<PAGE>
SCHEDULE 14A - INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Legg Mason, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
---------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------
5) Total fee paid:
---------------------------------------------------------------
<PAGE>
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
---------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
Legg Mason Tower
111 South Calvert Street
Baltimore, Maryland 21202
June __, 1996
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
which will be held at the Renaissance Harborplace Hotel (formerly known as the
Stouffer), 202 East Pratt Street, Baltimore, Maryland at 10:00 a.m. on
Wednesday, July 24, 1996. On the following pages you will find the formal Notice
of Annual Meeting and Proxy Statement.
Whether or not you plan to attend the meeting in person, it is
important that your shares be represented and voted at the meeting. Accordingly,
please date, sign and return the enclosed proxy card promptly.
I hope that you will attend the meeting and look forward to seeing you
there.
Sincerely,
RAYMOND A. MASON
Chairman of the Board
and President
<PAGE>
LEGG MASON, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Wednesday, July 24, 1996
To the Stockholders of LEGG MASON, INC.:
The Annual Meeting of Stockholders of Legg Mason, Inc., a Maryland
corporation, will be held at the Renaissance Harborplace Hotel, 202 East Pratt
Street, Baltimore, Maryland, on July 24, 1996, at 10:00 a.m. to consider and
vote upon:
(1) The election of six directors for the three-year
term ending in 1999.
(2) Approval of the Legg Mason, Inc. 1996 Equity
Incentive Plan.
(3) Amendment of the Legg Mason, Inc. Articles of
Incorporation to increase the number of authorized shares of
Common Stock from 20,000,000 to 100,000,000.
(4) Ratification of the appointment of Coopers & Lybrand
L.L.P. as independent auditors of the Company for the fiscal
year ending March 31, 1997.
(5) Any other matter that may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on May 20, 1996
as the date for determining stockholders of record entitled to notice of and to
vote at the Annual Meeting.
Your attention is directed to the accompanying Proxy Statement and 1996
Annual Report to Stockholders.
By order of the Board of Directors
CHARLES A. BACIGALUPO
Secretary
June __, 1996
<PAGE>
LEGG MASON, INC.
Legg Mason Tower
111 South Calvert Street
Baltimore, Maryland 21202
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
Wednesday, July 24, 1996
The enclosed proxy is solicited by the Board of Directors of Legg
Mason, Inc. (the "Company") and is revocable at any time prior to its exercise.
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation by mail, proxies may be solicited by officers, directors and
regular employees of the Company personally or by telephone or telegraph, and
the Company may reimburse brokers, banks, custodians, nominees and other
fiduciaries for their reasonable out-of-pocket expenses in forwarding proxy
materials to their principals. This proxy material is being sent to stockholders
on or about June __, 1996.
Stockholders of record at the close of business on May 20, 1996 are
entitled to notice of and to vote at the meeting. As of the close of business on
that date, there were outstanding and entitled to vote 15,402,627 shares of
Common Stock, $.10 par value ("Common Stock"), each of which is entitled to one
vote. See "Security Ownership of Management and Principal Stockholders" for
information regarding ownership of the Common Stock.
Directors are elected by a plurality of the votes cast by the holders
of shares of Common Stock present in person or represented by proxy at the
meeting, with a quorum present. For purposes of the election of directors,
abstentions and broker non-votes do not affect the plurality vote. The
affirmative vote of a majority of the shares of Common Stock in attendance or
represented at the meeting is required to approve the Legg Mason, Inc. 1996
Equity Incentive Plan, and the affirmative vote of a majority of the votes
entitled to be cast on the matter is required for approval of the amendment of
the Legg Mason, Inc. Articles of Incorporation. Abstentions and broker non-votes
will have the same effect as a negative vote with respect to these two matters.
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ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes. Each
year one class is elected to serve for a term of three years. The stockholders
will vote at this Annual Meeting for the election of six directors for the
three-year term expiring at the Annual Meeting of Stockholders in 1999. All
nominees presently serve as directors.
The persons named in the enclosed proxy will vote for the election of
the nominees named below unless authority to vote is withheld. In the event any
nominee is unable to serve, the persons named in the proxy will vote for such
substitute nominee as they, in their discretion, shall determine. The Board of
Directors has no reason to believe that any nominee named herein will be unable
to serve.
The following material contains information concerning the nominees for
election and those directors whose terms continue beyond the date of the Annual
Meeting.
Nominees for Director for the Term Expiring in 1999
Raymond A. Mason, age 59, has served as Chairman of the Board and
President of the Company since its inception in 1981. He has served as Chairman
and Chief Executive Officer of Legg Mason Wood Walker, Incorporated ("LMWW"),
the Company's principal subsidiary, since 1975, and was its President from 1970
to November 1985. Prior to 1970, he was President of Mason & Company, Inc.,
which he founded in 1962. Mr. Mason is Chairman of the Board of the Legg Mason
Value Trust, Inc., the Legg Mason Total Return Trust, Inc. and the Legg Mason
Special Investment Trust, Inc. He is a director of Environmental Elements
Corporation and Giant Food Inc.
James W. Brinkley, age 59, has been a director of the Company since its
inception in 1981 and has served as a Senior Executive Vice President of the
Company since December 1983. In November 1985, he became President of LMWW,
having served as an Executive Vice President of LMWW since 1970. Mr. Brinkley
has primary responsibility for LMWW's retail sales and marketing activities.
Nicholas J. St. George, age 57, has been a director of the Company
since July 1983. Since February 1979, he has been the President and Chief
Executive Officer of Oakwood Homes Corporation, a manufacturer and retailer of
manufactured homes. Mr. St. George was the Director of Corporate Development for
Ferguson Enterprises, Inc., a wholesale plumbing supplier, from 1976 to 1979 and
was Group Vice President of LMWW, where he was engaged in investment banking
activities, from 1973 to 1976. Mr. St. George is a director of Oakwood Homes
Corporation and American Bankers Insurance Group, Inc.
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<PAGE>
Richard J. Himelfarb, age 54, has served as a director of the Company
and as an Executive Vice President of the Company and LMWW since November 1983.
He has been a Senior Executive Vice President of the Company and LMWW since July
1995. He is responsible for supervising corporate, real estate and partnership
finance activities of LMWW and other subsidiaries of the Company. From 1967
until joining the Company in 1983, Mr. Himelfarb was engaged in the private
practice of law.
Roger W. Schipke, age 59, has been a director of the Company since
January 1991. He is engaged in private investment activities. From August 1993
through May 1996, he was Chairman of the Board and Chief Executive Officer of
Sunbeam Corporation, a manufacturer of consumer products. From May 1990 to July
1993, he was Chairman of the Board, President and Chief Executive Officer of The
Ryland Group, Inc. Prior to May 1990, Mr. Schipke served 29 years in various
executive capacities with the General Electric Company, most recently as Senior
Vice President of the Appliance Group. Mr. Schipke is a director of Brunswick
Corporation, Oakwood Homes Corporation and the Rouse Company.
Edward I. O'Brien, age 67, has been a director of the Company since
February 1993. He serves in an advisory capacity to certain entities in the
securities business, having served as a consultant to the Securities Industry
Association (the "SIA") from December 1992 to November 1993, and as its
President from 1974 to December 1992. From 1955 to 1974, Mr. O'Brien served in
various capacities with Bache & Co. (now Prudential Securities Incorporated),
including as a general partner, Chairman of the Executive Committee and
Director. Mr. O'Brien is a director of a number of mutual funds in the Neuberger
& Berman mutual fund complex.
Directors Continuing in Office
Directors whose terms will expire in 1997
Charles A. Bacigalupo, age 62, has been a director and the Secretary of
the Company since its inception in 1981 and has served as a Senior Vice
President of the Company since May 1982. He has served as a Senior Vice
President and Secretary of LMWW since 1970. He is the director of LMWW's legal
and compliance department. Mr. Bacigalupo is Chairman of the Board of Legg Mason
Capital Management, Inc.
Harry M. Ford, Jr., age 63, has been a director of the Company since
its inception in 1981 and has served as a Senior Vice President of the Company
since May 1982. He has been a Vice President of LMWW since 1976 and a Senior
Vice President since 1978. He joined Legg & Co. in 1964. Mr. Ford's principal
occupation is as an investment executive with LMWW.
3
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Margaret DeB. Tutwiler, age 45, has, since May 1993, been engaged in
the public relations and strategic communications business through firms of
which she has been the sole or a principal owner. Prior to May 1993, she held
various positions in government service, including from August 1992 to January
1993 Assistant to the President for Communications, The White House; from March
1989 to August 1992 Assistant Secretary of State for Public Affairs and
Department Spokesman, U.S. Department of State; from January 1989 to March 1989
Consultant, U.S. Department of State; from November 1988 to January 1989 Senior
Advisor, Transition Team, U.S. Department of State; from February 1985 to August
1988 Assistant Secretary for Public Affairs and Public Liaison, U.S. Department
of the Treasury; from July 1984 to February 1985 Deputy Assistant to the
President for Political Affairs, The White House; and from January 1981 to July
1984 Special Assistant to the President and Executive Assistant to the Chief of
Staff, The White House.
James E. Ukrop, age 58, has been a director of the Company since
January 1985. Since 1975, he has been the principal executive officer of Ukrop
Super Markets, Inc., which operates a chain of supermarkets in Virginia. Mr.
Ukrop is a director of Owens & Minor, Inc. and Richfood Holdings, Inc.
John E. Koerner, III, age 53, has been a director of the Company since
October 1990. He has been the President of Koerner Capital Corporation, a
private investment corporation, since August 1995. From 1976 until August 1995
he was President of Barq's, Inc., a soft drink producer and distributor.
Peter F. O'Malley, age 57, has been a director of the Company since
April 1992. He has been Of Counsel to the law firm of O'Malley, Miles, Nylen &
Gilmore and its predecessor, O'Malley & Miles, since 1989. Prior to that time he
was Managing Partner of O'Malley & Miles. Mr. O'Malley is a director of Potomac
Electric Power Company, Giant Food Inc. and Forensic Technologies International
Corp.
Directors whose terms will expire in 1998
Edmund J. Cashman, Jr., age 59, has been a director of the Company
since its inception in 1981 and has served as a Senior Executive Vice President
of the Company since December 1983. He has been an Executive Vice President of
LMWW since 1977. He is responsible for supervising LMWW's syndicate,
fixed-income securities and institutional sales activities. Mr. Cashman is also
President and a director of the Legg Mason Tax-Exempt Trust, Inc.; Vice Chairman
of the Board of Legg Mason Income Trust, Inc.; Presi dent and a trustee of the
Legg Mason Tax-Free Income Fund, and a director of Worldwide Value Fund, Inc.
and EA Engineering, Science, and Technology, Inc.
4
<PAGE>
John F. Curley, Jr., age 56, has served as Vice Chairman of the Company
and of LMWW since February 1982. He is the Chief Administrative Officer of the
Company. Mr. Curley is President and a director of the Legg Mason Value Trust,
Inc., the Legg Mason Total Return Trust, Inc. and the Legg Mason Special
Investment Trust, Inc., and is Chairman of the Board of the Legg Mason Tax-
Exempt Trust, Inc., the Legg Mason Income Trust, Inc., the Legg Mason Cash
Reserve Trust, the Legg Mason Tax-Free Income Fund, the Legg Mason Global Trust,
Inc., and the Legg Mason Investors Trust, Inc.
John B. Levert, Jr., age 65, has been a director of the Company since
February 1987. He is Chairman of the Board and President of Howard Weil
Financial Corporation, a financial services holding company acquired by the
Company in February 1987, and since January 1985 has been Chairman of the Board
of Howard, Weil, Labouisse, Friedrichs Incorporated ("HWLF"), the principal
subsidiary of Howard Weil Financial Corporation. From March 1975 until January
1985, Mr. Levert was President of HWLF.
William Wirth, age 65, was employed by Credit Suisse from 1961 until
his retirement in March 1994. From 1977 to 1994, Dr. Wirth served as a member of
the Credit Suisse Executive Board with responsibility for various areas of asset
management, institutional investment counseling, mutual funds, economic research
and financial analysis. He continues to occupy positions in several entities
within the CS Holding Group, an international financial organization, including
Chairman of the Board of Bank Hofmann AG, Zurich. He is also a Vice Chairman of
Deutsche Bank (Switzerland) AG, Geneva.
Harold L. Adams, age 57, has been a director of the Company since
January 1988. He has been the Chairman of RTKL Associates, Inc., an
international architecture, engineering and planning firm, since 1987 and the
President of the firm since 1969.
W. Curtis Livingston, age 52, has been a director of the Company since
1989 and has served as the President and Chief Executive Officer of Western
Asset Management Company since August 1984, having served as Senior Vice
President of that firm since 1980. Western Asset Management Company is an
investment advisory firm acquired by the Company in December 1986. Mr.
Livingston is a director of Western Asset Trust, Inc.
Committees of the Board - Board Meetings
The Board of Directors has an Audit Committee and a Compensation
Committee. It does not have a nominating committee.
The Audit Committee, which consists of Messrs. St. George (Chairman),
O'Brien and Schipke, is primarily concerned with the effectiveness of the audits
of the Company by the Company's
5
<PAGE>
independent auditors. Its duties include: recommending the selection of
independent auditors; reviewing the scope of the audits conducted by them, as
well as the results of their audits; meeting with the Company's internal
auditors; and reviewing the organization and scope of the Company's internal
system of accounting and financial controls.
The Compensation Committee, which consists of Messrs. Adams (Chairman),
Koerner and Ukrop, is responsible for recommending and approving the
compensation of the senior executive officers of the Company. The Compensation
Committee also serves as the administrative committee of certain of the
Company's employee benefit plans.
During the fiscal year ended March 31, 1996, the Board of Directors met
four times, the Audit Committee three times, and the Compensation Committee five
times. Each director attended 75% or more of the aggregate number of meetings of
the Board and all committees of the Board on which the director served.
Compensation of Directors
Directors who are not employees of the Company receive an annual
retainer of $15,000, a fee of $2,000 for each Board meeting attended, and
reimbursement of expenses for attendance at meetings. Committee members also
receive an annual retainer of $1,000 ($2,000 for the committee chair) for
service in that capacity.
Under the terms of the Legg Mason, Inc. 1988 Non-Employee Director
Stock Option Plan, which covers an aggregate of up to 175,000 shares of Common
Stock, each non-employee director is granted, on the date he is first elected as
a director, an option to purchase 2,000 shares of Common Stock, and, on the date
of each subsequent Annual Meeting of Stockholders, an option to purchase an
additional 2,000 shares. All options have an exercise price equal to the fair
market value of the Common Stock on the date of grant. The options are
exercisable immediately upon the date of grant and have a ten-year term, subject
to earlier termination in the event the optionee ceases to be a director of the
Company. During the fiscal year ended March 31, 1996, each of Messrs. Adams,
Koerner, O'Brien, O'Malley, Schipke, St. George, Ukrop and Wirth and Ms.
Tutwiler received an option to purchase 2,000 shares of Common Stock.
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the ownership of
Common Stock of the Company as of May 20, 1996 by each director and nominee for
director, each executive officer named in the Summary Compensation Table, all
executive officers, directors and nominees as a group, and each person who, to
the best of the
6
<PAGE>
Company's knowledge, beneficially owned more than five percent of the Company's
outstanding Common Stock.
Common
Stock Percent of
Beneficially Outstanding
Name of Owner (1) Owned (2)(3) Common Stock (3)
----------------- ------------ ----------------
Raymond A. Mason............................. 502,115(4) 3.24
James W. Brinkley............................ 290,151 1.88
Edmund J. Cashman, Jr. ...................... 191,669 1.24
John F. Curley, Jr. ........................ 154,881 1.00
Charles A. Bacigalupo........................ 130,916 *
Richard J. Himelfarb......................... 121,451 *
John B. Levert, Jr. ........................ 102,873 *
Harry M. Ford, Jr. .......................... 67,333 *
James E. Ukrop............................... 37,600 *
W. Curtis Livingston......................... 31,282(5) *
Nicholas J. St. George....................... 19,000 *
John E. Koerner, III......................... 17,525(6) *
Harold L. Adams.............................. 16,500 *
Peter F. O'Malley............................ 12,750 *
Roger W. Schipke............................. 12,750 *
Edward A. Taber III.......................... 11,027 *
Edward I. O'Brien............................ 9,500 *
Margaret DeB. Tutwiler....................... 2,000 *
William Wirth................................ 2,000 *
All executive officers, directors and
nominees as a group (23 persons)...........1,767,857 11.19
- ------------------------------
* Less than 1%.
(1) The table does not include 2,520,533 shares, of which 1,663,033 shares are
held for investment purposes on behalf of advisory clients of Alliance
Capital Management, L.P., an investment advisory subsidiary of The
Equitable Companies, Incorporated, and 850,000 shares are held for
investment purposes by The Equitable Life Assurance Society of the United
States, 787 Seventh Avenue, New York, New York 10019. All of the shares
(16.4% of the shares outstanding) are held with sole dispositive power and
2,261,989 shares are held with sole voting power. In addition, the table
does not include 1,589,674 shares (10.3% of the shares outstanding) held
by investment advisory clients of GeoCapital Corporation, 767 Fifth
Avenue, New York, New York 10153, as to which shares GeoCapital
Corporation has sole dispositive power; 862,700 shares (5.6% of the shares
outstanding) held by investment advisory clients of subsidiaries of FMR
Corp., 82 Devonshire Street, Boston, Massachusetts 02109, as to all of
which shares the subsidiaries have sole dispositive power and as to
321,000 of which shares the subsidiaries have sole voting power; and
778,473 shares (5.1% of the shares outstanding) held by investment
advisory clients of Wellington Management Company ("WMC"), 75 State
Street, Boston, Massachusetts 02109, as to all of which shares WMC has
shared dispositive power and as to 577,393 of which shares WMC has shared
voting power. The preceding information is based upon Schedule 13G reports
filed by The Equitable Companies, GeoCapital, FMR Corp., and WMC, respec
tively, reporting ownership as of December 31, 1995. The percentages are
based on the Company's outstanding shares as of May 20, 1996.
(2) Except as otherwise indicated and except for shares held by members of an
individual's family or in trust, all shares are held with sole dispositive
and voting power.
(3) Includes the following number of shares subject to options exercisable
within 60 days from May 20, 1996: Mr. Mason - 74,925; Mr. Brinkley -
48,656; Mr. Cashman - 28,787; Mr. Curley - 9,400; Mr. Bacigalupo - 14,712;
Mr. Himelfarb - 42,143; Mr. Levert - 2,500; Mr. Ford - 18,490; Mr. Ukrop -
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<PAGE>
19,000; Mr. Livingston - 30,957; Mr. St. George 19,000; Mr. Koerner -
11,500; Mr. Adams - 15,250; Mr. O'Malley - 10,250; Mr. Schipke - 4,500;
Mr. Taber - 10,402; Mr. O'Brien - 9,000; Ms. Tutwiler - 2,000; Mr. Wirth -
2,000; and all executive officers, directors and nominees as a group -
399,642. For purposes of determining the percent of outstanding stock,
such stock options are assumed to have been exercised. Does not include
shares represented by vested beneficial interests in the Legg Mason Profit
Sharing Plan and Trust.
(4) Does not include 5,000 shares owned by Mr. Mason's wife, as to which Mr.
Mason disclaims beneficial ownership.
(5) Includes 200 shares held by Mr. Livingston as a trustee of trusts for the
benefit of his children.
(6) Includes 900 shares owned by Mr. Koerner's children.
EXECUTIVE COMPENSATION
The following table provides certain information concerning
compensation of the Company's Chief Executive Officer and each of the five
other most highly compensated executive officers for the past three fiscal
years.
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Annual Compensation Compensation
---------------------------------------------------------- ------------
Options
Other Annual Granted All Other
Name and Principal Position Year Salary Bonus(1) Compensation (#)(2) Compensation(3)
--------------------------- ---- ------ -------- ------------ ------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Raymond A. Mason............... 1996 $222,000 $1,835,000 $ 1,638 20,000 $ 41,007
Chairman of the Board, 1995 212,000 608,000 1,564 10,000 39,826
President and Chief 1994 212,000 1,684,000 1,378 7,000 39,689
Executive Officer
James W. Brinkley............... 1996 $196,170 $ 800,000 $ 1,007 6,000 $ 26,462
Senior Executive 1995 184,000 260,000 879 5,000 22,106
Vice President 1994 173,340 770,000 1,463 5,000 29,593
Edmund J. Cashman, Jr........... 1996 $181,665 $ 700,000 $ -- 4,000 $ 19,501
Senior Executive 1995 167,500 260,000 -- 4,000 17,564
Vice President 1994 158,340 553,000 -- 2,000 17,156
John F. Curley, Jr.............. 1996 $193,330 $ 725,000 $ 334 6,000 $ 13,675
Vice Chairman of the Board 1995 178,995 260,000 177 4,000 11,062
and Chief Administrative 1994 168,000 695,000 393 4,000 12,916
Officer
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Richard J. Himelfarb............ 1996 $195,830 $ 750,000 $ 1,646 6,000 $ 9,006
Senior Executive Vice 1995 181,245 260,000 679 4,000 7,354
President 1994 168,336 765,000 1,427 5,000 10,385
Edward A. Taber III............. 1996 $201,660 $ 750,000 -- 20,000 $ 4,500
Senior Executive Vice 1995 200,000 245,000 -- 24,000 3,700
President 1994 175,000 665,000 -- 5,000 5,850
- -----------------------------------------
<FN>
(1) The Company pays discretionary incentive cash bonuses to certain
executive officers whose duties are administrative and managerial
or whose compensation is not solely based on commissions. The
Company sets aside in each fiscal year an executive bonus pool in
an amount up to 10% of the Company's pre-tax income for the fiscal
year (before deducting such bonuses). The selection of the
participants in the pool, the total amount reserved for bonuses,
and the allocation of incentive bonuses among the executive
officers identified in this table, is determined by the
Compensation Committee as described in the Compensation Committee
Report on Executive Compensation.
(2) Adjusted to reflect five-for-four stock split effected September
1993.
(3) Includes for fiscal 1996 for each individual $4,500 contributed by
the Company under the Company's Profit Sharing Plan; and for Mr.
Curley, $101 contributed under the Company's Employee Stock
Purchase Plan. In addition, includes for fiscal 1996 for Messrs.
Mason, Brinkley, Cashman, Curley and Himelfarb, respectively,
$36,507, $21,962, $15,001, $9,074, and $4,506 of commissions
earned from securities brokerage activities.
</FN>
</TABLE>
Stock Options
The following table summarizes option grants made during the
fiscal year ended March 31, 1996 to the executive officers named
in the Summary Compensation Table.
<TABLE>
<CAPTION>
Option Grants in Fiscal 1996
Individual Grants (1)
------------------------------------------
% of Total
Number of Options
Securities Granted to
Underlying Employees Exercise
Options in Fiscal Price Expiration Grant Date
Name Granted Year ($/Share) Date Present Value(2)
---- ------- ----- --------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Raymond A. Mason 20,000 4.80% $28.25 7/26/00 $169,400
James W. Brinkley 6,000 1.44 28.25 7/26/00 50,820
Edmund J. Cashman, Jr. 4,000 0.96 28.25 7/26/00 33,880
John F. Curley, Jr. 6,000 1.44 28.25 7/26/00 50,820
Richard J. Himelfarb 6,000 1.44 28.25 7/26/00 50,820
Edward A. Taber III 20,000 4.80 28.25 7/26/00 169,400
<FN>
(1) Option grants made pursuant to the Legg Mason, Inc. 1991 Omnibus Long-Term
Compensation Plan. The exercise price of each option granted under the
Plan is not less than the fair market value of the Common Stock on the
grant date. Options generally are not exercisable during the first year
after the date of grant, and thereafter generally vest in cumulative
installments of 25% on each anniversary of the date of grant, such that
the options are fully exercisable on and after 4 years from the date of
grant until the fifth year following that date, subject in all cases to
accelerated vesting if there is an unapproved change of control. The
vesting schedules for certain of the executive officers are as follows:
9
<PAGE>
Mr. Mason 3,230 shares at 7/27/96; 3,231 shares at 7/27/97; 3,230 shares
at 7/27/98; 6,770 shares at 7/27/99 and 3,539 shares at 1/27/00; Mr.
Brinkley 707 shares at 7/27/96; 1,353 shares at 7/27/97; 1,969 shares at
7/27/98 and 1,971 shares at 7/27/99; Mr. Curley 1,150 shares at 7/27/96;
1,667 shares at 7/27/97; 1,683 shares at 7/27/98 and 1,500 shares at
7/27/99; Mr. Himelfarb 975 shares at 7/27/96; 1,492 shares at 7/27/97;
2,033 shares at 7/27/98 and 1,500 shares at 7/27/99. Option holders may
use previously owned shares to pay all or part of the exercise price.
(2) The stock options were valued using the Modified American Black-Scholes
Model which is a variation of the Black-Scholes option pricing model. The
following assumptions were made for purposes of calculating the Grant Date
Present Value: an expected option term of five years to exercise; a
dividend yield of 1.9%; stock price volatility of .2730 based upon the
weekly common stock closing prices for the five years prior to the grant
date; and a risk-free interest rate of 6.16%. The actual value realized,
if any, on stock option exercises will be dependent on overall market
conditions and the future performance of the Company and its Common Stock.
There is no assurance the actual value realized will approximate the
amount calculated under the valuation model.
</FN>
</TABLE>
The following table summarizes option exercises during the fiscal year
ended March 31, 1996 by the executive officers named in the Summary Compensation
Table and the value of their unexercised options at March 31, 1996.
Aggregate Option Exercises During Fiscal 1996
and Value of Options Held at March 31, 1996
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Number of Underlying Unexercised In-the-Money
Shares Options at March 31, 1996 Options at March 31, 1996(1)
Acquired on Value ------------------------- ----------------------------
Name Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
---- -------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Raymond A. Mason 10,281 $130,903 74,925 54,574 $1,184,227 $427,217
James W. Brinkley 15,937 251,437 48,656 16,250 760,697 94,954
Edmund J. Cashman, Jr. 7,125 107,315 28,787 9,650 455,022 52,712
John F. Curley, Jr. 21,535 377,568 9,400 14,600 106,116 81,403
Richard J. Himelfarb 3,906 59,830 42,143 15,200 654,321 83,916
Edward A. Taber III -- -- 10,402 50,473 100,149 246,366
- ---------------------
<FN>
(1) Value realized and value of unexercised options are calculated by
determining the difference between the fair market value of the shares
underlying the options and the exercise price of the options at exercise
or March 31, 1996, respectively.
</FN>
</TABLE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Legg Mason's executive compensation program is designed to
attract, motivate and retain the management talent needed to strengthen the
Company's position in the financial services industry and to achieve its
business objectives.
Salaries of executive officers are set at levels which the Compensation
Committee of the Board of Directors (which committee consists entirely of
non-employee directors) believes are competitive with salaries of executives in
similar positions at comparable financial services companies. In addition,
substantial emphasis is placed on incentive compensation directly related to
short- and long-term corporate performance through annual cash bonuses and stock
option grants.
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<PAGE>
As is common in the financial services industry, a significant portion
of total compensation of the Company's executive officers is paid in the form of
annual bonuses. For example, in fiscal 1996, 89% of the annual cash compensation
of Raymond A. Mason, the Company's Chief Executive Officer ("CEO"), was paid as
an annual bonus. This is intended to maximize the portion of an individual's
compensation that is subject to fluctuation each year based upon corporate and
individual performance, as discussed below.
The compensation program is structured to recognize each executive's
level of responsibility and to reward exceptional individual and corporate
performance. The program takes into account both annual operating results and
the desirability of providing incentives for future improvement. This includes
the ability to implement the Company's business plans as well as to react to
unanticipated external factors which can have a significant impact on corporate
performance. Compensation decisions for all executives, including the CEO, are
based on the same criteria.
In carrying out its responsibilities, the Compensation Committee has
from time to time availed itself of independent consulting advice in connection
with its consideration of executive compensation plans, such as the Company's
1991 Omnibus Long-Term Compensation Plan. The Committee also has available to it
surveys of financial services industry compensation, which include the companies
comprising the peer group referenced in the Stock Performance Graph following
this report.
There are three major components of the Company's executive
compensation program: base salary, short-term awards, and long-term incentive
awards.
Base Salary
A competitive base salary is important in fostering a career
orientation among executives, consistent with the long-term nature of the
Company's business objectives. The Compensation Committee determines the salary
of the CEO and the Company's other executive officers based on its consideration
of the CEO's recommendations.
Salaries and salary adjustments are based on the responsibilities,
performance and experience of each executive, regular reviews of competitive
positioning (comparing the Company's salary structure with that of similar
companies) and business performance. While there is no specific weighting of
these factors, the responsibilities, performance and experience of each
executive and reviews of competitive positioning are the most important
considerations.
Raymond A. Mason, the Company's CEO, has more than 30 years of service
with the Company. The Compensation Committee established
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<PAGE>
his fiscal 1996 salary based upon competitive positioning and the Company's
overall compensation approach, as noted above, of limiting base salary levels
and emphasizing incentive compensation.
Short-Term Awards
Short-term cash awards to executives are directly based on the
Company's fiscal year operating results and recognize contributions to the
business during the fiscal year.
The Company's Executive Incentive Compensation Plan provides for an
executive bonus pool in an amount up to 10% of the Company's pre-tax income
(calculated before deduction of the bonuses) for annual cash awards to the CEO
and other key executive officers selected by the Committee. For fiscal 1996, the
Committee selected the CEO and the five other executives named in the Summary
Compensation Table to be eligible for bonus awards pursuant to the Plan, and
during the first quarter of the fiscal year established maximum percentage
allocations of the pool for each of these individuals. Mr. Mason's maximum
percentage allocation was established at 40%. The pre-established maximum
percentage allocation and the specific bonus the CEO and each of the other
selected executives receives within the amount determined pursuant to the
pre-established percentage allocation is dependent on his or her level of
responsibility and individual performance. Levels of responsibility are
evaluated annually by the Compensation Committee without regard to any specific
formula. Assessments of individual performance are made annually by the
Compensation Committee after receiving the recommendations of the CEO. Such
assessments are based on a number of factors, including individual and corporate
performance, initiative, business judgment and management skills.
Total bonuses to the CEO and the five named executive officers with
respect to fiscal 1996 aggregated approximately 8% of pre-tax income (before
deduction of the cash bonuses), with 33% of such total bonuses being awarded to
Mr. Mason. The portion of the total bonus pool awarded to Mr. Mason for fiscal
1996 reflects his significant personal contributions to the business and his
leadership in building the Company's revenues, earnings and capital position.
The award was based on the Compensation Committee's general evaluation of Mr.
Mason's overall contribution as CEO to the Company's performance levels. The
Compensation Committee believes that Mr. Mason's cash compensation (salary and
cash bonus) was appropriate in relation to compensation of CEOs of comparable
companies, including the companies comprising the peer group reflected in the
Stock Performance Graph, taking into account the size and business results of
Legg Mason and those companies.
Section 162(m) of the Internal Revenue Code, enacted in 1993, limits
deductions for certain annual compensation in excess of $1,000,000 paid to
individuals required to be named in the summary compensation table in proxy
statements of public companies. This
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<PAGE>
limitation did not result in the loss of any tax deduction to the Company for
its fiscal year ended March 31, 1996.
Long-Term Incentive Awards
Long-term incentive awards, made during fiscal 1996 pursuant to the
shareholder-approved Legg Mason, Inc. 1991 Omnibus Long- Term Compensation Plan,
are designed to reinforce the importance of building long-term value for the
Company's stockholders. The Committee has adopted, and the Board of Directors
has approved, the Legg Mason, Inc. 1996 Equity Incentive Plan to serve as the
Company's long-term incentive program to replace the 1991 Omnibus Long-Term
Compensation Plan. The adoption of the new plan is subject to shareholder
approval at this Annual Meeting. See "Approval of Legg Mason, Inc. 1996 Equity
Incentive Plan."
Stock options were the only long-term incentives granted to executive
officers in fiscal 1996. The Compensation Committee believes that the regular
annual grant of stock options focuses management attention on long-term growth
in stockholder value and stock price appreciation. Under the plan, options have
a term of up to 10 years and are granted at the fair market value of Legg Mason
Common Stock on the date of grant. Generally, twenty percent of the options
become exercisable one year from date of grant, with the balance becoming
exercisable in 20% increments over the ensuing four years. Recipients must
remain in the Company's employ to exercise their options.
The number of options that the Compensation Committee grants to
executive officers is based on individual performance (determined as described
under "Short-Term Awards") and level of responsibility, and is determined by the
Compensation Committee after considering the recommendations of the CEO. Award
levels must be sufficient in size so that executives develop strong incentives
to achieve long-term corporate goals. In fiscal 1996, the annual option award to
Mr. Mason increased from the preceding year, as part of the Committee's increase
of grant levels to a number of key personnel.
COMPENSATION COMMITTEE
Harold L. Adams, Chairman
John E. Koerner, III
James E. Ukrop
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on
Legg Mason's Common Stock for the last five fiscal years with the cumulative
total return of the S&P 500 Stock Index and the
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<PAGE>
Regional Sub-Index of the Financial Service Analytics Brokerage Stock Price
Index ("FSA Regional") over the same period (assuming the investment of $100 in
each on March 31, 1991, and the reinvestment of all dividends). The FSA Regional
is comprised of 15 publicly held regional securities firms.(1)
################################################################################
IMAGE OF GRAPH OMITTED
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
Legg Mason $100 $134 $153 $143 $168 $210
S&P 500 Stock Index $100 $111 $128 $130 $150 $198
FSA Regional $100 $184 $205 $224 $247 $330
################################################################################
(1) The Company's performance graph in its 1995 Proxy Statement compared
the cumulative total shareholder return of Legg Mason's Common Stock to
that of the Lipper Analytical Brokerage Stock Price Index ("Lipper
Regional"). The FSA Regional is comprised of the same 15 publicly held
regional securities firms as the Lipper Regional.
CERTAIN TRANSACTIONS
Pursuant to an arrangement between LMWW and Aberdeen Creek Corporation
("Aberdeen"), a corporation owned by Peter F. O'Malley, a director of the
Company, LMWW and Aberdeen may in certain instances provide investment banking
services under a joint working relationship. The portion of the total fees to be
received by Aberdeen and LMWW in any investment banking engagement subject to
the arrangement is determined by negotiation between Aberdeen and LMWW, and in
each case will depend upon a number of factors, including their respective roles
in securing the engagement and the level and nature of services performed by
each. During fiscal 1996, there were no investment banking engagements that were
performed under a joint working relationship.
During fiscal 1996, the Company paid approximately $297,000 to the law
firm of Ballard Spahr Andrews & Ingersoll for legal services and related
expenses. The daughter of Charles A.
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<PAGE>
Bacigalupo, a director of the Company, is a partner of that law firm.
In the ordinary course of its business, the Company has extended credit
to certain of its directors and executive officers in connection with their
purchase of securities in margin accounts. Such extension of credit has not
resulted in any losses to the Company and has been made on the same terms as
loans to unaffiliated customers.
APPROVAL OF LEGG MASON, INC.
1996 EQUITY INCENTIVE PLAN
Proposed Plan
At the Annual Meeting, there will be presented to the stockholders a
proposal to approve the adoption of the Legg Mason, Inc. 1996 Equity Incentive
Plan (the "Plan"). The Plan was adopted by the Compensation Committee and
approved by the Board of Directors of the Company (the "Board") on April 18,
1996, subject to stockholder approval.
The purpose of the Plan is to provide key employees of the Company and
its subsidiaries various stock ownership and performance incentives toward
achievement of continued growth, profitability, and success of the Company. The
Plan will replace the Legg Mason 1991 Omnibus Long-Term Compensation Plan that
authorized stock options and awards for a total of 1,250,000 shares of Common
Stock. As of April 1996, stock options had been granted covering the total
number of authorized shares.
The Plan is set forth as Appendix A to this Proxy Statement and the
description of the Plan contained herein is qualified in its entirety by
reference to Appendix A.
Description of the Plan
General. Subject to adjustment in certain circumstances as discussed
below, the Plan authorizes up to 3,000,000 shares of Common Stock for issuance
pursuant to the terms of the Plan. If and to the extent awards under the Plan
expire or are terminated for any reason without being exercised, or the shares
of Common Stock subject to an Award are forfeited, or the shares are exchanged
in the Committee's discretion for Awards not involving Common Stock, or the
shares are used by the Participant for the payment of the purchase price of
shares upon exercise of a stock option, the shares of Common Stock subject to
such Grants again will be available for Awards under the Plan.
Administration of the Plan. The Plan is administered and
interpreted by a Committee (the "Committee") of the Board
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<PAGE>
consisting of not fewer than two persons appointed by the Board from among its
members, each of whom must be a "disinterested person" as defined in Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
an "outside director" as defined by Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code"). The Committee has the sole authority to
determine (i) persons to whom awards may be granted under the Plan, (ii) the
type, size and other terms and conditions of each award, (iii) the time when the
awards will be made and the duration of any applicable exercise or restriction
period, including the criteria for vesting and the acceleration of vesting, and
(iv) any other matters arising under the Plan. Except as provided by Rule 16b-3
under the Exchange Act or Section 162(m) of the Code, the Plan authorizes the
Committee to delegate its authority and duties under the Plan in certain
circumstances to the Chief Executive Officer and other senior officers of the
Company.
The Committee will have full power and authority to administer and
interpret the Plan, to make factual determinations and to adopt or amend such
rules, regulations, agreements and instruments for implementing the Plan and for
conduct of its business as it deems necessary or advisable, in its sole
discretion.
Types of Awards. The Plan provides for the grant of any or all of the
following types of awards ("Awards"): (1) stock options, including incentive
stock options; (2) stock appreciation rights ("SARs"), in tandem with stock
options or freestanding; (3) Common Stock of the Company, including restricted
Common Stock, or Common Stock derivatives; (4) Common Stock units; (5)
performance units; (6) performance shares; and (7) and any other Awards
established by the Committee which are consistent with the Plan's purpose. Such
Awards may be granted individually, in combination, or in tandem as determined
by the Committee.
Eligibility for Participation. Awards may be made to any key employee
(including officers and directors) of the Company or any of its subsidiaries as
designated by the Committee. The selection of Participants from among key
employees is within the discretion of the Committee. During any calendar year,
no Participant may receive Awards for more than 250,000 shares of Common Stock
issued or available for issuance under the Plan.
Stock Options. Stock Options granted under the Plan may consist of (i)
options intended to qualify as incentive stock options ("ISOs") within the
meaning of section 422 of the Code and (ii) so-called "nonqualified stock
options" that are not intended to so qualify ("NQSOs"). All Stock Options are
subject to the terms and conditions set forth in the Plan as the Committee deems
appropriate and as are specified in writing by the Committee to the Participant
(the "Award Notice"). The Committee must approve the form and provisions of each
Award Notice.
16
<PAGE>
The Committee fixes the option price per share at the date of grant.
The option price of any ISO granted under the Plan will not be less than the
fair market value of the underlying shares of Common Stock on the date of grant,
except that the option price of an ISO granted to an employee who owns more than
10% of the Common Stock may not be less than 110% of the fair market value of
the underlying shares of Common Stock on the date of grant. The option price of
a nonqualified stock option may be greater than, equal to or less than the fair
market value of the underlying shares of Common Stock on the date of grant,
provided that such price shall not be less than 50 percent of the fair market
value of the Common Stock on the date of grant.
The Committee shall determine the term of each option; provided,
however, that the exercise period may not exceed ten years from the date of
grant, and the exercise period of an ISO granted to an employee who owns more
than 10% of the Common Stock may not exceed five years from the date of grant.
To the extent that the aggregate fair market value of shares of Common Stock,
determined on the date of grant, with respect to which ISOs become exercisable
for the first time by a Participant during any calendar year exceeds $100,000,
such ISOs will be treated as NQSOs.
The exercisability of stock options will be as determined by the
Committee, in its sole discretion, and specified in the Award Notice. The
Committee, in its sole discretion, may accelerate the exercisability of any
stock option. A Participant, or, in the discretion of the Committee, a properly
authorized broker-dealer on behalf of a Participant, may exercise a stock option
by delivering notice of exercise to the Committee with accompanying payment of
the option price. Under the Plan, a Participant may pay the option price (i) in
cash, or by check, bank draft or money order, (ii) by delivering shares of
Common Stock or restricted Common Stock as to which restrictions have lapsed
owned by the Participant and having a fair market value on the date of exercise
equal to the option price, or (iii) by any combination of the foregoing. The
Participant must pay, at the time of exercise, the option price and the amount
of any federal, state or local withholding tax due in connection with such stock
option exercise. Subject to the prior approval of the Committee, Participants
may make an election to satisfy the Company income tax withholding obligation by
having shares withheld up to an amount that does not exceed the participant's
maximum marginal tax rate for federal, state and local tax liabilities.
Stock Appreciation Rights. The Committee may grant SARs alone
("Freestanding SARs") or in tandem with any stock option ("Tandem SARs"). An SAR
entitles the Participant, upon exercise, to receive the amount by which the fair
market value of Common Stock on the date of exercise exceeds the fair market
value of such stock on the date of grant.
17
<PAGE>
A Tandem SAR may be granted either at the time of the grant of the
related stock option or at any time thereafter during the term of the stock
option. A Tandem SAR shall be exercisable to the extent its related stock option
is exercisable and the exercise price of such SAR shall be the same as the
option price under its related stock option. Upon the exercise of a stock option
as to some or all of the shares covered by the Award, the related Tandem SAR
shall be canceled automatically to the extent of the number of shares covered by
the stock option exercise.
The Committee will, with regard to a Freestanding SAR, determine the
number of shares subject to the SAR, the manner and time of the SAR's exercise,
and the exercise price of the SAR. However, the exercise price of a Freestanding
SAR will in no event be less than 50% of the fair market value of the Common
Stock on the date of the grant of the Freestanding SAR.
Stock Awards. The Committee may grant Awards in the form of shares of
Common Stock, restricted shares of Common Stock, Common Stock derivatives, and
Common Stock units ("Stock Awards"). Stock Awards may be granted purely as a
bonus, subject to certain performance goals that meet the requirements of
Section 162(m) of the Code, or may be granted for consideration, subject to such
conditions and restrictions, if any, as the Committee may determine in its sole
discretion.
Performance Shares. The Committee may grant performance shares, which
shall be either shares of Common Stock of the Company or units which are
expressed in terms of Common Stock of the Company. Such awards will be
contingent upon the attainment over a period to be determined by the Committee
(the "Performance Period") of certain performance objectives. The performance
objectives to be achieved during a Performance Period and the measure of whether
and to what degree such objectives have been attained will also be determined by
the Committee.
Performance Units. The Committee may grant performance units, which are
units valued by reference to criteria chosen by the Committee other than the
Company's Common Stock. Performance units are similar to performance shares in
that they are contingently awarded based on the attainment over a Performance
Period of certain performance objectives. The length of the Performance Period,
the performance objectives to be achieved during the Performance Period, and the
measure of whether and to what degree such objectives have been achieved, will
be determined by the Committee.
Awards subject to Section 162(m). The Omnibus Budget Reconciliation Act
of 1993 added section 162(m) to the Code. Effective January 1, 1994, this
provision generally disallows a public company's deductions for employee
remuneration exceeding $1,000,000 per year for the CEO and any of the other four
most
18
<PAGE>
highly compensated executive officers of the Company, but contains an exception
for qualified "performance-based compensation." Compensation is
performance-based if it is payable solely on account of the achievement of one
or more objective business criteria.
Section 162(m) of the Code requires that a compensation committee
consisting of two or more "outside directors" establish performance standards
that must be met before such remuneration may be awarded. The committee also
must certify that the performance standards have actually been met before
payment of the remuneration. Finally, the law also requires that the performance
standards be disclosed to and approved by the shareholders.
The Plan provides that within 90 days after the start of each fiscal
year, the Committee shall: (1) designate the Participants who are subject to the
provisions of section 162(m) of the Code; (2) select the performance goal or
goals applicable to such year or any other Performance Period; and (3) establish
the amount or number, and the method of computing the amount or number of Stock
Awards, performance shares or performance units which may be granted, or the
amount of any loan made under the Plan which may be forgiven, upon the
attainment of the performance goals. The performance goals shall be limited to
one or more of the following: (1) future economic value per share of Common
Stock, (2) earnings per shares, (3) return on average common equity, (4) pre-tax
income, (5) pre-tax operating income, (6) net revenue, (7) net income, (8)
profits before taxes, (9) book value per share, (10) stock price and (11)
earnings available to common stockholders.
Following the completion of each fiscal year or Performance Period, the
Committee shall certify in writing whether the applicable performance goals have
been achieved for such year or such Performance Period, as applicable, and the
amount or number of Stock Awards, performance shares or performance units, if
any, payable to such Participants, or the amount of any loan forgiven on behalf
of such Participant, for such fiscal year or such period. The amounts due to a
Participant will be paid following the end of the applicable fiscal year or
Performance Period after such certification by the Committee. The maximum annual
amount that may be paid to, or the amount of any loan that may be forgiven on
behalf of, a Section 162(m) Participant for the 1997 fiscal year shall not
exceed $2,000,000, and for each subsequent fiscal year shall not exceed 110% of
such maximum amount for the preceding fiscal year. In determining this maximum
amount, the value of any stock options granted to a Section 162(m) Participant
shall not be included.
Other Terms of Awards. Awards may be paid in cash, Common Stock, Common
Stock derivatives, a combination of the foregoing, or any other form of
property, as the Committee shall determine. In addition, the Plan provides that
the Committee may authorize the
19
<PAGE>
making of loans or cash payments to Participants in connection with any Award
under the Plan or to be used to exercise a stock option or to pay any
consideration required in connection with a Stock Award, which loan may be
secured by any security, including Common Stock or Common Stock derivatives,
underlying or related to such Award (provided that such loan shall not exceed
the fair market value of the security subject to such Award), and which may be
forgiven upon such terms and conditions as the Committee may establish at the
time of such loans or at any time thereafter, including the attainment of
performance goals that meet the requirement of Section 162(m) of the Code. If an
Award is granted in the form of a Stock Award, stock option, or performance
share, or in the form of any other stock-based grant, the Committee may include
as part of such award an entitlement to receive dividends or dividend
equivalents. At the discretion of the Committee, payment of a Stock Award,
performance share, performance unit, dividend, or dividend equivalent may be
deferred by a Participant.
The Plan provides for the forfeiture of Awards in the event of
termination of employment for a reason other than death, disability, retirement,
or any other approved reason. The Plan authorizes the Committee to promulgate
administrative guidelines for the purpose of determining what treatment will be
afforded a Participant under the Plan in the event of his death, disability,
retirement, or termination for any other approved reason; provided that, to the
extent that an ISO is not treated as an NQSO, an ISO may not be exercised more
than 90 days following the Participant's termination of employment for any
reason other than disability, and in the case of termination of employment
because of a disability, the ISO may not be exercised more than one year
following such termination.
Upon grant of any Award, the Committee may, by way of an award notice
or otherwise, establish such terms, conditions, restrictions and/or limitations
governing the grant of such an Award as are not inconsistent with the Plan.
Restrictions on Transferability of Grants. No Grants under the Plan may
be transferred, except by will or the laws of descent and distribution;
provided, however, that if permitted by the Committee and subject to such terms
and conditions as the Committee shall specify, the Participant may transfer an
Award to such Participant's family members or to one or more trusts established
in whole or in part for the benefit of one or more of such family members;
provided, further, that the restrictions in this sentence shall not apply to the
shares of Common Stock received in connection with an award after the date that
the restrictions on transferability of such shares set forth in the applicable
Award Notice have lapsed. During the lifetime of the Participant, a stock
option, SAR, or similar type of award shall be exercisable only by him or by the
family member or trust to whom such stock
20
<PAGE>
option, SAR, or other award has been transferred in accordance with the previous
sentence.
Amendment, Term and Termination of the Plan. The Company, through the
Committee, may amend or terminate the Plan at any time; provided, however, that
the Committee may not, without stockholder or Board approval, as necessary,
adopt any amendment which would increase the maximum number of shares which may
be issued under the Plan (except as provided in section 20 of the Plan), modify
the Plan's eligibility requirements, or make any amendment that requires
stockholder approval pursuant to Rule 16b-3 of the Exchange Act or 162(m) of the
Code without stockholder approval. If approved by the stockholders, the Plan
will be effective as of April 18, 1996, and will terminate on April 17, 2006,
unless terminated earlier by the Board or extended by the Board with approval of
the stockholders. No award may be made under the Plan after its termination, but
awards made prior thereto may extend beyond the date of termination.
Adjustment Provisions. If there is any change in the number of
outstanding shares of Common Stock through the declaration of stock dividends,
stock splits or the like, the number of shares available for Awards, the shares
subject to any Award and the option prices or exercise prices of Awards shall be
automatically adjusted. If there is any change in the number of outstanding
shares of Common Stock through any change in the capital account of the Company,
or through any other transaction referred to in section 424(a) of the Code, the
Committee shall make appropriate adjustments in the maximum number of shares of
Common Stock which may be issued under the Plan and any adjustments and/or
modifications to outstanding Awards as it deems appropriate. In the event of any
other change in the capital structure or in the Common Stock of the Company, the
Committee shall also be authorized to make such appropriate adjustments in the
maximum number of shares of Common Stock available for issuance under the Plan
and any adjustments and/or modifications to outstanding Awards as it deems
appropriate.
Federal Income Tax Consequences. There are no federal income tax
consequences to Participants or to the Company upon the grant of an NQSO under
the Plan. Upon the exercise of NQSOs, a Participant will recognize ordinary
compensation income in an amount equal to the excess of the fair market value of
the shares of Common Stock at the time of exercise over the exercise price of
the NQSO, and the Company generally will be entitled to a corresponding federal
income tax deduction. Upon the sale of shares of Common Stock acquired by
exercise of an NQSO, a Participant will have a capital gain or loss (long-term
or short-term depending upon the length of time the shares of Common Stock were
held) in an amount equal to the difference between the amount realized upon the
sale and the Participant's adjusted tax basis in the shares of Common Stock (the
exercise price plus the amount of
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<PAGE>
ordinary income recognized by the Participant at the time of exercise of the
NQSO).
A Participant who is granted an ISO will not recognize taxable income
for purposes of the regular income tax, upon either the grant or exercise of the
ISO. A Participant who disposes of the shares of Common Stock acquired upon
exercise of an ISO after two years from the date the ISO was granted and after
one year from the date such shares were transferred to him will recognize
long-term capital gain or loss in the amount of the difference between the
amount realized on the sale and the option price (or the Participant's other tax
basis in the shares), and the Company will not be entitled to any tax deduction
by reason of the grant or exercise of the ISO. As a general rule, if a
Participant disposes of the shares of Common Stock acquired upon exercise of an
ISO before satisfying both holding period requirements (a "disqualifying
disposition"), his or her gain recognized on such a disposition will be taxed as
ordinary income to the extent of the difference between the fair market value of
such shares on the date of exercise and the option price, and the Company will
be entitled to a deduction in that amount. The gain, if any, in excess of the
amount recognized as ordinary income on such a disqualifying disposition will be
long-term or short-term capital gain, depending upon the length of time the
Participant held his or her shares of Common Stock prior to the disposition.
The grant of a SAR will produce no federal tax consequences for the
Participant or the Company. The exercise of a SAR results in taxable
compensation income to the Participant, equal to the difference between the
exercise price of shares and the market price of the shares on the date of
exercise, and a corresponding deduction to the Company.
A Participant who has been granted either performance units or
performance shares expressed in the form of units of Common Stock will not have
taxable income at the time of the grant, and the Company will not be entitled to
a deduction at such time. A Participant will have ordinary income at the time
the Award is paid, and the Company will have a corresponding deduction.
A Participant who has been granted an Award of restricted shares will
normally not recognize taxable income at that time, and the Company will not be
entitled to a deduction, until such Common Stock is transferable by the
Participant or no longer subject to a substantial risk of forfeiture for federal
tax purposes, whichever occurs earlier. When the Common Stock is either
transferable or is no longer subject to a substantial risk of forfeiture, the
Participant will recognize ordinary compensation income in an amount equal to
the fair market value of the Common Stock subject to the grant of the restricted
stock (less any amounts paid for such shares) at that time, and the Company will
be entitled to a deduction in the same amount. A Participant may, however, elect
to
22
<PAGE>
recognize ordinary compensation income in the year the grant of the restricted
stock is awarded in an amount equal to the fair market value of the Common Stock
(less any amounts paid for such shares) at that time, determined without regard
to the restrictions. In such event, the Company will be entitled to a deduction
in the same year. Any gain or loss recognized by the Participant upon subsequent
disposition of the Common Stock will be capital gain or loss. If, after making
the election, any Common Stock subject to a grant of restricted stock is
forfeited, or if the market value declines during the restriction period, the
Participant is not entitled to any tax deduction or tax refund.
The award of an outright grant of Common Stock to a Participant or the
forgiveness of a loan amount will produce immediate tax consequences for both
the Participant and the Company. The Participant will be treated as having
received taxable compensation in an amount equal to the then fair market value
of the Common Stock distributed to him or the amount of the loan forgiven. The
Company will have a corresponding deduction of the same amount.
Local and state tax authorities may also tax incentive compensation
awarded under the Plan.
Tax Withholding. The Company has the right to require the Participant
to pay the Company the amount of any taxes which the Company is required to
withhold in respect of any Award or to take whatever action the Company deems
necessary to satisfy any federal, state and local income and employment
withholding tax obligations arising under the Plan. The Company's obligation to
issue shares of Common Stock upon the exercise of a stock option or any other
Award is conditioned upon the grantee's compliance with such withholding
requirements to the satisfaction of the Committee. The Company has the right to
deduct from any cash payment under the Plan an amount sufficient to cover the
Participant's federal, state and local withholding tax obligations associated
with such grant payment.
Other Information
The closing price of the Company's Common Stock reported on the New
York Stock Exchange for May 29, 1996, was $33.375 per share.
The table below sets forth the number of stock options that have been
granted to certain persons under the Plan, subject to shareholder approval at
this meeting. Each of the options has an exercise price of $28.75 and an
expiration date of April 17, 2001. It is anticipated that additional options
will be granted under the Plan at a meeting of the Compensation Committee
scheduled for July 24, 1996, but there has been no determination at this time of
the number of options that will be granted.
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New Plan Benefits
Legg Mason, Inc. 1996 Equity Incentive Plan
Number of Shares
Subject to Option
-----------------
All employees as a
group... 11,700
PROPOSED INCREASE IN AUTHORIZED
SHARES OF LEGG MASON STOCK
The Company's Board of Directors has proposed an amendment to the
Company's Articles of Incorporation which would increase the authorized shares
of Legg Mason Common Stock from 20,000,000 to 100,000,000 shares.
As of May 20, 1996, 15,402,627 shares of Common Stock were issued and
outstanding. In addition, 2,635,658 shares were reserved for issuance upon
conversion of the Company's 5 1/4% Convertible Subordinated Debentures, and
2,041,709 shares were reserved for issuance pursuant to Company stock plans, not
counting the 3,000,000 shares covered by the Legg Mason, Inc. 1996 Equity
Incentive Plan that is proposed for shareholder approval at this Annual Meeting.
After taking into account the shares reserved, and the 3,000,000 additional
shares to be reserved, the Company would not have any additional authorized
shares available for issuance without adopting the proposed amendment of the
Articles of Incorporation.
If the proposed amendment and the adoption of the Legg Mason, Inc. 1996
Equity Incentive Plan are approved, the Company would have 76,920,006 shares of
common stock available for issuance. These shares would be available for
issuance from time to time to such persons and for such consideration as the
Company's Board of Directors may determine, without further action by the
shareholders, except in the case of certain transactions as may be required by
Maryland law or the rules of the New York Stock Exchange, and free from any
shareholder preemptive rights. Although the Company has had discussions from
time to time with respect to acquisition opportunities which could involve the
issuance of shares of Common Stock, the Company is not presently engaged in any
discussions with respect to any such acquisition. Other than in connection with
its employee stock plans and future acquisition opportunities, the Company does
not presently have any specific proposed use for the additional shares to be
authorized.
RATIFICATION OF SELECTION OF AUDITORS
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The Board of Directors has selected Coopers & Lybrand L.L.P. to be the
independent auditors of the Company for the fiscal year ending March 31, 1997.
This selection will be submitted for ratification at the Annual Meeting.
Representatives of Coopers & Lybrand will be present at the Annual Meeting. They
will have the opportunity to make a statement if they desire to do so and will
be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Any stockholder proposal intended for inclusion in the proxy material
for the 1997 Annual Meeting must be received in writing by the Company on or
before February 15, 1997. The inclusion of any proposal will be subject to
applicable rules of the Securities and Exchange Commission.
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and
the rules thereunder, the Company's executive officers and directors are
required to file with the Securities and Exchange Commission and the New York
Stock Exchange reports of their ownership of Common Stock. Based solely on a
review of copies of such reports furnished to the Company, or written
representations that no reports were required, the Company believes that during
the fiscal year ended March 31, 1996 its executive officers and directors
complied with the Section 16(a) requirements except that reports covering a gift
of 460 shares and a dividend reinvestment purchase of 650 shares by Edmund J.
Cashman, Jr., and a gift of 112 shares and a sale of 1,000 shares by John B.
Levert, Jr. were filed late.
OTHER MATTERS
The Board of Directors of the Company is not aware of any other matters
to come before the meeting. If any other matters
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should come before the meeting, the persons named in the enclosed proxy will act
thereon according to their best judgment.
By order of the Board of Directors
CHARLES A. BACIGALUPO
Secretary
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APPENDIX A
LEGG MASON, INC.
1996 EQUITY INCENTIVE PLAN
1. Purpose
The purpose of the Plan is to provide motivation to Key Employees of
the Company and its Subsidiaries to put forth maximum efforts toward the
continued growth, profitability, and success of the Company and its Subsidiaries
by providing incentives to such Key Employees through the ownership and
performance of the Common Stock or Common Stock derivatives of the Company.
Toward this objective, the Committee may grant stock options, stock appreciation
rights, Stock Awards, performance units, performance shares, and/or other
incentive awards to Key Employees of the Company and its Subsidiaries on the
terms and subject to the conditions set forth in the Plan.
2. Definitions
2.1 "Award" means any form of stock option, stock appreciation right,
Stock Award, performance unit, performance shares or other incentive award
granted under the Plan, whether individually, in combination, or in tandem, to a
Participant by the Committee pursuant to such terms, conditions, restrictions,
and/or limitations, if any, as the Committee may establish by the Award Notice
or otherwise.
2.2 "Award Notice" means a written notice from the Company to a
Participant that establishes the terms, conditions, restrictions, and/or
limitations applicable to an Award in addition to those established by this Plan
and by the Committee's exercise of its administrative powers.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
2.5 "Committee" means the Compensation Committee of the Board, or such
other committee designated by the Board, authorized to administer the Plan under
paragraph 3 hereof. So long as required by law, the Committee shall consist of
not less than two members, each of whom shall be a "disinterested person" within
the meaning of Rule 16b-3 promulgated under Section 16 of the Exchange Act and
an outside director within the meaning of Section 162(m) of the Code and related
Treasury regulations. The Committee shall from time to time designate the Key
Employees who shall be eligible for Awards pursuant to this Plan.
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2.6 "Common Stock" means common stock, par value $.10 per share, of the
Company.
2.7 "Company" means Legg Mason, Inc.
2.8 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.9 "Key Employee" means officers of the Company or a Subsidiary and
any other employee of the Company or a Subsidiary so designated by the
Committee.
2.10 "Participant" means any individual to whom an Award has been
granted by the Committee under this Plan.
2.11 "Plan" means the Legg Mason, Inc. 1996 Equity Incentive Plan.
2.12 "Stock Award" means an award granted pursuant to paragraph 10
hereof in the form of shares of Common Stock, Common Stock derivatives,
restricted shares of Common Stock, and/or Units of Common Stock.
2.13 "Subsidiary" means a corporation or other business entity in which
the Company directly or indirectly has an ownership interest of 50 percent or
more.
2.14 "Unit" means a bookkeeping entry used by the Company to record and
account for the grant of the following Awards until such time as the Award is
paid, cancelled, forfeited or terminated, as the case may be: Units of Common
Stock, performance units, and performance shares which are expressed in terms of
Units of Common Stock.
3. Administration
The Plan shall be administered by the Committee. The Committee shall
have the authority to (a) interpret the Plan and make factual determinations;
(b) establish or amend such rules and regulations as it deems necessary for the
proper operation and administration of the Plan; (c) select Key Employees to
receive Awards under the Plan; (d) determine the form of an Award, whether a
stock option, stock appreciation right, Stock Award, performance unit,
performance share, or other incentive award established by the Committee in
accordance with clause (h) below, the number of shares or Units subject to the
Award, all the terms, conditions, restrictions and/or limitations, if any, of an
Award, including the time and conditions of exercise or vesting, and the terms
of any Award Notice, which may include the waiver or amendment of prior terms
and conditions or acceleration or early vesting or payment of an Award under
certain circumstances determined by the Committee; (e) determine whether Awards
will be granted individually, in
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combination or in tandem; (f) grant waivers of Plan terms, conditions,
restrictions, and limitations; (g) accelerate the vesting, exercise, or payment
of an Award or the performance period of an Award when such action or actions
would be in the best interest of the Company; (h) establish such other types of
Awards, besides those specifically enumerated in paragraph 2.1 hereof, which the
Committee determines are consistent with the Plan's purpose; and (i) take any
and all other action it deems necessary or advisable for the proper operation or
administration of the Plan. The Committee shall also have the authority to grant
Awards in replacement of Awards previously granted under this Plan or any other
executive compensation plan of the Company or a Subsidiary. All determinations
of the Committee shall be made by a majority of its members, and its
determinations shall be final, binding and conclusive. All actions required of
the Committee under the Plan shall be made in the Committee's sole discretion,
not in a fiduciary capacity and need not be uniformly applied to other persons,
including similarly situated persons. The Committee, in its discretion, may
delegate its authority and duties under the Plan to the Chief Executive Officer
and/or to other senior officers of the Company under such conditions and/or
subject to such limitations as the Committee may establish; provided, however,
that only the Committee may select and grant Awards to Participants who are
subject to Section 16 of the Exchange Act or to whom Section 162(m) of the Code
applies.
4. Eligibility
Any Key Employee is eligible to become a Participant of the Plan.
5. Shares Available
The maximum number of shares of Common Stock, $0.10 par value per
share, of the Company which shall be available for grant of Awards under the
Plan (including incentive stock options) during its term shall not exceed
3,000,000. Notwithstanding anything in the Plan to the contrary, the maximum
aggregate number of shares of Common Stock that shall be granted under the Plan
to any one individual during any calendar year shall be 250,000. (Such amount
shall be subject to adjustment as provided in paragraph 20.) Any shares of
Common Stock related to Awards which terminate by expiration, forfeiture,
cancellation or otherwise without the issuance of shares, are settled in cash in
lieu of Common Stock, or are exchanged in the Committee's discretion for Awards
not involving Common Stock, shall be available again for grant under the Plan.
Further, any shares of Common Stock which are used by a Participant for the full
or partial payment to the Company of the purchase price of shares of Common
Stock upon exercise of a stock option, or for any withholding taxes due as a
result of such exercise, shall again be available for Awards under the Plan.
Similarly, shares of Common Stock with respect to which a stock
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appreciation right ("SAR") has been exercised and paid in cash shall again be
available for grant under the Plan. The shares of Common Stock available for
issuance under the Plan may be authorized and unissued shares or treasury
shares.
6. Term
The Plan shall become effective as of April 18, 1996, subject to its
approval by the Company's shareholders at the 1996 annual meeting. No Awards
shall be exercisable or payable before approval of the Plan has been obtained
from the Company's shareholders. Awards shall not be granted pursuant to the
Plan after April 17, 2006.
7. Participation
The Committee shall select, from time to time, Participants from those
Key Employees who, in the opinion of the Committee, can further the Plan's
purposes. Once a Participant is so selected, the Committee shall determine the
type or types of Awards to be made to the Participant and shall establish in the
related Award Notices the terms, conditions, restrictions and/or limitations, if
any, applicable to the Awards in addition to those set forth in this Plan and
the administrative rules and regulations issued by the Committee.
8. Stock Options
(a) Grants. Awards may be granted in the form of stock options to
purchase Common Stock or Common Stock derivatives. These stock options may be
incentive stock options within the meaning of Section 422 of the Code or
non-qualified stock options (i.e., stock options which are not incentive stock
options), or a combination of both.
(b) Terms and Conditions of Options. An option shall be exercisable in
whole or in such installments and at such times as may be determined by the
Committee. The price at which Common Stock may be purchased upon exercise of a
stock option shall be established by the Committee, but such price shall not be
less than 50 percent of the fair market value of the Common Stock, as determined
by the Committee, on the date of the stock option's grant.
(c) Restrictions Relating to Incentive Stock Options. Stock options
issued in the form of incentive stock options shall, in addition to being
subject to all applicable terms, conditions, restrictions and/or limitations
established by the Committee, comply with Section 422 of the Code. Accordingly,
to the extent that the aggregate fair market value (determined at the time the
option was granted) of the Common Stock with respect to which incentive stock
options are exercisable for the first time by a
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Participant during any calendar year (under this Plan or any other plan of the
Company or any of its Subsidiaries) exceeds $100,000 (or such other limit as may
be required by the Code), then such option as to the excess shall be treated as
a nonqualified stock option. Further, the per share option price of an incentive
stock option shall not be less than 100 percent of the fair market value of the
Common Stock, as determined by the Committee, on the date of the grant. An
incentive stock option shall not be granted to any Participant who is not an
employee of the Company or any "subsidiary" (within the meaning of section
424(f) of the Code). An incentive stock option shall not be granted to any
employee who, at the time of grant, owns stock possessing more than 10 percent
of the total combined voting power of all classes of stock of the Company or any
"parent" or "subsidiary" of the Company (within the meaning of section 424(f) of
the Code), unless the purchase price per share is not less than 110% of the fair
market value of Common Stock on the date of grant and the option exercise period
is not more than five years from the date of grant. Otherwise, each option shall
expire not later than ten years from its date of grant.
(d) Additional Terms and Conditions. The Committee may, by way of the
Award Notice or otherwise, establish such other terms, conditions, restrictions
and/or limitations, if any, of any stock option Award, provided they are not
inconsistent with the Plan.
(e) Exercise. Upon exercise, the option price of a stock option may be
paid (i) in cash or by check, bank draft or money order payable to the order of
the Company; (ii) in shares of Common Stock or shares of restricted Common Stock
as to which restrictions have lapsed; (iii) a combination of the foregoing; or
(iv) such other consideration as the Committee may deem appropriate. Subject to
the discretion of the Committee, any option granted under the Plan may be
exercised by a broker-dealer acting on behalf of a Participant if (i) the
broker-dealer has received from the Participant or the Company a fully- and
duly-endorsed agreement evidencing such option and instructions signed by the
Participant requesting the Company to deliver the shares of Common Stock subject
to such option to the broker-dealer on behalf of the Participant and specifying
the account into which such shares should be deposited, (ii) adequate provision
has been made with respect to the payment of any withholding taxes due upon such
exercise or, in the case of an incentive stock option, the disposition of such
shares and (iii) the broker-dealer and the Participant have otherwise complied
with Section 220.3(e)(4) of Regulation T, 12 CFR Part 220 and any successor
rules and regulations applicable to such exercise. The Committee shall establish
appropriate methods for accepting Common Stock, whether restricted or
unrestricted, and may impose such conditions as it deems appropriate on the use
of such Common Stock to exercise a stock option.
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(f) Rule 16b-3 Restrictions. A Participant who is a director or officer
subject to Section 16 of the Exchange Act shall be required to exercise stock
options in accordance with the requirements of Rule 16b-3 under the Exchange
Act, as such Rule may be amended from time to time.
9. Stock Appreciation Rights
(a) Grants. Awards may be granted in the form of stock appreciation
rights ("SARs"). An SAR may be granted in tandem with all or a portion of a
related stock option under the Plan ("Tandem SARs"), or may be granted
separately ("Freestanding SARs"). A Tandem SAR may be granted either at the time
of the grant of the related stock option or at any time thereafter during the
term of the stock option. SARs shall entitle the recipient to receive a payment
equal to the appreciation in market value of a stated number of shares of Common
Stock from the exercise price to the market value on the date of exercise. In
the case of SARs granted in tandem with stock options granted prior to the grant
of such SARS, the appreciation in value is from the option price of such related
stock option to the market value on the date of exercise. No SAR may be
exercised for cash by an officer or director of the Company who is subject to
Section 16 of the Exchange Act, except in accordance with Rule 16b-3 under the
Exchange Act, as such Rule may be amended from time to time.
(b) Terms and Conditions of Tandem SARS. A Tandem SAR shall be
exercisable to the extent, and only to the extent, that the related stock option
is exercisable, and the "exercise price" of such an SAR (the base from which the
value of the SAR is measured at its exercise) shall be the option price under
the related stock option. However, at no time shall a Tandem SAR be issued if
the option price of its related stock option is less than 50 percent of the fair
market value of the Common Stock, as determined by the Committee, on the date of
the Tandem SAR's grant. If a related stock option is exercised as to some or all
of the shares covered by the Award, the related Tandem SAR, if any, shall be
cancelled automatically to the extent of the number of shares covered by the
stock option exercise. Upon exercise of a Tandem SAR as to some or all of the
shares covered by the Award, the related stock option shall be cancelled
automatically to the extent of the number of shares covered by such exercise,
and such shares shall again be eligible for grant in accordance with paragraph 5
hereof, except to the extent any shares of Common Stock are issued to settle the
SAR.
(c) Terms and Conditions of Freestanding SARS. Freestanding SARs shall
be exercisable in whole or in such installments and at such times as may be
determined by the Committee and designated in the Award Notice. The exercise
price of a Freestanding SAR shall also be determined by the Committee; provided,
however, that such price shall not be less than 50 percent of the fair market
value of
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the Common Stock, as determined by the Committee, on the date of the
Freestanding SAR's grant.
(d) Deemed Exercise. The Committee may provide that an SAR shall be
deemed to be exercised at the close of business on the scheduled expiration date
of such SAR, if at such time the SAR by its terms remains exercisable and, if
exercised, would result in a payment to the holder of such SAR.
(e) Additional Terms and Conditions. The Committee may, by way of the
Award Notice or otherwise, determine such other terms, conditions, restrictions
and/or limitations, if any, of any SAR Award, provided they are not inconsistent
with the Plan.
10. Stock Awards
(a) Grants. Awards may be granted in the form of Stock Awards. Stock
Awards may consist of grants of Common Stock or Common Stock derivatives, and
may be granted either for consideration or for no consideration, as determined
in the sole discretion of the Committee. Stock Awards shall be awarded in such
numbers and at such time during the term of the Plan as the Committee shall
determine.
(b) Terms and Conditions of Awards. Stock Awards shall be subject to
such terms, conditions, restrictions, and/or limitations, if any, as the
Committee deems appropriate including, but not by way of limitation,
restrictions on transferability and continued employment. The Committee may
modify or accelerate the delivery of a Stock Award under such circumstances as
it deems appropriate, unless the Stock Award is subject to the provisions of
paragraph 13.
(c) Rights as Shareholders. During the period in which any restricted
shares of Common Stock are subject to the restrictions imposed under paragraph
10(b), the Committee may, in its discretion, grant to the Participant to whom
such restricted shares have been awarded all or any of the rights of a
shareholder with respect to such shares, including, but not by way of
limitation, the right to vote such shares and to receive dividends.
(d) Evidence of Award. Any Stock Award granted under the Plan may be
evidenced in such manner as the Committee deems appropriate, including, without
limitation, book-entry registration or issuance of a stock certificate or
certificates.
11. Performance Units
(a) Grants. Awards may be granted in the form of performance units.
Performance units, as that term is used in this Plan, shall refer to Units
valued by reference to designated criteria established by the Committee, other
than Common Stock.
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(b) Performance Criteria. Performance units shall be contingent on the
attainment during a performance period of certain performance objectives. The
length of the performance period, the performance objectives to be achieved
during the performance period, and the measure of whether and to what degree
such objectives have been attained shall be conclusively determined by the
Committee in the exercise of its absolute discretion. Subject to the
requirements of paragraph 13, if applicable, performance objectives may be
revised by the Committee, at such times as it deems appropriate during the
performance period, in order to take into consideration any unforeseen events or
changes in circumstances.
(c) Additional Terms and Conditions. The Committee may, by way of the
Award Notice or otherwise, determine such other terms, conditions, restrictions,
and/or limitations, if any, of any Award of performance units, provided they are
not inconsistent with the Plan.
12. Performance Shares
(a) Grants. Awards may be granted in the form of performance shares.
Performance shares, as that term is used in this Plan, shall refer to shares of
Common Stock or Units which are expressed in terms of Common Stock.
(b) Performance Criteria. Performance shares shall be contingent upon
the attainment during a performance period of certain performance objectives.
The length of the performance period, the performance objectives to be achieved
during the performance period, and the measure of whether and to what degree
such objectives have been attained shall be conclusively determined by the
Committee in the exercise of its absolute discretion. Subject to the
requirements of paragraph 13, if applicable, performance objectives may be
revised by the Committee, at such times as it deems appropriate during the
performance period, in order to take into consideration any unforeseen events or
changes in circumstances.
(c) Additional Terms and Conditions. The Committee may, by way of the
Award Notice or otherwise, determine such other terms, conditions, restrictions
and/or limitations, if any, of any Award of performance shares, provided they
are not inconsistent with the Plan.
13. Provisions Applicable to Section 162(m) Participants
(a) Designation of Participants and Goals. Within 90 days after the
start of each fiscal year (or by such other time as may be required or permitted
by Section 162(m) of the Code), the Committee shall, in writing: (i) designate
the Participants for whom the grant of Stock Awards, performance units, or
performance
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shares (and the entitlement to dividends or dividend equivalents with respect to
such Awards, if any), or the forgiveness of any loan pursuant to paragraph 14,
shall be subject to this paragraph 13; (ii) select the performance goal or goals
applicable to the fiscal year or years included within any performance period;
(iii) establish the number or amount of Stock Awards, performance units and
performance shares which may be earned or the amount of any loan which may be
forgiven, for such year or such years within a performance period by each such
Participant; (iv) specify the relationship between performance goals and the
amount or number of Stock Awards, performance units or performance shares to be
earned by each such Participant, or the amount of the forgiveness of any loan
made under paragraph 14, for such year or period and (v) the method for
computing the amount or number of Stock Awards, performance units or performance
shares payable, or the amount of any loan which may be forgiven, if the
performance goals are attained.
The Committee may specify that the amount or number of Stock Awards,
performance units and performance shares (and the entitlement to dividends or
dividend equivalents with respect to such Awards, if any) will be earned, or
that the amount of any loan will be forgiven, if the applicable target is
achieved for one goal or for any one of a number of goals for a fiscal year or
years within a performance period. The Committee may also provide that the
amount or number of Stock Awards, performance units and performance shares to be
earned, or the amount of any loan forgiven, for a given fiscal year or years
within a performance period will vary based upon different levels of achievement
of the applicable performance targets.
(b) Performance Criteria. For purposes of this paragraph 13,
performance goals shall be limited to one or more of the following: (i) future
economic value per share of Common Stock, (ii) earnings per shares, (iii) return
on average common equity, (iv) pre-tax income, (v) pre-tax operating income,
(vi) net revenue, (vii) net income, (viii) profits before taxes, (ix) book value
per share, (x) stock price and (xi) earnings available to common stockholders.
(c) Annual Payment. Following the completion of each fiscal year or
completion of a performance period, the Committee shall certify in writing
whether the applicable performance goals have been achieved for such year or
performance period and the amount or number of Stock Awards, performance shares
or performance units, if any, payable to a Participant or the amount of any loan
forgiven with respect to a Participant for such fiscal year or performance
period. The amounts due to a Participant to whom this paragraph 13 applies will
be paid following the end of the applicable fiscal year or performance period
after such certification by the Committee. In determining the amount due to a
Participant, or the amount of any loan forgiven on with respect to a
Participant, to whom this paragraph applies for a given fiscal year or
performance
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period, the Committee shall have the right to reduce (but not to increase) the
amount payable or forgiven at a given level of performance to take into account
additional factors that the Committee may deem relevant to the assessment of
individual or corporate performance for the year.
(d) Restrictions. Anything in this paragraph 13 to the contrary
notwithstanding, the maximum annual amount that may be paid to a Participant or
the maximum amount of any loan that may be forgiven under the Plan for (i) the
fiscal year in which the Plan is approved by the Stockholders of the Company
shall equal no more than $2,000,000 and (ii) each subsequent fiscal year shall
equal 110% of such maximum amount for the preceding fiscal year; provided that
the maximum annual amount determined under this paragraph 13 shall be determined
without regard to the value of any stock options granted to a Participant under
the Plan.
(e) Adjustment for Non-Recurring Items, Etc. Notwithstanding anything
herein to the contrary, if the Company's financial performance is affected by
any event that is of a non-recurring nature, the Committee in its sole
discretion may make such adjustments in the financial criteria as it shall
determine to be equitable and appropriate in order to make the calculations of
Awards, as nearly as may be practicable, equivalent to the calculation that
would have been made without regard to such event. In the event of a significant
change of the business or assets of the Company under circumstances involving an
acquisition or a merger, consolidation or similar transaction, the Committee
shall, in good faith, recommend to the Board for approval such revisions to the
financial criteria and the other terms and conditions used in calculating Awards
for the then current Plan Year as it reasonably deems appropriate in light of
any such change.
(f) Repeal of Section 162(m). Without further action by the Board, the
provisions of this paragraph 13 shall cease to apply on the effective date of
the repeal of Section 162(m) of the Code (and any successor provision thereto).
14. Loans
The Committee may authorize the making of loans or cash payments to
Participants in connection with any Award under the Plan, the exercise of a
stock option or the payment of consideration in connection with a Stock Award,
which loan may be secured by any security, including Common Stock or Common
Stock derivatives, underlying or related to such Award or payment (provided that
such loan shall not exceed the fair market value of the security subject to such
Award or so purchased), and which may be forgiven upon such terms and conditions
as the Committee may establish at the time of such loans or at any time
thereafter, including the attainment of a performance goal or goals pursuant to
paragraph 13.
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15. Payment of Awards
At the discretion of the Committee, payment of Awards may be made in
cash, Common Stock, Common Stock derivatives, a combination of any of the
foregoing, or any other form of property as the Committee shall determine. In
addition, payment of Awards may include such terms, conditions, restrictions,
and/or limitations, if any, as the Committee deems appropriate, including, in
the case of Awards paid in the form of Common Stock, restrictions on transfer
and forfeiture provisions. Further, payment of Awards may be made in the form of
a lump sum or installments, as determined by the Committee.
16. Dividends and Dividend Equivalents
If an Award is granted in the form of a Stock Award, stock option, or
performance share, or in the form of any other stock- based grant, the Committee
may choose, at the time of the grant of the Award or any time thereafter up to
the time of the Award's payment, to include as part of such Award an entitlement
to receive dividends or dividend equivalents, subject to such terms, conditions,
restrictions, and/or limitations, if any, as the Committee may establish.
Dividends and dividend equivalents shall be paid in such form and manner (i.e.,
lump sum or installments), and at such time as the Committee shall determine.
All dividends or dividend equivalents which are not paid currently may, at the
Committee's discretion, accrue interest, be reinvested into additional shares of
Common Stock or, in the case of dividends or dividend equivalents credited in
connection with performance shares, be credited as additional performance shares
and paid to the Participant if and when, and to the extent that, payment is made
pursuant to such Award.
17. Deferral of Awards
At the discretion of the Committee, payment of a Stock Award,
performance share, performance unit, dividend, dividend equivalent, or any
portion thereof may be deferred by a Participant until such time as the
Committee may establish. All such deferrals shall be accomplished by the
delivery of a written, irrevocable election by the Participant at least six
months (and in the calendar year) prior to such time payment would otherwise be
made, on a form provided by the Company. Further, all deferrals shall be made in
accordance with administrative guidelines established by the Committee to ensure
that such deferrals comply with all applicable requirements of the Code and its
regulations. Deferred payments shall be paid in a lump sum or installments, as
determined by the Committee. The Committee may also credit interest, at such
rates to be determined by the Committee, on cash payments that are deferred and
credit dividends or dividend equivalents on deferred payments denominated in the
form of Common Stock.
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18. Termination of Employment
If a Participant's employment with the Company or a Subsidiary
terminates for a reason other than death, disability, retirement, or any
approved reason, all unexercised, unearned, and/or unpaid Awards, including, but
not by way of limitation, Awards earned, but not yet paid, all unpaid dividends
and dividend equivalents, and all interest accrued on the foregoing shall be
cancelled or forfeited, as the case may be, unless the Participant's Award
Notice provides otherwise. The Committee shall have the authority to promulgate
rules and regulations to (i) determine what events constitute disability,
retirement, or termination for an approved reason for purposes of the Plan, and
(ii) determine the treatment of a Participant under the Plan in the event of his
death, disability, retirement, or termination for an approved reason.
Notwithstanding the foregoing, and to the extent that an incentive stock option
is not treated as a nonqualified stock option by the Committee or under the
terms of the Plan, an incentive stock option may not be exercisable more than 90
days after the date the Participant terminates employment for any reason;
provided, however, that if the Participant terminates employment because of a
disability, the incentive stock option may not be exercised more than one year
after the date of such termination.
19. Nonassignability
Unless the Committee determines otherwise, no stock options, SARs,
performance shares or other derivative securities (as defined in the rules and
regulations promulgated under Section 16 of the Exchange Act) awarded under the
Plan shall be subject in any manner to alienation, anticipation, sale, transfer,
assignment, pledge, or encumbrance, except for transfers by will or the laws of
descent and distribution; provided, however, that the Committee may, subject to
such terms and conditions as the Committee shall specify, permit the transfer of
an Award to a Participant's family members or to one or more trusts established
in whole or in part for the benefit of one or more of such family members;
provided, further, that the restrictions in this sentence shall not apply to the
shares of Common Stock received in connection with an Award after the date that
the restrictions on transferability of such shares set forth in the applicable
Award Notice have lapsed. During the lifetime of the Participant, an Option,
SAR, or similar- type other award shall be exercisable only by him or by the
family member or trust to whom such Option, SAR, or other Award has been
transferred in accordance with the previous sentence.
20. Adjustment of Shares Available
If there is any change in the number of outstanding shares of Common
Stock through the declaration of stock dividends, stock splits or the like, the
number of shares available for Awards, the shares subject to any Award and the
option prices or exercise
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prices of Awards shall be automatically adjusted. If there is any change in the
number of outstanding shares of Common Stock through any change in the capital
account of the Company, or through any other transaction referred to in Section
424(a) of the Code, the Committee shall make appropriate adjustments in the
maximum number of shares of Common Stock which may be issued under the Plan and
any adjustments and/or modifications to outstanding Awards as it deems
appropriate. In the event of any other change in the capital structure or in the
Common Stock of the Company, the Committee shall also be authorized to make such
appropriate adjustments in the maximum number of shares of Common Stock
available for issuance under the Plan and any adjustments and/or modifications
to outstanding Awards as it deems appropriate.
21. Withholding Taxes
The Company shall be entitled to deduct from any payment under the
Plan, regardless of the form of such payment, the amount of all applicable
income and employment taxes required by law to be withheld with respect to such
payment or may require the Participant to pay to it such tax prior to and as a
condition of the making of such payment. In accordance with any applicable
administrative guidelines it establishes, the Committee may allow a Participant
to pay the amount of taxes required by law to be withheld from an Award by
withholding from any payment of Common Stock due as a result of such Award, or
by permitting the Participant to deliver to the Company, shares of Common Stock,
having a fair market value, as determined by the Committee, equal to the amount
of such required withholding taxes; provided that if the Participant is a
director or officer who is subject to Section 16 of the Exchange Act, the
withholding of shares of Common Stock must be made in compliance with Rule 16b-3
under the Exchange Act.
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22. Noncompetition Provision
Unless the Award Notice specifies otherwise, a Participant shall
forfeit all unexercised, unearned, and/or unpaid Awards, including, but not by
way of limitation, Awards earned but not yet paid, all unpaid dividends and
dividend equivalents, and all interest, if any, accrued on the foregoing if, (i)
in the opinion of the Committee, the Participant, without the written consent of
the Company, engages directly or indirectly in any manner or capacity as
principal, agent, partner, officer, director, employee, or otherwise, in any
business or activity competitive with the business conducted by the Company or
any Subsidiary; or (ii) the Participant performs any act or engages in any
activity which in the opinion of the Chief Executive Officer of the Company is
inimical to the best interests of the Company. In addition, the Committee may,
in its discretion, condition the grant, exercise, payment or deferral of any
Award, dividend, or dividend equivalent made under the Plan on a Participant's
compliance with the terms of this paragraph 22 and any other terms specified by
the Committee in the Award Notice, and cause such a Participant to forfeit any
payment which is deferred or to grant to the Company the right to obtain
equitable relief if the Participant fails to comply with the terms hereof.
23. Amendments to Awards
Subject to the requirements of paragraph 13, the Committee may at any
time unilaterally amend any unexercised, unearned, or unpaid Award, including,
but not by way of limitation, Awards earned but not yet paid, to the extent it
deems appropriate; provided, however, that any such amendment which, in the
opinion of the Committee, is adverse to the Participant shall require the
Participant's consent.
24. Compliance with Law
Notwithstanding anything contained in this Plan to the contrary, the
Company shall have no obligation to issue or deliver certificates of Common
Stock evidencing Stock Awards or any other Award resulting in the payment of
Common Stock prior to (a) the obtaining of any approval from, or satisfaction of
any waiting period or other condition imposed by, any governmental agency which
the Company shall, in its sole discretion, determine to be necessary or
advisable, (b) the admission of such shares to listing on the stock exchange on
which the Common Stock may be listed, and (c) the completion of any registration
or other qualification of said shares under any state or federal law or ruling
of any governmental body which the Company shall, in its sole discretion,
determine to be necessary or advisable. With respect to persons subject to
Section 16 of the Exchange Act, it is the intent of the Company that the Plan
and all transactions under the Plan comply
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with all applicable provisions of Rule 16b-3, as the Rule may be amended or
replaced, under the Exchange Act.
25. No Right to Continued Employment or Grants
Participation in the Plan shall not give any Key Employee any right to
remain in the employ of the Company or any Subsidiary. The Company or, in the
case of employment with a Subsidiary, the Subsidiary, reserves the right to
terminate any Key Employee at any time. Further, the adoption of this Plan shall
not be deemed to give any Key Employee or any other individual any right to be
selected as a Participant or to be granted an Award.
26. Amendment
The Committee may suspend or terminate the Plan at any time. In
addition, the Committee may, from time to time, amend the Plan in any manner,
but may not without Board and shareholder approval adopt any amendment which
would (a) materially increase the benefits accruing to Participants under the
Plan, (b) materially increase the number of shares of Common Stock which may be
issued under the Plan (except as specified in paragraph 19), or (c) materially
modify the requirements as to eligibility for participation in the Plan; and
provided further that the Committee shall not amend the Plan without the
approval of the Board or the shareholders if such approval is required by Rule
16b-3 of the Exchange Act or Section 162(m) of the Code.
27. Governing Law
The Plan shall be governed by and construed in accordance with the laws
of the State of Maryland except as superseded by applicable Federal Law.
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APPENDIX B
LEGG MASON, INC.
Proxy for Annual Meeting of Stockholders, July 24, 1996
The undersigned hereby appoints Raymond A. Mason, Charles A. Bacigalupo
and John F. Curley, Jr., and each of them, as proxy, with full power of
substitution, to vote all shares which the undersigned is entitled to vote at
the Annual Meeting of Stockholders of Legg Mason, Inc., on July 24, 1996, at
10:00 a.m., and at any adjournment thereof.
The Board of Directors recommends a vote FOR each of the items below.
1. FOR [ ] WITHHOLD [ ] The election of all Nominees listed (except as
marked to the contrary):
Nominees for the term expiring at the 1999 annual meeting
Raymond A. Mason James W. Brinkley Nicholas J. St. George
Richard J. Himelfarb Roger W. Schipke Edward I. O'Brien
(to withhold authority to vote for any individual nominee strike a line
through the nominee's name)
2. FOR [ ] AGAINST [ ] ABSTAIN [ ] Approval of Legg Mason, Inc. 1996
Equity Incentive Plan.
3. FOR [ ] AGAINST [ ] ABSTAIN [ ] Approval of Amendment of Legg Mason,
Inc. Articles of Incorporation to
Increase Authorized Common Stock.
4. FOR [ ] AGAINST [ ] ABSTAIN [ ] Ratification of Coopers & Lybrand
L.L.P. as independent auditors of the
Company for the fiscal year ending
March 31, 1997.
5. To act upon any other matter which may properly come before the meeting
or any adjournment thereof.
This proxy will be voted on each of the foregoing items as specified by
the person signing it, but if no specification is made the proxy will be voted
FOR the election of Directors and FOR the other proposals.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
IT MAY BE REVOKED PRIOR TO ITS EXERCISE.
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Receipt of notice of the meeting and proxy statement is hereby
acknowledged, and the terms of the notice and statement are hereby incorporated
by reference into this proxy. The undersigned hereby revokes all proxies
heretofore given for said meeting or any adjournment or adjournments thereof.
Dated:.......................1996 ..............................
(SEAL)
.............................
(SEAL)
Please date and then sign exactly
as name appears to the left. If
signing for trust, estate,
corporation or other legal entity,
capacity or title should be stated.
If shares are jointly owned, both
owners should sign.
PLEASE DATE AND SIGN THIS PROXY AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
<PAGE>
