Document:

LM_Exhibit 10.19_3.31.2014

EXHIBIT 10.19

LEGG MASON, INC. 1996 EQUITY INCENTIVE PLAN

PERFORMANCE SHARE UNIT 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 (the “Award”) of performance share units (“Performance Share Units”), upon and subject to the restrictions, terms and conditions set forth below.  Each Performance Share Unit will constitute a right to receive, upon and subject to earning and vesting of such Performance Share Unit, the number of shares of Common Stock determined and distributable as provided in Sections 2 and 3 below (the shares of Common Stock distributable upon the earning and vesting of Performance Share Units hereunder are referred to herein as “Shares”).  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 Performance Share Units 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 [DATE].    
    
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(k) 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.
	AWARD OF PERFORMANCE SHARE UNITS.

(a)Pursuant to and subject to the terms of the Plan, the Company hereby awards to Participant the number of Performance Share Units reflected on the Award Notification as the Award.  The Performance Share Units issued in the Award shall be paid out in shares of Common Stock in an amount determined under Section 2.

(b) Following the date that Performance Share Units are earned and vested pursuant to Section 2, each Performance Share Unit shall be distributed as shares of Common Stock, in the amount determined under Section 2.  The number of Performance Share Units reflected in the Award Notification shall be credited to Participant’s Account as of the Grant Date.  Participant’s Account shall be the record of Performance Share Units granted to Participant hereunder and is solely for accounting purposes and shall not require a segregation of any assets of the Company. 

(c)Participant shall not have the rights of a stockholder, including any rights to receive dividends with respect to any Performance Share Units credited to Participant’s Account or any shares of Common Stock that may be distributed in respect of such Performance 

Share Units, until shares of Common Stock have been distributed to Participant pursuant to Section 3.

		
	2.
	PERFORMANCE VESTING AND FORFEITURE.

(a)Satisfaction of Percentile Ranking Thresholds.  Performance Share Units shall become earned and vested in accordance with this Section 2, and shares of Common Stock shall be distributed in accordance with Section 3, only upon, and to the extent of, the attainment of the TSR Ranking specified in subsection (c) below as of the end of the Performance Period.  To the extent that the TSR Ranking specified below is achieved for the Performance Period, and Participant remains in full time employment with the Company (or a subsidiary or affiliate of the Company) through the end of the Performance Period, then Performance Share Units shall vest, and shares of Common Stock will be distributed to Participant under Section 3, in accordance with the schedule specified in subsection (c) (but subject to modification in accordance with subsection (g) below).

(b)TSR Ranking.

The TSR Ranking of the Company is calculated by comparing the aggregate TSR for the Company with the aggregate TSR for each company in the Benchmark Group over the entire Performance Period, and then ranking the Company and each company in the Benchmark group in order based on their aggregate TSR.  Such determination shall be made after making the following adjustments to the Benchmark Group:

		
	(i)
	If a member of the Benchmark Group becomes insolvent during the Performance Period (or its stock ceases to trade for more than twenty (20) consecutive days due to bankruptcy or other similar insolvency law or process), it shall remain in the Benchmark Group, but be placed at the bottom for purposes of determining the Company’s TSR Ranking.

		
	(ii)
	If a member of the Benchmark Group is acquired, it will be removed from the Benchmark Group.

		
	(iii)
	If a member of the Benchmark Group consolidates with (or becomes part of) another member of the Benchmark Group, the performance of the surviving entity will be used to determine TSR and the member or members that consolidate or become a part of another shall be removed from the Benchmark Group.

		
	(iv)
	If a member of the Benchmark Group consolidates (or becomes part of) an entity outside of the Benchmark Group, it will be removed from the Benchmark Group.

		
	(v)
	If the stock of a member of the Benchmark Group ceases to trade for more than twenty (20) consecutive days due to a going private transaction, it will be removed from the Benchmark Group.

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(c)TSR Ranking Thresholds.      The Company’s TSR performance will be ranked against the Benchmark Group and the percentage of the Target Payout Amount earned will be based on the Company’s ranking compared to the other firms in the Benchmark Group as follows:

	
		
	Rank Against Members of the Benchmark Group

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
	Percent of Target Payout 
Amount Earned

150%
143%
136%
129%
121%
114%
107%
100%
85%
70%
55%
40%
25%
0%
0%
0%
0%

Notwithstanding the foregoing, in no event shall the adjustment in the number of Shares pursuant to this Section 2(c) cause the number of Shares earned and distributed in respect of the Performance Share Units at the end of the Performance Period to be greater than one and one-half (1.5) times the Target Payout Amount. In addition, the number of Shares earned and distributed in respect of the Performance Share Units at the end of the Performance Period shall not exceed 100% of the Target Payout Amount if the Company’s TSR is negative over the Performance Period.

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

(1)Resignation.  Except as otherwise provided below, if Participant resigns or otherwise terminates his or her employment with the Firm for any reason other than as specified in clause (2) or (4) below prior to the end of the Performance Period, Participant’s Award shall be forfeited in its entirety.

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(2)Death or Disability.  If Participant terminates his or her employment with the Firm before the end of a Performance Period as a result of death or Separation from Service due to Disability, a Pro Rata Portion of the Award will vest and be earned.  The remaining Performance Share Units will be forfeited, and the number of Shares issuable in respect of the vested Pro Rata Portion of the Award (based on the vested Pro Rata Portion of the Target Payout Amount) shall be distributed in accordance with Section 3.  

(3)Termination with or without Cause.  Upon termination of Participant’s employment by the Firm with or without Cause, Participant’s Award shall be forfeited in its entirety.

(4)Termination of Employment Due to Retirement.  If Participant’s employment with the Firm terminates before the end of the Performance Period by reason of Participant’s Retirement, then a Pro Rata Portion of the Award will vest and be earned (subject to the terms set forth in clauses (a) through (c) above and clause (g) below) as of the end of the Performance Period, as long as Participant does not engage in Competitive Activity.  If Participant engages in Competitive Activity, then the Award shall be forfeited at the time Participant engages in such Competitive Activity.  If Participant does not engage in Competitive Activity, the number of Shares issuable in respect of the vested Pro Rata Portion of the actual Award (as determined in accordance with subsection (c) and subject to clause (g) below) shall be paid at the end of the Performance Period in accordance with Section 3.  The remaining Performance Share Units will be forfeited.

(e)Effect of Change in Control During Performance Period.      In the event that a Change of Control occurs after the Grant Date and prior to the end of the Performance Period, a Pro Rata Portion of Participant’s Award shall vest and be earned.  The remaining Performance Share Units will be forfeited, and the number of Shares issuable in respect of the vested Pro Rata Portion of the Performance Share Units (based on the vested Pro Rata Portion of the Target Payment Amount) shall be distributed in accordance with Section 3. 

(f)Reduction in Workforce.  If Participant’s employment with the Firm terminates before the date on which all Performance Share Units subject to Participant’s Award have vested and (i) such termination is due to the elimination of Participant’s employment in connection with a reduction in workforce by the Firm and (ii) such termination of employment is without Cause, and (iii) Participant has signed (and not revoked) a general release of claims provided by the Company then, a Pro Rata Portion of Participant’s Award shall vest and be earned. The remaining Performance Share Units will be forfeited, and the number of Shares issuable in respect of the vested Pro Rata Portion of the Performance Share Units shall be the lesser of the amount determined under subsection (c) (and subject to any adjustment under clause (g)) or the vested Pro Rata Portion of the Target Payout Amount, with the actual distribution made at the end of the Performance Period in accordance with Section 3. Failure to satisfy the condition set forth in the (iii) above by the date on which distribution is to be made in accordance with Section 3 will result in the forfeiture of all Performance Share Units.

(g)Committee Determination and Discretion to Reduce Payout Amount.  The Committee shall determine and certify the extent to which the requisite TSR level has been met following the end of the Performance Period, whether the Performance Share Units have been earned and vested hereunder and the number of Shares to be distributed in respect of vested 

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Performance Share Units, if any.  Prior to the date on which Shares are distributed in respect of vested Performance Share Units, the Committee may use negative discretion to reduce the number of Shares issued for each vested Performance Share Unit from the amount calculated under the any of the previous provisions of this Section 2. The Committee’s determinations shall be binding and conclusive on all parties. Performance Share Units shall not be deemed to have been earned and vested, and shares of Common Stock to be distributed will not be earned or distributed, until the Committee determination and certification as to the attainment of the achievement levels.  The Committee may not exercise discretion to increase the amount earned or vested and/or the number of Shares otherwise due based on the extent to which the achievement levels for the Performance Period are met.

		
	3.
	DISTRIBUTION OF PERFORMANCE SHARE UNITS

(a)Subject to the dollar limitation on payments that is contained in Section 13 of the Plan (applicable to Section 162(m) Participants), payment shall be made with respect to each vested and earned Performance Share Unit in the form of shares of Common Stock on or before the Distribution Date, with the number of Shares determined under Section 2.  Notwithstanding anything to the contrary herein, in accordance with Section 5 of the Plan, the number of Shares issued to Participant shall not exceed the value of the maximum number of shares of Common Stock (determined as of the first day of the Performance Period) that may be granted under Section 5 of the Plan to any one individual during any calendar year less the number of any shares of Common Stock previously granted to the Participant under the Plan for the calendar year containing the first day of the Performance Period. Subject to the provisions of Section 3(d), such distribution will be made on the applicable date set forth below:

(1)The date on which the Performance Share Units have been earned and vested under Section 2(a) through (c) following the end of a Performance Period, based on the determination of the Committee;

(2)The date of the Participant’s death or Separation from Service due to Disability under Section 2(d)(2);

(3)The later of the end of a Performance Period or the date on which the Committee determines that Performance Share Units have been earned and vested under Section 2(d)(4) or (f) following the end of a Performance Period;

(4)The date  of a Change in Control which meets the requirements of Section 409A(a)(2)(A)(v) of the Code; or 

(5)The end of the Performance Period in the case of a Change in Control that does not meet the requirements of Section 409A(a)(2)(A)(v) of the Code;

But not later than the 15th day of the third calendar month following the end of the Performance Period, or in the case of a Change in Control that meets the requirements of Section 409A(a)(2)(A)(v) of the Code, the 15th day of the third calendar month following the Fiscal Year in which such Change in Control occurred.

    

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Notwithstanding the foregoing provisions of this clause (a), the following provisions shall apply:

(1)In the event a Change in Control occurs after the occurrence of a Retirement under Section 2(d)(4) or a reduction in workforce under Section 2(f), the distribution of the Shares determined under Section 2(d)(4) or (f) shall be based upon the vested Pro Rata Portion of the Target Payout Amount and shall be made in accordance with Section 3(a)(4); and

(2)To the extent required in order to comply with Section 409A of the Code, any distribution or payment to a Specified Employee that is made in connection with or following Separation from Service shall not be made earlier than the first business day of the seventh month following Participant’s Separation from Service, or if earlier the date of death of Participant.  Any distribution or payment that is delayed in accordance with the foregoing sentence shall be made on the first business day following the expiration of such six (6) month period.

(b)The Company shall issue the Shares (except for any shares of Common Stock which are withheld to satisfy any tax withholding requirement) to an account of Participant opened by the Company at a financial institution selected by the Company. Cash shall be paid in lieu of issuing partial shares. Payment of cash or issuance and crediting shares of Common Stock to such account, in the amount determined under Section 2, constitute full payment and satisfaction of such Performance Share Units and this Award.

(c)To the extent that any cash or shares of Common Stock cannot be distributed to a Participant in respect of any Performance Share Units (or any other payment cannot be made) because of the payment limitations contained in Section 13 of the Plan, then payment of such amount shall be delayed until the earliest date on which such distribution or payment can be made consistent with Section 409A of the Code and the payment limitations contained in Section 13 of the Plan. If any distribution is deferred under this Section, such Performance Share Units shall nevertheless become fully vested and earned by Participant as of the date of the Committee determination and certification as to the attainment of the performance achievement levels, and the determination to distribute such Performance Share Units under Sections 3(a) and 3(b) above shall be made on the Distribution Date (as determined as if the deferral had not occurred).  To the extent required in order to comply with Section 409A of the Code, any distribution or payment that is delayed in accordance with the provisions of this Section 3(c) and which is made in connection with or following Separation from Service shall not be made earlier than the first business day of the seventh month following Separation from Service, or if earlier the date of death of Participant.  Any distribution or payment that is delayed in accordance with the foregoing sentence shall be made on the first business day following the expiration of such six (6) month period.

(d)     Notwithstanding the prior provisions of this Section 3, to the extent that the Committee reasonably determines that payment of any cash or shares of Common Stock in respect of any Performance Share Units, would cause the expense resulting from such Performance Share Units to be nondeductible under Section 162(m) of the Code, then payment of such amount shall be  deferred until either (i) the first calendar year in which the Committee 

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reasonably anticipates (or should reasonably anticipate) that if payment is made during such calendar year, the deduction of such payment would not be barred by Section 162(m) of the Code; (ii) or by the 15th day of the third month following the Participant’s Separation from Service (subject to the last two sentences of this Section).  To the extent that a portion of such cash or Common Stock cannot be fully paid in the first such calendar year (prior to a Separation from Service), the portion that cannot be paid without creating a nondeductible expense under Section 162(m) of the Code will be distributed during each subsequent calendar year (subject to the limitations of Section 162(m) of the Code and the requirements of Section 409A of the Code) until the entire amount has been distributed.   If any distribution is deferred under this Section, the Performance Share Units shall become fully vested and earned by Participant as of the date of the Committee determination and certification as to the attainment of the performance achievement levels, and the determination to distribute such Performance Share Units under Sections 3(a) and 3(b) above shall be made on the Distribution Date (as determined as if the deferral had not occurred).  To the extent required in order to comply with Section 409A of the Code, all distributions or payments for the year in which the Participant Separates from Service that could be delayed in accordance with the provisions of this Section 3(d) shall not be made earlier than the first business day of the seventh month following Separation from Service, or if earlier the date of death of Participant.  Any distribution or payment that is delayed in accordance with the foregoing 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.

(a)Obligation Unfunded.  The obligation of the Company with respect to Performance Share Units granted hereunder shall be interpreted solely as an unfunded contractual obligation to distribute shares of Common Stock in the manner and under the conditions prescribed under this Agreement.  Any shares or other assets set aside with respect to amounts payable under this Agreement shall be subject to the claims of the Company’s general creditors, and no person other than the Company shall, by virtue of the provisions of the Plan or this Agreement, have any interest in such assets. In no event shall any assets set aside (directly or indirectly) with respect to amounts payable under this Agreement be located or transferred outside the United States. Neither Participant nor any other person shall have any interest in any particular assets of the Company by reason of the right to receive a benefit under this Agreement, and Participant or any such other person shall have only the rights of a general unsecured creditor of the Company with respect to any rights under the Plan or this Agreement.

(b)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 Performance Share Units 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, amounts 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 

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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.

(c)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 Performance Share Units subject to a Participant’s Award and any distributions that would have otherwise been made to Participant under the Plan. Any offset made pursuant to the preceding sentence may be made only on the date the payment is otherwise scheduled to be made under the terms of the Plan and this Agreement and may not operate to accelerate any payment in violation of Treasury Regulation Section 1.409A-3(j)(4)(xiii).

(d)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, 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.

(e)Securities Laws.  Participant hereby represents and covenants that if in the future Participant decides to offer or dispose of any Common Stock received 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 of Common Stock 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 Common Stock 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.

(f)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 of Performance Share Units subject to the Award and, if applicable the number and class of underlying shares of stock, shall be adjusted to reflect such change.  Any decision of the Committee regarding the amount and timing of any adjustment shall be final and conclusive.

(g)Compliance With Applicable Law.  This Award is subject to the condition that if the listing, registration or qualification of any Common Stock to be issued in settlement of 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 of Common Stock hereunder, shares of Common Stock issued in settlement of this Award may not be delivered, in whole or in part, 

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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, 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.  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.

(h)Transfer Restrictions.  Performance Share Units 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 any such Performance Share Units shall be null and void.  Transfer of any shares of Common Stock received in respect of this Award shall be subject to the Company’s trading policies and any applicable securities laws or regulations governing transferability of shares of the Company.

(i)Withholding; Tax Matters.

(1)The Company may, and Participant hereby authorizes the Company to, charge Participant’s Account (or, to the extent permitted by law, to deduct from payments of any kind by the Company or its subsidiaries or affiliates to which Participant would otherwise be entitled, including without limitation, salary, bonus and other compensation) any federal, state or local taxes (including, without limitation, income taxes and Participant’s portion of any employment taxes) or other amounts which it deems are required by law to be withheld.  In addition, the Company may retain a sufficient amount of cash or number of shares of Common Stock to be distributed to Participant to cover all such required withholding.  Notwithstanding the forgoing, in lieu of having such required withholding deducted from other amounts due, Participant may direct the Company to reduce the number of earned Performance Share Units allocated to Participant’s Account or otherwise retain a sufficient amount of cash or number of shares of Common Stock to be distributed to Participant to cover any or all such required withholding. Alternatively, Participant may elect to remit to the Company by check an amount sufficient to satisfy any federal, state or local withholding tax requirements, prior to the delivery of cash or Common Stock pursuant to Section 3 hereof.  Participant acknowledges that if Participant fails to provide the direction or the check described in the prior two sentences, the Company shall elect the manner in which any required withholding shall be made in its sole discretion without any liability to Participant resulting from the option the Company selects or the timing under which the Company makes and carries out the election.

(2)To the extent the Participant is subject to liability under section 16(b) of the Securities and Exchange Act of 1934 on the date such Common Stock is issued to Participant if Participant were to sell such shares on that day and makes an election in a timely manner under Section 83(b) of the Code to recognize income for tax purposes, Participant shall notify the Compensation department within the Company’s Finance Department within thirty (30) days of making such election. Participant 

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acknowledges that if Participant elects to make a Section 83(b) election, Participant shall be responsible for satisfying applicable IRS filing requirements with respect to such election. 

(3)Participant understands and agrees that the Company makes no representations as to the tax consequences of the grant of Performance Share Units hereunder or the payment of cash or Common Stock with respect thereto (including, without limitation, under Section 409A of the Code, if applicable).  Participant is solely responsible for any and all income, excise or other taxes imposed on Participant with respect to the Award.

(j)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 or affiliate of the Company for a specified period of time or interfere with the right of the Company and its subsidiaries or affiliates to terminate such employment at any time.  In addition, neither the Plan nor this Agreement confers any right upon Participant to receive future awards under the Plan.  All future awards, if any, are completely at the discretion of the Company. 

(k)Rights Nontransferable.  Participant’s rights with respect to the Award are not transferable by Participant by means of sale, assignment, exchange, pledge, hypothecation, or otherwise.

(l)Clawback Provisions.  

(1)Notwithstanding anything to the contrary in this Agreement, this Award is expressly made subject to the terms of the Legg Mason, Inc. Clawback Policy as adopted by the Committee.  As a result, Participant may be required to forfeit his or her Award and return to the Company amounts or shares of Common Stock distributed with respect to his or her Award (or the value thereof), in the situations described below.  Participant agrees that the Company may enforce the forfeiture by all legal means available, including, without limitation, by withholding the forfeited amount from other sums owed to Participant by the Firm.  To the extent that Section 409A of the Code applies to any Award, the Company shall no exercise its rights under this Section in a manner that would operate to accelerate any payment or distribution in violation of Section 409A of the Code.

(2)In the event of a restatement of the Company’s financial results within three years of original reporting to correct a material error, then, if the Company’s Board of Directors determines that Participant’s acts or omissions were a significant contributing factor to the need to issue such restatement and that all or any portion of Participant’s Award, if the award was made prior to the restatement, would not have been awarded based upon the restated financial results, then Participant agrees to forfeit and return to the Company, to the extent permitted by applicable law, the portion (which may be all) of this Award or of the cash or shares of Common Stock distributed in respect of vested Performance Share Units or value thereof (regardless of whether vesting has occurred and cash or Common Stock distributed) that the Board of Directors, in its discretion, determines to be appropriate.

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(3)In the event that, Participant’s employment is terminated by the Firm for a Clawback Event or (ii) following the termination of Participant’s employment, the Company is or becomes aware that Participant committed an act that would have given rise to a termination for a Clawback Event, then, in either event, Participant agrees to forfeit to the Company, to the extent permitted by applicable law, the portion (which may be all) of this Award or of the cash or shares of Common Stock distributed in respect of vested Performance Share Units or value thereof (regardless of whether vesting has occurred and cash or Common Stock distributed), that Participant was awarded after the conduct or omission that gave rise to the Clawback Event and that the Board of Directors, in its discretion, determines to be appropriate.  

(4)The Award (including cash or shares of Common Stock distributed in respect of vested Performance Share Units or value thereof) shall also be subject to forfeiture to the extent required by applicable law.

(m)Impact On Other Benefits.  The value of (and any amount payable with respect to) the Performance Share Units shall not be includable as compensation or earnings for purposes of any other benefit plan offered by the Company. Moreover, any awards granted under the Plan are not part of Participant’s ordinary compensation, employment agreement, if any, or working relationship with the Company or any of its subsidiaries or 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.

(a)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.

(b)Notices. All notices, requests or other communications provided for in this Agreement shall be made in writing either (i) by actual delivery to the party entitled thereto, or (ii) 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 Deferred Compensation 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.

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(c)Consent And Disclosure Regarding Use Of Personal Information.  

(1)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.

(2)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).

(3)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 

12

information, and may correct or update such information, by contacting his/her human resources representative.

(d)Market Fluctuations.  The Company is not responsible for any foreign exchange fluctuations between Participant’s local currency, if 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 Participant.

(e)Entire Agreement; Modification.  The Agreement contains the entire agreement between the parties with respect to the subject matter contained herein and may not be modified, except as provided in the Plan or in a written document signed by each of the parties hereto.

(f)Code Section 162(m).  This Agreement shall be subject to the restrictions set forth in Section 13 of the Plan.

(g)Conformity with Plan.  This Agreement is intended to conform in all respects with, and is subject to all applicable provisions of, the Plan, which is incorporated herein by reference.  Inconsistencies between this Agreement and the Plan shall be resolved in accordance with the terms of the Plan.  In the event of any ambiguity in the Agreement or any matters as to which the Agreement is silent, the Plan shall govern including, without limitation, the provisions thereof pursuant to which the Committee has the power, among others, to (i) interpret the Plan and Awards, (ii) prescribe, amend and rescind rules and regulations relating to the Plan, and (iii) make all other determinations deemed necessary or advisable for the administration of the Plan.  Participant acknowledges by electronically accepting the Award that he or she has reviewed a copy of the Plan.

(h)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).  It is the intent of this Agreement to comply with the requirements of Section 409A of the Code, and any ambiguities herein will be interpreted, and this Agreement will be administered, to so comply.  If any payments or distributions hereunder constitute “nonqualified deferred compensation” subject to Section 409A of the Code, the term “termination of employment” and words of similar import shall have the same meaning as a Separation from Service.  Each payment or distribution of such “nonqualified deferred compensation” shall be considered a separate payment for purposes of Section 409A.

(i)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.

(j)Headings.  Headings in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this agreement.

13

(k)Definitions.  Unless otherwise defined herein, the following terms have the meanings set forth below.

“Account” means the bookkeeping account maintained for Participant pursuant to Section 1(b).

“Benchmark Group” means the following companies:  Affiliated Managers Group; AllianceBernstein Holding L.P., Ameriprise Financial, Bank of New York Mellon Corporation, BlackRock, Inc., Calamos Asset Management, Inc., Eaton Vance Corporation, Federated Investors, Inc., Franklin Resources Inc., GAMCO Investors Inc., Invesco Ltd, Janus Capital Group, Inc., Northern Trust Corporation, State Street Corporation, T. Rowe Price Group, Inc., Waddell & Reed Financial Inc.; as such list of companies is modified pursuant to Section 2 of this Agreement.
 
“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 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 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 90% 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 

14

of the Company; or (v) within any 12-month period, individuals who, as of May 15, 20__, 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.

An event described above shall constitute a Change in Control for purposes of the vesting provisions of Section 2(e), but shall not constitute a Change in Control for purposes of a distribution under Section 2(e) or 3, unless the event constitutes a change in control within the meaning of Section 409A(a)(2)(A)(v) of the Code or this Agreement is determined not to be subject to Code Section 409A. If an event described above does not constitute a change in control for purposes of Section 409A(a)(2)(A)(v) of the Code and this Agreement is determined to be subject to Code Section 409A, the  distribution shall be made without regard to the Change in Control in accordance with the provisions of Section 3.

“Clawback Event” means (i) Participant’s gross negligence, willful misconduct or willful malfeasance in connection with the performance of his or her job that has materially and adversely affected the Firm’s reputation or business, (ii) Participant’s willful commission or participation in any violation of any law, rule or regulation applicable to the Firm (unless Participant had a reasonable good faith belief that the act, omission or failure to act in question was not a violation of such law, rule or regulation) and such violation has materially and adversely affected the Firm’s reputation or business or Participant’s ability to be associated with an investment company or an investment advisor, (iii) Participant’s theft, embezzlement or fraud in connection with the performance of his or her duties for the Firm, and (iv) Participant is convicted of, or plead guilty or nolo contendere to, a crime committed during the course of Participant’s employment with, and performance of duties on behalf of, the Firm that the Committee, acting in good faith, reasonably determines is likely to have a material and adverse effect on the reputation or business of Participant’s employer or the Company.

“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 or affiliates.

15

“Disability” means a medically determinable physical or mental impairment which qualifies 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 Participant from performing his usual duties or any other similar duties available in the Firm’s employ.

“Distribution Date” means the applicable date under Section 3(a) on which distribution is to be made to a Participant (as determined without regard to any delay in the date of distribution required under Section 3(c) or 3(d)).

“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.  In the event the employing entity ceases to be an affiliate of the Company, the employing entity shall no longer be considered to be a Firm, and, for purposes of this agreement, the Participant shall be deemed to have terminated employment with the Firm as of such date.

“Fiscal Year” means the fiscal year of the Company, which is currently April 1 through March 31.

“Grant Date” means the “Grant Date” set forth in the 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, or any successor to such plan.

“Performance Period” means a period of three consecutive Fiscal Years commencing on the first day of the Fiscal Year during which the Grant Date occurs; which period constitutes the performance period over which the Award is to be valued.

“Performance Share Unit” means a bookkeeping entry that represents the right to receive an amount of cash or Common Stock under the Plan pursuant to the terms and conditions of this Agreement, without transferring to Participant any of the attributes of ownership of Common Stock prior to the issuance of any Common Stock.

“Pro Rata Portion” means the amount determined by multiplying the number of Performance Share Units in the Award by a fraction, the numerator of which is the number of full, completed months in the Performance Period at the time of Participant’s Separation from Service due to Retirement, death or Disability and the denominator of which is the total number of months in the Performance Period (36).  The provisions of Section 2 apply to determine the Payout Amount in respect of each Performance Share Unit included in a Pro Rata Portion.

“Retirement” means termination of Participant's employment with the Firm after the Grant Date, with the approval of the Committee, pursuant to Section 7.1 (or any 

16

successor retirement provision) of the Legg Mason Profit Sharing Plan, provided that such termination of employment is without Cause.

“Separation from Service” means a separation from service within the meaning of Section 409A(a)(2)(A)(i) of the Code and the regulations issued thereunder.

“Specified Employee” means a specified employee within the meaning of Section 409A (a)(2)(B)(i)  of the Code.
 
 “Target Payout Amount” means the number of Shares equal to 100% of the number of Performance Share Units based on the Company achieving the TSR Ranking at the end of the Performance Period set forth in Section 2 required for payment of Shares equal to 100% of the Award.

“TSR” or “Total Shareholder Return” means, with respect to a company, (i) the change in the price of one share of common stock (or other comparable equity unit) of such company during the Performance Period plus dividends paid on such share of stock during the Performance Period divided by (ii) the price of such share of stock at the beginning of the Performance Period.  For this purpose, the change in the price of a share of stock shall be equal to the price of such share of such stock on the last day of a Performance Period (or the previous trading day if the last day is not a trading day) minus the price of such share of stock on the trading day occurring immediately prior the first day of a Performance Period.  The price of a share of stock shall be based on the average of the closing prices for such stock on each of the immediately preceding twenty (20) trading days as reported by the primary exchange on which the stock is listed or quoted. Dividends shall mean the aggregate dollar value of all dividends paid on one share of stock during the Performance Period.  In addition, dividends shall be treated as though they were reinvested to purchase additional shares of such stock.  In the event of a stock split, stock dividend or similar transaction, TSR shall be appropriately adjusted.

“TSR Ranking” means the TSR ranking of the Firm relative to the Benchmark Group, and is calculated as set forth in Section 2(b) of this Agreement.

17

IN WITNESS WHEREOF, the Company and Participant have caused this Agreement to be executed on the date noted below.

LEGG MASON, INC.

                            

By: ______________________
Name: Thomas C. Merchant
Title:  Secretary

18Exhibit 10.1 Equity Plan Description

EXHIBIT 10.1
UNION BANKSHARES, INC.
2014 EQUITY INCENTIVE PLAN (the "Equity Plan")
Summary of the Equity Plan

Purpose.  The primary purpose of the Equity Plan is to promote our Company’s success by linking the personal interests of our officers and nonemployee directors to those of our shareholders, and by providing participants with an incentive for outstanding performance.  The Compensation Committee and Board believe that the Equity Plan will help the Company attract, retain and motivate officers, nonemployee directors and prospective officer-employees by providing a means for them to share in the long-term growth and profitability of the Company and encouraging them to acquire a proprietary stake in the Company.

Administration.  The Equity Plan will be administered by the Compensation Committee (the “Committee”) of the Board of Directors.  The Committee will have the authority to designate participants; determine the type or types of awards to be granted to each participant and the number, terms and conditions of awards; establish, adopt or revise any rules and regulations as it may deem advisable to administer the Equity Plan; and make all other decisions and determinations that may be required under the Plan.  In its discretion, the full Board of Directors may at any time administer the Plan in lieu of the Committee.  If it does so, it will have all the powers of the Committee described in the Plan and in this summary description of the Plan.

Eligibility.  As with the 2008 ISO Plan, the Equity Plan permits the grant of awards to officers of the Company and its affiliates, as selected by the Committee from time to time in its discretion. In addition, the Equity Plan permits the grant of awards to nonemployee directors of the Company and its affiliates.  While the Company has not previously provided stock-based compensation to its directors, the Board believes that equity awards are an appropriate component of outside director compensation in that they will serve to further align the long-term interests of the Directors with those of the shareholders. As of March 19, 2014, the number of eligible persons was approximately 55, including 8 nonemployee directors of the Company and/or Union Bank.  The number of eligible persons may increase over time based upon future growth of the Company and Union Bank.  Not all persons eligible for participation in the Plan will receive awards, as the selection of grantees from time to time is within the discretion of the Committee.

The Plan also permits the Committee to grant awards to prospective officer-employees.  The Board believes that this authority will provide desirable flexibility in recruiting top executive talent.

Types of Awards.  The Equity Plan authorizes the granting of awards in any of the following forms:

		
	•
	Options - options to purchase shares of the Company’s common stock, which may be options designed to qualify as incentive stock options (“ISOs”) under Section 422 of the U.S. tax code (the “Code”) or may be options not so qualified (“Non-Qualified Options”).

		
	•
	Restricted Stock - shares of the Company’s common stock that are subject to time-based vesting conditions or vesting conditions based on attainment of specified performance criteria, as determined by the Committee and specified in the award certificate.  Generally, a participant will have full voting and dividend rights as to unvested shares during the restriction period.  Restricted stock will be forfeited and canceled to the extent the specified vesting conditions are not met.

		
	•
	Restricted Stock Units - the right to receive shares of the Company’s common stock (or an equivalent value in cash or other property, as determined by the Committee and specified in the award certificate) in the future, subject to time-based vesting conditions or attainment of specified performance criteria, as specified in the award certificate. Unlike shares of restricted stock, restricted stock units do not represent issued shares. Accordingly, the participant does not have voting or dividend rights with respect to an award of restricted stock units.  However, in the Committee’s discretion, an award of restricted stock units may include an award of dividend equivalents, which entitle the participant to  payments (or an equivalent value payable in stock or other property as the Committee may determine) equal to any dividends paid on the number of shares of stock underlying the award.

The Plan does not provide for cash-based awards, other than dividends on restricted stock and dividend equivalents on restricted stock units. The Company’s Short Term Incentive Performance Plan, which provides for performance-based cash incentive awards, is described elsewhere in this proxy statement under the caption “EXECUTIVE COMPENSATION - Short Term Incentive Performance Plan.”

Shares Available for Awards.  Subject to adjustment as provided in the Equity Plan (see “Adjustments” below), the aggregate number of shares of our common stock reserved and available for issuance pursuant to awards granted under the Plan is 50,000, which includes approximately 25,000 unused shares remaining from the authorization under the 2008 ISO Plan.  If the Equity Plan is approved, no further grants will be made under the 2008 ISO Plan. Under the Equity Plan, shares covered by an award are counted against the maximum number of remaining shares authorized at the time the award is granted.  The Plan provides that the following shares will not be counted against the maximum number of shares authorized: (i) shares covered by an award that is terminated by expiration, forfeiture or cancellation; (ii) shares tendered by participants as full or partial payment of the exercise price of stock options, (iii) shares underlying a restricted stock unit grant settled in cash; and (iv) shares withheld by or remitted to the Company to satisfy a participant’s tax withholding obligations relating to an award. In addition, substitute awards issued to the optionees of an entity acquired by the Company would not be counted against the Plan’s share authorization. The Committee has discretion to utilize all 50,000 authorized shares for grants of any single type of award (ISOs, Non-Qualified Options, restricted stock or restricted stock units), but the aggregate of all awards may not exceed 50,000 shares subject to the foregoing rules on share availability.

Insignificant Dilution.  Potential stockholder dilution from the Equity Plan would be minimal.  Assuming all 50,000 shares were to be issued, based on our common stock outstanding as of the record date for the Annual Meeting (4,458,262 shares), the resulting dilution would be 1.12%.  Moreover, the potential incremental dilution is even lower (.56%) if the calculation excludes the approximately 25,000 shares remaining for issuance under the 2008 ISO Plan which were previously authorized by the shareholders.

Limitations on Individual Awards.  The maximum number of shares of common stock subject to awards that may be granted under the Equity Plan in any twelve-month period to any one person is as follows:

	
				
	 
	Options
	7,000
	 

	 
	Restricted stock
	5,000
	 

	 
	Restricted stock units
	5,000
	 

Vesting Conditions; Performance Goals.  In its discretion, the Committee may condition vesting of an award on such criteria as it deems appropriate, including continued service requirements and attainment of specified performance goals.  The specific business criteria the Board may use in establishing performance criteria are listed in Section 9.2 of the Plan, on page A 10 of Appendix A to this proxy statement.

Performance goals may be based on the performance of the Company as a whole or on any one or more Subsidiaries or business units of the Company or a Subsidiary and may be measured relative to a peer group, an index or a business plan.  In establishing any performance measures, the Committee may provide for the exclusion of the effects of the following items, to the extent identified in the audited financial statements of the Company, including footnotes, or in the Management’s Discussion and Analysis section of the Company’s annual report: (i) extraordinary, unusual, and/or nonrecurring items of gain or loss; (ii) gains or losses on the disposition of a business; (iii) changes in tax or accounting principles, regulations or laws; or (iv) mergers or acquisitions.

Code Section 162(m) limits to $1 million the deductibility of executive compensation paid during a fiscal year by a publicly-held corporation to any “covered employee” (generally, the chief executive officer and the other executives officers whose compensation is required to be reported in the proxy statement), except for certain exempt forms of compensation, including performance-based compensation that meets specified requirements.  Although the limitation on deductibility is unlikely to be of immediate concern to the Company, the Board deemed it prudent to design the Plan to include the flexibility of designating an award to a covered employee as performance-based under Section 162(m).

Term of Awards.  The exercise period of stock options will be as determined at the discretion of the Compensation Committee at the date of grant but may not exceed ten (10) years.  The expiration terms of awards of restricted stock and restricted stock units will be determined at the discretion of the Committee at the time of the grant.

Limitations on Transfer; Beneficiaries.  No award will be assignable or transferable by a participant other than by will or the laws of descent and distribution or (except in the case of an incentive stock option) pursuant to a qualified domestic relations order; provided, however, that the Compensation Committee may permit other transfers (other than transfers for value) where it concludes that such transferability does not result in accelerated taxation, does not cause any option intended to be an incentive stock option to fail to qualify as such, as is otherwise appropriate and desirable, taking into account any factors deemed relevant, including without limitation, any state or federal tax or securities laws or regulations applicable to transferable awards.  A participant may, in the manner determined by the Committee, designate a beneficiary to exercise the rights of the participant and to receive any distribution with respect to any award upon the participant’s death.

Treatment of Awards upon a Participant’s Termination of Service.  Unless otherwise provided in an award certificate under limitations relating to incentive stock options, if a participant’s service terminates by reason of death or disability:

		
	•
	all of such participant’s outstanding stock options will become fully vested and remain exercisable until (i) in the case of death, until the expiration date of the option, and (ii) in the case of disability, the earlier of the expiration date of the original term of the option or twelve months;

		
	•
	all time-based vesting restrictions on outstanding awards will lapse; and

		
	•
	the payout opportunities attainable under all of that participant’s outstanding performance-based awards will vest based on target or actual performance (depending on the time during the performance period in which the date of termination occurs) and the awards will payout on a prorata basis, based on the time elapsed prior to the date of termination.

Treatment of Awards upon a Change in Control.  Unless otherwise provided in an award certificate:

		
	•
	upon the occurrence of a change in control of the Company (as defined in the Plan) in which awards are not assumed by the surviving entity or otherwise equitably converted or substituted in connection with the change in control in a manner approved by the Committee or the Board of Directors:

		
	◦
	all outstanding stock options will become exercisable;

		
	◦
	all time-based vesting restrictions on outstanding awards will lapse; and

		
	◦
	all outstanding performance-based awards will vest based on target and the awards will payout on a pro-rata basis, based on the time elapsed prior to the change in control; and

		
	•
	with respect to awards assumed by the surviving entity or otherwise equitably converted or substituted in connection with a change in control, if within two years after the effective date of the change in control, a participant’s employment is terminated without cause or the participant resigns for good reason (as such terms are defined in the Equity Plan), then:

		
	◦
	all outstanding stock options that may be exercised will become fully exercisable;

		
	◦
	all time-based vesting restrictions on outstanding awards will lapse; and

		
	◦
	the payout opportunities attainable under all of the participant’s outstanding performance-based awards will vest based on target and the awards will payout on a pro-rata basis, based on the time elapsed prior to the date of termination.

Acceleration upon Certain Other Events.  Subject to limitations applicable to certain qualified performance-based awards under Code Section 162(m), the Committee may, in its discretion, accelerate awards in connection with a participant’s termination of service or upon a change in control of the Company.  The Committee need not treat all participants uniformly in exercising such discretion.

Adjustments.  If the Company effects an internal reorganization, recapitalization or similar corporate transaction that causes the value of a share or the Company’s common stock to change, such as a stock dividend, stock split, reverse stock split, spin-off, rights offering, or large nonrecurring cash dividend, the total share authorization and annual grant limitations under the Plan, as well as the number of shares and exercise price (if any) under outstanding awards, will be adjusted proportionately up or down, and the Committee will have the discretion to make such other adjustments to the Plan and outstanding awards as it deems necessary to preserve the benefits or potential benefits of the awards.

No Discounted Options. Stock options may not be granted with an exercise price lower than the fair market value of the underlying shares on the date of grant.

 No Repricing or “Evergreen” Provisions, or Tax “Gross Ups.”.  Outstanding stock options cannot be repriced, directly or indirectly, without the prior consent of the stockholders.  The exchange of an “underwater” option (i.e., an option having an exercise price in excess of the current market value of the underlying stock) for another award would be considered an indirect repricing and would, therefore, require the prior consent of the stockholders.

There are no “evergreen” features under which shares authorized for issuance pursuant to the Plan would be automatically replenished.

The Plan does not provide for any tax “gross-ups” or similar payments or reimbursements to defray tax liability associated with the issuance of awards.

Termination and Amendment.  

Plan.  Our Board of Directors or the Committee may, at any time and from time to time, terminate or amend the Equity Plan, but if an amendment would constitute a material amendment requiring stockholder approval under applicable listing requirements, laws, policies or regulations, then such amendment will be subject to stockholder approval.  In addition, the Board of Directors or the Committee may condition any Plan amendment on the approval of the stockholders for any other reason.  No termination or amendment of the Equity Plan may, without the written consent of the participant, reduce or diminish the value of an award determined as if the award had been exercised, vested, cashed in or otherwise settled on the date of such amendment or termination.

Outstanding Awards.  The Committee may amend or terminate outstanding awards.  However, such amendments may require the consent of the participant and, unless approved by the stockholders, the exercise price of an outstanding stock option may not be reduced, directly or indirectly, and the original term of a stock option may not be extended.

Plan Term.  Unless extended by amendment approved by the stockholders, the Plan will expire ten (10) years from its effective date.  The Plan will become effective on the date it is approved by the stockholders.

Certain Federal Income Tax Consequences

Non-Qualified Stock Options.  Generally, no taxable income is recognized by the optionee upon the grant of a Non-Qualified Option under the Equity Plan, nor will the Company be entitled to a deduction at that time.  When the optionee exercises a Non-Qualified Option, he or she will recognize ordinary income in an amount equal to the excess of the fair market value of the common stock received upon exercise of the option at the time of exercise over the exercise price, and the Company will be allowed a corresponding federal income tax deduction.  Any gain that the optionee realizes when he or she later sells or disposes of the shares will be short-term or long-term capital gain, depending on how long the shares were held.

Incentive Stock Options.  A participant will not recognize income, and the Company will not be allowed a tax deduction, if an incentive stock option is granted.  If the optionee holds the option shares for the required holding period of at least two years after the date the option was granted and one year after exercise, the difference between the exercise price and the amount realized upon sale or disposition of the option shares will be long-term capital gain or loss, and the Company will not be entitled to a federal income tax deduction at that time.  If the optionee disposes of the option shares in a sale, exchange, or other disqualifying disposition before the required holding period ends, he or she will recognize taxable ordinary income in an amount equal to the excess of the fair market value of the option shares at the time of exercise over the exercise price, and the Company will be allowed a federal income tax deduction equal to such amount.  While the exercise of an incentive stock option does not result in current taxable income, the excess of the fair market value of the option shares at the time of exercise over the exercise price will be an item of adjustment for purposes of determining the optionee’s alternative minimum taxable income.

Restricted Stock.  Unless a participant makes an election under Code Section 83(b) to accelerate recognition of the income to the date of grant as described below, a participant will not recognize income, and the Company will not be allowed a tax deduction, at the time a restricted stock award is granted, provided that the award is nontransferable and is subject to a substantial risk of forfeiture.  When the restrictions lapse, the participant will recognize ordinary income equal to the fair market value of the common stock as of that date (less the amount he or she paid for the stock, if any), and the Company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section 162(m).  If the participant files an election under Code Section 83(b) within 30 days after the date of grant of the restricted stock, he or she will recognize ordinary income as of the date of grant equal to the fair market value of the stock as of that date (less the amount paid for the stock, if any) and the Company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section 162(m).  However, if the stock fails to vest for any reason and is later forfeited, the participant will not be able to recover the tax previously paid pursuant to the Code Section 83(b) election.  If a Section 83(b) election is made, dividends paid on the restricted stock will be taxed at dividend rates rather than as ordinary income.

Restricted Stock Units.  A participant will not recognize income, and the Company will not be allowed a tax deduction, at the time a restricted stock unit award is granted.  Upon receipt of shares of common stock (or the equivalent value in cash or other property) in settlement of a restricted stock unit award, a participant will recognize ordinary income equal to the fair market value of the common stock or other property as of that date (less the amount he or she paid for the stock or property, if any) and the Company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section 162(m).  Dividend equivalents paid to a participant with respect to restricted stock units will be taxed to the participant as ordinary income.

Code Section 409A.  The Equity Plan permits the grant of various types of incentive awards, which may or may not be exempt from Code Section 409A.  If an award is subject to Section 409A, and if the requirements of Section 409A are not met, the taxable events as described above could apply earlier than described, and could result in the imposition of additional taxes and penalties.  Restricted stock awards and stock options that comply with the terms of the Equity Plan are generally exempt from the application of Code Section 409A.  Restricted stock unit awards generally are subject to Section 409A unless they are designed to satisfy the short-term deferral exemption from such law.  The Plan includes provisions designed to qualify restricted stock unit awards and any related dividend equivalent payments for the short-term deferral exemption under Code Section 409A.

Tax Withholding.  The Company or any affiliate has the right to deduct or withhold, or require a participant to remit to the Company, an amount sufficient to satisfy federal, state, and local taxes (including employment taxes) required by law to be withheld with respect to any exercise, lapse of restriction, or other taxable event arising as a result of the Equity Plan.

Benefits to Named Executive Officers and Others.  The Equity Plan prohibits the granting of awards prior to stockholder approval.  The Equity Plan became effective upon its approval at the annual meeting of shareholders held on May 21, 2014.  No awards have yet been made under the Equity Plan, and any awards made in the future will be at the discretion of the Committee.  Therefore, it is not possible at this time to determine the benefits or amounts that will be received by the Company’s executive officers and other participants pursuant to the Plan in the future.

The foregoing description is qualified in its entirety by reference to the text of the Equity Plan, which is filed as Exhibit 10.2 to this report.

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