As filed with the Securities and Exchange Commission on January 10, 2003
Registration No. 333-100156
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
LEGG MASON, INC.
(Exact name of registrant as specified in its charter)
Maryland 52-1200960
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
100 Light Street
Baltimore, Maryland 21202
(410) 539-0000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
Robert F. Price
Senior Vice President, Secretary and General Counsel
Legg Mason, Inc.
100 Light Street
Baltimore, Maryland 21202
(410) 539-0000
(Name, Address, Including Zip Code, and Telephone Number, Including Area
Code, of Agent for Service)
Copy to:
James S. Scott, Sr., Esq.
Annette V. Maluenda, Esq.
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
(212) 848-4000
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box.
[ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
===============================================================================
Proposed Maximum Proposed Maximum
Title of Each Class of Securities Aggregate Amount to Aggregate Offering Aggregate Offering Amount of
to be Registered(1)(5) be Registered(2) Price Per Unit(3) Price(3)(4) Registration Fee
-----------------------------------------------------------------------------------------------------------------------------------
Debt Securities, Convertible Debt
Securities and Warrants to purchase
Debt Securities or Convertible Debt
Securities (6)............................. $500,000,000(8)(9) 100% $500,000,000 $46,000(4)(10)
Common Stock, $.10 par value, and Warrants
to purchase Common Stock (7)............... -- -- -- --
Preferred Stock, $10.00 par value, and
Warrants to purchase Preferred Stock (11).. -- -- -- --
Stock Purchase Contracts .................. -- -- -- --
Equity Units (1)........................... -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
(1) Securities registered hereunder may be sold separately, together or as
units with other securities registered hereunder.
(2) In United States dollars or the equivalent thereof in any other currency,
currency unit or units, or composite currency or currencies.
(3) Estimated for the sole purpose of computing the registration fee pursuant
to Rule 457(o) under the Securities Act of 1933.
(4) Under Rule 457(g) and (i), there is no additional filing fee with respect
to the common stock, preferred stock or debt securities issuable upon
conversion, exercise or exchange of any convertible debt securities,
preferred stock or warrants, or upon settlement of stock purchase contracts
or equity units because no additional consideration will be received in
connection with the conversion, exercise, exchange or settlement, as the
case may be.
(5) Also relates to offers and sales of securities registered hereunder in
connection with the broker-dealer business conducted by and through
affiliates of the Registrant, including Legg Mason Wood Walker,
Incorporated.
(6) Includes an indeterminate amount of debt securities as may from time to
time be issued upon exercise of warrants to purchase debt securities or
upon exchange of preferred stock registered hereunder.
(7) Includes an indeterminate number of shares of common stock as may from time
to time be issued solely upon conversion of any convertible debt securities
or preferred stock, upon settlement of stock purchase contracts and/or
equity units, or upon exercise of warrants to purchase common stock
registered hereunder.
(8) Or, in the event of the issuance of original issue discount securities,
such higher principal amount as may be sold for an initial public offering
price of up to $500,000,000.
(9) Does not include $75,000,000 of securities previously registered on
Registration Statement No. 333-33298 being carried forward pursuant to Rule
429 under the Securities Act of 1933 none of which has been issued or sold
and for which we paid a registration fee of $19,800.
(10) The registration fee was previously paid on September 27, 2002.
(11) Includes an indeterminate number of shares of preferred stock as may from
time to time be issued upon exercise of warrants to purchase preferred
stock or upon conversion of convertible debt securities registered
hereunder.
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
Pursuant to Rule 429 of the General Rules and Regulations under the
Securities Act of 1933, the Prospectus included in this Registration Statement
is a combined Prospectus which also relates to Registration Statement No.
333-33298, previously filed by Legg Mason, Inc. on Form S-3. This Registration
Statement also constitutes a Post-Effective amendment to Registration Statement
No. 333-33298, and such Post-Effective Amendment shall hereafter become
effective concurrently with the effectiveness of this Registration Statement in
accordance with Section 8(c) of the Securities Act of 1933.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This propsectus is not an
offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JANUARY 10, 2003
PROSPECTUS
$575,000,000
LEGG MASON, INC.
DEBT SECURITIES
CONVERTIBLE DEBT SECURITIES
COMMON STOCK
PREFERRED STOCK
WARRANTS
STOCK PURCHASE CONTRACTS
EQUITY UNITS
Pursuant to a "shelf" registration statement of which this prospectus
is a part, we, Legg Mason, Inc., may offer notes, debentures or other debt
securities, including debt securities which may be convertible into shares of
our common stock, par value $.10 per share, shares of common stock, shares of
preferred stock, par value $10.00 per share, warrants, stock purchase contracts
and equity units. Pursuant to this process, we may sell such securities from
time to time together or separately in one or more separate offerings, in
amounts, at prices and on terms to be determined at the time of sale.
This prospectus will describe the general terms of the securities and
the general manner in which we will offer such securities. Each time we sell
securities, we will provide a prospectus supplement that will contain the
specific terms of the securities offered. The prospectus supplement will also
describe the specific manner in which we will offer the securities.
The prospectus supplement may also add, update or change information
contained in this prospectus. You should read this prospectus, the prospectus
supplement and the additional information described under "Where You Can Find
More Information" carefully before you invest.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 2003
TABLE OF CONTENTS
WHERE YOU CAN FIND MORE INFORMATION.........................................2
FORWARD-LOOKING INFORMATION.................................................3
THE COMPANY.................................................................4
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES AND CONSOLIDATED RATIO
OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS....6
USE OF PROCEEDS.............................................................6
THE SECURITIES..............................................................6
DESCRIPTION OF DEBT SECURITIES..............................................7
DESCRIPTION OF DEBT WARRANTS...............................................22
DESCRIPTION OF CAPITAL STOCK...............................................24
DESCRIPTION OF COMMON STOCK WARRANTS.......................................28
DESCRIPTION OF PREFERRED STOCK WARRANTS....................................30
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND EQUITY UNITS...................33
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES...............................34
ERISA MATTERS..............................................................35
HOLDING COMPANY STRUCTURE..................................................35
PLAN OF DISTRIBUTION.......................................................37
LEGAL MATTERS..............................................................40
EXPERTS....................................................................40
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any document we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public from the SEC's web site at http:/www.sec.gov. Our common
stock is listed on the New York Stock Exchange under the Symbol "LM."
Information about us also is available at the exchange.
This prospectus is part of a registration statement we filed with the
SEC. This prospectus omits some information contained in the registration
statement in accordance with SEC rules and regulations. You should review the
information and exhibits in the registration statement for further information
about us and our consolidated subsidiaries and the securities we are offering.
Statements in this prospectus concerning any document we filed as an exhibit to
the registration statement or that we otherwise filed with the SEC are not
intended to be comprehensive and are qualified by reference to these filings.
You should review the complete document to evaluate these statements.
The SEC allows us to incorporate by reference much of the information
we file with them. This means that we can disclose important information to you
by referring you to those documents that are considered part of this prospectus.
The information that we incorporate by reference in this prospectus is
considered to be part of this prospectus. Because we are incorporating by
reference future filings with the SEC, this prospectus is continually updated
and those future filings may modify or supersede some of the information
included or incorporated in this prospectus. The preferred stock, common stock,
warrants to purchase shares of common stock and preferred stock, certain debt
securities, warrants to purchase debt securities, stock purchase contracts and
equity units covered by this prospectus will be described in more detail in the
applicable prospectus supplement and in the form of such securities, if any,
which will be filed with the SEC before we issue such securities. This means
that you must look at all of the SEC filings that we incorporate by reference to
determine if any of the statements in this prospectus or in any document
previously incorporated by reference have been modified or superseded. We
incorporate by reference the documents listed below and any future filings we
make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 until the date our offering of securities has been
completed or, if later, the date on which our affiliates cease offering and
selling these securities:
o Annual Report on Form 10-K for the year ended March 31, 2002.
o Quarterly Reports on Form 10-Q for the quarters ended June 30,
2002 and September 30, 2002.
o The description of our common stock, par value $.10 per share,
contained in Amendment No. 5 to our Application for Registration
on Form 8-A, filed February 23, 2001.
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You may obtain a copy of these filings at no cost, by writing or
telephoning us at the following address:
Legg Mason, Inc.
100 Light Street
Baltimore, Maryland 21202
Attn: Corporate Secretary
(410) 539-0000
Exhibits to these filings will not be sent, however, unless those
exhibits have specifically been incorporated by reference in this document.
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different or additional information. We are not
making an offer of these securities in any state where the offer is not
permitted. The information contained in this prospectus is current only as of
the date hereof. Unless the context requires otherwise, the terms "Legg Mason,"
"we," "us," and "our" refers to Legg Mason, Inc. and its predecessors and
subsidiaries.
FORWARD-LOOKING INFORMATION
Certain statements included or incorporated by reference in this
prospectus or included in any prospectus supplement may be deemed to be
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. These statements relate to future
events or our future financial performance and involve known and unknown risks,
uncertainties and other factors that may cause our actual results to be
materially different from those expressed or implied by any forward-looking
documents. These forward-looking statements may contain information related, but
not limited to:
o anticipated growth in revenues or earnings per share;
o anticipated changes in our business or in the amount of client
assets under management;
o anticipated expense levels and expectations regarding financial
market conditions; and
o anticipated performance of recent, pending and future
acquisitions.
In some cases, you can identify forward looking statements by
terminology such as "may," "will," "could," "would," "should," "expect," "plan,"
"anticipate," "intend," "believe," "estimate," "predict," "potential" or
"continue" or the negative of those terms or other comparable terminology. These
statements are only predictions. Actual events or results may differ materially
due to a number of factors including, but not limited to:
o the volatile and competitive nature of the financial services
industry;
o changes in domestic and foreign economic and market conditions;
o the loss of key employees or principals of our current or future
operating subsidiaries;
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o the effect of current and future federal, state and foreign
regulation of the financial services industry, including
potential liability under applicable securities laws;
o market, credit and liquidity risks associated with our investment
management, underwriting, securities trading and market-making
activities;
o the impairment of acquired intangible assets and goodwill;
o potential restrictions on the business of, and withdrawal of
capital from, certain of our subsidiaries due to net capital
requirements; and
o the effect of any acquisitions.
Moreover, we do not, nor does any other person, assume responsibility
for the accuracy and completeness of those statements. We have no duty to update
any of the forward-looking statements after the date of this prospectus. In
assessing these forward-looking statements you should carefully consider the
factors discussed under the captions "Management's Discussion and Analysis of
Results of Operations and Financial Condition--Forward Looking Statements" of
our reports on Form 10-Q and "Business--Factors Affecting the Company and the
Financial Services Industry" and "Management's Discussion and Analysis of
Results of Operations and Financial Condition--Forward-Looking Statements" of
our most recent annual report on Form 10-K, which describe the risks and factors
that could cause results to differ materially from those projected in such
forward looking statements.
We caution the reader that these risk factors may not be exhaustive. We
operate in a continually changing business environment, and new risks emerge
from time to time. Management cannot predict such new risks or the impact of
such new risks on our businesses. Accordingly, forward-looking statements should
not be relied upon as a prediction of actual results.
THE COMPANY
We are a holding company that, through our subsidiaries, is principally
engaged in providing the following services to individuals, institutions,
corporations, governments and government agencies:
o asset management;
o securities brokerage;
o investment banking; and
o other related financial services.
We currently operate through four business segments: Asset Management,
Private Client, Capital Markets and Other.
In our Asset Management business segment, we provide investment
advisory services to company-sponsored investment funds and asset management
services to institutional and individual investors. As of September 30, 2002,
our subsidiaries had an aggregate of $176.6 billion of assets under management.
We divide our asset management business into three groups: Mutual Funds,
Institutional and Wealth Management.
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In our Mutual Funds business, we sponsor domestic and international
equity, fixed income and money market mutual and closed-end funds and other
proprietary funds. We have two asset management subsidiaries that primarily
focus on managing proprietary investment funds:
o Legg Mason Funds Management, Inc., which is located in Baltimore,
Maryland; and
o Royce & Associates, LLC, which is located in New York, New York.
Our Institutional asset management subsidiaries provide a wide range of
asset management services and products to domestic and international
institutional clients. Our Institutional asset management subsidiaries are:
o Western Asset Management Company and Western Asset Management
Company Limited, which are primarily located in Pasadena,
California and London, England, respectively;
o Perigee Investment Counsel Inc., which is primarily located in
Toronto, Canada;
o Brandywine Asset Management, LLC, which is located in Wilmington,
Delaware;
o Batterymarch Financial Management, Inc., which is primarily
located in Boston, Massachusetts;
o Legg Mason Capital Management, Inc., which is located in
Baltimore, Maryland; and
o Legg Mason Investments Holdings Limited, which is located in
London, England.
Our Wealth Management subsidiaries provide customized, discretionary
investment management services and products to high net worth individuals and
families, endowments and foundations and institutions. Our Wealth Management
subsidiaries are:
o Private Capital Management, L.P., which is located in Naples,
Florida;
o Bartlett & Co., which is primarily located in Cincinnati, Ohio;
o Barrett Associates, Inc., which is located in New York, New York;
o Gray, Seifert & Co., Inc., which is located in New York, New
York;
o Berkshire Asset Management, Inc., which is located in
Wilkes-Barre, Pennsylvania;
o Legg Mason Focus Capital, Inc., which is primarily located in
Bala Cynwyd, Pennsylvania; and
o Legg Mason Trust, fsb, which is located in Baltimore, Maryland.
Our Private Client and Capital Markets business segments are primarily
conducted through Legg Mason Wood Walker, Incorporated ("Legg Mason Wood
Walker"), our principal broker-dealer subsidiary. Legg Mason Wood Walker is a
full service broker-dealer, investment adviser and investment banking firm
operating primarily in the Eastern and Southern regions of the United States.
Our Other business segment consists primarily of the operations of Legg
Mason Real Estate Services, Inc., our principal real estate finance subsidiary.
Legg Mason Real Estate
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Services is primarily engaged in commercial mortgage banking and servicing and
discretionary and non-discretionary management of commercial real estate-related
assets.
Legg Mason, Inc. was incorporated in Maryland in 1981 to serve as a
holding company for Legg Mason Wood Walker and other subsidiaries. The
predecessor company to Legg Mason Wood Walker was formed in 1970 under the name
Legg Mason & Co., Inc. to combine the operations of Legg & Co., a Maryland-based
broker-dealer formed in 1899, and Mason & Company, Inc., a Virginia-based
broker-dealer formed in 1962. Our subsequent growth has occurred through
internal expansion as well as through the acquisition of asset management,
broker-dealer and commercial mortgage banking firms.
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES AND
CONSOLIDATED RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth our consolidated ratio of earnings to
fixed charges and consolidated ratio of earnings to combined fixed charges and
preferred stock dividends for the periods indicated.
Years Ended
Six Months Ended March 31,
Septemebr 30, --------------------------------
2002 2002 2001 2000 1999 1998
---------------- ---- ---- ---- ---- ----
Ratio of earnings to
fixed charges............ 3.6 2.7 2.3 2.7 2.4 2.5
Ratio of earnings to
combined fixed
charges and preferred
stock dividends.......... 3.6 2.7 2.3 2.7 2.4 2.5
The ratio of earnings to fixed charges was computed by dividing the sum
of our earnings before income taxes and fixed charges by fixed charges. Fixed
charges consist of all interest and one-third of our rent expense (considered
representative of the interest factor).
The ratio of earnings to combined fixed charges and preferred stock
dividends was computed by dividing the sum of our earnings before income taxes
and fixed charges by the sum of fixed charges and preferred stock dividends. As
of the date hereof, we have one share of preferred stock outstanding and we have
never declared any dividends on this share of preferred stock.
USE OF PROCEEDS
Except as may be described otherwise in a prospectus supplement, we
intend to use the net proceeds from the sale of our securities for general
corporate purposes. This may include our continued expansion and
diversification, both by internal growth and by acquisition, primarily of our
asset management and securities brokerage businesses and repayment of our
outstanding indebtedness. Pending any of the foregoing applications, the net
proceeds may be invested temporarily in short-term, interest bearing securities.
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THE SECURITIES
We intend to sell our securities from time to time. These securities
may include the following, in each case, as specified by us at the time of
offering:
o common stock;
o preferred stock which may be:
o convertible into another series of preferred stock or common
stock; or
o exchangeable for debt securities;
o warrants to purchase shares of common stock or preferred stock;
o debt securities, comprising senior debt securities and
subordinated debt securities, each of which may be convertible or
exchangeable into other securities, including our debt
securities, preferred stock or common stock or securities of
another company;
o warrants to purchase debt securities;
o stock purchase contracts which obligate holders to purchase from
us and obligate us to sell to the holders, a specified number of
shares of common stock, preferred stock or other securities at a
future date or dates; and
o equity units consisting of a stock purchase contract and debt
securities or debt obligations of third parties, including U.S.
treasury securities, securing the obligations of the holders of
the equity units to purchase the securities under the stock
purchase contracts.
We may offer the securities independently or together with other
securities and the securities may be attached to, or separate from other
securities. We will offer the securities to the public on terms determined by
market conditions at the time of sale. The terms will be described in a
prospectus supplement relating to the specific issue of securities.
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and
provisions that are common to all debt securities that we may offer. Most of the
financial terms and other specific terms of any debt securities that we offer
will be described in a prospectus supplement to be attached to the front of this
prospectus. If the information in the applicable prospectus supplement is
different than information contained in this prospectus, you should rely on
information in the prospectus supplement.
The debt securities will constitute either senior debt (the "Senior
Securities") or subordinated debt (the "Subordinated Securities") of Legg Mason.
Senior Securities will be issued under the Indenture dated as of February 9,
1996 between us and The Bank of New York,
7
as Trustee (the "Senior Trustee") (as it may be supplemented from time to time,
the "Senior Indenture"). Subordinated Securities will be issued under a separate
Indenture to be entered into between us and The Bank of New York (the
"Subordinated Trustee") (as it may be supplemented from time to time, the
"Subordinated Indenture"). We will refer to the Senior Indenture and the
Subordinated Indenture together as the "Indentures" and each as an "Indenture."
The Indentures are subject to and governed by the Trust Indenture Act of 1939,
as amended (the "TIA"). We have filed forms of each of the Indentures together
with our Form S-3, filed with the SEC on January 11, 1996, and an execution copy
of the Senior Indenture together with our Form 8-K, filed with the SEC on
February 12, 1996. The term "Trustee" refers to either the Senior Trustee or the
Subordinated Trustee, as the context requires.
Because this section is a summary, it does not describe every aspect of
the debt securities. This summary is subject to, and qualified in its entirety
by reference to, all the provisions of the Indentures, including definitions of
certain terms used in the Indentures. For example, in this section we use
capitalized words to signify terms that have been specifically defined in the
Indentures. Some of the definitions are repeated herein, but for the rest you
will need to read the Indentures. We also include references in parentheses to
certain sections of the Indentures or the TIA. Whenever we refer to particular
sections or defined terms of the Indentures in this prospectus or in the
applicable prospectus supplement, such sections or defined terms are
incorporated by reference herein or in the prospectus supplement. Unless
otherwise noted, the section numbers refer to both Indentures. Except as
otherwise indicated, the terms of the Indentures are identical. As used in the
discussion under this caption "Description of Debt Securities," the term "we" or
"us" means Legg Mason, Inc.
General
Neither Indenture limits the aggregate principal amount of debt
securities that we may issue from time to time. Each Indenture provides that we
may issue debt securities from time to time in one or more series. (Section 3.1)
Unless otherwise specified in the applicable prospectus supplement, the Senior
Securities, when issued, will be our unsecured and unsubordinated obligations
and will rank equally and ratably with all of our other unsecured and
unsubordinated indebtedness. The Subordinated Securities, when issued, will be
our unsecured obligations, subordinated in right of payment to the prior payment
in full of all our Senior Debt (as defined in the Subordinated Indenture) under
the circumstances described herein and in the applicable prospectus supplement.
(Section 15.1 of the Subordinated Indenture) Substantially all of our assets are
owned by our subsidiaries. Therefore, our rights and the rights of our
creditors, including holders of debt securities, to participate in the
distribution of the assets of any of our subsidiaries upon its liquidation,
recapitalization or otherwise, will generally be subject to the prior claims of
such subsidiary's creditors. In addition, dividends, loans and advances to us
from certain of our subsidiaries, including Legg Mason Wood Walker, are
restricted by net capital requirements under the Exchange Act and under rules of
certain exchanges and various domestic and foreign regulatory bodies.
You should read the applicable prospectus supplement for the following
terms and provisions with respect to the offered debt securities:
(1) the title of the debt securities;
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(2) whether the debt securities are Senior Securities or Subordinated
Securities;
(3) the aggregate principal amount, and any limit on the aggregate
principal amount, of the debt securities;
(4) the form of such debt securities, including whether such debt
securities are to be issuable in permanent or temporary global
form or in the form of Book-Entry Securities, as Registered
Securities, Bearer Securities or both, any restrictions on the
offer, sale or delivery of Bearer Securities and the terms, if
any, upon which Bearer Securities may be exchanged for Registered
Securities and vice versa (if permitted by applicable laws and
regulations);
(5) the circumstances under which any global securities or Book-Entry
Securities may be registered to a Person other than the
Depository for these global securities or Book-Entry Securities
or its nominee;
(6) the price or prices (expressed as a percentage of the aggregate
principal amount of the debt securities) at which the debt
securities will be issued;
(7) the date or dates on which the debt securities will mature;
(8) the rate or rates per annum at which the debt securities will
bear interest, if any, and the date from which any such interest
will accrue;
(9) the Interest Payment Dates on which any such interest on the debt
securities will be payable, the Regular Record Date for any
interest payable on any debt securities which are registered
securities on any Interest Payment Date and the extent to which,
or the manner in which, any interest payable on a temporary
global security on an Interest Payment Date will be paid;
(10) any mandatory or optional sinking fund or analogous provisions;
(11) each office or agency where, subject to the terms of the
applicable Indenture as described below under "Payment and Paying
Agents," the principal of and any premium and interest on the
debt securities will be payable;
(12) each office or agency where, subject to the terms of the
applicable Indenture as described below under "Form, Exchange,
Registration and Transfer," the debt securities may be presented
for registration of transfer or exchange;
(13) the date, if any, after which and the price or prices at which
the debt securities may, pursuant to any optional or mandatory
redemption provisions, be redeemed, in whole or in part, and the
other detailed terms and provisions of any such optional or
mandatory redemption provisions, which may include with respect
to a particular series or particular debt securities within a
series, a redemption option of Holders upon certain conditions,
as defined in the applicable Indenture;
9
(14) the denominations in which any debt securities which are
Registered Securities will be issuable, if other than
denominations of $1,000 and any integral multiple thereof, and
the denomination or denominations in which any debt securities
which are Bearer Securities will be issuable, if other than the
denomination of $5,000;
(15) the currency or currency units of payment of the principal of
(and premium, if any) and interest on the debt securities;
(16) any index or formula used to determine the amount of payments of
the principal of (and premium, if any) and interest on the debt
securities and the manner in which such amounts shall be
determined;
(17) the terms and conditions, if any, pursuant to which such debt
securities are convertible or exchangeable into other securities,
including our debt securities, common stock or preferred stock or
securities of another company;
(18) the terms pursuant to which such debt securities are subject to
defeasance; and
(19) any other terms of such debt securities.
Any prospectus supplement will also describe any special provisions for the
payment of additional amounts with respect to the debt securities.
We may issue debt securities as Original Issue Discount Securities. An
Original Issue Discount Security is a debt security, including any Zero-Coupon
Security, which is issued at a price lower than the amount payable upon the
Stated Maturity of the debt security and which provides that upon redemption or
acceleration of the maturity, an amount less than the amount payable upon the
Stated Maturity, determined in accordance with the terms of the debt security,
shall become due and payable. (Sections 3.1 and 5.2) We will describe certain
special United States federal income tax considerations applicable to debt
securities sold at an original issue discount in any prospectus supplement
relating to these debt securities. In addition, we will describe certain special
United States federal income tax or other considerations applicable to any debt
securities which are denominated in a currency or currency unit other than
United States dollars in any prospectus supplement relating to these debt
securities.
Under the Indentures, we will have the ability to issue debt securities
with terms different from those of debt securities previously issued. In
addition, we will have the ability, without the consent of the holders, to
reopen a previous issue of a series of debt securities and issue additional debt
securities of this series (unless a reopening was restricted when this series
was created), in an aggregate principal amount determined by us. (Section 3.1)
Form, Exchange, Registration and Transfer
Form
We may issue debt securities of a series in definitive form
10
o solely as Registered Securities;
o solely as Bearer Securities; or
o as both Registered Securities and Bearer Securities. (Section
3.1)
Unless otherwise indicated in the applicable prospectus supplement, we
will attach interest coupons to all Bearer Securities. (Section 2.1) The
Indentures also provide that we may issue debt securities of a series in
temporary or permanent global form and as Book-Entry Securities that will be
deposited with, or on behalf of, The Depository Trust Company (the "Depository")
or another depository named by us and identified in a prospectus supplement with
respect to such series. See "Global and Book-Entry Debt Securities." Each Bearer
Security, and any coupon attached thereto, other than a temporary global Bearer
Security will bear the following legend: "Any United States person who holds
this obligation will be subject to limitations under the United States income
tax laws, including the limitations provided in Sections 165(j) and 1287(a) of
the United States Internal Revenue Code."
In connection with its original issuance, we may not mail or otherwise
deliver a Bearer Security (including a debt security exchangeable for a Bearer
Security or a debt security in global form that is either a Bearer Security or
exchangeable for Bearer Securities) to any location in the United States or to
any United States person (as defined under "Limitations on Issuance of Bearer
Securities"). Also, we may deliver a Bearer Security in connection with its
original issuance only if the Person entitled to receive such Bearer Security
furnishes written certification of the beneficial ownership of the Bearer
Security as required by Treasury Regulation Section 1.163-5(c)(2)(i)(D)(3) (or
any comparable successor provisions). If you hold a Bearer Security in permanent
global form, you must give certification of the beneficial owner's interest in
such Bearer Security at the time such debt security is originally issued. See
"Global and Book-Entry Debt Securities" and "Limitations on Issuance of Bearer
Securities."
Exchange
You may exchange Registered Securities of any series for other
Registered Securities of the same series of any authorized denominations and of
a like aggregate principal amount and tenor. In addition, if debt securities of
any series are issuable as both Registered Securities and Bearer Securities, you
as holder have the option to exchange Bearer Securities of such series into
Registered Securities of the same series of any authorized denominations and of
a like aggregate principal amount and tenor.
If you surrender Bearer Securities in exchange for Registered
Securities before the relevant date for payment of interest on such Bearer
Securities, you must do so without the coupon relating to that date for payment
of interest. Interest accrued as of that date will not be paid on the Registered
Security but only to the holder of the coupon when due.
You may not register a Book-Entry Security for transfer or exchange
unless
o the Depository or a nominee of the Depository notifies us that it
is unwilling or unable to continue as Depository;
o the Depository ceases to be qualified as required by the
applicable Indenture;
o we instruct the Trustee otherwise;
11
o there exists an Event of Default or an event which after notice
or lapse of time would be an Event of Default with respect to the
debt securities evidenced by such Book-Entry Securities; or
o there exists such other circumstances if any, as may be specified
in the applicable prospectus supplement.
You may present debt securities for exchange as provided above. You may
present or surrender Registered Securities for registration of transfer or for
exchange (with the form of transfer endorsed thereon duly executed) at the
office of the Security Registrar or at the office of any transfer agent
designated by us for such purpose with respect to any series of debt securities
and referred to in the applicable prospectus supplement, without service charge
and upon payment of any taxes and other governmental charges as described in the
applicable Indenture. Any transfer or exchange will be effected after the
Security Registrar or a transfer agent, as the case may be, has verified the
documents of title and identity of the person making the request.
We may at any time rescind the designation of any transfer agent
initially made by us and referred to in the applicable prospectus supplement or
approve a change in its location. We will be required, however, to maintain a
transfer agent in each Place of Payment for any series of debt securities
issuable solely as Registered Securities. For any series issuable as Bearer
Securities, we will be required to maintain a transfer agent in a Place of
Payment for such series located outside the United States. We may at any time
designate additional transfer agents with respect to any series of debt
securities. (Section 10.2)
If the debt securities are redeemable and we redeem less than all of
the debt securities of a particular series, we may block the transfer or
exchange of debt securities during the period beginning 15 days before the day
we mail the notice of redemption or publish such notice (in the case of Bearer
Securities) and ending on the day of that mailing or publication, as the case
may be, in order to freeze the list of holders to prepare the mailing. We may
also refuse to register transfers or exchanges of debt securities selected for
redemption, except that we will continue to permit transfers and exchanges of
the unredeemed portion of any debt security being partially redeemed and except
that we will continue to exchange Bearer Securities for Registered Securities if
such Bearer Securities are simultaneously surrendered for redemption. (Section
7.5)
Payment and Paying Agents
If Bearer Securities are issued, unless otherwise indicated in the
applicable prospectus supplement, we will maintain an office or agency outside
the United States for the payments of all amounts due on the Bearer Securities.
Unless otherwise indicated in the prospectus supplement, payment of interest on
any Bearer Securities on any Interest Payment Date will be made only against
surrender to the Paying Agent of the coupon for such Interest Payment Date.
(Section 10.1) No payment with respect to any Bearer Security will be made at
any office or agency of ours in the United States or by check mailed to any
address in the United States or by transfer to an account maintained with a bank
located in the United States. Notwithstanding the foregoing, payments of the
principal of, premium and interest, if any, on Bearer Securities payable in U.S.
dollars will be made at the office of our Paying Agent in The City of New York,
if (but only if) payment of the full amount thereof in U.S. dollars at all
offices or agencies
12
outside the United States is illegal or effectively precluded by exchange
controls or other similar restrictions. (Section 10.2)
Unless otherwise indicated in the applicable prospectus supplement, we
will pay principal, interest, and premium, if any, on Registered Securities to
you at the office of the Paying Agent as we may designate from time to time,
except that we have the option to pay by wire transfer of immediately available
funds or check mailed to the address of the entitled person in the Security
Register. Unless otherwise indicated in the prospectus supplement, payment of
any installment of interest on Registered Securities will be made to the Holders
of Record on the Record Date. (Section 3.7)
Unless otherwise indicated in the applicable prospectus supplement, for
payment with respect to Registered Securities, we will designate the Corporate
Trust Office of our Trustee in The City of New York as our Paying Agent. For
payment with respect to debt securities which are issuable solely as Bearer
Securities, or both as Registered Securities and Bearer Securities, we will
maintain a Paying Agent outside of the United States. (Section 10.2) The
applicable prospectus supplement will name any Paying Agents outside the United
States and any other Paying Agent in the United States initially designated by
us for the debt securities. We may at any time designate additional Paying
Agents or rescind the designation of any Paying Agent or approve a change in the
location of any office or agency, except that if debt securities of a series are
issuable solely as Registered Securities, we will be required to maintain a
Paying Agent in each Place of Payment for such series and, if debt securities of
a series are issuable as Bearer Securities, we will be required to maintain (1)
a Paying Agent in The City of New York for payments with respect to any
Registered Securities of the series (and for payments with respect to Bearer
Securities of the series in the circumstances described above, but not
otherwise), and (2) a Paying Agent in a Place of Payment located outside the
United States where debt securities of such series and any coupons relating to
these debt securities may be presented and surrendered for payment. If the debt
securities are listed on The Stock Exchange of the United Kingdom and the
Republic of Ireland or the Luxembourg Stock Exchange or any other stock exchange
located outside the United States, we will maintain a Paying Agent in any city
located outside the United States required by such stock exchange. (Section
10.2)
We will make payments of any amounts due on Book-Entry Securities
registered in the name of the Depository or its nominee to the Depository or its
nominee, as the case may be, as the registered owner of the global security
representing such Book-Entry Securities. We expect that the Depository, upon
receipt of any amounts due on any debt securities, will credit immediately the
accounts of the participants in amounts proportionate to their respective
beneficial interests. Neither we, the Trustee, any Paying Agent nor the
Securities Registrar for such debt securities will have any responsibility or
liability for any aspects of the records relating to, or payments made on
account of, such beneficial ownership interests in the Book-Entry Securities, or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
All moneys we pay to a Paying Agent for the payment of any amounts due
on any debt securities which remain unclaimed at the end of two years after the
amount has become due will be repaid to us and the Holder of such debt security
or any coupon will thereafter be an unsecured general creditor and look only to
us for payment of any such amount. (Section 10.3)
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Global and Book-Entry Debt Securities
Debt securities of a series may be issued in whole or in part in global
form that will be deposited with, or on behalf of, a depository identified in
the applicable prospectus supplement. If so specified in the prospectus
supplement, debt securities of a series which are issuable as Bearer Securities
will initially be represented by one or more temporary or permanent global debt
securities, without interest coupons, to be deposited with a common depository
in London for the benefit of the Euroclear System ("Euroclear") and Cedel Bank,
Societe Anonyme ("Cedel") and credited to the accounts of the beneficial owners
of such debt securities. (Section 3.4) Unless otherwise indicated by the
applicable prospectus supplement, on or after 40 days following its issuance,
each temporary global debt security will be exchangeable for definitive Bearer
Securities, definitive Registered Securities, all or a portion of a permanent
global debt security, or any combination thereof, as specified in the prospectus
supplement, only upon written certification in the form and to the effect
described under "Form, Exchange, Registration and Transfer." No Bearer Security
(including a debt security in permanent global form) delivered in exchange for a
portion of a temporary or permanent global debt security shall be mailed or
otherwise delivered to any location in the United States in connection with such
exchange. (Section 3.5)
An investor should be aware that when debt securities are issued in the
form of global debt securities:
o the investor cannot get debt securities registered in his or her
own name;
o the investor cannot receive physical certificates for his or her
interest in the debt securities;
o the investor must look to his or her own bank or brokerage firm
for payments on the debt securities and protection of his or her
legal rights relating to the debt securities;
o the investor may not be able to sell interests in the debt
securities to some insurance companies and other institutions
that are required by law to hold the physical certificates of
debt securities that they own;
o the Depository's policies will govern payments, transfers,
exchange and other matters relating to the investor's interest in
the global debt security. We and the Trustee have no
responsibility for any aspect of the Depository's actions or for
its records of ownership interests in the global security. We and
the Trustee also do not supervise the Depository in any way; and
o the Depository will usually require that interests in a global
debt security be purchased or sold within its system using
same-day funds.
If debt securities to be sold in the United States are designated by us
in a prospectus supplement as Book-Entry Securities, a global debt security
representing the Book-Entry Securities will be deposited in the name of Cede &
Co., as nominee for the Depository representing the securities to be sold in the
United States. Upon such deposit of the Book-Entry Securities, the Depository
shall credit an account maintained or designated by an institution to be named
by us or any purchaser of the debt securities represented by the Book-Entry
Securities with an aggregate amount of debt securities equal to the total number
of debt securities that have been so purchased. The specific terms of any
depository arrangement with respect to any portion
14
of a series of debt securities to be represented by one or more global
securities will be described in the applicable prospectus supplement. Beneficial
interests in such debt securities will only be evidenced by, and transfers
thereof will only be effected through, records maintained by the Depository and
the institutions that are Depository participants.
Subordination of Subordinated Securities
Unless otherwise indicated in the applicable prospectus supplement, the
following provisions will apply to the Subordinated Securities.
Upon any distribution of our assets in the event of any dissolution,
winding up, liquidation or reorganization, the payment of any amounts due on the
Subordinated Securities is to be subordinated to the extent provided in the
Subordinated Indenture in right of payment to the prior payment in full of all
Senior Debt (Section 15.1 of the Subordinated Indenture). To that end, the
holders of our Senior Debt shall be entitled to receive, for application to the
payment of such debt, any payment or distribution of any kind or character,
whether in cash, property or securities, which may be payable or deliverable in
respect of the Subordinated Securities. (Section 15.2 of the Subordinated
Indenture)
By reason of such subordination, in the event of liquidation or
insolvency, our creditors may recover less, ratably, than holders of Senior Debt
and may recover more, ratably, than the Holders of the Subordinated Securities.
In the event of the acceleration of the maturity of any Subordinated
Securities, we must first pay the Holders of all Senior Debt outstanding at the
time of such acceleration payment in full of all amounts due before we pay the
Holders of the Subordinated Securities any payment upon the principal of (and
premium, if any) or interest on, the Subordinated Securities. (Section 15.3 of
the Subordinated Indenture)
We may not make any payments on account of any amounts due in respect
of the Subordinated Securities if there shall have occurred and be continuing a
default in any payment with respect to Senior Debt, or an event of default with
respect to any Senior Debt resulting in the acceleration of the maturity of such
Senior Debt, or if any judicial proceeding shall be pending with respect to any
such default. (Section 15.4 of the Subordinated Indenture) For purposes of the
subordination provisions, the payment, issuance and delivery of cash, property
or securities (other than our stock and certain subordinated securities) upon
conversion of a Subordinated Security will be deemed to constitute payment on
account of the principal of such Subordinated Debt Security. (Section 15.14 of
the Subordinated Indenture)
The Subordinated Indenture does not limit or prohibit us from incurring
additional Senior Debt, which may include indebtedness that is senior to the
Subordinated Securities, but subordinate to our other obligations. The Senior
Securities constitute Senior Debt under the Subordinated Indenture.
"Senior Debt" is defined to include the principal of (and premium, if
any) and interest on all of our indebtedness (including indebtedness of others
guaranteed by us), including our 6.50%
15
Senior Notes due 2006, our 6.75% Senior Notes due 2008 and our Liquid Yield
Option(TM)1 Notes due 2031, other than any obligations specifically designated
as being subordinate in right of payment to Senior Debt, whether outstanding on
the date of the Subordinated Indenture or thereafter created, incurred or
assumed, which is for money borrowed or evidenced by bonds, debentures, notes or
similar instruments and amendments, renewals, extensions, modifications and
refundings of any such indebtedness or obligation. (Section 1.1 of the
Subordinated Indenture)
The applicable prospectus supplement may further describe the
provisions, if any, applicable to the subordination of the Subordinated
Securities of a particular series.
Conversion or Exchange Rights
The terms on which debt securities of any series are convertible into
or exchangeable for other securities, including our debt securities, our
preferred stock or common stock or securities of another company will be set
forth in the applicable prospectus supplement relating to such securities. Such
terms will include provisions as to whether conversion or exchange is mandatory,
at the option of the Holder or at our option, and may include provisions
pursuant to which the number of shares or amount of the security to be received
by the Holders of debt securities would be subject to adjustment. (Section 3.1
and Article XIV)
Certain Covenants
Negative Pledge. The Senior Indenture provides that we and any
successor corporation will not, and will not permit any Subsidiary (as defined
in such Indenture) to create, assume, incur or guarantee any indebtedness for
borrowed money secured by a pledge, lien or other encumbrance (except for
certain liens specifically permitted by such Indenture) on the Voting Securities
(as defined in such Indenture) of Legg Mason Wood Walker without making
effective provision whereby the debt securities issued under such Indenture will
be secured equally and ratably with such secured indebtedness. (Section 10.7 of
the Senior Indenture)
Unless otherwise specified in any prospectus supplement, the Indentures
contain no other restrictive covenants or other provisions providing for a put
or increased interest or otherwise, including any that would afford holders of
the debt securities protection in the event of a highly leveraged transaction
involving us or any of our affiliates, or any covenants relating to total
indebtedness, interest coverage, stock repurchases, recapitalizations, dividends
and distributions to shareholders, current ratios and acquisitions and
divestitures.
Consolidation, Merger or Sale of Assets. We, without the consent of the
Holders of any of the Outstanding debt securities under the applicable
Indenture, may consolidate with or merge with or into, or sell, lease, transfer
or otherwise dispose of our assets substantially as an entirety to, any Person
which is a corporation, partnership or trust organized and validly existing
under the laws of any domestic jurisdiction, or may permit any such Person to
consolidate with or merge with or into us or sell, lease, transfer or otherwise
dispose of its assets substantially as an entirety to us, provided that, among
other things,
--------------------
1 Trademark of Merrill Lynch & Co., Inc.
16
o any successor Person assumes our obligations on the debt securities
and under the applicable Indenture,
o after giving effect to the transaction no Event of Default, and no
event which, after notice or lapse of time, would become an Event of
Default, shall have occurred and be continuing, and
o certain other conditions are met. (Section 8.1)
Events of Default
You will have special rights if an Event of Default occurs in respect
of the debt securities of your series and is not cured, as described later in
this subsection. (Section 5.1)
What Is An Event of Default? The term "Event of Default" in respect of
the debt securities of your series means any of the following:
o we do not pay the principal of a debt security of your series on its
due date;
o we do not pay interest on a debt security of your series within 30
days of its due date;
o we remain in breach of a covenant in respect of debt securities of
your series for 60 days after we receive a written notice of default
stating we are in breach. The notice must be sent by either the
Trustee or holders of 25% of the principal amount of debt securities
of your series;
o we file for bankruptcy or certain other events in bankruptcy,
insolvency or reorganization occur;
o we do not pay an amount due at maturity on indebtedness of over $10
million for 30 days after we receive notice of such default. The
notice must be sent by either the Trustee or holders of 25% of the
aggregate principal amount of all outstanding debt securities under
the relevant Indenture (treated as one class);
o we default on indebtedness and, as a result, over $10 million of our
indebtedness is accelerated and not cured within 30 days after we
receive a written notice of default. The notice must be sent by either
the Trustee or holders of 25% of the aggregate principal amount of all
outstanding debt securities under the relevant Indenture (treated as
one class); and
o any other Event of Default in respect of debt securities of your
series described in the applicable prospectus supplement occurs.
(Section 5.1)
Remedies If An Event of Default Occurs. If an Event of Default has
occurred and has not been cured, the Trustee or the holders of 25% in principal
amount of the debt securities of the affected series may declare the entire
principal amount of all the debt securities of that series to be due and
immediately payable. This is called a declaration of acceleration of maturity. A
declaration of acceleration of maturity may be canceled by the Holders of at
least a majority in principal amount of the debt securities of the affected
series. (Section 5.2)
Except in cases of default, where the Trustee has some special duties,
the Trustee is not required to take any action under the Indenture at the
request of any Holders unless the Holders offer the Trustee reasonable
protection from expenses and liability (called an "indemnity"). (Section 5.7 and
TIA Section 315) If reasonable indemnity is provided, the Holders of a
17
majority in principal amount of the Outstanding debt securities of the relevant
series may direct the time, method and place of conducting any lawsuit or other
formal legal action seeking any remedy available to the Trustee. The Trustee may
refuse to follow those directions in certain circumstances. (Section 5.12) No
delay or omission in exercising any right or remedy will be treated as a waiver
of such right, remedy or Event of Default. (Section 5.11)
Before you are allowed to bypass the Trustee and bring your own lawsuit
or other formal legal action or take other steps to enforce your rights or
protect your interests relating to the debt securities, the following must
occur:
o you must give the Trustee written notice that an Event of Default has
occurred and remains uncured;
o the Holders of 25% in principal amount of all outstanding debt
securities of the relevant series must make a written request that the
Trustee take action because of the default and must offer the Trustee
indemnity satisfactory to the Trustee against the cost and other
liabilities of taking that action;
o the Trustee must not have taken action for 60 days after receipt of
the above notice and offer of indemnity; and
o the holders of a majority in principal amount of the debt securities
must not have given the Trustee a direction inconsistent with the
above notice. (Section 5.12)
However, you are entitled at any time to bring a lawsuit for the payment of
money due on your debt securities on or after the due date. (Section 5.8)
Holders of a majority in principal amount of the debt securities of the
affected series may waive any past defaults other than (1) the payment of
principal, any premium, interest or (2) in respect of a covenant that cannot be
modified or amended without the consent of each Holder. (Section 5.13)
IF YOUR SECURITIES ARE HELD FOR YOU BY A BANK OR BROKERAGE FIRM, YOU
SHOULD CONSULT SUCH BANK OR BROKERAGE FIRM FOR INFORMATION ON HOW TO GIVE NOTICE
OR DIRECTION TO OR MAKE A REQUEST OF THE TRUSTEE AND TO MAKE OR CANCEL A
DECLARATION OF ACCELERATION.
Each Indenture contains a covenant that we will file annually with the
Trustee a certificate of no default or a certificate specifying any default that
exists. (Section 10.8 of the Senior Indenture; Section 10.7 of the Subordinated
Indenture)
Defeasance and Discharge
If so specified with respect to any particular series of debt
securities, we may discharge our indebtedness and our obligations or certain of
our obligations under the applicable Indenture with respect to such series by
depositing funds or obligations issued or guaranteed by the United States of
America with the Trustee. (Section 4.3)
If so specified with respect to the debt securities of any series, we
will be discharged from our obligations in respect of the debt securities of
such series (except for certain obligations relating to temporary debt
securities and exchange of debt securities, registration of transfer or
18
exchange of debt securities of such series, replacement of stolen, lost or
mutilated debt securities of such series, maintenance of paying agencies to hold
monies for payment in trust and payment of additional amounts, if any, required
in consequence of United States withholding taxes imposed on payments to
non-United States persons) upon the deposit in trust to your benefit and the
benefit of all other holders of debt securities of a combination of money and
U.S. Government Obligations that will generate enough cash to make interest,
principal and any other payments on the debt securities on their various due
dates. (Section 4.6)
Such a trust may only be established if, among other things:
o we have delivered to the applicable Trustee an opinion of counsel
confirming that under current federal income tax law we may make
the above deposit without causing you to be taxed on the debt
securities any differently than if we did not make the deposit
and just repaid the debt securities ourselves;
o the debt securities of such series, if then listed on any
domestic or foreign securities exchange, will not be delisted as
a result of such deposit, defeasance and discharge; and
o in the case of the Subordinated Securities, no default with
respect to any Senior Debt has occurred and is continuing or has
resulted in the acceleration of such Senior Debt.
In the event of any such defeasance and discharge of debt securities of
such series, holders of debt securities of such series would be able to look
only to such trust fund for payment of principal of and any premium and any
interest on their debt securities until Maturity. (Section 4.6)
Defeasance of Certain Obligations
If so specified with respect to the debt securities of any series, we
may omit to comply with any covenants applicable to such debt securities which
are subject to covenant defeasance and any such omission shall not be an Event
of Default with respect to the debt securities of such series, upon the
irrevocable deposit in trust to your benefit and the benefit of all other
Holders of debt securities of a combination of money and U.S. Government
Obligations that will generate enough cash to make interest, principal and any
other payments on the debt securities on their various due dates. (Sections 4.5
and 4.6) Our obligations under the applicable Indenture and the debt securities
of such series other than with respect to such covenants shall remain in full
force and effect. (Section 4.5) Such a trust may be established only if, among
other things,
o under current federal income tax law we may make the above
deposit without causing you to be taxed on the debt securities
any differently than if we did not make the deposit and just
repaid the debt securities ourselves; and
o the debt securities of such series, if then listed on any
domestic or foreign securities exchange, will not be delisted as
a result of such deposit, defeasance and discharge. (Section 4.6)
In the event we exercise our option to omit compliance with the
covenants described under "Covenants" above with respect to the debt securities
of any series or in any prospectus
19
supplement with respect to the debt securities of such series and such debt
securities are declared due and payable because of the occurrence of any Event
of Default and the amount of money and U.S. Government Obligations on deposit
with the Trustee may not be sufficient to pay amounts due on the debt securities
of such series at the time of the acceleration resulting from such Default, then
we will in any event remain liable for such payments as provided in the
Indentures.
The Trustee must deliver or pay to us from time to time, upon our
request, any amounts held by it with respect to any debt securities which, in
the opinion of a nationally recognized firm of independent public accountants,
are in excess of the amount which would then be required to be deposited to
effect a satisfaction, discharge or defeasance, as the case may be, with respect
to such debt securities.
Modification and Waiver
There are three types of changes we can make to the indentures and the
debt securities.
Changes Not Requiring Approval
First, there are changes that we and the Trustee may make without the
consent of the Holders. These include changes to:
o secure any debt securities in a manner not prohibited under the
Indentures;
o evidence the assumption by a successor corporation
of our obligations;
o add covenants for the protection of the holders of debt
securities;
o cure any ambiguity or correct any inconsistency in an Indenture;
o establish the forms or terms of debt securities of any series;
and
o evidence the acceptance of appointment by a successor trustee.
(Section 9.1)
Changes Requiring Each Holder's Approval
Second, there are changes that we and the Trustee cannot make without
the approval of each holder of debt securities affected by the change. We
cannot:
o change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any such debt
security;
o reduce the principal amount of (and premium, if any) or interest
on, any such debt security;
o change any obligation of us to pay additional amounts;
o reduce the amount of principal of an Original Issue Discount
Security or any other debt security payable upon acceleration of
the maturity thereof;
o change the coin or currency in which any debt security or any
premium or interest thereon is payable;
o impair the right to institute suit for the enforcement of any
payment on or with respect to any debt security;
o adversely change the right to convert or exchange, including
decreasing the conversion rate or increasing the conversion price
of, such debt security (if applicable);
20
o in the case of the Subordinated Indenture, modify the
subordination provisions in a manner adverse to the holders of
the Subordinated Securities;
o reduce the percentage in principal amount of Outstanding debt
securities of any series, the consent of whose holders is
required for modification or amendment of the applicable
Indenture or for waiver of compliance with certain provisions of
the applicable Indenture or for waiver of certain defaults;
o reduce the requirements contained in the applicable Indenture for
quorum or voting,
o change any obligations of us to maintain an office or agency in
the places and for the purposes required by the Indentures; or
o modify any of the above provisions. (Section 9.2)
Changes Requiring Majority Approval
Unless otherwise specified in the applicable prospectus supplement for
such series, any other change to the Indentures and the debt securities of such
series may be made by us and the Trustee under the applicable Indenture with the
consent of the holders of not less than a majority in principal amount of the
Outstanding debt securities of those series affected by such change (voting as
one class).
Unless otherwise specified in the applicable prospectus supplement for
such series, the same majority approval would be required for us to obtain a
waiver of any of our covenants in each Indenture and, if applicable, the debt
securities of such series. If the holders agree to waive a covenant, we will not
have to comply with it. Unless otherwise specified in the applicable prospectus
supplement for such series, the same majority approval would also be required
for us to obtain a waiver of any past default under the applicable Indenture,
except a default
o in the payment of principal of (and premium, if any) or any
interest on any debt security, and
o in respect of a covenant or provision of the applicable Indenture
and, if applicable, such debt securities, which cannot be
modified or amended without the consent of the holder of each
Outstanding debt security. (Section 5.13)
Notices
Except as otherwise provided in the applicable Indenture, we will give
notices to Holders of Bearer Securities by publication at least twice in a daily
newspaper in The City of New York and in such other city or cities as may be
specified in such debt securities. We will give notices to Holders of Registered
Securities by mail to the address of such Holders as they appear in the Security
Register. (Section 1.6)
Title
Title to any temporary global debt security, any Bearer Securities
(including Bearer Securities in permanent global form) and any coupons relating
thereto will pass by delivery. We, the Trustee and any of our or the Trustee's
agents may treat the bearer of any Bearer Security, the bearer of any coupon and
the registered owner of any Registered Security as the absolute owner thereof
(whether or not such debt security or coupon shall be overdue and
notwithstanding
21
any notice to the contrary) for the purpose of making payment and for all other
purposes. (Section 3.8)
Replacement of Debt Securities and Coupons
We will replace any mutilated debt security or a debt security with a
mutilated coupon attached thereto at the expense of the Holder upon surrender of
such debt security to the Trustee. We will replace debt securities or coupons
that became destroyed, stolen or lost at the expense of the Holder upon delivery
of the Trustee of the debt security and coupons or evidence of the destruction,
loss or theft thereof satisfactory to us and the Trustee. We will replace any
coupon which becomes destroyed, stolen or lost by issuance of a new debt
security in exchange for the debt security to which such coupon appertains. In
the case of a destroyed, lost or stolen debt security or coupon, we may require
an indemnity satisfactory to the Trustee and us at the expense of the Holder of
such debt security or coupon before a replacement debt security will be issued.
(Section 3.6)
Governing Law
The Indentures, the debt securities and the coupons will be governed
by, and construed in accordance with, the laws of the State of New York without
regard to principles of conflicts of laws. (Section 1.13)
Regarding the Trustee
The Indentures contain limitations on the right of a Trustee, as our
creditor, to obtain payment of claims in certain cases or to realize on certain
property received in respect of any such claim as security or otherwise.
(Section 6.11) In addition, a Trustee may be deemed to have a conflicting
interest and may be required to resign as Trustee if at the time of a default
under one of the Indentures it is our creditor. (Section 6.9) We and our
subsidiaries may from time to time maintain deposit accounts and credit
facilities and conduct our banking transactions with a Trustee in the ordinary
course of business. (Section 6.4)
DESCRIPTION OF DEBT WARRANTS
We may issue warrants for the purchase of debt securities ("Debt
Warrants"). The Debt Warrants are to be issued under debt warrant agreements to
be entered into between us and a bank or trust company, as debt warrant agent,
as set forth in the applicable prospectus supplement relating to the specific
issue of Debt Warrants being offered. We will file with the SEC the debt warrant
agreement, including the form of warrant certificates representing the Debt
Warrants, reflecting the alternative provisions to be included in the debt
warrant agreements that will be entered into with respect to particular
offerings of Debt Warrants. The following summaries of certain material
provisions of the debt warrant agreement and the debt warrant certificates are
not complete and are subject to, and are qualified in their entirety by
reference to, all the provisions of the debt warrant agreement and the debt
warrant certificates, respectively, including the definitions of terms.
22
Terms of the Debt Warrants
The applicable prospectus supplement will describe the terms of the
specific issue of Debt Warrants being offered, the debt warrant agreement
relating to the Debt Warrants and the debt warrant certificates representing the
Debt Warrants, including the following:
o the designation and aggregate principal amount of the debt
securities that the holder of a Debt Warrant may purchase upon
exercise of the Debt Warrant and the price at which the purchase
may be made;
o the designation and terms of any debt securities issued with or
purchasable upon exercise of the Debt Warrants, including whether
the debt securities will be senior debt securities or
subordinated debt securities and under which indenture the debt
securities will be issued;
o the procedures and conditions relating to the exercise of the
Debt Warrants;
o the number of Debt Warrants issued with each
debt security;
o any date on and after which the Debt Warrants
and any related debt securities are separately transferable;
o the date on which the right to exercise the Debt Warrants begins
and expires;
o whether the Debt Warrants represented by the debt warrant
certificates will be issued in registered or bearer form, and, if
registered, where they may be transferred and registered;
o any circumstances which will cause the Debt Warrants to be deemed
to be automatically exercised;
o the identity of the debt warrant agent; and
o any other terms of the Debt Warrants which are not inconsistent
with the provisions of the debt warrant agreement.
Holders may exchange debt warrant certificates for new debt warrant
certificates of different denominations. Holders may exercise Debt Warrants at
the corporate trust office of the debt warrant agent or any other office
indicated in the applicable prospectus supplement. Before the exercise of their
Debt Warrants, holders of Debt Warrants will not have any of the rights of
holders of the debt securities that may be purchased upon exercise of the Debt
Warrants and will not be entitled to payment or delivery of any amounts which
may be due on the debt securities purchasable upon exercise of the Debt
Warrants.
Prospective purchasers of Debt Warrants should be aware that special
United States federal income tax, accounting and other considerations may be
applicable to instruments such as Debt Warrants and to the debt securities
purchasable upon exercise of the Debt Warrants. The prospectus supplement
relating to any issue of Debt Warrants will describe these considerations.
Book-Entry Procedures
Except as may otherwise be provided in the applicable prospectus
supplement, the Debt Warrants will be issued in the form of global debt warrant
certificates, registered in the name of a depositary or its nominee. Except as
may otherwise be provided in the applicable prospectus supplement, beneficial
owners will not be entitled to receive definitive certificates representing Debt
Warrants unless the depositary is unwilling or unable to continue as depositary
or we
23
decide to have the Debt Warrants represented by definitive certificates. A
beneficial owner's interest in a Debt Warrant will be recorded on or through the
records of the brokerage firm or other entity that maintains the beneficial
owner's account. In turn, the total number of Debt Warrants held by an
individual brokerage firm for its clients will be maintained on the records of
the depositary in the name of the brokerage firm or its agent. Transfer of
ownership of any Debt Warrant will be effected only through the selling
beneficial owner's brokerage firm.
Governing Law
The debt warrant agreements, the Debt Warrants and the debt warrant
certificates will be governed by, and construed in accordance with, the laws of
the State of New York without regard to principles of conflicts of laws.
Exercise of Debt Warrants
Each Debt Warrant will entitle the holder to purchase for cash a
principal amount of debt securities at the exercise price set forth in, or
determined in the manner set forth in, the applicable prospectus supplement.
Holders may exercise Debt Warrants at any time up to the close of business on
the expiration date set forth in the applicable prospectus supplement. After the
close of business on the expiration date, unexercised Debt Warrants will become
void.
Holders may exercise Debt Warrants in the manner described in the
applicable prospectus supplement. Upon receipt of payment and properly completed
and duly executed debt warrant certificate at the corporate trust office of the
debt warrant agent or any other office indicated in the applicable prospectus
supplement, we will, as soon as practicable, forward the debt securities
purchased. If less than all of the Debt Warrants represented by any debt warrant
certificate are exercised, a new debt warrant certificate will be issued for the
remaining amount of Debt Warrants.
DESCRIPTION OF CAPITAL STOCK
The following description sets forth certain general terms of our
common stock and preferred stock. The terms of any series of our preferred stock
will be described in the applicable prospectus supplement relating to the
preferred stock being offered. The description set forth below and in any
prospectus supplement is not complete, and is subject to, and qualified in its
entirety by reference to, our Articles of Incorporation, as amended, which is
incorporated by reference as an exhibit to the registration statement of which
this prospectus is a part, and the Articles Supplementary to our Articles of
Incorporation relating to each particular series of the preferred stock, which
will be filed with the SEC at or before the issuance of the series of preferred
stock.
Our authorized capital stock consists of 250,000,000 shares of common
stock, par value $.10 per share, and 4,000,000 shares of preferred stock, par
value $10.00 per share. As of January 3, 2003, we had 64,852,844 shares of
common stock and one share of preferred stock outstanding. Prior to the issuance
of convertible debt securities or the related debt warrants, common stock
warrants, preferred stock warrants, stock purchase contracts, equity units, or
additional common stock or preferred stock, we may need to increase our
authorized common stock or preferred stock, as applicable, which would require
the approval of our stockholders.
24
Common Stock
Holders of our common stock are entitled to:
o one vote per share on matters to be voted upon by the
stockholders;
o receive dividends out of funds legally available for distribution
when and if declared by our board of directors; and
o share ratably in our assets legally available for distribution to
our stockholders in the event of our liquidation, dissolution or
winding up, after provisions for distributions to the holders of
any preferred stock.
We may not pay any dividend (other than in shares of our common stock)
or make any distributions of assets on shares of our common stock until
cumulative dividends on any preferred stock then outstanding have been paid.
Holders of our common stock have no preemptive, subscription,
redemption or conversion rights. The outstanding shares of our common stock are,
and the shares which may be issued upon conversion of the Convertible Debt
Securities will be, when issued, fully paid and nonassessable.
The holders of our common stock do not have cumulative voting rights.
This means that holders of more than half of the shares can elect all of the
directors and holders of the remaining shares will not be able to elect any
directors. Our By-laws provide for a classified board of directors consisting of
three classes with staggered three-year terms.
Transfer Agent
The transfer agent and registrar for our common stock is Wachovia Bank,
N.A.
Two-Tier Business Combination Provisions
Maryland law requires the affirmative vote of at least a majority of
all of the outstanding shares entitled to vote to approve a merger,
consolidation, share exchange or disposition of all or substantially all of our
assets. Our Articles of Incorporation require the affirmative vote of not less
than 70% of our then outstanding voting shares to approve any "business
combination" of us with any "Related Person" unless certain conditions have been
met. In addition, the 70% vote must include the affirmative vote of at least 55%
of the outstanding shares of voting stock held by stockholders other than the
Related Person. Accordingly, the actual vote required to approve the business
combination may be greater than the 70%, depending upon the number of shares
controlled by the Related Person. A Related Person is defined to include any
person or entity which is, directly or indirectly, the beneficial owner of 15%
or more of the outstanding shares of our voting stock, including any affiliate
or associate of such person or entity. The term "business combination" is
defined to include a wide variety of transactions between us and a Related
Person, including a merger, consolidation, share exchange or sale of assets
having a fair market value greater than 10% of the book value of our
consolidated assets.
However, if the Related Person pays a "fair price" to our stockholders
in the transaction, the 70% requirement would not be applicable and the proposed
business combination could be
25
approved by a simple majority of the stockholders unless otherwise required by
Maryland law, provided that such affirmative vote includes at least 55% of the
voting stock held by persons other than the Related Person. Under our Articles
of Incorporation, the "fair price" must be at least equal to the greater of
o the highest price paid or agreed to be paid by the Related Person
to purchase shares of our common stock during the 24-month period
prior to the taking of such vote; or
o the highest market price of the common stock during the 24-month
period prior to the taking of such vote; or
o the per share book value of our common stock at the end of the
calendar quarter immediately preceding the taking of such vote.
In addition, the "fair price" consideration to be received by our stockholders
must be of the same form and kind as the most favorable form and kind of
consideration paid by the Related Person in acquiring any of its shares of our
common stock.
The special voting provisions are not applicable to a business
combination authorized by our board of directors by a vote which includes a
majority of our "Disinterested Directors." A Disinterested Director is defined
to include any member of our board of directors who is not the Related Person
(or an affiliate or associate of the Related Person) and who was a director
prior to the time that the Related Person became a Related Person, and any
successor of a Disinterested Director who is not the Related Person (or an
affiliate or associate of the Related Person) and who is recommended to succeed
a Disinterested Director by a majority of the Disinterested Directors then on
our board of directors.
Our special voting provisions may not be amended, altered, changed or
repealed except by the affirmative vote of at least 70% of the shares of stock
entitled to vote at a meeting of the stockholders called for the consideration
of such amendment, alteration, change or repeal, and at least 55% of the
outstanding shares of stock entitled to vote thereon held by stockholders who
are not Related Persons, unless such proposal was proposed by our board of
directors by a vote which includes a majority of the Disinterested Directors.
The business combination provisions under our Articles of Incorporation
could have the effect of delaying, deterring or preventing a change in control.
Any possible change in control could also be affected by the applicability of
certain Maryland anti-takeover statutes dealing with business combinations and
acquisitions of controlling blocks of shares, as well as by our classified board
of director provisions.
Preferred Stock
Terms of the Preferred Stock
Our Articles of Incorporation authorize our board of directors to issue
shares of preferred stock, par value $10.00 per share, and to fix the terms
(including voting rights, dividends, redemption and conversion provisions, if
any, and rights upon liquidation) of any shares issued. Outstanding shares of
preferred stock that are redeemed or are converted or exchanged to
26
common stock or other securities are restored to the status of authorized and
unissued shares of preferred stock issuable in series by our board of directors.
On May 26, 2000, we issued one special voting share of preferred stock
in connection with our acquisition of Perigee Inc. This special voting share
provides the holders of exchangeable shares of our subsidiary, Legg Mason Canada
Holdings Ltd., with substantially the same voting rights as the holders of our
common stock. The special voting share has a number of votes, which may be cast
at a Legg Mason stockholders' meeting, equal to the number of exchangeable
shares outstanding. As of January 3, 2003, there were 2,340,917 exchangeable
shares outstanding.
Our board of directors has the authority, under our Articles of
Incorporation, to classify or reclassify any unissued preferred stock from time
to time by setting or changing the preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends, qualifications, or
terms or conditions of redemption of the stock.
The applicable prospectus supplement will describe the terms of each
series of preferred stock, including, where applicable, the following:
o the designation, stated value, liquidation preference and number
of shares offered;
o the offering price or prices;
o the dividend rate or rates, or method of calculation, the
dividend periods, the date on which dividends shall be payable
and whether dividends are cumulative or noncumulative and, if
cumulative, the dates from which dividends begin to cumulate;
o any redemption or sinking fund provisions;
o any conversion or exchange provisions;
o any voting rights;
o whether the preferred stock will be issued in certificated or
book-entry form;
o whether the preferred stock will be listed on a national
securities exchange;
o information with respect to any book-entry procedures; and
o any additional rights, preferences, privileges, limitations and
restrictions of the preferred stock which are not inconsistent
with the provisions of the certificate of incorporation.
The preferred stock will be, when issued against payment, fully paid
and nonassessable. Holders will have no preemptive rights to subscribe for any
additional securities which we may issue. Each series of preferred stock will
rank senior to our common stock as to payment of
27
dividends and/or distribution of assets upon liquidation, and senior to any
other stock of us that is expressly made junior to that series of preferred
stock.
Conversion or Exchange Rights
The prospectus supplement relating to a series of preferred stock that
is convertible or exchangeable will state the terms on which shares of that
series are convertible or exchangeable into common stock, another series of
preferred stock or debt securities.
DESCRIPTION OF COMMON STOCK WARRANTS
We may issue warrants for the purchase of common stock ("Common Stock
Warrants"). Each series of Common Stock Warrants will be issued under a common
stock warrant agreement to be entered into between us and a bank or trust
company, as common stock warrant agent, all as set forth in the applicable
prospectus supplement. The common stock warrant agreement, including the form of
warrant certificates representing the Common Stock Warrants, reflecting the
provisions to be included in the common stock warrant agreements that will be
entered into with respect to particular offerings of Common Stock Warrants, will
be filed with the SEC. The following summaries of certain material provisions of
the common stock warrant agreement and common stock warrant certificates are not
complete, are subject to, and are qualified in their entirety by reference to,
all of the provisions of the common stock warrant agreement and the common stock
warrant certificates, including the definitions of terms.
Terms of the Common Stock Warrants
The applicable prospectus supplement will describe the terms of the
Common Stock Warrants being offered, the common stock warrant agreement relating
to the Common Stock Warrants and the common stock warrant certificates,
including the following:
o the offering price or prices;
o the aggregate number of shares of common stock that may be
purchased upon exercise of the Common Stock Warrants and minimum
number of Common Stock Warrants that are exercisable;
o the number of securities, if any, with which the Common Stock
Warrants are being offered and the number of the Common Stock
Warrants being offered with each security;
o the date on and after which the Common Stock Warrants and the
related securities, if any, will be transferable separately;
o the number of shares of common stock purchasable upon exercise of
each Common Stock Warrant, the price at which the common stock
may be purchased, and events or conditions under which the number
of shares purchasable may be adjusted;
o the date on which the right to exercise the Common Stock Warrants
will begin and the date on which the right to exercise will
expire;
o the circumstances, if any, which will cause the Common Stock
Warrants to be deemed to be automatically exercised;
o any material risk factors relating to the Common Stock Warrants;
28
o the identity of the common stock warrant agent; and
o any other terms of the Common Stock Warrants which are not
inconsistent with the provisions of the common stock warrant
agreement.
Holders may exchange common stock warrant certificates for new common
stock warrant certificates of different denominations, may, if in registered
form, present for registration of transfer, and may exercise the Common Stock
Warrants, at the corporate trust office of the common stock warrant agent or any
other office indicated in the applicable prospectus supplement. Before the
exercise of any Common Stock Warrants to purchase common stock, holders of the
Common Stock Warrants will not have any rights of holders of common stock
purchasable upon exercise of the Common Stock Warrants, including the right to
receive payments of dividends, if any, on the common stock purchasable upon any
exercise or the right to vote the underlying Common Stock.
Prospective purchasers of Common Stock Warrants should be aware that
special United States federal income tax, accounting and other considerations
may be applicable to instruments such as Common Stock Warrants. The prospectus
supplement relating to any issue of Common Stock Warrants will describe these
considerations.
Book-Entry Procedures
Except as may otherwise be provided in the applicable prospectus
supplement, the Common Stock Warrants will be issued in the form of global
common stock warrant certificates, registered in the name of a depositary or its
nominee. In that case, beneficial owners will not be entitled to receive
definitive certificates representing Common Stock Warrants unless the depositary
is unwilling or unable to continue as depositary, certain specified events of
bankruptcy or insolvency occur with respect to us or we decide to have the
Common Stock Warrants represented by definitive certificates. A beneficial
owner's interest in a Common Stock Warrant will be recorded on or through the
records of the brokerage firm or other entity that maintains a beneficial
owner's account. In turn, the total number of Common Stock Warrants held by an
individual brokerage firm for its clients will be maintained on the records of
the depositary in the name of the brokerage firm or its agent. Transfer of
ownership of any Common Stock Warrant will be effected only through the selling
beneficial owner's brokerage firm.
Exercise of Common Stock Warrants
Each Common Stock Warrant will entitle its holder to purchase a
specific number of shares of Common Stock at the exercise price described in the
applicable prospectus supplement. After the close of business on the date the
right to exercise the Common Stock Warrants expires, or any later date if
extended by us, unexercised Common Stock Warrants will become void.
Common Stock Warrants may be exercised as set forth in the applicable
prospectus supplement. Upon receipt of payment and a properly completed and duly
executed common stock warrant certificate at the corporate trust office of the
common stock warrant agent or any other office indicated in the applicable
prospectus supplement, we will, as soon as practicable, issue and deliver the
shares of common stock purchased upon exercise. If less than all of the
29
Common Stock Warrants represented by any common stock warrant certificate are
exercised, a new common stock warrant certificate will be issued for the
remaining Common Stock Warrants.
Modifications
We and the common stock warrant agent may amend any common stock
warrant agreement and the terms of the related Common Stock Warrants, without
the consent of the holders of the Common Stock Warrants, for the purpose of
curing any ambiguity, or of curing, correcting or supplementing any defective or
inconsistent provision, or in any other manner which we may deem necessary or
desirable and which will not materially and adversely affect the interests of
the common stock warrantholders.
We and the common stock warrant agent also may amend any common stock
warrant agreement and the terms of the related Common Stock Warrants, with the
consent of the holder of not less than a majority in number of the then
outstanding unexercised Common Stock Warrants affected by amendment. However,
without the consent of each of the common stock warrantholders affected, no
amendment will be effective that:
o shortens the period of time during which the Common Stock
Warrants may be exercised;
o otherwise materially and adversely affects the exercise rights of
the common stock warrantholders; or
o reduces the number of outstanding Common Stock Warrants the
consent of whose holders is required to approve an amendment of
the common stock warrant agreement or the terms of the related
Common Stock Warrants.
Governing Law
The common stock warrant agreements, the Common Stock Warrants and the
common stock warrant certificates will be governed by, and construed in
accordance with, the laws of the State of New York without regard to principles
of conflicts of laws.
Enforceability of Rights by Common Stock Warrantholders
Any common stock warrantholder may, without the consent of the related
common stock warrant agent, enforce by appropriate legal action, and for its own
behalf, its right to exercise its Common Stock Warrant.
DESCRIPTION OF PREFERRED STOCK WARRANTS
We may issue warrants for the purchase of preferred stock ("Preferred
Stock Warrants"). Each series of Preferred Stock Warrants is to be issued under
a preferred stock warrant agreement to be entered into between us and a bank or
trust company, as preferred stock warrant agent, as described in the applicable
prospectus supplement relating to the Preferred Stock Warrants being offered.
The preferred stock warrant agreement, including the form of warrant
certificates representing the Preferred Stock Warrants, will be filed with the
SEC. The following summaries of certain material provisions of the preferred
stock warrant agreement and preferred stock warrant certificates are not
complete and are subject to and are qualified in their entirety by
30
reference to, all the provisions of the preferred stock warrant agreement and
the preferred stock warrant certificates, respectively, including the
definitions of terms.
Terms of the Preferred Stock Warrants
The applicable prospectus supplement will describe the terms of the
specific issue of Preferred Stock Warrants being offered, the preferred stock
warrant agreement relating to the Preferred Stock Warrants and the preferred
stock warrant certificates representing the Preferred Stock Warrants, including
the following:
o the offering price or prices;
o designation, aggregate number and terms of the series of
preferred stock that may be purchased upon exercise of the
Preferred Stock Warrants and the minimum number of Preferred
Stock Warrants that are exercisable;
o any designation and terms of the securities with which the
Preferred Stock Warrants are being offered and the number of
Preferred Stock Warrants being offered with each security;
o any date on and after which the Preferred Stock Warrants and the
related securities will be transferable separately;
o the number and stated values of the series of preferred stock
that may be purchased upon exercise of each Preferred Stock
Warrant and the price at which the shares of preferred stock of
that series may be purchased upon exercise, and events or
conditions under which the number of shares that may be purchased
may be adjusted;
o the date on which the right to exercise the Preferred Stock
Warrants will begin and the date on which the right to exercise
will expire;
o any circumstances that will cause the Preferred Stock Warrants to
be deemed to be automatically exercised;
o any material risk factors relating to the Preferred Stock
Warrants;
o the identity of the preferred stock warrant agent; and
o any other terms of the Preferred Stock Warrants which are not
inconsistent with the provisions of the preferred stock warrant
agreement.
Holders may exchange preferred stock warrant certificates for new
preferred stock warrant certificates of different denominations, may, if in
registered form, present for registration of transfer, and may exercise the
Preferred Stock Warrants, at the corporate trust office of the preferred stock
warrant agent or any other office indicated in the applicable prospectus
supplement. Before the exercise of any Preferred Stock Warrant, a holder will
not have the rights of a holder of shares of the preferred stock that may be
purchased upon exercise of the Preferred Stock Warrant, including the right to
receive payment of dividends, if any, on the underlying preferred stock or the
right to vote the underlying preferred stock.
Prospective purchasers of Preferred Stock Warrants should be aware that
special United States federal income tax, accounting and other considerations
may be applicable to instruments such as Preferred Stock Warrants. The
prospectus supplement relating to any issue of Preferred Stock Warrants will
describe these considerations.
31
Book-Entry Procedures
Except as may otherwise be provided in the applicable prospectus
supplement, the Preferred Stock Warrants will be issued in the form of global
preferred stock warrant certificates, registered in the name of a depositary or
its nominee. In that case, beneficial owners will not be entitled to receive
definitive certificates representing Preferred Stock Warrants unless the
depositary is unwilling or unable to continue as depositary, specified events of
bankruptcy or insolvency occur with respect to us or we decide to have the
Preferred Stock Warrants represented by definitive certificates. A beneficial
owner's interest in a Preferred Stock Warrant will be recorded on or through the
records of the brokerage firm or other entity that maintains the beneficial
owner's account. In turn, the total number of Preferred Stock Warrants held by
an individual brokerage firm for its clients will be maintained on the records
of the depositary in the name of the brokerage firm or its agent. Transfer of
ownership of any Preferred Stock Warrant will be effected only through the
selling beneficial owner's brokerage firm.
Exercise of Preferred Stock Warrants
Each Preferred Stock Warrant will entitle its holder to purchase a
number of shares of preferred stock at the exercise price described in the
applicable prospectus supplement. After the close of business on the date the
right to exercise the Preferred Stock Warrants expires, or any later date if
extended by us, unexercised Preferred Stock Warrants will become void.
Holders may exercise the Preferred Stock Warrants in the manner set
forth in the applicable prospectus supplement. Upon receipt of payment and a
properly completed and duly executed preferred stock warrant certificate at the
corporate trust office of the preferred stock warrant agent or any other office
indicated in the applicable prospectus supplement, we will, as soon as
practicable, issue and deliver the shares of preferred stock purchased upon
exercise. If less than all of the Preferred Stock Warrants represented by any
preferred stock warrant certificate are exercised, we will issue a new preferred
stock warrant certificate for the remaining number of Preferred Stock Warrants.
Modifications
We and the preferred stock warrant agent may amend any preferred stock
warrant agreement and the terms of the related Preferred Stock Warrants, without
the consent of the holders of the Preferred Stock Warrants, for the purpose of
curing any ambiguity, or of curing, correcting or supplementing any defective or
inconsistent provision, or in any other manner which we may deem necessary or
desirable and which will not materially and adversely affect the interests of
the preferred stock warrantholders.
We and the preferred stock warrant agent also may amend any preferred
stock warrant agreement and the terms of the related Preferred Stock Warrants,
with the consent of the holders of not less than a majority in number of the
then outstanding unexercised Preferred Stock Warrants affected by the amendment.
However, without the consent of each of the preferred stock warrantholders
affected, no amendment will be effective that:
32
o shortens the period of time during which the Preferred Stock
Warrants may be exercised;
o otherwise materially and adversely affects the exercise rights of
the preferred stock warrantholders; or
o reduces the number of outstanding Preferred Stock Warrants the
consent of whose holders is required to approve an amendment of
the preferred stock warrant agreement or the terms of the related
Preferred Stock Warrants.
Governing Law
The preferred stock warrant agreements, the Preferred Stock Warrants
and the preferred stock warrant certificates will be governed by, and construed
in accordance with, the laws of the State of New York without regard to
principles of conflicts of laws.
Enforceability of Rights by Preferred Stock Warrantholders
Any preferred stock warrantholder may, without the consent of the
related preferred stock warrant agent, enforce by appropriate legal action, in
and of its own behalf, its right to exercise its Preferred Stock Warrants.
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND EQUITY UNITS
We may issue stock purchase contracts, including contracts obligating
holders to purchase from us, and obligating us to sell to the holders, a
specified number of shares of common stock, preferred stock or other securities
at a future date or dates. We may fix the price and number of securities subject
to the stock purchase contracts at the time we issue the stock purchase
contracts, or we may provide that the price and number of securities will be
determined pursuant to a formula set forth in the stock purchase contracts. The
stock purchase contracts may be issued separately or as part of units consisting
of a stock purchase contract and debt securities or debt obligations of third
parties, including U.S. treasury securities, securing the obligations of the
holders of the units to purchase the securities under the stock purchase
contracts. We refer to these units as equity units. The stock purchase contracts
may require holders to secure their obligations under the stock purchase
contracts in a specified manner. The stock purchase contracts also may require
us to make periodic payments to the holders of the equity units or vice versa,
and those payments may be unsecured or unrefunded on some basis.
The applicable prospectus supplement will describe the terms of the
stock purchase contracts or equity units offered by that prospectus supplement.
The description in the prospectus supplement will not necessarily be complete,
and reference will be made to the stock purchase contracts or equity units, and,
if applicable, collateral or depositary arrangements, relating to the stock
purchase contracts or equity units, which will be filed with the SEC each time
we issue stock purchase contracts or equity units. Certain material United
States federal income tax considerations applicable to the equity units and the
stock purchase contracts will also be discussed in the applicable prospectus
supplement.
33
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES
In compliance with United States federal tax laws and regulations,
o Bearer Securities (including securities that are exchangeable for
Bearer Securities and securities in permanent global form that
are either Bearer Securities or exchangeable for Bearer
Securities) may not be offered, sold, resold or delivered in
connection with their original issuance in the United States or
to United States persons (each as defined below) except as
otherwise permitted by Treasury Regulation Section
1.163-5(c)(2)(i)(D) including offers and sales to offices located
outside the United States of United States financial institutions
(as defined in Treasury Regulation Section 1.165-12(c)(1)(v))
which agree in writing to comply with the requirements of Section
165(j)(3)(A), (B) or (C) of the Code (as defined below) and the
regulations thereunder; and
o any underwriters, agents and dealers participating in the
offering of Bearer Securities must agree in writing that they
will not offer, sell or resell any Bearer Securities to persons
within the United States or to United States persons (except as
described above) nor deliver Bearer Securities within the United
States.
In addition,
o any such underwriters, agents and dealers must have in effect, in
connection with the offer and sale of the Bearer Securities,
procedures reasonably designed to ensure that their employees or
agents who are directly engaged in selling the securities are
aware that Bearer Securities cannot be offered or sold to a
person who is within the United States or is a United States
person except as otherwise permitted by Treasury Regulation
Section 1.163-5(c)(2)(i)(D);
o the owner of the Bearer Security (or the financial institution or
clearing organization through which the owner holds the
obligation) must certify that the owner is not a United States
person; and
o Bearer Securities and any coupons attached thereto must bear the
following legend: "Any United States person who holds this
obligation will be subject to limitations under the United States
income tax laws, including the limitations provided in Sections
165(j) and 1287(a) of the United States Internal Revenue Code."
Purchasers of Bearer Securities may be affected by certain limitations
under United States tax laws.
As used herein, "United States person" means:
(1) an individual who is, for United States Federal income tax
purposes, a citizen or resident of the United States,
(2) a corporation, partnership or one of certain other entities
created or organized in or under the laws of the United States or
of any political subdivision thereof, or
34
(3) an estate or trust the income of which is subject to United
States Federal income taxation regardless of its source.
"United States" means the United States of America (including the States and the
District of Columbia), its territories and its possessions.
ERISA MATTERS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), the regulations issued by the Department of Labor under ERISA, the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
issued by the Internal Revenue Service under the Code impose certain
restrictions on the following:
(1) "employee benefit plans" (as defined in Section 3(3) of ERISA),
(2) "plans" described in Section 4975(e)(1) of the Code, including
individual retirement accounts or Keogh plans,
(3) entities whose underlying assets include plan assets by reason of
a plan's investment in such entities (each of (1), (2) and (3) is
referred to as a "Plan"), and
(4) persons who have certain specified relationships to Plans
("parties in interest" under ERISA and "disqualified persons"
under the Code).
Both ERISA and the Code prohibit certain transactions between a Plan
and parties in interest or disqualified persons. ERISA also imposes certain
duties on persons who are fiduciaries of Plans that are subject to Title I of
ERISA ("ERISA Plans").
Because of our activities or the activities of our affiliates, we may
be deemed to be a party in interest or disqualified person with respect to a
number of Plans (e.g., those to which we provide brokerage, investment or other
financial services). If the securities described in this prospectus are acquired
and held by a Plan with respect to which we are a party in interest or
disqualified person, such acquisition and holding could be deemed to be a direct
or indirect prohibited transaction, which could result in the imposition of
taxes or penalties on the parties to the prohibited transaction.
Such transactions may, however, be exempt from the otherwise applicable
taxes and penalties by reason of one or more statutory or administrative
exemptions such as those described below. Such administrative exemptions may
include
o Prohibited Transaction Class Exemption ("PTE") 95-60, 60 FR
35925, July 12, 1995, which exempts certain transactions
involving insurance company general accounts;
o PTE 96-23, 61 FR 15975, April 10, 1996, which exempts certain
transactions directed by an in-house asset manager;
o PTE 90-1, 55 FR 2891, January 29, 1990, which exempts certain
transactions involving insurance company pooled separate
accounts;
35
o PTE 91-38, 56 FR 31966, June 12, 1991, which exempts certain
transactions involving bank collective investment funds; and
o PTE 84-14, 49 FR 9494, March 13, 1984, which exempts certain
transactions entered into on behalf of a Plan by a qualified
professional asset manager.
If the conditions of one or more of these exemptions (or some other applicable
exemption) are met, the acquisition and holding of the securities by or on
behalf of a Plan should be exempt from certain of the prohibited transaction
provisions of ERISA and the Code. It should be noted, however, that even if such
conditions are met, the scope of relief provided by such exemptions may not
necessarily cover all acts that might be construed as prohibited transactions
under ERISA and the Code.
In addition to the foregoing exemptions, certain insurance company
general accounts, which support policies issued by an insurer on or after
December 31, 1998 to or for the benefit of Plans, are allowed to purchase the
securities described in this prospectus in reliance upon regulations promulgated
by the Department of Labor pursuant Section 1460 of the Small Business Job
Protection Act of 1996. If such policies satisfy the Section 1460 regulations,
then the insurer will be deemed in compliance with ERISA's fiduciary
requirements and prohibited transaction rules with respect to those assets of
the insurer's general account which supports such policies.
Furthermore, Section 404 of ERISA sets forth standards of care for
investment decisions made by a fiduciary of an ERISA Plan. In deciding whether
to invest in the offered securities, a fiduciary of an ERISA Plan must take the
following into account, among other considerations:
o whether the fiduciary has the authority to make the investment;
o whether the investment is made in accordance with the written
documents that govern the ERISA Plan;
o whether the investment constitutes a direct or indirect
transaction with a party in interest or disqualified person;
o the composition of the ERISA Plan's portfolio with respect to
diversification by type of asset;
o the ERISA Plan's funding objectives; the tax effects of the
investment; and
o whether under the general fiduciary standards of investment
procedure and diversification an investment in the securities is
appropriate for the ERISA Plan, taking into account the overall
investment policy of the ERISA Plan, the composition of the ERISA
Plan's investment portfolio and all other appropriate factors.
Each person who acquires the securities or an interest therein will be
deemed by such acquisition or acceptance to have represented and warranted that
either: (i) no assets of a Plan have been used to acquire such security or an
interest therein, or (ii) the purchase and holding of such security or an
interest therein by such person are exempt from the prohibited transaction
restrictions of ERISA and the Code pursuant to one or more prohibited
transaction statutory or class exemptions.
36
Prior to making an investment in the securities, a Plan investor must
determine whether we are a party in interest or disqualified person with respect
to such Plan and, if so, whether such transaction is subject to one or more
statutory or administrative exemptions, including those described above. In
addition, a fiduciary of an ERISA Plan must determine whether the investment is
otherwise a permissible and appropriate investment for the ERISA Plan.
Prospective investors should consult with their legal and other advisors
concerning the impact of ERISA and the Code and the potential consequences of
such investment with respect to their specific circumstances.
Employee benefit plans that are governmental plans (as defined in
Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33) of
ERISA) are not subject to the fiduciary responsibility or prohibited transaction
provisions of ERISA or the Code but may be subject to similar restrictions under
state or local law.
THE ABOVE DISCUSSION IS A SUMMARY OF SOME OF THE MATERIAL ERISA
CONSIDERATIONS APPLICABLE TO PROSPECTIVE PLAN INVESTORS. IT IS NOT INTENDED TO
BE A COMPLETE DISCUSSION, NOR IS IT TO BE CONSTRUED AS LEGAL ADVICE OR A LEGAL
OPINION. PROSPECTIVE PLAN INVESTORS SHOULD CONSULT THEIR OWN COUNSEL ON THESE
MATTERS.
HOLDING COMPANY STRUCTURE
We are a holding company and our assets consist primarily of
investments in our subsidiaries. A substantial portion of our consolidated
liabilities have been incurred by our subsidiaries. Our rights and the rights of
our creditors, including holders of our debt securities and holders of our
preferred stock, to participate in the distribution of assets of any subsidiary
upon liquidation or reorganization of this subsidiary or otherwise will be
subject to prior claims of such subsidiary's creditors, including trade
creditors, except to the extent that we may be a creditor with recognized claims
against the subsidiary. Accordingly, the holders of our debt securities and
preferred stock may be deemed to be effectively subordinated to such claims. As
of September 30, 2002, our subsidiaries had a total of approximately $4.1
billion of outstanding liabilities, including indebtedness.
Our ability to service our indebtedness and other obligations,
including the securities, and our ability to pay dividends on our capital stock
is dependent primarily upon the earnings and cash flow of our subsidiaries and
the distribution or other payment to us of such earnings and cash flow.
PLAN OF DISTRIBUTION
We may sell any series of debt securities, stock purchase contracts,
equity units and warrants and shares of common stock and shares of preferred
stock being offered by this prospectus in three ways: (1) to or through
underwriters or dealers, which may include Legg Mason Wood Walker, (2) directly
to other purchasers, or (3) through agents. The prospectus supplement with
respect to any series of securities will set forth the terms of the offering of
the securities, including
o the name or names of any underwriters, dealers or agents;
37
o the price of the offered securities;
o the net proceeds to us from such sale;
o any underwriting discounts or other items constituting
underwriters' compensation;
o any discounts or concessions allowed or reallowed or paid to
dealers; and
o any securities exchanges on which the securities may be listed.
If we use underwriters in the sale of the securities, we will enter
into an underwriting agreement with those underwriters when we and they
determine the offering price of the securities. The securities will be acquired
by the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
price or at varying prices determined at the time of sale. We will name the
underwriter or underwriters with respect to a particular underwritten offering
of securities in the prospectus supplement relating to such offering, and if an
underwriting syndicate is used, we will name the managing underwriter or
underwriters on the cover of such prospectus supplement. Unless otherwise set
forth in the prospectus supplement, the obligations of the underwriters or
agents to purchase the securities will be subject to certain conditions
precedent and the underwriters will be obligated to purchase all the securities
if any are purchased. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.
If we use a dealer to offer and sell any securities in respect of which
this prospectus is delivered, we will sell such securities to the dealer, as
principal. The dealer may then resell such securities to the public at varying
prices to be determined by such dealer at the time of resale. The name of the
dealer and the terms of the transaction will be set forth in the prospectus
supplement relating thereto.
Our net proceeds will be the purchase price in the case of sales to a
dealer, the public offering price less discount in the case of sales to an
underwriter or the purchase price less commission in the case of sales through
an agent -- in each case, less other expenses attributable to issuance and
distribution. Underwriters, agents, and dealers participating in the
distribution of such securities may be deemed to be underwriters, and any
discounts or commissions received by them from us and any profit on the resale
of such securities by them may be deemed to be underwriting discounts or
commissions under the Securities Act.
Each underwriter, dealer and agent participating in the distribution of
any securities which are issuable in bearer form will agree that it will not
offer, sell or deliver, directly or indirectly, securities in bearer form in the
United States or to United States persons except as otherwise permitted by
Treasury Regulation Section 1.163-5(c)(2)(i)(D). See "Limitations on Issuance of
Bearer Securities."
Each underwriter, dealer and agent participating in the distribution of
any securities will agree that
o it will not offer or sell any securities to persons in the United
Kingdom, except to persons whose ordinary activities involve them
in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their
38
businesses or otherwise in circumstances which do not constitute
an offer to the public in the United Kingdom for the purposes of
the Public Offers of Securities Regulations 1995;
o it will comply with all applicable provisions of the Financial
Services and Markets Act 2000 with respect to anything done by it
in relation to the securities in, from or otherwise involving the
United Kingdom; and
o it will only communicate or cause to be communicated any
invitation or inducement to engage in investment activity within
the meaning of Section 21 of the Financial Services and Markets
Act 2000 received by it in connection with the issue or sale of
any security in circumstances in which Section 21(1) of the
Financial Services and Markets Act 2000 does not apply to us.
Certain persons participating in an offering of securities may engage
in transactions that stabilize, maintain or otherwise affect the price of the
securities. Specifically, the underwriters, if any, may overallot in connection
with the offering, and may bid for, and purchase, such securities in the open
market.
We may issue series of securities with no established trading market.
Any underwriters to whom securities are sold by us for public offering and sale
may make a market in such securities, but such underwriters will not be
obligated to do so and may discontinue any market making at any time without
notice. No assurance can be given as to the liquidity of the trading market for
any securities.
If so indicated in the prospectus supplement, one or more firms,
including Legg Mason Wood Walker, which we refer to as "remarketing firms,"
acting as principals for their own accounts or as agents for us, may offer and
sell these securities as part of a remarketing upon their purchase, in
accordance with their terms. We will identify any remarketing firm, the terms of
its agreement, if any, with us and its compensation in the prospectus
supplement.
Remarketing firms, agents, dealers, and underwriters may be entitled
under agreements entered into with us to indemnification by us against certain
civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments that such agents, dealers, or underwriters
may be required to make with respect thereto. Underwriters, dealers, or agents
and their associates may be customers of, engage in transactions with and
perform services for, us in the ordinary course of business.
Legg Mason Wood Walker, our affiliate, may participate in distributions
of securities. Accordingly, each offering of securities and any market-making
activities by Legg Mason Wood Walker with respect to any securities will be
conducted in compliance with the requirements of Rule 2720 of the National
Association of Securities Dealers, Inc., which is commonly referred to as the
NASD, regarding an NASD member firm's distributing the securities of an
affiliate. Following the initial distribution of any securities, Legg Mason Wood
Walker may offer and sell securities in the course of its business as a
broker-dealer. Legg Mason Wood Walker may act as principal or agent in such
transactions. This prospectus may be used by Legg Mason Wood Walker in
connection with such transactions. Such sales, if any, will be made at varying
prices related to prevailing market prices at the time of sale or otherwise.
Legg Mason Wood Walker is
39
not obligated to make a market in any securities and may discontinue any
market-making activities at any time without notice.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
us by Shearman & Sterling, New York, New York, who will rely on the opinion of
Robert F. Price, Esq., our General Counsel, as to all matters of Maryland law.
Mr. Price beneficially owns, or has rights to acquire under our employee benefit
plan, less than one percent of our common stock.
EXPERTS
The financial statements and financial statement schedules incorporated
in this prospectus by reference to the Annual Report on Form 10-K of Legg Mason
for the year ended March 31, 2002 have been so incorporated in reliance on the
reports of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
40
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following are the expenses in connection with the issuance and
distribution of the securities being registered, other than underwriting fees
and commissions. All such expenses other than the Securities and Exchange
Commission registration fee and National Association of Securities Dealers, Inc.
filing fee are estimates.
Securities and Exchange Commission Registration Fee....................$46,000
National Association of Securities Dealers, Inc. Filing Fee............$30,500
Trustees' Fees and Expenses............................................$20,000
Printing and Engraving Fees and Expenses...............................$60,000
Accounting Fees and Expenses...........................................$60,000
Blue Sky Fees and Expenses..............................................$5,000
Legal Fees............................................................$120,000
Rating Agency Fees.....................................................$60,000
Miscellaneous (including Listing Fees, if applicable)...................$5,000
------
Total.................................................................$406,500
Item 15. Indemnification of Directors and Officers
The Registrant's By-laws provide for indemnification of any person who
is serving or has served as a director or officer of the Registrant, against all
liabilities and expenses incurred in connection with any action, suit or
proceeding arising out of such service to the full extent permitted under
Maryland law.
Section 2-418 of the Maryland General Corporation Law establishes
provisions whereby a Maryland corporation may indemnify any director or officer
made a party to an action or proceeding by reason of service in that capacity,
against judgments, penalties, fines, settlements and reasonable expenses
incurred in connection with such action or proceeding unless it is proved that
the director or officer (i) acted in bad faith or with active and deliberate
dishonesty, (ii) actually received an improper personal benefit in money,
property or services or (iii) in the case of a criminal proceeding, had
reasonable cause to believe that his act was unlawful. However, if the
proceeding is a derivative suit in favor of the corporation, indemnification may
not be made if the individual is adjudged to be liable to the corporation. In no
case may indemnification be made until a determination has been reached that the
director or officer has met the applicable standard of conduct. Indemnification
for reasonable expenses is mandatory if the director or officer has been
successful on the merits or otherwise in the defense of any action or proceeding
covered by the indemnification statute. The statute also provides for
indemnification of directors and officers by court order. The indemnification
provided or authorized in the indemnification statute does not preclude a
corporation from extending other rights (indemnification or otherwise) to
directors and officers.
The Registrant's officers and directors are insured against certain
liabilities under certain policies maintained by the Registrant with aggregate
coverage of $35,000,000.
II-1
The foregoing summaries are subject to the complete text of the
statute, by-laws and agreements referred to above and are qualified in their
entirety by reference thereto.
Item 16. Exhibits
The following is a list of all exhibits filed as a part of this
Registration Statement on Form S-3, including those incorporated herein by
reference.
Exhibit
Number Description of Exhibit
------ ----------------------
1.1* The form of Underwriting Agreement for Debt Securities.
1.2 The form of Underwriting Agreement for Debt Warrants will
be filed as an exhibit to a current report of the
Registrant on Form 8-K and incorporated herein by
reference.
1.3 The form of Underwriting Agreement for Equity Units will
be filed as an exhibit to a Current Report of the
Registrant on Form 8-K and incorporated herein by
reference.
1.4 The form or forms of Underwriting Agreement for Preferred
Stock and Common Stock Warrants, Stock Purchase
Contracts, Preferred Stock and Common Stock will be filed
as an exhibit to a Current Report of the Registrant on
Form 8-K and incorporated herein by reference.
4(a) Indenture for Senior Securities between Legg Mason, Inc.
and The Bank of New York, as Trustee, filed as exhibit to
the Registrant's Current Report on Form 8-K dated
February 9, 1996 and incorporated herein by reference.
4(b) Form of Indenture for Subordinated Securities between
Legg Mason, Inc. and The Bank of New York, as Trustee,
filed as exhibit to the Registrant's Registration
Statement (file number 333-00151) on Form S-3 dated
January 11, 1996 and incorporated herein by reference.
4(c) The form or forms of Debt Securities with respect to each
particular series of debt securities registered hereunder
will be filed as an exhibit to a Current Report of the
Registrant on Form 8-K and incorporated herein by
reference.
4(d) The form of Stock Purchase Contract will be filed as an
exhibit to a Current Report of the Registrant on Form 8-K
and incorporated herein by reference.
4(e) The form of Equity Unit Certificate will be filed as an
exhibit to a Current Report of the Registrant on Form 8-K
and incorporated herein by reference.
4(f) The form of Debt Warrant Agreement, including the form of
Debt Warrant Certificate, will be filed as an exhibit to
a Current Report of the Registrant on Form 8-K and
incorporated herein by reference.
II-2
4(g) The form of Preferred Stock and Common Stock Warrant
Agreement, including the forms of Preferred Stock and
Common Stock Warrant Certificate, will be filed as an
exhibit to a Current Report of the Registrant on Form 8-K
and incorporated herein by reference.
4(h) The form of certificate representing Preferred Stock will
be filed as an exhibit to a Current Report of the
Registrant on Form 8-K and incorporated herein by
reference.
4(i) Form of certificate representing Common Stock, filed as
exhibit to the Registrant's Registration Statement on
Form 8-A, amendment No. 5, dated February 23, 2001 and
incorporated herein by reference.
4(j) Articles of Incorporation of Legg Mason, Inc., as
amended, filed as exhibit to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30,
2000 and incorporated herein by reference.
4(k) Bylaws of Legg Mason Inc., as amended and restated April
25, 1988, filed as exhibit to the Registrant's Annual
Report on Form 10-K for the year ended March 31, 1988 and
incorporated herein by reference.
4(l) Form of Articles Supplementary relating to Preferred
Stock of Legg Mason, Inc. will be filed as an exhibit to
a Current Report of the Registrant on Form 8-K and
incorporated herein by reference.
5.1 Opinion of Shearman & Sterling.
5.2 Opinion of Robert F. Price, Esq.
12(a) Statements re: Computation of Consolidated Ratio of
Earnings to Fixed Charges, filed as exhibit to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2002 and incorporated herein
by reference.
12(b) Statements re: Computation of Consolidated Ratio of
Earnings to Fixed Charges and Preferred
Stock Dividends.
23(a) Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23(b) Consent of Shearman & Sterling (included in Exhibit 5.1).
23(c) Consent of Robert F. Price, Esq. (included in Exhibit
5.2).
24 Powers of Attorneys (included in the signature pages).
25(a)* The Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of the Trustee for the Senior
Indenture.
25(b)* The Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of the Trustee for the
Subordinated Indenture.
II-3
-------------
* Previously filed.
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: (i) To include any
prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement; notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the effective
registration statement; and (iii) To include any material information with
respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement; provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to section 13 or section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes that (i) for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the time it was
II-4
declared effective and (ii) for the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions set forth in Item 15, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Baltimore, State of Maryland, on January 10, 2003.
LEGG MASON, INC.
(Registrant)
By /s/ Raymond A. Mason
---------------------
Name: Raymond A. Mason
Title: Chairman of the Board, President
and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Raymond A. Mason, Robert F. Price
and Richard J. Himelfarb, or any of them, his true and lawful attorneys-in-fact,
with full powers of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments,
including any post-effective amendments, to this registration statement, and to
file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as they might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact or their
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
/s/ Raymond A. Mason Chairman of the Board, January 10, 2003
--------------------------- President, Chief
Raymond A. Mason Executive Officer and
Director (Principal
Executive Officer)
/s/ Charles J. Daley, Jr. Senior Vice President January 10, 2003
--------------------------- (Principal Financial
Charles J. Daley, Jr. and Accounting Officer)
/s/ James W. Brinkley Director January 10, 2003
---------------------------
James W. Brinkley
/s/ Harry M. Ford, Jr. Director January 10, 2003
---------------------------
Harry M. Ford, Jr.
/s/ Nicholas J. St. George Director January 10, 2003
---------------------------
Nicholas J. St. George
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/s/ Richard J. Himelfarb Director January 10, 2003
----------------------------
Richard J. Himelfarb
/s/ James E. Ukrop Director January 10, 2003
----------------------------
James E. Ukrop
/s/ Harold L. Adams Director January 10, 2003
----------------------------
Harold L. Adams
/s/ John E. Koerner, III Director January 10, 2003
----------------------------
John E. Koerner, III
/s/ Roger W. Schipke Director January 10, 2003
----------------------------
Roger W. Schipke
/s/ Edward I. O'Brien Director January 10, 2003
----------------------------
Edward I. O'Brien
/s/ Peter F. O'Malley Director January 10, 2003
----------------------------
Peter F. O'Malley
/s/ Kurt L. Schmoke Director January 10, 2003
----------------------------
Kurt L. Schmoke
/s/ Dennis R. Beresford Director January 10, 2003
----------------------------
Dennis R. Beresford
Director January ___, 2003
----------------------------
Carl Bildt
II-7
Exhibit
Number Description of Exhibit
------ ----------------------
1.1* The form of Underwriting Agreement for Debt Securities.
1.2 The form of Underwriting Agreement for Debt Warrants will
be filed as an exhibit to a Current Report of the
Registrant on Form 8-K and incorporated herein by
reference.
1.3 The form of Underwriting Agreement for Equity Units will
be filed as an exhibit to a Current Report of the
Registrant on Form 8-K and incorporated herein by
reference.
1.4 The form or forms of Underwriting Agreement for Preferred
Stock and Common Stock Warrants, Stock Purchase Contract,
Preferred Stock and Common Stock will be filed as an
exhibit to a Current Report of the Registrant on Form 8-K
and incorporated herein by reference.
4(a) Indenture for Senior Securities between Legg Mason, Inc.
and The Bank of New York, as Trustee, filed as exhibit to
the Registrant's Current Report on Form 8-K dated
February 9, 1996 and incorporated herein by reference.
4(b) Form of Indenture for Subordinated Securities between
Legg Mason, Inc. and The Bank of New York, as Trustee,
filed as exhibit to the Registrant's Registration
Statement (file number 333-00151) on Form S-3 dated
January 11, 1996 and incorporated herein by reference.
4(c) The form or forms of Debt Securities with respect to each
particular series of debt securities registered hereunder
will be filed as an exhibit to a Current Report of the
Registrant on Form 8-K and incorporated herein by
reference.
4(d) The form of Stock Purchase Contract will be filed as an
exhibit to a Current Report of the Registrant on Form 8-K
and incorporated herein by reference.
4(e) The form of Equity Unit Certificate will be filed as an
exhibit to a Current Report of the Registrant on Form 8-K
and incorporated herein by reference.
4(f) The form of Debt Warrant Agreement, including the form of
Debt Warrant Certificate, will be filed as an exhibit to
a Current Report of the Registrant on Form 8-K and
incorporated herein by reference.
4(g) The form of Preferred Stock and Common Stock Warrant
Agreement, including the forms of Preferred Stock and
Common Stock Warrant Certificate, will be filed as an
exhibit to a Current Report of the Registrant on Form 8-K
and incorporated herein by reference.
4(h) The form of certificate representing Preferred Stock will
be filed as an exhibit to a Current Report of the
Registrant on Form 8-K and incorporated
II-8
herein by reference.
4(i) Form of certificate representing Common Stock, filed as
exhibit to the Registrant's Registration Statement on
Form 8-A, amendment No. 5, dated February 23, 2001 and
incorporated herein by reference.
4(j) Articles of Incorporation of Legg Mason, Inc., as
amended, filed as exhibit to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30,
2000 and incorporated herein by reference.
4(k) Bylaws of Legg Mason Inc., as amended and restated April
25, 1988, filed as exhibit to the Registrant's Annual
Report on Form 10-K for the year ended March 31, 1988 and
incorporated herein by reference.
4(l) Form of Articles Supplementary relating to Preferred
Stock of Legg Mason, Inc. will be filed as an exhibit to
a Current Report of the Registrant on Form 8-K and
incorporated herein by reference.
5.1 Opinion of Shearman & Sterling.
5.2 Opinion of Robert F. Price, Esq.
12(a) Statements re: Computation of Consolidated Ratio of
Earnings to Fixed Charges, filed as exhibit to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2002 and incorporated herein
by reference.
12(b) Statements re: Computation of Consolidated Ratio of
Earnings to Fixed Charges and Preferred Stock Dividends.
23(a) Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23(b) Consent of Shearman & Sterling (included in Exhibit 5.1).
23(c) Consent of Robert F. Price, Esq. (included in Exhibit
5.2).
24 Powers of Attorneys (included in the signature pages).
25(a)* The Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of the Trustee for the Senior
Indenture.
25(b)* The Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of the Trustee for the
Subordinated Indenture.
-------------
* Previously filed.
II-9