<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8529
LEGG MASON, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 52-1200960
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
111 South Calvert Street - Baltimore, MD 21203-1476
(Address of principal executive offices) (Zip code)
(410) 539-0000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
18,106,502 shares of Common Stock as of the close of business on
November 1, 1996.
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
LEGG MASON, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands of dollars)
September 30,1996 March 31,1996
(Unaudited)
<S> <C> <C>
ASSETS:
Cash and cash equivalents.............. $ 157,186 $ 89,378
Cash and securities segregated for
regulatory purposes................... 175,501 168,859
Resale agreements...................... 139,077 108,413
Receivable from customers.............. 480,018 398,375
Securities borrowed.................... 220,560 196,569
Securities owned, at market value...... 94,372 84,219
Investment securities, at market value. 54,687 83,497
Property and equipment, net............ 34,162 33,339
Intangible assets...................... 63,950 67,370
Other.................................. 92,456 84,481
---------- ----------
$1,511,969 $1,314,500
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Payable to customers................... $ 666,439 $ 564,698
Payable to brokers and dealers......... 7,850 3,854
Securities loaned...................... 190,993 170,829
Short-term borrowings.................. 38,558 6,800
Securities sold, but not yet purchased,
at market value....................... 25,249 10,693
Accrued compensation................... 40,741 41,168
Other.................................. 52,166 50,018
Senior notes........................... 99,557 99,534
---------- ----------
1,121,553 947,594
---------- ----------
Subordinated liabilities................ - 68,000
---------- ----------
Stockholders' equity:
Common stock........................... 1,809 1,538
Additional paid-in capital............. 189,501 120,960
Retained earnings...................... 198,694 176,098
Net unrealized appreciation on
investment securities................. 412 310
---------- ----------
390,416 298,906
---------- ----------
$1,511,969 $1,314,500
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE> 3
<TABLE>
<CAPTION>
LEGG MASON, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(Unaudited)
Three Months Six Months
Ended September 30, Ended September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Commissions.........................$ 41,718 $ 41,629 $ 89,304 $ 79,121
Principal transactions.............. 16,610 15,765 34,954 32,696
Investment advisory and related fees 42,881 35,343 85,364 67,830
Investment banking.................. 18,750 9,996 32,891 19,150
Interest............................ 18,944 13,836 36,902 26,110
Other............................... 8,391 8,140 16,716 15,799
-------- -------- -------- --------
147,294 124,709 296,131 240,706
-------- -------- -------- --------
Expenses:
Compensation and benefits........... 82,765 72,242 167,212 138,702
Occupancy and equipment rental...... 10,071 8,851 20,196 17,707
Communications...................... 6,736 6,460 13,867 13,452
Floor brokerage and clearing fees... 1,271 1,443 2,804 2,896
Interest............................ 8,534 6,036 17,996 11,926
Other............................... 14,742 14,051 28,895 27,139
-------- -------- -------- --------
124,119 109,083 250,970 211,822
-------- -------- -------- --------
Earnings Before Income Taxes......... 23,175 15,626 45,161 28,884
Income taxes........................ 9,279 6,395 18,365 11,827
-------- -------- -------- --------
Net Earnings.........................$ 13,896 $ 9,231 $ 26,796 $ 17,057
======== ======== ======== ========
Earnings per common share:
Primary.............................$ .78 $ .61 $ 1.58 $ 1.17
Fully diluted.......................$ .74 $ .52 $ 1.44 $ .98
Average number of common shares
outstanding:
Primary............................. 17,861 15,065 16,961 14,613
Fully diluted....................... 18,766 18,540 18,743 18,524
Dividends declared per common share..$ .13 $ .12 $ .25 $ .23
Book value per common share..........$ 21.58 $ 18.32 $ 21.58 $ 18.32
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE> 4
<TABLE>
<CAPTION>
LEGG MASON, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months
Ended September 30,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings.................................... $ 26,796 $ 17,057
Noncash items included in earnings:
Depreciation and amortization................. 7,621 7,052
-------- --------
34,417 24,109
(Increase)decrease in assets:
Cash and securities segregated for regulatory
purposes..................................... (6,642) (27,232)
Receivable from customers...................... (81,643) (37,829)
Securities borrowed............................ (23,991) (50,132)
Securities owned............................... (10,153) (78,298)
Other.......................................... (8,822) (18,237)
Increase(decrease)in liabilities:
Payable to customers........................... 101,741 46,254
Payable to brokers and dealers................. 3,996 10,692
Securities loaned.............................. 20,164 8,416
Securities sold, but not yet purchased......... 14,556 15,416
Accrued compensation........................... (427) 12,802
Other.......................................... 1,574 156
-------- --------
CASH PROVIDED BY(USED FOR)OPERATING ACTIVITIES... 44,770 (93,883)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for:
Property and equipment......................... (4,936) (6,983)
Intangible assets.............................. (32) (298)
Net(increase)decrease in resale agreements...... (30,664) 50,006
Purchases of investment securities.............. (82,837) -
Proceeds from sales of investment securities.... 111,817 4,431
-------- --------
CASH PROVIDED BY(USED FOR)INVESTING ACTIVITIES... (6,652) 47,156
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in short-term borrowings........... 31,758 101,002
Repayment of subordinated liabilities........... (29) (69)
Issuance of common stock........................ 1,656 1,819
Dividends paid.................................. (3,695) (2,701)
-------- --------
CASH PROVIDED BY FINANCING ACTIVITIES............ 29,690 100,051
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS........ 67,808 53,324
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.. 89,378 60,097
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD....... $157,186 $113,421
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE> 5
LEGG MASON, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of dollars)
September 30, 1996
(Unaudited)
1. Interim Basis of Reporting:
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with the instructions
for Form 10-Q and, therefore, do not include all information and
notes required by generally accepted accounting principles for
complete financial statements. The interim financial statements
have been prepared utilizing the interim basis of reporting and,
as such, reflect all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management,
necessary for a fair presentation of the results for the periods
presented. The nature of the Company's business is such that the
results of any interim period are not necessarily indicative of
results for a full year.
2. Net Capital Requirements:
The Company's broker-dealer subsidiaries are subject to the
Securities and Exchange Commission's Uniform Net Capital Rule.
The Rule provides that equity capital may not be withdrawn or cash
dividends paid if resulting net capital would fall below specified
levels. As of September 30, 1996, the broker-dealer subsidiaries
had aggregate net capital, as defined, of $119,017 which exceeded
required net capital by $107,865.
3. Legal Proceedings:
The Company and its subsidiaries have been named as defendants in
various legal actions arising primarily from securities and
investment banking activities, including certain class actions
which primarily allege violations of securities laws and seek
unspecified damages which could be substantial. While the ultimate
resolution of these actions cannot be currently determined, in the
opinion of management, after consultation with legal counsel, the
actions will be resolved with no material adverse effect on the
consolidated financial statements of the Company.
4. Supplemental Cash Flow Information:
Interest payments were $19,225 1996 and $12,043 in 1995. Income
tax payments were $23,824 in 1996 and $12,344 in 1995.
<PAGE> 6
5. Convertible Subordinated Debenture Redemption:
On July 2, 1996, the Company called for redemption on August 1,
1996 the $68.0 million aggregate principal amount outstanding of
its 5.25% Convertible Subordinated Debentures due May 1, 2003
(the "Debentures"). Substantially all holders converted their
Debentures into 38.76 shares of Common Stock of the Company for
each $1 thousand principal amount of Debentures (based on the
conversion price of $25.80 per share of Common Stock) for a total
issuance of 2,634,515 new common shares. Cash was paid in lieu of
fractional shares.
<PAGE> 7
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition
RESULTS OF OPERATIONS
During the quarter and six months ended September 30, 1996, the
Company benefited from continued favorable market conditions,
despite a brief decline in equity prices in July 1996. Stable
interest rates, higher securities transaction volume, increased
underwriting activity and rising equity markets contributed to the
Company's strong revenues and earnings in both periods.
Quarter Ended September 30, 1996 Compared to Quarter Ended
September 30, 1995
In the second fiscal quarter ended September 30, 1996, the
Company's net earnings increased 51% to $13.9 million from $9.2
million in the prior year's quarter. Revenues rose 18% to $147.3
million from $124.7 million in the corresponding quarter of the
prior year. Fully diluted earnings per share increased 42% to $.74
from $.52.
Commission revenues were $41.7 million, up slightly from $41.6
million in the prior year, reflecting increased sales of listed
securities, annuities and non-affiliated mutual funds, offset in
part by a decline in sales of over-the-counter securities.
Revenues from principal transactions rose 5% to $16.6 million, as
higher sales of U.S. government, agency and over-the-counter
securities were partially offset by losses on energy-related equity
securities positions.
Investment advisory and related fees increased for the 26th
consecutive quarter and were 21% higher than in the corresponding
quarter of the prior year as a result of growth in assets under
management in Company-sponsored mutual funds, the Company's fixed-
income investment advisory subsidiary and fee-based brokerage
accounts. In addition, the current year's quarter includes fees
earned by Western Asset Global Management ("Western Asset Global"),
a manager of global fixed-income and currency investments, acquired
in February 1996. Company subsidiaries now serve as investment
advisors to individual and institutional accounts and mutual funds
with assets of $38.1 billion, up from $29.2 billion at September
30, 1995.
Investment banking revenues were $18.8 million, 88% higher than in
the corresponding quarter of the prior year, reflecting an increase
in public offerings of securities and financial advisory services.
Other revenues rose 3% to $8.4 million because of an increase in fee
income from increased investor activity.
Compensation and benefits increased 15% to $82.8 million, reflecting
higher sales and profitability-based compensation and personnel
additions in new and existing brokerage offices and product areas.
<PAGE> 8
Occupancy and equipment rental increased 14% to $10.1 million as a
result of increased rent and depreciation expense and higher
transaction volume processed by the Company's data processing
service bureau.
Communications expense rose 4% to $6.7 million because of new
brokerage office locations and the addition of expenses of Western
Asset Global.
Despite increased transaction volume, floor brokerage and clearing
fees decreased 12% to $1.3 million as a result of the installation
of a new order processing system in November 1995.
Other expense increased 5% to $14.7 million, attributable to
increased promotional, marketing and professional fee expenses,
offset in part by lower litigation-related expenses. In addition,
the current quarter includes expenses of Western Asset Global.
Interest revenue increased 37% to $18.9 million because of larger
firm investment and customer margin account balances.
Interest expense increased 41% to $8.5 million as a result of higher
interest paid on larger customer credit balances.
Income taxes rose 45% to $9.3 million because of an increase in
pre-tax earnings. The effective tax rate was 40.0% compared with
40.9% in the prior year's quarter.
<PAGE> 9
Six Months Ended September 30, 1996 Compared to Six Months Ended
September 30, 1995
The Company's net earnings in the six months ended September 30,
1996 increased 57% to $26.8 million from $17.1 million in the prior
year's corresponding period. Revenues rose 23% to $296.1 million
from $240.7 million. Fully diluted earnings per share increased 47%
to $1.44 from $.98.
Commission revenues rose 13% to $89.3 million because of increases
in sales of non-affiliated mutual funds, listed securities and
annuities, partially offset by a decline in sales of over-the-
counter securities.
Revenues from principal transactions increased 7% to $35.0 million,
as higher sales of over-the-counter stocks and U.S. government and
agency securities were partially offset by losses on energy-related
equity positions.
Investment advisory and related fees increased 26% to $85.4 million,
principally as a result of growth in assets under management in
Company-sponsored mutual funds, the Company's fixed-income
investment advisory subsidiary, fee-based brokerage accounts and the
addition of fees earned by Western Asset Global.
Investment banking revenues rose 72% to $32.9 million as a result
of increased corporate finance activity related to public offerings
of securities and financial advisory services.
Other revenues rose 6% to $16.7 million as a result of an increase
in fee income from increased investor activity, partially offset by a decline
in loan originations at the Company's mortgage banking subsidiaries.
Compensation and benefits increased 21% to $167.2 million because of
higher sales and profitability-based compensation and personnel
additions in new and existing brokerage offices and product areas.
Occupancy and equipment rental increased 14% to $20.2 million
because of increased depreciation and rent expense, higher
transaction volume processed by the Company's data processing
service bureau and the addition of expenses of Western Asset Global.
Communications expense increased 3% to $13.9 million, primarily
because of brokerage office expansion and the addition of expenses
of Western Asset Global.
Despite increased transaction volume, floor brokerage and clearing
fees decreased 3% to $2.8 million as a result of the installation
of a new order processing system.
<PAGE> 10
Other expense increased 6% to $28.9 million, attributable to
increased consulting and promotional expenses and the addition of
expenses of Western Asset Global, offset in part by lower
litigation-related expenses.
Interest revenue increased 41% to $36.9 million because of larger
firm investment and customer margin account balances.
Interest expense increased 51% to $18.0 million because of higher
interest paid on larger customer credit and conduit stock loan
balances and the issuance of $100 million in Senior Notes in
February 1996.
Income taxes rose 55% to $18.4 million because of an increase in
pre-tax earnings. The effective tax rate was 40.7% and 40.9% in
the current and prior year periods, respectively.
Liquidity and Capital Resources
On July 2, 1996, the Company called for redemption on August 1,
1996, the $68.0 million aggregate principal amount outstanding of
its 5.25% Convertible Subordinated Debentures due May 1, 2003 (the
"Debentures"). Substantially all holders converted their
Debentures into 38.76 shares of Common Stock for each $1 thousand
principal amount of Debentures (based on the conversion price of
$25.80 per share of Common Stock), with cash paid in lieu of
fractional shares.
Except for the Debenture redemption, there has been no material
change in the Company's financial position since March 31, 1996.
A substantial portion of the Company's assets is liquid, consisting
mainly of cash and assets readily convertible into cash. These
assets are financed primarily by free credit balances, equity
capital, bank lines of credit, senior notes and other payables.
During the six months ended September 30, 1996, cash and cash
equivalents increased $67.8 million. Cash flows from operating
activities provided the Company with $44.8 million of cash,
principally from net earnings, adjusted for depreciation and
amortization, and higher net customer payables. Cash flows from
financing activities contributed $29.7 million, attributable to
higher short-term borrowings by the Company's mortgage banking
affiliates. Cash flows from investing activities used $6.7 million,
principally for computer equipment purchases.
On January 5, 1995, the Company acquired the assets of Batterymarch
Financial Management ("Batterymarch"). The Company paid $54.1
million in cash at closing. An additional payment, due in early
1998 if Batterymarch achieves specified revenue levels for calendar
1997, could increase the total consideration up to $120.0 million.
If the amount of any 1998 payment exceeds $40.0 million, the
Company may pay all or any portion of the excess in the form of
shares of the Company's common stock.
<PAGE> 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Nasdaq Market-Makers Antitrust Litigation
Reference is made to the discussion under the caption "Nasdaq
Market-Makers Antitrust Litigation" in Item 3 of Registrant's 10-K
Report for the fiscal year ended March 31, 1996. In July 1996, the
Antitrust Division of the Department of Justice concluded its
investigation and entered into a Stipulation and Order with certain
of the broker dealer firms from whom it had sought information. At
that time, the Antitrust Division advised Legg Mason Wood Walker,
Incorporated that it would not be named as a defendant and need not
enter into any Stipulation and Order. The private class litigation
in which Legg Mason Wood Walker is one of the defendants remains
pending.
Item 4. Submission of Matters to a Vote of Security Holders.
Registrant's annual meeting of stockholders was held July 24, 1996.
In the election of directors, the six director nominees were
elected with the following votes:
<TABLE>
Votes
Cast For Withhold
<S> <C> <C> <C>
Raymond A. Mason 13,575,341 13,575,341 79,024
James W. Brinkley 13,574,818 13,574,818 79,547
Nicholas J. St. George 13,582,667 13,582,667 71,698
Richard J. Himelfarb 13,555,431 13,555,431 98,934
Roger W. Schipke 13,582,667 13,582,667 71,698
Edward I. O'Brien 13,583,010 13,583,010 71,355
</TABLE>
The stockholders voted in favor of the approval of the Legg Mason,
Inc. 1996 Equity Incentive Plan, the amendment of the Legg Mason,
Inc. Articles of Incorporation and the ratification of the
appointment of Coopers & Lybrand L.L.P. as independent auditors of
the Registrant as follows:
<TABLE>
Votes
Cast For Against Abstain Non-Vote
<S> <C> <C> <C> <C> <C>
Approval of
Legg Mason, Inc.
1996 Equity
Incentive Plan 11,899,551 9,181,090 2,718,461 123,933 1,630,881
Amendment of the
Legg Mason, Inc.
Articles of
Incorporation 11,832,570 9,686,312 2,718,461 123,933 1,535,258
Ratification of
Appointment of
Auditors 13,632,361 13,619,892 12,469 22,005 ---
</TABLE>
<PAGE> 12
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
3.1 Articles of Incorporation and
Articles of Amendment of Legg
Mason, Inc. through July 24, 1996
10.1 Form of Non-Qualified Stock
Option Agreement under Legg
Mason, Inc. 1996 Equity Incentive Plan*
11. Statement re: computation of per share earnings
27. Statement re: financial data schedules
(b) No reports on Form 8-K were filed during the quarter
ended September 30, 1996.
*These exhibits are management contracts or compensatory plans or
arrangements.
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
LEGG MASON, INC.
(Registrant)
DATE: November 14, 1996 /s/ John F. Curley, Jr.
John F. Curley, Jr.
Vice Chairman of the Board
DATE: November 14, 1996 /s/ F. Barry Bilson
F. Barry Bilson
Vice President - Finance
<PAGE> 14
INDEX TO EXHIBITS
PAGE
3.1 Articles of Incorporation and
Articles of Amendment of Legg
Mason, Inc. through July 24, 1996
10.1 Form of Non-Qualified Stock Option
Agreement under Legg Mason, Inc.
1996 Equity Incentive Plan*
11. Statement re: computation of per
share earnings
27. Statement re: financial data
schedules
*These exhibits are management contracts or compensatory plans or
arrangements.
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
LEGG MASON, INC.
THIS IS TO CERTIFY THAT:
FIRST: The undersigned, Charles A. Bacigalupo, whose
post office address is 7 East Redwood Street, Baltimore, Maryland
21203, being over eighteen (18) years of age, acting as
incorporator, does hereby form a corporation, under and by virtue
of the Maryland General Corporation Law.
SECOND: The name of the corporation (which is
hereinafter called the "Corporation") is:
LEGG MASON, INC.
THIRD: The purposes for which the Corporation is
formed are to engage in any part of the world in any capacity in
any lawful act or activity for which corporations may be
organized under the Maryland General Corporation Law and to enjoy
all powers, rights and privileges which a corporation organized
under the Maryland General Corporation Law may have under the
laws of the State of Maryland as in force from time to time,
including without limitation all powers, rights and privileges
necessary or convenient in carrying out all those acts and
activities in which it may lawfully engage.
FOURTH: The address of the principal office of the
Corporation in this State is 7 East Redwood Street, Baltimore,
Maryland 21203. The name and address of the resident agent of
the Corporation in this State is Charles A. Bacigalupo, 7 East
Redwood Street, Baltimore, Maryland 21203, an individual residing
in Maryland.
FIFTH: The aggregate par value of all shares which
the Corporation is authorized to issue is $10,300,000 represented
by 1,000,000 shares of Preferred Stock of the value of $10 per
share; and 3,000,000 shares of Common Stock of the par value of
$.10 per share.
A statement of the preferences, privileges and
restrictions granted to or imposed upon the shares of the stock
of the Corporation or the holders thereof is as follows:
1. Common Stock.
The powers, rights, qualifications, limitations or
restrictions thereof of the Common Stock shall be as follows:
<PAGE> 2
(a) Dividends on Common Stock. The holders of
the outstanding Common Stock shall be entitled as a class, share
for share, to receive, when and as declared by the Board of
Directors, dividends payable in cash, in property or in shares of
Preferred or Common Stock of the Corporation.
(b) Liquidation. In the event of any
dissolution, liquidation or winding up of the Corporation, the
holders of the Common Stock shall be entitled as a class, share
for share, after due payment or provision for payment of the
debts and other liabilities of the Corporation and the payment of
the full preferential amounts to which the holders of its
Preferred Stock are entitled, to share ratably in the remaining
net assets of the Corporation. A consolidation or merger of the
Corporation shall not be deemed to be a liquidation, dissolution
or winding up within the meaning of this Article.
(c) Redemption of Common Stock by the
Corporation. The Common Stock may be redeemed in whole or in
part at the option of the Board of Directors, at any time or from
time to time, at a price equal to its consolidated book value
determined as of the last day of the month in which the
Corporation gives notice of such redemption ("Valuation Date"),
determined in accordance with generally accepted accounting
principles in the following manner (the "Book Value"):
(i) No allowance of any kind shall be made
for the Corporation's good will or any similar intangible asset.
(ii) All accounts payable shall be taken at
the face amount less discounts deductible therefrom and all
accounts receivable shall be taken at the face amount thereof
less a reasonable reserve for bad debts.
(iii) All unpaid and accrued taxes shall be
deducted as liabilities.
(iv) Every membership on a national
securities exchange held for the benefit of the Corporation or a
subsidiary of the Corporation shall be taken at its fair value,
which shall be the price contracted for at the last sale of a
comparable membership on the Valuation Date, or if there is no
sale contracted for on that date, the value shall be the mean
between the bid and asked prices on that date. If there is no
quotation on the Valuation Date, then the value shall be
determined by the quotation (either of a sale or on a bid and
asked basis) which occurred before and closest in point of time
to the Valuation Date.
(v) All securities owned by the Corporation
shall be taken at their fair market value. The word "securities"
<PAGE> 3
as used in this Article FIFTH includes any instrument defined as
a "security" by the Securities Act of 1933.
(vi) All other assets and liabilities shall
be taken as shown on the Corporation's books.
(vii) The excess of the proceeds over the cash
surrender value of any policy of insurance on the life of an
employee or stockholder, or former employee or stockholder,
received by the Corporation or a subsidiary because of the death
of the insured within six (6) months of the Valuation Date shall
be excluded.
Not less than thirty (30) nor more than fifty (50) days
prior to the date fixed for redemption, the Corporation shall
give notice by mail, postage prepaid, to any holders of record of
Common Stock to be redeemed, such notice to be addressed to each
such stockholder at his post office address as shown on the stock
transfer books of the Corporation.
The amount of the Common Stock to be redeemed at the
option of the Board of Directors must be approved by a two-thirds
(2/3) vote of the entire Board of Directors but need not be
ratable or proportionate among the holders of the Common Stock.
On or after the date fixed for redemption as stated in
such notice, each holder of Common Stock called for redemption
shall surrender his certificate evidencing such shares to the
Corporation at the place designated in such notice and shall
thereupon be entitled to receive payment of the redemption price
in cash. In case less than all of the shares represented by any
such surrendered certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares. If such
notice of redemption shall have been duly given, and if on the
date fixed for redemption funds necessary for the redemption
shall be available therefor, then notwithstanding that the
certificate evidencing any shares of Common Stock so called for
redemption shall not have been surrendered, all rights with
respect to such shares shall forthwith after such date cease and
terminate, except only the right of the holders, subject to
applicable law, to receive the redemption price without interest
upon surrender of the certificate therefor.
(d) Voting. The holders of Common Stock shall be
entitled to notice of all meetings of stockholders, shall have
one vote per share and shall have exclusive voting rights on all
questions requiring a vote of stockholders, except as may be
provided in articles supplementary or as required by law.
(e) Reservation of Rights to Common Stock.
Except for and subject to those rights expressly granted to the
holders of the Preferred Stock, or except as may be provided by
<PAGE> 4
law, the holders of Common Stock shall have all other rights of
stockholders, including, but not by way of limitation: (1) voting
power for all purposes and the right to all notices of meetings
or of other corporate actions, (2) the right to receive dividends
when and as declared by the Board of Directors out of assets
legally available therefor, and (3) in the event of any
dissolution of, or distribution of assets of, the Corporation,
the right to receive all of the assets of the Corporation
remaining after payment to the holders of Preferred Stock of the
specific amounts, if any, which they are entitled to receive.
2. Preferred Stock.
The designations and the powers, preferences and
rights, and the qualifications, limitations or restrictions
thereof, of the Preferred Stock shall be as follows:
(a) Issuance in Series. The Board of Directors
is expressly authorized at any time, and from time to time, in
addition to and not in derogation of the rights granted to the
Board of Directors in paragraph 3 of Article SEVENTH, to provide
for the issuance of shares of Preferred Stock in one or more
series, with such voting powers, full or limited, or without
voting powers, and with such designations, preferences and
relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, as shall be
stated and expressed in the resolution or resolutions providing
for the issue thereof adopted by the Board of Directors and set
forth in articles supplementary filed for record with the State
Department of Assessments and Taxation, and as are not contrary
to those stated and expressed in these articles of incorporation,
or any amendment thereto, including (but without limiting the
generality of the foregoing) the following:
(i) The designation of and number of shares
constituting such series;
(ii) The dividend rate of such series, the
conditions and dates upon which such dividends shall be payable,
the preference or relation which such dividends shall bear to the
dividends payable on any other class or classes or of any other
series of capital stock, and whether such dividends shall be
cumulative or noncumulative;
(iii) Whether the shares of such series shall
be subject to redemption by the Corporation, and, if made subject
to such redemption, the times, prices and other terms and
conditions of such redemption;
(iv) The terms and amount of any sinking fund
provided for the purchase or redemption of the shares of such
series;
<PAGE> 5
(v) Whether or not the shares of such series
shall be convertible into or exchangeable for shares of any other
class or classes or of any other series of any class or classes
of capital stock of the Corporation, and, if provision be made
for conversion or exchange, the times, prices, rates,
adjustments, and other terms and conditions of such conversion or
exchange;
(vi) The extent, if any, to which the holders
of the shares of such series shall be entitled to vote as a class
or otherwise with respect to the election of the directors or
otherwise;
(vii) The restrictions, if any, on the issue
or reissue of any additional Preferred Stock; and
(viii) The rights of the holders of the shares
of such series upon the dissolution of, or upon the distribution
of assets of, the Corporation.
(b) Voting Rights. Except as otherwise required
by law and except for such voting powers with respect to the
election of directors or other matters as may be stated in the
resolutions of the Board of Directors creating any series of
Preferred Stock, the holders of any such series shall have no
voting power whatsoever.
3. No Pre-emptive Rights.
No holder of shares of Stock of the Corporation of
any class shall be entitled as such, as a matter of right, to
subscribe for or purchase any part of any new or additional issue
of stock, or securities convertible into stock, of any class
whatsoever, whether now or hereafter authorized, and whether
issued for cash, property, services or otherwise.
SIXTH: The number of directors of the Corporation
shall be twelve which number may be increased or decreased
pursuant to the bylaws of the Corporation, but shall never be
less than six. The names of the directors who shall serve until
the first annual meeting of Stockholders and until their
successors are duly elected and qualify are:
Raymond A. Mason
James W. Brinkley
Edmund J. Cashman, Jr.
Charles A. Bacigalupo
Philip O. Rogers
William C. Cicatelli
Calvert H. Crary
Harry M. Ford, Jr.
Kenneth S. Battye
Allan H. McAlpin, Jr.
Joseph W. Sener, Jr.
Charles T. Williams, Jr.
<PAGE> 6
SEVENTH: In carrying on its business or for the
purpose of attaining or furthering any of its objects the
Corporation shall nave all of the rights, powers and privileges
granted to corporations by the laws of the State of Maryland and
the power to do any and all acts and things which a natural
person or partnership could do and which may now or hereafter be
authorized by law, either alone or in partnership or conjunction
with others. In furtherance and not in limitation of the powers
conferred by law, the powers of the Corporation and of the
Directors and Stockholders shall including the following:
1. Consideration for Shares.
The Board of Directors of the Corporation is
hereby empowered to authorize the issuance of the shares of its
stock of any class, whether now or hereafter authorized, or
securities convertible into shares of its stock of any class or
classes, whether now or hereafter authorized, for such
consideration as said Board of Directors may deem advisable,
irrespective of the value or amount of such consideration,
subject to such restrictions or limitations, if any, as may be
set forth in the bylaws and these articles of incorporation, or
any amendment thereto or articles supplementary, of the
Corporation.
2. Reserved Right of Amendment.
The Corporation reserves the right from time to
time to make any amendments of its Charter, now or hereafter
authorized by law, including any amendment which alters the
contract rights, as expressly set forth in its Charter, of any
outstanding stock but no such amendment may change the terms of
any class or series of any class of the outstanding stock unless
such change of terms shall have been authorized by the holders of
not less than two-thirds of all shares of such class or series of
such class at the time outstanding.
3. Classification and Reclassification of Unissued
Shares.
The Board of Directors may without shareholders'
authorization, from time to time, classify or reclassify any
unissued shares of stock by setting or changing the preferences,
conversion or other rights, voting powers, restrictions,
limitation as to dividends, qualifications, or terms or
conditions of redemption provided that before issuing shares of
such stock the Corporation shall file articles supplementary for
record with the State Department of Assessments and Taxation.
<PAGE> 7
4. Indemnification.
(a) Proceeding not by or on behalf of
Corporation. The Corporation shall indemnify any individual who
is a present or former director or officer, and solely in the
discretion of the Board of Directors may indemnify any agent or
employee of the Corporation or any individual who serves or has
served another corporation, partnership, joint venture, trust or
any other enterprise in one of these capacities at the request of
the Corporation ("Corporate Representative") and who by his
position was, is or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative
("Proceeding") not brought by or on behalf of the Corporation to
the full extent permitted under the Maryland General Corporation
Law, as amended from time to time.
(b) Proceeding by or on behalf of Corporation.
The Corporation shall indemnify any present or former director or
officer of the Corporation and solely in the discretion of the
Board of Directors may indemnify any other Corporate
Representative who by reason of his position was, is or is
threatened to be made a party to any Proceeding brought by or on
behalf of the Corporation to the full extent permitted under the
Maryland General Corporation Law, as amended from time to time.
EIGHTH: The headings of various paragraphs in these
Articles are intended for convenience of reference and are not to
be construed as part of the text.
IN WITNESS WHEREOF, I have signed these Articles of
Incorporation on this 13th day of January, 1981.
/s/ Charles A. Bacigalupo
Charles A. Bacigalupo
<PAGE> 1
LEGG MASON, INC.
ARTICLES OF AMENDMENT
THIS IS TO CERTIFY THAT:
FIRST: The Articles of Incorporation of Legg Mason,
Inc., a Maryland corporation (the "Corporation"), are hereby
revised by amending Articles FIFTH, SIXTH and SEVENTH as follows:
1. The first paragraph of Article FIFTH is amended
to read as follows:
"FIFTH: The aggregate par value of all shares
which the Corporation is authorized to issue is $41,200,000,
represented by 4,000,000 shares of Preferred Stock of the par
value of $10 per share and 12,000,000 shares of Common Stock of
the par value of $.10 per share."
2. The first sentence of Article SIXTH is amended
to read as follows:
"SIXTH: The number of directors of the
Corporation shall be not less than six nor more than twenty, the
exact number to be fixed from time to time pursuant to the bylaws
of the Corporation."
3. The following paragraph is added to Article
SIXTH:
"The following additional provisions shall be
applicable to the Board of Directors:
1. Classification of Directors. Beginning with
the Board of Directors to be elected at the annual meeting of
stockholders held in 1983, directors shall be classified with
respect to the time for which they shall severally hold office by
dividing them into three classes, as nearly equal in number as
possible. At such meeting, separate elections shall be held for
the directors of each class, those of the first class to be
elected for a term of one year, those of the second class to be
elected for a term of two years, and those of the third class to
be elected for a term of three years. At each succeeding annual
meeting of stockholders, the successors to the class of directors
whose terms shall expire that year shall be elected to hold
office for a term of three years, so that the term of office of
one class of directors shall expire in each year.
2. Removal of Directors. Any director, any
class of directors, or the entire Board of Directors, may be
removed from office by stockholder vote at any time, with or
without assigning any cause, but only if stockholders entitled to
cast at least seventy percent (70%) of the votes which all
<PAGE> 2
stockholders would be entitled to cast at an annual election of
directors of such class or classes of directors shall vote in
favor of such removal."
4. Paragraph 4 of Article SEVENTH is amended to
read as follows:
"4. Limit on Indemnification. Notwithstanding
any contrary provision of law, unless the bylaws otherwise
provide, no indemnification shall be provided for any officer,
director, employee or agent of any predecessor of the
Corporation."
SECOND: The amendments to the Articles of
Incorporation of the Corporation as hereinabove set forth have
been duly advised by the Board of Directors and approved by the
Stockholders of the Corporation as required by law.
THIRD: The total number of shares of all classes of
stock which the Corporation had authority to issue immediately
prior to this amendment was 4,000,000 shares consisting of
3,000,000 shares of Common Stock, $.10 par value, and 1,000,000
shares of Preferred Stock, $10 par value. The aggregate par
value of all shares of all classes having a par value was Ten
Million, Three Hundred Thousand Dollars ($10,300,000).
FOURTH: The total number of shares of all classes of
stock which the Corporation has authority to issue, pursuant to
the Articles of Incorporation as hereby amended, is 16,000,000
shares consisting of 12,000,000 shares of Common Stock, $.10 par
value, and 4,000,000 shares of Preferred Stock, $10 par value.
The aggregate par value of all shares of all classes having a par
value is Forty-One Million, Two Hundred Thousand Dollars
($41,200,000).
FIFTH: The description of each class of stock of the
Corporation, as set forth in the original Articles of
Incorporation, and as amended from time to time, including the
preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption, has not been changed by this
amendment.
SIXTH: The undersigned President acknowledges these
Articles of Amendment to be the corporate act of said Corporation
and with respect to all matters and facts otherwise required to
be verified under oath, the undersigned President acknowledges
that to the best of his knowledge, information and belief, such
matters and facts are true in all material respects and such
statement is made under the penalties of perjury.
<PAGE> 3
IN WITNESS WHEREOF, the Corporation has caused these
presents to be signed in its name and on its behalf by its
President and attested to by its Assistant Secretary on this 15th
day of July, 1983.
ATTEST: LEGG MASON, INC.
/s/ Suzanne E. Peluso By: /s/ Raymond A. Mason
Suzanne E. Peluso, Raymond A. Mason, President
Assistant Secretary
<PAGE> 1
LEGG MASON, INC.
ARTICLES OF AMENDMENT
THIS IS TO CERTIFY THAT:
FIRST: The Articles of Incorporation of Legg Mason,
Inc., a Maryland corporation (the "Corporation"), are hereby
amended as follows:
1. Article FIFTH is amended by deleting existing
subparagraph 1(c) in its entirety and relettering subparagraphs
1(d) and 1(e) as 1(c) and 1(d), respectively.
2. A new Article EIGHTH is added to read as follows:
"EIGHTH:
1. Special Voting Requirements for Certain
Business Combinations. Except as otherwise provided by this
Article, in addition to any vote otherwise required by law or
these Articles or Articles Supplementary, a Business Combination
(as hereinafter defined) with a Related Person (as hereinafter
defined) shall be recommended by the Board of Directors and
approved by the affirmative vote of at least (1) seventy percent
(70%) of the votes entitled to be cast by outstanding shares of
voting stock of the Corporation, voting together as a single
voting group, and (2) fifty-five percent (55%) of the votes
entitled to be cast by holders of voting stock other than voting
stock held by the Related Person, voting together as a single
voting group; provided, however, that the 70% voting requirement
of Clause (1) shall not be applicable and the Business
Combination shall require approval only by the 55% vote of
stockholders other than the Related Person as provided by Clause
(2), in addition to any vote otherwise required by law or these
Articles or Articles Supplementary, if both of the following
conditions are satisfied with respect to the particular Business
Combination:
(a) the aggregate amount of the cash and the
fair market value of the "consideration other than
cash" (as hereinafter defined) to be received per share
by the holders of the Common Stock of the Corporation
in the Business Combination is (with appropriate
adjustments for recapitalizations and for stock splits,
stock dividends and like distributions) at least equal
to the greater of (1) the highest price per share
(including any brokerage commissions, transfer taxes
and soliciting dealer's fees) paid or agreed to be paid
by the Related Person to acquire beneficial ownership
of any share of such Common Stock during the twenty-four
month period immediately prior to the taking of
<PAGE> 2
such vote, (2) the highest price per share (including
any brokerage commissions, transfer taxes and
soliciting dealer's fees) paid by any person to acquire
beneficial ownership of any share of such Common Stock
on the open market at any time during the twenty-four
month period immediately prior to the taking of such
vote, or (3) the per share book value of such Common
Stock at the end of the calendar quarter immediately
preceding the taking of such vote; and
(b) the consideration to be received by
holders of Common Stock in the Business Combination
shall be in the same form and of the same kind as the
most favorable form and kind of consideration paid by
the Related Person in acquiring beneficial ownership of
any of the shares of Common Stock already held,
directly or indirectly, by it.
Notwithstanding the foregoing provisions, the
special stockholder voting requirements of Section 1 of Article
EIGHTH shall not be applicable to a Business Combination which has
been recommended to the stockholders by the Board of Directors by a
vote which includes the affirmative vote of a majority (but not
less than two) of the Disinterested Directors (as hereinafter
defined), in which event the Business Combination shall be
subject to such stockholder vote, if any, as may be required by
law or other provisions of these Articles or Articles
Supplementary.
A determination by a majority of the Disinterested
Directors of the Corporation, made in good faith and based upon
information known to them after reasonable inquiry, shall be
conclusive as to all facts necessary for compliance with this
Article, including without limitation (i) whether any person,
partnership, corporation or firm is a Related Person or affiliate
or associate as defined herein, and (ii) the most favorable form
and kind of consideration paid by the Related Person in acquiring
beneficial ownership of shares of Common Stock.
2. Definitions. For the purposes of these
Articles:
(a) The term "Business Combination" shall
mean (1) any merger, consolidation or share exchange of the
Corporation with or into a Related Person, (2) any sale, lease,
exchange, transfer or other disposition, including, without
limitation, a mortgage or any other security device, of all or
any "substantial part" of the assets of the Corporation
(including, without limitation, any voting securities of a
subsidiary) or of the assets of a subsidiary which constitute a
substantial part of the total consolidated assets of the
Corporation, to a Related Person, (3) any merger, consolidation
<PAGE> 3
or share exchange of a Related Person with or into the
Corporation or a subsidiary of the Corporation, (4) any sale,
lease, exchange, transfer or other disposition of all or any
substantial part of the assets of a Related Person to the
Corporation or a subsidiary of the Corporation, (5) the
reclassification of the shares of stock of the Corporation
generally possessing voting rights in elections for directors,
the purchase by the Corporation of such shares, or the issuance
by the Corporation of such shares or any securities convertible
thereto or exchangeable therefor which in any such case has the
effect, directly or indirectly, of increasing by more than five
percent (5%) the proportionate share of the outstanding shares of
any class of equity or convertible securities of the Corporation
which are directly or indirectly owned by any Related Person, or
(6) any agreement, contract or other arrangement providing for
any of the transactions described in this definition of business
combination.
(b) The term "Related Person" shall mean and
include any individual, corporation, partnership or other person
or entity which, together with its "affiliates" and "associates,"
"beneficially" owns (as those terms are presently defined in the
Securities Exchange Act of 1934 and in the rules thereunder)
voting stock of the Corporation which, in the aggregate,
represents fifteen percent (15%) or more of the votes entitled to
be cast for the election of directors, and any "affiliate" or
"associate" of any such individual, corporation, partnership or
other person or entity; provided that shares held or over which
such person or entity has the power to vote or otherwise control
as a trustee, plan administrator, officer of the Corporation or
in a similar capacity under an employee benefit plan of the
Corporation or of an employee benefit plan of an affiliate of the
Corporation shall not be deemed to be beneficially owned for
purposes of this definition.
(c) The term "substantial part" shall mean
assets of the Corporation or the Related Person, as the case may
be, which have a fair market value greater than ten percent (10%)
of the total consolidated assets of the Corporation as shown on
its audited balance sheet as of the end of its most recent fiscal
year ending prior to the time the determination is made.
(d) Without limitation, any shares of voting
stock of the Corporation which any person has the right to acquire
pursuant to any agreement, or upon exercise of conversion rights,
warrants or options, or otherwise shall be deemed beneficially
owned by such person.
(e) The term "consideration other than cash"
shall include, without limitation, outstanding Common Stock of
the Corporation retained by its then existing stockholders in the
<PAGE> 4
event of a Business Combination with a Related Person in which
the Corporation is the surviving corporation.
(f) The term "Disinterested Director" means
any member of the Board of Directors of the Corporation who is
neither the Related Person nor an affiliate or associate of the
Related Person and who was a member of the Board prior to the
time that the Related Person became a Related Person, and any
successor of a Disinterested Director who is neither the Related
Person nor an affiliate or associate of the Related Person and
who is recommended to succeed a Disinterested Director by a
majority of the Disinterested Directors then on the Board of
Directors.
3. Provisions Not Exclusive. Nothing contained
in this Article EIGHTH shall restrict the right of the
Corporation to elect to be covered by the provisions of any laws
of the State of Maryland which may impose special voting
requirements on transactions involving interested stockholders."
3. Article EIGHTH is renumbered to be Article TENTH.
4. A new Article NINTH is added to read as follows:
"NINTH: Except as provided by Articles SIXTH and
EIGHTH and elsewhere in this Article NINTH, notwithstanding any
provision of law permitting or requiring any action to be taken
or authorized by the affirmative vote of the holders of a greater
number of votes, such action shall be effective and valid if
taken or authorized by the affirmative vote of stockholders
holding a majority of all the votes entitled to be cast thereon,
subject to such other or greater vote as may be provided for the
holders of any class (or series of a class) of stock of the
Corporation pursuant to Articles Supplementary relating to such
class or series. However, no amendment of these Articles shall
be effective to amend, alter, repeal or change the effect of any
of the provisions of Articles SIXTH, EIGHTH or NINTH unless such
amendment shall receive the affirmative vote of at least seventy
percent (70%) of the votes entitled to be cast thereon, which
shall include at least fifty-five percent (55%) of the votes
entitled to be cast by holders of voting stock other than voting
stock held by a Related Person; provided, however, that these
voting requirements shall not be applicable to the approval of
such an amendment, and the amendment shall require only such
affirmative vote as would otherwise be required pursuant to
this Article NINTH, if such amendment shall have been proposed by
the Board of Directors by a vote which includes the affirmative
vote of a majority (but not less than two) of the Disinterested
Directors."
SECOND: The amendments to the Articles of
Incorporation of the Corporation as hereinabove set forth have
<PAGE> 5
been duly advised by the Board of Directors and approved by the
Stockholders of the Corporation as required by law.
THIRD: The undersigned President acknowledges these
Articles of Amendment to be the corporate act of said Corporation
and with respect to all matters and facts otherwise required to
be verified under oath, the undersigned President acknowledges
that to the best of his knowledge, information and belief, such
matters and facts are true in all material respects and such
statement is made under the penalties of perjury.
IN WITNESS WHEREOF, the Corporation has caused these
presents to be signed in its name and on its behalf by its
President and attested to by its Secretary on this 15th day of
July, 1983.
ATTEST: LEGG MASON, INC.
/s/ Suzanne E. Peluso By: /s/ Raymond A. Mason
Suzanne E. Peluso, Raymond A. Mason,
Assistant Secretary President
<PAGE> 1
LEGG MASON, INC.
ARTICLES OF AMENDMENT
THIS IS TO CERTIFY THAT:
FIRST: The Articles of Incorporation of Legg Mason,
Inc., a Maryland corporation (the "Corporation"), are hereby
amended by deleting the first paragraph of Article Fifth and
inserting in place thereof a new paragraph to read as follows:
"FIFTH: The aggregate par value of all
shares which the Corporation is authorized to
issue is $42,000,000, represented by
4,000,000 shares of Preferred Stock of the
par value of $10 per share and 20,000,000
shares of Common Stock of the par value of
$.10 per share."
SECOND: The amendment to the Articles of
Incorporation of the Corporation as hereinabove set forth has
been duly advised by the Board of Directors and approved by the
Stockholders of the Corporation as required by law.
THIRD: The total number of shares of all classes of
stock which the Corporation had authority to issue immediately
prior to this amendment was 16,000,000 shares consisting of
12,000,000 shares of Common Stock, $.10 par value, and 4,000,000
shares of Preferred Stock, $10 par value. The aggregate par
value of all shares of all classes having a par value was Forty-One
Million, Two Hundred Thousand Dollars ($41,200,000).
FOURTH: The total number of shares of all classes of
stock which the Corporation has authority to issue, pursuant to
the Articles of Incorporation as hereby amended, is 24,000,000
shares consisting of 20,000,000 shares of Common Stock, $.10 par
value, and 4,000,000 shares of Preferred Stock, $10 par value.
The aggregate par value of all shares of all classes having a par
value is Forty-Two Million Dollars ($42,000,000).
FIFTH: The description of each class of stock of the
Corporation, as set forth in the original Articles of
Incorporation, and as amended from time to time, including the
preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption, has not been changed by this
amendment.
SIXTH: The undersigned President acknowledges these
Articles of Amendment to be the corporate act of said corporation
and with respect to all matters and facts otherwise required to
be verified under oath, the undersigned President acknowledges
<PAGE> 2
that to the best of his knowledge, information and belief, such
matters
and facts are true in all material respects and such statement is
made under the penalties of perjury.
IN WITNESS WHEREOF, the Corporation has caused these
presents to be signed in its name and on its behalf by its
President and attested to by its Secretary on this 26th day of
February, 1987.
ATTEST: LEGG MASON, INC.
/s/ Charles A. Bacigalupo By: /s/ Raymond A. Mason
Charles A. Bacigalupo, Raymond A. Mason,
Secretary President
<PAGE> 1
LEGG MASON, INC.
ARTICLES OF AMENDMENT
THIS IS TO CERTIFY THAT:
FIRST: The charter of Legg Mason, Inc., a Maryland
corporation (the "Corporation"), is hereby amended by adding a
new Article to the Articles of Incorporation to read as follows:
TENTH: To the maximum extent that
Maryland law in effect from time to time
permits limitation of the liability of
directors and officers, no director or
officer of the Corporation shall be liable to
the Corporation or its stockholders for money
damages. Neither the amendment nor repeal of
this Article, nor the adoption or amendment
of any other provision of the charter or
bylaws inconsistent with this Article, shall
apply to or affect in any respect the
applicability of the preceding sentence with
respect to any act or failure to act which
occurred prior to such amendment, repeal or
adoption.
SECOND: The amendment to the Articles of
Incorporation of the Corporation as hereinabove set forth has
been duly advised by the Board of Directors and approved by the
Stockholders of the Corporation as required by law.
THIRD: The undersigned President acknowledges these
Articles of Amendment to be the corporate act of said Corporation
and as to all matters or facts required to be verified under
oath, the undersigned President acknowledges that, to the best of
his knowledge, information and belief, these matters and facts
are true in all material respects and that this statement is made
under the penalties for perjury.
IN WITNESS WHEREOF, the Corporation has caused these
presents to be signed in its name and on its behalf by its
President and attested to by its Secretary on this 28th day
of July, 1988.
ATTEST: LEGG MASON, INC.
/s/ Charles A. Bacigalupo By: /s/ Raymond A. Mason
Charles A. Bacigalupo, Raymond A. Mason,
Secretary President
<PAGE> 1
LEGG MASON, INC.
ARTICLES OF AMENDMENT
THIS IS TO CERTIFY THAT:
FIRST: The Articles of Incorporation of Legg Mason,
Inc., a Maryland corporation (the "Corporation"), are hereby
amended by deleting the first paragraph of Article Fifth and
inserting in place thereof a new paragraph to read as follows:
"FIFTH: The aggregate par value of all
shares which the Corporation is authorized to
issue is $50,000,000, represented by 4,000,000
shares of Preferred Stock of the par value of
$10 per share and 100,000,000 shares of Common
Stock of the par value of $.10 per share."
SECOND: The amendment to the Articles of Incorporation
of the Corporation as hereinabove set forth has been duly advised
by the Board of Directors and approved by the Stockholders of the
Corporation as required by law.
THIRD: The total number of shares of all classes of
stock which the Corporation had authority to issue immediately
prior to this amendment was 24,000,000 shares consisting of
20,000,000 shares of Common Stock, $.10 par value, and 4,000,000
shares of Preferred Stock, $10 par value. The aggregate par value
of all shares of all classes having a par value was Forty-Two
Million Dollars ($42,000,000).
FOURTH: The total number of shares of all classes of
stock which the Corporation has authority to issue, pursuant to the
Articles of Incorporation as hereby amended, is 104,000,000 shares
consisting of 100,000,000 shares of Common Stock, $.10 par value,
and 4,000,000 shares of Preferred Stock, $10 par value. The
aggregate par value of all shares of all classes having a par value
is Fifty Million Dollars ($50,000,000).
FIFTH: The description of each class of stock of the
Corporation, as set forth in the original Articles of
Incorporation, and as amended from time to time, including the
preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption, has not been changed by this
amendment.
SIXTH: The undersigned President acknowledges these
Articles of Amendment to be the corporate act of the Corporation
and with respect to all matters and facts otherwise required to be
<PAGE> 2
verified under oath, the undersigned President acknowledges that to
the best of his knowledge, information and belief, these matters
and facts are true in all material respects and that this statement
is made under the penalties for perjury.
IN WITNESS WHEREOF, the Corporation has caused these
Articles to be signed in its name and on its behalf by its
President and attested to by its Assistant Secretary on this 24th
day of July, 1996.
ATTEST: LEGG MASON, INC.
/s/ F. James Tennies By: /s/ Raymond A. Mason (SEAL)
F. James Tennies Raymond A. Mason
Assistant Secretary President
<PAGE> 1
EXHIBIT 10.1
LEGG MASON, INC.
1996 Equity Incentive Plan
NON-QUALIFIED STOCK OPTION AGREEMENT
FOR
____________________________
To: _________________________
We are pleased to advise you that Legg Mason, Inc. (the
"Company") hereby grants to you, subject to your acceptance which
shall be indicated by your execution of this Agreement below, an
option to purchase, pursuant to the 1996 Equity Incentive Plan (the
"Plan"), _________ shares of the Company's Common Stock, $.10 par
value each (the "Shares"), at $_____ per share. The date of grant
of the option provided hereby shall for all purposes be ________
__, 199_. 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, a complete copy of which has been furnished
to you and receipt of which you acknowledge by acceptance of this
option. Such provisions are 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 as evidenced hereby:
(1) 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.
(2) Subject to the provisions of Section (1), 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
<PAGE> 2
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.
(3) This option may not be exercised prior to ________ __,
199_. Thereafter, the option shall be exercisable only as follows:
(i) During the period of 12 months beginning _________ __,
199_, the option may be exercised to the extent of 25% of the
aggregate number of Shares originally covered by the option.
(ii) During each of the next two successive 12 month periods,
the first such period beginning ________ __, 199_, and the second
such period beginning _______ __, 199_, the option may be exercised
to the extent of an additional 25 percent of the aggregate number
of Shares originally covered by the option, and to the extent the
right to exercise the option theretofore has accrued and has not
been exercised.
(iii) At any time on and after ________ __, 200_, the option
shall be exercisable in full except to the extent it theretofore
shall have been exercised.
(iv) To the extent not exercised, installments shall
accumulate and be exercisable by you, in whole or in part, in any
subsequent period but not after the expiration of five years from
the date of grant of the option. The option will expire at the
close of business on ________ __, 200_.
(v) The Committee may, in its sole discretion, accelerate, to
a date not earlier than _________ __, 199_, the time at which any
of the deferred installments referred to in this Section (3) may be
exercised in whole or in part.
(vi) Notwithstanding any other provision contained in this
Agreement, the option shall become immediately exercisable in full
upon the happening of either of the following events: (1) the
approval by shareholders of the Company of an agreement to merge or
consolidate the Company with or into another corporation (with the
Company not surviving) or to sell or otherwise dispose of all or
substantially all of its assets and the satisfaction or waiver of
all conditions precedent to the closing thereunder; or (2) a
determination by the Board of Directors of the Company that in
connection with any proposed tender or exchange offer for voting
securities of the Company, any person has become the direct or
indirect beneficial owner of securities representing 40% or more of
the combined voting power of the Company's then outstanding
securities; provided, however, that this Section (3)(vi) shall not
<PAGE> 3
apply in the event that any such proposed merger, consolidation,
sale of assets or tender or exchange offer is approved by the
affirmative vote of 75% or more of the directors who are members of
the Company's Board of Directors prior to the proposal of such
merger, consolidation, sale of assets or tender or exchange offer.
(4) The following provisions shall apply in the event of
termination of your employment with the Company or a subsidiary of
the Company:
(i) Except as expressly provided hereinafter in this
Section (4), this option may be exercised only if, at all times
during the period beginning with the date of grant of the option
and ending on the date of such exercise, you were an employee of
the Company or a subsidiary of the Company. For purposes of this
Section (4), your employment shall not be considered terminated by
reason of sick leave or other bona fide leave of absence for a
period of 90 days or less. Further, your employment shall not be
considered terminated by reason of sick leave or other bona fide of
absence for a period longer than 90 days if, and for so long as,
your right to continued employment with the Company or any
subsidiary is guaranteed by any applicable statute or by contract.
(ii) Upon the termination of your employment for cause,
as determined in the sole discretion of the Committee, your option
rights shall expire immediately upon the delivery to you of the
notice of your termination.
(iii) Upon a termination of your employment by reason of
permanent and total disability within the meaning of Section
105(d)(4) of the Internal Revenue Code of 1986, as amended, or your
retirement under a retirement program of the Company or a
subsidiary, your option rights shall be limited to the option
shares which were immediately purchasable by you on the date of
your termination, and such option rights shall expire unless
exercised prior to the first to occur of (A) in the case of total
and permanent disability, the expiration of a period of twelve
months beginning on the date of your termination, or (B) in the
case of retirement, the expiration of a period of three months
beginning on the date of your termination, or (C) the option
expiration date established in Section (3)(iv) of this Agreement.
In the event of your death during the period provided for the
exercise of your option rights pursuant to this Subsection (iii),
your option rights shall be exercisable for the period provided by
Subsection (iv) hereof.
(iv) Upon the termination of your employment by reason of
death, your option rights shall be limited to the option shares
which were immediately purchasable by you on the date of your
death, and such option rights shall expire unless exercised (by the
executor or administrator of your estate or by a person who
acquired the right to exercise such option by bequest or
<PAGE> 4
inheritance or by reason of your death) prior to the first to occur
of (A) the expiration of a period of twelve months beginning on the
date of your death, or (B) the option expiration date established
in Section (3)(iv) of this Agreement.
(5) Nothing contained in this Agreement shall restrict the
right of the Company or any of its subsidiaries to terminate your
employment at any time, with or without cause.
(6) During your lifetime, this option shall be exercisable
only by you and shall not be transferable except as provided in
Subsection (4)(iv) hereof. 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.
(7) This option is exercisable solely by written notice to
the Company. Each such notice shall:
(a) state the election to exercise the option and the
number of shares in respect of which it is being exercised;
(b) be signed by you or, in the event of your death or
disability, by the party entitled to exercise the option;
(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 (together with duly
executed stock powers) with an aggregate value equal to the option
price of the Shares being acquired and/or the amount of federal
and/or state income tax withholding if you are electing to deliver
shares in satisfaction of the option price and/or your withholding
obligation or (iii) a combination of the foregoing; and
(d) state, if the employee so elects, that the Company
shall pay federal and/or state income tax withholding due as a
result of the exercise by retaining Shares with an aggregate value
equal to the amount of such withholding.
The value of any shares of the Corporation's Common Stock
delivered in full or partial payment of the option price and/or
federal and/or state income tax withholding, or retained by the
Company to satisfy the federal and/or state income tax withholding
obligation shall, unless otherwise determined by the Committee
subsequent to the date of this Agreement, be determined on the
basis of the mean between the high and low prices per share on the
New York Stock Exchange on the date preceding the date of delivery
or retention, as the case may be, of the shares.
<PAGE> 5
For the purposes of the Plan the date of exercise shall be the
date on which notice and any required payment shall have been
delivered to the Company. You shall not have any of the rights of
a stockholder with respect to any of the shares subject to this
option until the shares have been issued to you upon the exercise
of the option.
(8) Any notice to be given to the Company (including notice
of exercise of all or part of this option) shall be in writing and
either hand delivered or mailed to the office of the Secretary of
the Company. If mailed, it shall be addressed to the Secretary of
the Company at 111 South Calvert Street, Baltimore, Maryland
21202. Any notice given to you shall be addressed to you at your
address as reflected on the personnel records of the Company.
Either party hereto may hereafter designate a different address by
notice to the other. Notice shall be deemed to have been duly
delivered when hand delivered or, if mailed, on the day such notice
is postmarked.
LEGG MASON, INC.
By:___________________________
Charles A. Bacigalupo
Senior Vice President
and Secretary
In order to indicate your agreement to such cancellation and
your acceptance of the stock option granted by this Agreement
subject to the restrictions and upon the terms and conditions set
forth above and in the Plan, please execute and immediately return
to the Secretary of the Company the enclosed duplicate original of
this Agreement. The grant shall be deemed to have been withdrawn
if your acceptance has not been received at the office of the
Secretary of the Company by 5:00 p.m. on _____________ __, 199_.
ACCEPTED AND AGREED TO:
_________________________
Employee's Signature
_________________________
Date
<TABLE>
<CAPTION>
EXHIBIT 11
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share amounts)
For The Three Months Ended September 30,
1996 1995
Fully Fully
Primary Diluted Primary Diluted
<S> <C> <C> <C> <C>
Weighted average shares
outstanding:
Common stock 17,209 17,209 14,450 14,450
Shares available under
options 652 699 615 641
Issuable upon conversion
of debentures - 858 - 3,449
------- ------- ------- -------
Weighted average common
and common equivalent
shares outstanding 17,861 18,766 15,065 18,540
======= ======= ======= =======
Net earnings $13,896 $13,896 $ 9,231 $ 9,231
Interest expense, net,
on debentures - - - 429
------- ------- ------- -------
Net earnings applicable
to common stock $13,896 $13,896 $ 9,231 $ 9,660
======= ======= ======= =======
Per share $ .78 $ .74 $ .61 $ .52
======= ======= ======= =======
<PAGE> 2
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT 11
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share amounts)
For The Six Months Ended September 30,
1996 1995
Fully Fully
Primary Diluted Primary Diluted
<S> <C> <C> <C> <C>
Weighted average shares
outstanding:
Common stock 16,309 16,309 14,032 14,032
Shares available under
options 652 692 581 660
Issuable upon conversion
of debentures - 1,742 - 3,832
------- ------- ------- -------
Weighted average common
and common equivalent
shares outstanding 16,961 18,743 14,613 18,524
======= ======= ======= =======
Net earnings $26,796 $26,796 $17,057 $17,057
Interest expense, net,
on debentures - 143 - 1,099
------- ------- ------- -------
Net earnings applicable
to common stock $26,796 $26,939 $17,057 $18,156
======= ======= ======= =======
Per share $ 1.58 $ 1.44 $ 1.17 $ .98
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM CONDENSED
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION AND CONDENSED
CONSOLIDATED STATEMENTS OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000704051
<NAME> LEGG MASON, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> $157,186,000
<RECEIVABLES> $480,018,000
<SECURITIES-RESALE> $139,077,000
<SECURITIES-BORROWED> $220,560,000
<INSTRUMENTS-OWNED> $94,372,000
<PP&E> $34,162,000
<TOTAL-ASSETS> $1,511,969,000
<SHORT-TERM> $38,558,000
<PAYABLES> $674,289,000
<REPOS-SOLD> $0
<SECURITIES-LOANED> $190,993,000
<INSTRUMENTS-SOLD> $25,249,000
<LONG-TERM> $99,557,000
$0
$0
<COMMON> $1,809,000
<OTHER-SE> $388,607,000
<TOTAL-LIABILITY-AND-EQUITY> $1,511,969,000
<TRADING-REVENUE> $34,954,000
<INTEREST-DIVIDENDS> $36,902,000
<COMMISSIONS> $89,304,000
<INVESTMENT-BANKING-REVENUES> $32,891,000
<FEE-REVENUE> $85,364,000
<INTEREST-EXPENSE> $17,996,000
<COMPENSATION> $167,212,000
<INCOME-PRETAX> $45,161,000
<INCOME-PRE-EXTRAORDINARY> $45,161,000
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $26,796,000
<EPS-PRIMARY> $1.58
<EPS-DILUTED> $1.44
</TABLE>
