Exhibit 10.9

 

LEGG MASON, INC.

 

1996 Equity Incentive Plan

 

NON-QUALIFIED STOCK OPTION AGREEMENT

 

Legg Mason, Inc. (the “Company”) hereby grants to you an option to purchase
shares of the Company’s Common Stock, $.10 par value (the “Shares”), at
$             per share, pursuant to the Legg Mason, Inc. 1996 Equity Incentive
Plan (the “Plan”). The date of grant of the option provided hereby shall for all
purposes be                     . This option is intended to be a non-qualified
stock option for purposes of the Internal Revenue Code.

 

This option is subject in all respects to the applicable provisions of the Plan,
which is incorporated herein by reference and made a part hereof. In addition to
the terms, conditions and restrictions set forth in the Plan, all terms,
conditions and restrictions set forth in this Agreement, including the
following, are applicable to the option granted by this Agreement:

 

(1) Issuance of the Shares

 

The Company may postpone the issuance and delivery of any Shares until the
completion or amendment of any registration or qualification of the Shares,
under any federal or state law, rule or regulation which the Company may
determine to be necessary or advisable. In the event that, at the time of
issuance of the Shares to you pursuant to exercise of the option provided by
this Agreement, there shall not be in effect a current registration statement
under the Securities Act of 1933 (the “Act”) with respect to such issuance, you
shall, prior to issuance of the Shares to you (a) represent to the Company, in
form satisfactory to counsel for the Company, that you are acquiring the Shares
for your own account and not with a view to the resale or distribution thereof,
and (b) agree that none of the Shares issued to you pursuant to exercise of the
option provided hereby may be sold, transferred or otherwise disposed of unless:
(i) a registration statement under the Act shall be effective at the time of
disposition with respect to the Shares sold, transferred or otherwise disposed
of; (ii) the Company shall have received an opinion of counsel or other
information and representations, satisfactory to it to the effect that
registration under the Act is not required by reason of Rule 144 under the Act
or otherwise; or (iii) a “no-action” letter shall have been received from the
staff of the Securities and Exchange Commission to the effect that such sale,
transfer or other disposition may be made without registration.

 

(2) Normal Vesting

 

Except as provided in Section (3) below, vesting shall be in accordance with the
vesting schedule provided with this Agreement. To the extent not exercised,
installments shall accumulate and be exercisable by you in whole or in part
during the exercise period described in Section (4) below.

 

(3) Accelerated Vesting

 

(a) If your employment is terminated as a result of your death or “Permanent
Disability,” all of your then unvested option rights shall become vested and
exercisable on and after the date of the termination of your employment. For
purposes of this Agreement, you will be considered to have suffered a “Permanent
Disability,” if you are unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be
expected to result in your death or which has lasted or can be expected to last
for a continuous period of not less than 12 months.

 

(b) In the event that a proposed merger, consolidation, sale of assets or tender
or exchange offer is not approved by the affirmative vote of 75% or more of the
directors who are members of the Company’s Board of Directors prior to the
proposal of such merger, consolidation, sale of assets or tender or exchange
offer, all of your then unvested option rights shall become immediately vested
and exercisable upon: (i) the approval by stockholders of the Company of an
agreement to merge or consolidate the Company with or into another

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corporation (with the Company not surviving) or to sell or otherwise dispose of
all or substantially all of its assets and the satisfaction or waiver of all
conditions precedent to the closing thereunder; or (ii) a determination by the
Board of Directors of the Company that in connection with the proposed tender or
exchange offer for voting securities of the Company, any person has become the
direct or indirect beneficial owner of securities representing 40% or more of
the combined voting power of the Company’s then outstanding securities.

 

(c) In addition, the Compensation Committee (the “Committee”) of the Board of
Directors of the Company or the Board of Directors of the Company may, in its
sole discretion, accelerate the vesting of any part or all of the option rights
under this Agreement.

 

(4) Option Exercise Period

 

This option may not be exercised prior to vesting. Upon the termination of your
employment, any options that are not yet vested (after taking into account any
accelerated vesting provided for in Section (3) of this Agreement) shall expire
immediately. To the extent not exercised, vested options shall expire on
                    , unless they expire sooner as provided below:

 

(a) To the extent not previously exercised, vested options shall expire
immediately upon the termination of your employment for cause.

 

(b) To the extent not previously exercised, vested options shall expire on the
first anniversary of the termination of your employment as a result of your
death or Permanent Disability.

 

(c) To the extent not previously exercised, vested options shall expire three
months after the termination of your employment for any reason other than the
termination of your employment for cause or the termination of your employment
as a result of your death or Permanent Disability. In the event of your death
during the post-employment exercise period, the exercise period shall be
extended to the first anniversary of the termination of your employment.

 

(5) Transferability

 

During your lifetime, this option shall be exercisable only by you and shall not
be transferable. Any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of, or to subject to execution, attachment or similar process,
this option contrary to the provisions of this Agreement and the Plan, shall be
void and of no effect, shall give no right to the purported transferee, and
shall result in forfeiture of the option involved in such attempt.

 

(6) Exercise Notice

 

This option is exercisable solely by written notice to the Company. Each such
notice shall:

 

(a) state the election to exercise the stock option and the number of shares in
respect of which it is being exercised;

 

(b) be signed by you or, in the event of your death or permanent disability, by
your personal representative; and

 

(c) be accompanied by (i) cash, check, bank draft or money order in the amount
of the option price payable to the order of the Company or (ii) certificates for
shares of the Company’s Common Stock (together with duly executed stock powers)
or other written authorization as may be required by the Company to transfer
shares of such Common Stock to the Company, with an aggregate value equal to the
option price of the Shares being acquired or (iii) a combination of the
consideration described in clauses (i) and (ii). You may transfer shares of
Common Stock to pay the option price for shares being acquired pursuant to
clause (ii) or (iii) above only if such transferred shares (x) were acquired by
you in open market transactions or (y) have been owned by you for longer than
six months. Unless otherwise determined by the

 

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Committee subsequent to the date of this Agreement, the value of any shares of
the Company’s Common Stock delivered in full or partial payment of the option
price shall be determined on the basis of the mean between the high and low
prices per share on the New York Stock Exchange on the business day preceding
the date of delivery of the shares (or the next preceding business day on which
trading occurred if there was no trading on the preceding business day).

 

In addition to the exercise methods described above, you may exercise the option
through a procedure whereby you deliver to the Company an irrevocable notice of
exercise in exchange for the Company issuing the shares of the Company’s Common
Stock subject to the option to a broker previously designated or approved by the
Company, which broker may be Legg Mason Wood Walker, Incorporated, (the
“Broker”) versus payment of the option price by the broker to the Company,
subject to such rules and procedures as the Committee may determine.

 

For all purposes of the Plan, the date of exercise shall be the date on which
notice and any required payment shall have been delivered to the Company. You
shall not have any of the rights of a stockholder with respect to any of the
Shares subject to this option until the Shares have been issued to you upon the
exercise of the option.

 

(7) Delivery of Notices

 

Any notice to be given to the Company (including notice of exercise of all or
part of a stock option) shall be in writing and either hand delivered or mailed
to the Company’s Stock Option Plan Administrator. If mailed, it shall be
addressed to the Stock Option Plan Administrator, at 100 Light Street,
Baltimore, Maryland 21202, or at such other address as the Company may designate
by notice to you. Any notice given to you shall be addressed to you at your
address as reflected on the personnel records of the Company, or at such other
address as you may designate by notice to the Company. Notice shall be deemed to
have been duly delivered when hand delivered or, if mailed, at the close of
business on the day such notice is postmarked.

 

(8) Modification of Agreement

 

This Agreement may be modified only by the Committee or by the Company’s Board
of Directors. No officer or employee of the Company or any of its subsidiaries
is authorized to bind the Company to a modification of any of the terms of the
Agreement.

 

LEGG MASON, INC.

By:        

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    Robert F. Price     Senior Vice President,     General Counsel and Secretary

 

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