{"id":40263,"date":"2015-09-17T11:25:58","date_gmt":"2015-09-17T16:25:58","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/contracts\/uncategorized\/performance-unit-award-agreement-legg-mason-inc.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"performance-unit-award-agreement-legg-mason-inc","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/compensation\/performance-unit-award-agreement-legg-mason-inc.html","title":{"rendered":"Performance Unit Award Agreement – Legg Mason, Inc."},"content":{"rendered":"

LEGG MASON, INC. 1996 EQUITY INCENTIVE PLAN<\/strong>\n<\/p>\n<\/p>\n

PERFORMANCE UNIT AWARD AGREEMENT<\/strong><\/p>\n<\/p>\n

\n<\/p>\n

\n<\/p>\n\n\n\n\n\n
<\/td>\n<\/tr>\n
<\/td>\n<\/tr>\n
\n

Grant Summary<\/u><\/p>\n<\/p>\n

Participant: __________<\/p>\n

Grant Date: _____________<\/p>\n

Award: ___________ Performance Units<\/p>\n

Target Payout Amount: $10,000 per Performance Unit<\/p>\n

Threshold Adjusted EPS Level: _________________<\/p>\n

Target Adjusted EPS Level: _________________<\/p>\n

Maximum Adjusted EPS Level: _________________<\/p>\n

AWARD IS SUBJECT TO CONDITION IN SECTION 4(N) BELOW<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/p>\n<\/p>\n

Legg Mason, Inc. (the “Company<\/u>“) hereby grants to you (the
\n“Participant<\/u>“), pursuant to the Legg Mason, Inc. 1996 Equity Incentive
\nPlan, as amended (the “Plan<\/u>“), an award of Performance Units (the
\n“Award<\/u>“), upon and subject to the restrictions, terms and conditions set
\nforth below. The number of Performance Units included in the Award and the
\nperformance measures required to earn the Award are stated in the Grant Summary.
\nBy executing this Award Agreement, the Participant acknowledges acceptance of
\nthe Award subject to all of the restrictions, terms and conditions set forth in
\nthis Agreement and the Plan.<\/p>\n<\/p>\n

This Award is subject in all respects to the applicable provisions of the
\nPlan. Such provisions are incorporated herein by reference and made a part
\nhereof. Capitalized terms that are not defined in Section 5(k) below are defined
\nin the Plan and shall have the meanings specified in the Plan.<\/p>\n<\/p>\n

In addition to the terms, conditions and restrictions set forth in the Plan,
\nall terms, conditions and restrictions set forth in this Agreement are
\napplicable to the Award granted hereby.<\/p>\n<\/p>\n\n\n\n\n
<\/td>\n<\/td>\n<\/tr>\n
\n

1.<\/p>\n<\/td>\n

\n

AWARD OF PERFORMANCE UNITS.<\/strong><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/p>\n

(a)Pursuant to and subject to the terms of the Plan, the Company hereby
\nawards to Participant the number of Performance Units reflected on the Grant
\nSummary as the Award. Each Performance Unit issued in the Award shall be paid
\nout in cash, shares of Common Stock or a combination thereof, at the Committee’s
\nelection, with a value (as of the distribution date) equal to the Target Payout
\nAmount if the Target Adjusted EPS level is achieved.<\/p>\n<\/p>\n<\/p>\n

(b) Following the date that Performance Units are earned and vested pursuant
\nto Section 2, each Performance Unit shall be distributed as cash, shares of
\nCommon Stock, or a combination thereof, with a value (as of the distribution
\ndate) equal to the Payout Amount, which typically shall be between $2,500 and
\n$20,000 per Performance Unit as set out in Section 2. The number of Performance
\nUnits reflected in the Grant Summary shall be credited to Participant’s Account
\nas of the Grant Date. Participant’s Account shall be the record of Performance
\nUnits granted to Participant hereunder and<\/p>\n<\/p>\n<\/p>\n

\n

\n<\/p>\n<\/p>\n

is solely for accounting purposes and shall not require a segregation of any
\nassets of the Company.<\/p>\n<\/p>\n<\/p>\n

(c)Participant shall not have the rights of a stockholder, including any
\nrights to receive dividends with respect to any Performance Units credited to
\nParticipant’s Account or any shares of Common Stock that may be distributed in
\nrespect of such Performance Units until, if the Committee elects to distribute
\nshares, shares of Common Stock have been distributed to Participant pursuant to
\nSection 3.<\/p>\n<\/p>\n<\/p>\n<\/p>\n\n\n\n\n
<\/td>\n<\/td>\n<\/tr>\n
\n

2.<\/p>\n<\/td>\n

\n

PERFORMANCE VESTING AND FORFEITURE.<\/strong><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/p>\n

Performance Units shall become earned and vested in accordance with this
\nSection 2, and cash or shares of Common Stock shall be distributed in accordance
\nwith Section 3, only upon, and to the extent of, the attainment of the Threshold
\nAdjusted EPS Level specified in the Grant Summary as of the end of the
\nPerformance Period.<\/p>\n<\/p>\n

(a)Satisfaction of Performance Thresholds<\/u>. To the extent that the
\nThreshold Adjusted EPS Level specified in the Grant Summary is achieved for the
\nPerformance Period, and Participant remains in full time employment with the
\nCompany (or a subsidiary or affiliate of the Company) through the end of the
\nPerformance Period, then Performance Units shall vest, and cash, shares of
\nCommon Stock or a combination thereof, as selected by the Committee, will be
\ndistributed to Participant under Section 3, in accordance with the following
\n(but subject to modification in accordance with subsections (b), (c) and (f)
\nbelow):<\/p>\n<\/p>\n<\/p>\n

(1)Below Threshold Adjusted EPS Level<\/u>. If Adjusted EPS for the
\nPerformance Period is below the Threshold Adjusted EPS Level, Performance Units
\nwill not vest, and will be forfeited by Participant.<\/p>\n<\/p>\n<\/p>\n

(2)Threshold Adjusted EPS Level<\/u>. If Adjusted EPS for the Performance
\nPeriod is equal to or greater than the Threshold Adjusted EPS Level, but below
\nthe Target Adjusted EPS Level, then the Performance Units will vest and the
\nPayout Amount will equal one-quarter (0.25) of the Target Payout Amount.<\/p>\n<\/p>\n<\/p>\n

(3)Target Adjusted EPS Level<\/u>. If Adjusted EPS for the Performance
\nPeriod is equal to or greater than the Target Adjusted EPS Level, but below the
\nMaximum Adjusted EPS Level, then the Performance Units will vest and the Payout
\nAmount will equal the Target Payout Amount.<\/p>\n<\/p>\n<\/p>\n

(4)Maximum Adjusted EPS Level<\/u>. If Adjusted EPS for the Performance
\nPeriod is equal to or greater than the Maximum Adjusted EPS Level, then the
\nPerformance Units will vest and the Payout Amount will equal two (2) times the
\nTarget Payout Amount.<\/p>\n<\/p>\n<\/p>\n<\/p>\n

(b)Adjusted EPS Levels between Threshold and Target Adjusted EPS Level or
\nTarget and Maximum Adjusted EPS Level<\/u>. If Adjusted EPS for the Performance
\nPeriod is between the Threshold and Target Adjusted EPS Level or between the
\nTarget and Maximum Adjusted EPS Level, the Payout Amount under clause (a) above
\nwill be increased to include an additional amount representing a prorated amount
\n(on a straight line basis) of the difference between the Payout Amounts under
\nSection 2(a) for attainment of the two achievement levels. For example, if
\nAdjusted EPS for the Performance<\/p>\n<\/p>\n<\/p>\n

\n

\n<\/p>\n<\/p>\n

Period is the midpoint between the Threshold Adjusted EPS Level and the
\nTarget Adjusted EPS Level, the Payout Amount will include an additional amount
\nequal to .375 of the Target Payout Amount, reflecting the attainment of Adjusted
\nEPS for the Performance Period at the midpoint between the Threshold and Target
\nAdjusted EPS Levels (for a total Payout Amount of .625 of the Target Payout
\nAmount). If Adjusted EPS for the Performance Period is the midpoint between the
\nTarget Adjusted EPS Level and the Maximum Adjusted EPS Level, the Payout Amount
\nunder clause (a) above will be increased to include an additional amount equal
\nto 1\/2 of the Target Payout Amount reflecting the attainment of Adjusted EPS for
\nthe Performance Period at the midpoint between the Target and Maximum Adjusted
\nEPS Levels (for a total Payout Amount of 1.5 multiplied by the Target Payout
\nAmount).<\/p>\n<\/p>\n<\/p>\n

(c)TSR Modifier<\/u>.<\/p>\n<\/p>\n<\/p>\n

(1)If Adjusted EPS for the Performance Period is equal to or greater than the
\nThreshold Adjusted EPS Level, the Payout Amount shall be adjusted, based on the
\nTSR of the Company compared to the TSR of the Benchmark Group, by the following
\npercentage:<\/p>\n<\/p>\n<\/p>\n

Company TSR Percentile Ranking<\/u> Percentage Adjustment<\/u><\/p>\n<\/p>\n

At or below 25th<\/sup> percentile minus (-) 20%<\/p>\n

At or above 75th<\/sup> percentile plus (+) 20%<\/p>\n<\/p>\n

For example, if the Company has achieved the Target Adjusted EPS Level, and
\nthe Company TSR for the Performance Period would place it in the bottom quartile
\n(i.e.<\/em>, at or below the 25th<\/sup> percentile) of the Benchmark
\nGroup, the Payout Amount for each Performance Unit shall be adjusted downward
\n20% (from the Target Payout Amount to 80% of the Target Payout Amount).<\/p>\n<\/p>\n

(2)The TSR percentile ranking of the Company is calculated by comparing the
\nTSR for the Company with the TSR for each company in the Benchmark Group. If the
\nCompany TSR is lower than the TSR of 25% or fewer of the companies in the
\nBenchmark Group, then the Company TSR is at or below the 25th<\/sup>
\npercentile. If the Company TSR is higher than the TSR of 75% or more of the
\nCompanies in the Benchmark Group, then the Company TSR is at or above the
\n75th<\/sup> percentile. Such determination shall be made after making the
\nfollowing adjustments to the Benchmark Group:<\/p>\n<\/p>\n<\/p>\n\n\n\n\n
<\/td>\n<\/td>\n<\/tr>\n
\n

(i)<\/p>\n<\/td>\n

\n

If a member of the Benchmark Group becomes insolvent during the Performance
\nPeriod (or its stock ceases to trade for more than twenty (20) consecutive days
\ndue to bankruptcy or other similar insolvency law or process), it shall remain
\nin the Benchmark Group, but be placed at the bottom for purposes of determining
\nthe Company’s TSR percentile.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/p>\n\n\n\n\n
<\/td>\n<\/td>\n<\/tr>\n
\n

(ii)<\/p>\n<\/td>\n

\n

If a member of the Benchmark Group is acquired, it will be removed from the
\nBenchmark Group.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/p>\n\n\n\n\n
<\/td>\n<\/td>\n<\/tr>\n
\n

(iii)<\/p>\n<\/td>\n

\n

If a member of the Benchmark Group consolidates with (or becomes part of)
\nanother member of the Benchmark Group, the performance of the surviving entity
\nwill be used to determine TSR and the member or members that consolidate or
\nbecome a part of another shall be removed from the Benchmark<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/p>\n

\n

\n<\/p>\n<\/p>\n

Group.<\/p>\n<\/p>\n<\/p>\n\n\n\n\n
<\/td>\n<\/td>\n<\/tr>\n
\n

(iv)<\/p>\n<\/td>\n

\n

If a member of the Benchmark Group consolidates (or becomes part of) an
\nentity outside of the Benchmark Group, it will be removed from the Benchmark
\nGroup.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/p>\n\n\n\n\n
<\/td>\n<\/td>\n<\/tr>\n
\n

(v)<\/p>\n<\/td>\n

\n

If the stock of a member of the Benchmark Group ceases to trade for more than
\ntwenty (20) consecutive days due to a going private transaction, it will be
\nremoved from the Benchmark Group.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/p>\n

(3)Notwithstanding the foregoing, in no event shall the adjustment in the
\nPayout Amount pursuant to this Section 2(c) cause the Payout Amount per
\nPerformance Unit to be greater than two (2) times the Target Payout Amount or
\nless than one-quarter (0.25) of the Target Payout Amount.<\/p>\n<\/p>\n<\/p>\n

(d)Participant’s right to vest in this Award is conditioned upon
\nParticipant’s continuous full-time employment with the Firm throughout the
\nPerformance Period. If Participant’s continuous full-time employment with the
\nFirm terminates or is interrupted during the Performance Period for any reason
\nstated below, Participant’s rights with respect to the Award shall be affected
\nas follows:<\/p>\n<\/p>\n<\/p>\n

(1)Resignation<\/u>. If Participant resigns or otherwise terminates his or
\nher employment with the Firm for any reason other than as specified in clause
\n(2) or (4) below prior to the end of the Performance Period, Participant’s Award
\nshall be forfeited in its entirety.<\/p>\n<\/p>\n<\/p>\n

(2)Death or Disability<\/u>. If Participant terminates his or her
\nemployment with the Firm before the end of a Performance Period as a result of
\ndeath or Separation from Service due to Disability, the Committee, in its
\ndiscretion, may allow a Pro Rata Portion of the Award to vest and be earned
\n(subject to the vesting terms set forth in clause (a) above) as of the end of
\nthe Performance Period. Upon the vesting of a Pro Rata Portion of the Award, or
\nin the event the Committee does not exercise its discretion to allow any vesting
\nas provided above, the remaining Performance Units will be forfeited.<\/p>\n<\/p>\n<\/p>\n

(3)Termination with or without Cause<\/u>. Upon termination of
\nParticipant’s employment by the Firm with or without Cause (including an
\nelimination of Participant’s position in connection with a reduction in
\nworkforce), Participant’s Award shall be forfeited in its entirety.<\/p>\n<\/p>\n<\/p>\n

(4)Termination of Employment Due to Retirement.<\/u> If Participant’s
\nemployment with the Firm terminates before the end of the Performance Period by
\nreason of Participant’s Retirement, then a Pro Rata Portion of the Award will
\nvest and be earned (subject to the vesting terms set forth in clauses (a)
\nthrough (c) above and clause (f) below) as of the end of the Performance Period,
\nas long as Participant does not engage in Competitive Activity. If Participant
\nengages in Competitive Activity, then the Award shall be forfeited at the time
\nParticipant engages in such Competitive Activity. Upon the vesting of a Pro Rata
\nPortion of the Award, the remaining Performance Units will be forfeited.<\/p>\n<\/p>\n<\/p>\n

(e)Effect of Change in Control During Performance Period<\/u>.<\/p>\n<\/p>\n<\/p>\n

(1) Upon the occurrence of a Change in Control after the Grant Date but prior
\nto the end of the Performance Period (and while Participant remains a full-time
\nemployee of the<\/p>\n<\/p>\n<\/p>\n

\n

\n<\/p>\n<\/p>\n

Company or a subsidiary or affiliate), a portion of the Performance Units
\ncredited to Participant’s Account shall be considered as earned and vested. Such
\nportion shall equal a fraction, the numerator of which is the number of full,
\ncompleted months in the Performance Period at the time of the Change in Control
\nand the denominator of which is the total number of months in the Performance
\nPeriod.<\/p>\n<\/p>\n

(2) If (i) a Change in Control occurs after the Grant Date but prior to the
\nend of the Performance Period, (ii) Participant’s employment with the Firm had
\nterminated prior to the Change in Control as a result of death or Separation
\nfrom Service due to Disability, and (iii) Participant would otherwise (within
\nthe discretion of the Committee) be entitled to a Pro Rata Portion of the Award
\nas of the end of the Performance Period pursuant to Section 2(d)(2), then,
\nwithin the discretion of the Committee, such Pro Rata Portion of the Award shall
\nbe considered as earned and vested as of the date of the Change in Control.<\/p>\n<\/p>\n

(3) If (i) a Change in Control occurs after the Grant Date but prior to the
\nend of the Performance Period, (ii) Participant’s employment with the Firm had
\nterminated prior to the Change in Control as a result of Separation from Service
\ndue to Retirement, and (iii) Participant would otherwise be entitled to a Pro
\nRata Portion of the Award as of the end of the Performance Period pursuant to
\nSection 2(d)(4), such Pro Rata Portion of the Award shall be considered as
\nearned and vested as of the date of the Change in Control, as long as
\nParticipant does not engage in Competitive Activity. If Participant engages in
\nCompetitive Activity, then the Award shall be forfeited at the time Participant
\nengages in such Competitive Activity.<\/p>\n<\/p>\n

(4)Upon vesting as a result of a Change in Control, the Payout Amount will
\nequal the Target Payout Amount for each vested Performance Unit and the unvested
\nPerformance Units shall be forfeited<\/p>\n<\/p>\n<\/p>\n

(f)Committee Determination and Discretion to Reduce Payout Amount<\/u>. The
\nCommittee shall determine and certify the extent to which the requisite Adjusted
\nEPS level has been met following the end of the Performance Period, whether the
\nPerformance Units have been earned and vested hereunder and the Payout Amount to
\nbe distributed with respect to vested Performance Units, if any. Prior to the
\ndate on which amounts are distributed in respect of vested Performance Units,
\nthe Committee may use negative discretion to reduce the Payout Amount for each
\nvested Performance Unit from the amount calculated under the previous provisions
\nof this Section (2). The Committee’s determinations shall be binding and
\nconclusive on all parties. Performance Units shall not be deemed to have been
\nearned and vested, and cash or shares of Common Stock to be distributed and
\nvesting will not be earned or distributed, until the Committee determination and
\ncertification as to the attainment of the achievement levels. The Committee may
\nnot exercise discretion to increase the amount earned or vested and\/or the
\nPayout Amount otherwise due based on the extent to which the achievement levels
\nfor the Performance Period are met.<\/p>\n<\/p>\n<\/p>\n\n\n\n\n
<\/td>\n<\/td>\n<\/tr>\n
\n

3.<\/p>\n<\/td>\n

\n

DISTRIBUTION OF PERFORMANCE UNITS<\/strong><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/p>\n

(a)Subject to the dollar limitation on payments that is contained in Section
\n13 of the Plan (applicable to Section 162(m) Participants), payment shall be
\nmade with respect to each vested Performance Unit in the form of a distribution
\nof cash, shares of Common Stock or a combination thereof, at the election of the
\nCommittee in its sole discretion, with a value (as of the distribution date)
\nequal to the Payout Amount determined under Section 2. Notwithstanding anything
\nto the contrary herein, in accordance with Section 5 of the Plan, the Payment
\nAmount shall not exceed the<\/p>\n<\/p>\n<\/p>\n

\n

\n<\/p>\n<\/p>\n

value of the maximum number of shares of Common Stock (determined as of the
\nfirst day of the Performance Period) that may be granted under Section 5 of the
\nPlan to any one individual during any calendar year less the number of any
\nshares of Common Stock previously granted to the Participant under the Plan for
\nthe calendar year containing the first day of the Performance Period. Such
\ndistribution will be made on the applicable date set forth below:<\/p>\n<\/p>\n<\/p>\n

(1)The date on which the Performance Units have been earned and vested under
\nSection 2(a) through (c) following the end of a Performance Period, based on the
\ndetermination of the Committee;<\/p>\n<\/p>\n<\/p>\n

(2)The later of the end of a Performance Period or the date on which the
\nCommittee determines that Performance Units have been earned and vested under
\nSection 2(d)(2) or (4) following the end of a Performance Period;<\/p>\n<\/p>\n<\/p>\n

(3)The date of a Change in Control which meets the requirements of Section
\n409A(a)(2)(A)(v) of the Code; or<\/p>\n<\/p>\n<\/p>\n

(4)The end of the Performance Period in the case of a Change in Control that
\ndoes not meet the requirements of Section 409A(a)(2)(A)(v) of the Code;<\/p>\n<\/p>\n<\/p>\n

But not later than the 15th<\/sup> day of the third calendar month
\nfollowing the end of the Performance Period, or in the case of a Change in
\nControl that meets the requirements of Section 409A(a)(2)(A)(v) of the Code, the
\n15th day of the third calendar month following the Fiscal Year in which such
\nChange in Control occurred.<\/p>\n<\/p>\n

Notwithstanding the foregoing provisions of this clause (a), the following
\nprovisions shall apply:<\/p>\n<\/p>\n

(1) In the event of a vesting of a Pro Rata portion of Performance Units
\nunder Section 2(d)(2) or 2(d)(4) or a portion of Performance Units under Section
\n2(e), then the distribution made with respect to such Performance Units will be
\nentirely in the form of cash; and<\/p>\n<\/p>\n

(2) To the extent required in order to comply with Section 409A of the Code,
\nany distribution or payment made in connection with or following Separation from
\nService shall not be made earlier than the first business day of the seventh
\nmonth following Participant’s Separation from Service, or if earlier the date of
\ndeath of Participant. Any distribution or payment that is delayed in accordance
\nwith the foregoing sentence shall be made on the first business day following
\nthe expiration of such six (6) month period.<\/p>\n<\/p>\n

(b)If the Committee elects to make distributions all or partially in cash,
\nthe cash (except for any amounts which are withheld to satisfy any tax
\nwithholding requirement) will be paid to the same account of Participant, and in
\nthe same manner, as payments of Participant’s base salary. If the Committee
\nelects to make distributions all or partially in shares of Common Stock, the
\nCompany shall issue the shares (except for any shares of Common Stock which are
\nwithheld to satisfy any tax withholding requirement) to an account of
\nParticipant opened by the Company at a financial institution selected by the
\nCompany. Cash shall be paid in lieu of issuing partial shares. The number of
\nshares of Common Stock to be distributed to Participant will equal (i) the
\ndollar amount to be distributed to Participant divided by (ii) the average of
\nthe high and low trading prices of the Common Stock on the principal exchange on
\nwhich it is traded on the day of distribution. Payment of cash or issuance<\/p>\n<\/p>\n<\/p>\n

\n

\n<\/p>\n<\/p>\n

and crediting shares of Common Stock to such account, with an aggregate value
\nequal to the Payout Amount for each vested Performance Unit constitute full
\npayment and satisfaction of such Performance Units and this Award.<\/p>\n<\/p>\n<\/p>\n

(c)To the extent that any cash or shares of Common Stock cannot be
\ndistributed to participant in respect of any Performance Units (or any other
\npayment cannot be made) because of the payment limitations contained in Section
\n13 of the Plan, such Performance Units shall nevertheless become fully vested
\nand earned by Participant as of the date of the Committee determination and
\ncertification as to the attainment of the performance achievement levels, but
\nthe conversion of such Performance Units to cash or Common Stock and the
\ndistribution (and related distribution date) of such cash or Common Stock to
\nParticipant (as well as any other amount otherwise payable under this Section 3)
\nshall be delayed until the earliest date on which such distribution or payment
\ncan be made consistent with Section 409A of the Code and the payment limitations
\ncontained in Section 13 of the Plan. To the extent required in order to comply
\nwith Section 409A of the Code, any distribution or payment that is delayed in
\naccordance with the provisions of this Section 3(c) and which is made in
\nconnection with or following Separation from Service shall not be made earlier
\nthan the first business day of the seventh month following Separation from
\nService, or if earlier the date of death of Participant. Any distribution or
\npayment that is delayed in accordance with the foregoing sentence shall be made
\non the first business day following the expiration of such six (6) month period.\n<\/p>\n<\/p>\n<\/p>\n\n\n\n\n
<\/td>\n<\/td>\n<\/tr>\n
\n

4.<\/p>\n<\/td>\n

\n

ADDITIONAL TERMS AND CONDITIONS OF THE AWARD<\/strong>.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/p>\n

(a)Obligation Unfunded<\/u>. The obligation of the Company with respect to
\nPerformance Units granted hereunder shall be interpreted solely as an unfunded
\ncontractual obligation to distribute cash or shares of Common Stock in the
\nmanner and under the conditions prescribed under this Agreement. Any shares or
\nother assets set aside with respect to amounts payable under this Agreement
\nshall be subject to the claims of the Company’s general creditors, and no person
\nother than the Company shall, by virtue of the provisions of the Plan or this
\nAgreement, have any interest in such assets. In no event shall any assets set
\naside (directly or indirectly) with respect to amounts payable under this
\nAgreement be located or transferred outside the United States. Neither
\nParticipant nor any other person shall have any interest in any particular
\nassets of the Company by reason of the right to receive a benefit under this
\nAgreement, and Participant or any such other person shall have only the rights
\nof a general unsecured creditor of the Company with respect to any rights under
\nthe Plan or this Agreement.<\/p>\n<\/p>\n<\/p>\n

(b)Beneficiaries<\/u>. Participant may designate in writing, on a form to
\nbe prescribed by and filed with the Committee, a beneficiary to receive all or
\npart of the Performance Units to be distributed under the Plan in the event of
\nParticipant’s death. A designation of a beneficiary may be replaced by a new
\ndesignation or may be revoked by Participant at any time and in accordance with
\nsuch rules and procedures established by the Committee on a form prescribed by
\nand filed with the Committee. In the event of Participant’s death, amounts due
\nunder the Plan with respect to which a designation of a beneficiary has been
\nmade (to the extent it is valid and enforceable under applicable law) shall be
\ndistributed in accordance with the Plan to the designated beneficiary.
\nDistributions due under the Plan and not subject to a beneficiary designation
\nshall be distributed to Participant’s estate. If there is any question as to the
\nlegal right of any beneficiary to receive any distribution under the Plan, the
\ndistribution in question may be made in the sole discretion of the Committee to
\nthe estate of Participant, in which event the Firm shall have no further
\nliability to anyone with respect to such distribution. Distribution to the
\nexecutors or administrators of the estate of Participant may be conditioned on
\nthe delivery to the Committee of such tax waivers, letters testamentary and
\nother documents as the Committee may reasonably request.<\/p>\n<\/p>\n<\/p>\n

\n

\n<\/p>\n<\/p>\n<\/p>\n

(c)Right Of Set Off<\/u>. Notwithstanding any provisions of this Agreement
\nto the contrary, the Committee, the Firm and the Company may offset any amounts
\nthat Participant may owe to the Firm against the Performance Units subject to a
\nParticipant’s Award and any distributions that would have otherwise been made to
\nParticipant under the Plan. Any offset made pursuant to the preceding sentence
\nmay be made only on the date the payment is otherwise scheduled to be made under
\nthe terms of the Plan and this Agreement and may not operate to accelerate any
\npayment.<\/p>\n<\/p>\n<\/p>\n

(d)Consent To Electronic Delivery<\/u>. In lieu of receiving documents in
\npaper format, Participant hereby agrees, to the fullest extent permitted by law,
\nto accept electronic delivery of any documents that the Firm elects to or is
\nrequired to deliver (including, but not limited to, the Prospectus related to
\nParticipant’s Award, any supplements to that Prospectus, and agreements, account
\nstatements, monthly or annual reports, and all other forms or communications) in
\nconnection with Participant’s Award. Electronic delivery of a document to
\nParticipant may be via a Firm e-mail system or by reference to a location on a
\nFirm intranet site or a third-party’s Internet site to which Participant has
\naccess.<\/p>\n<\/p>\n<\/p>\n

(e)Securities Laws<\/u>. Participant hereby represents and covenants that
\nif in the future Participant decides to offer or dispose of any Common Stock
\nreceived subject to this Award or interest therein, Participant shall do so only
\nin compliance with this Agreement, the Securities Act of 1933, as amended and
\nall applicable state and local national securities laws as appropriate. As a
\ncondition precedent to the delivery to Participant of any subject to this Award,
\nParticipant shall comply with all regulations and requirements of any regulatory
\nauthority having control of or supervision over the issuance of the Common Stock
\nand, in connection therewith, shall execute any documents and make any
\nrepresentation and warranty to the Company which the Committee shall in its sole
\ndiscretion deem necessary or advisable.<\/p>\n<\/p>\n<\/p>\n

(f)Adjustment<\/u>. In the event that there occurs (a) any change in the
\nnumber of outstanding shares of Common Stock through the declaration of
\ndividends, stock splits or the like or through any change in the capital account
\nof the Company or any other transaction referred to in Section 424(a) of the
\nCode or (b) any other change in the capital structure of the Company or in the
\nCommon Stock, then, if applicable, the Threshold Adjusted EPS Level, Target
\nAdjusted EPS Level and Maximum Adjusted EPS Level shall be adjusted to reflect
\nsuch change. Any decision of the Committee regarding the amount and timing of
\nany adjustment shall be final and conclusive.<\/p>\n<\/p>\n<\/p>\n

(g)Compliance With Applicable Law<\/u>. This Award is subject to the
\ncondition that if the listing, registration or qualification of any Common Stock
\nto be issued in settlement of this Award upon any securities exchange or under
\nany law, or the consent or approval of any governmental body, or the taking of
\nany other action is necessary or desirable as a condition of, or in connection
\nwith, the vesting or delivery of shares of Common Stock hereunder, shares of
\nCommon Stock issued in settlement of this Award may not be delivered, in whole
\nor in part, unless such listing, registration, qualification, consent or
\napproval shall have been effected or obtained. The Company agrees to make every
\nreasonable effort to effect or obtain any such listing, registration,
\nqualification, consent or approval. By signing this Award Agreement, however,
\nParticipant acknowledges and agrees that he or she is and remains responsible
\nfor any local compliance requirements or regulations in relation to the receipt,
\nownership and possible subsequent sale of the Company’s Common Stock.
\nParticipant also agrees that he or she is responsible for any local compliance
\nrequirements or regulations in relation to the opening and use of a U.S.
\nbrokerage account.<\/p>\n<\/p>\n<\/p>\n<\/p>\n

\n

\n<\/p>\n<\/p>\n

(h)Transfer Restrictions<\/u>. Transfer of any shares of Common Stock
\nreceived in respect of this Award shall be subject to the Company’s trading
\npolicies and any applicable securities laws or regulations governing
\ntransferability of shares of the Company.<\/p>\n<\/p>\n<\/p>\n

(i)Withholding; Tax Matters<\/u>.<\/p>\n<\/p>\n<\/p>\n

(1)The Company may, and Participant hereby authorizes the Company to, charge
\nParticipant’s Account (or, to the extent permitted by law, to deduct from
\npayments of any kind by the Company or its subsidiaries or affiliates to which
\nParticipant would otherwise be entitled, including without limitation, salary,
\nbonus and other compensation) any federal, state or local taxes (including,
\nwithout limitation, income taxes and Participant’s portion of any employment
\ntaxes) or other amounts which it deems are required by law to be withheld. In
\naddition, the Company may retain a sufficient amount of cash or number of shares
\nof Common Stock to be distributed to Participant to cover all such required
\nwithholding. Notwithstanding the forgoing, in lieu of having such required
\nwithholding deducted from other amounts due, Participant may direct the Company
\nto reduce the number of earned Performance Units allocated to Participant’s
\nAccount or otherwise retain a sufficient amount of cash or number of shares of
\nCommon Stock to be distributed to Participant to cover any or all such required
\nwithholding. Alternatively, Participant may elect to remit to the Company by
\ncheck an amount sufficient to satisfy any federal, state or local withholding
\ntax requirements, prior to the delivery of cash or Common Stock pursuant to
\nSection 3 hereof. Participant acknowledges that if Participant fails to provide
\nthe direction or the check described in the prior two sentences, the Company
\nshall elect the manner in which any required withholding shall be made in its
\nsole discretion without any liability to Participant resulting from the option
\nthe Company selects or the timing under which the Company makes and carries out
\nthe election.<\/p>\n<\/p>\n<\/p>\n

(2)To the extent the Committee elects to distribute an Award in shares of
\nCommon Stock and Participant is subject to liability under section 16(b) of the
\nSecurities and Exchange Act of 1934 on the date such Common Stock is issued to
\nParticipant if Participant were to sell such shares on that day and makes an
\nelection in a timely manner under Section 83(b) of the Code to recognize income
\nfor tax purposes, Participant shall notify the Compensation department within
\nthe Company’s Finance Department within thirty (30) days of making such
\nelection. Participant acknowledges that if Participant elects to make a Section
\n83(b) election, Participant shall be responsible for satisfying applicable IRS
\nfiling requirements with respect to such election.<\/p>\n<\/p>\n<\/p>\n

(3)Participant understands and agrees that the Company makes no
\nrepresentations as to the tax consequences of the grant of Performance Units
\nhereunder or the payment of cash or Common Stock with respect thereto
\n(including, without limitation, under Section 409A of the Code, if applicable).
\nParticipant is solely responsible for any and all income, excise or other taxes
\nimposed on Participant with respect to the Award.<\/p>\n<\/p>\n<\/p>\n

(j)Award Confers No Rights To Continued Employment Or Future
\nAwards<\/u>. <\/u>Nothing in the Plan or in this Agreement shall confer upon
\nParticipant any right to continue in the employ of the Company or any subsidiary
\nor affiliate of the Company for a specified period of time or interfere with the
\nright of the Company and its subsidiaries or affiliates to terminate such
\nemployment at any time. In addition, neither the Plan nor this Agreement confers
\nany right upon Participant to receive future awards under the Plan. All future
\nawards, if any, are completely at the discretion of the Company.<\/p>\n<\/p>\n<\/p>\n<\/p>\n

\n

\n<\/p>\n<\/p>\n

(k)Rights Nontransferable<\/u>. <\/em>Participant’s rights with respect
\nto the Award are not transferable by Participant by means of sale, assignment,
\nexchange, pledge, hypothecation, or otherwise.<\/p>\n<\/p>\n<\/p>\n

(l)Clawback Provisions<\/u>.<\/p>\n<\/p>\n<\/p>\n

(1)Notwithstanding anything to the contrary in this Agreement, this Award is
\nexpressly made subject to the terms of the clawback provisions set forth below.
\nAs a result, Participant may be required to forfeit his or her Award and return
\nto the Company amounts distributed with respect to his or her Award (or the
\nvalue thereof), in the situations described below. Participant agrees that the
\nCompany may enforce the forfeiture by all legal means available, including,
\nwithout limitation, by withholding the forfeited amount from other sums owed to
\nParticipant by the Firm.<\/p>\n<\/p>\n<\/p>\n

(2)In the event of a restatement of the Company’s financial results within
\nthree years of original reporting to correct a material error, then, if the
\nCompany’s Board of Directors determines that Participant’s acts or omissions
\nwere a significant contributing factor to the need to issue such restatement and
\nthat all or any portion of Participant’s Award, if the award was made prior to
\nthe restatement, would not have been awarded based upon the restated financial
\nresults, then Participant agrees to forfeit and return to the Company, to the
\nextent permitted by applicable law, the portion (which may be all) of this Award
\nor of the cash or shares of Common Stock distributed in respect of vested
\nPerformance Units or value thereof (regardless of whether vesting has occurred
\nand cash or Common Stock distributed) that the Board of Directors, in its
\ndiscretion, determines to be appropriate.<\/p>\n<\/p>\n<\/p>\n

(3)In the event that, Participant’s employment is terminated by the Firm for
\na Clawback Event or (ii) following the termination of Participant’s employment,
\nthe Company is or becomes aware that Participant committed an act that would
\nhave given rise to a termination for a Clawback Event, then, in either event,
\nParticipant agrees to forfeit to the Company, to the extent permitted by
\napplicable law, the portion (which may be all) of this Award or of the cash or
\nshares of Common Stock distributed in respect of vested Performance Units or
\nvalue thereof (regardless of whether vesting has occurred and cash or Common
\nStock distributed), that Participant was awarded after the conduct or omission
\nthat gave rise to the Clawback Event and that the Board of Directors, in its
\ndiscretion, determines to be appropriate.<\/p>\n<\/p>\n<\/p>\n

(4)The Award (including cash or shares of Common Stock distributed in respect
\nof vested Performance Units or value thereof) shall also be subject to
\nforfeiture to the extent required by applicable law.<\/p>\n<\/p>\n<\/p>\n

(m)Impact On Other Benefits<\/u>. The value of (and any amount payable with
\nrespect to) the Performance Units shall not be includable as compensation or
\nearnings for purposes of any other benefit plan offered by the Company.
\nMoreover, any awards granted under the Plan are not part of Participant’s
\nordinary compensation, employment agreement, if any, or working relationship
\nwith the Company or any of its subsidiaries or affiliates and will therefore not
\nbe considered as part of such compensation, agreement or relationship in the
\nevent of severance, redundancy or resignation, unless otherwise required by
\napplicable law.<\/p>\n<\/p>\n<\/p>\n

(n) Condition on Award. Notwithstanding anything to the contrary herein, the
\nAward, and the terms and conditions of this Agreement, are expressly subject to
\nthe stockholders of the Company approving an amendment to the Plan that broadens
\nthe performance conditions under Section 13(b)<\/p>\n<\/p>\n<\/p>\n

\n

\n<\/p>\n<\/p>\n

of the Plan to include the Adjusted Earnings Per Share and Total Stockholder
\nReturn metrics included in this Agreement. In the event that no such amendment
\nhas been approved by the Company’s stockholders prior to the end of the
\nPerformance Period, this Agreement, the Award and the Performance Units shall
\nautomatically become null and void.<\/p>\n<\/p>\n<\/p>\n<\/p>\n\n\n\n\n
<\/td>\n<\/td>\n<\/tr>\n
\n

5.<\/p>\n<\/td>\n

\n

MISCELLANEOUS PROVISIONS.<\/strong><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/p>\n

(a)No Restriction on Company Authority<\/u>. The Award shall not affect in
\nany way the right or power of the Company or its stockholders to make or
\nauthorize any or all adjustments, recapitalizations, reorganizations or other
\nchanges in the Company’s capital structure or its business, or any merger or
\nconsolidation of the Company, or any issue of bonds, debentures, preferred or
\nprior preference stock ahead of or affecting the Common Stock or the rights
\nthereof, or the dissolution or liquidation of the Company, or any sale or
\ntransfer of all or any part of its assets or business, or any other corporate
\nact or proceeding, whether of a similar character or otherwise.<\/p>\n<\/p>\n<\/p>\n

(b)Notices<\/u>. All notices, requests or other communications provided for
\nin this Agreement shall be made in writing either (i) by actual delivery to the
\nparty entitled thereto, or (ii) by mailing in the mails of the United States or,
\nfor Participants who reside in another country, of the other country to the
\naddress of the party entitled thereto as set forth below, via certified or
\nregistered mail, return receipt requested. The notice shall be deemed to be
\nreceived in case of delivery, on the date of its actual receipt by the party
\nentitled thereto, and in case of mailing, five days following the date of such
\nmailing. Any notice mailed to the Company shall be addressed to the Deferred
\nCompensation Administrator of the Company at 100 International Drive, Baltimore,
\nMaryland 21202. Any notice mailed to Participant shall be addressed to
\nParticipant at Participant’s address as reflected in the personnel records of
\nthe Company. Either party hereto may designate a different address for notices
\nthan the one provided herein by notice to the other.<\/p>\n<\/p>\n<\/p>\n

(c)Consent And Disclosure Regarding Use Of Personal Information<\/u>.<\/p>\n<\/p>\n<\/p>\n

(1)In connection with the grant of the Award, and any other award under the
\nPlan, and the implementation and administration of the Plan, including, without
\nlimitation, Participant’s actual participation, or consideration by the
\nCommittee for potential future participation in the Plan at any time, it is or
\nmay become necessary for the Firm to collect, transfer, use, and hold certain
\npersonal information regarding Participant in and\/or outside of Participant’s
\nhome country. By accepting the Award, Participant explicitly consents (i) to the
\nuse of such information for the purpose of being considered for participation in
\nfuture awards under the Plan (to the extent he\/she is eligible under the Plan,
\nand without any guarantee that any award shall be made); and (ii) to the use,
\ntransfer, processing and storage, electronically or otherwise, of his\/her
\npersonal information, as such use has occurred to date, and as such use may
\noccur in the future, in connection with this Award or any other award under the
\nPlan, as further described below.<\/p>\n<\/p>\n<\/p>\n

(2)Use, transfer, storage and processing of personal information,
\nelectronically or otherwise, may be in connection with the Company’s internal
\nadministration of the Plan, or in connection with tax or other governmental and
\nregulatory compliance activities directly or indirectly related to the Award or
\nany other award under the Plan. For such purposes only, personal information may
\nbe used by third parties retained by the Company to assist with the<\/p>\n<\/p>\n<\/p>\n

\n

\n<\/p>\n<\/p>\n

administration and compliance activities of the Plan, and may be transferred
\nby the company that employs (or any company that has employed) Participant from
\nParticipant’s home country to other members of the Company and third parties
\nlocated in the United States and in other countries. Specifically, those parties
\nthat may have access to Participant’s information for the purposes described
\nherein include, but are not limited to, (i) human resources personnel
\nresponsible for administering the Plan; (ii) Participant’s U.S., regional and
\nlocal employing entity and business unit management, including Participant’s
\nsupervisor and his\/her superiors; (iii) the Committee or its designee, which is
\nresponsible for administering the Plan; (iv) the Company’s technology systems
\nsupport team (but only to the extent necessary to maintain the proper operation
\nof electronic information systems that support the Plan); and (v) internal and
\nexternal legal, tax and accounting advisors (but only to the extent necessary
\nfor them to advise the Company on compliance and other issues affecting the
\nawards under the Plan in their respective fields of expertise).<\/p>\n<\/p>\n<\/p>\n

(3)At all times, Company personnel and third parties shall be obligated to
\nmaintain the confidentiality of Participant’s personal information except to the
\nextent the Company is required to provide such information to governmental
\nagencies or other parties. Such action shall always be undertaken only in
\naccordance with applicable law. The personal information that the Company may
\ncollect, process, store and transfer for the purposes outlined above may include
\nParticipant’s name, nationality, citizenship, work authorization, date of birth,
\nage, government\/tax identification number, passport number, brokerage account
\ninformation, or other internal identifying information, home address, work
\naddress, job and location history, compensation, business unit, employing
\nentity, and Participant’s beneficiaries and contact information. Participant may
\nobtain more details regarding the access and use of his\/her personal
\ninformation, and may correct or update such information, by contacting his\/her
\nhuman resources representative.<\/p>\n<\/p>\n<\/p>\n

(d)Market Fluctuations<\/u>. The Company is not responsible for any foreign
\nexchange fluctuations between Participant’s local currency, if Participant is
\nnot located in the U.S., and the U.S. dollar nor is the Company responsible or
\nliable for any decrease in the value of the Company’s Common Stock at any time,
\nall of which shall be solely the risk and responsibility of Participant.<\/p>\n<\/p>\n<\/p>\n

(e)Entire Agreement; Modification<\/u>. The Agreement contains the entire
\nagreement between the parties with respect to the subject matter contained
\nherein and may not be modified, except as provided in the Plan or in a written
\ndocument signed by each of the parties hereto.<\/p>\n<\/p>\n<\/p>\n

(f)Code Section 162(m)<\/u>.<\/em> This Agreement shall be subject to
\nthe restrictions set forth in Section 13 of the Plan.<\/p>\n<\/p>\n<\/p>\n

(g)Conformity with Plan<\/u>. <\/strong>This Agreement is intended
\nto conform in all respects with, and is subject to all applicable provisions of,
\nthe Plan, which is incorporated herein by reference. Inconsistencies between
\nthis Agreement and the Plan shall be resolved in accordance with the terms of
\nthe Plan. In the event of any ambiguity in the Agreement or any matters as to
\nwhich the Agreement is silent, the Plan shall govern including, without
\nlimitation, the provisions thereof pursuant to which the Committee has the
\npower, among others, to (i) interpret the Plan and Awards, (ii) prescribe, amend
\nand rescind rules and regulations relating to the Plan, and (iii) make all other
\ndeterminations deemed necessary or advisable for the administration of the Plan.
\nParticipant acknowledges by electronically accepting the Award that he or she
\nhas reviewed a copy of the Plan.<\/p>\n<\/p>\n<\/p>\n<\/p>\n

\n

\n<\/p>\n<\/p>\n

(h)Governing Law<\/u>. This Agreement shall be governed by, and interpreted
\nin accordance with, the internal laws of the State of Maryland (without regard
\nto conflicts of laws rules thereof).<\/p>\n<\/p>\n<\/p>\n

(i)Counterparts<\/u>. This Agreement may be executed in two or more
\ncounterparts each of which shall be deemed an original and all of which together
\nshall constitute one and the same instrument.<\/p>\n<\/p>\n<\/p>\n

(j)Headings<\/u>. Headings in this Agreement are for reference purposes
\nonly and shall not affect the meaning or interpretation of this agreement.<\/p>\n<\/p>\n<\/p>\n

(k)Definitions<\/u>. Unless otherwise defined herein, the following terms
\nhave the meanings set forth below.<\/p>\n<\/p>\n<\/p>\n

“Account<\/u>” means the bookkeeping account maintained for Participant
\npursuant to Section 1(b).<\/p>\n<\/p>\n

“Adjusted Earnings<\/u>” means, for any Fiscal Year, means the Company’s
\nNet Income (Loss) Attributable to Legg Mason, Inc. for such Fiscal Year as
\ndetermined in accordance with GAAP, plus (i) the Company’s amortization and
\ndeferred taxes related to intangible assets and goodwill for such Fiscal Year,
\n(ii) imputed interest and tax benefits on contingent convertible debt for such
\nFiscal Year, (iii) non-cash goodwill and intangible asset impairment charges
\nincurred during such Fiscal Year, (iv) any charges to compensation expense
\nincurred during the Fiscal Year resulting from issuing minority equity interests
\nin one or more of the Company’s subsidiaries to their management teams in a
\none-time restructuring of the employment arrangements with each such management
\nteam, and (v) one-time initial expenses arising during the Fiscal Year as a
\nresult of the acquisition of one or more businesses, and minus (i) deferred
\nincome taxes on goodwill and indefinite life intangible assets in such Fiscal
\nYear, (ii) the impact of tax rate adjustments on certain deferred tax
\nliabilities related to indefinite-life intangible assets and goodwill in such
\nFiscal Year (which impact shall be removed regardless of whether it is positive
\nor negative), (iii) Unusual Items of Income, and (iv) any gains or losses
\narising from the repayment of debt. Adjusted Earnings will be calculated under
\nthe foregoing formula consistent with the calculation of the measure that is
\npublicly reported by the Company on the Grant Date with respect to adjustments
\nthat are made in such publicly reported measure.<\/p>\n<\/p>\n

“Adjusted Earnings Per Share<\/u>” means, for any Fiscal Year, the result
\ndetermined by dividing (i) the Adjusted Earnings for such Fiscal Year by (ii)
\nthe Company’s diluted weighted average shares outstanding for such Fiscal Year
\ndetermined in accordance with GAAP.<\/p>\n<\/p>\n

“Adjusted EPS for the Performance Period<\/u>” means the sum of the
\nAdjusted Earnings Per Share for each Fiscal Year within the Performance Period.\n<\/p>\n<\/p>\n

“Benchmark Group<\/u>” means the following companies:
\n____________; <\/strong>as such list of companies is modified pursuant to
\nSection 2(c)(2) above.<\/p>\n

“Cause<\/u>” means any one or more of the following types of behavior by
\nParticipant which the Firm in its sole discretion finds to be sufficient reason
\nto terminate Participant’s employment with the Firm: (i) any conduct (a) that
\nconstitutes Competitive Activity, (b) that breaches any obligation to the Firm
\nor Participant’s duty of loyalty to the Firm, or (c) that is materially
\ninjurious to the Firm, monetarily or otherwise; (ii) material violation of, or
\nan act taken by<\/p>\n<\/p>\n<\/p>\n

\n

\n<\/p>\n<\/p>\n

the failure to act which causes the Firm to be in violation of any government
\nstatue or regulation, or of the constitution, by-laws, rules or regulations of
\nany securities or commodities exchange or a self-regulatory organization, or of
\nthe policies of the Firm; (iii) the entering of an order or decree or the taking
\nof any similar action with respect to Participant which substantially impairs
\nsuch Participant from performing his or her duties or makes him or her
\nineligible from being associated with the Company pursuant to Section 9 of the
\nInvestment Company Act of 1940, as amended, or Section 203(f) of the Investment
\nAdvisors Act of 1940, as amended; (iv) malfeasance, disloyalty or dishonesty in
\nany material respect; (v) any conviction for a felony: (vi) any failure to
\ndevote all professional time to assigned duties and to the business of the Firm;
\n(vii) failure to satisfactorily perform duties, as determined by the Firm’s
\nmanagement in its sole discretion, or gross misconduct or gross negligence in
\nthe performance of duties; or (viii) failure to remain licensed to perform
\nduties or other act, conduct or circumstance which renders Participant
\nineligible for employment with the Firm.<\/p>\n<\/p>\n

“Change of Control<\/u>” means any of the following events: (i) any person,
\nincluding a “person” as such term is used in Section 14(d)(2) of the Securities
\nExchange Act of 1934, as amended, acquires, directly or indirectly, beneficial
\nownership of securities representing 50.1% or more of the combined voting power
\nof the outstanding equity securities of the Company; (ii) the closing of any
\nmerger, consolidation or other reorganization involving the Company with respect
\nto which the stockholders of the Company immediately prior to such
\nreorganization do not hold, directly or indirectly, more than 50% of the
\ncombined voting power of the outstanding equity securities of such successor
\nentity immediately following such transaction; (iii) the closing of any
\ntransaction involving a sale of assets of the Company that have a total gross
\nfair market value equal to or more than 90% of the total gross fair market value
\nof all of the assets of the Company; (iv) the adoption of any plan or proposal
\nfor the liquidation or dissolution of the Company; or (v) within any 12-month
\nperiod, individuals who, as of May 15, 2011, constitute the board of directors
\nof the Company (the “Incumbent Board”) cease for any reason to constitute at
\nleast a majority of such board; provided, however, that any individual becoming
\na director subsequent to such date whose election, or nomination for election by
\nthe Company’s stockholders, was approved by a vote of at least a majority of the
\ndirectors then comprising the Company’s board of directors shall be considered
\nas though such individual were a member of the Incumbent Board.<\/p>\n<\/p>\n

An event described above shall constitute a Change in Control for purposes of
\nthe vesting provisions of Section 2(e), but shall not constitute a Change in
\nControl for purposes of a distribution under Section 2(e) or 3, unless the event
\nconstitutes a change in control within the meaning of Section 409A(a)(2)(A)(v)
\nof the Code or this Agreement is determined not to be subject to Code Section
\n409A. If an event described above does not constitute a change in control for
\npurposes of Section 409A(a)(2)(A)(v) of the Code and this Agreement is
\ndetermined to be subject to Code Section 409A, the distribution shall be made
\nwithout regard to the Change in Control in accordance with the provisions of
\nSection 3.<\/p>\n<\/p>\n

“Clawback Event<\/u>” means (i) Participant’s gross negligence, willful
\nmisconduct or willful malfeasance in connection with the performance of his or
\nher job that has materially and adversely affected the Firm’s reputation or
\nbusiness, (ii) Participant’s willful commission or participation in any
\nviolation of any law, rule or regulation applicable to the Firm (unless
\nParticipant had a reasonable good faith belief that the act, omission or failure
\nto act in question was not a violation of such law, rule or regulation) and such
\nviolation has materially and adversely affected the Firm’s reputation or
\nbusiness or Participant’s ability to be associated<\/p>\n<\/p>\n<\/p>\n

\n

\n<\/p>\n<\/p>\n

with an investment company or an investment advisor, (iii) Participant’s
\ntheft, embezzlement or fraud in connection with the performance of his or her
\nduties for the Firm, and (iv) Participant is convicted of, or plead guilty or
\nnolo contendere<\/em> to, a crime committed during the course of
\nParticipant’s employment with, and performance of duties on behalf of, the Firm
\nthat the Committee, acting in good faith, reasonably determines is likely to
\nhave a material and adverse effect on the reputation or business of
\nParticipant’s employer or the Company.<\/p>\n<\/p>\n

“Code<\/u>” means the Internal Revenue Code of 1986, as amended.<\/p>\n<\/p>\n

“Committee<\/u>” means the Compensation Committee of the Company’s Board of
\nDirectors or such committee or persons designated by that Compensation Committee
\nto act on its behalf.<\/p>\n<\/p>\n

“Common Stock<\/u>” means Legg Mason, Inc. common stock, par value $.10 per
\nshare.<\/p>\n<\/p>\n

“Competitive Activity<\/u>” means Participant’s engagement in any activity
\nthat competes with any of the Firm’s business operations, as determined by the
\nCommittee, in its sole discretion, and shall include, without limitation,
\nrepresenting in any capacity, other than as an outside director, a company that
\ncompetes with the Company and its subsidiaries or affiliates.<\/p>\n<\/p>\n

“Disability<\/u>” means a medically determinable physical or mental
\nimpairment which qualifies Participant for total disability benefits under the
\nSocial Security Act; or which, in the opinion of the Committee (based upon such
\nevidence as it deems satisfactory): (i) can be expected to result in death or to
\nlast at least 12 months and (ii) will prevent Participant from performing his
\nusual duties or any other similar duties available in the Firm’s employ.<\/p>\n<\/p>\n

“Firm<\/u>” means, except as otherwise provided under Section 409A of the
\nCode and the regulations promulgated thereunder, the employing entity of any
\nindividual determined by the Committee to be a participant in the Plan and, if
\nthe employing entity of any Participant should change to another affiliate of
\nthe Company, such other affiliate.<\/p>\n<\/p>\n

“Fiscal Year<\/u>” means the fiscal year of the Company, which is currently
\nApril 1 through March 31.<\/p>\n<\/p>\n

“GAAP<\/u>” means U.S. generally accepted accounting principles,
\nconsistently applied.<\/p>\n<\/p>\n

“Grant Date<\/u>” means the “Grant Date” set forth in the Grant Summary.\n<\/p>\n<\/p>\n

“Grant Summary<\/u>” means the Grant Summary contained in the box on the
\nfirst page of this Agreement.<\/p>\n<\/p>\n

“Legg Mason Profit Sharing Plan<\/u>” means the Legg Mason & Co., LLC
\nProfit Sharing and 401(k) Plan and Trust, as such plan may be amended from time
\nto time, or any successor to such plan.<\/p>\n<\/p>\n

“Maximum Adjusted EPS Level<\/u>” means the Adjusted EPS specified in the
\nGrant Summary as the Maximum Adjusted EPS Level for the Performance Period.<\/p>\n<\/p>\n

“Payout Amount<\/u>” means the value of cash or shares of Common Stock to
\nbe distributed in payment of a vested Performance Unit under this Award, as
\ndetermined under Section 2. The<\/p>\n<\/p>\n<\/p>\n

\n

\n<\/p>\n<\/p>\n

Payout Amount for each Performance Unit will vary from $2,500 (subject to the
\nCommittee’s discretion to reduce the Payout Amount under Section 2(f)) to
\n$20,000.<\/p>\n<\/p>\n

“Performance Period<\/u>” means a period of three consecutive Fiscal Years
\ncommencing on the first day of the Fiscal Year during which the Grant Date
\noccurs; which period constitutes the performance period over which the Award is
\nto be valued.<\/p>\n<\/p>\n

“Performance Targets<\/u>” mean the schedule included in the Grant Summary
\ncontaining the Threshold, Target and Maximum Adjusted EPS Levels for the
\nPerformance Period.<\/p>\n<\/p>\n

“Performance Unit<\/u>” means a bookkeeping entry that represents the right
\nto receive an amount of cash or Common Stock under the Plan pursuant to the
\nterms and conditions of this Agreement, without transferring to Participant any
\nof the attributes of ownership of Common Stock prior to the issuance of any
\nCommon Stock.<\/p>\n<\/p>\n

“Pro Rata Portion<\/u>” means the amount determined by multiplying the
\nnumber of Performance Units in the Award by a fraction, the numerator of which
\nis the number of full, completed months in the Performance Period at the time of
\nParticipant’s Separation from Service due to Retirement, death or Disability and
\nthe denominator of which is the total number of months in the Performance Period
\n(36). The provisions of Section 2 apply to determine the Payout Amount in
\nrespect of each Performance Unit included in a Pro Rata Portion.<\/p>\n<\/p>\n

“Retirement<\/u>” means termination of Participant’s employment with the
\nFirm after the Grant Date, with the approval of the Committee, pursuant to
\nSection 7.1 (or any successor retirement provision) of the Legg Mason Profit
\nSharing Plan, provided that such termination of employment is without Cause.\n<\/p>\n<\/p>\n

“Separation from Service<\/u>” means a separation from service within the
\nmeaning of Section 409A(a)(2)(A)(i) of the Code and the regulations issued
\nthereunder.<\/p>\n

“Target Adjusted EPS Level<\/u>” means the Adjusted EPS specified in the
\nGrant Summary as the Target Adjusted EPS Level for the Performance Period.<\/p>\n<\/p>\n

“Target Award<\/u>” means the amount that would be payable with respect to
\na Program Award if the Target Adjusted EPS Level is exactly achieved.<\/p>\n<\/p>\n

“Target Payout Amount<\/u>” means the amount specified in the Grant
\nSummary.<\/p>\n<\/p>\n

“Threshold Adjusted EPS Level<\/u>” means the Adjusted EPS specified in the
\nGrant Summary as the Threshold Adjusted EPS Level for the Performance Period.\n<\/p>\n<\/p>\n

“TSR<\/u>” or “Total Shareholder Return<\/u>” means, with respect to a
\ncompany, (i) the change in the price of one share of common stock (or other
\ncomparable equity unit) of such company during the Performance Period plus
\ndividends paid on such share of stock during the Performance Period divided by
\n(ii) the price of such share of stock at the beginning of the Performance
\nPeriod. For this purpose, the change in the price of a share of stock shall be
\nequal to the price of such share of such stock on the last day of a Performance
\nPeriod (or the previous trading day if the last day is not a trading day) minus
\nthe price of such share of stock on the trading day occurring immediately prior
\nthe first day of a Performance Period. The price of a share<\/p>\n<\/p>\n<\/p>\n

\n

\n<\/p>\n<\/p>\n

of stock shall be based on the average of the closing prices for such stock
\non each of the immediately preceding twenty (20) trading days as reported by the
\nprimary exchange on which the stock is listed or quoted. Dividends shall mean
\nthe aggregate dollar value of all dividends paid on one share of stock during
\nthe Performance Period. In addition, dividends shall be treated as though they
\nwere reinvested to purchase additional shares of such stock. In the event of a
\nstock split, stock dividend or similar transaction, TSR shall be appropriately
\nadjusted.<\/p>\n<\/p>\n

Unusual Items of Income<\/u>” means any amount of income or gain included
\nin the calculation of the Company’s Net Income (loss) Attributable to Legg
\nMason, Inc. that the Committee, in its discretion, but acting in good faith,
\ndetermines to be unusual or extraordinary.<\/p>\n<\/p>\n<\/p>\n<\/p>\n<\/p>\n

IN WITNESS WHEREOF, the Company and Participant have caused this Agreement to
\nbe executed on the date noted below.<\/p>\n<\/p>\n<\/p>\n

LEGG MASON, INC.<\/p>\n<\/p>\n

\n<\/p>\n<\/p>\n

By: ______________________<\/p>\n

Name:<\/p>\n

Title:<\/p>\n

Date: _________<\/p>\n<\/p>\n

\n

PARTICIPANT:<\/p>\n<\/p>\n<\/p>\n<\/p>\n

_________________________ <\/u><\/p>\n<\/p>\n

Date: _________<\/p>\n<\/p>\n<\/p>\n

\n<\/p>\n<\/p>\n

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