowe Price Group, Inc. Annual Meeting of Stockholders.
[2-Component Logo Omitted]
T. Rowe Price
T. ROWE PRICE GROUP, INC.
100 East Pratt Street
Baltimore, MD 21202
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
April 8, 2004
We will hold the Annual Meeting of Stockholders of T. Rowe Price Group,
Inc. at the Renaissance Harborplace Hotel, 202 East Pratt Street, Baltimore,
Maryland, 21202, on Thursday, April 8, 2004, at 10:00 a.m. At this Meeting, we
will ask stockholders to:
1) elect a Board of 11 Directors;
2) ratify the appointment of KPMG LLP as the company's independent
accountant for the 2004 fiscal year;
3) approve the proposed 2004 Stock Incentive Plan and corollary amendment
of the 2001 Stock Incentive Plan; and
4) act upon any other business that properly comes before the Meeting.
Stockholders who owned shares of Price Group's common stock as of
February 6, 2004, are entitled to attend and vote at the Meeting or any
adjournments.
BY ORDER OF THE BOARD OF DIRECTORS
Barbara A. Van Horn
Secretary
Baltimore, Maryland
February 27, 2004
PROXY STATEMENT
TABLE OF CONTENTS
Introduction; Proxy Voting Information 1
Proposal 1: Election of Directors 2
The Nominees 3
The Board of Directors and Committees 5
Compensation Committee Interlocks and Insider Participation 6
Report of the Audit Committee 6
Audit Committee Pre-Approval Policies 7
Disclosure of Fees Charged by the Independent Accountant 7
Proposal 2: Ratification of the Appointment of KPMG LLP as the
Company's Independent Accountant for the 2004 Fiscal Year 8
Voting Recommendation 8
Compensation of Executive Officers and Directors 8
Summary Compensation Table 8
Option Grants in 2003 9
Aggregated Option Exercises in 2003 and Option Values at December 31, 2003 10
Equity Compensation Plan Information 10
Report of the Executive Compensation Committee 11
Proposal 3: Approval of the Proposed 2004 Stock Incentive Plan and
Corollary Amendment of the 2001 Stock Incentive Plan 13
Description of the Plan 14
Voting Recommendation 19
Report of the Nominating and Corporate Governance Committee 19
Stock Performance Chart 21
Certain Ownership of Price Group's Common Stock 21
Section 16(a) Beneficial Ownership Reporting Compliance 21
Stockholder Proposals for the 2005 Annual Meeting 21
Stockholder Communications with the Board of Directors 22
Other Matters 22
Exhibit A: Audit Committee Charter A-1
Exhibit B: T. Rowe Price Group, Inc. 2004 Stock Incentive Plan B-1
Exhibit C: First Amendment to the T. Rowe Price Group, Inc. 2001 Stock
Incentive Plan C-1
Exhibit D: Nominating and Corporate Governance Committee Charter D-1
Terms used in this proxy statement:
o "We" and "Price Group" all refer to T. Rowe Price Group, Inc. except in the
Reports of the Audit Committee, Executive Compensation Committee, and
Nominating and Corporate Governance Committee. In these reports, "we"
refers to members of each respective committee.
o "Meeting" refers to the 2004 Annual Meeting of Stockholders.
o "Price fund" means any mutual fund company or trust organized by T. Rowe
Price Associates, Inc., or T. Rowe Price International, Inc., two of the
investment adviser subsidiaries of T. Rowe Price Group, Inc.
o "You" refers to the stockholders of Price Group.
o "Price Associates" refers to T. Rowe Price Associates, Inc., a wholly owned
subsidiary of Price Group. Price Associates organizes and serves as an
investment adviser to certain of the Price funds.
o "T. Rowe Price International, Inc." refers to T. Rowe Price International,
Inc. which is the investment adviser to certain of the Price funds.
PROXY STATEMENT
INTRODUCTION; PROXY VOTING INFORMATION
We are sending you this proxy statement and the accompanying proxy card in
connection with the solicitation of proxies by Price Group's Board of Directors
for the Meeting described in the notice and at any adjournments or
postponements. The purpose of the Meeting is to:
1) elect a Board of 11 Directors;
2) ratify the appointment of KPMG LLP as the company's independent
accountant for the 2004 fiscal year;
3) approve the proposed 2004 Stock Incentive Plan and corollary amendment
of the 2001 Stock Incentive Plan; and
4) act upon any other business that properly comes before the Meeting.
This proxy statement, proxy card, and our 2003 Annual Report to
Stockholders, containing Price Group's consolidated financial statements and
other financial information for the year ended December 31, 2003, form your
Meeting package. We sent you this package on or about February 27, 2004.
At the close of business on February 6, 2004, the record date of the
Meeting, 125,526,209 shares of Price Group's common stock, par value $.20 per
share, were outstanding and entitled to vote at the Meeting. We have
approximately 3,900 stockholders of record. In electing directors, stockholders
may cast one vote per share owned for each director to be elected; stockholders
cannot use cumulative voting. If the number of votes present or represented at
the Meeting are sufficient to achieve a quorum, directors who receive a
plurality of the votes cast are elected to serve until the 2005 annual meeting
or until their successors are elected and qualify. To approve Proposal 2 (see
page 8) and Proposal 3 (see page 13), a majority of the votes cast at the
Meeting must be voted in favor of each proposal. Stockholders may cast one vote
per share on each of Proposal 2 and Proposal 3. Under Price Group's charter, the
"one share: one vote" policy may be modified in the case of certain persons and
groups owning in excess of 15% of our common stock. We do not believe this
provision will apply to any stockholders voting at this Meeting. Abstentions and
broker non-votes are not considered votes cast and will have no effect on
voting.
Price Group will pay for the costs of preparing materials for the Meeting
and soliciting proxies. We have retained Georgeson Shareholder Communications
Inc. to assist in soliciting proxies for a fee of $6,000 plus reimbursement for
out-of-pocket expenses. We ask securities brokers, custodians, nominees, and
fiduciaries to forward materials for the Meeting to our beneficial stockholders
as of the record date, and will reimburse them for the reasonable out-of-pocket
expenses they incur. Directors, officers, and employees of Price Group and our
subsidiaries may solicit proxies personally or by other means, but will not
receive additional compensation.
The Board of Directors has selected James S. Riepe and George A. Roche
to act as proxies. When you sign and return your proxy card or vote your shares
using the telephone or Internet connections to Wells Fargo Bank, N.A., our
transfer agent and proxy tabulator, you appoint Messrs. Riepe and Roche as your
representatives at the Meeting. If you wish to change your vote before the
Meeting, deliver a letter revoking the proxy to Price Group's Secretary (Barbara
A. Van Horn, c/o T. Rowe Price Group, Inc., 100 East Pratt Street, Mail Code
5210, Baltimore, MD 21202) or properly submit another proxy bearing a later
date. Even if you vote your proxy before the Meeting, you may still attend the
Meeting, and if we are able to verify that you are a registered stockholder, you
may file a notice revoking the previously submitted proxy and then vote again in
person. The last proxy properly submitted by you before voting is closed at the
Meeting will be counted.
You will be able to vote your proxy in three ways:
1) by mail - complete the enclosed proxy card and return it in the
envelope provided;
2) by telephone - call 1-800-560-1965 and then follow the voice
instructions. Please have the last four digits of your Social Security
Number and your proxy card available when you call; or
3) by using the Internet - as prompted by the menu found at
http://www.eproxy.com/trow/, follow the instructions to obtain your
records and create an electronic ballot. Please have the last four
digits of your Social Security Number and your proxy card available
when you access this voting site.
Remember, no matter which voting method you use, you may revoke your proxy
and resubmit a new one when you attend the Meeting, or if you vote by telephone
or access the Internet voting site, no later than noon Central Time on
Wednesday, April 7, 2004. Our counsel has advised us that these three voting
methods are permitted under the corporate law of Maryland, the state in which
Price Group is incorporated.
If you have selected a broker to hold your shares rather than having them
directly registered with our transfer agent, Wells Fargo Bank, N.A., you still
will receive a full Meeting package including a proxy card to vote your shares.
This package will be sent by your brokerage firm. Your brokerage firm also may
permit you to vote your proxy by telephone or the Internet. If you have
previously chosen to vote your proxy through the Internet, your Meeting
materials may be accessed through that medium. Brokerage firms have the
authority under New York Stock Exchange rules to vote their clients' unvoted
shares on certain routine matters, one of which is the election of directors. If
you do not vote your proxy on the election of directors, your brokerage firm may
choose to vote for you or leave your shares unvoted. However, if you want your
shares to be cast on Proposal 2 or Proposal 3, you must direct your broker to
vote on your behalf by returning your proxy card or using the alternative voting
methods provided. Since the ownership of shares held in brokerage accounts
cannot be verified at the Meeting, please allow sufficient time for revised
voting instructions to reach your broker and for your proxy to be re-voted
before the Meeting. We urge you to respond to your brokerage firm.
PROPOSAL 1
ELECTION OF DIRECTORS
There will be a number of changes in the composition of our Board of
Directors this year. Before examining the proposed slate of nominees for
director, we must acknowledge the contributions of three incumbents who will
retire as of the date of the Meeting. M. David Testa and William T. Reynolds
will retire from our Board of Directors and the Price organization. Both of
these retirements are part of a planned succession. Richard L. Menschel will
retire in accordance with the retirement policy for independent directors
adopted in 1998.
Mr. Testa has been with the Price organization since 1972 and has served on
the Board since 1981. He has been a vice chairman of the Board since 1997 and
served as the firm's chief investment officer from 1997 until December 31, 2003,
when he was succeeded by Brian C. Rogers. Mr. Testa was an innovator in the
development of international investing for U.S. investors and was instrumental
in the establishment of a joint venture in 1979 that became T. Rowe Price
International, Inc. in 2000. His leadership, strategic insight, and business
acumen will be missed.
Mr. Reynolds joined the Price organization in 1981 and has served on the
Board of Directors since 1996. He has played a critical role in the development
of our fixed income capabilities during the past 22 years and has been the
director of the Fixed Income Division since 1994. Upon his retirement, Mr.
Reynolds will turn the leadership of this division over to the current assistant
director, Mary J. Miller, who has worked with Mr. Reynolds for the past 20
years.
Mr. Menschel has been a member of the Board of Directors since 1995 and, in
addition to his service as a member of the Nominating and Corporate Governance
and Executive Compensation Committees, has been the chairman of the Executive
Compensation Committee since 2001. We will miss this esteemed gentleman's wisdom
and loyal service.
Two other current members of the Board of Directors, Henry H. Hopkins and
John H. Laporte, will step down from the Board as we move to comply with The
Nasdaq Stock Market, Inc.'s new listing standards that require the exchange's
member companies to have a majority of independent directors serving on their
boards beginning with the 2004 annual meeting cycle. Both will continue to serve
the firm in their current leadership positions -- Mr. Hopkins as the Chief Legal
Officer and director of the Legal Division and Mr. Laporte as one of our most
senior portfolio managers.
We thank them all for their service on the Board of Directors and their
past and continuing contributions to the success and growth of our company.
There was one other unanticipated change in the membership of our
Board. In August 2003, one of our independent directors, James H. Gilliam, Jr.,
suddenly passed away. Mr. Gilliam, a much respected and honored attorney,
consultant, and philanthropist, had served on our Board of Directors since 2001
and was a valued contributor. We miss his experience, leadership and judgment,
and again express our condolences to his family.
Though there are now 15 directors on our Board of Directors, the number
will be reduced to 11 effective at the time of the Meeting. Eleven nominees, 10
of whom are incumbents, are presented in this proxy statement. Mr. Dwight S.
Taylor has been nominated to fill the only vacancy and to serve as an additional
independent director. Pursuant to the recommendation of the Nominating and
Corporate Governance Committee, all of the candidates have been nominated by the
Board of Directors to hold office until the next annual meeting of stockholders
and until their respective successors are elected and qualify.
All properly executed proxies received in time to be tabulated for the
Meeting will be voted FOR the election of the nominees named in the following
table, unless otherwise specifically instructed. If any nominee becomes unable
or unwilling to serve between now and the Meeting, proxies will be voted FOR the
election of a replacement recommended by the Nominating and Corporate Governance
Committee and approved by the Board of Directors.
The Nominees
Following are brief biographical sketches of the 11 nominees. Unless
otherwise noted, all have been officers of the organizations named below as
their principal occupations or of affiliated organizations for more than five
years. Nominees who are employees of Price Group also may serve as directors or
officers of Price Associates or T. Rowe Price International Inc., each of which
is an investment adviser to certain of the Price funds. Information regarding
committee membership, the number of shares of Price Group's common stock
beneficially owned by each nominee as of the record date, and the percent of
individual beneficial ownership if 1% or greater also is included. Unless
otherwise indicated in the footnotes that follow, the nominees have sole voting
and disposition powers over the shares beneficially owned by them.
The Board of Directors has considered the independence of members who are
not employed by the Price organization and has concluded that Messrs. Brady,
Garrett, Hebb, and Taylor, Dr. Sommer, and Mrs. Whittemore qualify as
independent directors within the meaning of the applicable rules of the National
Association of Securities Dealers, Inc. In reaching this decision, the Board
examined the business relationships listed below that existed during 2003 and
continue to exist in 2004 between certain of the independent directors and the
company, and determined that the relationships are immaterial and will not
interfere with the exercise of independent judgment in carrying out their
responsibilities as directors.
1) Executive and other officers of Price Group hold investments in funds
managed by ABS Capital Partners, of which Mr. Hebb is the managing
general partner, which in the aggregate represent less than 1% of the
amount invested or committed to be invested in these funds.
2) Price Group provided 401(k) administrative services for McGuireWoods
LLP, a law firm in which Mrs. Whittemore is a partner. These services
were provided at standard commercial rates and did not exceed 1% of
the consolidated gross revenues of Price Group or McGuireWoods LLP.
The Board of Directors recommends that you vote FOR all of the following
nominees:
Edward C. Bernard, age 48, has been a director of Price Group since 1999, a
vice president since 1989, and an employee since 1988.
604,471 shares(1)
James T. Brady, age 63, has been an independent director of Price Group
since 2003, and is a member of the Audit and Executive Compensation Committees.
He has been the managing director - Mid Atlantic, Ballantrae International,
Ltd., a management consulting firm, since 1999. Mr. Brady is a director of
Aether Systems, Inc., a provider of wireless and mobile data products and
services; Constellation Energy Group, a diversified energy company; and
McCormick & Company, Inc., a manufacturer, marketer, and distributor of spices
and seasonings.
0 shares
(see notes on page 5)
D. William J. Garrett, age 58, has been an independent director of Price
Group since 2001, and is a member of the Audit and Executive Compensation
Committees. He was the group chief executive of Robert Fleming Holdings Limited
from 1997 until 2000 when the company was acquired by the Chase Manhattan
Corporation. He also served as a director of Rowe Price-Fleming International,
Inc. (now T. Rowe Price International, Inc.) from 1981 until 2000.
9,000 shares(2)
Donald B. Hebb, Jr., age 61, has been an independent director of Price
Group since 1999, is the chairman of the Audit Committee, and serves on the
Executive and Executive Compensation Committees. Mr. Hebb has been the managing
general partner of ABS Capital Partners, a private equity firm, since 1993. He
serves as a director of SBA Communications Corporation, an owner and operator of
wireless communications infrastructure in the United States.
18,500 shares(3)
James A.C. Kennedy, age 50, has been a director of Price Group since 1996,
the director of the Equity Division of Price Associates since 1997, a vice
president since 1981, and an employee since 1978. He is a director or trustee of
23 of the Price equity funds.
1,775,239 shares (1.41%)(4)
James S. Riepe, age 60, has been a director of Price Group since 1981, vice
chairman since 1997, and the director of the Investment Services Division, a
vice president, and an employee since 1981. He is the chairman and a director or
trustee of all of the 57 Price funds. Mr. Riepe is a member of the Executive
Committee. 2,539,396 shares (2.02%)(5)
George A. Roche, age 62, has been a director of Price Group since 1980, the
chairman and president since 1997, the chief financial officer from 1984 to 1997
and interim chief financial officer from 2000-2001 and since November 2003, a
vice president from 1973 to 1997, and an employee since 1968. He is the chairman
of the Executive Committee.
3,359,951 shares (2.67%)(6)
Brian C. Rogers, age 48, has been a director of Price Group since 1997, the
chief investment officer since January 1, 2004, a vice president since 1985, and
an employee since 1982. He is the president of two Price funds.
1,447,131 shares (1.15%)(7)
Dr. Alfred Sommer, age 61, has been an independent director of Price Group
since 2003 and serves on the Executive Compensation Committee. He is dean of The
Johns Hopkins University Bloomberg School of Public Health and a professor of
Epidemiology, Ophthalmology, and International Health at the school. Dr. Sommer
also is a director of Becton Dickinson and Company, a medical technology
company. 0 shares
Dwight S. Taylor, age 59, has been the president of Corporate Development
Services, LLC, a commercial real estate developer which is a subsidiary of
Corporate Office Properties Trust, since September 1999. Prior to that date, he
served as senior vice president. Mr. Taylor is also a director of MICROS
Systems, Inc., a provider of information technology for the hospitality and
retail industry.
0 shares
Anne Marie Whittemore, age 57, has been an independent director of Price
Group since 1995, is the chairman of the Nominating and Corporate Governance
Committee, and serves on the Executive Compensation Committee. She is a partner
in the law firm of McGuireWoods LLP, and is a director of Owens & Minor, Inc., a
distributor of medical and surgical supplies, and Albemarle Corporation, a
manufacturer of specialty chemicals.
49,800 shares(8)
Beneficial ownership of common stock
by all directors and executive
officers as a group (21 persons) 18,487,672 shares
(14.12%)(9)
(see notes on page 5)
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(1) Includes 403,861 shares that may be acquired by Mr. Bernard within 60
days upon the exercise of stock options. Also includes 24,000 shares
owned by a member of Mr. Bernard's family. Mr. Bernard disclaims
beneficial ownership of the shares identified in the preceding
sentence.
(2) Includes 9,000 shares that may be acquired by Mr. Garrett within 60
days upon the exercise of stock options.
(3) Includes 15,000 shares that may be acquired by Mr. Hebb within 60 days
upon the exercise of stock options.
(4) Includes 418,365 shares that may be acquired by Mr. Kennedy within 60
days upon the exercise of stock options.
(5) Includes 437,624 shares that may be acquired by Mr. Riepe within 60
days upon the exercise of stock options. Also includes 115,000 shares
held in a charitable foundation for which Mr. Riepe has voting and
disposition power, 289,000 shares held by or in trusts for members of
Mr. Riepe's family, and 1,600 shares held on behalf of an estate of a
deceased family member for which Mr. Riepe serves as the co-executor
and has joint voting and disposition power. Mr. Riepe disclaims
beneficial ownership of the shares held by or in trusts for family
members and the shares held in the estate.
(6) Includes 504,800 shares that may be acquired by Mr. Roche within 60
days upon the exercise of stock options. Also includes 800,000 shares
held by or in trusts for members of Mr. Roche's family. Mr. Roche
disclaims beneficial ownership of the shares identified in the
preceding sentence.
(7) Includes 653,652 shares that may be acquired by Mr. Rogers within 60
days upon the exercise of stock options.
(8) Includes 49,000 shares that may be acquired by Mrs. Whittemore within
60 days upon the exercise of stock options.
(9) Includes 5,350,059 shares that may be acquired by all directors and
executive officers as a group within 60 days upon the exercise of
stock options.
The Board of Directors and Committees
During 2003, there were seven meetings of the Board of Directors. Each
director attended at least 75% of the combined total number of meetings of the
Board and Board committees of which he or she was a member. The Board of
Directors of Price Group has an Audit Committee, Executive Committee, Executive
Compensation Committee, and a Nominating and Corporate Governance Committee. All
Board committees, with the exception of the Executive Committee, are comprised
solely of independent directors. The company has no specific policy with respect
to director attendance at its annual meetings; however, all nominees for
director submitted to the stockholders for approval at the April 10, 2003 annual
meeting attended that meeting.
All three current members of the Audit Committee, which met six times
during 2003, are non-employee directors. James H. Gilliam, Jr. was also a member
of the committee until his death in August 2003. The Board of Directors has
determined that each of Mr. Brady, Mr. Garrett, and Mr. Hebb meet the
independence and financial literacy criteria of the National Association of
Securities Dealers, Inc. The Board also has concluded that Mr. Brady, who is the
chairman of the audit committee of the three other public companies on which he
serves as a director and was a managing partner of Arthur Andersen LLP from 1985
to 1995, meets the criteria for an "audit committee financial expert" as
established by the Securities and Exchange Commission. The Board of Directors
has adopted a written charter for the Audit Committee which is included in this
proxy statement as Exhibit A. The report of the Audit Committee describes the
scope of authority of the committee and may be found on page 6.
The Executive Committee functions between meetings of the Board of
Directors. It possesses the authority to exercise all the powers of the Board
except as limited by Maryland law. If the committee acts on matters requiring
formal Board action, those acts are reported to the Board of Directors at its
next meeting for ratification. The Executive Committee acted on one such matter
during 2003.
As will be further described in the Report of the Executive Compensation
Committee beginning on page 11, this committee establishes the compensation of
our executive officers and generally reviews benefits and compensation for other
officers and key employees. It also administers our stock incentive and stock
purchase plans, the Executive Incentive Compensation Plan, and the Annual
Incentive Compensation Pool. The committee met eight times during 2003.
The Nominating and Corporate Governance Committee has the responsibility
and authority to supervise and review the affairs of Price Group as they relate
to the nomination of directors and corporate governance matters, and advise the
entire Board of Directors accordingly. Nominations for director submitted to the
committee by stockholders are evaluated according to our needs and the nominee's
knowledge, experience, and background. The committee, comprised of two
independent directors, met on seven occasions in 2003. The Board of Directors
has adopted a written charter for the Nominating and Corporate Governance
Committee, which is included in this proxy statement as Exhibit D. A report on
the committee's responsibilities and activities may be found on page 19.
Compensation Committee Interlocks and Insider Participation
During 2003, Messrs. Menschel, Brady, Garrett, and Hebb, Dr. Sommer, and
Mrs. Whittemore served on our Executive Compensation Committee. None of these
directors has ever been an officer or employee of Price Group or its
subsidiaries.
None of our directors or other executive officers served as a director or
executive officer of another corporation that has another person as a director
or executive officer serving on our Board of Directors.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees Price Group's financial reporting process on
behalf of the Board of Directors. Our committee held six meetings during 2003.
Management has the primary responsibility for the financial statements and the
reporting process, including the systems of internal controls. Our independent
accountant is responsible for expressing an opinion on the conformity of our
audited financial statements with generally accepted accounting principles. We
appointed KPMG LLP as Price Group's independent accountant for 2003 after
reviewing that firm's performance and independence from management. We expect to
reappoint KPMG LLP as Price Group's independent accountant for fiscal year 2004
at our meeting scheduled in April 2004.
In fulfilling our oversight responsibilities, we reviewed with management
the audited financial statements prior to their issuance and publication in the
2003 Annual Report to Stockholders. We reviewed with our independent accountant
its judgments as to the quality, not just the acceptability, of Price Group's
accounting principles and discussed with its representatives other matters
required to be discussed under generally accepted auditing standards, including
matters required to be discussed in accordance with the Statement on Auditing
Standards No. 61 (Communication with Audit Committees) of the Auditing Standards
Board of the American Institute of Certified Public Accountants. We also
discussed with the independent accountant its independence from management and
Price Group, and received its written disclosures pursuant to Independence
Standards Board Standard No. 1. We further considered whether the non-audit
services described elsewhere in this proxy statement provided by the independent
accountant are compatible with maintaining the accountant's independence.
We also discussed with Price Group's internal auditors and independent
accountant the overall scope and plans for their respective audits. We met with
the internal auditors and independent accountant, with and without management
present, to discuss the results of their examinations, their evaluations of
Price Group's internal controls, and the overall quality of financial reporting.
In reliance upon the reviews and discussions referred to above, we
recommended to the Board of Directors, and the Board approved, the inclusion of
the audited financial statements in the Annual Report on Form 10-K for the year
ended December 31, 2003, for filing with the Securities and Exchange Commission.
Donald B. Hebb, Jr., Chairman
James T. Brady
D. William J. Garrett
***************
AUDIT COMMITTEE PRE-APPROVAL POLICIES
The Audit Committed has adopted policies and procedures which set forth the
manner in which the committee will review and approve all audit and non-audit
services to be provided by KPMG LLP before that firm is retained for such
services. The pre-approval policies and procedures are as follows:
o Any audit or non-audit service to be provided to Price Group by the
independent accountant must be submitted to the Audit Committee for
review and approval. The proposed services are submitted on the Audit
Committee's "Independent Accountant Audit and Non-Audit Services
Request Form" with a description of the services to be performed, fees
to be charged, and affirmation that the services are not prohibited
under Section 201 of the Sarbanes-Oxley Act of 2002. The form must be
approved by Price Group's chief executive officer, chief financial
officer, or director of Internal Audit prior to submission to the
Audit Committee.
o The Audit Committee in its sole discretion then approves or
disapproves the proposed services and documents such approval, if
given, by signing the approval form. Pre-approval actions taken during
Audit Committee meetings are recorded in the minutes of the meetings.
o Any audit or non-audit service to be provided to Price Group which is
proposed between meetings of the Audit Committee will be submitted to
the Audit Committee chairman on a properly completed "Independent
Accountant Audit and Non-Audit Services Request Form" for the
chairman's review and pre-approval and will be included as agenda
items at the next scheduled Audit Committee meeting.
DISCLOSURE OF FEES CHARGED BY THE INDEPENDENT ACCOUNTANT
The following table summarizes the fees charged by KPMG LLP for certain
services rendered to Price Group and its subsidiaries during 2002 and 2003.
Amount Billed and Paid
-------------------------------------
Type of Fee Fiscal Year 2002 Fiscal Year 2003
- --------------------------------------------------------------------------------
Audit(1) $ 165,300 $ 213,000
Audit Related(2) 421,200 115,000
Tax(3) 189,000 255,000
All Other(4) 242,000 2,490
- --------------------------------------------------------------------------------
Total $ 1,017,500 $ 585,490
(1) Audit Fees - aggregate fees charged by KPMG LLP in 2002 and 2003 for
annual audits and quarterly reviews.
(2) Audit-Related Fees - aggregate fees charged by KPMG LLP for assurance
and related services that are reasonably related to the performance of
the audit and are not reported as Audit Fees. These services included
audits of several affiliated entities such as corporate retirement
plans, accounting consultations regarding Sarbanes-Oxley requirements,
and the implementation of new accounting requirements such as those
for variable interest entities. In 2002 these fees included $303,000
for services rendered for a business risk assessment project.
(3) Tax Fees - aggregate fees charged by KPMG LLP for professional
services for tax compliance, tax advice, and tax planning with respect
to our U.S. and foreign operations.
(4) All Other Fees - aggregate fees charged by KPMG LLP for products and
services other than those services previously reported. In 2002, the
services included a business continuity assessment and the development
of capital expenditure policies and procedures. In 2003 the services
included participation at a KPMG LLP executive education program.
PROPOSAL 2
RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE
COMPANY'S INDEPENDENT ACCOUNTANT FOR THE 2004 FISCAL YEAR
The Audit Committee expects to appoint the accounting firm of KPMG LLP as
Price Group's independent accountant for fiscal year 2004 at its meeting
scheduled in April 2004 and the Board of Directors intends to ratify and affirm
that reappointment subject to ratification by our stockholders. KPMG LLP was
first appointed to serve as our independent accountant on September 6, 2001.
Representatives of KPMG are expected to be present at the Meeting and will
have the opportunity to make a statement and respond to appropriate questions
from stockholders.
Recommendation of the Board of Directors; Vote Required
We recommend that you vote FOR Proposal 2, the ratification of KPMG LLP as
our independent accountant for fiscal year 2004. Proxies solicited by the Board
of Directors will be voted FOR Proposal 2 unless otherwise specified. In order
to be adopted at the Meeting, Proposal 2 must be approved by the affirmative
vote of a majority of the votes cast at the Meeting. Abstentions and broker
non-votes will not be considered to be votes cast and will have no effect on the
outcome of the vote.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Summary Compensation Table. The following table summarizes the compensation of
certain of our executive officers who received the highest compensation during
2003.
Summary Compensation Table
Long-Term
Annual Compensation All Other
Compensation Award Compensation(2)
- --------------------------------------------------------------------------------
Name and Securities
Principal Underlying
Position Year Salary Bonus(1) Options (#)
- --------- ---- ------ --------- -----------
George A.
Roche 2003 $300,000 $2,000,000 10,306(3) $27,585
Chairman
and 2002 300,000 1,600,000 0 26,480
President 2001 300,000 1,700,000 0 25,653
James S.
Riepe 2003 300,000 2,000,000 40,007(3) 26,085
Vice
Chairman 2002 300,000 1,600,000 8,674(3) 24,980
2001 300,000 1,700,000 0 24,153
M. David
Testa 2003 300,000 2,000,000 50,512(3) 30,585
Vice
Chairman 2002 300,000 1,600,000 0 29,480
2001 300,000 1,700,000 0 28,653
James A.C.
Kennedy 2003 300,000 1,900,000 62,061(3) 30,960
Vice
President
and 2002 300,000 1,500,000 50,000 29,855
Director,
Equity
Division 2001 300,000 1,600,000 80,000 32,728
Brian C.
Rogers 2003 300,000 2,100,000 103,052(3) 30,585
Vice
President 2002 300,000 1,800,000 80,000 28,730
2001 300,000 2,000,000 80,000 72,778(4)
- --------------------------------------------------------------------------------
(1) Bonuses for 2003, 2002, and 2001 were paid to Messrs. Roche, Riepe,
Testa, and Kennedy under the Executive Incentive Compensation Plan.
Mr. Rogers' 2003 bonus was paid under the Executive Incentive
Compensation Plan. Bonuses may vary significantly from year to year
and among eligible employees. See "Report of the Executive
Compensation Committee."
(2) The following types of compensation are included in "all other
compensation":
a. Contributions made under the T. Rowe Price U.S. Retirement
Program. This plan provides retirement benefits based on the
investment performance of each plan participant's account.
Each of the officers named in the foregoing table received a
contribution of $26,085 in 2003.
b. Directors' fees paid by a wholly owned subsidiary of Price Group.
Mr. Roche was paid $1,500 in directors' fees in 2003.
c. Matching contributions paid under our Employee Stock Purchase
Plan.
Matching contributions were paid to the following named officers
in 2003: Mr. Testa - $4,500; Mr. Kennedy - $4,875; and Mr. Rogers
- $4,500.
(3) See the table entitled "Option Grants in 2003" which provides detail
on the character of the option grants.
(4) In 2001, includes $5,971 for additional cash compensation representing
payment for an amount that could not be credited to the officer's
retirement account due to contribution limits imposed under Section
415 of the Internal Revenue Code; $4,500 for matching contributions
paid under our Employee Stock Purchase Plan; $21,882 for contributions
made under the T. Rowe Price U.S. Retirement Program; and $40,425
representing the appraised fair market value of interests in limited
liability companies formed by Price Associates to hold certain venture
capital funds and be distributed to certain officers and key
employees.
Option Grants Table. The following table shows the number of stock options
granted in 2003 to the executive officers named in the Summary Compensation
Table and other information regarding their grants. Stock options under our
annual award program are granted at 100% of fair market value on the date of
grant and generally become exercisable in five equal increments on the first
through fifth anniversaries of the grant date. Replenishment grants allow an
option holder to receive additional options if a non-qualified stock option is
exercised by relinquishing shares already owned in payment of the exercise
price. The replenishment options are granted at fair market value on the date of
exercise of the option giving rise to the replenishment grant and may themselves
be exercised until the expiration date of the related option. The replenishment
options, which are equal in number to the shares relinquished, are exercisable
immediately. There is a provision in all existing option agreements under our
2001 Stock Incentive Plan that may accelerate the vesting of currently
outstanding but unexercisable options so that all options will become
exercisable for the one-year period following a change in control of Price
Group. The Executive Compensation Committee may modify or rescind this
provision, or make other provisions for accelerating the ability to exercise
options.
Option Grants in 2003
Individual Grants
Potential Realizable
Value at
Assumed Annual
Number of Percent of Rates of Stock Price
Securities Total Options Appreciation for
Underlying Granted to Exercise Option Term(2)
Options Employees in Price Expiration
Name Granted Fiscal Year ($ Per Share) Date 5% 10%
- --------------------------------------------------------------------------------
George
A. Roche 10,306(1) .28 $37.93 10/26/2003 $0(3) $ 0(3)
James S.
Riepe 7,183(1) .19 31.81 10/26/2003 0(3) 0(3)
17,237(1) .46 37.89 11/01/2005 66,944 137,153
15,587(1) .42 41.90 11/01/2005 66,942 137,150
M. David
Testa 18,843(1) .50 32.09 11/10/2004 30,234 60,467
16,616(1) .44 36.39 11/10/2004 30,233 60,466
15,053(1) .40 40.17 11/10/2004 30,234 60,468
James A.C.
Kennedy 12,061(1) .32 43.32 11/01/2005 53,554 109,721
50,000 1.34 43.45 12/11/2013 1,366,274 3,462,405
Brian C.
Rogers 15,139(1) .40 38.45 11/10/2004 29,105 58,209
27,913(1) .75 43.24 11/01/2005 123,713 253,461
60,000 1.60 43.45 12/11/2013 1,639,528 4,154,887
(1) Replenishment grant.
(2) We are required by the Securities and Exchange Commission to use a 5%
and 10% assumed rate of appreciation over the terms of stock options
granted in 2003. If the price of our common stock does not appreciate
over the exercise price, the option holders will receive no benefit
from the stock option grants. The appreciated stock prices used in
these calculations do not represent Price Group's projections or
estimates of the price of our common stock. Federal or state income
tax consequences relating to stock option transactions have not been
taken into account.
(3) These grants were exercised in 2003 and are no longer outstanding.
They are included in the next table and in the accompanying note.
Aggregated Option Exercises and Option Values Table. The following table
shows 2003 stock option exercises and the value of unexercised options for those
executive officers named in the Summary Compensation Table on page 8. In the
case of exercised options, "value realized" is considered to be the difference
between the exercise price and the market price on the date of exercise. In the
case of unexercised options, value is considered to be the difference between
the exercise price and market price at the end of 2003. An "In-the-Money" option
is an option for which the exercise price of the underlying stock is less than
$47.41, the closing market price of Price Group's common stock on December 31,
2003. The following values resulted from appreciation of the stock price since
the options were granted.
Aggregated Option Exercises in 2003
and Option Values at December 31, 2003
Number of
Securities Value of
Underlying Unexercised
Unexercised "In-the-Money"
Options at Options
December 31, 2003 December 31, 2003
Shares Acquired Value (Exercisable/ (Exercisable/
Name Upon Exercise Realized Unexercisable) Unexercisable)
- --------------------------------------------------------------------------------
George A.
Roche 115,906(1) $2,930,964 504,800/30,000 $14,718,618/$334,800
James S.
Riepe 159,890(1) 3,821,572 437,624/30,000 11,533,849/334,800
M. David
Testa 275,000(1) 7,366,062 847,312/30,000 28,712,855/334,800
James
A.C.
Kennedy 65,000(1) 1,798,738 418,365/186,000 7,119,444/2,578,560
Brian C.
Rogers 169,600(1) 5,089,116 653,652/224,000 12,050,949/3,166,480
(1) Includes the exercise of the following number of replenishment
options: Mr. Roche-10,306 and Mr. Riepe-19,790.
Equity Compensation Plan Information. The following table sets forth information
regarding outstanding options and shares reserved for future issuance under our
equity compensation plans as of December 31, 2003. None of the plans have
outstanding warrants or rights other than options. All plans have been approved
by our stockholders.
Equity Compensation Plan Information
Number of Securities
Number of Securities Remaining Available
to be Issued Upon Weighted Average for Future Issuance
Exercise of Out- Exercise Price of Under Equity
Plan Category Standing Options Outstanding Options Compensation Plans
- --------------------------------------------------------------------------------
Equity
Compensation
Plans Approved
by Stockholders 27,425,777 $29.98 6,921,831(1)
(1) Includes 5,241,831 shares that may be issued under our 2001 Stock
Incentive Plan and 1995 and 1998 Director Stock Options Plans and
1,680,000 shares that may be issued under our 1986 Employee Stock
Purchase Plan. No shares have been issued under the Employee Stock
Purchase Plan since its inception; all plan shares have been purchased
in the open market.
Compensation of Directors. Directors who are also officers of Price Group
do not receive separate fees as directors of Price Group. Each non-employee
director received a $50,000 retainer for his or her 2003 service on the Board of
Directors. The chairman of the Audit Committee and members of the committee
received additional fees of $10,000 and $5,000, respectively.
Pursuant to the 1998 Director Stock Option Plan approved by stockholders on
April 16, 1998 and amended by the Board of Directors on December 12, 2002, the
following stock options were awarded to our independent directors who served on
the Board of Directors in 2003:
1) Each of Messrs. Garrett and Hebb received options to purchase 6,500
shares of Price Group's common stock at $30.52 per share, the fair
market value of a share of stock on April 30, 2003, and 2,500 shares
at $41.64, the fair market value of a share of stock on October 29,
2003.
2) Each of Mr. Menschel and Mrs. Whittemore received options to purchase
2,500 shares of Price Group's common stock at $30.52 per share, the
fair market value of a share of stock on April 30, 2003, and 2,500
shares at $41.64, the fair market value of a share of stock on October
29, 2003.
3) Mr. Gilliam received options to purchase 6,500 shares of Price Group's
common stock at $30.52 per share, the fair market value of a share of
stock on April 30, 2003.
4) Mr. Brady received options to purchase 10,000 shares of Price Group's
common stock at $27.27 per share, the fair market value of a share of
stock on April 10, 2003, the day he was elected to the Board of
Directors.
5) Dr. Sommer received options to purchase 10,000 shares of Price Group's
common stock at $37.89, the fair market value or a share of stock on
June 5, 2003, the day he was elected to the Board of Directors.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
The individuals identified at the end of this report are all members of the
Executive Compensation Committee and independent members of the Board of
Directors. In this report, the term "we" refers to members of the committee. Our
report on executive compensation for 2003 follows.
We are responsible to the Board of Directors, and ultimately to the
stockholders of Price Group, for:
1) determining the compensation of the chief executive officer and other
executive officers;
2) overseeing the administration of Price Group's Executive Incentive
Compensation Plan, Annual Incentive Compensation Pool, stock incentive
plans, and employee stock purchase plan; and
3) reviewing and approving general salary and compensation policies for
the rest of Price Group's senior officers.
The Management Compensation Committee makes compensation decisions not
included in these categories, including individual compensation decisions for
non-executive officers.
The investment management and securities industries are highly competitive,
and experienced professionals in those industries have significant career
mobility. We believe that the ability to attract, retain, and provide
appropriate incentives for the highest quality professional personnel is
essential for Price Group's competitive position in the investment management
and financial services industries and the long-term success of Price Group.
We believe that Price Group must pay competitive levels of cash
compensation and offer appropriate equity and other incentive programs. These
programs must be consistent with stockholder interests. We think these programs
are necessary to motivate and retain Price Group's professional personnel. These
compensation programs are keyed to achieve short- and long-term performance
goals established by our committee and the Board. We believe that our
compensation policies are competitive with those of other companies in the
investment management and financial services industries.
During 2003, base salaries for each of the individuals named in the Summary
Compensation Table on page 8 were unchanged from the prior year. Price Group's
policy is that base salaries for these executives should form a relatively low
percentage (substantially below 50%) of their total cash compensation
opportunity, and that the major portion of cash compensation should be
performance based and derived from payments made under the Executive Incentive
Compensation Plan. We will authorize payments from this plan only to the extent
permitted by the performance goals established under the plan.
Price Group's Board of Directors and stockholders approved the Executive
Incentive Compensation Plan applicable for 2003 in 1995. It establishes a pool
that relates incentives to Price Group's income before income taxes and minority
interests for the year (which we call adjusted earnings), subject to Price Group
meeting a return on equity target. The pool, assuming adjusted earnings exceed
$50 million, is $3,000,000 plus 8% of adjusted earnings over $50 million. The
minimum return on equity to permit full payments under the plan is 20%. If the
return on equity is less than 20% but at least 10%, for each full percentage
point shortfall below 20%, the maximum pool is reduced by 5%. If the return on
equity falls below 10%, no bonus payment will be made under the plan for that
year. At Price Group's 2003 annual meeting, stockholders of the company approved
a new Annual Incentive Compensation Pool which will replace the Executive
Incentive Compensation Plan beginning in 2004. Under the terms of the new Annua
Incentive Compensation Pool, each year's pool will be an amount equal to 6% of
the first $50 million of adjusted earnings plus 8% of any adjusted earnings in
excess of $50 million.
In early 2003, we designated the executive officers named in the Summary
Compensation Table on page 8 as participants in the Executive Incentive
Compensation Plan. We also determined that each participant would be eligible to
receive up to a specified maximum percentage of the available pool. The
percentages varied among the participants. At the end of 2003, we reviewed the
requirements established by the plan for determining incentive awards and also
determined that the plan's performance goals had been satisfied before we
approved and permitted payment of bonuses pursuant to the plan. We expect that
all payments pursuant to the plan will be deductible under Section 162(m) of the
Internal Revenue Code of 1986, and that all compensation payable to these
individuals for 2003 performance similarly will be deductible.
We considered various qualitative and quantitative factors in determining
the amount of incentive compensation awarded to Mr. Roche, Mr. Riepe and Mr.
Testa in 2003. These factors included investment performance in comparison to
comparable mutual funds and market indices, marketing effectiveness,
international expansion, customer service, management of corporate assets,
financial performance, and corporate infrastructure development. We also took
into account the fact that Messrs. Roche, Riepe, and Testa during 2003 had broad
company-wide management responsibilities as well as line operating
responsibilities. We viewed each as making generally equivalent company-wide
contributions to 2003 performance and determined that each of these individuals
had demonstrated strong management performance over an extended timeframe.
In the cases of Mr. Kennedy and Mr. Rogers, we took into consideration
their respective contributions as members of Price Group's Management Committee
and senior executives of Price Associates' Equity Division, including in
particular the strong 2003 performance of the Equity Division. We noted that
many of Price Associates' investment professionals, including certain senior
portfolio managers whom we did not designate as participants in the 2003 plan
and are compensated under other incentive compensation programs and
arrangements, also were significant contributors to 2003 performance.
The awards were based upon our consideration of the improved financial
performance of Price Group during 2003 as well as the strong relative
performance of our investment portfolios, improved fund cash flows and other
positive trends in the business. We considered this performance and the
compensation levels in light of Price Group's historical compensation policies
and financial industry compensation trends. The incentive compensation awarded
to each of the named executives was considerably less than the maximum amount
permitted by the Executive Incentive Compensation Plan. We could determine in
the future to award payment of a greater portion or all of the compensation pool
as calculated under the Annual Incentive Compensation Pool in order to maintain
a competitive compensation structure and thus retain key personnel.
In 2003, we did not award options to purchase shares of common stock to Mr.
Roche, Mr. Riepe, or Mr. Testa under our annual grant program. We awarded
options under the program to Mr. Kennedy to purchase 50,000 shares of common
stock, and to Mr. Rogers options to purchase 60,000 shares of common stock, all
at an exercise price of $43.45 per share. These grants accounted for about 3.34%
of the total option awards under the program, as we and senior management sought
to continue to make additional stock options available to a significant number
of other employees. Consistent with recent practice, we made no grants this year
to our three most senior executives in order to focus more of the annual option
pool on other officers and key employees who do not already have as significant
an ownership interest in Price Group. We believe that our option program,
particularly as it relates to other key employees, plays an important role in
our ability to attract and retain our senior executives and key employees. Th
foregoing excludes replenishment options which automatically are granted under
certain circumstances upon the exercise of outstanding options.
We have compared the compensation levels of top management at Price Group
to relevant publicly available data for the investment management, securities,
and other financial services industries and have found these 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
that appears on page 21.
We believe that Price Group competes for executive talent with a large
number of investment management, securities, and other financial services
companies. Some of our competitors are privately owned and others have
significantly larger market capitalizations than Price Group. The practice of
Price Group and our committee is to review available compensation data from a
large universe of financial services companies. We receive the assistance of an
independent compensation consulting firm, selected by our committee and not by
management, in comparing the executive compensation and compensation policies of
Price Group with those of other public companies, including companies that
compete with Price Group for talent. We reiterate that our goal is to maintain
compensation programs that are competitive within the investment management and
financial services industries, and, therefore, in our stockholders' continuing
best interests.
We believe that the 2003 compensation levels disclosed in this proxy
statement are reasonable and appropriate in light of Price Group's performance.
Richard L. Menschel, Chairman
James T. Brady
D. William J. Garrett
Donald B. Hebb, Jr.
Dr. Alfred Sommer
Anne Marie Whittemore
***************
PROPOSAL 3
APPROVAL OF THE PROPOSED 2004 STOCK INCENTIVE PLAN AND
COROLLARY AMENDMENT OF THE 2001 STOCK INCENTIVE PLAN
We believe that our ability to award incentive compensation based on equity
in Price Group is critical to our continued success in attracting, motivating
and retaining key personnel and remaining competitive. Therefore, we are asking
our stockholders to approve our adoption of a new stock incentive plan, the 2004
Stock Incentive Plan (the "2004 Plan"), and simultaneous amendment of our
existing 2001 Stock Incentive Plan (the "2001 Plan") to freeze the number of
shares available for awards under that plan as of the date of the Meeting.
Approval of Proposal 3 would provide 8 million additional shares to be used for
grants under the 2004 Plan in addition to the approximately 5 million shares
that would remain available for grants under the 2001 Plan.
The creativity and entrepreneurial drive of our employees generates the
growth and success of our business. Since Price Group's IPO in 1986 through
December 31, 2003, the compound annualized return on our shares has been in
excess of 23%, due in large part to the work of our professionals. We believe
that our broad-based option program has been highly successful in motivating and
rewarding the efforts of our employees. As reflected in the table entitled
"Option Grants in 2003" on page 9, participation in the program by our most
senior officers is modest, thereby permitting increased participation by many
others who contribute to our success. By giving our employees an opportunity to
share in the growth of Price Group's equity, we align their interests with those
of our stockholders. Our employees understand that their stock options will have
value only if Price Group creates value for our stockholders. The
entrepreneurial spirit and competitive drive that are so pervasive at Price
Group reflect our employees' stake in our growth and profitability. Awards under
the 2001 and 2004 Plans generally vest over five years, giving the recipient an
additional incentive to provide services over a number of years and build on
past performance. We believe that our option program has helped us to build a
team of high achievers who have demonstrated long-term dedication and
productivity and who, in turn, help us to attract like-minded individuals to our
organization.
We remain committed to the goals of managing dilution from options and
enhancing stockholder value. We have granted awards under the 2001 Plan
judiciously. Those grants have been consistent with standards we established
when we adopted the plan and have been made at the rate we projected to you. We
have successfully managed share dilution from options over the past seventeen
years. We have never repriced options and will not reprice options in the future
without prior stockholder approval. In addition, neither the 2001 Plan nor the
2004 Plan allows the grant of "discount" options (i.e., options with an exercise
price below fair market value).
Consistent with our goal of managing dilution, last year we reduced our
annual option program by 15% compared to the prior year's grants, exclusive of
replenishment options that were issued in certain cases where we received
previously-owned shares in payment of the option exercise price. Even with the
reduced annual program, additional shares will be needed for us to continue our
equity incentive compensation program. Recognizing the level of stock option
grants made in recent years, taking into account last year's reduction in our
annual grant program, and given our expectations of continued expansion of our
work force, shares under the 2001 Plan will provide sufficient award capacity
for less than two more years. We project that approval of the 2004 Plan and 2001
Plan amendment will provide us with adequate shares for incentive compensation
awards for approximately five years. The visibility and sustainability of the
executive incentive compensation program are important factors in accomplishing
our goals of attracting, motivating and retaining key employees. For these
reasons, we encourage you to vote FOR Proposal 3.
Summary of the 2004 Stock Incentive Plan and
Corollary Amendment of the 2001 Stock Incentive Plan
The substantive terms of the 2004 Plan mirror the 2001 Plan, with certain
differences that are outlined below. The 2001 Plan amendment is described below
under the heading "Number of Shares." The material terms of the 2001 Plan are
also described in the proxy statement dated February 26, 2001 and distributed in
advance of the 2001 Annual Meeting of Stockholders. A copy of the 2004 Plan is
attached as Exhibit B, and a copy of the 2001 Plan amendment is attached as
Exhibit C. The following summary description is qualified by reference to the
2004 Plan, the 2001 Plan and the 2001 Plan amendment.
Number of Shares
- ----------------
Approximately 13.9 million shares of our common stock were reserved
initially for issuance under the 2001 Plan. The 2001 Plan amendment freezes the
number of shares available for awards under that plan as of the date of the
Meeting. Shares that ordinarily would have been restored to the 2001 Plan due to
award forfeitures, shares tendered in payment of option exercise prices, and
shares withheld in payment of tax withholding obligations will not be available
for future awards under the 2001 Plan, but will roll into and become available
under the 2004 Plan if Proposal 3 is approved. Approximately 5 million shares
would remain available for grant under the 2001 Plan.
Under the 2004 Plan, 8 million shares of our common stock, and any shares
that are represented by awards under the 2004 Plan or any of our prior plans
that are forfeited, expire, or are canceled or settled as stock appreciation
rights in cash without delivery of shares, forfeited back to us after delivery
because of the failure to meet an award condition or contingency, or tendered to
us or withheld to pay the exercise price or related tax withholding obligations
in connection with any award under the 2004 Plan or any prior plan will be
available for awards under the 2004 Plan. In addition, subject to the limitation
below, shares that we reacquire on the open market or otherwise using the cash
proceeds received by us from the exercise of stock options granted under the
2004 Plan or any prior plan will be added to the number of shares available
under the 2004 Plan. The maximum number of shares that may be reacquired and
restored to the 2004 Plan is equal to (A) the amount of the cash proceeds,
divided by (B) the fair market value on the date of the exercise which generated
such proceeds. If we acquire another entity through a merger or similar
transaction and issue replacement awards under the 2004 Plan to employees,
officers and directors of the acquired entity, those awards, to the extent
permitted under applicable laws and securities exchange rules, will not reduce
the number of shares reserved for the 2004 Plan.
The 2004 Plan imposes the following additional maximum limitations:
o The maximum number of shares that may be issued in connection with
incentive stock options intended to qualify under Internal Revenue
Code Section 422 is 8 million, the same as under the 2001 Plan.
o The maximum number of shares that may be issued in connection with
stock awards under the 2004 Plan is 1 million, the same as under the
2001 Plan.
o The maximum number of shares that may be subject to stock awards
granted under the 2004 Plan to any one person that are intended to
constitute or give rise to deductible "qualified performance-based
compensation" within the meaning of Internal Revenue Code Section
162(m) is 1 million shares during any 36-month period. The 2001 Plan
does not allow the grant of such awards.
o The maximum number of shares subject to awards of any combination that
may be granted under the 2004 Plan during any calendar year to any one
person is 1 million. This same maximum applies under the 2001 Plan.
However, the 2004 Plan does not permit the unused portion of this
maximum to carry forward from year to year as permitted under the 2001
Plan.
The number of shares reserved for issuance under the 2004 Plan and 2001
Plan, and the limits on the number of awards that may be granted under each plan
to any one participant or of a particular type, as described above, are subject
to adjustment to reflect certain subsequent capital adjustments such as stock
splits, stock dividends, and share exchanges.
Eligibility
- -----------
The selection of the participants in the 2004 Plan and 2001 Plan and the
term of awards granted to each participant will generally be determined by the
Executive Compensation Committee (the "Committee") or a subcommittee of the
Committee. The Committee may delegate to a committee of officers the authority
to make awards to individuals who are not subject to Section 16 of the
Securities Exchange Act of 1934. Employees, including those who are officers or
directors, of Price Group and its subsidiaries and affiliates are eligible to be
selected to receive awards under the 2004 Plan and/or 2001 Plan, as are
non-employee service providers (except for non-employee directors) and employees
of unaffiliated entities that provide services to us. We estimate that
approximately 3,800 Price Group employees and other service providers presently
are eligible to receive awards under the 2004 Plan and/or 2001 Plan.
Types of Awards
- ---------------
The 2004 Plan and 2001 Plan allow for the grant of stock options, stock
appreciation rights, and stock awards in any combination, separately or in
tandem. We may make or guarantee loans to participants to assist them in
exercising awards and satisfying their withholding tax obligations, but we may
not make such loans or guarantees to directors or executive officers of Price
Group. Price Group has not made or guaranteed such loans in the past. The
Committee will determine the terms and conditions of awards granted under the
2004 Plan and 2001 Plan, including the times when awards vest and their exercise
periods following certain events such as termination of employment. Unless the
Committee determines otherwise, all awards granted under the 2004 Plan and/or
2001 Plan would fully vest and remain exercisable for a one-year period
following a change in control of Price Group.
Stock Options. The Committee may grant either incentive stock options
qualified with respect to Internal Revenue Code Section 422 or options not
qualified under any section of the Internal Revenue Code ("non-qualified
options"). All stock options granted under the 2001 Plan and/or 2004 Plan must
have an exercise price that is at least equal to the fair market value of our
underlying common stock on the grant date. As of February 6, 2004, the fair
market value of a share of our common stock, determined by the last reported
sale price per share on that date as quoted on The Nasdaq National Market, Inc.,
was $51.40. No stock option granted under the 2001 Plan or 2004 Plan may have a
term longer than 10 years, except that under the 2004 Plan the term may extend
for six months beyond the date of death in the event that an option recipient
dies within the six-month period immediately before the expiration of the
initial 10-year term. The exercise price of stock options may be paid in cash,
or, if the Committe permits, by tendering shares of common stock, or by any
other means the Committee approves. Our stock options may, and many outstanding
stock options currently do, contain a replenishment provision under which we
issue a new option to an option holder (called a "replenishment option"), in
order to maintain his or her equity stake in Price Group, if the option holder
surrenders previously-owned shares to us in payment of the exercise price of an
outstanding stock option. The automatic replenishment option grant generally
covers only the number of shares surrendered, and expires at the same time as
the option that was exercised would have expired.
The following table shows the number of shares subject to option grants
made under the 2001 Plan to our executive officers and the other individuals and
groups indicated, from the date of the 2001 plan's inception to February 6,
2004. A separate column indicates the number of shares underlying options
granted that are replenishment options.
Cumulative Option Grant Table
2001 Stock Incentive Plan
Aggregate Number of Shares
Name and Position Underlying Options Granted Replenishment Options(1)
- --------------------------------------------------------------------------------
George A. Roche,
Chairman and President 10,306 10,306
James S. Riepe,
Vice Chairman 48,681 48,681
M. David Testa,
Vice Chairman 83,835 83,835
James A.C. Kennedy,
Vice President and
Director, Equity
Division 192,061 12,061
Brian C. Rogers,
Vice President 263,052 43,052
All Current Executive
Officers as a Group 1,560,830 275,830
All Current Directors
who are not Executive
Officers 99,097 14,097
All Current Employees,
including Officers
who are not Executive
Officers, as
a Group (312 persons) 9,745,538 390,647
- --------------------------------------------------------------------------------
(1) This column contains the number of shares included under "Aggregate
Number of Shares Underlying Options Granted" that are replenishment
options.
Stock Appreciation Rights. The Committee may grant stock appreciation rights
which provide the recipient the right to receive a payment (in cash, shares, or
a combination of both) equal to the difference between the fair market value of
a specific number of shares on the grant date (or, if lower, the exercise price
of any tandem stock option to which the stock appreciation right is related) and
the fair market value of such shares on the date of exercise. Although stock
appreciation rights have been available for grant under the 2001 Plan and our
prior plans, the Committee has never granted this type of award.
Stock Awards. Awards of shares of common stock may be issued with or without
payment of consideration by the recipient. An award of stock may be denominated
in shares of stock or other securities, stock-equivalent units, securities or
debentures convertible into our common stock, or in any combination of the
foregoing, and may be paid in cash, our common stock or other securities, or a
combination thereof. All or part of any stock award may be subject to conditions
and restrictions, which the Committee will specify. Unless the Committee
determines otherwise, there will be a restriction period of at least three
years' duration on stock awards.
Performance-Based Awards. In order to enable Price Group to avail itself of
the tax deductibility of "qualified performance-based compensation," within the
meaning of Internal Revenue Code Section 162(m), paid to certain of its senior
officers, the 2004 Plan provides for a new type of stock award, the grant or
vesting of which is dependent upon the recipient's attainment of objective
performance targets relative to certain performance measures. Performance
targets may include minimum, maximum and target levels of performance, with the
size of the stock award or vesting based on the level attained. Performance
measures are criteria established by the Committee relating to any of the
following, as it may apply to an individual, one or more business units,
divisions or subsidiaries, or on a company-wide basis, and either in absolute
terms or relative to the performance of one or more comparable companies or an
index covering multiple companies: revenue; earnings before interest, taxes,
depreciation and amortization (EBITDA); income before income taxes and minority
interests; operating income; pre- or after-tax income; cash flow; cash flow per
share; net earnings; earnings per share; return on equity; return on invested
capital; return on assets; growth in assets; share price performance; total
stockholder return; improvement in or attainment of expense levels; relative
performance to a group of companies or relevant market indices comparable to
Price Group; and strategic business criteria consisting of one or more
objectives based on Price Group's meeting specified goals relating to revenue,
market penetration, business expansion, costs or acquisitions or divestitures.
Awards
- ------
No awards have been granted under the 2004 Plan. The Committee has not
considered specific awards to be made under the 2004 Plan; therefore, the number
of shares that will be covered by any awards or the individuals to whom awards
will be made cannot be determined at this time. The following New Plan Benefits
Table contains the number of awards made under the 2001 Plan to the individuals
and groups listed below during our last fiscal year.
New Plan Benefits Table
2001 Stock 2004 Stock
Incentive Plan Incentive Plan
Number of Number of
Name and Position Units(1) Units(2)
- --------------------------------------------------------------------------------
George A. Roche, Chairman and President 10,306 0
James S. Riepe, Vice Chairman 40,007 0
M. David Testa, Vice Chairman 50,512 0
James A.C. Kennedy, Vice President and
Director, Equity Division 62,061 0
Brian C. Rogers, Vice President 103,052 0
Executive Group 540,506 0
Non-Executive Director Group 29,097 0
Non-Executive Officer Employee Group 3,192,141 0
(1) The number of shares included in awards made under the 2001 Stock Incentive
Plan are as follows: Mr. Roche-10,306; Mr. Riepe-40,007; Mr. Testa-50,512;
Mr. Kennedy-12,061; Mr. Rogers-43,052; Executive Group-215,506;
Non-Executive Director Group-14,097; Non-Executive Officer Employee
Group-228,641.
(2) Awards are subject to discretion and, therefore, are not currently
determinable.
Amendments
The Board may alter, amend, suspend, or discontinue the 2004 Plan and/or
2001 Plan or any portion of either plan at any time, but no such action may be
taken without stockholder approval if it materially increases the benefits to
participants, including modifying the minimum exercise price or maximum term of
stock options, or increases the number of shares that may be issued under the
plan. The Committee may alter or amend awards under the 2004 Plan and/or 2001
Plan, but no such action may be taken without the consent of the participant if
it would materially adversely affect an outstanding award, and no such action
may be taken without prior stockholder approval if it would result in repricing
a stock option to a lower exercise price other than to reflect a capital
adjustment of Price Group, such as a stock split. Price Group has not acted in
the past to reprice stock options.
Term of Plans
If our stockholders approve Proposal 3, the 2004 Plan will become effective
April 8, 2004, and will remain in effect until February 4, 2014, unless it is
terminated earlier by the Board. The 2001 Plan will expire with respect to
future grants on February 7, 2011, or at an earlier date if the shares available
for issuance are exhausted.
Federal Income Tax Consequences
The following summary is intended only as a general guide to the U.S.
federal income tax consequences under current law of incentive stock options and
non-qualified stock options, which are authorized for grant under the 2004 Plan
and 2001 Plan. It does not attempt to describe all possible federal or other tax
consequences of participation in the plans or tax consequences based on
particular circumstances. The tax consequences may vary if options are granted
outside the United States.
Incentive Stock Options. An option holder recognizes no taxable income for
regular income tax purposes as a result of the grant or exercise of an incentive
stock option qualifying under Internal Revenue Code Section 422. Option holders
who neither dispose of their shares within two years following the date the
option was granted nor within one year following the exercise of the option will
normally recognize a capital gain or loss upon a sale of the shares equal to the
difference, if any, between the sale price and the purchase price of the shares.
If an option holder satisfies such holding periods upon a sale of the shares,
Price Group will not be entitled to any deduction for federal income tax
purposes. If an option holder disposes of shares within two years after the date
of grant or within one year after the date of exercise (a "disqualifying
disposition"), the difference between the fair market value of the shares on the
exercise date and the option exercise price (not to exceed the gain realized on
the sale if the disposition is a transaction with respect to which a loss, if
sustained, would be recognized) will be taxed as ordinary income at the time of
disposition. Any gain in excess of that amount will be a capital gain. If a loss
is recognized, there will be no ordinary income, and such loss will be a capital
loss. Any ordinary income recognized by the option holder upon the disqualifying
disposition of the shares generally will result in a deduction by Price Group
for federal income tax purposes.
Non-Qualified Stock Options. Options not designated or qualifying as
incentive stock options will be non-qualified stock options having no special
tax status. An optionee generally recognizes no taxable income as the result of
the grant of such an option. Upon exercise of a non-qualified stock option, the
optionee normally recognizes ordinary income in the amount of the difference
between the option exercise price and the fair market value of the shares on the
exercise date. If the optionee is an employee, such ordinary income generally is
subject to withholding of income and employment taxes. Upon the sale of stock
acquired by the exercise of a non-qualified stock option, any gain or loss,
based on the difference between the sale price and the fair market value on the
exercise date, will be taxed as a capital gain or loss. No tax deduction is
available to Price Group with respect to the grant of a non-qualified stock
option or the sale of the stock acquired pursuant to such grant. Price Group
generally should be entitled to a deduction equal to the amount of ordinary
income recognized by the optionee as a result of the exercise of a non-qualified
stock option.
Other Considerations. The Internal Revenue Code allows publicly-held
corporations to deduct compensation in excess of $1 million paid to the
corporation's chief executive officer and its four other most highly compensated
executive officers if the compensation payable is payable solely based on the
attainment of one or more performance goals and certain statutory requirements
are satisfied. We intend for compensation arising from grants of awards under
the 2004 Plan and the 2001 Plan which are based on performance goals, including
stock options and stock appreciation rights granted at fair market value, to be
deductible by us as performance-based compensation not subject to the $1 million
limitation on deductibility.
Recommendation of the Board of Directors; Vote Required
We recommend that you vote FOR Proposal 3 and thereby approve our adoption
of the 2004 Plan and amendment of the 2001 Plan. Proxies solicited by the Board
of Directors will be voted FOR Proposal 3 unless otherwise specified. The 2001
Plan amendment will not become effective unless the adoption of the 2004 Plan is
approved. Therefore, your vote applies to both the 2004 Plan adoption and the
2001 Plan amendment. In order to be adopted at the Meeting, Proposal 3 must be
approved by the affirmative vote of a majority of the votes cast at the Meeting.
Abstentions and broker non-votes will not be considered votes cast and will have
no effect on the outcome of the matter.
REPORT OF THE NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
The individuals identified at the end of this report are the members of the
Nominating and Corporate Governance Committee. Each of the members of the
committee is independent under listing standards applicable to Price Group. In
this report, the term "we" refers to members of the committee.
The Nominating and Corporate Governance Committee has the responsibility
and authority to supervise and review the affairs of Price Group as they relate
to the nomination of directors and corporate governance. The principal recurring
functions of the committee include developing criteria for selecting new
directors, establishing and monitoring procedures for the receipt and
consideration of director nominations by stockholders and others, considering
and examining director candidates, developing and recommending corporate
governance principles for Price Group and monitoring Price Group's compliance
with these principles, establishing and monitoring procedures for the receipt of
stockholder communications directed to the Board of Directors and monitoring the
role and effectiveness of the Board of Directors.
The committee met on seven occasions during 2003. A major initiative of the
committee during 2003 was to add additional independent directors to the Board
so that by the 2004 annual meeting a majority of the directors are independent.
During 2003, two additional independent directors, Mr. Brady and Dr. Sommer,
were added to the Board of Directors. In addition, an additional independent
director, Mr. Dwight Taylor, has been nominated for addition to the Board of
Directors at the 2004 annual meeting.
In addition to activity with respect to the attraction of additional
independent directors, the committee also focused in 2003 on monitoring Price
Group's compliance with the Sarbanes-Oxley Act of 2002 and related rules and
regulations affecting corporate governance. In addition, we discussed during
2003, and are presently developing, a set of corporate governance guidelines for
Price Group. We anticipate that the guidelines will be approved by the Board of
Directors and published in 2004.
The nomination process for directors is supervised by the committee. The
committee seeks out appropriate candidates to serve as directors of Price Group,
and the committee interviews and examines director candidates and makes
recommendations to the Board regarding candidate selection. We believe that all
director candidates should demonstrate unimpeachable character and integrity,
have sufficient time to carry out their duties, have experience at senior levels
in areas of expertise helpful to Price Group and consistent with the objective
of having a diverse and well-rounded Board, and have the willingness and
commitment to assume the responsibilities required of a director of Price Group.
Once the committee has selected appropriate candidates for director, it presents
the candidates to the full Board for election if the selection has occurred
during the course of the year or for nomination if the director is to be first
elected by stockholders. In any case, all directors are nominated each year for
election by stockholders and included in Price Group's proxy statement. Director
candidates are obtained principally through suggestions from members of the
Board and senior management of Price Group. The chief executive officer of Price
Group and Board members may seek candidates through informal discussions with
third parties. The only nominee for election to Price Group's Board this year
who has not previously served as a Price Group director is Dwight S. Taylor. Mr.
Taylor was initially brought to the attention of the committee by an independent
director of the Price funds.
Price Group's amended and restated by-laws provide the procedure for
stockholders to make director nominations. A nominating stockholder must give
appropriate notice to Price Group of the nomination not less than 90 days prior
to the first anniversary of the preceding year's annual meeting. In the event
that the date of the annual meeting is advanced by more than 30 days or delayed
by more than 60 days from the anniversary date of the preceding year's annual
meeting, the notice by the stockholder must be delivered not later than the
close of business on the later of the 60th day prior to such annual meeting or
the tenth day following the day on which public announcement of the date of such
annual meeting is first made. The stockholders' notice shall set forth, as to
1) each person whom the stockholder proposes to nominate for election as
a director:
o the name, age, business address and residence address of such
person,
o the principal occupation or employment of the person,
o the class and number of shares of Price Group which are
beneficially owned by such person, if any, and
o any other information relating to such person which is required
to be disclosed in solicitations for proxies for election of
directors pursuant to Regulation 14A under the Securities and
Exchange Act of 1934, as amended, and the rules and regulations
thereunder; and
2) the stockholder giving the notice:
o the name and record address of the stockholder and the class and
number of shares of Price Group which are beneficially owned by
the stockholder,
o a description of all arrangements or understandings between such
stockholder and each proposed nominee and any other person or
persons (including their names) pursuant to which nomination(s)
are to be made by such stockholder,
o a representation that such stockholder intends to appear in
person or by proxy at the meeting to nominate the persons named
in its notice,
o any other information relating to such person which is required
to be disclosed in solicitations for proxies for election of
directors pursuant to Regulation 14A under the Securities and
Exchange Act of 1934, as amended, and the rules and regulations
thereunder.
The notice must be accompanied by a written consent of the proposed nominee
to be named as a director.
The Board of Directors has also adopted a Code of Ethics for its Principal
Executive and Senior Financial Officers. This Code supplements our code of
ethics applicable to all employees and directors and is intended to promote
honest and ethical conduct, full and accurate reporting, and compliance with
laws as well as other matters. A copy of our Code of Ethics for Principal
Executive and Senior Financial Officers will be filed as an exhibit to Price
Group's Annual Report on Form 10-K for fiscal 2003.
Anne Marie Whittemore, Chairman
Richard L. Menschel
***************
STOCK PERFORMANCE CHART
We are required by the Securities and Exchange Commission to provide you
with a five-year comparison of the cumulative total return on our common stock
as of December 31, 2003, with that of a broad equity market index and either a
published industry index or a peer group index selected by us. We have chosen to
use broad market and published industry indices which included our stock in
2003.
The following chart compares the yearly change in the cumulative return on
our common stock with the cumulative total return on the CRSP Total Return Index
for NASDAQ Financial Stocks and the S&P 500 Index. The comparison assumes that
$100 was invested in Price Group's common stock and in each of the named indices
on December 31, 1998, and that all dividends were reinvested.
Since we do not make or endorse any predictions as to future stock
performance, the values in the following columns do not represent our
projections or estimates of either the annual or cumulative return on our common
stock or any of the indices represented.
[Graphic Omitted]
CRSP Total
Return Index for
T. Rowe Price NASDAQ
Group, Inc. Financial Stocks S&P 500 Index
1998 100 100 100
1999 109 99 121
2000 127 107 110
2001 106 118 97
2002 85 121 76
2003 150 164 97
1998 1999 2000 2001 2002 2003
T. Rowe Price
Group, Inc. $100 $109 $127 $106 $85 $150
CRSP Total Return
Index for NASDAQ
Financial Stocks(1) 100 99 107 118 121 164
S&P 500 Index(2) 100 121 110 97 76 97
(1) The CRSP Total Return Index for NASDAQ Financial Stocks is an index
comprised of all financial company American Depository Receipts, domestic
common shares and foreign common shares traded on the NASDAQ National
Market(RT) and the NASDAQ SmallCap Market(SM), and represents SIC Codes 60
through 67. We have not verified these values independently. Price Group's
common stock is included in this index. Price Group's Secretary will
provide the names of companies included in this index upon receipt of a
stockholder's written request. (Source: 2004 CRSP, Center for Research in
Securities Prices. Graduate School of Business, The University of Chicago
used with permission. All rights reserved. www.crsp.uchicago.edu.)
(2) Total return performance for the S&P 500 Index also has been provided by
CRSP. This index has consistently been presented in prior years as a broad
market index. Price Group's common stock has been included in this index
since October 13, 1999.
CERTAIN OWNERSHIP OF PRICE GROUP'S COMMON STOCK
We have no knowledge at this time of any individual or entity owning,
beneficially or otherwise, 5% or more of the outstanding common stock of Price
Group.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
We believe that our directors and executive officers have complied with
requirements of the Securities and Exchange Commission to report ownership, and
transactions which change ownership, on time during 2003 with one exception. On
June 12, 2003, the Form 4 filed by George A. Roche, chairman and president of
Price Group, did not report the award of replenishment options granted as a
result of the exercise of non-qualified stock options on June 11, 2003. An
Amended Form 4 was filed on October 22, 2003, to correct this oversight.
STOCKHOLDER PROPOSALS FOR THE 2005 ANNUAL MEETING
Qualified stockholders who wish to have proposals presented at the 2005
annual meeting of stockholders must deliver them to Price Group by October 30,
2004, in order to be considered for inclusion in next year's proxy statement and
proxy pursuant to Rule 14a-8 under the Securities Exchange Act of 1934.
Any stockholder proposal or director nomination for our 2005 annual meeting
that is submitted outside the processes of Rule 14a-8 will be considered
"untimely" if we receive it before December 9, 2004, or after January 8, 2005.
Such proposals and nominations must be made in accordance with the amended and
restated by-laws of Price Group. An untimely proposal may be excluded from
consideration at our 2005 annual meeting. All proposals and nominations must be
delivered to Price Group's Secretary at 100 E. Pratt Street, Mail Code 5210,
Baltimore, MD 21202.
STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
The following procedures have been established by the Nominating and
Corporate Governance Committee in order to facilitate communications between our
stockholders and our Board of Directors:
1) Stockholders may send correspondence, which should indicate that the
sender is a stockholder, to our Board of Directors or to any
individual director by mail to T. Rowe Price Group, Inc., c/o Chief
Legal Officer, T. Rowe Price Group, Inc., P.O. Box 17134, Baltimore,
MD 21297-1134, or by e-mail to
stockholdercommunications@troweprice.com.
2) Our Chief Legal Officer will be responsible for the first review and
logging of this correspondence and will forward the communication to
the director or directors to whom it is addressed unless it is a type
of correspondence which the Nominating and Corporate Governance
Committee has identified as correspondence which may be retained in
our files and not sent to directors.
The Nominating and Corporate Governance Committee has authorized the
Chief Legal Officer to retain and not send to directors communications
that: (a) are advertising or promotional in nature (offering goods or
services), (b) solely relate to complaints by clients with respect to
ordinary course of business customer service and satisfaction issues,
or (c) clearly are unrelated to our business, industry, management or
Board or committee matters. These types of communications will be
logged and filed but not circulated to directors. Except as set forth
in the preceding sentence, the Chief Legal Officer will not screen
communications sent to directors.
3) The log of stockholder correspondence will be available to members of
the Nominating and Corporate Governance Committee for inspection. At
least once each year, the Chief Legal Officer will provide to the
Nominating and Corporate Governance Committee a summary of the
communications received from stockholders, including the
communications not sent to directors in accordance with screening
procedures approved by the Nominating and Corporate Governance
Committee.
OTHER MATTERS
We know of no other matters to be presented to you at the Meeting. As
stated in an earlier section, if other matters are considered at the Meeting,
the proxies will vote on these matters in accordance with their judgment of the
best interests of Price Group.
Exhibit A
Audit Committee Charter
The Audit Committee (the "Committee") of the Board of Directors (the
"Board") of T. Rowe Price Group, Inc. (the "Corporation") has the oversight
responsibility, authority and duties described in this Charter.
Purpose
The primary purpose of the Committee is to assist the Board in fulfilling
its oversight responsibilities with respect to (1) the integrity of the
Corporation's financial statements and other financial information provided by
the Corporation to its stockholders, (2) the Corporation's retention of its
independent accountants, including oversight of the terms of their engagement
and their performance, qualifications and independence and (3) the performance
of the Corporation's internal audit function, internal controls and disclosure
controls. The Committee shall prepare the report of the Committee included in
the Corporation's annual proxy statement as required by the Securities and
Exchange Commission (the "SEC"). In addition, the Committee provides an avenue
for communication among the internal auditors, the independent accountants,
financial management and the Board. The Committee's responsibility is one of
oversight, recognizing that the Corporation's management is responsible for
preparing the Corporation's financial statements and that the independent
accountants are responsible for auditing those financial statements. The
independent accountants report directly to the Committee and are ultimately
accountable to the Committee and the Board for such accountants' audit of the
financial statements of the Corporation.
Composition
The Committee shall be appointed annually by the Board on the
recommendation of the Nominating and Corporate Governance Committee and shall
comprise at least three directors, each of whom shall meet the independence and
financial literacy requirements of The Nasdaq Stock Market, Inc. ("Nasdaq"), the
SEC and applicable law. In addition, at least one member of the Committee will
possess accounting or financial management expertise as defined by Nasdaq, the
SEC and applicable law. The Board shall designate one member as Chair of the
Committee. The Committee may, at its discretion in accordance with applicable
law or regulation, delegate to one or more of its members the authority to act
on behalf of the Committee.
Meetings
The Committee shall hold meetings as deemed necessary or desirable by the
Chair of the Committee. In addition to such meetings of the Committee as may be
required to perform the functions described under "Duties and Powers" below, the
Committee shall meet at least annually with the chief financial officer, the
internal auditors and the independent accountants to discuss any matters that
the Committee or any of these persons or firms believe should be discussed. The
Committee may, at its discretion, meet in executive session with or without the
presence of the independent accountants, internal auditors or corporate
officers.
Duties and Powers
The following shall be the principal recurring functions of the Committee
in carrying out its oversight responsibilities. The functions are set forth as a
guide with the understanding that the Committee may modify or supplement them as
appropriate.
Independent Accountants
1. Appoint, approve audit fees for and oversee the Corporation's independent
accountants.
2. Review and provide prior approval of the engagement of the Corporation's
independent accountants to perform non-audit services. The Chair of the
Committee may represent and act on behalf of the entire Committee for
purposes of this review and approval.
3. Adopt policies and procedures relating to the pre-approval of audit and
non-audit services.
4. Ensure that the independent accountants prepare and deliver at least
annually a formal written statement delineating all relationships between
the independent accountants and the Corporation addressing at least the
matters set forth in Independence Standards Board, Standard No. 1,
Independence Discussions with Audit Committees, as amended.
5. Discuss with the independent accountants any disclosed relationships or
services that may impact the objectivity and independence of the
independent accountants and recommend that the Board take appropriate
action in response to the independent accountants' report to satisfy itself
of the independent accountants' independence.
6. Obtain and review at least annually a report by the independent accountants
describing: (a) the accounting firm's internal quality-control procedures,
(b) any issues material to the Corporation's audit raised (i) by the most
recent internal quality-control review or peer review of the accounting
firm or (ii) by any inquiry or investigation by governmental or
professional authorities and any steps taken to deal with any such issues.
7. Obtain from the independent accountants assurance that their audit of the
Corporation's financial statements was conducted in accordance with
auditing standards generally accepted in the United States.
8. Confirm that the Corporation's independent accountants have complied with
any applicable rotation requirements for the lead audit partner and any
reviewing audit partner with responsibility for the Corporation's audit.
9. To the extent required by the rules of the SEC, obtain and review at least
annually an attestation to and a report from the Corporation's independent
accountants regarding management's assessment of the effectiveness of the
Corporation's internal controls and procedures for financial reporting to
be included in the Corporation's Annual Report on Form 10-K, in advance of
such filing.
10. Pursuant to Section 10A of the Securities Exchange Act of 1934, as amended,
obtain and review from the independent accountants a timely report
describing (a) all critical accounting policies and practices to be used;
(b) all alternative treatments of financial information within generally
accepted accounting principles that have been discussed with management
officials of the Corporation, ramifications of the use of such alternative
disclosures and treatments, and the treatment preferred by the internal
auditors and the independent accountants; (c) other material written
communications between the independent accountants, the internal auditors
and the management of the Corporation, such as any management letter or
schedule of unadjusted differences; and (d) any illegal acts that have been
detected or have otherwise come to the attention of the independent
accountants or the internal auditors in the course of their audit.
11. Monitor compliance with regulatory requirements applicable to the hiring of
employees and former employees of the independent accountants.
Internal Auditors
12. Consult with management before the appointment or replacement of the
Director of Internal Audit.
13. Review with the Director of Internal Audit the significant reports to
management prepared by the internal auditors and management's responses
thereto, and also such other reports or matters as the Committee or the
Director of Internal Audit deems necessary or desirable.
Compliance
14. Periodically review with the Director of Compliance the status of the
Corporation's compliance programs.
Financial Statements, Controls and Reports
15. Obtain, review and approve, if applicable, a timely analysis from
management relating to any significant proposed or contemplated changes to
the Corporation's accounting principles, policies, estimates, internal
controls, disclosure controls, procedures, practices and auditing plans
(including those policies for which management is required to exercise
discretion or judgments regarding the implementation thereof).
16. Review disclosures made to the Committee by the Corporation's Chief
Executive Officer and Chief Financial Officer during their certification
process for the Corporation's Annual Report on Form 10-K and Quarterly
Reports on Form 10-Q about any significant deficiencies in the design or
operation of internal controls or material weaknesses therein and any fraud
involving management or other employees who have a significant role in the
Corporation's internal controls.
17. Discuss with the independent accountants the matters required to be
discussed by Statement on Auditing Standards No. 61, Communications with
Audit Committees.
18. Periodically discuss with the independent accountants and internal
auditors, without management being present, (a) their judgments about the
quality, appropriateness, and acceptability of the Corporation's accounting
principles and financial disclosure practices, as applied in its financial
reporting, and (b) the completeness and accuracy of the Corporation's
financial statements.
19. Review the Corporation's annual and quarterly consolidated financial
statements with management and the independent accountants prior to the
first public release of the Corporation's financial results for such year
or quarter and review any "pro forma" or "adjusted" non-GAAP information
included in such release. The Chair of the Committee may represent and act
on behalf of the entire Committee for purposes of the review of any
quarterly consolidated financial statements.
20. Review the Corporation's Annual Report on Form 10-K and Quarterly Reports
on Form 10-Q in advance of such filings. The Chair of the Committee may
represent and act on behalf of the entire Committee for purposes of the
review of any Quarterly Reports on Form 10-Q.
21. Meet periodically with management, the Director of Internal Audit and/or
the independent accountants to:
o review the respective annual audit plans of the independent
accountants and internal auditors;
o discuss any significant matters arising from any audit or report or
communication relating to the consolidated financial statements,
including any material audit problems, disagreements or difficulties
and responses by management;
o understand the significant judgments made and alternatives considered
in the Corporation's financial reporting, including the
appropriateness of the alternatives ultimately chosen; and
o discuss policies with respect to significant risks and exposures, if
any, and the steps taken to assess, monitor and manage such risks.
22. Review with the Corporation's internal and external counsel any legal
matters that could have a significant impact on the Corporation's financial
statements, the Corporation's compliance with applicable laws and
regulations, and inquiries received from regulators or governmental
agencies.
Reporting and Recommendations
23. Determine, based on the reviews and discussions noted above, whether to
recommend to the Board that the audited financial statements be included in
the Corporation's Annual Report to Stockholders and on Form 10-K for filing
with the SEC.
24. Prepare any report, including any recommendation of the Committee, required
by the rules of the SEC to be included in the Corporation's annual proxy
statement.
25. Maintain minutes or other records of meetings and activities of the
Committee.
26. Report the Committee's activities to the Board on a regular basis and make
such recommendations with respect to the above as the Committee or the
Board may deem necessary or appropriate.
Other Responsibilities
27. Monitor the activities of the Corporation's banking and trust company
subsidiaries by (a) meeting at least annually with management, the Director
of Internal Audit and the Director of Compliance to review the financial
condition, business activities and regulatory compliance status of the
Corporation's banking and trust company subsidiaries and (b) receiving from
management periodic reports of any examinations by regulatory authorities
or other material business, accounting or regulatory issues relating to
such entities.
28. Establish and maintain procedures for (a) the receipt, retention and
treatment of complaints received by the Corporation regarding accounting,
internal accounting controls and auditing matters and (b) the confidential,
anonymous submission by employees of the Corporation of concerns regarding
questionable accounting or auditing matters.
29. Review and recommend to the Board (a) any change in or waiver to the
Corporation's code of ethics for its principal executive and senior
financial officers and (b) any disclosure made on Form 8-K regarding such
change or waiver.
30. Review and provide prior approval of all transactions or arrangements
required to be disclosed pursuant to SEC Regulation S-K, Item 404, between
the Corporation and any of its directors, officers, principal stockholders
or any of their respective affiliates, associates or related parties.
31. Take such other actions as the Committee or the Board may deem necessary or
appropriate.
32. Review the Committee's performance of the foregoing duties on at least an
annual basis.
Resources and Authority
The Committee shall have the resources and authority appropriate to
discharge its responsibilities, including the authority to engage and determine
the necessary funding for independent accountants for special audits, reviews
and other procedures and to retain and determine the necessary funding for
special counsel and other experts or consultants.
Annual Review
The Committee shall review, on at least an annual basis, this Charter and
the scope of the responsibilities of this Committee. Any proposed changes, where
indicated, shall be referred to the Board for appropriate action.
Operating Procedures
Formal actions to be taken by the Committee shall be by unanimous written
consent or by a majority of the persons present (in person or by conference
telephone) at a meeting at which a quorum is present. A quorum shall consist of
at least 50% of the members of the Committee.
Exhibit B
T. Rowe Price Group, Inc. 2004 Stock Incentive Plan
1. Establishment, Purpose and Types of Awards
T. ROWE PRICE GROUP, INC., a Maryland corporation (the "Company"), hereby
establishes the T. ROWE PRICE GROUP, INC. 2004 STOCK INCENTIVE PLAN (the
"Plan"). The purpose of the Plan is to promote the long-term growth and
profitability of the Company by (i) providing key people with incentives to
improve stockholder value and to contribute to the growth and financial success
of the Company, and (ii) enabling the Company and its affiliated companies to
attract, retain and reward the best-available persons. The Plan permits the
granting of stock options (including incentive stock options qualifying under
Code Section 422 and nonqualified stock options), stock appreciation rights, and
stock awards, or any combination of the foregoing.
2. Definitions
Under this Plan, except where the context otherwise indicates, the
following definitions apply:
(a) "Administrator" shall mean the Board, the ECC, the ECC's delegate, and
the committee of Non-Employee Directors who administer the Plan in
accordance with Section 3 hereof.
(b) "Affiliate" shall mean any entity, whether now or hereafter existing,
in which the Company has a proprietary interest by reason of stock
ownership or otherwise (including, but not limited to, joint ventures,
limited liability companies, and partnerships) or any entity that
provides services to the Company or a subsidiary or affiliated entity
of the Company.
(c) "Approval Date" shall mean the date of the approval by the Board of an
agreement providing for an exchange offer, merger, consolidation or
other business combination, sale or disposition of all or
substantially all of the assets of the Company, or any combination of
the foregoing transactions as a result of the consummation of which
the persons who were directors of the Company immediately before the
transaction shall cease to constitute a majority of the Board of
Directors of the Company or any successor to the Company or the
persons who were stockholders of the Company immediately before the
Approval Date will own less than a majority of the outstanding voting
stock of the Company or any successor to the Company
(d) "Award" shall mean any stock option, stock appreciation right, or
stock award.
(e) "Board" shall mean the Board of Directors of the Company.
(f) A "Change of Control" shall be deemed to have taken place on the date
of the earlier to occur of either of the following events: (i) a third
party, including a "group" as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, becomes the beneficial owner of 25%
or more of the Company's outstanding Common Stock, or (ii) as the
result of, or in connection with, any cash tender or exchange offer,
merger, consolidation or other business combination, sale or
disposition of all or substantially all of the Company's assets, or
contested election, or any combination of the foregoing transactions
(a "Transaction"), the persons who were directors of the Company
immediately before the Transaction shall cease to constitute a
majority of the Board of Directors of the Company or any successor to
the Company or the persons who were stockholders of the Company
immediately before the Transaction shall cease to own at least a
majority of the outstanding voting stock of the Company or any
successo to the Company.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended, and
any regulations promulgated thereunder.
(h) "Common Stock" shall mean shares of common stock of the Company, par
value twenty cents ($0.20) per share.
(i) "ECC" shall mean the Executive Compensation Committee of the Board.
(j) "Effective Date" shall mean the date on which a Change of Control
occurs.
(k) "Fair Market Value" shall mean, with respect to a share of the
Company's Common Stock for any purpose on a particular date, as
applicable, (i) either the closing price on the relevant date or the
average of the high and low sale price on the relevant date, as
determined in the Administrator's discretion, quoted on the New York
Stock Exchange, the American Stock Exchange, or the Nasdaq National
Market; (ii) the last sale price on the relevant date quoted on the
Nasdaq SmallCap Market; (iii) the average of the high bid and low
asked prices on the relevant date quoted on the Nasdaq OTC Bulletin
Board Service or by the National Quotation Bureau, Inc. or a
comparable service as determined in the Administrator's discretion; or
(iv) if the Common Stock is not quoted by any of the above, the
average of the closing bid and asked prices on the relevant date
furnished by a professional market maker for the Common Stock, or by
such other source, selected by the Administrator. If no public trading
of the Common Stock occurs on the relevant date but the Common Stock
is then listed for trading on a national exchange or market, then Fair
Market Value shall be determined as of the next preceding date on
which trading of the Common Stock does occur. If the Common Stock is
not listed for trading on a national exchange or market, "Fair Market
Value" shall mean the value determined by the Administrator in good
faith. For all purposes under this Plan, the term "relevant date" as
used in this Section 2(k) shall mean either the date as of which Fair
Market Value is to be determined or the next preceding date on which
public trading of the Common Stock occurs, as determined in the
Administrator's discretion.
(l) "Grant Agreement" shall mean a written document memorializing the
terms and conditions of an Award granted pursuant to the Plan and
shall incorporate the terms of the Plan.
(m) "Performance Measures" shall mean criteria established by the
Administrator relating to any of the following, as it may apply to an
individual, one or more business units, divisions or subsidiaries, or
on a Company-wide basis, and in either absolute terms or relative to
the performance of one or more comparable companies or an index
covering multiple companies: revenue; earnings before interest, taxes,
depreciation and amortization (EBITDA); income before income taxes and
minority interests; operating income; pre- or after-tax income; cash
flow; cash flow per share; net earnings; earnings per share; return on
equity; return on invested capital; return on assets; growth in
assets; share price performance; total stockholder return; improvement
in or attainment of expense levels; relative performance to a group of
companies or relevant market indices comparable to the Company, and
strategic business criteria consisting of one or more objectives based
on the Company meeting specified goals relating to revenue, market
penetration, business expansion, costs or acquisitions or
divestitures.
(n) "Prior Plans" shall mean the Company's 1990 Stock Incentive Plan, 1993
Stock Incentive Plan, 1996 Stock Incentive Plan and 2001 Stock
Incentive Plan.
3. Administration
(a) Administration of the Plan. Unless determined otherwise by the Board,
the Plan shall be administered by the ECC. The ECC may delegate to a
committee of officers of the Company any or all of its duties under
the Plan pursuant to such conditions or limitations as the ECC may
establish, but all grants of Awards subject to Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), shall be
made by the Board or a committee appointed by the Board that is
comprised of two or more "Non-Employee Directors" within the meaning
of Rule 16b-3 of the 1934 Act or any successor provision, which
committee may be the ECC or a subcommittee thereof.
(b) Powers of the Administrator.
(i) The Administrator shall have all the powers vested in it by the
terms of the Plan, such powers to include authority, in its sole
and absolute discretion, to grant Awards under the Plan,
prescribe Grant Agreements evidencing such Awards, and establish
programs for granting Awards.
(ii) The Administrator shall have full power and authority to take all
other actions necessary to carry out the purpose and intent of
the Plan, including, but not limited to, the authority to: (A)
determine the eligible persons to whom, and the time or times at
which Awards shall be granted; (B) determine the types of Awards
to be granted; (C) determine the number of shares to be covered
by or used for reference purposes for each Award; (D) impose such
terms, limitations, restrictions and conditions upon any such
Award as the Administrator shall deem appropriate; (E) modify,
amend, extend or renew outstanding Awards, or accept the
surrender of outstanding Awards and substitute new Awards
(provided, however, that, except as provided in Section 7(c) of
the Plan, any modification that would materially adversely affect
any outstanding Award shall not be made without the consent of
the holder, and provided, further, that no modification,
amendment or substitution that results in repricing a stoc option
to a lower exercise price, other than to reflect an adjustment
made pursuant to Section 7(c)(i), shall be made without prior
stockholder approval); (F) accelerate or otherwise change the
time in which an Award may be exercised or becomes payable and
waive or accelerate the lapse, in whole or in part, of any
restriction or condition with respect to such Award, including,
but not limited to, any restriction or condition with respect to
the vesting or exercisability of an Award following termination
of any grantee's employment or other relationship with the
Company or an Affiliate; provided, however, that no such waiver
or acceleration of lapse restrictions shall be made with respect
to a performance-based stock award granted to an executive
officer of the Company if such waiver or acceleration is
inconsistent with Code Section 162(m); (G) establish objectives
and conditions, if any, for earning Awards and determining
whether Awards will be paid after the end of a performance
period; and (H) for any purpose, including but not limited to,
qualifying for preferred tax treatment under foreign tax laws or
otherwise complying with the regulatory requirements of local or
foreign jurisdictions, to establish, amend, modify, administer or
terminate sub-plans, and prescribe, amend and rescind rules and
regulations relating to such sub-plans.
(iii) The Administrator shall have full power and authority, in its
sole and absolute discretion, to administer, construe and
interpret the Plan, Grant Agreements and all other documents
relevant to the Plan and Awards issued thereunder, to establish,
amend, rescind and interpret such rules, regulations, agreements,
guidelines and instruments for the administration of the Plan and
for the conduct of its business as the Administrator deems
necessary or advisable, and to correct any defect, supply any
omission or reconcile any inconsistency in the Plan or in any
Award in the manner and to the extent the Administrator shall
deem it desirable to carry it into effect.
(c) Non-Uniform Determinations. The Administrator's determinations under
the Plan (including without limitation, determinations of the persons
to receive Awards, the form, amount and timing of such Awards, the
terms and provisions of such Awards and the Grant Agreements
evidencing such Awards) need not be uniform and may be made by the
Administrator selectively among persons who receive, or are eligible
to receive, Awards under the Plan, whether or not such persons are
similarly situated.
(d) Limited Liability. To the maximum extent permitted by law, no member
of the Administrator shall be liable for any action taken or decision
made in good faith relating to the Plan or any Award thereunder.
(e) Indemnification. To the maximum extent permitted by law, by the
Company's charter and by-laws, and by any directors' and officers'
liability insurance coverage which may be in effect from time to time,
the members of the Administrator shall be indemnified and reimbursed
by the Company in respect of all their activities under the Plan.
(f) Effect of Administrator's Decision. All actions taken and decisions
and determinations made by the Administrator on all matters relating
to the Plan pursuant to the powers vested in it hereunder shall be in
the Administrator's sole and absolute discretion and shall be
conclusive and binding on all parties concerned, including the
Company, its stockholders, any participants in the Plan and any other
employee, consultant, or director of the Company, and their respective
successors in interest.
4. Shares Available for the Plan; Maximum Awards
Subject to adjustments as provided in Section 7(c) of the Plan, the
number of shares of Common Stock for which Awards may be granted under the
Plan shall be determined in accordance with this Section 4:
(a) The shares of Common Stock with respect to which Awards may be made
under the Plan shall be shares authorized but unissued, including
shares purchased in the open market or in private transactions.
(b) Subject to the following provisions of this Section 4, the maximum
number of shares of Common Stock that may be delivered to participants
under the Plan shall be equal to the sum of (i) eight million
(8,000,000) shares of Common Stock; (ii) any shares of Common Stock
subject to Awards under any Prior Plan that are forfeited, expire or
are canceled or settled in cash without delivery of shares of Common
Stock; (iii) any shares of Common Stock tendered (either actually or
through attestation) or withheld to pay the exercise price of any
Award under this Plan or any Prior Plan or to satisfy withholding
taxes that arise in connection with any Award under this Plan or any
Prior Plan; (iv) any shares of Common Stock that are forfeited back to
the Company after delivery because of the failure to meet an Award
contingency or condition in connection with any Award under this Plan
or any Prior Plan; and (v) the amount of any shares of Common Stock
reacquired by the Company on the open market or otherwise using the
cash proceeds received by the Company from the exercise of stock
options granted under the Plan or any Prior Plan, provided, however,
that the maximum number of shares of Common Stock in respect of the
exercise of a stock option that may be so reacquired and made
available for delivery to participants under the Plan shall be equal
to (A) the amount of the proceeds received by the Company, divided by
(B) the Fair Market Value of the Common Stock on the date of the
exercise which generated such proceeds.
(c) Any shares of Common Stock covered by an Award (or portion of an
Award) granted under the Plan that is forfeited or canceled, expires
or is settled in cash, including the settlement of tax withholding
obligations using shares of Common Stock, shall be deemed not to have
been delivered for purposes of determining the maximum number of
shares available for delivery under the Plan.
(d) Subject to adjustment as provided in Section 7(c), the following
additional maximums are imposed under the Plan.
(i) The maximum number of shares of Common Stock that may be issued
under the Plan pursuant to Awards intended to be "incentive stock
options" within the meaning of Code Section 422 shall be eight
million (8,000,000) shares.
(ii) The maximum number of shares of Common Stock that may be issued
under the Plan in conjunction with stock awards under Section
6(d) of the Plan shall be one million (1,000,000) shares.
(iii)The maximum number of shares of Common Stock that may be subject
to Stock Awards granted under the Plan to any one person pursuant
to Section 6(d) that are intended to constitute or give rise to
"qualified performance-based compensation" within the meaning of
Code Section 162(m) shall be one million (1,000,000) shares
during any 36-month period. Such per-individual limit shall not
be adjusted to effect a restoration of shares of Common Stock
with respect to which the related Award is terminated,
surrendered or canceled.
(iv) The maximum number of shares of Common Stock subject to Awards of
any combination that may be granted during any calendar year
under the Plan to any one person is one million (1,000,000)
shares. Such per-individual limit shall not be adjusted to effect
a restoration of shares of Common Stock with respect to which the
related Award is terminated, surrendered or canceled.
5. Participation
Participation in the Plan shall be open to all employees and officers of,
and other individuals, excluding non-employee directors, providing bona fide
services to or for, the Company or of any Affiliate of the Company, as may be
selected by the Administrator from time to time. The Administrator may also
grant Awards to individuals in connection with hiring, retention or otherwise,
prior to the date the individual first performs services for the Company or an
Affiliate; provided, however, that such Awards shall not become vested or
exercisable prior to the date the individual first commences performance of such
services.
6. Awards
(a) Awards, In General. The Administrator, in its sole discretion, shall
establish the terms of all Awards granted under the Plan. Awards may
be granted individually or in tandem with other types of Awards,
concurrently with or with respect to outstanding Awards. All Awards
are subject to the terms and conditions provided in the Grant
Agreement. The Administrator may permit or require a recipient of an
Award to defer such individual's receipt of the payment of cash or the
delivery of Common Stock that would otherwise be due to such
individual by virtue of the exercise of, payment of, or lapse or
waiver of restrictions respecting, any Award. If any such payment
deferral is required or permitted, the Administrator shall, in its
sole discretion, establish rules and procedures for such payment
deferrals.
(b) Stock Options. The Administrator may from time to time grant to
eligible participants Awards of incentive stock options as that term
is defined in Code Section 422 or nonqualified stock options;
provided, however, that Awards of incentive stock options shall be
limited to employees of the Company or of any current or hereafter
existing "parent corporation" or "subsidiary corporation," as defined
in Code Sections 424(e) and (f), respectively, of the Company. No
Award shall be an incentive stock option unless so designated by the
Administrator at the time of grant or in the Grant Agreement
evidencing such Award. No stock option Award granted under the Plan
shall have a term in excess of 10 years; provided, however, that the
term may extend for six months beyond the date of death in the event
that a grantee dies within the six-month period immediately before the
expiration of the initial 10-year term. The exercise price of all
stock option Awards granted under this Plan shall be at least equal to
Fair Market Value as of the date of grant. The Company or its
Affiliate may make or guarantee loans to grantees to assist grantees
in exercising Awards and satisfying any withholding tax obligations,
but no such loan or guarantee shall be made to or for the benefit of a
director or executive officer of the Company.
(c) Stock Appreciation Rights. The Administrator may from time to time
grant to eligible participants Awards of stock appreciation rights
("SAR"). A SAR entitles the grantee to receive, subject to the
provisions of the Plan and the Grant Agreement, a payment having an
aggregate value equal to the product of (i) the excess of (A) the Fair
Market Value on the exercise date of one share of Common Stock over
(B) the base price per share specified in the Grant Agreement, times
(ii) the number of shares specified by the SAR, or portion thereof,
which is exercised. The base price per share specified in the Grant
Agreement shall not be less than the lower of the Fair Market Value on
the grant date or the exercise price of any tandem stock option Award
to which the SAR is related. Payment by the Company of the amount
receivable upon any exercise of a SAR may be made by the delivery of
Common Stock or cash, or any combination of Common Stock and cash, as
determined in the sole discretion of the Administrator If upon
settlement of the exercise of a SAR a grantee is to receive a portion
of such payment in shares of Common Stock, the number of shares shall
be determined by dividing such portion by the Fair Market Value of a
share of Common Stock on the exercise date. No fractional shares shall
be issued for such payment and the Administrator shall determine
whether cash shall be given in lieu of such fractional shares or
whether such fractional shares shall be eliminated.
(d) Stock Awards.
(i) The Administrator may from time to time grant stock awards to
eligible participants in such amounts, on such terms and
conditions, and for such consideration, including no
consideration or such minimum consideration as may be required by
law, as it shall determine. A stock award may be denominated in
Common Stock or other securities, stock-equivalent units,
securities or debentures convertible into Common Stock, or any
combination of the foregoing and may be paid in Common Stock or
other securities, in cash, or in a combination of Common Stock or
other securities and cash, all as determined in the sole
discretion of the Administrator. Unless the Administrator
determines otherwise, the restriction period of stock awards
shall be of at least three years' duration.
(ii) The Administrator may grant stock awards in a manner constituting
"qualified performance-based compensation" within the meaning of
Code Section 162(m). The grant of, or lapse of restrictions with
respect to, such performance-based stock awards shall be based
upon one or more Performance Measures and objective performance
targets to be attained relative to those Performance Measures,
all as determined by the Administrator. Performance targets may
include minimum, maximum and target levels of performance, with
the size of the performance-based stock award or the lapse of
restrictions with respect thereto based on the level attained.
7. Miscellaneous
(a) Withholding of Taxes. Grantees and holders of Awards shall pay to the
Company or its Affiliate, or make provision satisfactory to the
Administrator for payment of, any taxes required to be withheld in
respect of Awards under the Plan no later than the date of the event
creating the tax liability. The Company or its Affiliate may, to the
extent permitted by law, deduct any such tax obligations from any
payment of any kind otherwise due to the grantee or holder of an
Award. In the event that payment to the Company or its Affiliate of
such tax obligations is made in shares of Common Stock, such shares
shall be valued at Fair Market Value on the applicable date for such
purposes and shall not exceed the statutory minimum tax withholding
requirement.
(b) Transferability. Except as otherwise determined by the Administrator,
and in any event in the case of an incentive stock option or a stock
appreciation right granted with respect to an incentive stock option,
no Award granted under the Plan shall be transferable by a grantee
otherwise than by will or the laws of descent and distribution. Unless
otherwise determined by the Administrator in accord with the
provisions of the immediately preceding sentence, an Award may be
exercised during the lifetime of the grantee, only by the grantee or,
during the period the grantee is under a legal disability, by the
grantee's guardian or legal representative.
(c) Adjustments for Corporate Transactions and Other Events.
(i) Capital Adjustments, Stock Dividend. The aggregate number of
shares of Common Stock on which Awards under the Plan may be
granted to persons participating under the Plan, the number of
shares thereof covered by each Award, the price per share thereof
in each Award, and any numerical limitations contained herein
relating to Awards shall all be proportionately adjusted for any
increase or decrease in the number of issued shares of Common
Stock of the Company resulting from a subdivision or
consolidation of shares or other capital adjustment, or the
payment of a stock dividend or other increase or decrease in such
shares, effected without receipt of consideration by the Company;
provided, however, that any fractional shares resulting from any
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 Administrator as necessary or
appropriate to reflect the transaction.
(ii) Merger, Consolidation, other Events. If the Company shall be the
surviving or resulting corporation in any merger or consolidation
and the Common Stock shall be converted into other securities,
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. Unless the
Administrator determines otherwise, all Awards outstanding under
the Plan shall terminate upon the dissolution or liquidation of
the Company. Unless the Administrator shall have otherwise
determined within the limits specified in this paragraph, all
Awards outstanding under the Plan shall become fully vested and
exercisable immediately following the date on which the
Administrator no longer may revoke or modify the acceleration
contemplated by this paragraph and shall remain exercisable for a
one-year period thereafter. After the expiration of any such
one-year period, the Awards shall remain exercisable only to the
extent, if any, provided in the applicable Grant Agreement
without taking into consideration the effect of this paragraph.
The Administrator's discretion to revoke or limit the
acceleration contemplated by this paragraph may be exercised at
any time before or within 20 business days after the Effective
Date or the Approval Date, as applicable; provided, however, that
such discretion to revoke or limit the acceleration may not be
exercised after the persons who were directors of the Company
immediately before the Transaction shall cease to constitute a
majority of the Board of Directors of the Company or any
successor to the Company. In the event the Approval Date and an
Effective Date arise from substantially identical facts and
circumstances (as determined by the Administrator in its sole
discretion) and unless the Administrator shall have determined to
limit the effect of this sentence, such one-year period (and the
20-day period referred to in the immediately preceding sentence)
shall commence onl once and upon the first to occur of the
Approval Date or the Effective Date.
(iii)Other. In the event of a change in the Company's Common Stock
which is limited to a change in the designation thereof to
"Capital Stock" or other similar designation, or to a change in
the par value thereof, or from par value to no par value, without
increase in the number of issued shares, the shares resulting
from any such change shall be deemed to be Common Stock within
the meaning of the Plan.
(d) Substitution of Awards in Mergers and Acquisitions. Awards may be
granted under the Plan from time to time in substitution for awards
held by employees, officers, consultants or directors of entities who
become or are about to become employees, officers, consultants or
directors of the Company or an Affiliate as the result of a merger or
consolidation of the employing entity with the Company or an
Affiliate, or the acquisition by the Company or an Affiliate of the
assets or stock of the employing entity. The terms and conditions of
any substitute Awards so granted may vary from the terms and
conditions set forth herein to the extent that the Administrator deems
appropriate at the time of grant to conform the substitute Awards to
the provisions of the awards for which they are substituted. To the
extent permitted by applicable law and exchange rules, any Awards
granted pursuant to this Section 7(d) shall not reduce the number of
shares available for delivery pursuant to Section 4.
(e) Termination, Amendment and Modification of the Plan. The Board may
terminate, amend or modify the Plan or any portion thereof at any
time; provided, however, that the prohibition on repricing stock
options set forth in Section 3 may not be modified, the share
limitations set forth in Section 4 may not be increased, the minimum
exercise prices and maximum term of stock options set forth in Section
6 may not be modified, and no other amendment or modification that
materially increases the benefits to participants may be made without
prior stockholder approval. Except as otherwise determined by the
Board, termination of the Plan shall not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to
Awards granted under the Plan prior to the date of such termination.
(f) Non-Guarantee of Employment or Service. Nothing in the Plan or in any
Grant Agreement thereunder shall confer any right on an individual to
continue in the service of the Company or shall interfere in any way
with the right of the Company to terminate such service at any time
with or without cause or notice and whether or not such termination
results in (i) the failure of any Award to vest; (ii) the forfeiture
of any unvested or vested portion of any Award; and/or (iii) any other
adverse effect on the individual's interests under the Plan.
(g) No Trust or Fund Created. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company and a grantee or any other
person. To the extent that any grantee or other person acquires a
right to receive payments from the Company pursuant to an Award, such
right shall be no greater than the right of any unsecured general
creditor of the Company.
(h) Application of Funds. The proceeds received by the Company from the
issuance of Common Stock pursuant to Awards under the Plan will be
used for general corporate purposes.
(i) Governing Law. The validity, construction and effect of the Plan, of
Grant Agreements entered into pursuant to the Plan, and of any rules,
regulations, determinations or decisions made by the Administrator
relating to the Plan or such Grant Agreements, and the rights of any
and all persons having or claiming to have any interest therein or
thereunder, shall be determined exclusively in accordance with
applicable federal laws and the laws of the State of Maryland, without
regard to its conflict of laws principles.
(j) Effective Date; Termination Date. The Plan shall become effective on
the date it receives approval by the affirmative vote of a majority of
the votes cast in person or by proxy at a meeting of the stockholders
of the Company duly held in accordance with applicable law. No award
shall be granted pursuant to this Plan after February 4, 2014. Subject
to other applicable provisions of the Plan, all Awards made under the
Plan on or before February 4, 2014, or such earlier termination of the
Plan shall remain in effect until such Awards have been satisfied or
terminated in accordance with the Plan and the terms of such Awards.
Exhibit C
First Amendment to the
T. Rowe Price Group, Inc.
2001 Stock Incentive Plan
W I T N E S S E T H:
WHEREAS, T. Rowe Price Group, Inc., a Maryland corporation (the "Company"),
maintains the 2001 Stock Incentive Plan (the "2001 Plan"); and
WHEREAS, Section 7(e) of the 2001 Plan reserves to the Board of Directors
of the Company (the "Board") the authority to amend the plan from time to time;
and
WHEREAS, the Board, having determined that it is desirable and in the best
interests of the Company and its stockholders, in conjunction with the adoption
of a new stock incentive plan (the "2004 Plan"), to amend the 2001 Plan to
freeze its share pool for purposes of future awards at the number of shares of
common stock of the Company remaining available for issuance thereunder as of
the date the stockholders of the Company approve adoption of the 2004 Plan. NOW,
THEREFORE, the Plan is amended as follows, effective upon approval by the
stockholders of the Company of this amendment and adoption of the 2004 Plan:
First and Only Change
Section 4 of the Plan is amended in its entirety to read as follows:
4. Shares Available for the Plan; Maximum Awards
Subject to adjustments as provided in Section 7(c) of the Plan,
the maximum number of shares of Common Stock that may be delivered to
participants under the Plan on or after the date of the Annual Meeting
of the Stockholders of the Company held in April 2004 (the "Annual
Meeting Date") shall be equal to the sum of (i) the number of shares
of Common Stock subject to purchase under Awards outstanding as of the
Annual Meeting Date and (ii) the number of shares of Common Stock that
remained available for issuance under the Plan as of the Annual
Meeting Date that were not then subject to outstanding Awards.
Subject to adjustment as provided in Section 7(c), the following
additional maximums are imposed under the Plan. The maximum number of
shares of Common Stock that may be issued in connection with incentive
stock options intended to qualify under Code Section 422 shall be
8,000,000. The maximum number of shares of Common Stock that may be
issued in conjunction with stock awards under Section 6(d) of the Plan
shall be 1,000,000. The maximum number of shares of Common Stock
subject to Awards of any combination that may be granted during any
calendar year under the Plan to any one person is 1,000,000; provided,
however, that to the extent the maximum permissible award is not made
in a year, such amount may be carried over to subsequent years. Such
per-individual limit shall not be adjusted to effect a restoration of
shares of Common Stock with respect to which the related Award is
terminated, surrendered or canceled."
IN WITNESS WHEREOF, the Company has caused this First Amendment to be
executed by its duly authorized officer this ___ day of _______________, 2004.
ATTEST: T. ROWE PRICE GROUP, INC.
By: ____________________________________ By:____________________________________
Exhibit D
Nominating and Corporate Governance Committee Charter
Organization
This Charter governs the activities of the Nominating and Corporate
Governance Committee (the "Committee"). The Committee shall be comprised of at
least two "independent" directors as defined by the National Association of
Securities Dealers, Inc. The members of the Committee shall be appointed
annually by a majority vote of the entire Board of Directors. The Committee
proposes a slate of directors for election by the stockholders at each annual
meeting, recommends candidates to fill vacancies on the Board of Directors,
makes recommendations about the composition of the committees of the Board of
Directors, and makes recommendations with respect to corporate governance
matters.
Meetings
The Committee shall hold meetings as deemed necessary or desirable by the
Chair of the Committee. In addition to such meetings of the Committee as may be
required to perform the functions described under "Duties and Powers" below, the
Committee shall meet at least annually to discuss any matters that the Committee
believes should be discussed. The Committee may, at its discretion, meet in
executive session with or without the presence of management.
Duties and Powers
The Committee has the responsibility and authority to supervise and review
the affairs of the Corporation as they relate to nominations of directors and
corporate governance. The following shall be the principal recurring functions
of the Committee in carrying out its responsibilities:
o Develop criteria for selecting new directors.
o Seek out appropriate, qualified candidates to serve as directors of
the Corporation and encourage and receive recommendations for director
candidates from all sources.
o Monitor the Corporation's procedures for the receipt and consideration
of director nominations by stockholders.
o Interview and otherwise examine director candidates and their
credentials.
o Recommend to the Board of Directors candidates for nomination as
directors and the composition of the committees of the Board.
o Perform such other advisory functions with respect to the selection
and nomination of directors of the Corporation as are deemed
appropriate by the members of the Committee.
o Develop and recommend to the Board a set of corporate governance
principles for the Corporation and monitor the Corporation's
compliance with those principles.
o Monitor the role and effectiveness of the Board of Directors in the
corporate governance process.
o Review the Committee's performance of these duties on at least an
annual basis.
o Report to the Board of Directors on the Committee's activities as
appropriate, but at least annually.
o Establish and monitor procedures for the receipt of stockholder
communications directed to the Board of Directors.
Resources and Authority
The Committee shall have the resources and authority appropriate to
discharge its responsibilities, including the authority to retain and terminate
special counsel and other experts or consultants.
Operating Procedures
Formal actions to be taken by the Committee shall be by unanimous written
consent or by a majority of the persons present (in person or by conference
telephone) at a meeting at which a quorum is present. A quorum shall consist of
at least 50% of the members of the Committee.
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T. Rowe Price (RM) INVEST WITH CONFIDENCE
FINAL CONFIDENTIAL
CONTAINS ATTORNEY-CLIENT COMMUNICATION/ATTORNEY WORK PRODUCT
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T. ROWE PRICE GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS
Thursday, April 8, 2004
10:00 a.m.
RENAISSANCE HARBORPLACE HOTEL
202 East Pratt Street
Baltimore, Maryland 21202
DIRECTIONS TO THE ANNUAL MEETING OF STOCKHOLDERS
The Renaissance Harborplace Hotel at 202 East Pratt Street (between Calvert and
South Streets) is located across from the northern edge of Baltimore's Inner
Harbor.
From the south: Take I-95 north to I-395 (downtown) directly into Baltimore
City. Turn right onto Pratt Street and then left onto Calvert Street or South
Street. You may enter the hotel's parking garage from either street.
From the north: Take I-83 (Jones Falls Expressway) directly into Baltimore City.
Turn right onto Lombard Street. Proceed for approximately 2/3 mile and then turn
left onto South Street. The entrance to the hotel's parking garage is on the
right.
From the west: Take Route 40 (Baltimore National Pike) east directly into
Baltimore City (Edmondson Avenue to Mulberry Street). Turn right onto Martin
Luther King Boulevard; proceed south for approximately 1/2 mile and then turn
left (east) onto Pratt Street. Proceed east on Pratt Street for approximately
7/8 mile and then left onto Calvert Street or South Street. You may enter the
hotel's parking garage from either street.
From the east: Take I-95 south through the Fort McHenry Tunnel. Exit at I-395
(downtown) directly into Baltimore City. Turn right onto Pratt Street and then
left onto Calvert Street or South Street. You may enter the hotel's parking
garage from either street.
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T. ROWE PRICE GROUP, INC.
2004 Proxy
Revocable Proxy Solicited on Behalf of the Board of Directors
I hereby appoint James S. Riepe and George A. Roche, together and separately, as
proxies to vote all shares of common stock which I have power to vote at the
annual meeting of stockholders to be held on Thursday, April 8, 2004, at 10:00
a.m., at the Renaissance Harborplace Hotel, 202 East Pratt Street, Baltimore,
Maryland 21202, and at any adjournments thereof in accordance with the
instructions on the reverse side of this proxy card and as if I were present in
person and voting such shares. The proxies are authorized in their discretion to
vote upon such other business as may properly come before the meeting and they
may name others to take their place. I also hereby acknowledge receipt of the
Notice of Annual Meeting and Proxy Statement, dated February 27, 2004, and Price
Group's 2003 Annual Report to Stockholders.
This proxy, when properly completed and returned, will be voted in the manner
directed herein by the stockholder named on the reverse side. IF NO DIRECTION IS
GIVEN, THIS PROXY WILL BE VOTED "FOR" THE NOMINEES AND OTHER PROPOSALS LISTED ON
THE REVERSE SIDE, AND, IN THE DISCRETION OF THE PROXYHOLDER, ON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING AND AT ANY ADJOURNMENTS AND
POSTPONEMENTS THEREOF.
PLEASE VOTE YOUR PROXY PROMPTLY.
See reverse side for voting instructions.
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Company #
Control #
THERE ARE THREE WAYS TO VOTE YOUR PROXY.
Your telephone or Internet vote authorizes the Named Proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.
VOTE BY TELEPHONE - TOLL FREE - 1-800-560-1965 - QUICK *** EASY *** IMMEDIATE
o Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days
a week, until 12:00 p.m. (CT) on April 7, 2004.
o Please have your proxy card and the last four digits of your Social
Security Number available. Follow the simple instructions the voice
provides you.
VOTE BY INTERNET - http://www.eproxy.com/trow/ - QUICK *** EASY *** IMMEDIATE
o Use the Internet to vote your proxy 24 hours a day, 7 days a week,
until 12:00 p.m. (CT) on April 7, 2004.
o Please have your proxy card and the last four digits of your Social
Security Number available. Follow the simple instructions to obtain
your records and create an electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to T. Rowe Price Group, Inc., c/o Shareowner
Services(sm) , P.O. Box 64945, St. Paul, MN 55164-0945.
If you vote by phone or the Internet, please do not mail your Proxy Card (arrow
graphic). Please detach here (arrow
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The Board of Directors Recommends a Vote FOR Items 1, 2, 3 and 4.
1. Election of directors:
01 Edward C. Bernard 05 James A.C. Kennedy 09 Dr. Alfred Sommer
02 James T. Brady 06 James S. Riepe 10 Dwight S. Taylor
03 D. William J. Garrett 07 George A. Roche 11 Anne Marie Whittemore
04 Donald B. Hebb, Jr. 08 Brian C. Rogers
[ ]Vote FOR all nominees [ ]Vote WITHHELD
(except as marked) from all nominees
(Instructions: To withhold authority to vote for any indicated nominee, write
the number(s) of the nominee(s) in the box provided to the right.)[ ]
2. Ratification of the appointment of KPMG LLP as the company's independent
accountant for fiscal year 2004
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of the proposed 2004 Stock Incentive Plan and corollary amendment
of the 2001 Stock Incentive Plan
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
business and further business as may properly come before the meeting or
any adjournments and postponements thereof.
[ ] FOR [ ] WITHHOLD
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR ITEMS 1, 2, 3 AND 4.
Address Change? Mark Box [ ] Indicate changes below:
Date: _________________________________
[ ]
Signature(s) in Box If you are voting by mail, please date and
sign exactly as your name appears to the left. When signing as a
fiduciary, representative or corporate officer, give full title
as such. If you receive more than one proxy card, please vote the
shares represented by each card separately.