UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                           SCHEDULE 14A INFORMATION

          Proxy Statement Pursuant to Section 14(a) of the Securities
                    Exchange Act of 1934 (Amendment No.  )

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                                              RULE 14A-6(E)(2))

[X]  Definitive Proxy Statement

[_]  Definitive Additional Materials

[_]  Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12


                               LEGG MASON, INC.
--------------------------------------------------------------------------------
               (Name of Registrant as Specified In Its Charter)


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   (Name of Person(s) Filing Proxy Statement, if other than the Registrant)


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Notes:




                             [LOGO OF LEGG MASON]

                               100 Light Street
                           Baltimore, Maryland 21202

                                                                  June 21, 2001

Dear Stockholder:

  You are cordially invited to attend the Annual Meeting of Stockholders which
will be held at The Center Club, 100 Light Street, 16th Floor, Baltimore,
Maryland at 10:00 a.m. on Tuesday, July 24, 2001. On the following pages you
will find the Notice of Annual Meeting and Proxy Statement.

  Whether or not you plan to attend the meeting, it is important that your
shares be represented and voted at the meeting. Accordingly, please date, sign
and return the enclosed proxy card promptly.

  I hope that you will attend the meeting, and I look forward to seeing you
there.

                                          Sincerely,

                                          /s/ Raymond A. Mason
                                          --------------------
                                          RAYMOND A. MASON
                                          Chairman of the Board, President and
                                           Chief Executive Officer


                               LEGG MASON, INC.

                               ----------------

                   NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
                            Tuesday, July 24, 2001

                               ----------------

To the Stockholders of
 LEGG MASON, INC.:

  The Annual Meeting of Stockholders of Legg Mason, Inc., a Maryland
corporation, will be held at The Center Club, 100 Light Street, 16th Floor,
Baltimore, Maryland, on Tuesday, July 24, 2001 at 10:00 a.m. to consider and
vote upon:

    (1) The election of four directors for the three-year term ending in
        2004;

    (2) Amendment of the Legg Mason Wood Walker, Incorporated Deferred
        Compensation Phantom Stock Plan;

    (3) Reapproval of the Legg Mason, Inc. 1996 Equity Incentive Plan;

    (4) Approval of the Legg Mason, Inc. Employee Stock Purchase Plan; and

    (5) Any other matter that may properly come before the meeting or any
        adjournment thereof.

  The Board of Directors has fixed the close of business on May 25, 2001 as
the date for determining stockholders of record entitled to notice of and to
vote at the Annual Meeting.

  Your attention is directed to the accompanying Proxy Statement and 2001
Annual Report to Stockholders.

                                          By order of the Board of Directors

                                          /s/ ROBERT F. PRICE
                                          -------------------
                                          ROBERT F. PRICE
                                          Secretary

June 21, 2001


                               LEGG MASON, INC.
                               100 Light Street
                           Baltimore, Maryland 21202

                               ----------------

                                PROXY STATEMENT

                               ----------------

                        ANNUAL MEETING OF STOCKHOLDERS
                            Tuesday, July 24, 2001

                               ----------------

  The enclosed proxy is solicited by the Board of Directors of Legg Mason,
Inc. ("Legg Mason") and may be revoked by the stockholder at any time before
it is exercised. The cost of soliciting proxies will be borne by Legg Mason.
Proxies will be solicited by mail and may be solicited by Legg Mason's
officers, directors and employees personally or by telephone or any other
means of communication. Legg Mason may reimburse brokers, banks, custodians,
nominees and other fiduciaries for their reasonable out-of-pocket expenses in
forwarding proxy materials to their principals. Legg Mason is sending this
proxy material to stockholders on or about June 21, 2001.

  Stockholders of record at the close of business on May 25, 2001 are entitled
to notice of and to vote at the meeting. As of the close of business on that
date, there were outstanding and entitled to vote (i) 63,192,901 shares of
Common Stock, $.10 par value ("Common Stock"), of Legg Mason, each of which is
entitled to one vote and (ii) 2,721,886 Exchangeable Shares, no par value
("Exchangeable Shares"), of a Canadian subsidiary of Legg Mason, each of which
is exchangeable into, and has voting rights identical to, one share of Common
Stock. See "Security Ownership of Management and Principal Stockholders" for
information regarding ownership of Common Stock.

  Directors are elected by a plurality of the votes cast by the holders of
shares of Common Stock and Exchangeable Shares present in person or
represented by proxy at the meeting, with a quorum present. For purposes of
the election of directors, abstentions and broker non-votes do not affect the
plurality vote. The affirmative vote of a majority of the votes cast on the
proposal is required for approval of the amendment of the Legg Mason Wood
Walker, Incorporated Deferred Compensation Phantom Stock Plan and for approval
of the Legg Mason, Inc. Employee Stock Purchase Plan provided the total votes
cast on each proposal represent over 50% in interest of all securities
entitled to vote on the proposal. The affirmative vote of a majority of the
votes cast on the matter is required for reapproval of the Legg Mason, Inc.
1996 Equity Incentive Plan. Abstentions and broker non-votes will have the
effect of a vote against the proposed amendment of the Legg Mason Wood Walker,
Incorporated Deferred Compensation Phantom Stock Plan and the proposed
approval of the Legg Mason, Inc. Employee Stock Purchase Plan, unless holders
of more than 50% in interest of all securities entitled to vote on each
proposal cast votes, in which event abstentions and broker non-votes will not
have any effect on the results of the vote. Abstentions and broker non-votes
will have no effect on the proposed reapproval of the Legg Mason, Inc. 1996
Equity Incentive Plan.


                             ELECTION OF DIRECTORS

  Legg Mason's Board of Directors is divided into three classes. Each year one
class is elected to serve for a term of three years. The stockholders will
vote at this Annual Meeting for the election of four directors for the three-
year term expiring at the Annual Meeting of Stockholders in 2004. All nominees
presently serve as directors. Two directors in the class whose terms expire at
the 2001 Annual Meeting, W. Curtis Livingston and William Wirth, are not
standing for re-election. Effective as of the 2001 Annual Meeting, the Board
of Directors will be reduced to 13 members.

  The persons named in the enclosed proxy will vote for the election of the
nominees named below unless authority to vote is withheld. In the event any
nominee is unable to serve, the persons named in the proxy will vote for the
substitute nominee that they, in their discretion, shall determine. The Board
of Directors has no reason to believe that any nominee named herein will be
unable to serve.

Nominees for Director for the Term Expiring in 2004*

  Raymond A. Mason, age 64, has served as Chairman of the Board, President and
Chief Executive Officer of Legg Mason since its formation in 1981. He has
served as Chairman and Chief Executive Officer of Legg Mason Wood Walker,
Incorporated ("LMWW"), Legg Mason's principal subsidiary, since 1975, and was
its President from 1970 to November 1985. Mr. Mason is Chairman of the Board
and a director of the Legg Mason Value Trust, Inc. and the Legg Mason Special
Investment Trust, Inc.

  James W. Brinkley, age 64, has been a director of Legg Mason since its
formation in 1981 and has served as a Senior Executive Vice President of Legg
Mason since December 1983. In November 1985, he became President of LMWW and
in February 1998, he also became the Chief Operating Officer of LMWW. During
2000, Mr. Brinkley was Chairman of the Securities Industry Association.

  Edmund J. Cashman, Jr., age 64, has been a director of Legg Mason since its
formation in 1981 and has served as a Senior Executive Vice President of Legg
Mason and LMWW since December 1983. He is responsible for supervising LMWW's
syndicate, fixed-income securities, public finance and institutional sales
activities. Mr. Cashman is also a director or trustee of five funds within the
Legg Mason mutual funds complex and a director of EA Engineering, Science, and
Technology, Inc.

  Harold L. Adams, age 62, has been a director of Legg Mason since January
1988. He has been the Chairman and Chief Executive Officer of RTKL Associates,
Inc., an international architecture, engineering and planning firm, since 1987
and was the President of that firm from 1969 through 2000.

Directors Continuing in Office

                   Directors whose terms will expire in 2002

  Nicholas J. St. George, age 62, has been a director of Legg Mason since July
1983. He is engaged in private investment activities. He was the Chief
Executive Officer of Oakwood Homes Corporation, a manufacturer and retailer of
manufactured homes, from 1979 to 1999.
--------
* Messrs. Mason and Brinkley currently serve on the Board of Directors with
  terms expiring in 2002. To balance the classes, they are standing for re-
  election this year. Upon their re-election, the class whose terms expire in
  2002 will be reduced to 4 members.

                                       2


  Richard J. Himelfarb, age 59, has served as a director of Legg Mason since
November 1983. He has been a Senior Executive Vice President of Legg Mason and
LMWW since July 1995 and was an Executive Vice President of those companies
from November 1983 to July 1995. He is responsible for supervising the
corporate and real estate finance activities of LMWW and other subsidiaries of
Legg Mason.

  Roger W. Schipke, age 64, has been a director of Legg Mason since January
1991. He is engaged in private investment activities. From August 1993 through
May 1996, he was Chairman of the Board and Chief Executive Officer of Sunbeam
Corporation, a manufacturer of consumer products. Mr. Schipke is a director of
Brunswick Corporation, Oakwood Homes Corporation and the Rouse Company.

  Edward I. O'Brien, age 72, has been a director of Legg Mason since February
1993. He is engaged in private investment activities. He serves in an advisory
capacity to certain entities in the securities business, having served as a
consultant to the Securities Industry Association from December 1992 to
November 1993, and as its President from 1974 to December 1992. Mr. O'Brien is
a director of a number of mutual funds in the Neuberger & Berman mutual fund
complex.

                   Directors whose terms will expire in 2003

  Harry M. Ford, Jr., age 68, has been a director of Legg Mason since its
formation in 1981 and has served as a Senior Vice President of Legg Mason
since May 1982. Mr. Ford's principal occupation is as a Financial Advisor with
LMWW.

  Margaret DeB. Tutwiler, age 50, has been a director of Legg Mason since July
1995. Since January 2001 she has been the ambassador designate, subject to
confirmation, to the Kingdom of Morocco. Legg Mason expects that Ms. Tutwiler
will be required to resign from the Board when her position is confirmed by
the United States Senate. From May 1997 until January 2001, she served as
Senior Vice President for Communications and Public Affairs for the Cellular
Telecommunications Industry Association. From May 1993 until May 1997, she was
engaged in the public relations and strategic communications business through
firms of which she was the sole or a principal owner.

  James E. Ukrop, age 63, has been a director of Legg Mason since January
1985. Since 1975, he has been the principal executive officer of Ukrop Super
Markets, Inc., which operates a chain of supermarkets in Virginia. Mr. Ukrop
is a director of Owens & Minor, Inc. and Chairman of First Market Bank.

  John E. Koerner, III, age 58, has been a director of Legg Mason since
October 1990. He has been the President of Koerner Capital Corporation, a
private investment corporation, since August 1995.

  Peter F. O'Malley, age 62, has been a director of Legg Mason since April
1992. He has been Of Counsel to the law firm of O'Malley, Miles, Nylen &
Gilmore, P.A. and its predecessor, O'Malley & Miles, since 1989. Mr. O'Malley
currently serves as the President of Aberdeen Creek Corp., a privately-held
company engaged in investment, business consulting and development activities,
and is a director of Potomac Electric Power Company, Legg Mason Trust, fsb and
Forensic Technologies International Corp.

                                       3


Committees of the Board--Board Meetings

  The Board of Directors has an Audit Committee and a Compensation Committee.
It does not have a nominating committee.

  The Audit Committee, which consists of Messrs. St. George (Chairman),
O'Brien and Schipke, is primarily concerned with the effectiveness of the
audits of Legg Mason by Legg Mason's independent auditors. Its duties include:

  .  recommending the selection of independent auditors;

  .  reviewing the scope and results of the audits conducted by them;

  .  reviewing the activities of Legg Mason's internal auditors; and

  .  reviewing the organization and scope of Legg Mason's internal system of
     accounting and financial controls.

  The Compensation Committee, which consists of Messrs. Koerner (Chairman) and
Ukrop and Ms. Tutwiler, is responsible for recommending and approving the
compensation of the senior executive officers of Legg Mason. The Compensation
Committee also serves as the administrative committee of certain of Legg
Mason's employee benefit plans.

  During the fiscal year ended March 31, 2001, the Board of Directors met six
times, the Audit Committee met five times and the Compensation Committee met
four times. Each director attended 75% or more of the aggregate number of
meetings of the Board and all committees of the Board on which the director
served except Dr. Wirth, who attended 66% of the meetings of the Board of
Directors.

Compensation of Directors

  Directors who are not employees of Legg Mason receive:

  .  an annual retainer of $20,000;

  .  a fee of $4,000 for each Board meeting attended; and

  .  reimbursement of expenses for attendance at meetings.

  In addition, committee members receive a fee of $2,500 for each committee
meeting attended, and the chairperson of each committee receives an additional
annual retainer of $5,000.

  Under the terms of the Legg Mason, Inc. Stock Option Plan for Non-Employee
Directors, Legg Mason grants each non-employee director, on the date he or she
is first elected as a director, an option to purchase 6,000 shares of Common
Stock, and, on the date of each subsequent Annual Meeting of Stockholders, an
option to purchase an additional 6,000 shares. All options have an exercise
price equal to the fair market value of the Common Stock on the date of grant.
The options are exercisable immediately upon the date of grant and have a ten-
year term, subject to earlier termination in the event the recipient ceases to
be a director of Legg Mason. During the fiscal year ended March 31, 2001, each
of the non-employee directors received an option to purchase 6,000 shares of
Common Stock. This stock option plan covers an aggregate of 1,100,000 shares
of Common Stock.

                                       4


          SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS

  The following table sets forth information regarding the ownership of Common
Stock of Legg Mason as of May 25, 2001 by each director, each executive
officer named in the Summary Compensation Table, all executive officers and
directors as a group, and each person who, to the best of Legg Mason's
knowledge, beneficially owned more than five percent of Legg Mason's
outstanding Common Stock.



                                                                   PERCENT OF
                                                   COMMON STOCK    OUTSTANDING
                                                   BENEFICIALLY      COMMON
                  NAME OF OWNER                    OWNED(1)(2)     STOCK(2)(3)
                  -------------                    ------------    -----------
                                                             
AXA Financial, Inc................................  6,620,307(4)      10.48
American Express Financial Corporation............  3,630,656(5)       5.75
Raymond A. Mason..................................  1,814,771(6)       2.86
James W. Brinkley.................................    743,864(7)       1.18
Edmund J. Cashman, Jr. ...........................    371,836             *
Richard J. Himelfarb..............................    292,880(8)          *
Harry M. Ford, Jr. ...............................    149,202             *
Edward A. Taber, III..............................    126,958(9)          *
James E. Ukrop....................................    125,584             *
Timothy C. Scheve.................................    101,753(10)         *
Thomas P. Mulroy..................................     89,546(11)         *
W. Curtis Livingston..............................     75,913(12)         *
John E. Koerner, III..............................     75,390(13)         *
Peter F. O'Malley.................................     69,324             *
Harold L. Adams...................................     68,233             *
Edward I. O'Brien.................................     54,260             *
Roger W. Schipke..................................     49,128(14)         *
Margaret DeB. Tutwiler............................     33,996             *
William Wirth.....................................     31,186             *
Nicholas J. St. George............................     23,332(15)         *
All executive officers and directors as a group
 (26 persons).....................................  4,865,476          7.54

--------
  * Less than 1%.

 (1) Except as otherwise indicated and except for shares held by members of an
     individual's family or in trust, all shares are held with sole
     dispositive and voting power.

 (2) Includes the following number of shares subject to options exercisable
     within 60 days from May 25, 2001: Mr. Mason--350,668; Mr. Brinkley--
     109,138; Mr. Cashman--27,864; Mr. Himelfarb--62,540; Mr. Ford--37,716;
     Mr. Taber--22,596; Mr. Ukrop--52,658; Mr. Scheve--52,328; Mr. Mulroy--
     35,998; Mr. Livingston--20,398; Mr. Koerner--49,326; Mr. O'Malley--
     55,992; Mr. Adams--52,658; Mr. O'Brien--52,660; Mr. Schipke--40,662; Ms.
     Tutwiler--33,996; Dr. Wirth--28,664; Mr. St. George--23,332; and all
     executive officers and directors as a group--1,345,898. For purposes of
     determining the percentage of outstanding Common Stock for any person on
     the table, these options held by that person are assumed to have been
     exercised. Does not include shares represented by vested beneficial
     interests in the Legg Mason Profit Sharing and 401(k) Plan and Trust.

 (3) For purposes of determining percentages of outstanding Common Stock,
     Exchangeable Shares are not included because none are beneficially owned
     by any director or executive officer.

 (4) Represents shares held by the following two subsidiaries of AXA
     Financial, Inc. ("AXA"), 1290 Avenue of the Americas, New York, New York
     10104: Alliance Capital Management, L.P. holds 4,411,807 shares for
     investment purposes on behalf of client discretionary investment advisory

                                       5


      accounts; and The Equitable Life Assurance Society of the United States
      holds 2,208,500 shares for investment purposes. All of the 6,620,307
      shares are held with sole dispositive power, 3,214,350 shares are held
      with sole voting power and 2,512,800 shares are held with shared voting
      power. The number of shares in the preceding information is based upon a
      Schedule 13G report filed by AXA reporting ownership as of December 31,
      2000. The percentages are based upon Legg Mason's outstanding shares as of
      May 25, 2001.

 (5)  Represents shares held by American Express Financial Corporation
      ("American Express"), 200 AXP Financial Center, Minneapolis, MN 55474.
      All of the 3,630,656 shares are held with sole dispositive power,
      3,129,271 shares are held with shared voting power and no shares are
      held with sole voting power. The number of shares in the preceding
      information is based upon a Schedule 13G report filed by American
      Express reporting ownership as of December 31, 2000. The percentages are
      based upon Legg Mason's outstanding shares as of May 25, 2001.

 (6)  Does not include 12,600 shares owned by Mr. Mason's wife, as to which
      Mr. Mason disclaims beneficial ownership. Includes 40,000 shares of
      restricted stock as to which Mr. Mason has voting power, but which are
      subject to transfer restrictions.

 (7)  Excludes 7,332 shares owned by a charitable foundation of which Mr.
      Brinkley is co-trustee.

 (8)  Includes 2,787 shares of restricted stock as to which Mr. Himelfarb has
      voting power, but which are subject to transfer restrictions.

 (9)  Excludes 1,600 shares held in trust. Includes 3,431 shares of restricted
      stock as to which Mr. Taber has voting power, but which are subject to
      transfer restrictions.

(10)  Includes 3,431 shares of restricted stock as to which Mr. Scheve has
      voting power, but which are subject to transfer restrictions.

(11)  Includes 3,216 shares of restricted stock as to which Mr. Mulroy has
      voting power, but which are subject to transfer restrictions.

(12)  Includes 2,400 shares held by Mr. Livingston as a trustee of a trust for
      the benefit of his children.

(13)  Includes 2,400 shares owned by Mr. Koerner's children.

(14)  Includes 1,800 shares held in trust of which Mr. Schipke is trustee.

(15)  Does not include 29,332 shares owned by Mr. St. George's wife, as to
      which Mr. St. George disclaims beneficial ownership.

                                       6


                            EXECUTIVE COMPENSATION

  The following table provides information concerning compensation for the
past three fiscal years of Legg Mason's Chief Executive Officer and each of
the four other most highly compensated executive officers.

                          Summary Compensation Table



                                                                     Long-Term
                                    Annual Compensation            Compensation
                              -------------------------------- ------------------------
                                                               Restricted
Name and Principal                                Other Annual   Stock        Options      All Other
Position                 Year  Salary   Bonus(1)  Compensation Awards(2)     Granted(#) Compensation(3)
------------------       ---- -------- ---------- ------------ ----------    ---------- ---------------
                                                                   
Raymond A. Mason........ 2001 $327,500 $6,650,000    $1,993            --     100,000      $ 28,428
 Chairman of the Board,  2000  300,000  6,800,000     1,899            --          --        40,211
  President              1999  295,833  4,759,000     1,651    $2,220,000(4)   60,000        45,087
 and Chief Executive
  Officer

James W. Brinkley....... 2001 $272,920 $2,950,000    $2,085            --      27,000      $145,394
 Senior Executive Vice   2000  249,996  3,100,000     1,968            --          --       127,459
  President              1999  247,913  2,300,000     1,684            --      25,000        98,492

Thomas P. Mulroy(5)..... 2001 $238,333 $1,350,000    $1,843    $  150,000(6)   18,000      $ 12,731
 Senior Vice President

Timothy C. Scheve....... 2001 $238,750 $1,440,000        --    $  160,000(6)   18,000      $ 12,731
 Senior Executive Vice   2000  223,750  1,625,000        --            --      20,000        11,600
  President              1999  205,833    850,000        --            --      18,000         8,800

Edward A. Taber, III.... 2001 $239,167 $1,440,000        --    $  160,000(6)   12,000      $ 12,731
 Senior Executive Vice   2000  230,004  1,600,000        --            --      12,000        11,600
  President              1999  229,170  1,350,000        --            --      18,000         8,800

--------
(1)  Each fiscal year Legg Mason sets aside an executive bonus pool in an
     amount up to 10% of Legg Mason's pre-tax income for the fiscal year
     (before deducting the bonuses). The selection of the participants in the
     pool, the total amount received for bonuses, and the allocation of
     incentive bonuses among the executive officers identified in this table
     is determined by the Compensation Committee as described in the
     Compensation Committee Report on Executive Compensation.

(2)  Awards have been valued for this table using the closing price of Legg
     Mason Common Stock on the New York Stock Exchange on the grant date of
     the award.

(3)  Amounts for fiscal 2001 include $12,731 for each individual contributed
     under the Legg Mason Profit Sharing and 401(k) Plan and Trust, and
     include for Messrs. Mason and Brinkley, respectively, $15,697 and
     $132,663 of commissions earned from securities brokerage activities.

(4)  The 80,000 shares of restricted stock granted to Mr. Mason vest in 25%
     annual increments commencing December 8, 1999. Mr. Mason receives the
     dividends paid on this stock. As of March 31, 2001, the number and value
     of shares of restricted stock held by Mr. Mason was 40,000 shares and
     $1,684,000.

(5)  Mr. Mulroy became an executive officer of Legg Mason during fiscal 2001.

(6)  On May 15, 2001, Messrs. Mulroy, Scheve and Taber were granted 3,216,
     3,431 and 3,431 shares of restricted stock, respectively, in lieu of
     receiving a portion of their annual cash bonuses for fiscal 2001. These
     individuals receive the dividends paid on this restricted stock. The
     shares vest in 33% annual increments commencing May 15, 2002. Prior to
     the grants, these individuals owned no restricted stock.

                                       7


                                 STOCK OPTIONS

  The following table summarizes option grants made by Legg Mason during the
fiscal year ended March 31, 2001 to the executive officers named in the
Summary Compensation Table.

                         Option Grants in Fiscal 2001



                                Individual Grants(1)
                         -----------------------------------
                         Number of    % of Total
                         Securities    Options
                         Underlying   Granted to   Exercise
                          Options     Employees      Price   Expiration    Grant Date
      Name                Granted   in Fiscal Year ($/Share)    Date    Present Value(2)
      ----               ---------- -------------- --------- ---------- ----------------
                                                         
Raymond A. Mason........  100,000        4.94%      $52.90   7/22/2008     $2,325,330
James W. Brinkley.......   27,000        1.33        52.90   7/22/2008        627,839
Thomas P. Mulroy........   18,000        0.89        52.90   7/22/2008        418,559
Timothy C. Scheve.......   18,000        0.89        52.90   7/22/2008        418,559
Edward A. Taber, III....   12,000        0.59        52.90   7/22/2008        279,040

--------
(1)  Option grants made pursuant to the Legg Mason, Inc. 1996 Equity Incentive
     Plan. The exercise price of each option granted under the Plan is not
     less than the fair market value of the Common Stock on the grant date.
     Options generally are not exercisable during the first year after the
     date of grant, and thereafter generally become exercisable in cumulative
     installments of 20% on each anniversary of the date of grant, so that the
     options are fully exercisable on and after 5 years from the date of grant
     until the eighth year following that date, subject in all cases to
     accelerated vesting in certain circumstances. Option holders may use
     previously owned shares to pay all or part of the exercise price.

(2)  The stock options were valued using the Black-Scholes Option Pricing
     Model. The following assumptions were made for purposes of calculating
     the Grant Date Present Value: an expected option term of 8 years to
     exercise; a dividend yield of .85%; stock price volatility of 29.25%,
     based upon the daily Common Stock market price for the 8 years prior to
     the grant date; and risk-free interest rate of 6.17%. The actual value
     realized, if any, on stock option exercises will be dependent on overall
     market conditions and the future performance of Legg Mason and its Common
     Stock. Legg Mason cannot be certain that the actual value realized will
     approximate the amount calculated under the valuation model.

  The following table summarizes option exercises during the fiscal year ended
March 31, 2001 by the executive officers named in the Summary Compensation
Table and the value of their unexercised options at March 31, 2001.

  Aggregate Option Exercises During Fiscal 2001 and Value of Options Held at
                                March 31, 2001



                                                   Number of Securities      Value of Unexercised
                          Number of               Underlying Unexercised    In-the-Money Options at
                           Shares                Options at March 31, 2001     March 31, 2001(1)
                         Acquired on    Value    ------------------------- -------------------------
      Name                Exercise   Realized(1) Exercisable Unexercisable Exercisable Unexercisable
      ----               ----------- ----------- ----------- ------------- ----------- -------------
                                                                     
Raymond A. Mason........   43,896    $1,163,535    230,668      314,666    $6,494,403   $4,912,957
James W. Brinkley.......       --            --     96,128       49,200     2,967,935      332,022
Thomas P. Mulroy........   18,584       663,762     23,808       56,192       381,474      461,346
Timothy C. Scheve.......    8,000       257,280     54,804       56,192     1,500,756      461,346
Edward A. Taber, III....   11,000       484,701     59,568       44,096     1,822,584      529,682

--------
(1)  Value realized and value of unexercised options are calculated by
     determining the difference between the fair market value of the shares
     underlying the options and the exercise price of the options at exercise
     or March 31, 2001, respectively.

                                       8


            COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

  Legg Mason's executive compensation program is designed to attract, motivate
and retain the management talent needed to strengthen Legg Mason's position in
the financial services industry and to achieve its business objectives.

  Salaries of senior executive officers are set at levels which the
Compensation Committee (the "Committee") of the Board of Directors believes
are competitive with salaries of executives in similar positions at comparable
financial services companies. In addition, in determining senior executive
compensation, the Committee places substantial emphasis on incentive
compensation directly related to short and long-term corporate performance
through annual cash bonuses and stock option grants. The members of the
Committee are all non-employee directors.

  As is common in the financial services industry, a significant portion of
total cash compensation of Legg Mason's executive officers is paid in the form
of annual bonuses. For example, in fiscal 2001, approximately 95% of the
annual cash compensation of Raymond A. Mason, Legg Mason's Chief Executive
Officer ("CEO"), was paid as an annual bonus. This is intended to maximize the
portion of an individual's compensation that is subject to fluctuation each
year based upon corporate and individual performance.

  The compensation program is structured to recognize each executive's level
of responsibility and to reward exceptional individual and corporate
performance. The program takes into account both annual operating results and
the desirability of providing incentives for future improvement. This includes
the ability to implement Legg Mason's business plans as well as to react to
unanticipated external factors which can have a significant impact on
corporate performance. Compensation decisions for all executives, including
the CEO, are based on the same criteria.

  In carrying out its responsibilities, the Committee has from time to time
availed itself of independent consulting advice in connection with its
consideration of executive compensation plans.

  There are three major components of Legg Mason's executive compensation
program: base salary, short-term awards, and long-term incentive awards.

Base Salary

  A competitive base salary is important in fostering a career orientation
among executives consistent with the long-term nature of Legg Mason's business
objectives. The Committee determines the salary of the CEO and Legg Mason's
other senior executive officers based on its consideration of the CEO's
recommendations.

  Salaries and salary adjustments are based on the responsibilities,
performance and experience of each executive, regular reviews of competitive
positioning (comparing Legg Mason's salary structure with that of similar
companies) and business performance. While there is no specific weighting of
these factors, the responsibilities, performance and experience of each
executive and reviews of competitive positioning are the most important
considerations.

  Raymond A. Mason, Legg Mason's CEO, has more than 35 years of service with
Legg Mason. The Committee established his fiscal 2001 salary based upon
competitive positioning and Legg Mason's overall compensation approach of
limiting base salary levels and emphasizing incentive compensation.

                                       9


Short-Term Awards

  Short-term awards to executives are based on Legg Mason's fiscal year
operating results and recognize contributions to the business during the
fiscal year.

  Legg Mason's Executive Incentive Compensation Plan provides for an executive
bonus pool in an amount up to 10% of Legg Mason's pre-tax income (calculated
before deduction of the bonuses) for annual awards to the CEO and other key
executive officers selected by the Committee. During the first quarter of the
fiscal year the Committee established maximum percentage allocations of the
total pool for certain key executive officers. Mr. Mason's maximum percentage
allocation was established at 35%. The pre-established maximum percentage
allocation and the specific bonus the CEO and each of the other selected
executives receives within the amount determined pursuant to the pre-
established percentage allocation is dependent on the executive's level of
responsibility and individual performance. The Committee annually evaluates
levels of responsibility without regard to any specific formula. Assessments
of individual performance are made annually by the Committee after receiving
the evaluations and recommendations of the CEO. These assessments are based on
a number of factors, including individual and corporate performance,
initiative, business judgment and management skills.

  Total bonuses (including restricted stock awards) to the CEO and the four
other named executive officers with respect to fiscal 2001 aggregated 5.1% of
pre-tax income (before deduction of the bonuses), with 46.5% of the total
bonuses being awarded to Mr. Mason. For certain executive officers, not
including Mr. Mason, the Committee approved the issuance of restricted shares
of Common Stock in May 2001 in lieu of paying a portion of their cash bonuses
for fiscal 2001 under the Executive Incentive Compensation Plan. The portion
of the total bonus pool awarded to Mr. Mason for fiscal 2001 reflects his
significant personal contributions to the business and his leadership in
building Legg Mason's revenues, earnings and capital position. The award was
based on the Committee's general evaluation of Mr. Mason's overall
contribution as CEO to Legg Mason's performance levels. The Committee believes
that Mr. Mason's salary and cash bonus were appropriate in relation to
compensation of CEOs of comparable companies, taking into account the size and
business results of Legg Mason and those companies.

  Section 162(m) of the Internal Revenue Code limits deductions for certain
annual compensation in excess of $1,000,000 paid to individuals required to be
named in the summary compensation table in proxy statements of public
companies. The Committee believes it is important to balance the effectiveness
of executive compensation plans with the materiality of potentially reduced
tax deductions. Accordingly, the Committee may authorize payments that may not
be fully deductible if the Committee believes it is in the interest of Legg
Mason to do so.

Long-Term Incentive Awards

  Long-term incentive awards are designed to reinforce the importance of
building long-term value for Legg Mason's stockholders. All long-term
incentive awards made in fiscal 2001 were made under the stockholder-approved
Legg Mason, Inc. 1996 Equity Incentive Plan.

  Stock options and restricted shares of Common Stock were the only long-term
incentives granted to executive officers for fiscal 2001. The Committee
believes that stock option grants focus management's attention on long-term
growth in stockholder value and stock price appreciation. Generally, options
have a term of up to 10 years, are granted at the fair market value of Legg
Mason Common Stock on the date of grant, and an initial portion of the options
becomes exercisable one

                                      10


year from date of grant, with the balance becoming exercisable in increments
over the ensuing four years. Generally, recipients must remain in Legg Mason's
employ to exercise their options.

  The number of options that the Committee grants to executive officers is
based on individual performance (determined as described under "Short-Term
Awards") and level of responsibility, and is determined by the Committee after
considering the recommendations of the CEO. In some years, the Committee may
not grant a long-term incentive award to an executive officer in spite of his
or her individual performance and level of responsibility if it determines
that the officer has sufficient outstanding long-term incentive awards from
prior fiscal years. Award levels must be sufficient in size so that executives
develop strong incentives to achieve long-term corporate goals.

  In order to increase stock ownership of executive officers, the Committee
granted restricted shares of Common Stock to certain executive officers in
lieu of paying a portion of their cash bonuses for fiscal 2001 under Legg
Mason's Executive Incentive Compensation Plan. In May 2001 each recipient was
granted shares that had a fair market value, on the date the Committee
approved the grant, equal to the amount of cash bonus that was withheld. One-
third of the shares of restricted stock granted vest on each of the first
three anniversaries of the grant date. Prior to vesting, the shares may not be
transferred and are generally subject to forfeiture if the executive officer
ceases to be employed by Legg Mason.

                                          COMPENSATION COMMITTEE
                                            John E. Koerner, III, Chairman
                                            Margaret DeB. Tutwiler
                                            James E. Ukrop

Compensation Committee Interlocks and Insider Participation

  During the fiscal year ended March 31, 2001, John E. Koerner, III, Margaret
DeB. Tutwiler and James E. Ukrop served on the Compensation Committee. None of
these individuals has ever been an officer or employee of Legg Mason or any of
its subsidiaries and no "compensation committee interlocks" existed during
fiscal 2001.

                                      11


                            AUDIT COMMITTEE REPORT

  The Audit Committee of the Board of Directors assists the Board of Directors
in its oversight of the financial reporting of Legg Mason and its
subsidiaries, Legg Mason's financial reporting process and internal control
systems, Legg Mason's audit process and Legg Mason's process for monitoring
compliance with laws and regulations by Legg Mason and its subsidiaries. The
Audit Committee is composed of three non-employee directors and operates under
a written charter adopted by the Board of Directors. A copy of that charter is
attached to this Proxy Statement as Exhibit A. Each Audit Committee member is
independent as required by the listing standards of the New York Stock
Exchange.

  Legg Mason's management is responsible for the financial reporting process,
including the system of internal controls, and for the preparation,
presentation and integrity of consolidated financial statements in accordance
with generally accepted accounting principles. Legg Mason's independent
auditors are responsible for auditing those financial statements in accordance
with generally accepted auditing standards. The Audit Committee monitors and
reviews these processes. However, the members of the Audit Committee are not
professionally engaged in the practice of accounting or auditing and are not
experts in the fields of accounting or auditing, including with respect to
auditor independence. The members of the Audit Committee rely, without
independent verification, on the information provided to them and on the
representations made by management and the independent auditors. Accordingly,
the Audit Committee's oversight does not provide an independent basis to
determine that management has maintained appropriate accounting and financial
reporting principles or appropriate internal controls and procedures designed
to assure compliance with accounting standards and applicable laws and
regulations. Furthermore, the Audit Committee's considerations and discussions
referred to below do not assure that the audit of Legg Mason's financial
statements has been carried out in accordance with generally accepted auditing
standards, that the financial statements are presented in accordance with
generally accepted accounting principles or that Legg Mason's independent
auditors are in fact independent.

  In this context, the Audit Committee has reviewed and discussed the audited
consolidated financial statements of Legg Mason as of and for the fiscal year
ended March 31, 2001 with management and Legg Mason's independent auditors.
The Audit Committee has also discussed with the independent auditors the
matters required to be discussed by Statement on Auditing Standards No. 61,
"Communication with Audit Committees." Furthermore, the Audit Committee has
received the written disclosures and the letter from the independent auditors
required by Independence Standards Board Standard No. 1, "Independence
Discussions with Audit Committees," and has discussed with the independent
auditors their independence from Legg Mason and its management. When
considering the independent auditors' independence, the Audit Committee
considered whether their provision of services to Legg Mason beyond those
rendered in connection with their audit and review of Legg Mason's
consolidated financial statements was compatible with maintaining their
independence. The Audit Committee also reviewed, among other things, the
amount of fees paid to the independent auditors for audit and non-audit
services.

  Based on the reports and discussions described in this Report, and subject
to the limitations on the Audit Committee's role and responsibilities referred
to above, the Audit Committee has recommended to the Board of Directors that
Legg Mason's audited consolidated financial statements as of and for the
fiscal year ended March 31, 2001 be included in Legg Mason's Annual Report on
Form 10-K.

                                          AUDIT COMMITTEE
                                            Nicholas J. St. George, Chairman
                                            Edward I. O'Brien
                                            Roger W. Schipke

                                      12


                            STOCK PERFORMANCE GRAPH

  The graph below compares the cumulative total stockholder return on Legg
Mason's Common Stock for the last five fiscal years with the cumulative total
return of the S&P 500 Stock Index and the SNL Securities and Investments Index
(the "SNL Securities Index") over the same period (assuming the investment of
$100 in each on March 31, 1996, and the reinvestment of all dividends). The
SNL Securities Index consists of 83 publicly held broker dealer and investment
adviser firms. The graph also shows the stockholder return over the period of
the Regional Sub-Index of the Financial Service Analytics Brokerage Stock
Price Index ("FSA Regional"). Legg Mason believes that the FSA Regional, which
consists of 4 publicly held regional securities firms and Legg Mason, is no
longer an appropriate index to compare to its Common Stock performance because
Legg Mason's business has changed into that of an investment adviser more than
that of a regional securities firm and because industry consolidation has
resulted in Legg Mason Common Stock constituting too large a portion of the
FSA Regional.


                                    [GRAPH]


                                   Fiscal Year Ended March 31,

                        1996    1997     1998     1999     2000      2001


Legg Mason              $100    $147     $278     $319     $412      $404
S&P 500 Stock Index      100     120      177      210      248       194
SNL Securities Index     100     126      257      341      476       365
FSA Regional             100     143      269      259      306       373


                                      13


                             CERTAIN TRANSACTIONS

  From April 2000 through July 2000, Legg Mason paid approximately $1,500,000
to the law firm of Ballard Spahr Andrews & Ingersoll for legal services and
related expenses. The daughter of Charles A. Bacigalupo, who until July 2000
was a Senior Vice President, the Secretary and a director of Legg Mason, is a
partner of that law firm.

  During fiscal 2001, Legg Mason engaged RTKL Associates, Inc. ("RTKL") to
perform architectural and engineering services for Legg Mason. Approximately
$297,000 was paid by Legg Mason for these services during the fiscal year
ended March 31, 2001. Harold L. Adams, a director of Legg Mason, is the Chief
Executive Officer and Chairman of RTKL.

  On December 8, 1998, Legg Mason loaned to Raymond A. Mason, Legg Mason's
Chairman of the Board, President and Chief Executive Officer, $3,378,750 to
finance the purchase of 120,000 shares of Legg Mason Common Stock from Legg
Mason. The loan is full recourse, is secured by a pledge of the shares, and
accrues interest at a rate of 4.47% per annum, compounded semi-annually. The
principal amount is due in full at maturity on June 8, 2006 and interest
payments are due on June 8 of each year. As of May 31, 2001, the amount of
indebtedness outstanding under this loan was $3,378,750, plus accrued
interest.

  In the ordinary course of its business, Legg Mason has extended credit to
certain of its directors and executive officers in connection with their
purchases of securities in margin accounts. These extensions of credit have
been made on terms comparable to loans to unaffiliated customers, and no such
extension has resulted in a loss to Legg Mason.

               AMENDMENT OF LEGG MASON WOOD WALKER, INCORPORATED
                   DEFERRED COMPENSATION PHANTOM STOCK PLAN

  In December 1988, the Board of Directors of LMWW adopted the Legg Mason Wood
Walker, Incorporated Deferred Compensation Phantom Stock Plan (the "Phantom
Plan"). The Phantom Plan was approved by the Legg Mason Board of Directors on
January 24, 1989 and by the stockholders of Legg Mason on July 27, 1989. The
Phantom Plan is intended to provide supplemental retirement benefits to
employees of Legg Mason's subsidiaries whose salary reduction contributions
under Legg Mason's profit sharing and 401(k) plan are restricted by
limitations imposed by the federal tax code. The Phantom Plan currently
provides that eligible employees may elect to defer from 1% to 8% of their
annual compensation, but no more than $50,000 in any one year. Deferred
amounts are credited to an unfunded "phantom stock" account as follows: the
first $25,000 deferred in a year is credited to a number of phantom stock
units based on a unit price equal to 95% of the five day average market price
for a share of Legg Mason Common Stock; and any remaining amounts deferred are
credited to a number of phantom stock units based on a unit price equal to
100% of that average market price. On April 24, 2001, the Legg Mason Board of
Directors approved an amendment to the Phantom Stock Plan that would:

  .  increase the maximum percentage of annual compensation that may be
     deferred under the Phantom Plan from 8% to 13%;

  .  increase the maximum dollar amount of annual compensation that may be
     deferred under the Phantom Plan from $50,000 to $60,000; and

                                      14


  .  revise the crediting of deferred amounts to phantom stock units so that
     all amounts deferred are credited to a number of phantom stock units
     based on a unit price equal to 90% of the five day average market price
     for a share of Legg Mason Common Stock.

  This amendment to the Phantom Plan is being submitted to the stockholders of
Legg Mason for approval. If approved by the stockholders, this amendment will
take effect in calendar year 2002. The Board of Directors believes that the
amendment to the Phantom Plan is in the best interests of Legg Mason and its
stockholders and recommends that the stockholders approve the amendment.

  The benefits to be awarded to executive officers and other employees of Legg
Mason under the Phantom Plan in the future are not presently determinable. The
table below lists the benefits received under the Phantom Plan (including
employee contributions) for the calendar year ended December 31, 2000 by the
named executive officers, all executive officers as a group and all non-
executive officer employees as a group.

                           Phantom Plan Benefits(1)



                                                     Dollar Value
                                                     Under Plan as
                                                      Proposed to   Phantom Stock Units(3)
                           Dollar    Phantom Stock        be         Granted under Plan as
   Name and Position      Value(2)  Units(3) Granted Amended(2)(4) Proposed to be Amended(4)
   -----------------     ---------- ---------------- ------------- -------------------------
                                                       
Raymond A. Mason........ $   34,401         836       $   36,319                883
 Chairman of the Board,
 President
 and Chief Executive
 Officer
James W. Brinkley.......     57,154       1,389           61,520              1,495
 Senior Executive Vice
 President
Thomas P. Mulroy........     52,799       1,283           56,923              1,383
 Senior Vice President
Timothy C. Scheve.......         --          --               --                 --
 Senior Executive Vice
 President
Edward A. Taber, III....         --          --               --                 --
 Senior Executive Vice
 President
All executive officers      361,676       8,788          389,158              9,456
 as a group.............
All non-executive
 officer employees
 as a group.............  7,923,042     192,522        8,437,473            205,022

--------
(1)  Non-employee directors are not eligible to participate in the Phantom
     Plan.
(2)  Calculated by multiplying Phantom Stock Units acquired during the year by
     the five day average market price for Common Stock for the period ending
     March 30, 2001.
(3)  Phantom Stock Units are paid out in shares of Common Stock on a one-for-
     one basis.
(4)  Assumes amounts elected to be deferred would not have changed.

Description of the Phantom Plan

  Under the Phantom Plan, eligible employees may make annual elections to
defer receipt of compensation until termination of employment. The participant
may elect to defer from 1% to 8% of his or her annual compensation, however
the amount deferred for any one year may not exceed $50,000. The amount
deferred by each participant is credited to an unfunded "phantom stock"
account containing a number of phantom stock units as follows: the first
$25,000 deferred in any year is credited to a number of phantom stock units
based on a unit price equal to 95% of a five day average market price for a
share of Legg Mason Common Stock and any remaining amounts deferred are

                                      15


credited to a number of phantom stock units based on a unit price equal to
100% of that five day average market price. The number of phantom stock units
credited to an account will be adjusted over the deferral period to account
for any stock dividends, stock splits and similar events. Dividends paid on
Common Stock are credited to phantom stock accounts by adding a number of
phantom stock units based on a unit price equal to 95% of the five day average
market price for a share of Common Stock. Upon the participant's retirement,
death or other termination of employment, LMWW will distribute to the
participant a number of shares of Common Stock (in a lump sum or in periodic
installments, at the participant's election) equal to the number of phantom
stock units in the account. Contributions to the Phantom Stock Plan are not
recognized as income for tax purposes until the shares are paid out. The board
of directors of LMWW may amend the Phantom Plan at any time, provided that no
such amendment may affect the rights of any participant to payment of the
amount in his or her account. A committee appointed by the board of directors
of LMWW designates the employees who are eligible to participate. The number
of employees eligible to participate as of March 31, 2001 was approximately
1,500. See the discussion above for a description of how the Phantom Plan will
change if the amendment is approved by the stockholders.

           REAPPROVAL OF LEGG MASON, INC. 1996 EQUITY INCENTIVE PLAN

  In 1996, the Compensation Committee of the Board of Directors (the
"Committee") adopted and the Board of Directors (the "Board") and stockholders
approved the Legg Mason, Inc. 1996 Equity Incentive Plan (the "Plan"). In
1999, the Committee adopted and the Board and stockholders approved an
amendment to the Plan increasing the number of shares covered by the Plan. In
order to meet the requirements of Section 162(m) of the federal tax code, the
Plan must be resubmitted to, and reapproved by, stockholders every five years.
Accordingly, in April 2001, the Board approved submitting the Plan for
reapproval by a vote of stockholders at the 2001 Annual Meeting.

  The purpose of the Plan is to provide key employees of Legg Mason and its
subsidiaries various stock ownership and performance incentives toward
achievement of continued growth, profitability, and success of Legg Mason. The
Plan covers a total of 13,000,000 shares of Common Stock.

  Reapproval of the Plan by Legg Mason's stockholders is required to maintain
the feature of the Plan described below under the heading "Awards Subject to
Section 162(m)." Although this feature has yet to be used, the Board believes
that it is important to maintain the flexibility this feature provides and
recommends that the stockholders reapprove the Plan. If the stockholders do
not reapprove the Plan, the Plan will continue to be available and grants will
continue to be made under the Plan, but the Plan will not be available for the
granting of performance-based compensation that meets the requirements of
Section 162(m) of the federal tax code as described below.

  The benefits to be awarded under the Plan to executive officers and other
employees of Legg Mason in the future are not presently determinable. The
benefits received under the Plan for fiscal 2001 by Legg Mason's CEO and four
other most highly compensated executive officers are contained in the Option
Grants in Fiscal 2001 table and Summary Compensation Table contained above. In
fiscal 2001, the Committee granted options to acquire 313,000 shares of Common
Stock to all executive officers as a group and options to acquire 1,710,310
shares of Common Stock to all non-executive officer employees as a group. The
aggregate grant date present value of these options, calculated using the
Black-Scholes Option Pricing Model, is approximately $7,278,000 and
$33,266,000, respectively.

  The closing price of Legg Mason's Common Stock on the New York Stock
Exchange on June 15, 2001 was $46.80 per share.

                                      16


Description of the Plan

  General. Subject to adjustment in certain circumstances as discussed below,
up to 13,000,000 shares of Common Stock may be issued under the Plan. Shares
subject to grants under the Plan will be re-available to be included in other
awards in the following circumstances:

  .  to the extent awards under the Plan expire or are terminated for any
     reason without being exercised;

  .  if the shares of Common Stock subject to an award are forfeited;

  .  if the Committee permits the shares to be exchanged for awards not
     involving Common Stock; or

  .  if the recipient uses the shares for the payment of the purchase price
     of shares upon exercise of a stock option.

  Administration of the Plan. The Committee administers and interprets the
Plan and has the sole authority to determine

  .  persons to whom awards may be granted under the Plan,

  .  the type, size and other terms and conditions of each award,

  .  the time when the awards will be made and the duration of any applicable
     exercise or restriction period, including the criteria for vesting and
     the acceleration of vesting, and

  .  any other matters arising under the Plan.

Except as provided by Rule 16b-3 under the Exchange Act or Section 162(m) of
the federal tax code, the Plan authorizes the Committee to delegate its
authority and duties under the Plan in certain circumstances to the Chief
Executive Officer and other senior officers of Legg Mason.

  The Committee has full power and authority to administer and interpret the
Plan, to make factual determinations and to adopt or amend rules, regulations,
agreements and instruments for implementing the Plan and for conduct of its
business as it deems necessary or advisable, in its sole discretion.

  Types of Awards. The Plan provides for the grant of any or all of the
following types of awards: (1) stock options, including incentive stock
options; (2) stock appreciation rights ("SARs"), in tandem with stock options
or freestanding; (3) Common Stock of Legg Mason, including restricted Common
Stock, or Common Stock derivatives; (4) Common Stock units; (5) performance
units; (6) performance shares; and (7) any other awards which are established
by the Committee and are consistent with the Plan's purpose. The Committee may
grant these awards individually, in combination or in tandem.

  Eligibility for Participation. Awards may be made to any key employee
(including officers and directors) of Legg Mason or any of its subsidiaries as
designated by the Committee. During the fiscal year ended March 31, 2001, 743
employees received awards under the Plan. Subject to adjustment as described
below, during any calendar year no participant may receive awards for more
than 666,666 shares of Common Stock issued or available for issuance under the
Plan.

  Stock Options. Stock options granted under the Plan may consist of:

  .  options intended to qualify as incentive stock options ("ISOs") within
     the meaning of section 422 of the federal tax code; and

  .  so-called "nonqualified stock options" that are not intended to so
     qualify ("NQSOs").


                                      17


All Stock options are subject to the terms and conditions set forth in the
Plan as the Committee deems appropriate and as are specified in writing by the
Committee to the participant in an award notice. The Committee must approve
the form and provisions of each award notice.

  The Committee fixes the option price per share at the date of grant. The
option price of any ISO granted under the Plan will not be less than the fair
market value of the underlying shares of Common Stock on the date of grant,
and the option price of an ISO granted to an employee who owns more than 10%
of the Common Stock will not be less than 110% of the fair market value of the
underlying shares of Common Stock on the date of grant. The option price of an
NQSO may be greater than, equal to or less than the fair market value of the
underlying shares of Common Stock on the date of grant, however the option
price may not be less than 50 percent of the fair market value of the Common
Stock on the date of grant.

  The Committee determines the term of each option, however the exercise
period may not exceed ten years from the date of grant, and the exercise
period of an ISO granted to an employee who owns more than 10% of the Common
Stock may not exceed five years from the date of grant. ISOs will be treated
as NQSOs to the extent that the aggregate fair market value of shares of
Common Stock, determined on the date of grant, with respect to which ISOs
become exercisable for the first time by a participant during any calendar
year exceeds $100,000.

  The Committee determines the exercisability of stock options and specifies
this in the award notice. The Committee may also accelerate the exercisability
of any stock option. A participant, or, in the discretion of the Committee, a
properly authorized broker-dealer on behalf of a participant, may exercise a
stock option by delivering notice of exercise to the Committee with
accompanying payment of the option price. Under the Plan, a participant may
pay the option price

  .  in cash, or by check, bank draft or money order,

  .  by delivering shares of Common Stock or restricted Common Stock as to
     which restrictions have lapsed owned by the participant and having a
     fair market value on the date of exercise equal to the option price, or

  .  by any combination of the foregoing.

The participant must pay, at the time of exercise, the option price and the
amount of any federal, state or local withholding tax due in connection with
such stock option exercise. If the Committee approves, participants may elect
to satisfy income tax withholding obligations by having shares withheld.

  Stock Appreciation Rights. The Committee may grant SARs alone ("Freestanding
SARs") or in tandem with any stock option ("Tandem SARs"). A SAR entitles the
participant, upon exercise, to receive the amount by which the fair market
value of Common Stock on the date of exercise exceeds the fair market value of
the stock on the date of grant.

  A Tandem SAR may be granted either at the time of the grant of the related
stock option or at any time thereafter during the term of the stock option. A
Tandem SAR is exercisable to the extent its related stock option is
exercisable and the exercise price of the SAR is the same as the option price
under the related stock option. Upon the exercise of a stock option as to some
or all of the shares covered by the award, the related Tandem SAR is canceled
automatically to the extent of the number of shares covered by the stock
option exercise.

                                      18


  The Committee will, with regard to a Freestanding SAR, determine the number
of shares subject to the SAR, the manner and time of the SAR's exercise, and
the exercise price of the SAR. However, the exercise price of a Freestanding
SAR will in no event be less than 50% of the fair market value of the Common
Stock on the date of the grant of the Freestanding SAR.

  Stock Awards. The Committee may grant awards in the form of shares of Common
Stock, restricted shares of Common Stock or Common Stock derivatives ("Stock
Awards"). Stock Awards may be granted purely as a bonus, subject to certain
performance goals that meet the requirements of Section 162(m) of the federal
tax code, or for consideration, subject to any conditions and restrictions the
Committee imposes.

  Performance Shares. The Committee may grant performance shares, which are
either shares of Common Stock of Legg Mason or units which are expressed in
terms of Common Stock of Legg Mason. Performance share awards are contingent
upon the attainment over a period to be determined by the Committee (the
"Performance Period") of certain performance objectives. The Committee will
also determine the performance objectives to be achieved during a Performance
Period and the measure of whether and to what degree the objectives have been
attained.

  Performance Units. The Committee may grant performance units, which are
units valued by reference to criteria chosen by the Committee other than
Common Stock. Performance units are similar to performance shares in that they
are contingently awarded based on the attainment over a Performance Period of
certain performance objectives. The length of the Performance Period, the
performance objectives to be achieved during the Performance Period, and the
measure of whether and to what degree such objectives have been achieved, will
be determined by the Committee.

  Awards subject to Section 162(m). Section 162(m) of the federal tax code
generally disallows a public company's deductions for employee remuneration
exceeding $1,000,000 per year for the CEO and any of the other four most
highly compensated executive officers of the company, but contains an
exception for qualified "performance-based compensation." Compensation is
performance-based if it is payable solely on account of the achievement of one
or more objective business criteria.

  Section 162(m) of the federal tax code requires that a compensation
committee consisting of two or more "outside directors" establish performance
standards that must be met before performance-based remuneration may be
awarded. The committee also must certify that the performance standards have
actually been met before payment of the remuneration. Finally, the law
requires that the performance standards be disclosed to and approved by the
shareholders.

  The Plan provides that within 90 days after the start of each fiscal year or
Performance Period, the Committee will

  .  designate the participants who are subject to the provisions of section
     162(m) of the federal tax code,

  .  select the performance goal or goals applicable to the year or other
     Performance Period, and

  .  establish the amount or number, and the method of computing the amount
     or number of Stock Awards, performance shares or performance units which
     may be granted, or the amount of any loan made under the Plan which may
     be forgiven, upon the attainment of the performance goals.

                                      19


  The performance goals shall be limited to one or more of the following:

  .  future economic value per share of Common Stock;

  .  earnings per share;

  .  return on average common equity;

  .  pre-tax income;

  .  pre-tax operating income;

  .  net revenue;

  .  net income;

  .  profits before taxes;

  .  book value per share;

  .  stock price; and

  . earnings available to common stockholders.

  Following the completion of each fiscal year or other Performance Period,
the Committee will certify in writing whether the applicable performance goals
have been achieved for the applicable period and the amount or number of Stock
Awards, performance shares or performance units, if any, payable to Section
162(m) participants, or the amount of any loan forgiven on behalf of any such
participant, for the period. Legg Mason will pay the amounts due to a
participant following the end of the applicable fiscal year or Performance
Period after the certification by the Committee. The maximum annual amount
that may be paid to, or the amount of any loan that may be forgiven on behalf
of, a Section 162(m) participant for the 2002 fiscal year may not exceed
$3,221,000, and for each subsequent fiscal year may not exceed 110% of the
maximum amount for the preceding fiscal year. In determining this maximum
amount, the value of any stock options granted to a Section 162(m) participant
will not be included.

  Other Terms of Awards. The Plan authorizes awards to be paid in cash, Common
Stock, Common Stock derivatives, a combination of the foregoing, or any other
form of property, as determined by the Committee. In addition, the Plan
provides that the Committee may authorize the making of loans or cash payments
to participants in connection with any award under the Plan or to be used to
exercise a stock option or to pay any consideration required in connection
with a Stock Award. These loans may be secured by any security, including
Common Stock or Common Stock derivatives, underlying or related to the award
(so long as the amount of the loan does not exceed the fair market value of
the security subject to the award), and may be forgiven upon the terms and
conditions established by the Committee at the time of the loans or at any
time thereafter, including the attainment of performance goals that meet the
requirement of Section 162(m) of the federal tax code. If an award is granted
in the form of a Stock Award, stock option, or performance share, or in the
form of any other stock-based grant, the Committee may include as part of the
award an entitlement to receive dividends or dividend equivalents. At the
discretion of the Committee, a participant may defer payment of a Stock Award,
performance share, performance unit, dividend, or dividend equivalent.

  The Plan provides for the forfeiture of awards in the event of termination
of employment for a reason other than death, disability, retirement, or any
other approved reason. The Plan authorizes the Committee to promulgate
administrative guidelines for the purpose of determining what treatment will
be afforded a participant under the Plan in the event of his death,
disability, retirement, or termination

                                      20


for any other approved reason, however to the extent that an ISO is not
treated as an NQSO, an ISO may not be exercised more than 90 days following
the participant's termination of employment for any reason other than
disability, and in the case of termination of employment because of a
disability, the ISO may not be exercised more than one year following the
termination.

  The Committee may, in an award notice or otherwise, establish terms,
conditions, restrictions and/or limitations governing the grant of any award
that are not inconsistent with the Plan.

  Restrictions on Transferability of Awards. No awards under the Plan may be
transferred, except by will or the laws of descent and distribution, except
that if permitted by the Committee and subject to any terms and conditions
specified by the Committee, the participant may transfer an award to the
participant's family members or to one or more trusts established in whole or
in part for the benefit of one or more family members, however the
restrictions in this sentence do not apply to any restricted shares of Common
Stock received in connection with an award after the date that the
restrictions on transferability of the shares have lapsed. During the lifetime
of the participant, a stock option, SAR, or similar type of award shall be
exercisable only by him or her or by the family member or trust to whom the
stock option, SAR, or other award has been transferred in accordance with the
previous sentence.

  Amendment, Term and Termination of the Plan. Legg Mason, through the
Committee, may amend or terminate the Plan at any time, however the Committee
may not, without stockholder or Board approval, as necessary,

  .  adopt any amendment which would increase the maximum number of shares
     which may be issued under the Plan (except as described below),

  .  modify the Plan's eligibility requirements, or

  .  make any amendment that requires stockholder approval pursuant to Rule
     16b-3 of the Exchange Act or Section 162(m) of the federal tax code,

in each case as these provisions may be amended from time to time, without
stockholder approval. The Plan became effective as of April 18, 1996, and will
terminate on April 17, 2006, unless terminated earlier by the Board or
extended by the Board with approval of the stockholders. No award may be made
under the Plan after its termination, but earlier awards may extend beyond the
date of termination.

  Adjustment Provisions. If there is any change in the number of outstanding
shares of Common Stock through the declaration of stock dividends, stock
splits or the like, the number of shares available for awards, the shares
subject to any existing award and the option prices or exercise prices of
existing awards will be automatically adjusted. If there is any change in the
number of outstanding shares of Common Stock through any change in the capital
account of Legg Mason, or through any other transaction referred to in section
424(a) of the federal tax code, the Committee will make appropriate
adjustments in the maximum number of shares of Common Stock which may be
issued under the Plan and any adjustments and/or modifications to outstanding
awards as it deems appropriate. In the event of any other change in the
capital structure or in the Common Stock of Legg Mason, the Committee is
authorized to make appropriate adjustments in the maximum number of shares of
Common Stock available for issuance under the Plan and any adjustments and/or
modifications to outstanding awards.

  Federal Income Tax Consequences. There are no federal income tax
consequences to participants or to Legg Mason upon the grant of an NQSO under
the Plan. Upon the exercise of NQSOs, a participant will recognize ordinary
compensation income in an amount equal to the excess

                                      21


of the fair market value of the shares of Common Stock at the time of exercise
over the exercise price of the NQSO, and Legg Mason generally will be entitled
to a corresponding federal income tax deduction. Upon the sale of shares of
Common Stock acquired by exercise of an NQSO, a participant will have a
capital gain or loss (long-term or short-term depending upon the length of
time the shares of Common Stock were held) in an amount equal to the
difference between the amount realized upon the sale and the participant's
adjusted tax basis in the shares of Common Stock (the exercise price plus the
amount of ordinary income recognized by the participant at the time of
exercise of the NQSO).

  A participant who is granted an ISO will not recognize taxable income for
purposes of the regular income tax, upon either the grant or exercise of the
ISO. A participant who disposes of the shares of Common Stock acquired upon
exercise of an ISO after two years from the date the ISO was granted and after
one year from the date the shares were transferred to him will recognize long-
term capital gain or loss in the amount of the difference between the amount
realized on the sale and the option price (or the participant's other tax
basis in the shares), and Legg Mason will not be entitled to any tax deduction
by reason of the grant or exercise of the ISO. As a general rule, if a
participant disposes of the shares of Common Stock acquired upon exercise of
an ISO before satisfying both holding period requirements (a "disqualifying
disposition"), his or her gain recognized on the disposition will be taxed as
ordinary income to the extent of the difference between the fair market value
of the shares on the date of exercise and the option price, and Legg Mason
will be entitled to a deduction in that amount. The gain, if any, in excess of
the amount recognized as ordinary income on such a disqualifying disposition
will be long-term or short-term capital gain, depending upon the length of
time the participant held his or her shares of Common Stock prior to the
disposition.

  Local and state tax authorities may also tax incentive compensation awarded
under the Plan.

  Tax Withholding. Legg Mason may require a participant to pay Legg Mason the
amount of any taxes which Legg Mason is required to withhold in connection
with any award or to take whatever action Legg Mason deems necessary to
satisfy any federal, state and local income and employment withholding tax
obligations arising under the Plan. Legg Mason's obligation to issue shares of
Common Stock upon the exercise of a stock option or any other award is
conditioned upon the Committee being satisfied that the grantee has complied
with any tax withholding requirements. Legg Mason may deduct from any cash
payment under the Plan an amount sufficient to cover the participant's
federal, state and local withholding tax obligations associated with the
payment.

           APPROVAL OF LEGG MASON, INC. EMPLOYEE STOCK PURCHASE PLAN

  On April 24, 2001, the Board of Directors approved the Legg Mason, Inc.
Employee Stock Purchase Plan (the "Stock Purchase Plan"). The purpose of the
Stock Purchase Plan is to provide employees of Legg Mason and its subsidiaries
with the opportunity to purchase shares of Legg Mason Common Stock through
voluntary payroll deductions. The Stock Purchase Plan covers a total of
3,000,000 shares of Common Stock. Legg Mason intends to implement the Stock
Purchase Plan, subject to stockholder approval, as soon as practicable after
the 2001 Annual Meeting. When implemented, the Stock Purchase Plan will
replace the employee stock purchase plan currently in effect. The benefits to
be awarded under the Stock Purchase Plan to executive officers and other
employees of Legg Mason will depend upon their participation elections and are
not presently determinable.

  Any regular employee of Legg Mason or one of its participating subsidiaries
is eligible to participate in the Stock Purchase Plan so long as the employee

  .  generally works more than 20 hours per week,


                                      22


  .  generally works more than five months per year, and

  .  does not own 5% or more of the outstanding Common Stock.

The Committee will determine which Legg Mason subsidiaries are eligible to
participate in the Stock Purchase Plan. As of March 31, 2001, there were
approximately 5,150 employees who would have been eligible to participate in
the Stock Purchase Plan had it been in effect. Each eligible employee who
elects to participate may authorize payroll deductions of not less than 1% and
not more than 10% of his or her regular compensation, but not more than
$22,700 in any calendar year. The participant may increase or decrease the
amount of deductions at any time, but not more than once during any calendar
year. In addition, a participant may terminate payroll deductions under the
Stock Purchase Plan at any time, but will not be allowed to resume payroll
deductions before the beginning of the next calendar year after the date when
the deductions terminate. Payroll deductions under the Stock Purchase Plan
cease immediately upon the employee's retirement, resignation, death or other
termination of employment.

  Legg Mason will contribute each month an amount equal to 10% of each
participant's payroll deductions for the month. Legg Mason's Board of
Directors may at any time increase or decrease the amount of the Legg Mason
contribution, but may not increase it to more than 17.5% of employee
contributions. Payroll deductions and Legg Mason contributions are accumulated
and forwarded to a bank or other firm selected by Legg Mason (the "Agent"). As
promptly as practicable after the end of each month, the Agent causes to be
purchased on the open market as many shares of Common Stock as those funds
will permit. The number of shares purchased depends upon the market price of
the Common Stock at the time of each purchase. Shares purchased in each month
are allocated on the basis of the average cost thereof among participants in
proportion to the respective amount of funds contributed on behalf of each
participant. Allocations are made in whole shares and fractional shares. The
Stock Purchase Plan prevents any participant from acquiring under the plan in
any year Common Stock with a market value when purchased in excess of $25,000,
and payroll deductions in any year will cease if that threshold is reached.

  Shares of Common Stock purchased under the Stock Purchase Plan will be held
by the Agent until the participant sells them or requests delivery of a
certificate for the shares. The participant may request delivery of a
certificate at any time (but only once in any year). If the participant elects
to end payroll deductions, or if his or her employment terminates, a
certificate will automatically be delivered to the participant unless he or
she instructs the Agent to sell the shares. Dividends on shares held in an
account will be automatically reinvested in shares of Common Stock.

  Legg Mason pays brokerage commissions and other charges with respect to
purchases made under the Stock Purchase Plan and reinvestment of dividends
under the Stock Purchase Plan. The participant may at any time instruct the
Agent to sell all or any part of the shares held in his or her account, but
partial sales are permitted only once in any year. Brokerage commissions and
other charges in connection with sales are payable by the participant.

  Income taxes on the 10% Legg Mason contribution are deferred until the
shares are sold or the participant dies. If the participant disposes of the
shares within two years of purchase, the 10% Legg Mason contribution is
taxable to the participant as ordinary income in the year of sale. If the
shares are disposed of by the participant for more than their basis (i.e., the
participant's cost plus the amount of taxable income recognized), the excess
is taxable as long-term or short-term capital gain, depending

                                      23


on how long the shares were held; if the shares are sold for less than their
basis, the loss is treated as a capital loss. If the participant disposes of
the shares after holding them for at least two years, or dies while holding
the shares (regardless of whether the two-year holding period has expired),
the same tax treatment applies, except that the amount recognized as income
rather than capital gain is limited to any amount by which the value of the
shares when sold exceeds what the participant paid for the shares; if the
value of the shares is less than what the participant paid, no income is
recognized (and the participant has a capital loss for the difference). Legg
Mason is not entitled to a tax deduction for its 10% contribution, except to
the extent that the participant disposes of his or her shares before the
expiration of the two-year holding period.

  Legg Mason's Board of Directors may amend the Stock Purchase Plan in any
respect, except that certain amendments require the approval of Legg Mason's
stockholders. Without that approval, no amendment may be made (a) increasing
or decreasing the total number of shares covered by the Stock Purchase Plan
(except pursuant to the anti-dilution provisions of the Stock Purchase Plan),
or (b) modifying the eligibility requirements for participation in the Stock
Purchase Plan. Legg Mason's Board of Directors may terminate the Stock
Purchase Plan at any time, and it automatically terminates when all 3,000,000
authorized shares have been acquired.

                             INDEPENDENT AUDITORS

  The Board of Directors has selected PricewaterhouseCoopers LLP to be the
independent auditors of Legg Mason for the fiscal year ending March 31, 2002.
Representatives of PricewaterhouseCoopers LLP will be present at the Annual
Meeting. They will have the opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions.

Audit Fees

  The aggregate fees billed by PricewaterhouseCoopers LLP for professional
services rendered for the audit of Legg Mason's and affiliates' annual
financial statements for the fiscal year ended March 31, 2001 and for the
reviews of the financial statements included in Legg Mason's Quarterly Reports
on Form 10-Q for that fiscal year were $650,000.

Financial Information Systems Design and Implementation Fees

  No fees were billed by PricewaterhouseCoopers LLP for the fiscal year ended
March 31, 2001 for professional services rendered for information technology
services relating to financial information systems design and implementation.

All Other Fees

  The aggregate fees billed by PricewaterhouseCoopers LLP for services
rendered to Legg Mason, other than the services described above under "Audit
Fees" and "Financial Information Systems Design and Implementation Fees," for
the fiscal year ended March 31, 2001 were approximately $2,000,000. Of this
amount, approximately $1,000,000 was paid for accounting services provided to
mutual funds and offshore funds and approximately $600,000 was paid for
acquisition-related tax and accounting services.

                                      24


                 STOCKHOLDER PROPOSALS FOR 2002 ANNUAL MEETING

  Legg Mason must receive in writing any stockholder proposal intended for
inclusion in the proxy material for the 2002 Annual Meeting on or before
February 21, 2002. The inclusion of any proposal will be subject to applicable
rules of the Securities and Exchange Commission. The persons named as proxies
for the 2002 Annual Meeting will generally have discretionary authority to
vote on any matter presented by a stockholder for action at the meeting. In
the event Legg Mason receives notice of any stockholder proposal by May 7,
2002, then, if Legg Mason includes in its proxy statement advice on the nature
of the matter and how the named proxies intend to vote the shares for which
they have received discretionary authority, those proxies may exercise
discretionary authority with respect to such matter, except to the extent
limited by the Securities and Exchange Commission's rules governing
stockholder proposals.

                       COMPLIANCE WITH SECTION 16(A) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

  Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and the
rules thereunder, Legg Mason's executive officers and directors are required
to file with the Securities and Exchange Commission and the New York Stock
Exchange reports of their ownership of Common Stock. Based solely on a review
of copies of such reports furnished to Legg Mason, or written representations
that no reports were required, Legg Mason believes that during the fiscal year
ended March 31, 2001 its executive officers and directors complied with the
Section 16(a) requirements except that (a) Joseph A. Sullivan failed to report
in his Form 3 report his ownership of (i) 6,048 phantom stock units under the
Legg Mason Wood Walker, Incorporated Deferred Compensation Phantom Stock Plan,
and (ii) 327.5 shares of Common Stock acquired under the Legg Mason, Inc.
Employee Stock Purchase Plan, both of which were reported in subsequent
amendments to the report, (b) the reports covering the acquisition of 13,933
phantom stock units under the Legg Mason Wood Walker, Incorporated Private
Client Group Deferred Compensation Plan by Harry M. Ford, Jr. were filed late,
(c) the report covering a gift of 1,000 shares of Common Stock by James W.
Brinkley was filed late and (d) the report covering a gift of 175 shares of
Common Stock by Edmund J. Cashman, Jr. in December 1999 was filed late.

                                 OTHER MATTERS

  The Board of Directors of Legg Mason is not aware of any other matters to
come before the meeting. If any other matters should come before the meeting,
the persons named in the enclosed proxy will act thereon according to their
best judgment.

                                          By order of the Board of Directors

                                          /s/ ROBERT F. PRICE
                                          ROBERT F. PRICE
                                          Secretary

                                      25


                                                                      EXHIBIT A

            Charter of Responsibilities for the Audit Committee of
                  the Board of Directors of Legg Mason, Inc.

  The Audit Committee (the "Committee") of the Board of Directors (the
"Board") of Legg Mason, Inc. (the "Company") shall oversee the financial
reporting of the Company and its subsidiaries; the Company's financial
reporting process and internal control systems; the Company's audit process;
and the Company's process for monitoring compliance with laws and regulations
by the Company and its subsidiaries. Management of the Company is responsible
for the content of financial reporting and for establishing and maintaining
the financial, internal control and compliance systems.

  1. Structure: The Board shall appoint a Chairperson of the Committee, and
determine the size, membership qualifications and composition of the Committee
in accordance with the applicable rules of the Securities and Exchange
Commission (the "SEC"), the New York Stock Exchange, Inc. (the "NYSE") and
other applicable regulatory authorities. The Committee shall be provided all
needed assistance by the Company's employees and may engage outside counsel
and other professional advisers in the furtherance of its purpose.

  2. Meetings and Reports: The Committee shall meet not less than five (5)
times each year. The Committee may invite to its meetings or meet privately
with, among others, management and operating personnel of the Company,
representatives of the Company's Internal Audit Department (the "Department")
and the Company's independent public accountants (the "Accountants"). The
Committee shall regularly report its activities to the Board and make
appropriate recommendations.

  3. Responsibilities: In connection with its oversight duties, the Committee
shall perform the following functions:

    a. Recommendation of Accountants--The Committee shall review the
  performance of the Accountants and recommend to the Board the appointment
  or discharge of the Accountants. The Accountants are ultimately accountable
  to the Board and the Committee, and the Board and the Committee shall have
  the ultimate authority and responsibility to select, evaluate and, where
  appropriate, replace the Accountants.

    b. Accountants' independence--The Committee shall ensure that the
  Accountants submit to the Committee on a periodic basis a formal written
  statement delineating all relationships between the Accountants and the
  Company. The Committee shall actively engage in a dialogue with the
  Accountants with respect to any disclosed relationships or services that
  may impact the objectivity and independence of the Accountants and shall
  recommend that the Board take appropriate action in response to the
  Accountants' report to satisfy itself of the Accountants' independence.

    c. Accountants' audit plan review--The Committee shall review and discuss
  with the Accountants their proposed audit scope and approach, and any
  subsequent material changes thereto, to satisfy itself that, in the
  development of its audit plan, the Accountants have considered appropriate
  areas of the Company's operations and relevant Company and industry
  conditions and trends.

    d. Post-audit review--The Committee shall meet with the Accountants and
  appropriate representatives of management to review matters relating to the
  annual audit of the Company's financial statements, including any proposed
  audit adjustments thereto.

    e. Management letter review--The Committee shall review letters to
  management relating to the Company's internal control systems and related
  policies and procedures prepared by the Accountants and management's
  responses thereto.


    f. Required communication review--The Committee shall review significant
  accounting and reporting issues, including recent professional and
  regulatory pronouncements, and their impact on the Company and its
  financial reporting.

    g. Annual and interim financial information review--The Committee shall
  discuss with the Accountants and the Company's management matters relating
  to annual and interim financial information and the reporting thereof to
  stockholders, the SEC, the NYSE or others.

    h. Changes in accounting or reporting practices--The Committee shall be
  kept informed by the Company's management and the Accountants of any actual
  or proposed changes in accounting or financial reporting practices.

    i. Review of activities of the Department--The Committee shall
  periodically review the effectiveness of the Department's function,
  activities and organizational structure. The Committee shall also review
  the Department's long range audit plan (the "Plan") as well as periodic
  reports provided by the Department setting forth its progress toward
  completion of the Plan, any significant changes to or deviations from the
  Plan, the results of completed internal audit procedures, and any other
  matters brought to the attention of the Committee by the Department.

    j. Review of regulatory examinations--The Committee shall review the
  reports of regulatory examinations relating to the affairs of the Company
  and its subsidiaries and management's responses thereto.

    k. Legal matters--The Committee shall review, with the Company's general
  counsel, any legal matters that could have a significant impact on the
  Company's financial statements, and the Company's compliance with laws and
  regulations.

    l. Investment of Company assets--The Committee shall monitor compliance
  with the Company's investment policy and approve exceptions or recommend
  them to the Board.

    m. Interested party transactions--The Committee shall review the
  procedures in effect for considering officers' and directors' perquisites
  and interested parties transactions.

  4. Communications with the Committee: The Committee shall make clear to the
Accountants, the Department and the Company's management that if, at any time,
matters come to their attention which they believe should be communicated to
the Committee, such matters should be communicated immediately to the Chairman
of the Committee. When any Committee member learns of information which he or
she believes should be communicated to the Board, he or she shall promptly
notify the Chairman of the Committee.

                                       2


                                LEGG MASON, INC.
            Proxy for Annual Meeting of Stockholders, July 24, 2001


  The undersigned hereby appoints Raymond A. Mason, Robert F. Price and Timothy
C. Scheve, and each of them, as proxy, with full power of substitution, to vote
all shares which the undersigned is entitled to vote at the Annual Meeting of
Stockholders of Legg Mason, Inc., on July 24, 2001, at 10:00 a.m., and at any
adjournment thereof.

     The Board of Directors recommends a vote FOR each of the items below.

1. FOR [ ] WITHHOLD [ ] The election of all Nominees for the Board of Directors
   listed (except as marked to the contrary):
   Nominees for the term expiring at the 2004 annual meeting

   Raymond A. Mason  James W. Brinkley  Edmund J. Cashman, Jr.  Harold L. Adams

(To withhold authority to vote for any individual nominee strike a line through
                              the nominee's name)

2. FOR [ ] AGAINST [ ] ABSTAIN [ ] Amendment of the Legg Mason Wood Walker,
   Incorporated Deferred Compensation Phantom Stock Plan.

3. FOR [ ] AGAINST [ ] ABSTAIN [ ] Reapproval of the Legg Mason, Inc. 1996
   Equity Incentive Plan.

4. FOR [ ] AGAINST [ ] ABSTAIN [ ] Approval of the Legg Mason, Inc. Employee
   Stock Purchase Plan.

5. To act upon any other matter which may properly come before the meeting or
   any adjournment thereof.

  This proxy will be voted on each of the foregoing items as specified by the
person signing it, but if no specification is made the proxy will be voted
FOR the election of Directors and FOR the other proposals.

          THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
                    IT MAY BE REVOKED PRIOR TO ITS EXERCISE.


  Receipt of notice of the meeting, proxy statement and 2001 annual report is
hereby acknowledged, and the terms of the notice and statement are hereby
incorporated by reference into this proxy. The undersigned hereby revokes all
proxies heretofore given for said meeting or any adjournment or adjournments
thereof.

Dated.................... 2001         .......................................
                                                      (SEAL)

                                       .......................................
                                                      (SEAL)

Please date and then sign exactly as name appears to the left. If signing for a
trust, estate, corporation or other legal entity, capacity or title should be
stated. If shares are jointly owned, both owners should sign.

 PLEASE DATE AND SIGN THIS PROXY AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.




                                                                      APPENDIX A

                      LEGG MASON WOOD WALKER, INCORPORATED
                      ------------------------------------

                    DEFERRED COMPENSATION/PHANTOM STOCK PLAN
                    ----------------------------------------

          (November, 2000 Amending Restatement, as Amended July, 2001)


                               TABLE OF CONTENTS


                                                                 PAGE
                                                                 ----
                                                              
ARTICLE I      General..........................................  1

     1.1    Purpose of Plan ....................................  1
     1.2    Nature of Plan .....................................  1

ARTICLE II     Definitions .....................................  1

     2.1    Definitions ........................................  1

ARTICLE III    Eligibility and Participation ...................  3

     3.1    Requirements........................................  3
     3.2    Enrollment and Participation........................  4
     3.3    Change of Employment Category.......................  4
     3.4    Leaves of Absence...................................  4
     3.5    Termination of Employment...........................  4
     3.6    Failure to Participate on Entry Date................  4
     3.7    Inactive Participation..............................  4

ARTICLE IV     Deferral Elections...............................  5

     4.1    General.............................................  5
     4.2    Timing of Elections.................................  5
     4.3    Irrevocability of Elections.........................  5
     4.4    Financial Hardship..................................  5

ARTICLE V      Contributions....................................  6

     5.1    Nature of Contributions.............................  6
     5.2    Compensation Deferral Contributions.................  6

ARTICLE VI     Participant Accounts.............................  6

     6.1    Account Established for Each Participant............  6
     6.2    No Funding Requirement..............................  7
     6.3    Value Adjustments...................................  7




                                                          
ARTICLE VII  Entitlement to Benefits..........................   9

     7.1   Termination of Employment..........................   9
     7.2   Death..............................................   9

ARTICLE VIII Distribution of Benefits.........................   9

     8.1   Benefits During Lifetime...........................   9
     8.2   Death Benefits.....................................  10
     8.3   Payment Option Elections...........................  10
     8.4   Mode of Distribution...............................  10
     8.5   Deductions.........................................  10
     8.6   Payment to Minor or Incompetent....................  11
     8.7   Qualified Domestic Relations Order.................  11
     8.8   Location of Participants and Beneficiaries.........  11

ARTICLE IX  Administration....................................  12

     9.1   Administrative Authority...........................  12
     9.2   Company Administration.............................  12
     9.3   Administrative Committee...........................  13

ARTICLE X   Amendment and Termination.........................  14

     10.1  Right to Amend.....................................  14
     10.2  Amendment Required by Federal Law..................  14
     10.3  Right to Terminate.................................  14
     10.4  Cessation of Business..............................  14
     10.5  Successor to Company...............................  15
     10.6  Change in Control or Cessation of Public Trading...  15
     10.7  Termination of 401(k) Plan.........................  15
     10.8  Preservation of Rights.............................  15
     10.9  Effect of Termination..............................  15

ARTICLE XI  Multiple-Employer Provisions......................  15

     11.1  Adoption by Other Employers........................  15
     11.2  Separate Plans.....................................  16
     11.3  Participation......................................  16
     11.4  Combined Service...................................  16
     11.5  Administration.....................................  16
     11.6  Amendment..........................................  16
     11.7  Termination........................................  16




                                                          
ARTICLE XII  Miscellaneous...................................  16

     12.1  Limitations on Liability of Company...............  16
     12.2  Construction......................................  17
     12.3  Spendthrift Provision.............................  17



                      LEGG MASON WOOD WALKER, INCORPORATED
                      ------------------------------------

                    DEFERRED COMPENSATION/PHANTOM STOCK PLAN
                    ----------------------------------------

         (November, 2000 Amending Restatement, as Amended July__, 2001)


          THIS AMENDING RESTATEMENT OF THE LEGG MASON WOOD WALKER, INCORPORATED
DEFERRED COMPENSATION/PHANTOM STOCK PLAN (the "Plan") is adopted by LEGG MASON
WOOD WALKER, INCORPORATED under the terms and conditions hereinafter set forth.

                                R E C I T A L S
                                - - - - - - - -

                LEGG MASON WOOD WALKER, INCORPORATED has adopted
          a deferred compensation/phantom stock plan for the
          benefit of certain of its employees and has been
          operating thereunder since the effective date of February
          1, 1988. The purpose of this amending restatement is to
          incorporate certain amendments to the Plan approved by
          the Board of Directors of the Company in November 2000.
          In July 2001, the Plan was amended, subject to the
          approval of the stockholders of Legg Mason, Inc., to
          take effect for calendar years beginning with 2002.

                                   ARTICLE I
                                   ---------

                                    General
                                    -------

          1.1  Purpose of Plan - The Plan is established to provide supplemental
               ---------------
retirement income benefits to those executives who, by virtue of statutory
restrictions within the Internal Revenue Code, are prevented from fully
participating in the Legg Mason Profit Sharing and 401(k) Plan and Trust.

          1.2  Nature of Plan - The Plan is intended to be a non-qualified,
               --------------
unfunded plan maintained to provide deferred compensation to a select group of
management and/or highly compensated employees, and is not intended to be
subject to ERISA (other than Title 1, Subtitle B, Part I, Reporting and
Disclosure).


                                   ARTICLE II
                                   ----------

                                  Definitions
                                  -----------

          2.1  Definitions - The following terms, as used herein, unless a
               -----------
different meaning is implied by the context, shall have the following meanings:


                                       1


               Account - The account established for each Participant pursuant
               -------
to Section 6.1.

               Administrator - The person, group or entity designated in
               -------------
accordance with the provisions of ARTICLE IX to administer and operate the Plan.

               Beneficiary - Any person or persons so designated in accordance
               -----------
with the provisions of Section 8.2.

               Change in Control - The happening of any of the following events
               -----------------
(a "Change Event"): (i) the approval by shareholders of LMI of an agreement to
merge or consolidate LMI with or into another corporation (with LMI not
surviving), or to sell or otherwise dispose of all or substantially all of the
assets of LMI, (ii) the approval by shareholders of the Company of an agreement
to merge or consolidate the Company with or into another corporation (with the
Company not surviving), or to sell or otherwise dispose of all or substantially
all of the assets of the Company, (iii) a determination by the Board of
Directors of LMI that, in connection with any proposed tender or exchange offer
for voting securities of LMI, any person has become the direct or indirect
beneficial owner of securities representing 40% or more of the combined voting
power of LMI's then outstanding securities; provided, however, that: (A) a
Change in Control shall be deemed not to have occurred for purposes of this Plan
if, not later than five business days after a Change Event described in clause
(i) or (ii) of this definition, that Change Event is designated by the
affirmative vote of 75% or more of the directors who were members of LMI's Board
of Directors immediately prior to the Change Event as not constituting a Change
in Control for purposes of the Plan; and (B) if a Change Event described in
clause (i) or (ii) of this definition occurs with respect to a portion of the
Company, the Change in Control, if any, shall be deemed to have occurred only
with respect to the employees transferred in connection therewith.

               Company - LEGG MASON WOOD WALKER, INCORPORATED, a corporation
               -------
duly organized and existing under the laws of the State of Maryland, and its
successors and assigns, unless otherwise herein provided, or any other business
organization which, as hereinafter provided, shall assume the obligations
hereunder, or which shall agree to become a party to the Plan.

               Compensation - A Participant's compensation as defined under the
               ------------
401(k) Plan for the purpose of calculating the Participant's elective pre-tax
deferrals thereunder.

               Compensation Deferral Agreement - The written agreement whereby
               -------------------------------
an Employee or Participant elects to commence or resume participation in the
Plan and to defer Compensation pursuant to the terms of the Plan.

               Compensation Deferral Amendment - A special form of Compensation
               -------------------------------
Deferral Agreement whereby a Participant changes a previously-made election.

               Covered Employee - Any Employee who is a participant in the
               ----------------
401(k) Plan and who is determined by the Company, in its sole and absolute
discretion, to be a member

                                       2


of "a select group of management or highly compensated employees" within the
meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.

               Effective Date - The effective date of the Plan, which shall be
               --------------
February 1, 1988.

               Employee - Any person employed by the Company.
               --------

               Entry Date - The last day in each Plan Year, and, with respect to
               ----------
any Employee, the earlier of: (i) 45 days after the date on which the Company
notifies him of his eligibility to participate in the Plan, or (ii) the day,
during such 45 day period, on which he files a completed Compensation Deferral
Agreement with the Company.

               ERISA - The Employee Retirement Income Security Act of 1974, or
               -----
any provision or section thereof herein specifically referred to, as such Act,
provision or section may from time to time be amended or replaced.

               401(k) Plan - The Legg Mason Profit Sharing and 401(k) Plan and
               -----------
Trust (as amended from time to time), a tax-qualified profit sharing plan
maintained by the Company pursuant to Sections 401(a) and 401(k) of the Internal
Revenue Code.

               Internal Revenue Code - The Internal Revenue Code of 1986, or any
               ---------------------
provision or section thereof herein specifically referred to, as such Code,
provision or section may from time to time be amended or replaced.

               LMI - Legg Mason, Inc.
               ---

               Participant - Any person so designated in accordance with the
               -----------
provisions of ARTICLE III, including, where appropriate according to the context
of the Plan, any former Employee in whose name an Account (with an undistributed
balance) exists under the Plan.

               Payment Option Election - A written election, on a form provided
               -----------------------
or approved by the Company,  whereby a Participant elects the form and/or timing
of the distribution of his Account.

               Plan - The plan set forth herein, as amended from time to time.
               ----

               Plan Year - A twelve month period coincident with the plan year
               ---------
of the 401(k) Plan (which, as of the Effective Date, ends on the last day of the
month of December).

               Publicly Traded - Traded on the New York Stock Exchange, the
               ---------------
American Stock Exchange or NASDAQ.

               Sponsor - Legg Mason Wood Walker, Incorporated, and its
               -------
successors and assigns.

                                       3


                                  ARTICLE III
                                  -----------

                         Eligibility and Participation
                         -----------------------------

          3.1  Requirements - On or after the Effective Date, every Covered
               ------------
Employee shall be eligible to become a Participant on the first Entry Date
occurring after the date he has met each of the following requirements:

               3.1.1 He has been, or in the judgment of the Company will be,
prevented from maximizing elective deferrals to the 401(k) Plan by reason of the
annual limit on elective deferrals imposed by Section 402(g) of the Internal
Revenue Code; and

               3.1.2 He is individually approved by the Company, in its sole and
absolute discretion, for participation in the Plan.

          3.2  Enrollment and Participation - Participation in the Plan is
               ----------------------------
voluntary.  Each Covered Employee may elect to participate in the Plan as of the
Entry Date on which he becomes eligible in accordance with Section 3.1.  The
election to commence or resume participation shall be made by, and only by,
completing and delivering to the Company a Compensation Deferral Agreement on or
before the Entry Date.

          Subject to the right of the Company to terminate the participation of
any Participant at any time (except as provided in Section 3.7), once an
Employee has become a Participant his participation in the Plan shall continue
(without regard to whether or not a Compensation Deferral Agreement is in
effect) throughout his tenure as an Employee.

          3.3  Change of Employment Category - During any period in which a
               -----------------------------
Participant remains in the employ of the Company but ceases to be a Covered
Employee, he will continue his Plan participation, but his Account shall not be
credited with, nor shall he be entitled to make, any contributions based upon
Compensation payable with respect to such period.

          3.4  Leaves of Absence - During any authorized absence from active
               -----------------
service under conditions which are not treated by the Company as a termination
of employment, the Employee shall remain as a Participant to the same extent as
if he had not taken the leave of absence.

          3.5  Termination of Employment - Upon termination of a Participant's
               -------------------------
employment, his participation in the Plan shall terminate (except as provided in
Section 3.7).  If an Employee (whether or not a Participant) whose employment is
terminated is subsequently re-employed, he shall be treated as a new Employee
who shall be eligible to become a Participant only after again meeting the
requirements of Section 3.1 and filing a new Compensation Deferral Agreement
pursuant to Section 3.2.

          3.6  Failure to Participate on Entry Date - In the event that an
               ------------------------------------
Employee who, pursuant to Section 3.1, is eligible to commence or resume
participation on an Entry Date fails to elect to participate as of that Entry
Date, he shall not again be eligible to participate until

                                       4


the next, or any subsequent, Entry Date (provided he is still then otherwise
eligible for participation). If he does so elect, his participation shall be
effective as of the first Entry Date occurring on or after the date his
Compensation Deferral Agreement is filed with the Company.

          3.7  Inactive Participation - In the event that a Participant's active
               ----------------------
participation in the Plan ceases, as described in Section 3.2 or 3.5, he shall
nevertheless be deemed to remain as a Participant for all purposes other than
the crediting of further Section 5.2 contributions to his Account, until such
time as there is no longer an undistributed balance in his Account.


                                   ARTICLE IV
                                   ----------

                               Deferral Elections
                               ------------------

          4.1  General - The election by any Participant to defer Compensation
               -------
pursuant to the terms of the Plan shall be made by, and only by, the filing of a
completed Compensation Deferral Agreement (or Compensation Deferral Amendment)
with the Company.  Subject to the remainder of this ARTICLE IV, deferral
elections shall be made at the time, in the manner, and subject to the
conditions specified by the Company.

          4.2  Timing of Elections - Except as otherwise provided in Section
               -------------------
4.2.1 or 4.4, the election to defer Compensation for a Plan Year shall not be
effective unless made prior to the first day of the Plan Year.

               4.2.1 Initial Election - The Compensation Deferral Agreement
                     ----------------
constituting the initial deferral election by an Employee who becomes eligible
to commence or resume participation in the Plan, pursuant to Section 3.1 must be
filed with the Company on or before the Employee's Entry Date.  Unless the Entry
Date coincides with the last day of a Plan Year, the initial election shall be
for the remainder of the current Plan Year.

               4.2.2 Elections for Subsequent Plan Years - A Participant may
                     -----------------------------------
make changes in his deferral election (including a revocation of further
deferrals), effective for any Plan Year after his initial Plan Year as a
Participant, by filing a completed Compensation Deferral Amendment prior to the
first day of the subsequent Plan Year. If a Participant fails to file a
completed Compensation Deferral Amendment prior to a Plan Year, and is still
eligible to defer, he will be deemed to have elected to keep his prior election
in force for that Plan Year.

          4.3  Irrevocability of Elections - Except as provided in Section 4.2.1
               ---------------------------
or 4.4, any Participant electing to make deferral contributions must make an
irrevocable election for an entire Plan Year.  Once a Plan Year has begun, a
deferral election may not be changed or revoked during the Plan Year (except
with respect to deferrals in future Plan Years).

          4.4  Financial Hardship - Notwithstanding the provisions of Sections
               ------------------
4.2 and 4.3, in the event of a Participant's financial hardship, the Participant
may apply to the Company for permission to reduce or suspend deferral
contributions for the remainder of the Plan Year or

                                       5


any part thereof. The Company shall have the sole discretion as to the extent
(if at all) it shall grant the Participant's request.

               "Financial hardship" shall be defined as financial need arising
as a result of a sudden and unexpected illness or accident of the Participant or
of a dependent (as defined in Section 152(a) of the Internal Revenue Code) of
the Participant, loss of the Participant's property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant, but only where such financial need
is not and may not be relieved: (i) through reimbursement or compensation by
insurance or otherwise, or (ii) by liquidation of the Participant's assets, to
the extent the liquidation of such assets would not itself cause severe
financial hardship.


                                   ARTICLE V
                                   ---------

                                 Contributions
                                 -------------

          5.1  Nature of Contributions - Contributions described in this ARTICLE
               -----------------------
V shall not represent actual deposits to a separate fund or trust, but shall be
bookkeeping entries in the form of credits to the Accounts of the Participants
on whose behalf the contributions are made.

          5.2  Compensation Deferral Contributions - By so electing in his
               -----------------------------------
Compensation Deferral Agreement, each Participant may elect to defer
Compensation (which would otherwise have been paid to him) in any whole
percentage amount designated by him, provided that such amount is not less than
1%, nor more than 13%, of his Compensation for the Plan Year.  In no event,
however, shall any Participant's deferrals for a Plan Year: (i) begin until he
has been prevented from making elective deferrals to the 401(k) Plan by reason
of the annual limit on elective deferrals imposed by Section 402(g) of the
Internal Revenue Code, or (ii) exceed $60,000, and the Company may establish
such procedures with respect to timing and amount of individual deferrals by
each Participant as it deems appropriate to implement these limitations (other
than any procedure which would require or permit the Company to pay to the
Participant any Compensation previously deferred by the Participant pursuant to
this Section 5.2, whether during the current or any preceding Plan Year).

               Pursuant to each Participant's deferral election, the Company
shall reduce the gross amount of the Participant's Compensation. In lieu of
paying the deferred portion of the Participant's Compensation to him as earned,
the Company will credit to the Participant's Account dollar amounts equal to the
deferred Compensation, each such credit to be made as of a date no later than
fifteen (15) business days after the last day of the month during which the
Participant would have been entitled to such Compensation had it been paid as
current Compensation.

          Any FICA or other payroll tax which may be imposed on the Participant
with respect to deferral contributions shall, unless otherwise determined by the
Company, be deducted from the non-deferred remainder of the Participant's
remuneration.

                                       6


                                  ARTICLE VI
                                  ----------

                             Participant Accounts
                             --------------------

          6.1  Account Established for Each Participant - An individual Account
               ----------------------------------------
shall be established on the books of the Company in the name of each
Participant, for the purpose of accounting for contributions credited to, and
benefits paid to or on behalf of, the Participant, and to account for
incremental adjustments pursuant to Section 6.3.  Each Account shall be divided
into such sub-accounts, if any, as the Company deems appropriate to properly
implement the provisions of the Plan.

          6.2  No Funding Requirement - The Company shall not be required to
               ----------------------
purchase, hold or dispose of any investments with respect to amounts credited to
the Account, its only obligation being to make payments as described in ARTICLE
VIII.  Should the Company elect to make contributions to a trust (hereinafter
referred to as the "Trust") to assist the Company in paying the benefits which
may accrue hereunder, the amounts contributed shall be used to purchase the
deemed investments under Section 6.3, subject to application of the provisions
of this Section 6.2 to the actual investments.  However, contributions to the
Trust shall not reduce or otherwise affect the Company's liability to pay
benefits under this Plan (which benefits may be paid from the Trust or from the
Company's general assets, in the discretion of the Company), except that the
Company's liability shall be reduced by actual benefit payments from the Trust
(and the Account shall be appropriately adjusted to reflect such payments).  If
any such investments, or any contributions to the Trust, are made by the
Company, such investments shall have been made solely for the purpose of aiding
the Company in meeting its obligations under the Plan, and, except for actual
contributions to the Trust, no trust or trust fund is intended.  To the extent
that the Company does, in its discretion, purchase or hold any such investments
(other than through contributions to the Trust), the Company will be named sole
owner of all such investments and of all rights and privileges conferred by the
terms of the instruments or certificates evidencing such investments.  Nothing
stated herein will cause such investments, or the Trust, to form part of the
Account, or to be treated as anything but the general assets of the Company,
subject to the claims of its general creditors, nor will anything stated herein
cause such investments, or the Trust, to represent the vested, secured or
preferred interest of the Participant or his Beneficiaries.  The Company shall
have the right at any time to use such investments not held in the Trust in the
ordinary course of its business.  Neither the Participant nor any of his
Beneficiaries shall at any time have any interest in the Account or the Trust or
in any such investments, except as a general, unsecured creditor of the Company
to the extent of the deferred compensation arrangement which is the subject of
the Plan.

          6.3  Value Adjustments
               -----------------

               6.3.1 For purposes of this Section 6.3, the following definitions
shall be utilized:

                     Common Stock - the common stock of LMI or any successor
                     ------------
corporation.

                                       7


                    Contribution Credit - a dollar amount equal to a
                    -------------------
contribution credit made to the Account of a Participant pursuant to ARTICLE V.

                    Credit Date Value - the Value of a share of Common Stock on
                    -----------------
the fifth business day after the date as of which a Contribution Credit is made.

                    Dividend Unit - the equivalent of that number of shares of
                    -------------
Common Stock obtained by dividing the amount of any dividend or other
distribution paid or made by LMI with respect to a share of Common Stock (but
not including a distribution in Common Stock) by 95% of the Value of a share of
Common Stock on the fifth business day after the payment date of the dividend or
other distribution.

                    Maturity Value - the value of a share of Common Stock on the
                    --------------
Valuation Date.

                    Share Unit - the equivalent of one share of Common Stock.
                    ----------

                    Units - Share Units and Dividend Units, collectively.
                    -----

                    Value - the fair market value of a share of Common Stock,
                    -----
equal to the average of the closing prices on the principal exchange on which
the shares are traded for the five business days preceding the applicable date,
or, if the shares are not then traded on an exchange, as such value is
determined by the Company using any reasonable method of valuation (including
the mean of the high and low quotations of the shares as reported by NASDAQ for
the applicable date, or, in the absence of any reported sales on such date, the
first preceding date on which there were such sales).

                    Valuation Date - the date as of which a distribution is due
                    --------------
to a Participant or Beneficiary pursuant to ARTICLE VII.

             6.3.2  Units (calculated to four decimal places) shall be credited
to the Account of each Participant as follows:

                    6.3.2.1  As of the date on which any Contribution Credit is
made to the Account, any Contribution Credit shall be converted to a number of
Share Units equal to the Contribution Credit divided by 90% of the Credit Date
Value.

                    6.3.2.2  Whenever, prior to the Valuation Date, LMI shall
pay any dividend (other than in Common Stock) upon issued and outstanding Common
Stock, or shall make any distribution (other than in Common Stock) with respect
thereto, there shall be credited to the Account such number of Dividend Units as
shall be allocable to the Units credited to the Account as of the record date of
the dividend or other distribution.

             6.3.3  In the event that, prior to the Valuation Date: (i) the
number of outstanding shares of Common Stock shall be changed by reason of a
stock split, combination of shares, recapitalization, stock dividend or
otherwise, or (ii) the Common Stock is converted into

                                       8


or exchanged for other shares as a result of a merger, consolidation, sale of
assets, or other reorganization or recapitalization, the number of Units then
credited or to be credited to the Account shall be appropriately adjusted so as
to reflect such change (based upon the best estimate of LMI management as to
relative values).

               6.3.4  The amount of any distribution to be paid to a Participant
or Beneficiary with respect to the Account shall be determined on the Valuation
Date and shall be based upon the Maturity Value of the Units included in the
Account.

               6.3.5  Nothing herein contained shall be construed as conferring
upon any Participant or Beneficiary any rights as a stockholder of LMI or any
right to have access to the books and records, financial statements or other
financial information of or relating to the Company or LMI.


                                  ARTICLE VII
                                  -----------

                            Entitlement to Benefits
                            -----------------------

          7.1  Termination of Employment - In the event of a termination of
               -------------------------
employment by a Participant for any reason other than his death, then, as of the
fifth business day after the date of his termination of employment, he shall
become entitled to the full amount of his Account, payable according to the
provisions of ARTICLE VIII.

          7.2  Death - In the event of the death of a Participant prior to his
               -----
termination of employment, then, as of the fifth business day after the date of
his death, the full amount of his Account shall become payable, according to the
provisions of ARTICLE VIII, to his designated Beneficiary, upon submission of
proof of death satisfactory to the Company.


                                  ARTICLE VIII
                                 ------------

                           Distribution of Benefits
                           ------------------------

          8.1  Benefits During Lifetime - In the event that the Participant's
               ------------------------
employment with the Company terminates for any reason other than his death,
then, beginning as soon as is administratively practicable after the fifth
business day following termination of employment (but, if the Participant has so
elected in his Payment Option Election, no earlier than the first day of the
calendar year next following termination), the Company will, in accordance with
the Payment Option Election, either (i) distribute an amount equal to the entire
balance of the Account to the Participant in a single lump sum, or (ii)
distribute the first of a series of three annual installment distributions of
the balance of the Account; provided, however, that if the Participant's total
Account balance is less than $20,000, he may not elect option (ii) above.

          8.2  Death Benefits - In the event of the death of a Participant who
               --------------
has an undistributed balance in his Account:

                                       9


               8.2.1 As soon as is administratively practicable after the fifth
business day following the date of death, the Company will distribute to the
Participant's Beneficiary an amount equal to the balance of the Account in a
single lump sum, or, if the Participant has so indicated in his Payment Option
Election, in the same manner as the Account would have been distributed to the
Participant had he lived.

               8.2.2 Each Participant from time to time may designate any person
or persons (who may be named contingently or successively) to receive such
benefits as may be payable under the Plan upon or after his death, and such
designation may be changed from time to time by the Participant by filing a new
designation. Each designation will revoke all prior designations by the same
Participant, shall be in form prescribed by the Company, and will be effective
only when filed in writing with the Company during his lifetime.

               8.2.3 In the absence of a valid Beneficiary designation, or if,
at the time any benefit payment is due to a Beneficiary, there is no living
Beneficiary eligible to receive the payment, validly named by the Participant,
the Company shall distribute any such benefit payment to the person or persons
designated to receive the Employee's accrued benefit from the 401(k) Plan. In
the absence of a valid designation to a living person under the 401(k) Plan, the
Company shall distribute the benefit payment to the Participant's estate. In
determining the existence or identity of anyone entitled to a benefit payment,
the Company may rely conclusively upon information supplied by the Personal
Representative of the Participant's estate. In the event of a lack of adequate
information having been supplied to the Company, or in the event that any
question arises as to the existence or identity of anyone entitled to receive a
benefit payment as aforesaid, or in the event that a dispute arises with respect
to any such payment, or in the event that a Beneficiary designation conflicts
with applicable law, or in the event the Company is in doubt for any other
reason as to the right of any person to receive a payment as Beneficiary then,
notwithstanding the foregoing, the Company, in its sole discretion, may, in
complete discharge, and without liability for any tax or other consequences
which might flow therefrom: (i) distribute the payment to the Participant's
estate, (ii) retain such payment, without liability for interest, until the
rights thereto are determined, or (iii) deposit the payment into any court of
competent jurisdiction.

          8.3  Payment Option Elections
               ------------------------

               8.3.1  General Rules - Simultaneously with the filing of his
                      -------------
Compensation Deferral Agreement, the Participant shall make an election to
receive the benefits payable hereunder in a lump sum or in periodic
installments.  The Participant's election shall be set forth in a Payment Option
Election.  Following the filing of his Compensation Deferral Agreement, the
Participant shall have no further right to alter any election set forth in his
Payment Option Election except pursuant to Section 8.3.2, but the Participant
shall have the right to make new elections from time to time (but not more than
once every five years), each on a separate Payment Option Election, provided
that each such new election shall be applicable only to the portion of his
Account attributable to Plan Years beginning after the filing of the new Payment
Option Election, and all pre-existing elections shall remain in effect with
respect to the portions of the Account attributable to the periods for which
such elections were applicable.

                                       10


               8.3.2  Special Re-Election - Any Participant may change his
                      -------------------
Payment Option Election with respect to his Account, whether attributable to
Plan Years beginning prior to or subsequent to the date of change, by making a
special, one-time Payment Option Election, designated by the Participant and
acknowledged by the Administrator as such. To be effective, the special,
one-time Payment Option Election must be made by the Participant subsequent to
the execution date of the June, 1999 Amending Restatement but on or before June
30, 1999.

          8.4  Mode of Distribution - The Company shall make all distributions
               --------------------
in Common Stock (as defined in Section 6.3.1); provided, however, that (i) the
Company shall distribute only whole shares of Common Stock and cash in lieu of
any fractional shares of Common Stock based on 100% of the Value of a share of
Common Stock on the Valuation Date (i.e., no fractional shares will be issued),
and (ii) the Company may not distribute Common Stock unless and until there
exists an effective registration statement under the Securities Act of 1933, as
amended, covering the shares to be distributed.

          8.5  Deductions - Any amounts payable under the Plan shall be subject
               ----------
to such deductions or withholdings as may be required by law, but shall not be
deemed to be salary or other compensation for the purpose of computing benefits
to which the Participant may be entitled under any retirement plan or other
arrangement of the Company for the benefit of its employees generally.

          8.6  Payment to Minor or Incompetent - If any person to whom a payment
               -------------------------------
is due under the Plan is a minor, or is found by the Company to be incompetent
by reason of physical or mental disability, the Company shall have the right to
cause the payments becoming due to such person to be made to another for his
benefit, without responsibility of the Company to see to the application of such
payments, and such payments will constitute a complete discharge of the
liabilities of the Company with respect thereto.

          8.7  Qualified Domestic Relations Order - Payments under the Plan
               ----------------------------------
shall not be subject to the provision of any Qualified Domestic Relations Order
(a "QDRO"), as defined by Section 414(p) of the Internal Revenue Code,
applicable to a Participant's benefit under the 401(k) Plan.  Any amount which
would be payable under this Plan to an alternate payee if the QDRO were applied
to this Plan shall instead be paid to the Participant, if living, otherwise to
his Beneficiary.

          8.8  Location of Participants and Beneficiaries - Any communication,
               ------------------------------------------
statement or notice addressed to a Participant (or Beneficiary) at his last post
office address filed with the Company, or if no such address was filed with the
Company then at his last post office address as shown on the Company's records,
shall be binding on the Participant (or Beneficiary) for all purposes of the
Plan.  Except for the sending of a registered letter to the last known address,
the Company shall not be obliged to search for any Participant (or Beneficiary).
If the Company notifies any Participant (or Beneficiary) that he is entitled to
an amount under the Plan and the Participant (or Beneficiary) fails to claim
such amount or make his location known to the Company within three years, then,
except as otherwise required by law, the Company shall have the right to treat
the amount payable as a forfeiture.

                                       11


                                   ARTICLE IX
                                   ----------

                                 Administration
                                 --------------

          9.1  Administrative Authority - Except as otherwise specifically
               ------------------------
provided herein, the Company shall have the sole responsibility for and the sole
control of the operation and administration of the Plan, and shall have the
power and authority to take all action and to make all decisions and
interpretations which may be necessary or appropriate in order to administer and
operate the Plan, including, without limiting the generality of the foregoing,
the power, duty and responsibility to: (i) resolve and determine all disputes or
questions arising under the Plan, including the power to determine the rights of
Employees, Participants and Beneficiaries, and their respective benefits, and to
remedy any ambiguities, inconsistencies or omissions; (ii) adopt such rules of
procedure and regulations as in its opinion may be necessary for the proper and
efficient administration of the Plan and as are consistent with the Plan; (iii)
implement the Plan in accordance with its terms and such rules and regulations;
(iv) notify the Participants of any amendment or termination of, or of a change
in any benefits available under, the Plan; and (v) prescribe such forms as may
be required for Employees to make elections under, and otherwise participate in,
the Plan.  Subject to the power to delegate in the manner described in Section
9.2, the Company shall act through its Board of Directors.

          9.2  Company Administration - The Plan shall be operated and
               ----------------------
administered on behalf of the Company by an Administrator.  The Administrator
shall be governed by the following:

               9.2.1 In the absence of any designation to the contrary by the
Company, the Administrator shall be the Administrative Committee established
pursuant to Section 9.3. Except as the Company shall otherwise expressly
determine, the Administrator shall have full authority to act for the Company
before all persons in any matter directly pertaining to the Plan, including the
exercise of any power or discretion otherwise granted to the Company pursuant to
the terms of the Plan, other than the power to amend or terminate the Plan, to
determine Company contributions, and to affect the employer-employee
relationship between the Company and any Employee, all of which powers are
reserved to the Company unless expressly granted to the Administrator.

               9.2.2 The Administrator may appoint any persons or firms, or
otherwise act to secure specialized advice or assistance, as it deems necessary
or desirable in connection with the administration and operation of the Plan;
the Administrator shall be entitled to rely conclusively upon, and shall be
fully protected in any action or omission taken by it in good faith reliance
upon, the advice or opinion of such firms or persons. The Administrator shall
have the power and authority to delegate from time to time by written instrument
all or any part of its duties, powers or responsibilities under the Plan, both
ministerial and discretionary, as it deems appropriate, to any person, and in
the same manner to revoke any such delegation of duties, powers or
responsibilities. Any action of such person in the exercise of such delegated
duties, powers or responsibilities shall have the same force and effect for all
purposes hereunder as if such action had been taken by the Administrator.
Further, the Administrator may authorize one or more persons to execute any
certificate or document on behalf of the Administrator, in which

                                       12


event any person notified by the Administrator of such authorization shall be
entitled to accept and conclusively rely upon any such certificate or document
executed by such person as representing action by the Administrator until such
third person shall have been notified of the revocation of such authority. The
Administrator shall not be liable for any act or omission of any person to whom
the Administrator's duties, powers or responsibilities have been delegated, nor
shall any person to whom any duties, powers or responsibilities have been
delegated have any liabilities with respect to any duties, powers or
responsibilities not delegated to him.

               9.2.3 All representatives of the Company, and/or members of the
Administrative Committee, shall use ordinary care and diligence in the
performance of their duties pertaining to the Plan, but no such individual shall
incur any liability: (i) by virtue of any contract, agreement, bond or other
instrument made or executed by him or on his behalf in his official capacity
with respect to the Plan, (ii) for any act or failure to act, or any mistake or
judgment made, in his official capacity with respect to the Plan, unless
resulting from his gross negligence or willful misconduct, or (iii) for the
neglect, omission or wrongdoing of any other person involved with the Plan. The
Company shall indemnify and hold harmless each such individual who is an
Employee from the effects and consequences of his acts, omissions and conduct in
his official capacity with respect to the Plan, except to the extent that such
effects and consequences shall result from his own willful misconduct or gross
negligence. If any matter arises as to which an individual is entitled to
indemnity hereunder, the indemnitee shall give the Company prompt written notice
thereof. The Company, at its own expense, shall then take charge of the
disposition of the asserted liability, including compromise or the conduct of
litigation. The indemnitee may, at his own expense, retain his own counsel and
share in the conduct of any such litigation, but the failure to do so shall not
adversely affect his right to indemnity.

               9.2.4 Nothing in the Plan shall be construed so as to prevent any
person involved in administration of the Plan from receiving any benefit to
which he may be entitled as a Participant.

               9.2.5 Expenses incurred in the administration and operation of
the Plan (including the functioning of the Administrative Committee) shall be
paid by the Company.

          9.3  Administrative Committee - The Company shall designate and
               ------------------------
appoint a committee, to be known as the Administrative Committee, as
Administrator.  Except to the extent that the Company has retained any power or
authority, or allocated duties and responsibilities to another, said Committee
shall have full power and authority to administer and operate the Plan in
accordance with its terms and in particular the authority contained in this
ARTICLE IX, and, in acting pursuant thereto, shall have full power and authority
to deal with all persons in any matter directly connected with the Plan, in
accordance with the following provisions:

               9.3.1 The Committee shall consist of one or more individuals
designated by the Company. Subject to his right to resign at any time, each
member of the Committee shall serve (without compensation, unless otherwise
determined by the Company) at the pleasure of the Company, and the Company may
appoint, and may revoke the appointment of, additional

                                       13


members to serve with the Committee as may be determined to be necessary or
desirable from time to time. Each member of the Committee, by accepting his
appointment to the Committee, shall thereby be deemed to have accepted all of
the duties and responsibilities of such appointment, and to have agreed to the
faithful performance of his duties thereunder.

                9.3.2 The Committee shall adopt such formal organization and
method of operation as it shall deem desirable for the conduct of its affairs.
The Committee shall act as a body, and the individual members of the Committee
shall have no powers and duties as such, except as provided herein; the
Committee shall act by vote of a majority of its members at the time in office,
either at a meeting or in writing without a meeting.

                9.3.3 The determination of the Committee on any matter
pertaining to the Plan within the powers and discretion granted to it shall be
final and conclusive on all Participants and all other persons dealing in any
way or capacity with the Plan.


                                   ARTICLE X
                                   ---------

                           Amendment and Termination
                           -------------------------

          10.1  Right to Amend - Subject to Section 10.8, the Company shall have
                --------------
the right to amend the Plan in writing, at any time, and with respect to any
provisions hereof, and all parties hereto or claiming any interest hereunder
shall be bound thereby.

          10.2  Amendment Required by Federal Law - Notwithstanding the
                ---------------------------------
provisions of Section 10.8, the Plan or any Plan may be amended at any time,
retroactively if required, if found necessary in order to conform to the
provisions and requirements of the Internal Revenue Code or ERISA, or any
similar act or any amendments thereto or regulations promulgated thereunder; no
such amendment shall be considered prejudicial to any interest of any Employee
or Participant.

          10.3  Right to Terminate - The Company reserves the right, at any
                ------------------
time, to terminate the Plan.

          10.4  Cessation of Business - Notwithstanding any other provision of
                ---------------------
this Plan to the contrary, in the event the Company ceases to actively carry on
the trade or business in which the Participant was employed (whether or not such
cessation involves a liquidation of the Company's assets), and if the cessation
is not pursuant to a transaction whereby a successor entity continues the trade
or business (including the obligations under the Plan), the entire value of the
Account shall (as soon as possible but in any event prior to the completion of
any liquidation of assets) be distributed in a single lump sum to the
Participant or, in the event the Participant is not then living, to the
Beneficiary designated in accordance with Section 8.2.

          10.5  Successor to Company - Subject to Section 10.6, in the event of
                --------------------
the merger, consolidation, sale of all or substantially all the assets, or
reorganization, of the Company:

                                       14


               10.5.1 Provision may be made by which the Plan will be continued
by the successor employer, in which case such successor shall be substituted for
the Company under the Plan and Section 7.1 shall not apply to the transaction.
The substitution of the successor shall constitute an assumption of Plan
liabilities by the successor and the successor shall have all of the powers,
duties and responsibilities of the Company under the Plan.

               10.5.2 If the action described in Section 10.5.1 has not been
taken within 90 days from the effective date of the transaction, the Plan shall
terminate as of the effective date of the transaction and the Account balance of
each Participant shall be distributed to him in a single lump sum.

               10.5.3 In the event of a transaction described in this Section
10.5 which applies to a portion of the Company, the provisions of this 10.5
shall apply only to the employees transferred in connection therewith.

          10.6 Change in Control or Cessation of Public Trading-  If there is a
               ------------------------------------------------
Termination Vote within 90 days after a Change in Control, or within 90 days
after the stock of LMI or any successor ceases to be Publicly Traded, the Plan
shall terminate and the Account balance of each Participant shall be immediately
distributed to him in a single lump sum.  A Termination Vote shall mean the
affirmative vote to terminate the Plan by Participants whose Accounts represent
more than 50% of the total value of the Accounts of all of the individuals who
were Participants immediately prior to the Change in Control or cessation of
public trading (based upon values determined in accordance with ARTICLE VI as of
the fifth business day preceding the date of the vote).

          10.7 Termination of 401(k) Plan - In the event the Company terminates
               --------------------------
the 401(k) Plan, this Plan shall be deemed to have simultaneously terminated,
and the provisions of Section 10.9 shall be applicable thereto.

          10.8 Preservation of Rights - Amendment or termination of the Plan
               ----------------------
shall not affect the rights of any Participant (or Beneficiary) to payment of
the amount in his Account, to the extent that such amount was payable under the
terms of the Plan prior to the effective date of such amendment or termination.

          10.9 Effect of Termination - Upon termination of the Plan, the rights
               ---------------------
of all Participants in their Accounts shall be payable as the Company shall
determine from either of the following alternatives: (i) continued
administration of all Accounts pursuant to the terms of the Plan, with
distributions to each Participant to be made pursuant to ARTICLES VII and VIII,
or (ii) immediate distribution to each Participant of his undistributed Account
balance.

                                       15


                                   ARTICLE XI
                                   ----------

                          Multiple-Employer Provisions
                          ----------------------------

          11.1 Adoption by Other Employers - Subject to approval of the Sponsor,
               ---------------------------
the Plan may be adopted by any other employer.  Such adoption and approval shall
be evidenced by the execution of an Adoption Agreement by the Sponsor and the
adopting employer.

          11.2 Separate Plans - It is intended that the provisions of the Plan
               --------------
shall apply separately to each participating Company, if there be more than one,
and to the Participants of each such participating Company, and, unless the
context otherwise requires, the term "Company" as used throughout the Plan shall
be so construed, to the end that, except as otherwise provided in this ARTICLE
XI, the Plan shall constitute a separate Plan for each participating Company.

          11.3 Participation - The participation of any participating Company in
               -------------
the Plan shall become effective as of the date the Adoption Agreement is
executed and approved as provided in Section 11.1, or on such other date as may
be set forth in said Adoption Agreement.  Once participation by a participating
Company has begun, such participation shall continue until terminated in
accordance with the terms of the Plan.

          11.4 Combined Service - Except as otherwise provided in the Adoption
               ----------------
Agreement, the term "service" or "employment" shall be deemed to refer equally
to service with any participating Company, so that, for any purpose under the
Plan, service with any participating Company shall be deemed to be the
equivalent of service with any other participating Company.  A Participant shall
be deemed to have terminated employment only upon the termination of his
employment with all of the participating Companies.

          11.5 Administration - The term "Company" as used in ARTICLE IX,
               --------------
pertaining to administration of the Plan, refers only to the Sponsor, and to the
Administrative Committee appointed by the Sponsor, although any other
participating Company may appoint its own separate committee, or otherwise act,
to administer the Plan with regard to those internal matters peculiar to that
participating Company and which do not conflict with the concept set forth in
this Section 11.5.

          11.6 Amendment - The term "Company" as used in ARTICLE X, pertaining
               ---------
to amendment of the Plan, refers only to the Sponsor, which shall be vested with
the sole power to amend the Plan in any manner, and such amendment will bind
each participating Company and its Participants.  However, with the consent of
the Sponsor, any other participating Company shall have the right to amend the
Plan in any manner (otherwise permitted by ARTICLE X) which affects the Plan
only as to that participating Company and, in the sole judgment of the Sponsor,
in no significant way affects the Plan as to any other participating Company.

          11.7 Termination - A participating Company may terminate the Plan,
               -----------
pursuant to ARTICLE X, at any time.  Any such action shall operate only as to
the Participants employed by that participating Company.

                                       16


                                  ARTICLE XII
                                  -----------

                                 Miscellaneous
                                 -------------

          12.1 Limitations on Liability of Company - Neither the establishment
               -----------------------------------
of the Plan nor any modification thereof, nor the creation of any Account, nor
the payment of any benefits, shall be construed as giving to any Participant or
other person any legal or equitable right against the Company (or any person
connected therewith), except as provided by law or by any Plan provision.
Nothing contained in the Plan, and no action taken pursuant to its provisions,
shall create or be construed to create a fiduciary relationship between the
Company (or any person connected therewith) and any Participant, Beneficiary or
other person.  In no event shall the Company (or any person connected therewith)
be liable to any person for the failure of any Participant, Beneficiary or other
person to be entitled to any particular tax consequences with respect to the
Plan or any contribution thereto or distribution therefrom.

          12.2 Construction - The Plan is intended to be exempt from ERISA
               ------------
(other than reporting and disclosure requirements as to which no exemption is
available) and, if any provision of the Plan is subject to more than one
interpretation or construction, such ambiguity shall be resolved in favor of
that interpretation or construction which is consistent with the Plan being so
exempted.  In case any provision of the Plan shall be held to be illegal or
void, such illegality or invalidity shall not affect the remaining provisions of
the Plan, but shall be fully severable, and the Plan shall be construed and
enforced as if said illegal or invalid provisions had never been inserted
herein.  For all purposes of the Plan, where the context admits, words in the
masculine gender shall include the feminine and neuter genders, the singular
shall include the plural, and the plural shall include the singular.  Headings
of Articles and Sections are inserted only for convenience of reference and are
not to be considered in the construction of the Plan.  Except to the extent
preempted by the laws of the United States of America, the laws of the state in
which the Company is domiciled shall govern, control and determine all questions
arising with respect to the Plan and the interpretation and validity of its
respective provisions.  Participation under the Plan will not give any
Participant the right to be retained in the service of the Company nor any right
or claim to any benefit under the Plan unless such right or claim has
specifically accrued hereunder.

          12.3 Spendthrift Provision - No amount payable under the Plan will,
               ---------------------
except as otherwise specifically provided by law, be subject in any manner to
anticipation, alienation, attachment, garnishment, sale, transfer, assignment
(either at law or in equity), levy, execution, pledge, encumbrance, charge or
any other legal or equitable process, and any attempt to do so will be void; nor
will any benefit be in any manner liable for or subject to the debts, contracts,
liabilities, engagements or torts of the person entitled thereto.  The foregoing
shall not preclude any arrangement for:  (i) the withholding of taxes from Plan
benefit payments, (ii) the recovery by the Plan of overpayments of benefits
previously made to a Participant, or (iii) the direct deposit of benefit
payments to an account in a banking institution (if not part of an arrangement
constituting an assignment or alienation).

               In the event that any Participant's benefits are garnished or
attached by order of any court, the Company may bring an action for a
declaratory judgment in a court of

                                       17


competent jurisdiction to determine the proper recipient of the benefits to be
paid by the Plan. During the pendency of said action, any benefits that become
payable shall be paid into the court as they become payable, to be distributed
by the court to the recipient it deems proper at the close of said action.

          IN WITNESS WHEREOF, this Amending Restatement, as amended, is executed
under seal this _____ day of July, 2001.

                                LEGG MASON WOOD WALKER, INCORPORATED


                                By:                                       (Seal)
                                   --------------------------------------------





                                       18


                                                                      APPENDIX B
                                LEGG MASON, INC.
                           1996 EQUITY INCENTIVE PLAN
                           (As Amended July 27, 1999)


          1.   Purpose

               The purpose of the Plan is to provide motivation to Key
Employees of the Company and its Subsidiaries to put forth maximum efforts
toward the continued growth, profitability, and success of the Company and its
Subsidiaries by providing incentives to such Key Employees through the ownership
and performance of the Common Stock or Common Stock derivatives of the Company.
Toward this objective, the Committee may grant stock options, stock appreciation
rights, Stock Awards, performance units, performance shares, and/or other
incentive awards to Key Employees of the Company and its Subsidiaries on the
terms and subject to the conditions set forth in the Plan.

          2.   Definitions

          2.1  "Award" means any form of stock option, stock appreciation right,
Stock Award, performance unit, performance shares or other incentive award
granted under the Plan, whether individually, in combination, or in tandem, to a
Participant by the Committee pursuant to such terms, conditions, restrictions,
and/or  limitations, if any, as the Committee may establish by the Award Notice
or otherwise.

          2.2  "Award Notice" means a written notice from the Company to a
Participant that establishes the terms, conditions, restrictions, and/or
limitations applicable to an Award in addition to those established by this Plan
and by the Committee's exercise of its administrative powers.

          2.3  "Board" means the Board of Directors of the Company.

          2.4  "Code" means the Internal Revenue Code of 1986, as amended from
time to time.

          2.5  "Committee" means the Compensation Committee of the Board, or
such other committee designated by the Board, authorized to administer the Plan
under paragraph 3 hereof.  So long as required by law, the Committee shall
consist of not less than two members, each of whom shall be a "disinterested
person" within the meaning of Rule 16b-3 promulgated under Section 16 of the
Exchange Act and an "outside director" within the meaning of Section 162(m) of
the Code and related Treasury regulations.  The Committee shall from time to
time designate the Key Employees who shall be eligible for Awards pursuant to
this Plan.


          2.6  "Common Stock" means common stock, par value $.10 per share, of
the Company.

          2.7  "Company" means Legg Mason, Inc.

          2.8  "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

          2.9  "Key Employee" means officers of the Company or a  Subsidiary and
any other employee of the Company or a Subsidiary so designated by the
Committee.

          2.10 "Participant" means any individual to whom an Award has been
granted by the Committee under this Plan.

          2.11 "Plan" means the Legg Mason, Inc. 1996 Equity Incentive Plan.

          2.12 "Stock Award" means an award granted pursuant to paragraph 10
hereof in the form of shares of Common Stock, Common Stock derivatives,
restricted shares of Common Stock, and/or Units of Common Stock.

          2.13 "Subsidiary" means a corporation or other business entity in
which the Company directly or indirectly has an ownership interest of 50 percent
or more.

          2.14 "Unit" means a bookkeeping entry used by the Company to record
and account for the grant of the following Awards until such time as the Award
is paid, cancelled, forfeited or terminated, as the case may be: Units of Common
Stock, performance units, and performance shares which are expressed in terms of
Units of Common Stock.

          3.   Administration

               The Plan shall be administered by the Committee.  The Committee
shall have the authority to (a) interpret the Plan and make factual
determinations; (b) establish or amend such rules and regulations as it deems
necessary for the proper operation and administration of the Plan; (c) select
Key Employees to receive Awards under the Plan; (d) determine the form of an
Award, whether a stock option, stock appreciation right, Stock Award,
performance unit, performance share, or other incentive award established by the
Committee in accordance with clause (h) below, the number of shares or Units
subject to the Award, all the terms, conditions, restrictions and/or
limitations, if any, of an Award, including the time and conditions of exercise
or vesting, and the terms of any Award Notice, which may include the waiver or
amendment of prior terms and conditions or acceleration or early vesting or
payment of an Award under certain circumstances determined by the Committee; (e)
determine whether Awards will be granted individually, in combination or in
tandem; (f) grant waivers of Plan terms, conditions, restrictions, and
limitations; (g) accelerate the vesting, exercise, or payment of an Award or the
performance period of an Award when such action or actions would be in the best
interest of the Company; (h) establish such other types of Awards, besides those
specifically enumerated in

                                       2


paragraph 2.1 hereof, which the Committee determines are consistent with the
Plan's purpose; and (i) take any and all other action it deems necessary or
advisable for the proper operation or administration of the Plan. The Committee
shall also have the authority to grant Awards in replacement of Awards
previously granted under this Plan or any other executive compensation plan of
the Company or a Subsidiary. All determinations of the Committee shall be made
by a majority of its members, and its determinations shall be final, binding and
conclusive. All actions required of the Committee under the Plan shall be made
in the Committee's sole discretion, not in a fiduciary capacity and need not be
uniformly applied to other persons, including similarly situated persons. The
Committee, in its discretion, may delegate its authority and duties under the
Plan to the Chief Executive Officer and/or to other senior officers of the
Company under such conditions and/or subject to such limitations as the
Committee may establish; provided, however, that only the Committee may select
and grant Awards to Participants who are subject to Section 16 of the Exchange
Act or to whom Section 162(m) of the Code applies.

          4.  Eligibility

              Any Key Employee is eligible to become a Participant of the Plan.

          5.  Shares Available

              The maximum number of shares of Common Stock, $0.10 par value per
share, of the Company which shall be available for grant of Awards under the
Plan (including incentive stock options) during its term shall not exceed
13,000,000 (such amount shall be subject to adjustment as provided in paragraph
20 for events occurring after July 27, 1999). Notwithstanding anything in the
Plan to the contrary, the maximum aggregate number of shares of Common Stock
that shall be granted under the Plan to any one individual during any calendar
year shall be 250,000. (Such amount shall be subject to adjustment as provided
in paragraph 20.) Any shares of Common Stock related to Awards which terminate
by expiration, forfeiture, cancellation or otherwise without the issuance of
shares, are settled in cash in lieu of Common Stock, or are exchanged in the
Committee's discretion for Awards not involving Common Stock, shall be available
again for grant under the Plan. Further, any shares of Common Stock which are
used by a Participant for the full or partial payment to the Company of the
purchase price of shares of Common Stock upon exercise of a stock option, or for
any withholding taxes due as a result of such exercise, shall again be available
for Awards under the Plan. Similarly, shares of Common Stock with respect to
which a stock appreciation right ("SAR") has been exercised and paid in cash
shall again be available for grant under the Plan. The shares of Common Stock
available for issuance under the Plan may be authorized and unissued shares or
treasury shares.

          6.  Term

              The Plan shall become effective as of April 18, 1996, subject to
its approval by the Company's shareholders at the 1996 Annual Meeting. No Awards
shall be exercisable or

                                       3


payable before approval of the Plan has been obtained from the Company's
shareholders. Awards shall not be granted pursuant to the Plan after April 17,
2006.

          7.  Participation

              The Committee shall select, from time to time, Participants from
those Key Employees who, in the opinion of the Committee, can further the Plan's
purposes. Once a Participant is so selected, the Committee shall determine the
type or types of Awards to be made to the Participant and shall establish in the
related Award Notices the terms, conditions, restrictions and/or limitations, if
any, applicable to the Awards in addition to those set forth in this Plan and
the administrative rules and regulations issued by the Committee.

          8.  Stock Options

              (a) Grants. Awards may be granted in the form of stock options to
purchase Common Stock or Common Stock derivatives. These stock options may be
incentive stock options within the meaning of Section 422 of the Code or non-
qualified stock options (i.e., stock options which are not incentive stock
options), or a combination of both.

              (b) Terms and Conditions of Options. An option shall be
exercisable in whole or in such installments and at such times as may be
determined by the Committee. The price at which Common Stock may be purchased
upon exercise of a stock option shall be established by the Committee, but such
price shall not be less than 50 percent of the fair market value of the Common
Stock, as determined by the Committee, on the date of the stock option's grant.

              (c) Restrictions Relating to Incentive Stock Options. Stock
options issued in the form of incentive stock options shall, in addition to
being subject to all applicable terms, conditions, restrictions and/or
limitations established by the Committee, comply with Section 422 of the Code.
Accordingly, to the extent that the aggregate fair market value (determined at
the time the option was granted) of the Common Stock with respect to which
incentive stock options are exercisable for the first time by a Participant
during any calendar year (under this Plan or any other plan of the Company or
any of its Subsidiaries) exceeds $100,000 (or such other limit as may be
required by the Code), then such option as to the excess shall be treated as a
nonqualified stock option. Further, the per share option price of an incentive
stock option shall not be less than 100 percent of the fair market value of the
Common Stock, as determined by the Committee, on the date of the grant. An
incentive stock option shall not be granted to any Participant who is not an
employee of the Company or any "subsidiary" (within the meaning of section
424(f) of the Code). An incentive stock option shall not be granted to any
employee who, at the time of grant, owns stock possessing more than 10 percent
of the total combined voting power of all classes of stock of the Company or any
"parent" or "subsidiary" of the Company (within the meaning of section 424(f) of
the Code), unless the purchase price per share is not less than 110% of the fair
market value of Common Stock on the date of grant and the option exercise period
is not more than five years from the date of grant. Otherwise, each option shall
expire not later than ten years from its date of grant.

                                       4


              (d) Additional Terms and Conditions. The Committee may, by way of
the Award Notice or otherwise, establish such other terms, conditions,
restrictions and/or limitations, if any, of any stock option Award, provided
they are not inconsistent with the Plan.

              (e) Exercise. Upon exercise, the option price of a stock option
may be paid (i) in cash or by check, bank draft or money order payable to the
order of the Company; (ii) in shares of Common Stock or shares of restricted
Common Stock as to which restrictions have lapsed; (iii) a combination of the
foregoing; or (iv) such other consideration as the Committee may deem
appropriate. Subject to the discretion of the Committee, any option granted
under the Plan may be exercised by a broker-dealer acting on behalf of a
Participant if (i) the broker-dealer has received from the Participant or the
Company a fully- and duly-endorsed agreement evidencing such option and
instructions signed by the Participant requesting the Company to deliver the
shares of Common Stock subject to such option to the broker-dealer on behalf of
the Participant and specifying the account into which such shares should be
deposited, (ii) adequate provision has been made with respect to the payment of
any withholding taxes due upon such exercise or, in the case of an incentive
stock option, the disposition of such shares and (iii) the broker-dealer and the
Participant have otherwise complied with Section 220.3(e)(4) of Regulation T, 12
CFR Part 220 and any successor rules and regulations applicable to such
exercise. The Committee shall establish appropriate methods for accepting Common
Stock, whether restricted or unrestricted, and may impose such conditions as it
deems appropriate on the use of such Common Stock to exercise a stock option.

              (f) Rule 16b-3 Restrictions. A Participant who is a director or
officer subject to Section 16 of the Exchange Act shall be required to exercise
stock options in accordance with the requirements of Rule 16b-3 under the
Exchange Act, as such Rule may be amended from time to time.

          9.  Stock Appreciation Rights

              (a) Grants. Awards may be granted in the form of stock
appreciation rights ("SARs"). An SAR may be granted in tandem with all or a
portion of a related stock option under the Plan ("Tandem SARs"), or may be
granted separately ("Freestanding SARs"). A Tandem SAR may be granted either at
the time of the grant of the related stock option or at any time thereafter
during the term of the stock option. SARs shall entitle the recipient to receive
a payment equal to the appreciation in market value of a stated number of shares
of Common Stock from the exercise price to the market value on the date of
exercise. In the case of SARs granted in tandem with stock options granted prior
to the grant of such SARs, the appreciation in value is from the option price of
such related stock option to the market value on the date of exercise. No SAR
may be exercised for cash by an officer or director of the Company who is
subject to Section 16 of the Exchange Act, except in accordance with Rule 16b-3
under the Exchange Act, as such Rule may be amended from time to time.

              (b) Terms and Conditions of Tandem SARS. A Tandem SAR shall be
exercisable to the extent, and only to the extent, that the related stock option
is exercisable, and

                                       5


the "exercise price" of such an SAR (the base from which the value of the SAR is
measured at its exercise) shall be the option price under the related stock
option. However, at no time shall a Tandem SAR be issued if the option price of
its related stock option is less than 50 percent of the fair market value of the
Common Stock, as determined by the Committee, on the date of the Tandem SAR's
grant. If a related stock option is exercised as to some or all of the shares
covered by the Award, the related Tandem SAR, if any, shall be cancelled
automatically to the extent of the number of shares covered by the stock option
exercise. Upon exercise of a Tandem SAR as to some or all of the shares covered
by the Award, the related stock option shall be cancelled automatically to the
extent of the number of shares covered by such exercise, and such shares shall
again be eligible for grant in accordance with paragraph 5 hereof, except to the
extent any shares of Common Stock are issued to settle the SAR.

              (c) Terms and Conditions of Freestanding SARS. Freestanding SARs
shall be exercisable in whole or in such installments and at such times as may
be determined by the Committee and designated in the Award Notice. The exercise
price of a Freestanding SAR shall also be determined by the Committee; provided,
however, that such price shall not be less than 50 percent of the fair market
value of the Common Stock, as determined by the Committee, on the date of the
Freestanding SAR's grant.

              (d) Deemed Exercise. The Committee may provide that an SAR shall
be deemed to be exercised at the close of business on the scheduled expiration
date of such SAR, if at such time the SAR by its terms remains exercisable and,
if exercised, would result in a payment to the holder of such SAR.

              (e) Additional Terms and Conditions. The Committee may, by way of
the Award Notice or otherwise, determine such other terms, conditions,
restrictions and/or limitations, if any, of any SAR Award, provided they are not
inconsistent with the Plan.

          10.  Stock Awards

              (a) Grants. Awards may be granted in the form of Stock Awards.
Stock Awards may consist of grants of Common Stock or Common Stock derivatives,
and may be granted either for consideration or for no consideration, as
determined in the sole discretion of the Committee. Stock Awards shall be
awarded in such numbers and at such time during the term of the Plan as the
Committee shall determine.

              (b) Terms and Conditions of Awards. Stock Awards shall be subject
to such terms, conditions, restrictions, and/or limitations, if any, as the
Committee deems appropriate including, but not by way of limitation,
restrictions on transferability and continued employment. The Committee may
modify or accelerate the delivery of a Stock Award under such circumstances as
it deems appropriate, unless the Stock Award is subject to the provisions of
paragraph 13.

                                       6


              (c) Rights as Shareholders. During the period in which any
restricted shares of Common Stock are subject to the restrictions imposed under
paragraph 10(b), the Committee may, in its discretion, grant to the Participant
to whom such restricted shares have been awarded all or any of the rights of a
shareholder with respect to such shares, including, but not by way of
limitation, the right to vote such shares and to receive dividends.

              (d) Evidence of Award. Any Stock Award granted under the Plan may
be evidenced in such manner as the Committee deems appropriate, including,
without limitation, book-entry registration or issuance of a stock certificate
or certificates.

          11.  Performance Units

              (a) Grants. Awards may be granted in the form of performance
units. Performance units, as that term is used in this Plan, shall refer to
Units valued by reference to designated criteria established by the Committee,
other than Common Stock.

              (b) Performance Criteria. Performance units shall be contingent on
the attainment during a performance period of certain performance objectives.
The length of the performance period, the performance objectives to be achieved
during the performance period, and the measure of whether and to what degree
such objectives have been attained shall be conclusively determined by the
Committee in the exercise of its absolute discretion. Subject to the
requirements of paragraph 13, if applicable, performance objectives may be
revised by the Committee, at such times as it deems appropriate during the
performance period, in order to take into consideration any unforeseen events or
changes in circumstances.

              (c) Additional Terms and Conditions. The Committee may, by way of
the Award Notice or otherwise, determine such other terms, conditions,
restrictions, and/or limitations, if any, of any Award of performance units,
provided they are not inconsistent with the Plan.

          12.  Performance Shares

              (a) Grants. Awards may be granted in the form of performance
shares. Performance shares, as that term is used in this Plan, shall refer to
shares of Common Stock or Units which are expressed in terms of Common Stock.

              (b) Performance Criteria. Performance shares shall be contingent
upon the attainment during a performance period of certain performance
objectives. The length of the performance period, the performance objectives to
be achieved during the performance period, and the measure of whether and to
what degree such objectives have been attained shall be conclusively determined
by the Committee in the exercise of its absolute discretion. Subject to the
requirements of paragraph 13, if applicable, performance objectives may be
revised by the Committee, at such times as it deems appropriate during the
performance period, in order to take into consideration any unforeseen events or
changes in circumstances.

                                       7

              (c) Additional Terms and Conditions. The Committee may, by way of
the Award Notice or otherwise, determine such other terms, conditions,
restrictions and/or limitations, if any, of any Award of performance shares,
provided they are not inconsistent with the Plan.

        13.   Provisions Applicable to Section 162(m) Participants

              (a) Designation of Participants and Goals. Within 90 days after
the start of each fiscal year (or by such other time as may be required or
permitted by Section 162(m) of the Code), the Committee shall, in writing: (i)
designate the Participants for whom the grant of Stock Awards, performance
units, or performance shares (and the entitlement to dividends or dividend
equivalents with respect to such Awards, if any), or the forgiveness of any loan
pursuant to paragraph 14, shall be subject to this paragraph 13; (ii) select the
performance goal or goals applicable to the fiscal year or years included within
any performance period; (iii) establish the number or amount of Stock Awards,
performance units and performance shares which may be earned or the amount of
any loan which may be forgiven, for such year or such years within a performance
period by each such Participant; (iv) specify the relationship between
performance goals and the amount or number of Stock Awards, performance units or
performance shares to be earned by each such Participant, or the amount of the
forgiveness of any loan made under paragraph 14, for such year or period and (v)
the method for computing the amount or number of Stock Awards, performance units
or performance shares payable, or the amount of any loan which may be forgiven,
if the performance goals are attained.

              The Committee may specify that the amount or number of Stock
Awards, performance units and performance shares (and the entitlement to
dividends or dividend equivalents with respect to such Awards, if any) will be
earned, or that the amount of any loan will be forgiven, if the applicable
target is achieved for one goal or for any one of a number of goals for a fiscal
year or years within a performance period. The Committee may also provide that
the amount or number of Stock Awards, performance units and performance shares
to be earned, or the amount of any loan forgiven, for a given fiscal year or
years within a performance period will vary based upon different levels of
achievement of the applicable performance targets.

              (b) Performance Criteria. For purposes of this paragraph 13,
performance goals shall be limited to one or more of the following: (i) future
economic value per share of Common Stock, (ii) earnings per shares, (iii) return
on average common equity, (iv) pre-tax income, (v) pre-tax operating income,
(vi) net revenue, (vii) net income, (viii) profits before taxes, (ix) book value
per share, (x) stock price and (xi) earnings available to common stockholders.

              (c) Annual Payment. Following the completion of each fiscal year
or completion of a performance period, the Committee shall certify in writing
whether the applicable performance goals have been achieved for such year or
performance period and the amount or number of Stock Awards, performance shares
or performance units, if any, payable to

                                       8


a Participant or the amount of any loan forgiven with respect to a Participant
for such fiscal year or performance period. The amounts due to a Participant to
whom this paragraph 13 applies will be paid following the end of the applicable
fiscal year or performance period after such certification by the Committee. In
determining the amount due to a Participant, or the amount of any loan forgiven
on with respect to a Participant, to whom this paragraph applies for a given
fiscal year or performance period, the Committee shall have the right to reduce
(but not to increase) the amount payable or forgiven at a given level of
performance to take into account additional factors that the Committee may deem
relevant to the assessment of individual or corporate performance for the year.

              (d) Restrictions. Anything in this paragraph 13 to the contrary
notwithstanding, the maximum annual amount that may be paid to a Participant or
the maximum amount of any loan that may be forgiven under the Plan for (i) the
fiscal year in which the Plan is approved by the Stockholders of the Company
shall equal no more than $2,000,000 and (ii) each subsequent fiscal year shall
equal 110% of such maximum amount for the preceding fiscal year; provided that
the maximum annual amount determined under this paragraph 13 shall be determined
without regard to the value of any stock options granted to a Participant under
the Plan.

              (e) Adjustment for Non-Recurring Items, Etc. Notwithstanding
anything herein to the contrary, if the Company's financial performance is
affected by any event that is of a non-recurring nature, the Committee in its
sole discretion may make such adjustments in the financial criteria as it shall
determine to be equitable and appropriate in order to make the calculations of
Awards, as nearly as may be practicable, equivalent to the calculation that
would have been made without regard to such event. In the event of a significant
change of the business or assets of the Company under circumstances involving an
acquisition or a merger, consolidation or similar transaction, the Committee
shall, in good faith, recommend to the Board for approval such revisions to the
financial criteria and the other terms and conditions used in calculating Awards
for the then current Plan Year as it reasonably deems appropriate in light of
any such change.

              (f) Repeal of Section 162(m). Without further action by the Board,
the provisions of this paragraph 13 shall cease to apply on the effective date
of the repeal of Section 162(m) of the Code (and any successor provision
thereto).

          14. Loans

              The Committee may authorize the making of loans or cash payments
to Participants in connection with any Award under the Plan, the exercise of a
stock option or the payment of consideration in connection with a Stock Award,
which loan may be secured by any security, including Common Stock or Common
Stock derivatives, underlying or related to such Award or payment (provided that
such loan shall not exceed the fair market value of the security subject to such
Award or so purchased), and which may be forgiven upon such terms and

                                       9


conditions as the Committee may establish at the time of such loans or at any
time thereafter, including the attainment of a performance goal or goals
pursuant to paragraph 13.

          15. Payment of Awards

              At the discretion of the Committee, payment of Awards may be made
in cash, Common Stock, Common Stock derivatives, a combination of any of the
foregoing, or any other form of property as the Committee shall determine. In
addition, payment of Awards may include such terms, conditions, restrictions,
and/or limitations, if any, as the Committee deems appropriate, including, in
the case of Awards paid in the form of Common Stock, restrictions on transfer
and forfeiture provisions. Further, payment of Awards may be made in the form of
a lump sum or installments, as determined by the Committee.

          16. Dividends and Dividend Equivalents

              If an Award is granted in the form of a Stock Award, stock option,
or performance share, or in the form of any other stock-based grant, the
Committee may choose, at the time of the grant of the Award or any time
thereafter up to the time of the Award's payment, to include as part of such
Award an entitlement to receive dividends or dividend equivalents, subject to
such terms, conditions, restrictions, and/or limitations, if any, as the
Committee may establish. Dividends and dividend equivalents shall be paid in
such form and manner (i.e., lump sum or installments), and at such time as the
Committee shall determine. All dividends or dividend equivalents which are not
paid currently may, at the Committee's discretion, accrue interest, be
reinvested into additional shares of Common Stock or, in the case of dividends
or dividend equivalents credited in connection with performance shares, be
credited as additional performance shares and paid to the Participant if and
when, and to the extent that, payment is made pursuant to such Award.

          17. Deferral of Awards

              At the discretion of the Committee, payment of a Stock Award,
performance share, performance unit, dividend, dividend equivalent, or any
portion thereof may be deferred by a Participant until such time as the
Committee may establish. All such deferrals shall be accomplished by the
delivery of a written, irrevocable election by the Participant at least six
months (and in the calendar year) prior to such time payment would otherwise be
made, on a form provided by the Company. Further, all deferrals shall be made in
accordance with administrative guidelines established by the Committee to ensure
that such deferrals comply with all applicable requirements of the Code and its
regulations. Deferred payments shall be paid in a lump sum or installments, as
determined by the Committee. The Committee may also credit interest, at such
rates to be determined by the Committee, on cash payments that are deferred and
credit dividends or dividend equivalents on deferred payments denominated in the
form of Common Stock.

                                       10


          18. Termination of Employment

              If a Participant's employment with the Company or a Subsidiary
terminates for a reason other than death, disability, retirement, or any
approved reason, all unexercised, unearned, and/or unpaid Awards, including, but
not by way of limitation, Awards earned, but not yet paid, all unpaid dividends
and dividend equivalents, and all interest accrued on the foregoing shall be
cancelled or forfeited, as the case may be, unless the Participant's Award
Notice provides otherwise. The Committee shall have the authority to promulgate
rules and regulations to (i) determine what events constitute disability,
retirement, or termination for an approved reason for purposes of the Plan, and
(ii) determine the treatment of a Participant under the Plan in the event of his
death, disability, retirement, or termination for an approved reason.
Notwithstanding the foregoing, and to the extent that an incentive stock option
is not treated as a nonqualified stock option by the Committee or under the
terms of the Plan, an incentive stock option may not be exercisable more than 90
days after the date the Participant terminates employment for any reason;
provided, however, that if the Participant terminates employment because of a
disability, the incentive stock option may not be exercised more than one year
after the date of such termination.

          19. Nonassignability

              Unless the Committee determines otherwise, no stock options, SARs,
performance shares or other derivative securities (as defined in the rules and
regulations promulgated under Section 16 of the Exchange Act) awarded under the
Plan shall be subject in any manner to alienation, anticipation, sale, transfer,
assignment, pledge, or encumbrance, except for transfers by will or the laws of
descent and distribution; provided, however, that the Committee may, subject to
such terms and conditions as the Committee shall specify, permit the transfer of
an Award to a Participant's family members or to one or more trusts established
in whole or in part for the benefit of one or more of such family members;
provided, further, that the restrictions in this sentence shall not apply to the
shares of Common Stock received in connection with an Award after the date that
the restrictions on transferability of such shares set forth in the applicable
Award Notice have lapsed. During the lifetime of the Participant, an Option,
SAR, or similar-type other award shall be exercisable only by him or by the
family member or trust to whom such Option, SAR, or other Award has been
transferred in accordance with the previous sentence.

          20. Adjustment of Shares Available

              If there is any change in the number of outstanding shares of
Common Stock through the declaration of stock dividends, stock splits or the
like, the number of shares available for Awards, the shares subject to any Award
and the option prices or exercise prices of Awards shall be automatically
adjusted. If there is any change in the number of outstanding shares of Common
Stock through any change in the capital account of the Company, or through any
other transaction referred to in Section 424(a) of the Code, the Committee shall
make appropriate adjustments in the maximum number of shares of Common Stock
which may be issued under the

                                       11


Plan and any adjustments and/or modifications to outstanding Awards as it deems
appropriate. In the event of any other change in the capital structure or in the
Common Stock of the Company, the Committee shall also be authorized to make such
appropriate adjustments in the maximum number of shares of Common Stock
available for issuance under the Plan and any adjustments and/or modifications
to outstanding Awards as it deems appropriate.

          21. Withholding Taxes

              The Company shall be entitled to deduct from any payment under the
Plan, regardless of the form of such payment, the amount of all applicable
income and employment taxes required by law to be withheld with respect to such
payment or may require the Participant to pay to it such tax prior to and as a
condition of the making of such payment. In accordance with any applicable
administrative guidelines it establishes, the Committee may allow a Participant
to pay the amount of taxes required by law to be withheld from an Award by
withholding from any payment of Common Stock due as a result of such Award, or
by permitting the Participant to deliver to the Company, shares of Common Stock,
having a fair market value, as determined by the Committee, equal to the amount
of such required withholding taxes; provided that if the Participant is a
director or officer who is subject to Section 16 of the Exchange Act, the
withholding of shares of Common Stock must be made in compliance with Rule 16b-3
under the Exchange Act.

          22. Noncompetition Provision

              Unless the Award Notice specifies otherwise, a Participant shall
forfeit all unexercised, unearned, and/or unpaid Awards, including, but not by
way of limitation, Awards earned but not yet paid, all unpaid dividends and
dividend equivalents, and all interest, if any, accrued on the foregoing if, (i)
in the opinion of the Committee, the Participant, without the written consent of
the Company, engages directly or indirectly in any manner or capacity as
principal, agent, partner, officer, director, employee, or otherwise, in any
business or activity competitive with the business conducted by the Company or
any Subsidiary; or (ii) the Participant performs any act or engages in any
activity which in the opinion of the Chief Executive Officer of the Company is
inimical to the best interests of the Company. In addition, the Committee may,
in its discretion, condition the grant, exercise, payment or deferral of any
Award, dividend, or dividend equivalent made under the Plan on a Participant's
compliance with the terms of this paragraph 22 and any other terms specified by
the Committee in the Award Notice, and cause such a Participant to forfeit any
payment which is deferred or to grant to the Company the right to obtain
equitable relief if the Participant fails to comply with the terms hereof.

          23. Amendments to Awards

              Subject to the requirements of paragraph 13, the Committee may at
any time unilaterally amend any unexercised, unearned, or unpaid Award,
including, but not by way of limitation, Awards earned but not yet paid, to the
extent it deems appropriate; provided, however,

                                       12


that any such amendment which, in the opinion of the Committee, is adverse to
the Participant shall require the Participant's consent.

          24. Compliance with Law

              Notwithstanding anything contained in this Plan to the contrary,
the Company shall have no obligation to issue or deliver certificates of Common
Stock evidencing Stock Awards or any other Award resulting in the payment of
Common Stock prior to (a) the obtaining of any approval from, or satisfaction of
any waiting period or other condition imposed by, any governmental agency which
the Company shall, in its sole discretion, determine to be necessary or
advisable, (b) the admission of such shares to listing on the stock exchange on
which the Common Stock may be listed, and (c) the completion of any registration
or other qualification of said shares under any state or federal law or ruling
of any governmental body which the Company shall, in its sole discretion,
determine to be necessary or advisable. With respect to persons subject to
Section 16 of the Exchange Act, it is the intent of the Company that the Plan
and all transactions under the Plan comply with all applicable provisions of
Rule 16b-3, as the Rule may be amended or replaced, under the Exchange Act.

          25. No Right to Continued Employment or Grants

              Participation in the Plan shall not give any Key Employee any
right to remain in the employ of the Company or any Subsidiary. The Company or,
in the case of employment with a Subsidiary, the Subsidiary, reserves the right
to terminate any Key Employee at any time. Further, the adoption of this Plan
shall not be deemed to give any Key Employee or any other individual any right
to be selected as a Participant or to be granted an Award.

          26. Amendment

              The Committee may suspend or terminate the Plan at any time. In
addition, the Committee may, from time to time, amend the Plan in any manner,
but may not without Board and shareholder approval adopt any amendment which
would (a) materially increase the benefits accruing to Participants under the
Plan, (b) materially increase the number of shares of Common Stock which may be
issued under the Plan (except as specified in paragraph 19), or (c) materially
modify the requirements as to eligibility for participation in the Plan; and
provided further that the Committee shall not amend the Plan without the
approval of the Board or the shareholders if such approval is required by Rule
16b-3 of the Exchange Act or Section 162(m) of the Code, in each case as such
provisions may be amended from time to time.

          27. Governing Law

              The Plan shall be governed by and construed in accordance with the
laws of the State of Maryland except as superseded by applicable Federal Law.

                                       13


                                                                     APPENDIX C


                                LEGG MASON, INC.
                          EMPLOYEE STOCK PURCHASE PLAN
                          ----------------------------


     1.   GENERAL
          -------

          1.1  Purpose - The purpose of the Legg Mason, Inc. Employee Stock
               -------
Purchase Plan (the "Plan") is to provide an opportunity for eligible employees
of Legg Mason, Inc. (the "Company") and certain subsidiaries of the Company (the
Company and those certain subsidiaries being sometimes hereinafter referred to
as the "Employer") to purchase shares, on a discounted basis, of Common Stock
issued by the Company, $.10 par value (the "Stock"), through regular payroll
deductions.

          1.2  Tax Status - It is the intent of the Company to have the Plan
               ----------
qualify as an "employee stock purchase plan" under Section 423 of the Internal
Revenue Code of 1986, as now or hereafter amended (the "Code"), and the
regulations promulgated thereunder.  The provisions of the Plan shall be
construed in a manner consistent with that intention.

          1.3  Participating Subsidiaries - The Plan shall be deemed to have
               --------------------------
been adopted not only by the Company, but by any present or future corporation
that:  (i) is a "subsidiary corporation" as that term is defined in Section
424(f) of the Code, and (ii) is designated by the Committee as an Employer whose
employees are eligible to participate in the Plan (a "Participating
Subsidiary").

          Exhibit A, attached hereto, sets forth the corporations that are
Participating Subsidiaries as of the Effective Date of the Plan.  The Committee
shall have the authority to add or delete subsidiaries of the Company (including
newly-created or newly-acquired subsidiaries) as Participating Subsidiaries,
from time to time and without Shareholder Approval.

          1.4  Effective and Operational Dates - The Plan shall become effective
               -------------------------------
as of September 1, 2001, subject to Shareholder Approval at a meeting of the
stockholders to be held on July 24, 2001.  If the Plan is not so approved, the
Plan shall not become effective.  However, the operation of the Plan shall not
commence until:  (i) the Plan receives all necessary governmental approvals,
including registration under the Securities Act of 1933 of the shares of Stock
subject to the Plan, and (ii) the Agent has been appointed and is able to
properly implement all of its duties and responsibilities under the Plan.

          1.5  Replacement of Existing Plan - This Plan shall be deemed to
               ----------------------------
supersede and replace the employee stock purchase plan heretofore in effect (the
"Prior Plan"), and the Prior Plan shall remain in effect until such time as this
Plan becomes operational.  However on the date that this Plan becomes
operational:  (i) all accounts extant under the Prior Plan shall become Accounts
under this Plan, (ii) any unused payroll deductions accumulated under the Prior
Plan shall be utilized to purchase Stock under this Plan, (iii) shares purchased
under the Prior Plan shall not be charged against the available share limit set
forth in Section 2 of this Plan or the purchase limit set forth in Section 8.6
of this Plan, (iv) payroll deductions accumulated under the Prior Plan shall be
charged against the payroll deduction limit set forth in Section 6.3 of this
Plan, and (v) any individual who is a Participant in the Prior Plan on the date
this Plan becomes operational, and who is employed as an Eligible Employee on
such date, shall automatically be deemed to be a Participant in this Plan as of
such date.

          Alternatively, the Company, in its sole discretion, may elect to have
clauses (i), (ii) and (iv) of the preceding paragraph not become operative, in
which case:  (i) all accounts extant under the Prior Plan shall remain in the
Prior Plan, (ii) any unused payroll deductions accumulated under the Prior Plan
shall be utilized to purchase Stock under the Prior Plan, (iii) payroll
deductions accumulated under the Prior Plan shall not be charged against the
payroll deduction limit set forth in Section 6.3 of this Plan, and (iv) the
Prior Plan shall remain in effect until such time as there are no more shares of
Stock subject to its terms.  However, once this Plan becomes operational, no
further payroll deductions shall be accumulated under the Prior Plan.


          1.6  Governing Law - The laws of the State of Maryland shall govern
               -------------
all matters relating to the Plan, except to the extent superseded by the laws of
the United States.

          1.7  Construction - For all purposes of the Plan, where the context
               ------------
admits, words in the masculine gender shall include the female and neuter
genders, the plural shall include the singular, and the singular shall include
the plural.

          1.8  Definitions - The following defined terms shall be utilized in
               -----------
construing the Plan:

          Account - defined in Section 9.1
          -------

          Agent - defined in Section 8.1
          -----

          Code - defined in Section 1.2
          ----

          Committee - defined in Section 3.1
          ---------

          Company - defined in Section 1.1
          -------

          Compensation - defined in Section 6.2
          ------------

          Eligible Employee - defined in Section 4
          -----------------

          Employer - defined in Section 1.1
          --------

          Excluded Employee - defined in Section 4
          -----------------

          Participant - defined in Section 4
          -----------

          Participating Subsidiary - defined in Section 1.3
          ------------------------

          Payment Period - defined in Section 6.1
          --------------

          Plan - defined in Section 1.1
          ----

          Prior Plan - defined in Section 1.5
          ----------

          Shareholder Approval - defined in Section 17
          --------------------

          Stock - defined in Section 1.1
          -----

          Termination Event - defined in Section 16.1
          -----------------

     2.   SHARES SUBJECT TO THE PLAN
          --------------------------

          Subject to adjustment as provided in Section 13, the number of shares
of Stock which may be purchased by Participants under the Plan shall be
3,000,000 shares, which number may not be changed without Shareholder Approval.

          If the total number of shares to be purchased with respect to any
Payment Period exceeds the maximum number of shares available under this Section
2, the Committee shall make a pro rata allocation of the shares available for
delivery and distribution in as nearly a uniform manner as shall be practicable
and as it shall determine to be equitable, and the balance of payroll deductions
credited to the Account of each Participant shall be returned to him as promptly
as possible.

                                       2


     3.   ADMINISTRATION
          --------------

          3.1  Establishment of Administrative Committee - The Plan shall be
               -----------------------------------------
administered by an administrative committee (the "Committee").  The Committee
shall consist of one or more individuals designated by the Board of Directors of
the Company, at least three of whom are members of the Board of Directors who
are not Eligible Employees.  Unless otherwise determined by the Board of
Directors, the Committee shall consist of the Compensation Committee appointed
by the Board of Directors.

          Subject to his right to resign at any time, each member of the
Committee shall serve (without compensation, unless otherwise determined by the
Board of Directors) at the pleasure of the Board of Directors, and the Board of
Directors may appoint, and may revoke the appointment of, additional members to
serve with the Committee as may be determined to be necessary or desirable from
time to time.  Each member of the Committee, by accepting his appointment to the
Committee, shall thereby be deemed to have accepted all of the duties and
responsibilities of such appointment, and to have agreed to the faithful
performance of his duties thereunder.  The Committee shall adopt such formal
organization and method of operation as it shall deem desirable for the conduct
of its affairs.  The Committee shall act as a body, and the individual members
of the Committee shall have no powers and duties as such, except as provided
herein; the Committee shall act by vote of a majority of its members at the time
in office, either at a meeting or in writing without a meeting.

          3.2  Authority of Committee - Subject to the provisions of the Plan,
               ----------------------
the Committee shall have authority to interpret the Plan, to prescribe, amend
and rescind rules relating to it and to make all other determinations necessary
or advisable in administering the Plan, all of which determinations shall be
final and binding upon all persons.  No member of the Board of Directors or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan.

     4.   ELIGIBLE EMPLOYEES
          ------------------

          Any employee of the Company, or of any Participating Subsidiary, who
is not an Excluded Employee shall be eligible to participate in the Plan (and
shall be hereinafter referred to as an "Eligible Employee").  An Excluded
Employee is any employee who would be an Eligible Employee but for the fact
that:

          (i)   his customary employment is for 20 hours or less per week;

          (ii)  his customary employment is for not more than five months in any
                calendar year; or

          (iii) he is a 5% or greater stockholder of the Company, within the
                meaning of Section 423(b) of the Code.

                Any individual who ceases to be an Excluded Employee shall be
immediately eligible to participant in the Plan if he would have been an
Eligible Employee but for his status as an Excluded Employee.  Any Eligible
Employee who has in effect an election to make payroll deductions pursuant to
Section 6, and any other individual for whom an Account is maintained pursuant
to Section 9, shall be hereinafter referred to as a "Participant."

                The provisions of this Section 4 may not, without Shareholder
Approval, be amended in any way that changes the persons eligible to participate
in the Plan.

                No member of the Board of Directors who is not an employee of
the Company or a Participating Subsidiary, or who is a member of the Committee,
shall be deemed to be an Eligible Employee.

                                       3


     5.   COMMENCEMENT OF PARTICIPATION
          -----------------------------

          An Eligible Employee may enroll as a Participant by completing and
signing a payroll deduction authorization/beneficiary form and forwarding the
completed form to his Employer.  Enrollment shall become effective as soon as
practicable following receipt of the form by the Employer.  The form shall state
the whole percentage of Compensation to be deducted regularly from the Eligible
Employee's pay (subject to the limit set forth in Section 6.3) and shall
authorize the purchase of Stock for him in each Payment Period in accordance
with the terms of the Plan.

     6.  PAYMENT PERIODS AND EMPLOYEE CONTRIBUTIONS
         ------------------------------------------

         6.1  Payment Periods - Each calendar month shall be a Payment Period
              ---------------
during which payroll deductions will be accumulated under the Plan.  Payroll
deductions during each Payment Period shall be made only on regular paydays
falling within the Payment Period.

         6.2  Payroll Deductions - Subject to Section 6.3, a Participant may
              ------------------
authorize payroll deductions in any whole percentage (but not more than 10%) of
Compensation received during a Payment Period.  For purposes of the Plan,
Compensation shall consist of wages, salary, commissions and overtime pay
(including pre-tax and after-tax amounts deducted from pay as contributions to
or for any 401(k) or other employee benefit plan in which the Participant
participates), but shall exclude bonuses, deferred compensation, severance and
all noncash compensation.  A Participant may not contribute amounts to purchase
Stock under the Plan in any manner other than by payroll deductions.

         6.3  Limit - Except as the Committee shall otherwise determine from
              -----
time to time, the total amount of payroll deductions for a Participant during
any calendar year may not exceed $22,700.

         6.4  Changes - A Participant may at any time (but not more than once
              -------
during any calendar year) increase or decrease his payroll deductions by
delivery of a new payroll deduction authorization form to the Employer in
accordance with Section 5.  The change may not become effective sooner than the
next Payment Period.

         6.5  Use of Funds - All payroll deductions received or held by the
              ------------
Company under the Plan may be used by the Company for any corporate purpose and
the Company shall not be obligated to segregate such payroll deductions prior to
transfer to the Agent.

     7.  EMPLOYER CONTRIBUTIONS
         ----------------------

         As of the end of each Payment Period, each Employer shall contribute
an amount equal to 10% of the amount of the payroll deductions, during the
Payment Period, of all of the Participants employed by that Employer.  The
Committee may at any time increase or decrease the percentage of the Employer
contribution, but any such change must apply equally to all of the Participants
employed by all of the Employers, and may in no event exceed 17.5% of
Participant contributions.  Neither the Employer's contribution nor any payment
of costs by the Employer under this Plan shall constitute a part of base
earnings, compensation or salary of an employee for purposes of determining wage
scales, insurance, retirement benefits or other employee benefits.

     8.  METHOD OF OPERATION
         -------------------

         8.1  Designation of Agent - The Committee shall designate a bank,
              --------------------
broker-dealer or other firm as agent (the "Agent") to maintain Accounts  in the
names of the Participants and to effect purchases and sales of  shares of the
Stock through registered broker-dealers.  The Agent shall be subject to removal
by action of the Committee at any time.

                                       4


         8.2  Commissions - The Employer shall pay brokerage commissions, if
              -----------
any, and other charges with respect to purchases made under the Plan and
reinvestment of dividends under the Plan.  Brokerage commissions, if any, and
other charges in connection with sales of Stock shall be payable by the
Participant.  Commissions under the Plan shall be determined by negotiation
between the Agent and the brokers through which the Agent effects purchases and
sales of the Stock.

         8.3  Deduction and Transfer - The Employer shall deduct funds from
              ----------------------
each Participant's Compensation as authorized and, as promptly as practicable
after the end of each Payment Period, forward the total of the amounts deducted
for all Participants, together with the Employer's contribution, to the Agent at
such address as is designated in writing by the Agent, together with a list of
Participants and the amounts applicable to the Account of each Participant.

         8.4  Advances - The Company, or any Participating Subsidiary with the
              --------
consent of the Company, may advance payroll deductions or Employer
contributions, or both, on behalf of any Participating Subsidiary.

         8.5  Stock Purchase and Allocation - Upon receipt of funds from the
              -----------------------------
Employer, the Agent shall, as promptly as practicable, cause to be purchased for
the Participants as many whole and fractional shares of Stock as such funds
shall permit.  The amount of Stock purchased shall depend upon the market price
of the Stock at the time such purchases are made.  Such purchases shall be
allocated by the Agent, at the average cost thereof, to the Participants'
Accounts  in proportion to the respective amount received by the Agent for each
Participant.  Allocations shall be made in full shares and in fractional shares
to the thousandth of a share.

         8.6  Limit - In no event shall the fair market value of the Stock
              -----
purchased under the Plan for any Participant during any calendar year exceed
$25,000.  For purposes of this limitation, the fair market value of the Stock
purchased for the Participant shall be equal to the cumulative cost of that
Stock (as determined pursuant to Section 8.5) at each of the monthly purchases
during the calendar year.  At such time (if ever) as the cumulative cost of the
Stock purchased for the Participant during the calendar year equals $25,000,
such purchases shall cease for the remainder of the calendar year, and, in the
discretion of the Committee, any unused Employer or Participant contributions
attributable to the Participant shall either be returned to the Participant and
the Employer, as the case may be, or held by the Agent, without liability for
interest, for utilization in the first monthly purchase in the next succeeding
calendar year.

     9.  PARTICIPANT'S ACCOUNT WITH THE AGENT
         ------------------------------------

         9.1  Establishment of Accounts - The Agent shall establish a separate
              -------------------------
account for each Participant (the "Account") to reflect the Participant's
beneficial interest in Stock and/or cash held under the Plan, and to reflect all
transactions with respect thereto.

         9.2  Custody - Shares purchased pursuant to the Plan shall be held in
              -------
the custody of the Agent.  The Agency may hold in nominee or street name
certificates for shares purchased pursuant to the Plan, and may commingle shares
in its custody pursuant to the Plan in a single Account without identification
as to individual Participants.

         9.3  Sales - The Participant may at any time, by prior written notice,
              -----
instruct the Agent to effect the sale of all of the whole shares held in his
account.  The Participant may also, by prior written notice, instruct the Agent
to sell less than all of the whole shares in his account, but such partial sales
shall be permitted not more than once during any calendar year.  All sales shall
be made through such brokerage firm or firms as may be selected by the Agent.
Upon receipt of the proceeds of the sale from one or more broker-dealers, the
Agent shall mail the Participant a check for such proceeds; less the brokerage
commission, if any, and any transfer taxes, registration fee or other charges
incurred in connection with the sale.

         9.4  Dividends - Each Participant's Account shall be credited, without
              ---------
charge to the Participant, with all dividends received in respect of the whole
shares and fractional shares held in the account.

                                       5


Cash dividends shall automatically be reinvested in shares of Stock as promptly
as practicable following the Agent's receipt of such dividends.

              9.5  Quarterly Statements - The Agent shall deliver to each
                   --------------------
Participant a quarterly statement reflecting the amount of payroll deductions
and Employer contributions for the prior calendar quarter, the number of whole
and fractional shares purchased for the Participant's Account during such
quarter, the average price per share of all Stock purchased for the
Participant's Account during such quarter, and the number of whole and
fractional shares held in the Account at the end of such quarter.

         10.  NO TRANSFER OR ASSIGNMENT OF PARTICIPANT'S RIGHTS
              -------------------------------------------------

              No right or interest of any Participant in any payroll deductions,
Employer contributions, Employer payment of commissions or fees or any other
interest of Participants or obligations of any Employer under this Plan may be
assigned or transferred by Participants in whole or in part, whether directly or
by operation of law or otherwise, except as otherwise set forth in Section 16
upon the death of a Participant.

         11.  RIGHTS AS A STOCKHOLDER
              -----------------------

              11.1  Record Ownership is Determinative - None of the rights or
                    ---------------------------------
privileges of a stockholder of the Company shall exist with respect to shares
purchased under the Plan unless and until a stock certificate representing such
shares shall have been issued to the nominee for each Participant or directly to
the Participant.  In the case of shares held in the name of the nominee holder,
such rights and privileges shall only inhere indirectly to the Participant as a
beneficial owner, and the Company shall be entitled to treat the nominee as the
record owner of such shares.

              11.2  Proxies and Voting - The Agent shall deliver to each
                    ------------------
Participant as promptly as practicable, by mail or otherwise, all notices of
meetings, proxy statements, proxies or other material distributed by the Company
to its stockholders. The whole shares in each Participant's Account shall be
voted by the Agent in accordance with the Participant's signed proxy
instructions duly delivered to the Agent. There shall be no charge to the
Participants in connection with such notices, proxies or other material.

              11.3  Issuance of Certificates - Stock certificates representing
                    ------------------------
shares of Stock purchased under the Plan shall be issued to a Participant only:
(i) upon his written request (which may be made not more than once during any
calendar year), (ii) if his Account is closed pursuant to Section 16 (unless he
instructs the Agent to sell the shares), or (iii) at the time of the termination
of the Plan.  Certificates shall be issued only for whole numbers of shares; any
distribution from the Account representing fractional shares shall be in cash.

          12.  NO RIGHT TO CONTINUED EMPLOYMENT
               --------------------------------

               Neither the Plan, nor any right to purchase Stock under the Plan,
shall confer upon any employee any right to continuance of employment by the
Company or any subsidiary of the Company, nor shall they restrict or interfere
in any way with the right of the Company or any subsidiary to terminate, or
otherwise modify, an employee's employment at any time.

          13.  ADJUSTMENT IN CASE OF CHANGES AFFECTING STOCK
               ---------------------------------------------

               If the outstanding shares of Stock shall at any time be changed
or exchanged by declaration of a stock dividend, stock split, combination of
shares, recapitalization, merger, consolidation or other corporate
reorganization in which the Company is the surviving corporation, the Committee
shall make an appropriate adjustment in the number and kind of shares subject to
this Plan or any relevant aspect thereof. The determination of the Committee as
to the terms of any such adjustment shall be conclusive.

                                       6


          14.  PAYMENT OF EXPENSES RELATED TO THE PLAN
               ---------------------------------------

               The Company shall bear all costs of administering and carrying
out the Plan. Neither the Company nor any Participating Subsidiary shall pay any
expenses, commissions or taxes in connection with sales of shares by the Agent
at the request of the Participant. Expenses payable by the Participant in
connection with any such sale shall be deducted from the proceeds of sale prior
to remittance to the Participant.

          15.  TERMINATION OF PAYROLL DEDUCTIONS
               ---------------------------------

               A Participant may voluntarily terminate payroll deductions under
the Plan at any time by delivering written notice to his Employer. Termination
of payroll deductions shall take effect as soon as practicable following the
Employer's receipt of such notice. Upon termination of a Participant's payroll
deductions, his participation in the Plan shall cease, and the provisions of
Section 16 shall become operative.

               A Participant who terminates payroll deductions under the Plan
may thereafter (but not before the beginning of the next calendar year) resume
payroll deductions by following the procedure set forth in Section 5.

          16.  TERMINATION OF PARTICIPATION
               ----------------------------

               16.1  Termination Events - A Participant's participation in the
                     ------------------
Plan shall terminate immediately upon: (i) his termination of employment for any
reason, (ii) delivery to his Employer of his written notice to voluntarily
terminate payroll deductions as described in Section 15, or (iii) delivery to
his Employer of his written election pursuant to Section 16.3. Such events are
referred to herein as "Termination Events."

               16.2  Procedure - Upon the occurrence of a Termination Event, the
                     ---------
Participant or his legal representative (including, in the event of death, the
personal representative of his estate) may elect either:  (i) to have the shares
in his Account delivered to him, or (ii) to have the shares sold and the
proceeds remitted to him.  Upon receipt by the Employer of the Participant's
written election to sell, the Employer shall instruct the Agent to sell all
whole shares and any fractional shares in the Account and to remit the net
proceeds from such sale to the Participant or his representative.  Unless the
Employer receives such written sale request within 30 days after the occurrence
of the Termination Event, the Employer shall instruct the Agent to deliver to
the Participant or his representative a stock certificate representing the
number of whole shares held in the Participant's account, together with a check
representing the net proceeds from the sale of any fractional shares.

               Upon the occurrence of a Termination Event, any payroll
deductions that have not yet been used to purchase Stock shall (regardless of
whether or not the funds remain with the Employer or have been transferred to
the Agent) be combined with the applicable Employer contributions in accordance
with Section 7 and utilized to purchase Stock in accordance with Section 8.
However, if the Termination Event is not the death of the Participant, and if
the Participant, at least five business days before the last day of the Payment
Period in which the Termination Event occurs, delivers to the Employer a written
request for return of the funds, any funds that have not yet been transferred to
the Agent shall be remitted to the Participant.

               16.3  Participant Ceases to be an Eligible Employee - If a
                     ---------------------------------------------
Participant becomes an Excluded Employee, or otherwise ceases to be an Eligible
Employee, he shall remain as a Participant in accordance with the terms of the
Plan, but he shall not be permitted to make any further payroll deductions to
purchase Stock under the Plan. Subject to the Participant's right, at any time,
to deliver to his Employer a written election to terminate his participation in
the Plan (in which case the remainder of this Section 16 shall become
operative), the Agent shall continue to hold all whole and fractional shares in
the Account for the benefit of the Participant and shall credit the Account with
any reinvested dividends in respect of such shares.

               16.4  Death of a Participant - In the event of a Participant's
                     ----------------------
death, all Stock in his account, or any proceeds of sale, shall be delivered to
the beneficiary he has designated pursuant to this Section 16.4, if any.

                                       7


               A Participant may file a written designation of a beneficiary who
is to receive any Stock and/or cash. Such designation of beneficiary may be
changed by the Participant at any time by written notice to the Company. Upon
receipt by the Company of proof of identity and existence at the Participant's
death of a beneficiary validly designated by him under the Plan, the Company
shall instruct the Agent to deliver the Stock and/or cash to such beneficiary.
In the absence of a beneficiary validly designated under the Plan who is living
at the time of such Participant's death, the Company shall instruct the Agent to
deliver the Stock and/or cash to the executor or administrator of the estate of
the Participant, or if no such executor or administrator has been appointed (to
the knowledge of the Company), the Company, in its discretion, shall instruct
the Agent to deliver the Stock and/or cash to the spouse or to any one or more
dependents of the Participant as the Company may designate. No beneficiary
shall, prior to the death of the Participant by whom he has been designated,
acquire any interest in the Stock and/or cash credited to the Participant under
the Plan.

          17.  AMENDMENT OF THE PLAN
               ---------------------

               The Board of Directors of the Company may at any time, or from
time to time, amend this Plan in any respect; provided, however, that, without
the approval of the holders of a majority of the shares of common stock of the
Company then issued and outstanding and entitled to vote (Shareholder
Approval"), no amendment shall be made: (i) increasing or decreasing the number
of shares covered by the Plan (other than as provided in Section 13), or (ii)
except as set forth in Section 1.3, materially modifying the eligibility
requirements for participation in the Plan.

          18.  TERMINATION OF THE PLAN
               -----------------------

               The Board of Directors of the Company may terminate the Plan at
any time, provided that such termination shall not impair the rights of
Participants outstanding at the time of termination. The Plan shall in any event
terminate (and Section 2 shall become operational) at such time as the
accumulated payroll deductions of Participants are sufficient to purchase a
number of shares equal to or greater than the number of shares remaining
available for purchase under the Plan. Upon termination of the Plan, all funds
in the Accounts of Participants not applied to the purchase of Stock shall be
promptly refunded.

                                       8


                                LEGG MASON, INC.
                          EMPLOYEE STOCK PURCHASE PLAN
                          ----------------------------

                                   EXHIBIT A
                                   ---------

                PARTICIPATING SUBSIDIARIES AS OF EFFECTIVE DATE
                -----------------------------------------------



 Legg Mason Wood Walker, Incorporated
 Asset Management Technology Solutions, Inc.
 Barrett Associates, Inc.
 Bartlett & Co.
 Berkshire Asset Management, Inc.
 Arthur Karafin Investment Advisors, Inc.
 LM Institutional Advisors, Inc.
 Legg Mason Trust, fsb
 Legg Mason Real Estate Services
 Legg Mason Financial Partners, Inc.
 Legg Mason Funds Management, Inc.
 Legg Mason Financial Services, Inc.
 Legg Mason Fund Adviser, Inc.
 Legg Mason Capital Management, Inc.
 Legg Mason Merchant Banking, Inc.
 Legg Mason Mortgage Capital Corporation
 Legg Mason Real Estate Investors, Inc.
 Western Asset Management Company

                                       9