Performance Unit Award Agreement – Legg Mason, Inc.
LEGG MASON, INC. 1996 EQUITY INCENTIVE PLAN
PERFORMANCE UNIT AWARD AGREEMENT
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Grant Summary Participant: __________ Grant Date: _____________ Award: ___________ Performance Units Target Payout Amount: $10,000 per Performance Unit Threshold Adjusted EPS Level: _________________ Target Adjusted EPS Level: _________________ Maximum Adjusted EPS Level: _________________ AWARD IS SUBJECT TO CONDITION IN SECTION 4(N) BELOW |
Legg Mason, Inc. (the “Company“) hereby grants to you (the
“Participant“), pursuant to the Legg Mason, Inc. 1996 Equity Incentive
Plan, as amended (the “Plan“), an award of Performance Units (the
“Award“), upon and subject to the restrictions, terms and conditions set
forth below. The number of Performance Units included in the Award and the
performance measures required to earn the Award are stated in the Grant Summary.
By executing this Award Agreement, the Participant acknowledges acceptance of
the Award subject to all of the restrictions, terms and conditions set forth in
this Agreement and the Plan.
This Award is subject in all respects to the applicable provisions of the
Plan. Such provisions are incorporated herein by reference and made a part
hereof. Capitalized terms that are not defined in Section 5(k) below are defined
in the Plan and shall have the meanings specified in the Plan.
In addition to the terms, conditions and restrictions set forth in the Plan,
all terms, conditions and restrictions set forth in this Agreement are
applicable to the Award granted hereby.
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1. |
AWARD OF PERFORMANCE UNITS. |
(a)Pursuant to and subject to the terms of the Plan, the Company hereby
awards to Participant the number of Performance Units reflected on the Grant
Summary as the Award. Each Performance Unit issued in the Award shall be paid
out in cash, shares of Common Stock or a combination thereof, at the Committee’s
election, with a value (as of the distribution date) equal to the Target Payout
Amount if the Target Adjusted EPS level is achieved.
(b) Following the date that Performance Units are earned and vested pursuant
to Section 2, each Performance Unit shall be distributed as cash, shares of
Common Stock, or a combination thereof, with a value (as of the distribution
date) equal to the Payout Amount, which typically shall be between $2,500 and
$20,000 per Performance Unit as set out in Section 2. The number of Performance
Units reflected in the Grant Summary shall be credited to Participant’s Account
as of the Grant Date. Participant’s Account shall be the record of Performance
Units granted to Participant hereunder and
is solely for accounting purposes and shall not require a segregation of any
assets of the Company.
(c)Participant shall not have the rights of a stockholder, including any
rights to receive dividends with respect to any Performance Units credited to
Participant’s Account or any shares of Common Stock that may be distributed in
respect of such Performance Units until, if the Committee elects to distribute
shares, shares of Common Stock have been distributed to Participant pursuant to
Section 3.
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2. |
PERFORMANCE VESTING AND FORFEITURE. |
Performance Units shall become earned and vested in accordance with this
Section 2, and cash or shares of Common Stock shall be distributed in accordance
with Section 3, only upon, and to the extent of, the attainment of the Threshold
Adjusted EPS Level specified in the Grant Summary as of the end of the
Performance Period.
(a)Satisfaction of Performance Thresholds. To the extent that the
Threshold Adjusted EPS Level specified in the Grant Summary is achieved for the
Performance Period, and Participant remains in full time employment with the
Company (or a subsidiary or affiliate of the Company) through the end of the
Performance Period, then Performance Units shall vest, and cash, shares of
Common Stock or a combination thereof, as selected by the Committee, will be
distributed to Participant under Section 3, in accordance with the following
(but subject to modification in accordance with subsections (b), (c) and (f)
below):
(1)Below Threshold Adjusted EPS Level. If Adjusted EPS for the
Performance Period is below the Threshold Adjusted EPS Level, Performance Units
will not vest, and will be forfeited by Participant.
(2)Threshold Adjusted EPS Level. If Adjusted EPS for the Performance
Period is equal to or greater than the Threshold Adjusted EPS Level, but below
the Target Adjusted EPS Level, then the Performance Units will vest and the
Payout Amount will equal one-quarter (0.25) of the Target Payout Amount.
(3)Target Adjusted EPS Level. If Adjusted EPS for the Performance
Period is equal to or greater than the Target Adjusted EPS Level, but below the
Maximum Adjusted EPS Level, then the Performance Units will vest and the Payout
Amount will equal the Target Payout Amount.
(4)Maximum Adjusted EPS Level. If Adjusted EPS for the Performance
Period is equal to or greater than the Maximum Adjusted EPS Level, then the
Performance Units will vest and the Payout Amount will equal two (2) times the
Target Payout Amount.
(b)Adjusted EPS Levels between Threshold and Target Adjusted EPS Level or
Target and Maximum Adjusted EPS Level. If Adjusted EPS for the Performance
Period is between the Threshold and Target Adjusted EPS Level or between the
Target and Maximum Adjusted EPS Level, the Payout Amount under clause (a) above
will be increased to include an additional amount representing a prorated amount
(on a straight line basis) of the difference between the Payout Amounts under
Section 2(a) for attainment of the two achievement levels. For example, if
Adjusted EPS for the Performance
Period is the midpoint between the Threshold Adjusted EPS Level and the
Target Adjusted EPS Level, the Payout Amount will include an additional amount
equal to .375 of the Target Payout Amount, reflecting the attainment of Adjusted
EPS for the Performance Period at the midpoint between the Threshold and Target
Adjusted EPS Levels (for a total Payout Amount of .625 of the Target Payout
Amount). If Adjusted EPS for the Performance Period is the midpoint between the
Target Adjusted EPS Level and the Maximum Adjusted EPS Level, the Payout Amount
under clause (a) above will be increased to include an additional amount equal
to 1/2 of the Target Payout Amount reflecting the attainment of Adjusted EPS for
the Performance Period at the midpoint between the Target and Maximum Adjusted
EPS Levels (for a total Payout Amount of 1.5 multiplied by the Target Payout
Amount).
(c)TSR Modifier.
(1)If Adjusted EPS for the Performance Period is equal to or greater than the
Threshold Adjusted EPS Level, the Payout Amount shall be adjusted, based on the
TSR of the Company compared to the TSR of the Benchmark Group, by the following
percentage:
Company TSR Percentile Ranking Percentage Adjustment
At or below 25th percentile minus (-) 20%
At or above 75th percentile plus (+) 20%
For example, if the Company has achieved the Target Adjusted EPS Level, and
the Company TSR for the Performance Period would place it in the bottom quartile
(i.e., at or below the 25th percentile) of the Benchmark
Group, the Payout Amount for each Performance Unit shall be adjusted downward
20% (from the Target Payout Amount to 80% of the Target Payout Amount).
(2)The TSR percentile ranking of the Company is calculated by comparing the
TSR for the Company with the TSR for each company in the Benchmark Group. If the
Company TSR is lower than the TSR of 25% or fewer of the companies in the
Benchmark Group, then the Company TSR is at or below the 25th
percentile. If the Company TSR is higher than the TSR of 75% or more of the
Companies in the Benchmark Group, then the Company TSR is at or above the
75th percentile. Such determination shall be made after making the
following adjustments to the Benchmark Group:
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(i) |
If a member of the Benchmark Group becomes insolvent during the Performance |
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(ii) |
If a member of the Benchmark Group is acquired, it will be removed from the |
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(iii) |
If a member of the Benchmark Group consolidates with (or becomes part of) |
Group.
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(iv) |
If a member of the Benchmark Group consolidates (or becomes part of) an |
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(v) |
If the stock of a member of the Benchmark Group ceases to trade for more than |
(3)Notwithstanding the foregoing, in no event shall the adjustment in the
Payout Amount pursuant to this Section 2(c) cause the Payout Amount per
Performance Unit to be greater than two (2) times the Target Payout Amount or
less than one-quarter (0.25) of the Target Payout Amount.
(d)Participant’s right to vest in this Award is conditioned upon
Participant’s continuous full-time employment with the Firm throughout the
Performance Period. If Participant’s continuous full-time employment with the
Firm terminates or is interrupted during the Performance Period for any reason
stated below, Participant’s rights with respect to the Award shall be affected
as follows:
(1)Resignation. If Participant resigns or otherwise terminates his or
her employment with the Firm for any reason other than as specified in clause
(2) or (4) below prior to the end of the Performance Period, Participant’s Award
shall be forfeited in its entirety.
(2)Death or Disability. If Participant terminates his or her
employment with the Firm before the end of a Performance Period as a result of
death or Separation from Service due to Disability, the Committee, in its
discretion, may allow a Pro Rata Portion of the Award to vest and be earned
(subject to the vesting terms set forth in clause (a) above) as of the end of
the Performance Period. Upon the vesting of a Pro Rata Portion of the Award, or
in the event the Committee does not exercise its discretion to allow any vesting
as provided above, the remaining Performance Units will be forfeited.
(3)Termination with or without Cause. Upon termination of
Participant’s employment by the Firm with or without Cause (including an
elimination of Participant’s position in connection with a reduction in
workforce), Participant’s Award shall be forfeited in its entirety.
(4)Termination of Employment Due to Retirement. If Participant’s
employment with the Firm terminates before the end of the Performance Period by
reason of Participant’s Retirement, then a Pro Rata Portion of the Award will
vest and be earned (subject to the vesting terms set forth in clauses (a)
through (c) above and clause (f) below) as of the end of the Performance Period,
as long as Participant does not engage in Competitive Activity. If Participant
engages in Competitive Activity, then the Award shall be forfeited at the time
Participant engages in such Competitive Activity. Upon the vesting of a Pro Rata
Portion of the Award, the remaining Performance Units will be forfeited.
(e)Effect of Change in Control During Performance Period.
(1) Upon the occurrence of a Change in Control after the Grant Date but prior
to the end of the Performance Period (and while Participant remains a full-time
employee of the
Company or a subsidiary or affiliate), a portion of the Performance Units
credited to Participant’s Account shall be considered as earned and vested. Such
portion shall equal a fraction, the numerator of which is the number of full,
completed months in the Performance Period at the time of the Change in Control
and the denominator of which is the total number of months in the Performance
Period.
(2) If (i) a Change in Control occurs after the Grant Date but prior to the
end of the Performance Period, (ii) Participant’s employment with the Firm had
terminated prior to the Change in Control as a result of death or Separation
from Service due to Disability, and (iii) Participant would otherwise (within
the discretion of the Committee) be entitled to a Pro Rata Portion of the Award
as of the end of the Performance Period pursuant to Section 2(d)(2), then,
within the discretion of the Committee, such Pro Rata Portion of the Award shall
be considered as earned and vested as of the date of the Change in Control.
(3) If (i) a Change in Control occurs after the Grant Date but prior to the
end of the Performance Period, (ii) Participant’s employment with the Firm had
terminated prior to the Change in Control as a result of Separation from Service
due to Retirement, and (iii) Participant would otherwise be entitled to a Pro
Rata Portion of the Award as of the end of the Performance Period pursuant to
Section 2(d)(4), such Pro Rata Portion of the Award shall be considered as
earned and vested as of the date of the Change in Control, as long as
Participant does not engage in Competitive Activity. If Participant engages in
Competitive Activity, then the Award shall be forfeited at the time Participant
engages in such Competitive Activity.
(4)Upon vesting as a result of a Change in Control, the Payout Amount will
equal the Target Payout Amount for each vested Performance Unit and the unvested
Performance Units shall be forfeited
(f)Committee Determination and Discretion to Reduce Payout Amount. The
Committee shall determine and certify the extent to which the requisite Adjusted
EPS level has been met following the end of the Performance Period, whether the
Performance Units have been earned and vested hereunder and the Payout Amount to
be distributed with respect to vested Performance Units, if any. Prior to the
date on which amounts are distributed in respect of vested Performance Units,
the Committee may use negative discretion to reduce the Payout Amount for each
vested Performance Unit from the amount calculated under the previous provisions
of this Section (2). The Committee’s determinations shall be binding and
conclusive on all parties. Performance Units shall not be deemed to have been
earned and vested, and cash or shares of Common Stock to be distributed and
vesting will not be earned or distributed, until the Committee determination and
certification as to the attainment of the achievement levels. The Committee may
not exercise discretion to increase the amount earned or vested and/or the
Payout Amount otherwise due based on the extent to which the achievement levels
for the Performance Period are met.
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3. |
DISTRIBUTION OF PERFORMANCE UNITS |
(a)Subject to the dollar limitation on payments that is contained in Section
13 of the Plan (applicable to Section 162(m) Participants), payment shall be
made with respect to each vested Performance Unit in the form of a distribution
of cash, shares of Common Stock or a combination thereof, at the election of the
Committee in its sole discretion, with a value (as of the distribution date)
equal to the Payout Amount determined under Section 2. Notwithstanding anything
to the contrary herein, in accordance with Section 5 of the Plan, the Payment
Amount shall not exceed the
value of the maximum number of shares of Common Stock (determined as of the
first day of the Performance Period) that may be granted under Section 5 of the
Plan to any one individual during any calendar year less the number of any
shares of Common Stock previously granted to the Participant under the Plan for
the calendar year containing the first day of the Performance Period. Such
distribution will be made on the applicable date set forth below:
(1)The date on which the Performance Units have been earned and vested under
Section 2(a) through (c) following the end of a Performance Period, based on the
determination of the Committee;
(2)The later of the end of a Performance Period or the date on which the
Committee determines that Performance Units have been earned and vested under
Section 2(d)(2) or (4) following the end of a Performance Period;
(3)The date of a Change in Control which meets the requirements of Section
409A(a)(2)(A)(v) of the Code; or
(4)The end of the Performance Period in the case of a Change in Control that
does not meet the requirements of Section 409A(a)(2)(A)(v) of the Code;
But not later than the 15th day of the third calendar month
following the end of the Performance Period, or in the case of a Change in
Control that meets the requirements of Section 409A(a)(2)(A)(v) of the Code, the
15th day of the third calendar month following the Fiscal Year in which such
Change in Control occurred.
Notwithstanding the foregoing provisions of this clause (a), the following
provisions shall apply:
(1) In the event of a vesting of a Pro Rata portion of Performance Units
under Section 2(d)(2) or 2(d)(4) or a portion of Performance Units under Section
2(e), then the distribution made with respect to such Performance Units will be
entirely in the form of cash; and
(2) To the extent required in order to comply with Section 409A of the Code,
any distribution or payment made in connection with or following Separation from
Service shall not be made earlier than the first business day of the seventh
month following Participant’s Separation from Service, or if earlier the date of
death of Participant. Any distribution or payment that is delayed in accordance
with the foregoing sentence shall be made on the first business day following
the expiration of such six (6) month period.
(b)If the Committee elects to make distributions all or partially in cash,
the cash (except for any amounts which are withheld to satisfy any tax
withholding requirement) will be paid to the same account of Participant, and in
the same manner, as payments of Participant’s base salary. If the Committee
elects to make distributions all or partially in shares of Common Stock, the
Company shall issue the shares (except for any shares of Common Stock which are
withheld to satisfy any tax withholding requirement) to an account of
Participant opened by the Company at a financial institution selected by the
Company. Cash shall be paid in lieu of issuing partial shares. The number of
shares of Common Stock to be distributed to Participant will equal (i) the
dollar amount to be distributed to Participant divided by (ii) the average of
the high and low trading prices of the Common Stock on the principal exchange on
which it is traded on the day of distribution. Payment of cash or issuance
and crediting shares of Common Stock to such account, with an aggregate value
equal to the Payout Amount for each vested Performance Unit constitute full
payment and satisfaction of such Performance Units and this Award.
(c)To the extent that any cash or shares of Common Stock cannot be
distributed to participant in respect of any Performance Units (or any other
payment cannot be made) because of the payment limitations contained in Section
13 of the Plan, such Performance Units shall nevertheless become fully vested
and earned by Participant as of the date of the Committee determination and
certification as to the attainment of the performance achievement levels, but
the conversion of such Performance Units to cash or Common Stock and the
distribution (and related distribution date) of such cash or Common Stock to
Participant (as well as any other amount otherwise payable under this Section 3)
shall be delayed until the earliest date on which such distribution or payment
can be made consistent with Section 409A of the Code and the payment limitations
contained in Section 13 of the Plan. To the extent required in order to comply
with Section 409A of the Code, any distribution or payment that is delayed in
accordance with the provisions of this Section 3(c) and which is made in
connection with or following Separation from Service shall not be made earlier
than the first business day of the seventh month following Separation from
Service, or if earlier the date of death of Participant. Any distribution or
payment that is delayed in accordance with the foregoing sentence shall be made
on the first business day following the expiration of such six (6) month period.
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4. |
ADDITIONAL TERMS AND CONDITIONS OF THE AWARD. |
(a)Obligation Unfunded. The obligation of the Company with respect to
Performance Units granted hereunder shall be interpreted solely as an unfunded
contractual obligation to distribute cash or shares of Common Stock in the
manner and under the conditions prescribed under this Agreement. Any shares or
other assets set aside with respect to amounts payable under this Agreement
shall be subject to the claims of the Company’s general creditors, and no person
other than the Company shall, by virtue of the provisions of the Plan or this
Agreement, have any interest in such assets. In no event shall any assets set
aside (directly or indirectly) with respect to amounts payable under this
Agreement be located or transferred outside the United States. Neither
Participant nor any other person shall have any interest in any particular
assets of the Company by reason of the right to receive a benefit under this
Agreement, and Participant or any such other person shall have only the rights
of a general unsecured creditor of the Company with respect to any rights under
the Plan or this Agreement.
(b)Beneficiaries. Participant may designate in writing, on a form to
be prescribed by and filed with the Committee, a beneficiary to receive all or
part of the Performance Units to be distributed under the Plan in the event of
Participant’s death. A designation of a beneficiary may be replaced by a new
designation or may be revoked by Participant at any time and in accordance with
such rules and procedures established by the Committee on a form prescribed by
and filed with the Committee. In the event of Participant’s death, amounts due
under the Plan with respect to which a designation of a beneficiary has been
made (to the extent it is valid and enforceable under applicable law) shall be
distributed in accordance with the Plan to the designated beneficiary.
Distributions due under the Plan and not subject to a beneficiary designation
shall be distributed to Participant’s estate. If there is any question as to the
legal right of any beneficiary to receive any distribution under the Plan, the
distribution in question may be made in the sole discretion of the Committee to
the estate of Participant, in which event the Firm shall have no further
liability to anyone with respect to such distribution. Distribution to the
executors or administrators of the estate of Participant may be conditioned on
the delivery to the Committee of such tax waivers, letters testamentary and
other documents as the Committee may reasonably request.
(c)Right Of Set Off. Notwithstanding any provisions of this Agreement
to the contrary, the Committee, the Firm and the Company may offset any amounts
that Participant may owe to the Firm against the Performance Units subject to a
Participant’s Award and any distributions that would have otherwise been made to
Participant under the Plan. Any offset made pursuant to the preceding sentence
may be made only on the date the payment is otherwise scheduled to be made under
the terms of the Plan and this Agreement and may not operate to accelerate any
payment.
(d)Consent To Electronic Delivery. In lieu of receiving documents in
paper format, Participant hereby agrees, to the fullest extent permitted by law,
to accept electronic delivery of any documents that the Firm elects to or is
required to deliver (including, but not limited to, the Prospectus related to
Participant’s Award, any supplements to that Prospectus, and agreements, account
statements, monthly or annual reports, and all other forms or communications) in
connection with Participant’s Award. Electronic delivery of a document to
Participant may be via a Firm e-mail system or by reference to a location on a
Firm intranet site or a third-party’s Internet site to which Participant has
access.
(e)Securities Laws. Participant hereby represents and covenants that
if in the future Participant decides to offer or dispose of any Common Stock
received subject to this Award or interest therein, Participant shall do so only
in compliance with this Agreement, the Securities Act of 1933, as amended and
all applicable state and local national securities laws as appropriate. As a
condition precedent to the delivery to Participant of any subject to this Award,
Participant shall comply with all regulations and requirements of any regulatory
authority having control of or supervision over the issuance of the Common Stock
and, in connection therewith, shall execute any documents and make any
representation and warranty to the Company which the Committee shall in its sole
discretion deem necessary or advisable.
(f)Adjustment. In the event that there occurs (a) any change in the
number of outstanding shares of Common Stock through the declaration of
dividends, stock splits or the like or through any change in the capital account
of the Company or any other transaction referred to in Section 424(a) of the
Code or (b) any other change in the capital structure of the Company or in the
Common Stock, then, if applicable, the Threshold Adjusted EPS Level, Target
Adjusted EPS Level and Maximum Adjusted EPS Level shall be adjusted to reflect
such change. Any decision of the Committee regarding the amount and timing of
any adjustment shall be final and conclusive.
(g)Compliance With Applicable Law. This Award is subject to the
condition that if the listing, registration or qualification of any Common Stock
to be issued in settlement of this Award upon any securities exchange or under
any law, or the consent or approval of any governmental body, or the taking of
any other action is necessary or desirable as a condition of, or in connection
with, the vesting or delivery of shares of Common Stock hereunder, shares of
Common Stock issued in settlement of this Award may not be delivered, in whole
or in part, unless such listing, registration, qualification, consent or
approval shall have been effected or obtained. The Company agrees to make every
reasonable effort to effect or obtain any such listing, registration,
qualification, consent or approval. By signing this Award Agreement, however,
Participant acknowledges and agrees that he or she is and remains responsible
for any local compliance requirements or regulations in relation to the receipt,
ownership and possible subsequent sale of the Company’s Common Stock.
Participant also agrees that he or she is responsible for any local compliance
requirements or regulations in relation to the opening and use of a U.S.
brokerage account.
(h)Transfer Restrictions. Transfer of any shares of Common Stock
received in respect of this Award shall be subject to the Company’s trading
policies and any applicable securities laws or regulations governing
transferability of shares of the Company.
(i)Withholding; Tax Matters.
(1)The Company may, and Participant hereby authorizes the Company to, charge
Participant’s Account (or, to the extent permitted by law, to deduct from
payments of any kind by the Company or its subsidiaries or affiliates to which
Participant would otherwise be entitled, including without limitation, salary,
bonus and other compensation) any federal, state or local taxes (including,
without limitation, income taxes and Participant’s portion of any employment
taxes) or other amounts which it deems are required by law to be withheld. In
addition, the Company may retain a sufficient amount of cash or number of shares
of Common Stock to be distributed to Participant to cover all such required
withholding. Notwithstanding the forgoing, in lieu of having such required
withholding deducted from other amounts due, Participant may direct the Company
to reduce the number of earned Performance Units allocated to Participant’s
Account or otherwise retain a sufficient amount of cash or number of shares of
Common Stock to be distributed to Participant to cover any or all such required
withholding. Alternatively, Participant may elect to remit to the Company by
check an amount sufficient to satisfy any federal, state or local withholding
tax requirements, prior to the delivery of cash or Common Stock pursuant to
Section 3 hereof. Participant acknowledges that if Participant fails to provide
the direction or the check described in the prior two sentences, the Company
shall elect the manner in which any required withholding shall be made in its
sole discretion without any liability to Participant resulting from the option
the Company selects or the timing under which the Company makes and carries out
the election.
(2)To the extent the Committee elects to distribute an Award in shares of
Common Stock and Participant is subject to liability under section 16(b) of the
Securities and Exchange Act of 1934 on the date such Common Stock is issued to
Participant if Participant were to sell such shares on that day and makes an
election in a timely manner under Section 83(b) of the Code to recognize income
for tax purposes, Participant shall notify the Compensation department within
the Company’s Finance Department within thirty (30) days of making such
election. Participant acknowledges that if Participant elects to make a Section
83(b) election, Participant shall be responsible for satisfying applicable IRS
filing requirements with respect to such election.
(3)Participant understands and agrees that the Company makes no
representations as to the tax consequences of the grant of Performance Units
hereunder or the payment of cash or Common Stock with respect thereto
(including, without limitation, under Section 409A of the Code, if applicable).
Participant is solely responsible for any and all income, excise or other taxes
imposed on Participant with respect to the Award.
(j)Award Confers No Rights To Continued Employment Or Future
Awards. Nothing in the Plan or in this Agreement shall confer upon
Participant any right to continue in the employ of the Company or any subsidiary
or affiliate of the Company for a specified period of time or interfere with the
right of the Company and its subsidiaries or affiliates to terminate such
employment at any time. In addition, neither the Plan nor this Agreement confers
any right upon Participant to receive future awards under the Plan. All future
awards, if any, are completely at the discretion of the Company.
(k)Rights Nontransferable. Participant’s rights with respect
to the Award are not transferable by Participant by means of sale, assignment,
exchange, pledge, hypothecation, or otherwise.
(l)Clawback Provisions.
(1)Notwithstanding anything to the contrary in this Agreement, this Award is
expressly made subject to the terms of the clawback provisions set forth below.
As a result, Participant may be required to forfeit his or her Award and return
to the Company amounts distributed with respect to his or her Award (or the
value thereof), in the situations described below. Participant agrees that the
Company may enforce the forfeiture by all legal means available, including,
without limitation, by withholding the forfeited amount from other sums owed to
Participant by the Firm.
(2)In the event of a restatement of the Company’s financial results within
three years of original reporting to correct a material error, then, if the
Company’s Board of Directors determines that Participant’s acts or omissions
were a significant contributing factor to the need to issue such restatement and
that all or any portion of Participant’s Award, if the award was made prior to
the restatement, would not have been awarded based upon the restated financial
results, then Participant agrees to forfeit and return to the Company, to the
extent permitted by applicable law, the portion (which may be all) of this Award
or of the cash or shares of Common Stock distributed in respect of vested
Performance Units or value thereof (regardless of whether vesting has occurred
and cash or Common Stock distributed) that the Board of Directors, in its
discretion, determines to be appropriate.
(3)In the event that, Participant’s employment is terminated by the Firm for
a Clawback Event or (ii) following the termination of Participant’s employment,
the Company is or becomes aware that Participant committed an act that would
have given rise to a termination for a Clawback Event, then, in either event,
Participant agrees to forfeit to the Company, to the extent permitted by
applicable law, the portion (which may be all) of this Award or of the cash or
shares of Common Stock distributed in respect of vested Performance Units or
value thereof (regardless of whether vesting has occurred and cash or Common
Stock distributed), that Participant was awarded after the conduct or omission
that gave rise to the Clawback Event and that the Board of Directors, in its
discretion, determines to be appropriate.
(4)The Award (including cash or shares of Common Stock distributed in respect
of vested Performance Units or value thereof) shall also be subject to
forfeiture to the extent required by applicable law.
(m)Impact On Other Benefits. The value of (and any amount payable with
respect to) the Performance Units shall not be includable as compensation or
earnings for purposes of any other benefit plan offered by the Company.
Moreover, any awards granted under the Plan are not part of Participant’s
ordinary compensation, employment agreement, if any, or working relationship
with the Company or any of its subsidiaries or affiliates and will therefore not
be considered as part of such compensation, agreement or relationship in the
event of severance, redundancy or resignation, unless otherwise required by
applicable law.
(n) Condition on Award. Notwithstanding anything to the contrary herein, the
Award, and the terms and conditions of this Agreement, are expressly subject to
the stockholders of the Company approving an amendment to the Plan that broadens
the performance conditions under Section 13(b)
of the Plan to include the Adjusted Earnings Per Share and Total Stockholder
Return metrics included in this Agreement. In the event that no such amendment
has been approved by the Company’s stockholders prior to the end of the
Performance Period, this Agreement, the Award and the Performance Units shall
automatically become null and void.
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5. |
MISCELLANEOUS PROVISIONS. |
(a)No Restriction on Company Authority. The Award shall not affect in
any way the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or other
changes in the Company’s capital structure or its business, or any merger or
consolidation of the Company, or any issue of bonds, debentures, preferred or
prior preference stock ahead of or affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.
(b)Notices. All notices, requests or other communications provided for
in this Agreement shall be made in writing either (i) by actual delivery to the
party entitled thereto, or (ii) by mailing in the mails of the United States or,
for Participants who reside in another country, of the other country to the
address of the party entitled thereto as set forth below, via certified or
registered mail, return receipt requested. The notice shall be deemed to be
received in case of delivery, on the date of its actual receipt by the party
entitled thereto, and in case of mailing, five days following the date of such
mailing. Any notice mailed to the Company shall be addressed to the Deferred
Compensation Administrator of the Company at 100 International Drive, Baltimore,
Maryland 21202. Any notice mailed to Participant shall be addressed to
Participant at Participant’s address as reflected in the personnel records of
the Company. Either party hereto may designate a different address for notices
than the one provided herein by notice to the other.
(c)Consent And Disclosure Regarding Use Of Personal Information.
(1)In connection with the grant of the Award, and any other award under the
Plan, and the implementation and administration of the Plan, including, without
limitation, Participant’s actual participation, or consideration by the
Committee for potential future participation in the Plan at any time, it is or
may become necessary for the Firm to collect, transfer, use, and hold certain
personal information regarding Participant in and/or outside of Participant’s
home country. By accepting the Award, Participant explicitly consents (i) to the
use of such information for the purpose of being considered for participation in
future awards under the Plan (to the extent he/she is eligible under the Plan,
and without any guarantee that any award shall be made); and (ii) to the use,
transfer, processing and storage, electronically or otherwise, of his/her
personal information, as such use has occurred to date, and as such use may
occur in the future, in connection with this Award or any other award under the
Plan, as further described below.
(2)Use, transfer, storage and processing of personal information,
electronically or otherwise, may be in connection with the Company’s internal
administration of the Plan, or in connection with tax or other governmental and
regulatory compliance activities directly or indirectly related to the Award or
any other award under the Plan. For such purposes only, personal information may
be used by third parties retained by the Company to assist with the
administration and compliance activities of the Plan, and may be transferred
by the company that employs (or any company that has employed) Participant from
Participant’s home country to other members of the Company and third parties
located in the United States and in other countries. Specifically, those parties
that may have access to Participant’s information for the purposes described
herein include, but are not limited to, (i) human resources personnel
responsible for administering the Plan; (ii) Participant’s U.S., regional and
local employing entity and business unit management, including Participant’s
supervisor and his/her superiors; (iii) the Committee or its designee, which is
responsible for administering the Plan; (iv) the Company’s technology systems
support team (but only to the extent necessary to maintain the proper operation
of electronic information systems that support the Plan); and (v) internal and
external legal, tax and accounting advisors (but only to the extent necessary
for them to advise the Company on compliance and other issues affecting the
awards under the Plan in their respective fields of expertise).
(3)At all times, Company personnel and third parties shall be obligated to
maintain the confidentiality of Participant’s personal information except to the
extent the Company is required to provide such information to governmental
agencies or other parties. Such action shall always be undertaken only in
accordance with applicable law. The personal information that the Company may
collect, process, store and transfer for the purposes outlined above may include
Participant’s name, nationality, citizenship, work authorization, date of birth,
age, government/tax identification number, passport number, brokerage account
information, or other internal identifying information, home address, work
address, job and location history, compensation, business unit, employing
entity, and Participant’s beneficiaries and contact information. Participant may
obtain more details regarding the access and use of his/her personal
information, and may correct or update such information, by contacting his/her
human resources representative.
(d)Market Fluctuations. The Company is not responsible for any foreign
exchange fluctuations between Participant’s local currency, if Participant is
not located in the U.S., and the U.S. dollar nor is the Company responsible or
liable for any decrease in the value of the Company’s Common Stock at any time,
all of which shall be solely the risk and responsibility of Participant.
(e)Entire Agreement; Modification. The Agreement contains the entire
agreement between the parties with respect to the subject matter contained
herein and may not be modified, except as provided in the Plan or in a written
document signed by each of the parties hereto.
(f)Code Section 162(m). This Agreement shall be subject to
the restrictions set forth in Section 13 of the Plan.
(g)Conformity with Plan. This Agreement is intended
to conform in all respects with, and is subject to all applicable provisions of,
the Plan, which is incorporated herein by reference. Inconsistencies between
this Agreement and the Plan shall be resolved in accordance with the terms of
the Plan. In the event of any ambiguity in the Agreement or any matters as to
which the Agreement is silent, the Plan shall govern including, without
limitation, the provisions thereof pursuant to which the Committee has the
power, among others, to (i) interpret the Plan and Awards, (ii) prescribe, amend
and rescind rules and regulations relating to the Plan, and (iii) make all other
determinations deemed necessary or advisable for the administration of the Plan.
Participant acknowledges by electronically accepting the Award that he or she
has reviewed a copy of the Plan.
(h)Governing Law. This Agreement shall be governed by, and interpreted
in accordance with, the internal laws of the State of Maryland (without regard
to conflicts of laws rules thereof).
(i)Counterparts. This Agreement may be executed in two or more
counterparts each of which shall be deemed an original and all of which together
shall constitute one and the same instrument.
(j)Headings. Headings in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this agreement.
(k)Definitions. Unless otherwise defined herein, the following terms
have the meanings set forth below.
“Account” means the bookkeeping account maintained for Participant
pursuant to Section 1(b).
“Adjusted Earnings” means, for any Fiscal Year, means the Company’s
Net Income (Loss) Attributable to Legg Mason, Inc. for such Fiscal Year as
determined in accordance with GAAP, plus (i) the Company’s amortization and
deferred taxes related to intangible assets and goodwill for such Fiscal Year,
(ii) imputed interest and tax benefits on contingent convertible debt for such
Fiscal Year, (iii) non-cash goodwill and intangible asset impairment charges
incurred during such Fiscal Year, (iv) any charges to compensation expense
incurred during the Fiscal Year resulting from issuing minority equity interests
in one or more of the Company’s subsidiaries to their management teams in a
one-time restructuring of the employment arrangements with each such management
team, and (v) one-time initial expenses arising during the Fiscal Year as a
result of the acquisition of one or more businesses, and minus (i) deferred
income taxes on goodwill and indefinite life intangible assets in such Fiscal
Year, (ii) the impact of tax rate adjustments on certain deferred tax
liabilities related to indefinite-life intangible assets and goodwill in such
Fiscal Year (which impact shall be removed regardless of whether it is positive
or negative), (iii) Unusual Items of Income, and (iv) any gains or losses
arising from the repayment of debt. Adjusted Earnings will be calculated under
the foregoing formula consistent with the calculation of the measure that is
publicly reported by the Company on the Grant Date with respect to adjustments
that are made in such publicly reported measure.
“Adjusted Earnings Per Share” means, for any Fiscal Year, the result
determined by dividing (i) the Adjusted Earnings for such Fiscal Year by (ii)
the Company’s diluted weighted average shares outstanding for such Fiscal Year
determined in accordance with GAAP.
“Adjusted EPS for the Performance Period” means the sum of the
Adjusted Earnings Per Share for each Fiscal Year within the Performance Period.
“Benchmark Group” means the following companies:
____________; as such list of companies is modified pursuant to
Section 2(c)(2) above.
“Cause” means any one or more of the following types of behavior by
Participant which the Firm in its sole discretion finds to be sufficient reason
to terminate Participant’s employment with the Firm: (i) any conduct (a) that
constitutes Competitive Activity, (b) that breaches any obligation to the Firm
or Participant’s duty of loyalty to the Firm, or (c) that is materially
injurious to the Firm, monetarily or otherwise; (ii) material violation of, or
an act taken by
the failure to act which causes the Firm to be in violation of any government
statue or regulation, or of the constitution, by-laws, rules or regulations of
any securities or commodities exchange or a self-regulatory organization, or of
the policies of the Firm; (iii) the entering of an order or decree or the taking
of any similar action with respect to Participant which substantially impairs
such Participant from performing his or her duties or makes him or her
ineligible from being associated with the Company pursuant to Section 9 of the
Investment Company Act of 1940, as amended, or Section 203(f) of the Investment
Advisors Act of 1940, as amended; (iv) malfeasance, disloyalty or dishonesty in
any material respect; (v) any conviction for a felony: (vi) any failure to
devote all professional time to assigned duties and to the business of the Firm;
(vii) failure to satisfactorily perform duties, as determined by the Firm’s
management in its sole discretion, or gross misconduct or gross negligence in
the performance of duties; or (viii) failure to remain licensed to perform
duties or other act, conduct or circumstance which renders Participant
ineligible for employment with the Firm.
“Change of Control” means any of the following events: (i) any person,
including a “person” as such term is used in Section 14(d)(2) of the Securities
Exchange Act of 1934, as amended, acquires, directly or indirectly, beneficial
ownership of securities representing 50.1% or more of the combined voting power
of the outstanding equity securities of the Company; (ii) the closing of any
merger, consolidation or other reorganization involving the Company with respect
to which the stockholders of the Company immediately prior to such
reorganization do not hold, directly or indirectly, more than 50% of the
combined voting power of the outstanding equity securities of such successor
entity immediately following such transaction; (iii) the closing of any
transaction involving a sale of assets of the Company that have a total gross
fair market value equal to or more than 90% of the total gross fair market value
of all of the assets of the Company; (iv) the adoption of any plan or proposal
for the liquidation or dissolution of the Company; or (v) within any 12-month
period, individuals who, as of May 15, 2011, constitute the board of directors
of the Company (the “Incumbent Board”) cease for any reason to constitute at
least a majority of such board; provided, however, that any individual becoming
a director subsequent to such date whose election, or nomination for election by
the Company’s stockholders, was approved by a vote of at least a majority of the
directors then comprising the Company’s board of directors shall be considered
as though such individual were a member of the Incumbent Board.
An event described above shall constitute a Change in Control for purposes of
the vesting provisions of Section 2(e), but shall not constitute a Change in
Control for purposes of a distribution under Section 2(e) or 3, unless the event
constitutes a change in control within the meaning of Section 409A(a)(2)(A)(v)
of the Code or this Agreement is determined not to be subject to Code Section
409A. If an event described above does not constitute a change in control for
purposes of Section 409A(a)(2)(A)(v) of the Code and this Agreement is
determined to be subject to Code Section 409A, the distribution shall be made
without regard to the Change in Control in accordance with the provisions of
Section 3.
“Clawback Event” means (i) Participant’s gross negligence, willful
misconduct or willful malfeasance in connection with the performance of his or
her job that has materially and adversely affected the Firm’s reputation or
business, (ii) Participant’s willful commission or participation in any
violation of any law, rule or regulation applicable to the Firm (unless
Participant had a reasonable good faith belief that the act, omission or failure
to act in question was not a violation of such law, rule or regulation) and such
violation has materially and adversely affected the Firm’s reputation or
business or Participant’s ability to be associated
with an investment company or an investment advisor, (iii) Participant’s
theft, embezzlement or fraud in connection with the performance of his or her
duties for the Firm, and (iv) Participant is convicted of, or plead guilty or
nolo contendere to, a crime committed during the course of
Participant’s employment with, and performance of duties on behalf of, the Firm
that the Committee, acting in good faith, reasonably determines is likely to
have a material and adverse effect on the reputation or business of
Participant’s employer or the Company.
“Code” means the Internal Revenue Code of 1986, as amended.
“Committee” means the Compensation Committee of the Company’s Board of
Directors or such committee or persons designated by that Compensation Committee
to act on its behalf.
“Common Stock” means Legg Mason, Inc. common stock, par value $.10 per
share.
“Competitive Activity” means Participant’s engagement in any activity
that competes with any of the Firm’s business operations, as determined by the
Committee, in its sole discretion, and shall include, without limitation,
representing in any capacity, other than as an outside director, a company that
competes with the Company and its subsidiaries or affiliates.
“Disability” means a medically determinable physical or mental
impairment which qualifies Participant for total disability benefits under the
Social Security Act; or which, in the opinion of the Committee (based upon such
evidence as it deems satisfactory): (i) can be expected to result in death or to
last at least 12 months and (ii) will prevent Participant from performing his
usual duties or any other similar duties available in the Firm’s employ.
“Firm” means, except as otherwise provided under Section 409A of the
Code and the regulations promulgated thereunder, the employing entity of any
individual determined by the Committee to be a participant in the Plan and, if
the employing entity of any Participant should change to another affiliate of
the Company, such other affiliate.
“Fiscal Year” means the fiscal year of the Company, which is currently
April 1 through March 31.
“GAAP” means U.S. generally accepted accounting principles,
consistently applied.
“Grant Date” means the “Grant Date” set forth in the Grant Summary.
“Grant Summary” means the Grant Summary contained in the box on the
first page of this Agreement.
“Legg Mason Profit Sharing Plan” means the Legg Mason & Co., LLC
Profit Sharing and 401(k) Plan and Trust, as such plan may be amended from time
to time, or any successor to such plan.
“Maximum Adjusted EPS Level” means the Adjusted EPS specified in the
Grant Summary as the Maximum Adjusted EPS Level for the Performance Period.
“Payout Amount” means the value of cash or shares of Common Stock to
be distributed in payment of a vested Performance Unit under this Award, as
determined under Section 2. The
Payout Amount for each Performance Unit will vary from $2,500 (subject to the
Committee’s discretion to reduce the Payout Amount under Section 2(f)) to
$20,000.
“Performance Period” means a period of three consecutive Fiscal Years
commencing on the first day of the Fiscal Year during which the Grant Date
occurs; which period constitutes the performance period over which the Award is
to be valued.
“Performance Targets” mean the schedule included in the Grant Summary
containing the Threshold, Target and Maximum Adjusted EPS Levels for the
Performance Period.
“Performance Unit” means a bookkeeping entry that represents the right
to receive an amount of cash or Common Stock under the Plan pursuant to the
terms and conditions of this Agreement, without transferring to Participant any
of the attributes of ownership of Common Stock prior to the issuance of any
Common Stock.
“Pro Rata Portion” means the amount determined by multiplying the
number of Performance Units in the Award by a fraction, the numerator of which
is the number of full, completed months in the Performance Period at the time of
Participant’s Separation from Service due to Retirement, death or Disability and
the denominator of which is the total number of months in the Performance Period
(36). The provisions of Section 2 apply to determine the Payout Amount in
respect of each Performance Unit included in a Pro Rata Portion.
“Retirement” means termination of Participant’s employment with the
Firm after the Grant Date, with the approval of the Committee, pursuant to
Section 7.1 (or any successor retirement provision) of the Legg Mason Profit
Sharing Plan, provided that such termination of employment is without Cause.
“Separation from Service” means a separation from service within the
meaning of Section 409A(a)(2)(A)(i) of the Code and the regulations issued
thereunder.
“Target Adjusted EPS Level” means the Adjusted EPS specified in the
Grant Summary as the Target Adjusted EPS Level for the Performance Period.
“Target Award” means the amount that would be payable with respect to
a Program Award if the Target Adjusted EPS Level is exactly achieved.
“Target Payout Amount” means the amount specified in the Grant
Summary.
“Threshold Adjusted EPS Level” means the Adjusted EPS specified in the
Grant Summary as the Threshold Adjusted EPS Level for the Performance Period.
“TSR” or “Total Shareholder Return” means, with respect to a
company, (i) the change in the price of one share of common stock (or other
comparable equity unit) of such company during the Performance Period plus
dividends paid on such share of stock during the Performance Period divided by
(ii) the price of such share of stock at the beginning of the Performance
Period. For this purpose, the change in the price of a share of stock shall be
equal to the price of such share of such stock on the last day of a Performance
Period (or the previous trading day if the last day is not a trading day) minus
the price of such share of stock on the trading day occurring immediately prior
the first day of a Performance Period. The price of a share
of stock shall be based on the average of the closing prices for such stock
on each of the immediately preceding twenty (20) trading days as reported by the
primary exchange on which the stock is listed or quoted. Dividends shall mean
the aggregate dollar value of all dividends paid on one share of stock during
the Performance Period. In addition, dividends shall be treated as though they
were reinvested to purchase additional shares of such stock. In the event of a
stock split, stock dividend or similar transaction, TSR shall be appropriately
adjusted.
Unusual Items of Income” means any amount of income or gain included
in the calculation of the Company’s Net Income (loss) Attributable to Legg
Mason, Inc. that the Committee, in its discretion, but acting in good faith,
determines to be unusual or extraordinary.
IN WITNESS WHEREOF, the Company and Participant have caused this Agreement to
be executed on the date noted below.
LEGG MASON, INC.
By: ______________________
Name:
Title:
Date: _________
PARTICIPANT:
_________________________
Date: _________
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