LEGG MASON, INC. - FORM 8-K - EX-10.1

Attached files

file	filename
8-K - LEGG MASON, INC.	c69781_8k.htm
EX-4.2 - LEGG MASON, INC.	c69781_ex4-2.htm
EX-4.1 - LEGG MASON, INC.	c69781_ex4-1.htm
EX-4.3 - LEGG MASON, INC.	c69781_ex4-3.htm

Exhibit 10.1

NOTE EXCHANGE AGREEMENT

among

LEGG MASON, INC.

KKR I-L LIMITED

CITIBANK, N.A.

CREDIT SUISSE INTERNATIONAL

HSBC BANK USA, NATIONAL ASSOCIATION

and for limited purposes

KOHLBERG KRAVIS ROBERTS & CO. L.P.

May 16, 2012


TABLE OF CONTENTS

1.	Definitions		1

2.	Closing Transactions		4
	2.1	Closing Transactions	4
	2.2	Closing	4

3.	Representations and Warranties of the Company		5
	3.1	Organization and Power	5
	3.2	Capitalization	6
	3.3	Authorization	7
	3.4	Valid Issuance	7
	3.5	No Conflict	8
	3.6	Consents	8
	3.7	Absence of Litigation	9
	3.8	NYSE	9
	3.9	Company Not Required to Register as an “Investment Company”	9
	3.10	General Solicitation; No Integration	9

4.	Representations and Warranties of KKR and Each Holder		9
	4.1	Organization	9
	4.2	Authorization	9
	4.3	No Conflict	10
	4.4	Consents	10
	4.5	Absence of Litigation	11
	4.6	No Liens	11
	4.7	Swap Unwind Agreements	11
	4.8	Brokers	11
	4.9	Purchase Entirely for Own Account	11
	4.10	Investor Status	11
	4.11	Securities Not Registered	12

5.	Covenants		12
	5.1	HSR Approval	12
	5.2	Shares Issuable Upon Exercise of Warrants	12
	5.3	PORTAL and CUSIPs	12
	5.4	Resignation of KKR Board Designee	12
	5.5	Waiver of Certain Covenants	13
	5.6	Further Assurances	13
	5.7	Pre-Closing Adjustments to Terms of Warrants	13
	5.8	Termination	13
	5.9	Swap Unwind Agreements	13

6.	Conditions Precedent		13
	6.1	Conditions to the Obligation of the Holders to Consummate the Closing	13
	6.2	Conditions to the Obligation of the Company to Consummate the Closing	14


7.	Termination of this Agreement		15
	7.1	Termination	15
	7.2	Effect of Termination	16

8.	Miscellaneous Provisions		16
	8.1	Public Statements or Releases	16
	8.2	Interpretation	16
	8.3	Notices	17
	8.4	Severability	18
	8.5	Governing Law	18
	8.6	Waiver	19
	8.7	Assignment	19
	8.8	Third Parties	19
	8.9	Counterparts	19
	8.10	Entire Agreement; Amendments	19
	8.11	Survival	19
	8.12	Other KKR Activities	19
	8.13	Indemnity for the Holders	20

Schedules

Schedule I		Principal Amounts of Notes to be Repurchased

Exhibits

Exhibit A		Form of Warrant Agreement
Exhibit B		Form of Registration Rights Agreement
Exhibits C-1 and C-2 Forms of Legal Opinions
Exhibit D		Form of Amended and Restated Standstill

- ii -

INDEX OF DEFINED TERMS


2008 Registration Rights Agreement	1
2008 Standstill Agreement	1
2008 Transaction Agreements	1
Affected KKR Notes	16
Affiliate	2
Affiliated Entity	2
Amended and Restated Standstill Agreement	2
Applicable Consideration	2
Beneficially Own	2
Benefit Plan	2
Benefit Plans	2
Business Day	2
Capitalization Date	6
Citi	1
Closing	5
Closing Date	5
Code	2
Common Stock	1
Company	1
Confirmations Relating to the Bond Hedge and Warrant Transactions	2
Control	2
controlled by	2
controlling	2
Conversion Rate	3
Covered Person	19
CS	1
Cut-Off Date	5
DTC	5
ERISA	3
Exchange Act	3
Exercise Price	1
Global Certificates	5
Governmental Entity	3
Holder	1
Holders	1
HSBC	1
HSR Act	3
Indemnified Persons	20
Indenture	3
Investment Company Act	9
KKR	1
KKR Holder	1
KKR Swap Agreements	10
KKR/Holder Adverse Effect	10
Law	8
Lien	8
Loss	20
Losses	20
Material Adverse Effect	3
Note Purchase Agreement	1
Note Repurchase	1
Notes	1
Number of Warrants	4
NYSE	9
Other Holders	1
Person	3
Prepayment Consideration	4
Purchase Price	4
Registration Rights Agreement	3
Securities	3
Securities Act	3
Subsidiary	3
Swap Unwind Agreement	5
Terminating Holder	15
Termination	4
Transaction Press Release	4
under common control with	2
Warrant	1
Warrant Agent	4
Warrant Agreement	4

- iii -

NOTE EXCHANGE AGREEMENT

NOTE EXCHANGE AGREEMENT dated as of May 16, 2012 among Legg Mason, Inc., a Maryland corporation (the “Company”), KKR I-L Limited (the “KKR Holder”), Citibank, N.A. (“Citi”), Credit Suisse International (“CS”), HSBC Bank USA, National Association (“HSBC” and, together with Citi and CS, the “Other Holders”, and together with the KKR Holder, the “Holders” and each, a “Holder”) and, solely for purposes of Sections 1, 2, 4, 5, 7 and 8 hereof, Kohlberg Kravis Roberts & Co. L.P. (“KKR”).

WHEREAS, pursuant to the Note Purchase Agreement dated as of January 14, 2008 among the Company, the Purchasers named therein and KKR, as amended on January 30, 2008 and modified by the waiver letter dated May 5, 2008 (as so amended, the “Note Purchase Agreement”), the Company issued and sold $1,250,000,000 aggregate principal amount of its 2.50% Convertible Senior Notes due 2015 (the “Notes”);

WHEREAS, in connection with such Note Purchase Agreement, (i) KKR and the Company entered into a Standstill Agreement dated as of January 14, 2008 (the “2008 Standstill Agreement”) and (ii) the Company, the KKR Holder, CS and HSBC entered into a Registration Rights Agreement dated as of January 31, 2008 (the “2008 Registration Rights Agreement”);

WHEREAS, the Company desires to repurchase the Notes from the Holders pursuant to this Agreement (the “Note Repurchase”), and each Holder, severally, desires to sell to the Company Notes in an aggregate principal amount set forth opposite such Holder’s name in Schedule I hereto for (i) cash in an amount equal to the Purchase Price (as defined below) for the principal amount of Notes set forth opposite such Holder’s name in Schedule I hereto, plus accrued and unpaid interest on such Notes to, but excluding, the Closing Date, (ii) the Prepayment Consideration (as defined below) applicable to such Holder, and (iii) the Number of Warrants (each, a “Warrant”) applicable to such Holder, subject to adjustment pursuant to Section 5.7, each Warrant entitling the holder thereof to purchase shares of the Company’s common stock, par value $0.10 per share (the “Common Stock”), having an exercise price of $88.00 per share (the “Exercise Price”) and the other terms set forth in the form of warrant agreement attached hereto as Exhibit A;

WHEREAS, the parties to the Note Purchase Agreement and the 2008 Registration Rights Agreement (collectively, the “2008 Transaction Agreements”) wish to terminate such agreements effective as of the Closing Date; and

WHEREAS, the parties to the 2008 Standstill Agreement desire to amend the 2008 Standstill Agreement effective as of the Closing Date.

NOW THEREFORE, in consideration of the mutual agreements, representations, warranties and covenants herein contained, the parties hereto agree as follows:

1. Definitions. As used in this Agreement, the following terms shall have the following respective meanings:

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with such Person; provided that with respect to KKR, each Affiliated Entity of KKR, the KKR Holder and each Affiliate of an Affiliated Entity of KKR or the KKR Holder shall be deemed to be an Affiliate of KKR; provided further that an “Affiliate” of KKR shall not include portfolio companies and non-private equity affiliates directly or indirectly controlling, controlled by or under direct or indirect common control with KKR.

“Affiliated Entity” shall mean with respect to KKR, any investment fund or holding company formed for investment purposes, other than portfolio companies and non-private equity affiliates, that is primarily managed, advised or serviced by KKR or by an Affiliate of KKR.

“Amended and Restated Standstill Agreement” means the Amended and Restated Standstill Agreement between KKR and the Company substantially in the form set forth in Exhibit D hereto.

“Applicable Consideration” shall have the meaning ascribed thereto in the Indenture.

“Beneficially Own” shall have the meaning set forth in Rule 13d-3 of the rules and regulations promulgated under the Exchange Act, except that for purposes of this Agreement the words “within sixty days” in Rule 13d-3(d)(1)(i) shall not apply, to the effect that a Person shall be deemed to be the beneficial owner of a security if that Person has the right to acquire beneficial ownership of such security at any time.

“Benefit Plan” or “Benefit Plans” shall mean employee benefit plans as defined in Section 3(3) of ERISA and all other employee and director benefit practices or arrangements, including employee stock purchase plans and phantom stock plans, and any such practices or arrangements providing severance pay, sick leave, vacation pay, salary continuation for disability, retirement benefits, deferred compensation, bonus pay, incentive pay, stock options or other stock-based compensation, hospitalization insurance, medical insurance, life insurance, scholarships or tuition reimbursements, maintained by the Company or any of its Subsidiaries or to which the Company or any of its Subsidiaries is obligated to contribute for employees or former employees.

“Business Day” means any day other than a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York.

“Code” means the Internal Revenue Code of 1986, as amended.

“Confirmations Relating to the Bond Hedge and Warrant Transactions” means the eight separate confirmations, each dated January 14, 2008, as amended, between the Company and each of Bank of America, N.A., Goldman Sachs & Co., JPMorgan Chase Bank, National Association and Merrill Lynch Financial Markets, Inc., relating to the bond hedge and warrant transactions executed in connection with the issuance of the Notes by the Company.

“Control” (including the terms “controlling” “controlled by” and “under common control with”) with respect to any Person means the possession, directly or indirectly, of the

- 2 -

power to direct or cause the direction of the management policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

“Conversion Rate” shall have the meaning ascribed thereto in the Indenture.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and all of the rules and regulations promulgated thereunder.

“Governmental Entity” means any United States or foreign governmental or regulatory agency, commission, court, body, entity or authority.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder.

“Indenture” means the Indenture, dated as of January 31, 2008, between the Company and the Bank of New York as trustee, relating to the Notes.

“Material Adverse Effect” means any fact, circumstance, event, change, effect or occurrence that, individually or in the aggregate with all other facts, circumstances, events, changes, effects, or occurrences, prevents or materially delays or materially impairs the ability of the Company to consummate the transactions contemplated by this Agreement, the Registration Rights Agreement, the Amended and Restated Standstill Agreement, the Warrant Agreement and the Warrants.

“Person” means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or any other entity or organization.

“Registration Rights Agreement” means the Registration Rights Agreement between the KKR Holder and the Company substantially in the form set forth in Exhibit B hereto.

“Securities” shall mean the Warrants and the Common Stock or other securities issuable upon exercise of the Warrants.

“Securities Act” shall mean the Securities Act of 1933, as amended, and all of the rules and regulations promulgated thereunder.

“Subsidiary” when used with respect to any party means any corporation or other organization, whether incorporated or unincorporated, at least a majority of the securities or other interests of which having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such party or by any one or more of its Subsidiaries, or by such party and one or more of its Subsidiaries.

- 3 -

“Transaction Press Release” means the press release to be issued by the Company relating to the transactions contemplated by this Agreement and other related matters, in the form provided to KKR by the Company.

“Warrant Agent” shall have the meaning ascribed thereto in the Warrant Agreement.

“Warrant Agreement” means the Warrant Agreement between the Company and the Warrant Agent substantially in the form set forth in Exhibit A hereto.

2. Closing Transactions.

2.1 Closing Transactions. Subject to and upon the terms and conditions set forth in this Agreement each of the following shall occur at the Closing:


	(a) Each Holder, severally, shall sell to the Company, and the Company shall repurchase from each Holder, the principal amount of Notes set forth opposite the name of such Holder on Schedule I hereto for:

	(i) cash in an amount equal to the principal amount of Notes set forth opposite such Holder’s name in Schedule I hereto (the “Purchase Price”), plus accrued and unpaid interest on such Notes to, but excluding, the Closing Date;

	(ii) the prepayment consideration set forth opposite the name of such Holder on Schedule I hereto (the “Prepayment Consideration”); and

	(iii) the number of Warrants set forth opposite the name of such Holder on Schedule I hereto (the “Number of Warrants”), signed by the Company and countersigned by the Warrant Agent, each Warrant having the terms set forth in the Warrant Agreement, subject to adjustment pursuant to Section 5.7.

	(b) Each of the 2008 Transaction Agreements shall automatically terminate in their entirety and be void and have no further effect without any further action by any of the parties hereto or thereto (the “Termination”).

	(c) The Company and KKR shall execute the Amended and Restated Standstill Agreement to amend and restate the 2008 Standstill Agreement.

	(d) For the avoidance of doubt, the termination pursuant to Section 7.1(b) hereof by any Other Holder of its obligations under this Agreement shall have no effect upon (i) the Termination contemplated in Section 2.1(b) hereof, which Termination shall be deemed effective at Closing with respect to all of the parties to the 2008 Transaction Agreements, or (ii) the obligation of the Company and KKR to execute at Closing the Amended and Restated Standstill Agreement as contemplated in Section 2.1(c) hereof.

2.2 Closing.


	(a) Subject to the satisfaction or waiver of the conditions set forth in Section 6 of this Agreement, the closing of the transactions described in Section 2 of this

- 4 -


	Agreement (the “Closing”) shall take place at the offices of Shearman & Sterling LLP, 599 Lexington Avenue, New York, NY 10022 on any Business Day (the “Closing Date”) occurring after the date hereof and on or prior to November 15, 2012 (the “Cut-Off Date”) designated by the Company by written notice to KKR and the Other Holders no later than the third Business Day immediately preceding the designated Closing Date (or such other date as may be mutually agreed in writing by the Company and KKR and as shall be designated by written notice to the Other Holders no later than the second Business Day immediately preceding the mutually agreed Closing Date).

	(b) At the Closing, each Holder shall transfer, or cause to be transferred, its beneficial interests in the global notes representing the Notes to the account designated by the Company with The Depositary Trust Company (“DTC”) against:

	(i) payment by the Company to such Holder of (A) the Purchase Price for the principal amount of Notes set forth opposite such Holder’s name in Schedule I hereto and (B) accrued and unpaid interest on such Notes to, but excluding the Closing Date, by wire transfer to such Holder of immediately available funds to the account designated by such Holder, or to the extent that such beneficial interests in the global notes representing the Notes are delivered on behalf of the KKR Holder by or on behalf of a secured party under a security agreement between the KKR Holder and such secured party, to the account designated by or on behalf of such secured party;

	(ii) payment by the Company of the Prepayment Consideration for such Holder by wire transfer to such Holder of immediately available funds to the account designated by such Holder; provided that each Holder other than the KKR Holder hereby directs the Company to pay the Prepayment Consideration for such Holder to the account nominated by the KKR Holder in satisfaction of such Holder’s obligation under the letter agreement for Full Early Settlement of Convertible Note Total Return Swap Transaction between the KKR Holder and such Holder dated the date hereof (the “Swap Unwind Agreement”, and collectively for all Other Holders, the “Swap Unwind Agreements”); and

	(iii) delivery by the Company of one or more global certificates (collectively, the “Global Certificates”) representing the Number of Warrants for such Holder to the nominee of DTC for the account of such Holder, with any transfer taxes payable in connection with the issuance and delivery of such Warrants duly paid by the Company; provided that each Holder other than the KKR Holder hereby directs the Company to deliver the Number of Warrants for such Holder to the nominee of DTC for the account of the KKR Holder in satisfaction of such Holder’s obligation under the applicable Swap Unwind Agreement.

	(c) The Global Certificates will be made available for inspection by the Holders at the offices of Shearman & Sterling LLP set forth above not later than 1:00 p.m. New York City time, on the Business Day prior to the Closing Date.

3. Representations and Warranties of the Company. The Company hereby represents and warrants to each of the Holders as follows:

3.1 Organization and Power.

- 5 -


	(a) The Company is a legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, with all requisite corporate, partnership or similar power and authority to own, lease and operate its properties and assets and to carry on its business as presently conducted.

	(b) The Company is duly qualified to do business and is in good standing as a foreign corporation (or other legal entity) in each jurisdiction where the ownership, leasing or operation of its assets or properties or conduct of its business requires such qualification, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, have a Material Adverse Effect. The articles of incorporation, by-laws or other equivalent organizational or governing documents of the Company are in full force and effect. The Company is not in violation of its articles of incorporation, by-laws or other equivalent organizational or governing documents.

3.2 Capitalization.


	(a) As of the date of this Agreement, the authorized shares of capital stock of the Company consist of 500,000,000 shares of Common Stock and 4,000,000 shares of preferred stock, par value $10 per share. As of the close of business on December 31, 2011 (the “Capitalization Date”), (i) 139,771,172 shares of Common Stock were issued and outstanding, (ii) 5,839,972 shares of Common Stock were reserved for issuance upon exercise of outstanding options to acquire shares of Common Stock or upon the vesting of outstanding restricted stock units, (iii) 19,224,651 additional shares of Common Stock were reserved for issuance for future grants pursuant to the Company’s Benefit Plans, (iv) 26,000,000 shares of Common Stock were reserved for issuance under the Notes and (v) 28,409,090 shares of Common Stock were reserved for issuance under the Confirmations Relating to the Bond Hedge and Warrant Transactions. All shares of Common Stock outstanding as of the date of this Agreement, and all shares of Common Stock reserved for issuance set forth in clauses (ii) through (v) of the foregoing sentence, when issued in accordance with the respective terms thereof, are or will be duly authorized, validly issued, fully paid and non-assessable and free of pre-emptive or similar rights. Since the Capitalization Date through the date hereof, the only shares of capital stock issued by the Company were restricted stock, restricted stock units or shares issued pursuant to the exercise of outstanding options. No Subsidiary of the Company owns any Common Stock.

	(b) As of the date of this Agreement, except pursuant to the Company’s Benefit Plans, the Confirmations Relating to the Bond Hedge and Warrant Transactions, the Notes or as would not, individually or in the aggregate, result in a material increase in the number of shares of capital stock of the Company, there are no existing options, warrants, calls, preemptive (or similar) rights, subscriptions or other rights, agreements or commitments obligating the Company to issue, transfer or sell, or cause to be issued, transferred or sold, any capital stock of the Company or any securities convertible into or exchangeable for such capital stock, and there are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any of its shares of capital stock.

	(c) Except as set forth in the Registration Rights Agreement, the 2008 Transaction Agreements, and registration rights granted in connection with the Confirmations

- 6 -


	Relating to the Bond Hedge and Warrant Transactions, the Company has not granted to any Person the right to require the Company to register Common Stock on or after the date of this Agreement.

3.3 Authorization. The Company has all requisite corporate power to enter into this Agreement, the Registration Rights Agreement, the Amended and Restated Standstill Agreement, the Warrant Agreement and the Warrants and to carry out and perform its obligations under the terms of this Agreement, the Registration Rights Agreement, the Amended and Restated Standstill Agreement, the Warrant Agreement and the Warrants. All corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization, execution, delivery and performance of this Agreement, the Registration Rights Agreement, the Amended and Restated Standstill Agreement, the Warrant Agreement and the Warrants and the consummation of the transactions contemplated herein has been taken. The execution, delivery and performance of this Agreement, the Registration Rights Agreement, the Amended and Restated Standstill Agreement, the Warrant Agreement and the Warrants by the Company, the issuance of Common Stock upon exercise of the Warrants in accordance with their terms and the consummation of the other transactions contemplated herein do not require any approval of the Company’s stockholders. Assuming this Agreement constitutes the legal, valid and binding agreement of the Holders and KKR (to the extent this Agreement is applicable to KKR), this Agreement constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or fraudulent conveyance and similar laws relating to or affecting creditors generally or by general equity principles, including without limitation concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law) and except as rights to indemnity may be limited by applicable federal and state securities laws and principles of public policy. Upon execution by the Company and the other parties thereto and assuming that they constitute legal, valid and binding agreements of the other parties thereto, each of the Registration Rights Agreement, the Amended and Restated Standstill Agreement and the Warrant Agreement will constitute a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or fraudulent conveyance and similar laws relating to or affecting creditors generally or by general equity principles, including without limitation concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law), and except as rights to indemnity and contribution under the Registration Rights Agreement may be limited by applicable federal and state securities law and principles of public policy.

3.4 Valid Issuance. (a) The Warrants will, upon issuance pursuant to the terms hereof be valid and legally binding obligations of the Company, enforceable in accordance with their terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or fraudulent conveyance and similar laws relating to or affecting creditors generally or by general equity principles, including without limitation concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law).

- 7 -

(b) At or prior to the Closing, the Company will have available for issuance the Common Stock initially issuable upon exercise of the Warrants. The Common Stock to be issued upon exercise of the Warrants in accordance with their terms has been duly authorized, and when issued upon exercise of the Warrants, all such Common Stock will be validly issued, fully paid and nonassessable and free of pre-emptive or similar rights. Subject to the accuracy of the representations made by the Holders in Section 4 hereof, the Warrants will be issued to the Holders in compliance with applicable exemptions from (i) the registration and prospectus delivery requirements of the Securities Act and (ii) the registration and qualification requirements of all applicable securities laws of the states of the United States. The Company is a “well-known seasoned issuer” as defined in Rule 405 under the Securities Act, and is eligible to file as of the date hereof a registration statement on Form S-3 under the Securities Act.

3.5 No Conflict. The execution, delivery and performance of this Agreement, the Registration Rights Agreement, the Amended and Restated Standstill Agreement, the Warrant Agreement and the Warrants by the Company, the issuance of the Common Stock upon exercise of the Warrants in accordance with their terms and the consummation of the other transactions contemplated hereby will not (i) conflict with or result in any violation of any provision of the articles of incorporation or by-laws of the Company, (ii) result in any breach or violation of, or default (with or without notice or lapse of time, or both) under, require consent under, or give rise to a right of termination, cancellation, modification or acceleration of any obligation or to the loss of any benefit under any loan, guarantee of indebtedness or credit agreement, note, bond, mortgage, indenture, lease, agreement, contract, purchase or sale order, instrument, permit, concession, franchise, right or license binding upon the Company or any of its Subsidiaries (other than, for the avoidance of doubt, the Confirmations relating to the Bond Hedge and Warrant Transactions) or result in the creation of any liens, claims, mortgages, encumbrances, pledges, security interests, equities or charges of any kind (each, a “Lien”) upon any of the properties, assets or rights of the Company or any of its Subsidiaries, or (iii) assuming (A) the accuracy of the representations made by the Holders in Section 4 hereof, (B) the consents, approvals, orders and authorizations referred to in clauses (ii) and (iii) of Section 3.6 have been obtained and (C) the expiration or termination of applicable waiting periods referred to in clause (i) of Section 3.6, conflict with or violate any applicable federal, state, local or foreign or provincial law, statute, code, ordinance, rule, regulation, judgment, order, injunction, decree or agency requirement of or undertaking to or agreement with any Governmental Entity, including common law (collectively, “Laws” and each, a “Law”), (x) other than, in the case of clauses (ii) and (iii), as would not, individually or in the aggregate, have a Material Adverse Effect and (y) except that if KKR and any Affiliated Entity with respect to KKR Beneficially Own more than 10% of the Company’s Common Stock, certain funds advised or managed by the Company’s Subsidiaries may be required to take action with respect to securities sponsored by KKR and its Affiliated Entities.

3.6 Consents. All consents, approvals, orders and authorizations required on the part of the Company or its Subsidiaries in connection with the execution, delivery or performance of this Agreement, the Registration Rights Agreement, the Amended and Restated Standstill Agreement, the Warrant Agreement and the Warrants and the issuance of the Common Stock upon exercise of the Warrants in accordance with their terms have been obtained or made, other than (i) the expiration or termination of any applicable waiting periods under the HSR Act

- 8 -

or any applicable requirements under foreign law in connection with the issuance of Common Stock upon exercise of the Warrants, (ii) those to be obtained, in connection with the registration of Securities under the Registration Rights Agreement, under the applicable requirements of the Securities Act and Exchange Act and any related filings and approvals under applicable state securities laws, and (iii) such consents, approvals, orders and authorizations the failure of which to make or obtain would not reasonably be expected to have a Material Adverse Effect.

3.7 Absence of Litigation. There are no (i) investigations or proceedings pending or, to the knowledge of the Company, threatened by any Governmental Entity with respect to the Company or any of its Subsidiaries or any of their respective properties or assets, (ii) actions, suits, arbitrations, claims or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries, or any of their respective properties or assets, at law or in equity, or (iii) orders, judgments or decrees of any Governmental Entity against the Company or any of its Subsidiaries, which, in the case of clauses (i), (ii) or (iii), individually or in the aggregate, would be reasonably expected to have a Material Adverse Effect.

3.8 NYSE. The Common Stock is registered pursuant to Section 12(b) of the Exchange Act and is listed on the New York Stock Exchange (“NYSE”), and the Company has no action pending to terminate the registration of the Common Stock under the Exchange Act or delist the Common Stock from NYSE, nor has the Company received any notification that the SEC or the NYSE is currently contemplating terminating such registration or listing.

3.9 Company Not Required to Register as an “Investment Company”. The Company has been advised of the rules and requirements under the Investment Company Act of 1940, as amended (the “Investment Company Act”). The Company is not, and immediately after the repurchase of the Notes and issuance of the Warrants will not be, required to register as an “investment company” under the Investment Company Act.

3.10 General Solicitation; No Integration. Neither the Company nor any other Person authorized by the Company to act on its behalf has engaged in a general solicitation or general advertising (within the meaning of Regulation D of the Securities Act) of investors with respect to offers or sales of the Warrants. The Company has not, directly or indirectly, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as defined in the Securities Act) which, to its knowledge, is or will be integrated with the Warrants sold pursuant to this Agreement.

4. Representations and Warranties of KKR and Each Holder. KKR and each Holder, severally for itself and not jointly, represents and warrants to the Company as follows:

4.1 Organization. Each of KKR and such Holder is a legal entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has the requisite power and authority to own, lease and operate its properties and assets and to carry on its business as presently conducted.

4.2 Authorization. Each of KKR and such Holder has all requisite corporate or similar power to enter into this Agreement, the Registration Rights Agreement and the Amended

- 9 -

and Restated Standstill Agreement and to carry out and perform its obligations hereunder and thereunder, in each case, to the extent that it is a party thereto. All corporate, member or partnership action on the part of KKR and such Holder or their respective stockholders, members or partners necessary for the authorization, execution, delivery and performance of this Agreement, the Registration Rights Agreement, the Amended and Restated Standstill Agreement, in each case, to the extent that it is a party thereto, and the consummation of the transactions contemplated herein has been taken. Assuming this Agreement constitutes the legal, valid and binding agreement of the Company, this Agreement constitutes a legal, valid and binding obligation of KKR and such Holder, enforceable against KKR and such Holder in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or fraudulent conveyance and similar laws relating to or affecting creditors generally or by general equity principles, including without limitation concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law). Upon their respective execution by KKR and such Holder, to the extent that KKR or such Holder is a party thereto, and by the other parties thereto, and assuming that they constitute legal and binding agreements of the Company, each of the Registration Rights Agreement and the Amended and Restated Standstill Agreement will constitute a legal, valid and binding obligation of KKR and such Holder, enforceable against KKR and such Holder in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or fraudulent conveyance and similar laws relating to or affecting creditors generally or by general equity principles, including without limitation concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law), in each case, to the extent that it is a party thereto.

4.3 No Conflict. The execution, delivery and performance of this Agreement by KKR and such Holder and the consummation by KKR and such Holder of the transactions contemplated hereby will not (i) conflict with or result in any violation of any provision of the certificate of incorporation or by-laws or other equivalent organizational document, in each case as amended, of KKR or such Holder, as applicable, (ii) result in any breach or violation of, or default (with or without notice or lapse of time, or both) under, require consent under, or give rise to a right of termination, cancellation, modification or acceleration of any obligation or to the loss of any benefit under any loan, guarantee of indebtedness or credit agreement, note, bond, mortgage, indenture, lease, agreement, contract, purchase or sale order, instrument, permit, concession, franchise, right or license binding upon KKR or such Holder, as applicable (other than, for the avoidance of doubt, any swap agreement with respect to Notes to which the KKR Holder is party, the “KKR Swap Agreements,” which KKR Swap Agreements shall be terminated in connection with the Closing), or result in the creation of any Lien upon any of the properties, assets or rights of KKR or such Holder, as applicable, or (iii) conflict with or violate any applicable Laws, other than, in the case of clauses (ii) and (iii), as would not, individually or in the aggregate, be reasonably expected to materially delay or hinder the ability of KKR or such Holder to perform its obligations under this Agreement, the Registration Rights Agreement and the Amended and Restated Standstill Agreement, in each case, to the extent that KKR or such Holder is a party thereto (a “KKR/Holder Adverse Effect”).

4.4 Consents. All consents, approvals, orders and authorizations required on the part of KKR and such Holder in connection with the execution, delivery or performance of this

- 10 -

Agreement and the consummation by KKR and such Holder of the other transactions contemplated herein have been obtained or made, other than (i) the expiration or termination of the applicable waiting period under the HSR Act or any applicable requirements under foreign law in connection with the issuance of Common Stock to the KKR Holder upon exercise of the Warrants, and (ii) such consents, approvals, orders and authorizations the failure of which to make or obtain, individually or in the aggregate, would not reasonably be expected to have a KKR/Holder Adverse Effect.

4.5 Absence of Litigation. There are no suits, claims, actions, proceedings, arbitrations, mediations or investigations pending or, to the knowledge of KKR and such Holder, threatened against KKR or such Holder that would, individually or in the aggregate, reasonably be expected to have a KKR/Holder Adverse Effect. Neither KKR nor such Holder is subject to any order, writ, judgment, injunction, decree or award that would, individually or in the aggregate, have a KKR/Holder Adverse Effect.

4.6 No Liens. At the Closing, each Holder will hold the Notes to be sold by such Holder at the Closing free and clear of any Liens (other than any Liens on the Notes to secure the KKR Holder’s obligations under the KKR Swap Agreements, which Liens shall be released upon Closing).

4.7 Swap Unwind Agreements. Each Holder has executed and delivered the applicable Swap Unwind Agreement to which it is a party, and a true and complete copy of each such Swap Unwind Agreement (including any amendments thereto) has been delivered by the KKR Holder to the Company; provided that the Company agrees not to disclose or furnish any such Swap Unwind Agreement or the terms thereof to any third party. Notwithstanding the foregoing, the Company may disclose or furnish any such Swap Unwind Agreement or the terms thereof to a third party to the extent required by applicable law or the rules of any relevant national securities exchange.

4.8 Brokers. Neither KKR nor such Holder has retained, utilized or been represented by any broker or finder in connection with the transactions contemplated by this Agreement whose fees the Company would be required to pay.

4.9 Purchase Entirely for Own Account. Such Holder is acquiring the Warrants for its own account, and not with a view to, or for sale in connection with, any distribution of the Warrants in violation of the Securities Act. Such Holder has no present agreement, undertaking, arrangement, obligation or commitment providing for the disposition of the Warrants, other than to the KKR Holder as contemplated by Section 2.2 in connection with the termination of the KKR Swap Agreements in satisfaction of such Holder’s obligation under the applicable Swap Unwind Agreement.

4.10 Investor Status. Such Holder certifies and represents to the Company that it is an “accredited investor” as defined in Rule 501 of Regulation D promulgated under the Securities Act and a “qualified institutional buyer” as defined in Rule 144A under the Securities Act. Such Holder’s financial condition is such that it is able to bear the risk of holding the Warrants for an indefinite period of time and the risk of loss of its entire investment. Such

- 11 -

Holder has sufficient knowledge and experience in investing in companies similar to the Company so as to be able to evaluate the risks and merits of its investment in the Company.

4.11 Securities Not Registered. Such Holder understands that the Securities have not been registered under the Securities Act, by reason of their issuance by the Company in a transaction exempt from the registration requirements of the Securities Act, and that the Securities must continue to be held by such Holder unless a subsequent disposition thereof is registered under the Securities Act or is exempt from such registration. Such Holder understands that the exemptions from registration afforded by Rule 144 (the provisions of which are known to it) promulgated under the Securities Act depend on the satisfaction of various conditions. Such Holder shall transfer the Securities only in compliance with the Transfer Restrictions set forth in the Warrant Agreement or as contemplated by Section 2.2(b) hereof.

5. Covenants.

5.1 HSR Approval. The Company and each Holder acknowledge that one or more filings under the HSR Act or foreign antitrust laws may be necessary in connection with the issuance of shares of Common Stock upon exercise of the Warrants. Each Holder will promptly notify the Company if any such filing is required on the part of such Holder. To the extent required, the Company, each Holder and any other Affiliate of such Holder will cooperate in making any required filings under the HSR Act or any foreign antitrust requirements in connection with the issuance of shares of Common Stock upon exercise of Warrants held by such Holder.

5.2 Shares Issuable Upon Exercise of Warrants. The Company will at all times have and keep available for issuance such number of shares of Common Stock as shall be sufficient to permit the exercise of the Warrants into Common Stock as provided for in the terms of the Warrants, including as may be adjusted for share splits, combinations or other similar transactions as of the date of determination. To the extent not already listed, subject to official notice of issuance, the Company will use reasonable commercial efforts to cause any Common Stock issued upon exercise of the Warrants to be listed with the stock exchange or quotation system on which the Common Stock may then be listed by the Company.

5.3 PORTAL and CUSIPs. The Company will use reasonable commercial efforts to (a) permit the Warrants to be eligible for PORTAL trading securities in accordance with the rules and regulations adopted by The NASDAQ OMX Group, Inc. relating to the PORTAL Market as of the Closing or as promptly as practicable thereafter and (b) obtain all necessary Committee on Uniform Securities Identification Procedures numbers (CUSIP numbers) for the Warrants required for creating a market in warrants traded pursuant to Rule 144A under the Securities Act or that are not “restricted securities” for purposes of Rule 144 under the Securities Act, in each case as of the Closing or as promptly as practicable thereafter. The KKR Holder will provide all reasonable assistance and cooperation as may be requested by the Company to effectuate the intent and purposes of this Section 5.3.

5.4 Resignation of KKR Board Designee. KKR shall cause the representative nominated by it to the Company’s board of directors pursuant to Section 5.5(a) of the Note

- 12 -

Purchase Agreement, Mr. Scott Nuttall, to resign from the Company’s board of directors with effect upon consummation of the Closing.

5.5 Waiver of Certain Covenants. At the request of the Company, KKR hereby waives compliance by the Company with the covenants set forth in Section 5.7 of the Note Purchase Agreement solely for purposes of incurring any indebtedness to raise all or a portion of the capital contemplated by Section 6.2(g) of this Agreement. The waiver granted pursuant to this Section 5.5 shall expire upon termination of this Agreement. The waiver granted pursuant to this Section 5.5 shall be limited precisely as written, and shall not extend to any failure by the Company to comply with any other covenant in the Note Purchase Agreement or to any failure to comply with Section 5.7 of the Note Purchase Agreement after termination of this Agreement (including, for the avoidance of doubt, any failure to comply with Section 5.7 of the Note Purchase Agreement that would exist as of the termination of this Agreement but for the waiver in this Section 5.5).

5.6 Further Assurances. Each party agrees to cooperate with each other and their respective officers, employees, attorneys, accountants and other agents, and, generally, do such other reasonable acts and things in good faith as may be necessary to effectuate the intents and purposes of this Agreement, subject to the terms and conditions hereof and compliance with applicable Law, including taking reasonable action to facilitate the filing of any document or the taking of reasonable action to assist the other parties hereto in complying with the terms hereof.

5.7 Pre-Closing Adjustments to Terms of Warrants. If after the date hereof and before the consummation of the Closing the Conversion Rate of the Notes is adjusted or the Notes become convertible into Applicable Consideration, the terms of the Warrants issued on the Closing Date shall be adjusted pursuant to the terms of the Warrant Agreement as if the Warrants had been issued on the date hereof.

5.8 Termination. Each party agrees that the Termination shall occur automatically upon consummation of the Closing.

5.9 Swap Unwind Agreements. Each Holder agrees that, from the date hereof until the Closing Date, it will not amend the applicable Swap Unwind Agreement to which it is a party by (i) adding any material conditions to the occurrence of a Full Early Settlement Date (as defined in the Swap Unwind Agreement) or (ii) postponing the Full Early Settlement Date to a date later than the Closing Date or terminating the Swap Unwind Agreement without the prior consent of the Company (other than if the Note Exchange Agreement is terminated).

6. Conditions Precedent.

6.1 Conditions to the Obligation of the Holders to Consummate the Closing. The several obligations of each Holder to consummate the transactions to be consummated at the Closing are subject to the satisfaction of the following conditions precedent:


	(a) The representations and warranties of the Company contained herein shall be true and correct on and as of the Closing Date, with the same force and effect as though made on and as of the Closing Date.

- 13 -


	(b) The Company shall have performed in all material respects all obligations and conditions herein required to be performed or observed on or prior to the Closing Date by the Company.

	(c) Each Holder shall have received a certificate, dated the Closing Date, signed by an officer of the Company, certifying on behalf of the Company that the conditions specified in the foregoing Sections 6.1(a) and (b) have been fulfilled.

	(d) The transfer and delivery of the Notes by such Holder to the Company, the receipt by such Holder of the Purchase Price and accrued and unpaid interest on such Holder’s Notes to, but excluding, the Closing Date, and the receipt by such Holder of the Prepayment Consideration and the Number of Warrants for such Holder, in each case in accordance with the terms of this Agreement, shall not be prohibited or enjoined by any court order or prohibited by any law or governmental regulation.

	(e) With respect to each Other Holder, the consummation at the Closing of the termination of the KKR Swap Agreement to which such Other Holder is a party pursuant to the applicable Swap Unwind Agreement.

	(f) With respect to the KKR Holder, unless otherwise waived by the KKR Holder, the consummation at the Closing of the termination of each of the KKR Swap Agreements pursuant to the applicable Swap Unwind Agreement, other than any KKR Swap Agreements terminated pursuant to Section 7.1(b) hereof, and the release at the Closing of any Lien to which the KKR Holder’s Notes are subject pursuant to the related security agreements and account control agreements.

	(g) The Company shall have executed and delivered to the KKR Holder the Registration Rights Agreement.

	(h) The Company shall have executed and delivered to KKR the Amended and Restated Standstill Agreement.

	(i) The Company and the Warrant Agent shall have executed and delivered the Warrant Agreement.

	(j) The Holders and KKR shall have received from Shearman & Sterling LLP and the General Counsel Corporate to the Company opinions substantially in the form attached hereto as Exhibits C-1 and C-2.

	(k) The NYSE shall have accepted for listing, subject to official notice of issuance, any Common Stock to be issued upon exercise of the Warrants.

6.2 Conditions to the Obligation of the Company to Consummate the Closing. The obligation of the Company to consummate the transactions to be consummated at the Closing is subject to the satisfaction of the following conditions precedent:

- 14 -


	(a) The representations and warranties contained herein of each Holder shall be true and correct on and as of the Closing Date, with the same force and effect as though made on and as of the Closing Date.

	(b) Each Holder shall have performed in all material respects all obligations and conditions herein required to be performed or observed by such Holder on or prior to the Closing Date.

	(c) The Company shall have received a certificate, dated the Closing Date, on behalf of each Holder, signed by an officer thereof, certifying on behalf of each Holder that the conditions specified in the foregoing Sections 6.2(a) and (b) have been fulfilled.

	(d) The transfer and delivery of the Notes by each Holder to the Company shall not be prohibited or enjoined by any law or governmental or court order or regulation.

	(e) The KKR Holder shall have executed and delivered to the Company the Registration Rights Agreement.

	(f) KKR shall have executed and delivered to the Company the Amended and Restated Standstill Agreement.

	(g) The Company shall have raised $900,000,000 of capital.

7. Termination of this Agreement.

7.1 Termination.


	(a) Notwithstanding anything to the contrary contained herein, (i) this Agreement may be terminated at any time before the Closing by mutual consent of the Company and KKR and upon written notice to the Other Holders of such termination, and (ii) if the Closing shall not have occurred on or prior to 5:00 p.m., New York time, on the Cut-Off Date, this Agreement shall automatically terminate at such time.

	(b) Each Other Holder may, by written notice to the Company at any time before the final pricing terms have been agreed for the capital raise contemplated by Section 6.2(g), terminate its obligations under this Agreement (such Other Holder, a “Terminating Holder”) if an Early Termination Date (as defined in the KKR Swap Agreement with such Terminating Holder) occurs or is designated under such KKR Swap Agreement prior to the time such pricing terms have been agreed.

	(c) In the event of any termination pursuant to Section 7.1(b) hereof, the Company may (i) terminate this Agreement upon written notice to KKR and the Other Holders, or (ii) consummate the transactions to be consummated at the Closing, as contemplated by this Agreement, but only with respect to (A) each Other Holder that has not terminated its obligations under this Agreement pursuant to Section 7.1(b) hereof, and (B) the

- 15 -


	KKR Holder to the extent of the KKR Holder’s Notes that are not subject to any Lien granted by the KKR Holder pursuant to the security agreement and account control agreement relating to the KKR Swap Agreement with such Terminating Holder.

7.2 Effect of Termination. In the event of any termination pursuant to Section 7.1(a) or 7.1(c)(i) hereof, this Agreement shall become null and void and have no effect, with no liability on the part of the Company, KKR or the Holders, or their directors, officers, agents or stockholders, with respect to this Agreement, except for liability for any willful breach of this Agreement. In the event of any termination by any Terminating Holder pursuant to Section 7.1(b) hereof, (i) such Terminating Holder shall have no further obligations hereunder, (ii) the KKR Holder shall have no further obligations hereunder with respect to the KKR Holder’s Notes that are subject to any Lien granted by the KKR Holder pursuant to the security agreement and account control agreement relating to the KKR Swap Agreement with such Terminating Holder (such Notes, the “Affected KKR Notes”), and (iii) the other parties hereto shall have no further obligations hereunder to the KKR Holder with respect to the Affected KKR Notes.

8. Miscellaneous Provisions.

8.1 Public Statements or Releases. None of the Company, KKR or any Holder shall make any public announcement with respect to the existence or terms of this Agreement or the transactions provided for herein without the prior approval of the Company for an announcement by KKR or the Holders, or KKR for an announcement by the Company, which shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, nothing in this Section 8.1 shall prevent (a) any party from making any public announcement it considers necessary in order to satisfy its obligations under the law or under the rules of any national securities exchange, (b) the Company (i) from making any statements regarding the transactions contemplated herein that it deems necessary or desirable in connection with the financings referred to in Section 6.2(g) or (ii) from making any statements or responding to any questions from analysts or investors with respect to the existence or terms of this Agreement or the transaction provided for herein, provided that any such statement or response does not contain any information that was not previously publicly announced (x) by the Company pursuant to clauses (a) or (b)(i) above or (y) by KKR or any Holder, or (c) KKR from making any statements or responding to any questions from analysts or investors with respect to the existence or terms of this Agreement or the transactions provided for herein; provided that any such statement or response does not contain any information that was not previously publicly announced (x) by KKR or a Holder pursuant to clause (a) above or (y) by the Company. Notwithstanding the foregoing, the Company may (i) issue the Transaction Press Release and (ii) file with the SEC a current report on Form 8-K relating to the transactions contemplated hereby within the time frame required by the applicable rules of the SEC.

8.2 Interpretation. The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement will refer to this Agreement as a whole and not to any particular provision of this Agreement, and section and subsection references are to this Agreement unless otherwise specified. The headings in this Agreement are included for convenience of reference only and will not limit or otherwise affect the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they will be deemed to be followed by the words “without limitation.” The phrases

- 16 -

“the date of this Agreement,” “the date hereof” and terms of similar import, unless the context otherwise requires, will be deemed to refer to the date set forth in the first paragraph of this Agreement. The meanings given to terms defined herein will be equally applicable to both the singular and plural forms of such terms. Unless expressly provided otherwise, references to agreements, policies, standards, guidelines or instruments, or to statutes or regulations, are to such agreements, policies, standards, guidelines or instruments, or statutes or regulations, as amended or supplemented from time to time (or to successors thereto).

8.3 Notices. Any notices or other communications required or permitted to be given hereunder shall be in writing and shall be deemed to be given when delivered in person or by private courier with receipt, if telefaxed when verbal or email confirmation from the recipient is received, or three (3) days after being deposited in the United States mail, first-class, registered or certified, return receipt requested, with postage paid and,


	(a) if to the Company, addressed as follows:


	Legg Mason, Inc.
	100 International Drive
	Baltimore, Maryland 21202
	Attention: General Counsel
	Facsimile: (410) 454-4607

	with copies to:

	Shearman & Sterling LLP
	599 Lexington Avenue
	New York, New York 10022
	Attention: James S. Scott, Sr./John A. Marzulli, Jr.
	Facsimile: (212)-848-7179


	(b) if to any Holder, addressed as set forth in Schedule I for such Holder with a copy to:


	Davis Polk & Wardwell
	450 Lexington Ave.
	New York, NY 10017
	Attention: John Brandow
	Facsimile: (212) 450-3800


	(c) if to KKR, addressed as follows:


	Kohlberg Kravis Roberts & Co. L.P.
	9 West 57^th Street
	New York, NY 10019
	Attention: Scott Nuttall
	Facsimile: (212) 750-0003

- 17 -


	with a copy to:

	Simpson Thacher & Bartlett LLP
	425 Lexington Ave.
	New York, NY 10017
	Attention: Gary Horowitz
	Facsimile: (212) 455-2502

Any Person may change the address to which notices and communications to it are to be addressed by notification as provided for herein.

8.4 Severability. If any part or provision of this Agreement is held unenforceable or in conflict with the applicable laws or regulations of any jurisdiction, the invalid or unenforceable part or provisions shall be replaced with a provision which accomplishes, to the extent possible, the original business purpose of such part or provision in a valid and enforceable manner, and the remainder of this Agreement shall remain binding upon the parties hereto.

8.5 Governing Law.


	(a) This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

	(b) The Company, each of the Holders and KKR hereby irrevocably and unconditionally:

	(i) submits for itself and its property in any legal action or proceeding relating solely to this Agreement or the transactions contemplated hereby, to the general jurisdiction of any state or federal court sitting in the Borough of Manhattan of The City of New York;

	(ii) consents that any such action or proceeding may be brought in such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same to the extent permitted by applicable law;

	(iii) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the party, as the case may be, at its address set forth in Section 8.3 or at such other address of which the other party shall have been notified pursuant thereto;

	(iv) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction for recognition and enforcement of any judgment or if jurisdiction in the courts referenced in the foregoing clause (i) are not available despite the intentions of the parties hereto;

- 18 -


	(v) agrees that final judgment in any such suit, action or proceeding brought in such a court may be enforced in the courts of any jurisdiction to which such party is subject by a suit upon such judgment, provided that service of process is effected upon such party in the manner specified herein or as otherwise permitted by Law;

	(vi) agrees that to the extent that such party has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process with respect to itself or its property, such party hereby irrevocably waives such immunity in respect of its obligations under this Agreement, to the extent permitted by law; and

	(VII) IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING IN RELATION TO THIS AGREEMENT.

8.6 Waiver. No waiver of any term, provision or condition of this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or be construed as, a further or continuing waiver of any such term, provision or condition or as a waiver of any other term, provision or condition of this Agreement.

8.7 Assignment. None of the parties may assign its rights or obligations under this Agreement or designate another person to perform all or part of its obligations under this Agreement.

8.8 Third Parties. This Agreement does not create any rights, claims or benefits inuring to any Person that is not a party hereto nor create or establish any third party beneficiary hereto, except the Company agrees that the KKR Holder shall be a beneficiary of all representations, warranties and agreements made by the Company to or with any Other Holder hereunder.

8.9 Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.

8.10 Entire Agreement; Amendments. This Agreement, the Registration Rights Agreement and the Amended and Restated Standstill Agreement constitute the entire agreement between the parties hereto respecting the subject matter hereof and supersedes all prior agreements, negotiations, understandings, representations and statements respecting the subject matter hereof, whether written or oral. No modification, alteration, waiver or change in any of the terms of this Agreement shall be valid or binding upon the parties hereto unless made in writing and duly executed by the parties hereto.

8.11 Survival. The representations and warranties contained in this Agreement shall terminate upon the first to occur of the Closing or the termination of this Agreement pursuant to Section 7 hereof.

8.12 Other KKR Activities. Notwithstanding anything herein to the contrary, (i) KKR, each of its officers, employees, partners and Affiliates and partners and members of its Affiliates (each a “Covered Person”), may engage in or possess any interest in other investments, business ventures or Persons of any nature or description, independently or with

- 19 -

others, similar or dissimilar to, or that competes with, the investments or business of the Company and its Subsidiaries, and may provide advice and other assistance to any such investment, business venture or Person, (ii) the Company and its Affiliates shall have no rights by virtue of this Agreement, the Registration Rights Agreement, the Amended and Restated Standstill Agreement, the Warrant Agreement or the Warrants in and to such investments, business ventures or Persons or the income or profits derived therefrom, and (iii) the pursuit of any such investment or venture, even if competitive with the business of the Company and its Subsidiaries, shall not be deemed wrongful or improper. No Covered Person shall be obligated to present any particular investment or business opportunity to the Company even if such opportunity is of a character that, if presented to the Company, could be pursued by the Company, or any of its officers, employees, partners or Affiliates or partners or members of its Affiliates and KKR and each other Covered Person shall have the right to pursue for its own account (individually or as a partner or a fiduciary) or to recommend to any other Person any such investment opportunity.

8.13 Indemnity for the Holders. The Company agrees to hold harmless and indemnify each Holder and such Holder’s Affiliates and any officer, director, partner, employee, agent or member of such Holder or such Holder’s Affiliates and any Person controlling such Holder or such Holder’s Affiliates (collectively, the “Indemnified Persons”) from and against any and all losses, claims, damages, liabilities and expenses (each a “Loss” and collectively, the “Losses”) whatsoever (including reasonable expenses incurred in preparing or defending against any litigation or proceeding, commenced or threatened, or any claims whatsoever whether or not resulting in any liability) imposed on or incurred by any Indemnified Person, to the extent that such Loss results from any claim or cause of action brought by or on behalf of a Company stockholder (i) alleging that the execution, delivery or performance of this Agreement breaches the fiduciary duties of the Company’s directors, or that any Indemnified Person induced any such breach of fiduciary duty or was an aider and abettor or conspirator or otherwise responsible therefor; or (ii) solely to the extent that such claim or cause of action relates to the transactions contemplated in this Agreement, because such Holder holds any Securities of the Company, provided that the foregoing indemnity as to any Indemnified Person shall not extend to any Loss resulting from or arising out of or which would not have occurred but for one or more of the following: (1) any representation or warranty by such Indemnified Person in this Agreement being incorrect in any material respect; (2) the failure by such Indemnified Person to perform or observe any agreement, covenant or condition in this Agreement, the Registration Rights Agreement or the Amended and Restated Standstill Agreement (except to the extent such failure was caused directly by the failure of the Company to perform any obligation under this Agreement, the Registration Rights Agreement, the Amended and Restated Standstill Agreement, the Warrant Agreement or the Warrants); or (3) the willful misconduct or the gross negligence of such Indemnified Person (or any of its Affiliates), other than any Loss arising out of or resulting from actions performed at the request of, with the consent of, or in conformity with actions taken or omitted to be taken by, the Company. The Company shall make payments under this indemnity as Losses are incurred by the Indemnified Persons, subject to the obligation of an Indemnified Party to reimburse the Company for payments made in respect of Losses of an Indemnified Person that a court of competent jurisdiction decides in a final non-appealable judgment are not available to the Indemnified Person under this Section 8.13.

[Remainder of the Page Intentionally Left Blank]

- 20 -

IN WITNESS WHEREOF, the parties herto have executed this Agreement as of the day and year first above written.


LEGG MASON, INC.

By:	/s/ Jeff Nattans

	Name:	JEFF NATTANS
	Title:	EVP