Document:

Exhibit
10.7

 

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”).  This document constitutes
your “Award Notification.”  By
electronically accepting the award described in this agreement, you are
acknowledging your acceptance of the award subject to the restrictions and upon
the terms and conditions set forth in this agreement and the Plan.  The number of Shares that may be purchased
under the option granted hereby shall be as set forth on the third party
website pursuant to which this Award Notification is electronically delivered
to you and in the books and records of the Company, which shall control, absent
manifest error, in the event of a discrepancy. 
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, the
option awarded hereby shall vest in 20% increments over a five year period such
that you may exercise the option with respect to, and purchase, 20% of the
Shares purchasable under your option on each of May 31,         ,
May 31,         , May 31,
        , May 31,         
and May 31,         .  If vesting occurs on a non-trading day,
vested options may be first exercised on the next trading day.  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 “Change of Control” occurs and
within 12 months of such “Change of Control” (i) your employment is
terminated by your employer without “Cause” or (ii) your employment is
terminated by you for “Good Reason,” then all of your unvested option rights
shall become immediately vested and exercisable on and after the date of
termination of your employment.

 

For purposes of this Agreement, “Change of Control”
means any of the following events: (i) any person, including a “person” as
such term is used in Section 14(d)(2) of the Securities Exchange Act
of 1934, as amended, acquires, directly or indirectly, beneficial  ownership of securities representing 50.1% or
more of the combined voting power of the outstanding equity securities of the
Company; (ii) the closing of any merger, consolidation or other
reorganization involving the Company with respect to which the stockholders of
the Company immediately prior to such reorganization do not hold, directly or
indirectly, more than 50% of the combined voting power of the outstanding
equity securities of such successor entity immediately following such
transaction; (iii) the closing of any transaction involving a sale of
assets of the Company that have a total gross fair market value equal to or
more than 40% of the total gross fair market value of all of the assets of the
Company; (iv) the adoption of any plan or proposal for the liquidation or
dissolution of the Company; or (v) within any 12-month period, individuals
who, as of May 15,         ,
constitute the board of directors of the Company (the “Incumbent Board”) cease
for any reason to constitute at least a majority of such board; provided,
however, that any individual becoming a director subsequent to such date whose
election, or nomination for election by the Company’s stockholders, was
approved by a vote of at least a majority of the directors then comprising the
Company’s board of directors shall be considered as though such individual were
a member of the Incumbent Board.

 

For purposes of this Agreement, “Good Reason” means (i) a
material adverse change in your responsibilities from those in effect prior to
the Change of Control and (ii) your principal 

 

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place of employment is moved more than 50 miles from
the location immediately prior to the Change of Control, (iii) your base
salary is significantly reduced or (iv) your incentive compensation for a
fiscal year is materially reduced from your incentive compensation for the
prior fiscal year, and such reduction is not related to a reduction in your
responsibilities or either individual or corporate performance.

 

(c)             If your
employment is terminated before the date on which all of your option rights
have vested and (i) such termination is due to the elimination of your
position in connection with a reduction in workforce by your employer and (ii) such
termination of employment is without “Cause”, then all of your unvested option
rights shall become vested and exercisable on and after the date of termination
of your employment.

 

For purposes of this Agreement, “Cause” means
any one or more of
the following types of behavior by you which the Company or your employer in
its sole discretion finds to be sufficient reason to terminate your
employment:  (i) any conduct (a) that
constitutes Competitive Activity, (b) that breaches any obligation to, or
your duty of loyalty to, the Company or your employer, or (c) that is
materially injurious to the Company or your employer, monetarily or otherwise; (ii) material violation of, or an act taken by the failure to act
which causes the Company or your employer to be in violation of any government
statue or regulation, or of the constitution, by-laws, rules or
regulations of any securities or commodities exchange or a self-regulatory
organization, or of the policies of the Company or your employer; (iii) the
entering of an order or decree or the taking of any similar action with respect
to you which substantially impairs you from performing your duties or makes you
ineligible from being associated with the Company or your employer pursuant to Section 9
of the Investment Company Act of 1940, as amended, or Section 203(f) of
the Investment Advisors Act of 1940, as amended; (iv) malfeasance,
disloyalty or dishonesty in any material respect; (v) any conviction for a
felony: (vi) any failure to devote all professional time to assigned
duties and to the business of the Company and your employer; (vii) failure
to satisfactorily perform duties, as determined by the Company’s or your
employer’s management in its sole discretion, or gross misconduct or gross
negligence in the performance of duties; or (viii) failure to remain
licensed to perform duties or other act, conduct or circumstance which renders
you ineligible for employment with the Company or your employer.  For purposes of this Agreement, “Competitive
Activity” means your
engagement in any activity that competes with any of the business operations of
the Company or its subsidiaries, as determined by the Committee, in its sole
discretion, and shall include, without limitation, representing in any
capacity, other than as an outside director, a company that competes with the
Company and its subsidiaries.

 

(d)           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

 

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provided for in Section (3) of
this Agreement) shall expire immediately. 
To the extent not exercised, vested options shall expire on May 17,
2018, 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 or its designee.  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 delivered 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)

 

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have been owned by you
for longer than six months.  Unless
otherwise determined by the 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 day of delivery of the shares (or the next preceding business day on
which trading occurred if there was no trading on the day of delivery).

 

In addition to the
exercise methods described above, you may exercise the option through a
procedure whereby you deliver to the Company or its designee 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 (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 or its designee.  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 delivered or mailed to the Company’s Stock Option Plan
Administrator or designee.  If mailed, it
shall be addressed to the Stock Option Plan Administrator, at 100 International
Drive, 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:

  	
   

  
	
   

  	
   

  	
  Thomas C. Merchant

  
	
   

  	
   

  	
  Secretary

  
	
   

  	
   

  

 

5Exhibit
10.8

 

LEGG
MASON, INC. 1996 EQUITY INCENTIVE PLAN

 

RESTRICTED STOCK AWARD AGREEMENT

 

Legg Mason, Inc.
(the “Company”) hereby grants to you (the “Participant”),
pursuant to the Legg Mason, Inc. 1996 Equity Incentive Plan, as amended
(the “Plan”), an award of restricted shares of the Company’s Common
Stock (the “Award”), upon and subject to the restrictions, terms and
conditions set forth below.  This
document constitutes Participant’s “Award Notification”. By electronically
accepting the Award, you are acknowledging your acceptance of the Award subject
to the restrictions and upon the terms and conditions set forth in this
Agreement and the Plan. The number of shares of restricted stock included in
the Award shall be as set forth on the third party website pursuant to which
this Award Notification is electronically delivered to Participant and in the
books and records of the Company, which shall control, absent manifest error,
in the event of a discrepancy.  The Grant
Date for this Award shall for all purposes be               .

 

This Award is subject in
all respects to the applicable provisions of the Plan.  Such provisions are incorporated herein by
reference and made a part hereof. 
Capitalized terms that are not defined in Section 5.7 below are
defined in the Plan and shall have the meanings specified in the Plan.

 

In addition to the terms,
conditions and restrictions set forth in the Plan, all terms, conditions and
restrictions set forth in this Agreement are applicable to the Award granted
hereby.

 

1.             RIGHTS AS A STOCKHOLDER.

 

Until the Shares subject
to this Award have vested under Section 3, Participant shall have no
ordinary rights as a stockholder with respect to such Shares other than the
right to receive dividends or distributions on the Shares as set out
below.  Therefore, until the Shares
subject to this Award have vested, Participant shall have no rights to vote the
underlying Shares or to take physical possession of or transfer the Shares.  Notwithstanding the foregoing, the Company,
in its sole discretion, may elect to permit Participant to vote unvested Shares
subject to this Award at one or more meetings of stockholders of the
Company.  Commencing on the Grant Date,
Participant shall have the right to receive dividends and other distributions
on the Shares that are the subject of this Award unless and until such Shares
are forfeited pursuant to Section 3 hereof; provided, however,
that any dividend or other distribution (including, without limitation, a stock
dividend or stock split) that is not a cash dividend or distribution shall be
delivered to the Company, shall be held by the Company in accordance with Section 2
below and shall be subject to the same vesting schedule and other restrictions
as the Shares with respect to which such dividend or other distribution was
made.  In connection with the payment of
such dividends or other distributions, the Company may deduct any taxes or
other amounts required by any governmental authority to be withheld and paid
over to such authority for the account of Participant or may include such
dividend or distribution in the payroll of Participant’s employer so that such
dividend or distribution is included within the compensation of Participant for
withholding and other taxation purposes. 
Participant shall be entitled to retain cash dividends and distributions
received regardless of whether the Shares with respect to which such dividends 

 

 

or distributions were
made are subsequently forfeited pursuant to Section 3 hereof.  Notwithstanding anything to the contrary,
prior to the date on which the Shares subject to this Award vest pursuant to Section 3
hereof, such Shares shall be subject to the restrictions on transferability
contained in Section 4.1 hereof.

 

2.             CUSTODY AND DELIVERY OF SHARES.

 

Shares subject to this
Award (and any related property received under Section 1 hereof) shall be
issued in street name to an account of the Company and held in such account
until the Shares have vested under Section 3 hereof.  Participant may not receive or take possession
of any unvested Shares subject to this Award, either through physical share
certificates or through book-entry accounts held by, or in the name of,
Participant.  The Company may commingle
the unvested Shares subject to this Award with other shares of restricted stock
or other equity awards granted to other employees under the Plan.  The Company shall not allow any transfers of
unvested Shares subject to this Award from its account, other than transfers to
another account of the Company.  The
Company may hold unvested Shares subject to this Award at any financial
institution or other custodian that it from time to time chooses, in its sole
discretion, and shall not be responsible to Participant for any losses or
damages resulting from the choice of, or actions or omissions of, any financial
institution or other custodian that holds unvested Shares on behalf of the
Company.  The Company shall deliver
Shares subject to this Award that have vested pursuant to Section 3 below
to Participant through book entry transfer to an account in Participant’s name
at a financial institution, which may, but is not required to be, the
institution or other custodian that holds the unvested Shares on behalf of the
Company.  Share certificates representing
vested Shares shall not be issued by the Company until such Shares have been
delivered to Participant’s account as specified above.  Participant hereby authorizes the Company,
and any financial institution or other custodian at which the Company
establishes an account in which the Shares subject to this Award are held, to
hold all unvested shares as discussed above, to transfer any vested shares to
Participant’s account as discussed above and to transfer to the Company and
cancel any Shares subject to this Award that are forfeited pursuant to Section 3
below.  The Company shall pay all
original issue or transfer taxes and all fees and expenses incident to the
delivery of any Shares hereunder; provided that the Company shall not pay the
expenses related to any sale of vested Shares subject to this Award, regardless
of whether such sale is made to satisfy expenses or withholding or other taxes.

 

3.             VESTING AND FORFEITURE.

 

(a)           Except as otherwise provided in the Plan
or in Section 3(b) of this Agreement, twenty-five percent (25%) of
the Shares subject to Participant’s Award shall vest, shall be delivered to an
account of Participant, shall become transferable and shall cease to be subject
to forfeiture on each of April 30,      , April
      , April 30,      
and April 30,       (each, a “Vesting
Date”).

 

(b)           Participant’s right to vest in this Award is conditioned upon
Participant’s continuous employment with the Firm, except to the limited extent
to which vesting may continue following a termination of Participant’s employment
as provided below.  If Participant’s
continuous employment with the Firm terminates or is interrupted for any reason
stated below, Participant’s rights with respect to the Award shall be affected
as follows:

 

2

 

(1)                                  Resignation. 
Except as otherwise provided below or otherwise agreed by the Committee,
if Participant resigns or otherwise terminates his or her employment with the
Firm for any reason, Participant’s unvested Award shall be forfeited and Participant’s
vested but undistributed Award (if any) shall be distributed to Participant in
accordance with Section 2 hereof.

 

(2)                                  Disability.  Upon termination of Participant’s employment
with the Firm by reason of his or her Disability, on the date of such termination,
Participant’s unvested Award shall be 100% vested and all restrictions upon the
Shares subject to Participant’s Award shall lapse.  Participant’s vested Award shall be
distributed to Participant in accordance with Section 2 hereof.

 

(3)                                  Death.  Upon termination of Participant’s employment
with the Firm due to death, on the date of such termination, Participant’s
unvested Award shall be 100% vested and all restrictions upon the Shares
subject to Participant’s Award shall lapse. 
Participant’s vested Award shall be distributed to his or her
beneficiaries in accordance with Section 4.2 hereof.

 

(4)                                  Termination for Cause.  Upon termination of Participant’s employment
by the Firm for Cause, Participant’s unvested Award shall be immediately
forfeited.

 

(5)                                  Change of Control.  In
the event that a Change of Control occurs and within 12 months of such Change
of Control (i) the Participant’s employment with the Firm is terminated by
the Firm without Cause or (ii) the Participant terminates his or her employment
with the Firm for Good Reason, then, as of the date of such termination,
Participant’s unvested Award shall be 100% vested and all restrictions upon the
Shares subject to Participant’s Award shall lapse.  Participant’s vested Award shall be
distributed to Participant in accordance with Section 2 hereof.

 

(6)                                  Termination without Cause.  Except as otherwise specified in this Section 3(b),
upon a termination of Participant’s employment by the Firm without Cause, Participant’s
unvested Award shall be immediately forfeited.

 

(7)                                  Termination of Employment
when Satisfying the “Rule of 15.” 
If Participant’s employment with the Firm terminates before the date on
which all Shares subject to Participant’s Award have vested and (i) Participant,
at the time of such termination, has completed 15 years of service with the
Firm and (ii) such termination of employment is without Cause, then the
unvested portion of Participant’s Award shall continue to vest in accordance
with Section 3(a) as long as Participant does not engage in
Competitive 

 

3

 

Activity.  If Participant engages in Competitive
Activity, then the portion of Participant’s Award that is unvested at the time
Participant engages in such activity shall be immediately forfeited.  In the event of Participant’s death during
the period in which unvested Awards are continuing to vest under this clause
(7), then, as of the date the Company becomes aware of such death, Participant’s
unvested Award shall be 100% vested and all restrictions upon the Shares
subject to Participant’s Award shall lapse. 
Participant’s vested Award shall be distributed in accordance with Section 2
hereof.

 

(8)                                  Termination of Employment Due
to Retirement.  If Participant’s employment
with the Firm terminates before the date on which all Shares subject to
Participant’s Award have vested and (i) the reason for such termination is
Participant’s retirement pursuant to Section 7.1 (or any successor
retirement provision) of the Legg Mason Profit Sharing Plan and (ii) such
termination of employment is without Cause, then the unvested portion of
Participant’s Award shall continue to vest in accordance with Section 3(a) as
long as Participant does not engage in Competitive Activity.  If Participant engages in Competitive
Activity, then the portion of Participant’s Award that is unvested at the time
Participant engages in such activity shall be immediately forfeited.  In the event of Participant’s death during
the period in which unvested Awards are continuing to vest under this clause
(8), then, as of the date the Company becomes aware of such death, Participant’s
unvested Award shall be 100% vested and all restrictions upon the Shares
subject to Participant’s Award shall lapse. 
Participant’s vested Award shall be distributed in accordance with Section 2
hereof.

 

(9)                                  Reduction in
Workforce.  If
Participant’s employment with the Firm terminates before the date on which all
Shares subject to Participant’s Award have vested and (i) such termination
is due to the elimination of Participant’s position in connection with a
reduction in workforce by the Firm and (ii) such termination of employment
is without Cause, then, as of the date of such termination, Participant’s
unvested Award shall be 100% vested and all restrictions upon the Shares
subject to Participant’s Award shall lapse. 
Participant’s vested Award shall be distributed to Participant in
accordance with Section 2 hereof.

 

To the extent that Section 409A
of the Code applies to the vesting or distribution of any shares hereunder,
then any vesting or distribution made in connection with or following the
Participant’s separation from service (within the meaning of Section 409A(a)(2)(A)(i) of
the Code and the regulations issued thereunder) shall not be made earlier than
the first business day of the seventh month following the Participant’s
Separation from Service, or if earlier the date of death of the
Participant.  Any vesting or distribution
that is delayed in accordance with the foregoing 

 

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sentence shall be made on
the first business day  following the
expiration of such six (6) month period.

 

4.            ADDITIONAL TERMS AND CONDITIONS
OF THE AWARD.

 

4.1.         NONTRANSFERABILITY OF SHARES.

 

Prior to the date on
which Shares subject to this Award vest pursuant to Section 3 hereof, such
Shares may not be sold, transferred, assigned, pledged, hypothecated,
encumbered or otherwise disposed of (whether by operation of law or otherwise)
or be subject to execution, attachment or similar process.  Any such attempted sale, transfer,
assignment, pledge, hypothecation or encumbrance, or other disposition of such
Shares shall be null and void.

 

4.2.         BENEFICIARIES.

 

Participant may designate
in writing, on a form to be prescribed by and filed with the Committee, a
beneficiary to receive all or part of the Shares to be distributed under the
Plan in the event of Participant’s death. 
A designation of a beneficiary may be replaced by a new designation or
may be revoked by Participant at any time and in accordance with such rules and
procedures established by the Committee on a form prescribed by and filed with
the Committee.  In the event of
Participant’s death, Shares due under the Plan with respect to which a
designation of a beneficiary has been made (to the extent it is valid and
enforceable under applicable law) shall be distributed in accordance with the
Plan to the designated beneficiary. 
Distributions due under the Plan and not subject to a beneficiary
designation shall be distributed to Participant’s estate.  If there is any question as to the legal
right of any beneficiary to receive any distribution under the Plan, the
distribution in question may be made in the sole discretion of the Committee to
the estate of Participant, in which event the Firm shall have no further
liability to anyone with respect to such distribution.  Distribution to the executors or
administrators of the estate of Participant may be conditioned on the delivery
to the Committee of such tax waivers, letters testamentary and other documents
as the Committee may reasonably request.

 

4.3.         RIGHT OF SET OFF.

 

Notwithstanding
any provisions of this Agreement to the contrary, the Committee, the Firm and
the Company may offset any amounts that Participant may owe to the Firm against
the shares subject to a Participant’s Award and any distributions that would
have otherwise been made to Participant under the Plan.

 

4.4.         CONSENT TO ELECTRONIC DELIVERY.

 

In lieu of receiving
documents in paper format, Participant hereby agrees, to the fullest extent
permitted by law, to accept electronic delivery of any documents that the Firm
elects to or is required to deliver (including, but not limited to, the Prospectus
related to Participant’s Award, any supplements to that Prospectus, award
notifications and agreements, account statements, monthly or annual reports,
and all other forms or communications) in connection with Participant’s
Award.  Electronic delivery of a document
to Participant may be via a Firm e-mail system or by reference to a location on
a Firm intranet site or a third-party’s Internet site to which Participant has
access.

 

5

 

4.5.         SECURITIES LAWS.

 

Participant hereby
represents and covenants that if in the future Participant decides to offer or
dispose of any Shares subject to this Award or interest therein, Participant
shall do so only in compliance with this Agreement, the Securities Act of 1933,
as amended, and all applicable state and local national securities laws as
appropriate.  As a condition precedent to
the delivery to Participant of any Shares subject to this Award, Participant
shall comply with all regulations and requirements of any regulatory authority
having control of or supervision over the issuance of the Shares and, in
connection therewith, shall execute any documents and make any representation
and warranty to the Company which the Committee shall in its sole discretion
deem necessary or advisable.

 

4.6.         ADJUSTMENT.

 

In the event that there
occurs (a) any change in the number of outstanding shares of Common Stock
through the declaration of dividends, stock splits or the like or through any
change in the capital account of the Company or any other transaction referred
to in Section 424(a) of the Code or (b) any other change in the
capital structure of the Company or in the Common Stock, then, if applicable,
the number and class of shares subject to this Award shall be adjusted as
provided in the Plan.  Any decision of the
Committee regarding the amount and timing of any adjustment shall be final and
conclusive.

 

4.7.         COMPLIANCE WITH APPLICABLE LAW.

 

This Award is subject to
the condition that if the listing, registration or qualification of the Shares
subject to this Award upon any securities exchange or under any law, or the
consent or approval of any governmental body, or the taking of any other action
is necessary or desirable as a condition of, or in connection with, the vesting
or delivery of shares hereunder, the Shares subject to this Award may not be
delivered, in whole or in part, unless such listing, registration,
qualification, consent or approval shall have been effected or obtained.  The Company agrees to make every reasonable
effort to effect or obtain any such listing, registration, qualification,
consent or approval.

 

By signing the Award
Notification, however, the Participant acknowledges and agrees that he or she
is and remains responsible for any local compliance requirements or regulations
in relation to the receipt, ownership and possible subsequent sale of the
Company’s Common Stock.  The Participant
also agrees that he or she is responsible for any local compliance requirements
or regulations in relation to the opening and use of a U.S. brokerage account.

 

4.8.         WITHHOLDING; TAX MATTERS

 

(a)           The Company may, and the Participant hereby authorizes
the Company to, deduct an amount sufficient to satisfy all federal, state and
local withholding tax requirements arising in connection with this Award, from
payments of any kind by the Company or its subsidiaries to which the
Participant would otherwise be entitled, including without limitation, salary,
bonus and other compensation. 
Alternatively the Participant may elect to remit to the Company by check
an amount sufficient to satisfy any federal, state or local withholding tax 

 

6

 

requirements, prior to
the delivery of Shares pursuant to Section 2 hereof.  As another alternative, the Participant may,
with respect to withholding taxes that are due upon vesting of Shares, elect,
prior to the vesting of any Shares subject to this Award, to irrevocably
instruct the financial institution that holds such Shares, or as applicable,
the financial institution to which such Shares shall be delivered upon vesting,
prior to vesting (x) to sell on behalf of Participant immediately on
vesting a sufficient number of vested Shares to produce funds to satisfy any
federal, state or local withholding tax requirements and (y) to pay such
funds over to the Company to satisfy such taxes and provide the Company, prior
to the applicable vesting date, with notice of such election (including a copy
of such instructions).  Notwithstanding
the foregoing, if Participant fails to either provide the check described in
the prior sentence or, if applicable, provide the irrevocable sale instructions
described in the preceding sentence, in each case by the date any withholding
tax with respect to any Shares granted hereunder is due, the Company shall, and
Participant hereby authorizes the Company to, either (i) withhold delivery
of Shares or deduct amounts required to be withheld from payments of any kind
by the Company or its subsidiaries to which Participant would otherwise be
entitled, including without limitation salary, bonus and other compensation or (ii) to
irrevocably instruct the financial institution that will hold such Shares
immediately after vesting (x) to sell on behalf of Participant immediately
on vesting a sufficient number of vested Shares to produce funds to satisfy any
federal, state or local withholding tax requirements and (y) to pay such
funds over to the Company to satisfy such taxes.  Participant acknowledges that in the event
the preceding sentence applies, the Company shall elect either option contained
therein in its sole discretion without any liability to the Participant
resulting from the option the Company selects or the timing under which the
Company makes and carries out the election.

 

(b)           If Participant makes the election provided under Section 83(b) of
the Code to be taxed currently on the value of any Shares subject to this Award
notwithstanding the restrictions placed upon such Shares (the “Section 83(b) Election”),
Participant shall promptly notify the Company, shall complete, sign and return
to the Company the Section 83(b) Election Form which was
distributed to Participant and shall remit to the Company with such form a
check in an amount sufficient to satisfy any federal, state or local
withholding tax requirements. 
Participant acknowledges that if he or she elects to make a Section 83(b) election,
Participant shall be responsible for filing the appropriate form with the IRS
and notifying the Compensation department within the Company’s Finance
Department within 30 days of the date of the award that Participant made a Section 83(b) election.

 

(c)           The Company reserves the right to make whatever
further arrangements it deems appropriate for the withholding of taxes in
connection with any transaction contemplated by this Agreement or the Plan,
including, without limitation, providing for payments of withholding taxes by
deducting amounts required to be withheld, plus interest thereon, from payments
of any kind by the Company or any of its subsidiaries to which Participant
would otherwise be entitled.

 

4.9.         AWARD CONFERS NO RIGHTS TO CONTINUED EMPLOYMENT OR FUTURE AWARDS.

 

Nothing in the Plan or in
this Agreement shall confer upon Participant any right to continue in the
employ of the Company or any subsidiary of the Company for a specified period
of time or interfere with the right of the Company and its subsidiaries to
terminate such 

 

7

 

employment at any
time.  In addition, neither the Plan nor
this Agreement confers any right upon the Participant to receive future awards
under the Plan.  All future awards, if
any, are completely at the discretion of the Company.  Moreover, any awards granted under the Plan
are not part of the Participant’s ordinary compensation, employment agreement,
if any, or working relationship with the Company or any of its affiliates and
will therefore not be considered as part of such compensation, agreement or
relationship in the event of severance, redundancy or resignation, unless
otherwise required by applicable law.

 

5.             MISCELLANEOUS PROVISIONS.

 

5.1.          SUCCESSORS; ASSIGNMENTS AND TRANSFERS.

 

This Agreement shall be
binding upon and inure to the benefit of any successor or successors of the
Company and any person or persons who shall, upon the death of Participant,
acquire any rights hereunder.  The rights
and interests of Participant under this Agreement may not be sold, assigned,
encumbered or otherwise transferred except in the event of death of
Participant, by will or by the laws of descent and distribution.  This Agreement may be assigned by the Company
without Participant’s consent.

 

5.2.          NOTICES.

 

All notices, requests or
other communications provided for in this Agreement shall be made in writing
either (a) by actual delivery to the party entitled thereto, or (b) by
mailing in the mails of the United States or, for Participants who reside in
another country, of the other country to the address of the party entitled
thereto as set forth below, via certified or registered mail, return receipt
requested.  The notice shall be deemed to
be received in case of delivery, on the date of its actual receipt by the party
entitled thereto, and in case of mailing, five days following the date of such
mailing.  Any notice mailed to the
Company shall be addressed to the Restricted Stock Administrator of the Company
at 100 International Drive, Baltimore, Maryland 21202.  Any notice mailed to Participant shall be
addressed to Participant at Participant’s address as reflected in the personnel
records of the Company.  Either party
hereto may designate a different address for notices than the one provided
herein by notice to the other.

 

5.3.          CONSENT AND DISCLOSURE REGARDING USE OF PERSONAL INFORMATION.

 

In connection with the
grant of the Award, and any other award under the Plan, and the implementation
and administration of the Plan, including, without limitation, Participant’s
actual participation, or consideration by the Committee for potential future
participation in the Plan at any time, it is or may become necessary for the
Firm to collect, transfer, use, and hold certain personal information regarding
Participant in and/or outside of Participant’s home country.  By accepting the Award, Participant
explicitly consents (i) to the use of such information for the purpose of
being considered for participation in future awards under the Plan (to the
extent he/she is eligible under the Plan, and without any guarantee that any
award shall be made); and (ii) to the use, transfer, processing and
storage, electronically or otherwise, of his/her personal information, as such
use has occurred to date, and as such use may occur in the future, in
connection with this Award or any other award under the Plan, as further
described below.

 

8

 

Use, transfer, storage and processing of personal
information, electronically or otherwise, may be in connection with the Company’s
internal administration of the Plan, or in connection with tax or other
governmental and regulatory compliance activities directly or indirectly
related to the Award or any other award under the Plan.  For such purposes only, personal information
may be used by third parties retained by the Company to assist with the
administration and compliance activities of the Plan, and may be transferred by
the company that employs (or any company that has employed) Participant from
Participant’s home country to other members of the Company and third parties
located in the United States and in other countries.  Specifically, those parties that may have
access to Participant’s information for the purposes described herein include,
but are not limited to, (i) human resources personnel responsible for
administering the Plan; (ii) Participant’s U.S., regional and local
employing entity and business unit management, including Participant’s
supervisor and his/her superiors; (iii) the Committee or its designee,
which is responsible for administering the Plan; (iv) the Company’s
technology systems support team (but only to the extent necessary to maintain
the proper operation of electronic information systems that support the Plan);
and (v) internal and external legal, tax and accounting advisors (but only
to the extent necessary for them to advise the Company on compliance and other
issues affecting the awards under the Plan in their respective fields of
expertise).

 

At all times, Company personnel and third parties
shall be obligated to maintain the confidentiality of Participant’s personal
information except to the extent the Company is required to provide such
information to governmental agencies or other parties.  Such action shall always be undertaken only
in accordance with applicable law.  The
personal information that the Company may collect, process, store and transfer
for the purposes outlined above may include Participant’s name, nationality,
citizenship, work authorization, date of birth, age, government/tax
identification number, passport number, brokerage account information, or other
internal identifying information, home address, work address, job and location
history, compensation, business unit, employing entity, and Participant’s
beneficiaries and contact information. 
Participant may obtain more details regarding the access and use of
his/her personal information, and may correct or update such information, by contacting
his/her human resources representative.

 

5.4           MARKET FLUCTUATIONS.

 

The Company is not responsible for any
foreign exchange fluctuations between the Participant’s local currency, if the
Participant is not located in the U.S., and the U.S. dollar nor is the Company
responsible or liable for any decrease in the value of the Company’s Common
Stock at any time, all of which shall be solely the risk and responsibility of
the Participant.

 

5.5.          CONFLICT; GOVERNING LAW.

 

In the event of a
conflict between this Agreement and the Plan, the Plan shall control.  This Agreement shall be governed by, and
interpreted in accordance with, the internal laws of the State of New York  (without regard to conflicts of laws rules thereof).

 

9

 

5.6           COUNTERPARTS.

 

This Agreement may be
executed in two or more counterparts each of which shall be deemed an original
and all of which together shall constitute one and the same instrument.

 

5.7           DEFINITIONS.

 

Unless otherwise defined herein, the following terms have
the meanings set forth below.

 

“Cause” means any one or more of the following
types of behavior by Participant which the Firm in its sole discretion finds to
be sufficient reason to terminate the Participant’s employment with the
Firm:  (i) any conduct (a) that
constitutes Competitive Activity, (b) that breaches any obligation to the Firm or
Participant’s duty of loyalty to the Firm, or (c) that is materially
injurious to the Firm, monetarily or otherwise; (ii) material violation of, or an act taken by the failure to act
which causes the Firm to be in violation of any government statue or
regulation, or of the constitution, by-laws, rules or regulations of any
securities or commodities exchange or a self-regulatory organization, or of the
policies of the Firm; (iii) the entering of an order or decree or the
taking of any similar action with respect to Participant which substantially
impairs such Participant from performing his or her duties or makes him or her
ineligible from being associated with the Company pursuant to Section 9 of
the Investment Company Act of 1940, as amended, or Section 203(f) of
the Investment Advisors Act of 1940, as amended; (iv) malfeasance,
disloyalty or dishonesty in any material respect; (v) any conviction for a
felony: (vi) any failure to devote all professional time to assigned
duties and to the business of the Firm; (vii) failure to satisfactorily
perform duties, as determined by the Firm’s management in its sole discretion,
or gross misconduct or gross negligence in the performance of duties; or (viii) failure
to remain licensed to perform duties or other act, conduct or circumstance
which renders the Participant ineligible for employment with the Firm.

 

“Change of Control” means any of the following
events: (i) any person, including a “person” as such term is used in Section 14(d)(2) of
the Securities Exchange Act of 1934, as amended, acquires, directly or
indirectly, beneficial  ownership of
securities representing 50.1% or more of the combined voting power of the
outstanding equity securities of the Company; (ii) the closing of any
merger, consolidation or other reorganization involving the Company with
respect to which the stockholders of the Company immediately prior to such
reorganization do not hold, directly or indirectly, more than 50% of the
combined voting power of the outstanding equity securities of such successor
entity immediately following such transaction; (iii) the closing of any
transaction involving a sale of assets of the Company that have a total gross
fair market value equal to or more than 40% of the total gross fair market
value of all of the assets of the Company; (iv) the adoption of any plan
or proposal for the liquidation or dissolution of the Company; or (v) within
any 12-month period, individuals who, as of May 15,       ,
constitute the board of directors of the Company (the “Incumbent Board”) cease
for any reason to constitute at least a majority of such board; provided,
however, that any individual becoming a director subsequent to such date whose
election, or nomination for election by the Company’s stockholders, was
approved by a vote of at least a majority of the directors then comprising the
Company’s 

 

10

 

board of directors shall be considered as though such
individual were a member of the Incumbent Board.

 

“Code” means the Internal Revenue Code of 1986,
as amended.

 

“Committee” means the Compensation Committee of
the Company’s Board of Directors or such committee or persons designated by that
Compensation Committee to act on its behalf.

 

“Common Stock” means Legg Mason, Inc. common
stock, par value $.10 per share.

 

“Competitive Activity” means Participant’s
engagement in any activity that competes with any of the Firm’s business
operations, as determined by the Committee, in its sole discretion, and shall
include, without limitation, representing in any capacity, other than as an
outside director, a company that competes with the Company and its
subsidiaries.

 

“Disability” means a medically determinable
physical or mental impairment which qualifies the Participant for total
disability benefits under the Social Security Act; or which, in the opinion of
the Committee (based upon such evidence as it deems satisfactory):  (i) can be expected to result in death
or to last at least 12 months and (ii) will prevent the Participant from
performing his usual duties or any other similar duties available in the Firm’s
employ.

 

“Firm” means, except as otherwise provided
under Section 409A of the Code and the regulations promulgated thereunder,
the employing entity of any individual determined by the Committee to be a
participant in the Plan and, if the employing entity of any Participant should
change to another affiliate of the Company, such other affiliate.

 

“Good Reason”
means (i) a material adverse change in the responsibilities of the
Participant from those in effect prior to the Change of Control and (ii) the
Participant’s principal place of employment is moved more than 50 miles from
the location immediately prior to the Change of Control, (iii) the
Participant’s base salary is significantly reduced or (iv) Participant’s
incentive compensation for a fiscal year is materially reduced from his or her
incentive compensation for the prior fiscal year, and such reduction is not
related to a reduction in the responsibilities of the Participant or either
individual or corporate performance.

 

“Grant Date” means the “Grant Date” set forth
in the Participant’s Award Notification.

 

“Legg Mason Profit Sharing Plan” means the Legg
Mason & Co., LLC Profit Sharing and 401(k) Plan and Trust, as
such plan may be amended from time to time.

 

11

 

“Share” means a share of Common Stock.

 

	
   

  	
  LEGG MASON, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name: Thomas C.
  Merchant

  
	
   

  	
  Title: Secretary

  

 

12

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