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 57th
 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

 


[Signature
Page – Note Exchange Agreement]










	
  

 	
  

 	
  

 	
  

 
	
  

 	
 KKR HOLDER:

 
	
  

 	
  

 
	
  

 	
 KKR I-L
 Limited

 
	
  

 	
  

 
	
  

 	
 By:

 	
/s/ William J. Janetschek

 
	
  

 	
  

 	

 


 
	
  

 	
  

 	
 Name:

 	
 William J. Janetschek

 
	
  

 	
  

 	
 Title:

 	
  

 


[Signature
Page – Note Exchange Agreement]










	
  

 	
  

 	
  

 	
  

 
	
  

 	
 OTHER HOLDER:

 
	
  

 	
  

 
	
  

 	
 CITIBANK,
 N.A.

 
	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ Herman Hirsch

 
	
  

 	
  

 	

 


 
	
  

 	
  

 	
 Name:

 	
 HERMAN HIRSCH

 
	
  

 	
  

 	
 Title:

 	
 Authorized
 Representative

 


[Signature
Page – Note Exchange Agreement]










	
  

 	
  

 	
  

 	
  

 
	
  

 	
 OTHER HOLDER:

 
	
  

 	
  

 
	
  

 	
 CREDIT
 SUISSE INTERNATIONAL

 
	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ Shui Wong

 
	
  

 	
  

 	

 


 
	
  

 	
  

 	
 Name:

 	
 Shui Wong

 
	
  

 	
  

 	
 Title:

 	
 Authorized
 Signatory

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ Bik Kwan Chung

 
	
  

 	
  

 	

 


 
	
  

 	
  

 	
 Name:

 	
 Bik Kwan Chung

 
	
  

 	
  

 	
 Title:

 	
 Authorized Signatory

 


 [Signature Page – Note Exchange Agreement]










	
  

 	
  

 	
  

 	
  

 
	
  

 	
 OTHER HOLDER:

 
	
  

 	
  

 
	
  

 	
 HSBC BANK
 USA, NATIONAL ASSOCIATION

 
	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ Sandra Nicotra 

 
	
  

 	
  

 	

 


 
	
  

 	
  

 	
 Name:

 	
 Sandra Nicotra 

 
	
  

 	
  

 	
 Title:

 	
 Authorized Signatory #14239 

 


[Signature
Page – Note Exchange Agreement]










	
  

 	
  

 	
  

 	
  

 
	
  

 	
 KKR:

 
	
  

 	
 soley for
 purposes of Sections 1, 2, 4, 5, 7 and 8,

 
	
  

 	
  

 
	
  

 	
 KOHLBERG
 KRAVIS ROBERTS & CO. L.P.

 
	
  

 	
   By:
 KKR & Co LLC

 
	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ William J.
 Janetschek

 
	
  

 	
  

 	

 


 
	
  

 	
  

 	
 Name:

 	
 William J.
 Janetschek

 
	
  

 	
  

 	
 Title:

 	
 Chief
 Financial Officer

 


[Signature
Page – Note Exchange Agreement]







Schedule I 


PRINCIPAL AMOUNTS OF NOTES TO BE REPURCHASED


	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Holder Name and Address

 	
  

 	
 Principal

 Amount

 of Notes to be

 Repurchased

 	
  

 	
 Prepayment

 Consideration

 	
  

 	
 Number

 of

 Warrants

 
	

 


 	
  

 	

 


 	
  

 	

 


 	
  

 	

 


 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 KKR I-L Limited

 	
  

 	
 $625,000,000

 	
  

 	
 $3,125,000

 	
  

 	
 7,102,273

 
	
 Kohlberg Kravis Roberts & Co. L.P.

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 9 West 57th Street

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 New York, NY 10019

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Attention: Bill Janetscheck

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Facsimile: (212) 750-0003

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Citibank, N.A

 	
  

 	
 $208,000,000

 	
  

 	
 $1,040,000

 	
  

 	
 2,363,636

 
	
 390 Greenwich St, 3rd Floor

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 New York, NY 10013

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Attention: Dustin Sheppard

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Email: herman.hirsch@citi.com

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 eq.us.corporates.middle.office@citi.com

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Facsimile: (347) 853-7278

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Credit Suisse
 International

 	
  

 	
 $250,000,000

 	
  

 	
 $1,250,000

 	
  

 	
 2,840,909

 
	
 One Cabot Square

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 London E14 4QJ England

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Attention: Managing Director – Legal Department

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Facsimile: 44 20 7888 4603

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 HSBC Bank USA, N.A

 	
  

 	
 $167,000,000

 	
  

 	
 $835,000

 	
  

 	
 1,897,727

 
	
 425 Fifth Avenue, 9th Floor

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 New York, NY 10018

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Attention: Equity Derivatives / Olivier Rico

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Email: nykeqdtrad@us.hsbc.com

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Facsimile: (212) 525-0673

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Copy to:

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 HSBC Bank USA, N.A.

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 452 Fifth Avenue, 7th Floor

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 New York, NY 10018

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Attention: Legal Department / Frank Weigand

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Facsimile: (646) 366-6803

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 TOTAL

 	
  

 	
 $1,250,000,000

 	
  

 	
 $6,250,000

 	
  

 	
 14,204,545

 


I-1







EXHIBIT A 


FORM OF WARRANT AGREEMENT


A-1










	
  

 
	
 WARRANT AGREEMENT

 
	
  

 
	
 Dated as of

 
	
  

 
	
  [          ],
 20[  ]

 
	
  

 
	
 between

 
	
  

 
	
 LEGG MASON, INC.

 
	
  

 
	
 and

 
	
  

 
	
 AMERICAN STOCK TRANSFER & TRUST
 COMPANY, LLC

 
	
  

 
	
 as Warrant Agent

 
	
  

 
	

 


 
	
  

 
	
 Warrants for

 
	
 Common Stock of

 
	
 Legg Mason, Inc.

 
	
  

 
	

 


 





A-2







Table of Contents


	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Page

 
	
  

 	
  

 	
  

 
	
 ARTICLE I Definitions

 
	
  

 
	
 Section
 1.01.

 	
 Definitions

 	
 1

 
	
 Section
 1.02.

 	
 Other
 Definitions

 	
 6

 
	
 Section
 1.03.

 	
 Rules of
 Construction

 	
 6

 
	
  

 	
  

 	
  

 
	
 ARTICLE II Form of Warrant; Beneficial Interests

 
	
  

 
	
 Section
 2.01.

 	
 Issuance and
 Registration

 	
 7

 
	
 Section
 2.02.

 	
 Warrant
 Certificates

 	
 8

 
	
 Section
 2.03.

 	
 Warrant
 Register

 	
 8

 
	
 Section
 2.04.

 	
 Transfer and
 Exchange

 	
 8

 
	
 Section 2.05.

 	
 Definitive
 Warrants

 	
 13

 
	
 Section
 2.06.

 	
 Replacement
 Certificates

 	
 14

 
	
 Section
 2.07.

 	
 Outstanding
 Warrants

 	
 14

 
	
 Section
 2.08.

 	
 Cancellation

 	
 15

 
	
 Section
 2.09.

 	
 CUSIP
 Numbers

 	
 15

 
	
  

 	
  

 	
  

 
	
 ARTICLE III Exercise Terms

 
	
  

 
	
 Section
 3.01.

 	
 Exercise

 	
 15

 
	
 Section
 3.02.

 	
 Exercise Period

 	
 15

 
	
 Section
 3.03.

 	
 Expiration

 	
 15

 
	
 Section
 3.04.

 	
 Manner of
 Exercise

 	
 15

 
	
 Section
 3.05.

 	
 Settlement
 Upon Exercise of Warrants

 	
 17

 
	
 Section
 3.06.

 	
 Fractional
 Shares

 	
 18

 
	
 Section
 3.07.

 	
 Warrant
 Shares

 	
 18

 
	
  

 	
  

 	
  

 
	
 ARTICLE IV Adjustment and Notice Provisions

 	
  

 
	
  

 	
  

 
	
 Section
 4.01.

 	
 Adjustments

 	
 19

 
	
 Section
 4.02.

 	
 Adjustment
 to Number of Warrant Shares

 	
 26

 
	
 Section
 4.03.

 	
 Reorganizations

 	
 26

 
	
 Section
 4.04.

 	
 Adjustment
 to Number of Warrant Shares upon a Make-Whole Event.

 	
 27

 
	
 Section
 4.05.

 	
 Stockholder
 Rights Plans

 	
 29

 
	
 Section
 4.06.

 	
 Adjustment
 to Warrant Certificate

 	
 29

 
	
  

 	
  

 	
  

 
	
 ARTICLE V Warrant Agent

 
	
  

 
	
 Section
 5.01.

 	
 Appointment
 of Warrant Agent

 	
 30

 
	
 Section
 5.02.

 	
 Rights and
 Duties of Warrant Agent

 	
 30

 
	
 Section
 5.03.

 	
 Individual
 Rights of Warrant Agent

 	
 31

 
	
 Section
 5.04.

 	
 Warrant
 Agent’s Disclaimer

 	
 31

 


-i-

A-3










	
  

 	
  

 	
  

 
	
 Section
 5.05.

 	
 Compensation
 and Indemnity

 	
 31

 
	
 Section
 5.06.

 	
 Successor
 Warrant Agent

 	
 31

 
	
  

 	
  

 	
  

 
	
 ARTICLE VI Miscellaneous

 
	
  

 
	
 Section
 6.01.

 	
 Persons
 Benefiting

 	
 33

 
	
 Section
 6.02.

 	
 Rights of
 Holders

 	
 33

 
	
 Section
 6.03.

 	
 Amendment

 	
 33

 
	
 Section 6.04.

 	
 Notices

 	
 33

 
	
 Section
 6.05.

 	
 Governing
 Law

 	
 34

 
	
 Section
 6.06.

 	
 Successors

 	
 34

 
	
 Section
 6.07.

 	
 Counterparts

 	
 35

 
	
 Section
 6.08.

 	
 Severability

 	
 35

 
	
 Section
 6.09.

 	
 Withholding

 	
 35

 
	
 Section
 6.10.

 	
 Holder Tax
 Certification

 	
 35

 
	
 EXHIBIT
 A          Form of Warrant

 


-ii-

A-4







          WARRANT
AGREEMENT, dated as of
[             ],
20[  ] (this “Agreement”),
between LEGG MASON, INC., a Maryland corporation (including any successor
thereto, the “Company”), and
AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC, a New York limited liability
trust company, as Warrant Agent (including any successor thereto, the “Warrant Agent”).


          WHEREAS,
pursuant to a Note Exchange Agreement dated as of [             ], 20[ ] among the Company,
KKR I-L Limited (the “KKR Holder”),
Credit Suisse International, HSBC Bank USA, National Association and, for
limited purposes, Kohlberg Kravis Roberts & Co. L.P. (the “Note Exchange Agreement”), the Company is
repurchasing $1,250,000,000 aggregate principal amount of its 2.50% Convertible
Senior Notes due 2015 (the “Notes”);


          WHEREAS,
in consideration of the repurchase of the Notes, the Termination (as defined in
the Note Exchange Agreement) and the amendment of certain agreements that were
entered into when the Notes were issued, the Company desires to issue to the
KKR Holder, Citibank, N.A., Credit Suisse International and HSBC Bank USA,
National Association (collectively, the “Initial
Holders”) 14,204,545 warrants (the “ Warrants”) to purchase shares of Common Stock (as defined
below);


          WHEREAS,
in connection with the issuance of the Warrants to the KKR Holder pursuant to
the Note Exchange Agreement, the Company and the KKR Holder are entering into a
Registration Rights Agreement dated as of [             ], 20[ ]; and


          WHEREAS,
the Company desires the Warrant Agent to act on behalf of the Company in
connection with the issuance, registration, transfer, exchange, exercise and
cancellation of the Warrants as provided herein, and the Warrant Agent is
willing to so act.


          Each
party agrees for the benefit of the other party and for the equal and ratable
benefit of the registered holders of the Warrants (the “Holders”):


ARTICLE I


Definitions


          Section
1.01. Definitions.


          “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. For the purposes of
this definition, “control” when
used with respect to any Person means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms “controlling”,
“controlled by” and “under common control with” have meanings correlative to the
foregoing.


          “Board of Directors” means the Board of
Directors of the Company or any committee thereof duly authorized to act on
behalf of such Board. 


-1-

A-5






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


          “Capital Stock” of any Person means any and
all shares, interests, rights to purchase, warrants, options, participations or
other equivalents of or interests in (however designated) equity of such
Person, including any Preferred Stock of such Person, but excluding any debt
securities convertible into such equity.


          “Closing Date” shall have the meaning set
forth in the Note Exchange Agreement.


          “Closing Sale Price” of any share of Common
Stock or any other publicly-traded equity security on any Trading Day means the
closing sale price of such security (or, if no closing sale price is reported,
the average of the closing bid and closing ask prices or, if more than one in
either case, the average of the average closing bid and the average closing ask
prices) on such date as reported in composite transactions for the principal
U.S. securities exchange on which the shares of Common Stock or other security
are traded. If the shares of Common Stock or other security are not listed on a
U.S. national or regional securities exchange, the “Closing Sale Price” shall
be determined by a nationally recognized securities dealer retained by the Company
for that purpose. The “Closing Sale Price” shall be determined without
reference to extended or after hours trading.


          “Common Stock” means shares of the class
designated as common stock of the Company at the date of this Warrant Agreement
(namely, common stock, par value $0.10) or shares of any class or classes
resulting from any reclassification or reclassifications thereof and which have
no preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company.


          “Daily Cash Amount” means for each Warrant,
for each of the 20 Trading Days during the Observation Period, to the extent
the Exercise Value exceeds the Exercise Price, an amount of cash equal to
1/20th of such excess.


          “Daily Share Amount” means for each Warrant,
for each of the 20 Trading Days during the Observation Period, to the extent
the Exercise Value exceeds the Exercise Price on such Trading Day, a number of
shares of Common Stock equal to 1/20th of (A) such excess, divided by (B) the VWAP of the Common
Stock for such Trading Day.


          “Definitive Warrant” means any certificated
Warrant in registered form that is not deposited with the Depository or with
the Warrant Agent as the Warrant Custodian.


          “Depository” means The Depository Trust
Company, its nominees and their respective successors.


          “Exercise Value” means, for any Trading Day
during the Observation Period, (i) the Number of Warrant Shares as of such
Trading Day, multiplied by (ii)
the VWAP of the Common Stock (or any publicly-traded equity securities into
which the Common Stock has been converted in connection with any
Reorganization) on such Trading Day. For the purposes of determining the Exercise
Value of any Reference Property, the following provisions shall apply: 


-2-

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          (a)
if the Reference Property includes publicly-traded equity securities for which
the price can be determined as contemplated by the definition of “VWAP,” then the
value of such securities shall be determined in accordance with such
definition;


          (b)
if the Reference Property includes cash, then the value of such cash shall be
the amount thereof; and


          (c)
if the Reference Property includes any other property, then the value of such
property shall be the Fair Market Value of such property as determined by the
Board of Directors in good faith.


          “Exchange Act” means the U.S. Securities
Exchange Act of 1934 and the rules and regulations promulgated thereunder, as
they may be amended from time to time.


          “Ex-Date” means, for any issuance or
distribution, the first date on which the shares of Common Stock trade regular
way on the relevant exchange or in the relevant market from which the Closing
Sale Price was obtained without the right to receive such issuance or
distribution.


          “Fair Market Value” means the amount which a
willing buyer would pay a willing seller in an arm’s-length transaction.


          “Indebtedness” means, with respect to any
Person, all indebtedness of such Person for borrowed money.


          “Initial Dividend Threshold” means $0.24 per
share of Common Stock.


          “Issue Date” means the date on which the
Warrants are initially issued. 


          “Make Whole
Event” means the occurrence of any of the following after the
Closing Date:



          (a)
the consummation of any transaction (including, without limitation, any merger
or consolidation) the result of which is that any “person” or “group” becomes
the “beneficial owner” (as these terms are defined in Rule 13d-3 and Rule 13d-5
under the Exchange Act), directly or indirectly, of more than 50% of the
Company’s Capital Stock that is at the time entitled to vote by the holder
thereof in the election of the Board of Directors (or comparable body); or


          (b)
any transaction or event or any series of transactions or events (whether by
means of an exchange offer, liquidation, tender offer, consolidation, merger,
combination, reclassification, recapitalization, asset sale, lease of assets or
otherwise) in connection with which all or substantially all of the Common
Stock is exchanged for, converted into, acquired for or constitutes solely the
right to receive stock, other securities or other property, assets or cash, other
than any merger primarily for the purpose of changing the Company’s
jurisdiction of incorporation and resulting in a reclassification, conversion
or exchange of outstanding shares of Common Stock solely into shares of common
stock of the surviving entity; or 


-3-

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          (c)
the termination of trading of the Common Stock, which will be deemed to have
occurred if, for 30 consecutive Trading Days, the Common Stock or other common
stock into which the Warrants are exercisable is not listed for trading on a
U.S. national securities exchange or approved for quotation and trading on a
national automated inter-dealer quotation system.


          However,
a “Make Whole Event” will be deemed not to have occurred if at least 90% of the
consideration in the transaction or transactions (other than cash payments for
fractional shares and cash payments made in respect of dissenters’ appraisal
rights) which otherwise would constitute a “Make Whole Event” under clause (b)
above consists of shares of common stock traded or to be traded immediately
following such transaction on a U.S. national securities exchange or national
automated inter-dealer quotation system and, as a result of the transaction or
transactions, the Warrants become exercisable for such common stock and other
consideration, subject to the provisions set forth in Section 4.03.


          “Market Disruption Event” means, for any
Scheduled Trading Day for the Common Stock (i) a failure by the primary United
States national or regional securities exchange or market on which the Common
Stock is listed or admitted to trading to open for trading during its regular
trading session on such Scheduled Trading Day, or (ii) the occurrence or
existence for more than a one-half-hour period in the aggregate on such Scheduled
Trading Day of any suspension or limitation imposed on trading (by reason of
movements in price exceeding limits permitted by the relevant stock exchange or
otherwise) in the Common Stock or in any options, contracts or futures
contracts relating to the Common Stock, and such suspension or limitation
occurs or exists at any time before 1:00 p.m., New York time, on such Scheduled
Trading Day.


          “Number of Warrant Shares” per Warrant means
one share of Common Stock, subject to adjustment pursuant to the terms of this
Agreement.


          “Observation Period” means the 20
consecutive Trading Day period beginning on the third Scheduled Trading Day
following the related Exercise Date.


          “Officer” means the Chairman of the Board,
the Chief Executive Officer, the Chief Financial Officer, the President, any
Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company.


          “Officers’ Certificate” means a certificate
signed by an Officer.


          “Person” means any individual, corporation,
partnership, limited liability company, joint venture, association, joint-stock
company, trust, unincorporated association or organization, government or any
agency or political subdivision thereof or any other entity.


          “Preferred Stock,” as applied to the Capital
Stock of any Person, means Capital Stock of any class or classes (however
designated) that is preferred as to the payment of dividends, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over shares of Capital Stock of any other class of
such Person.


          “Scheduled Trading Day” means a day that is
scheduled to be a Trading Day on the primary U.S. national or regional securities
exchange or market on which the Common Stock is listed or, if the Common Stock
is not listed on a U.S. national or regional securities exchange, on 


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the principal
other market on which the Common Stock is then traded or, if the Common Stock
is not so traded, a Business Day.


          “SEC” means the U.S. Securities and Exchange
Commission. 


          “Securities Act” means the U.S. Securities
Act of 1933 and the rules and regulations promulgated thereunder, as they may
be amended from time to time.


          “Settlement Method” means, with respect to
any exercise of Warrants, Net Share Settlement or Cash Settlement, as elected
(or deemed to have been elected) by the Company.


          “Subsidiary” of any Person means any
corporation, association, partnership or other business entity of which more
than 50% of the total voting power of shares of Capital Stock or other
interests (including partnership interests) entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or indirectly,
by (i) such Person, (ii) such Person and one or more Subsidiaries of such
Person or (iii) one or more Subsidiaries of such Person.


          “Trading Day” means a day during which (i)
there is no Market Disruption Event and (ii) the principal U.S. national or
regional securities exchange on which the Common Stock is then listed or, if
the Common Stock is not listed on a U.S. national or regional securities exchange,
the principal other market on which the Common Stock is then traded, is open
for trading. If the Common Stock (or other security for which a Closing Sale
Price must be determined) is not listed or traded, “Trading Day” means a
“Business Day.”


          “VWAP” per share of the Common Stock on any
Trading Day means the per share volume-weighted average price as displayed
under the heading “Bloomberg VWAP” on Bloomberg page LM.N <Equity> VWAP
(or any successor thereto) in respect of the period from the scheduled open of
trading until the scheduled close of trading of the primary trading session on
such Trading Day or, with respect to any other publicly-traded equity security,
“VWAP” per share of such publicly-traded equity security on any Trading Day means
the per share volume-weighted average price as displayed on Bloomberg (or any
successor service) in respect of the period from the scheduled open of trading
until the scheduled close of trading of the primary trading session on such
Trading Day (or, in either case, if such volume-weighted average price is
unavailable, the market value per share of Common Stock or such publicly-traded
equity security on such Trading Day, as determined by a nationally recognized
investment banking firm retained for this purpose by the Company using a
volume-weighted method).


          “Warrant Certificate” means any Global
Warrant or Definitive Warrant issued by the Company under this Agreement.


          “Warrant Custodian” means the custodian with
respect to a Global Warrant (as appointed by the Depository) or any successor
Person thereto. 


-5-

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          Section
1.02. Other Definitions. 


	
  

 	
  

 
	
 Term

 	
 Defined in Section

 
	

 


 
	
 Additional
 Shares

 	
 4.04(a)

 
	
 Adjustment
 Event

 	
 4.01(l)

 
	
 Agent
 Members

 	
 2.01(c)

 
	
 Agreement

 	
 Recitals

 
	
 Cash Settlement

 	
 3.05(a)

 
	
 Company

 	
 Recitals

 
	
 Determination
 Date

 	
 4.01(l)

 
	
 Distributed
 Assets

 	
 4.01(c)

 
	
 DTC

 	
 Exhibit A

 
	
 Effective
 Date

 	
 4.04(a)

 
	
 Exercise
 Date

 	
 3.04(a)

 
	
 Exercise
 Price

 	
 3.01

 
	
 Expiration
 Date

 	
 3.02

 
	
 Global
 Warrant

 	
 2.01(a)

 
	
 Holders

 	
 Recitals

 
	
 Initial
 Holders

 	
 Recitals

 
	
 KKR Holder

 	
 Recitals

 
	
 Make Whole
 Termination Date

 	
 4.04(e)

 
	
 Net Share
 Settlement

 	
 3.05(a)

 
	
 Note
 Exchange Agreement

 	
 Recitals

 
	
 Notes

 	
 Recitals

 
	
 Notice of
 Exercise

 	
 3.04(a)

 
	
 Reference
 Period

 	
 4.01(c)

 
	
 Reference
 Property

 	
 4.03(a)

 
	
 Reorganization

 	
 4.03(a)

 
	
 Resale
 Restriction Termination Date

 	
 2.04(c)

 
	
 Restricted
 Securities

 	
 2.04(c)

 
	
 Settlement
 Notice

 	
 3.05(d)

 
	
 Spin-Off

 	
 4.01(c)

 
	
 Stock Price

 	
 4.04(a)

 
	
 Stock
 Transfer Agent

 	
 3.05(b)

 
	
 Transfer

 	
 2.04(c)

 
	
 Unit of
 Reference Property

 	
 4.03(a)

 
	
 Valuation
 Period

 	
 4.01(c)

 
	
 Warrant
 Agent

 	
 Recitals

 
	
 Warrant
 Register

 	
 2.03

 
	
 Warrants

 	
 Recitals

 



          Section
1.03. Rules of Construction. Unless the text or context otherwise
requires:


	
  

 	
  

 
	
  

 	
           (i)
 a defined term has the meaning assigned to it herein; 

 


-6-

A-10










	
  

 	
  

 
	
  

 	
           (ii)
 an accounting term not otherwise defined has the meaning assigned to it in
 accordance with U.S. generally accepted accounting principles as in effect
 from time to time;

 
	
  

 	
  

 
	
  

 	
           (iii)
 “including” means including, without limitation;

 
	
  

 	
  

 
	
  

 	
           (iv)
 words in the singular include the plural and words in the plural include the
 singular;

 
	
  

 	
  

 
	
  

 	
           (v)
 references to any statute, rule, standard, regulation or other law include a
 reference to (x) the corresponding rules and regulations and (y) each of them
 as amended, modified, supplemented, consolidated, replaced or rewritten from
 time to time; and

 
	
  

 	
  

 
	
  

 	
           (vi)
 headings to Articles and Sections in this Agreement are inserted for
 convenience of reference only, and are not intended to be a part of or to
 affect the meaning or interpretation of this Agreement.

 


ARTICLE II


Form of Warrant; Beneficial Interests


          Section
2.01. Issuance and Registration. 


                    (a)
Warrants. The Warrants shall be represented by one or more permanent
Global Warrants, in fully registered form with the global securities legend set
forth in Exhibit A hereto (each, a “Global
Warrant”).Any such Global Warrant shall be deposited on behalf of
the relevant Holders with the Warrant Agent, as custodian for the Depository
(or with such other custodian as the Depository may direct), registered in the
name of the Depository or a nominee of the Depository, and duly executed by the
Company and countersigned by the Warrant Agent as hereinafter provided.


                    (b)
Definitive Warrants. Holders of Warrants or holders of beneficial interests in
any Global Warrant will not be entitled to physical delivery of Definitive
Warrants (except as provided in Section 2.05). 


                    (c)
Procedures for Global Warrants. This Section 2.01(c) shall apply only to any
Global Warrant deposited with or on behalf of the Depository. 


	
  

 	
  

 
	
  

 	
           (i)
 If any Warrants are to be represented by a Global Warrant, the Company shall
 execute and the Warrant Agent shall, in accordance with Section 2.02,
 countersign and deliver initially one or more Global Warrants that (a) shall
 be registered in the name of the Depository for such Global Warrant or Global
 Warrants or of the nominee of the Depository and (b) shall be delivered by
 the Warrant Agent to the Depository or pursuant to the Depository’s instructions or held by the Warrant
 Agent as custodian for the Depository. The Depositary shall be a clearing
 agency registered under the Exchange Act. 

 


-7-

A-11










	
  

 	
  

 
	
  

 	
           (ii)
 Members of, or participants in, the Depository (“Agent Members”)
 shall have no rights under this Agreement with respect to any Global Warrant
 held on their behalf by the Depository or by the Warrant Agent as the custodian
 of the Depository or under such Global Warrant, and the Company, the Warrant
 Agent and any agent of the Company or the Warrant Agent may treat the Depository
 as the absolute owner of such Global Warrant for all purposes whatsoever. Notwithstanding
 the foregoing, nothing herein shall prevent the Company, the Warrant Agent or
 any agent of the Company or the Warrant Agent from giving effect to any written
 certification, proxy or other authorization furnished by the Depository, or
 impair, as between the Depository and its Agent Members, the operation of
 customary practices of the Depository governing the exercise of the rights of
 a holder of a beneficial interest in any Global Warrant.

 



          Section
2.02. Warrant Certificates. At least one Officer shall sign the Warrant
Certificates for the Company by manual or facsimile signature.


                    (a)
If an Officer whose signature is on a Warrant Certificate no longer holds that
office at the time the Warrant Agent countersigns the Warrant Certificate, the
Warrants evidenced by such Warrant Certificate shall be valid nevertheless.


                    (b)
The Warrants shall not be valid until countersigned by the Warrant Agent and
registered on the Warrant Register.


          Section
2.03. Warrant Register. The Warrants shall be issued in registered form
only. The Warrant Agent shall keep a register (the “Warrant
Register”) of the Warrants (and Warrant Certificates) and of their
transfer and exchange. The Warrant Register shall show the names and addresses
of the respective Holders and the date and number of Warrants owned by such
Holders (as evidenced on the face of each of the Warrant Certificates). The
Holder of any Global Warrant will be the Depository or a nominee in whose name
the Global Warrant is registered. 


                    The
Company and the Warrant Agent may deem and treat the Person in whose name
Warrants are registered in the Warrant Register as the absolute owner of such
Warrants for all purposes and regardless of any notice to the contrary.


          Section
2.04. Transfer and Exchange.


                    (a)
Transfer and Exchange of Warrants. 


	
  

 	
  

 
	
  

 	
           (i)
 The transfer and exchange of Warrants or beneficial interests therein shall
 be effected through the Warrant Agent’s book-entry procedures and, in the
 case of any Global Warrants, the Depository, in each case in accordance with
 this Agreement and the procedures of the Warrant Agent and, as applicable,
 the Depository therefor.

 
	
  

 	
  

 
	
  

 	
           (ii)
 Except as set forth in Section 2.04(a)(iii), a Global Warrant may only be
 transferred as a whole, and not in part, and only by (x) the Depository to a
 nominee of the Depository, (y) a nominee of the Depository to the Depository
 or 

 


-8-

A-12










	
  

 	
  

 
	
  

 	
 another
 nominee of the Depository or (z) the Depository or any such nominee to a
 successor Depository or its nominee.

 
	
  

 	
  

 
	
  

 	
           (iii)
 In the event that a Global Warrant is exchanged and transferred for
 Definitive Warrants pursuant to Section 2.05, such Warrants may be exchanged
 only in accordance with such procedures as are substantially consistent with
 the provisions of this Section 2.04 and such other procedures as may from
 time to time be adopted by the Company.

 
	
  

 	
  

 
	
  

 	
           (iv)
 The Warrant Agent shall register the transfer, from time to time, of any
 Definitive Warrant upon the Warrant Register, upon surrender of such Warrant
 for transfer, properly endorsed with signatures properly guaranteed and
 accompanied by the appropriate instructions for transfer. Upon any such
 transfer, one or more new Definitive Warrants representing an equal aggregate
 number of Definitive Warrants shall be issued and the transferred certificate
 shall be cancelled.

 



                     (b)
Cancellation or Adjustment of Global Warrant. At such time as all beneficial
interests in a Global Warrant have been exchanged for Definitive Warrants,
exercised, repurchased or canceled, such Global Warrant shall be returned by
the Warrant Agent to the Depository for cancellation or retained and canceled
by the Warrant Agent. At any time prior to such cancellation, if any beneficial
interest in a Global Warrant is exchanged for Definitive Warrants, exercised,
repurchased or canceled, the number of Warrants represented by such Global
Warrant shall be reduced and an adjustment shall be made on the books and
records of the Warrant Agent (if it is then the Warrant Custodian for such
Global Warrant) with respect to such Global Warrant, by the Warrant Agent, to
reflect such reduction. 


                     (c)
Every Warrant that bears or is required under this Section 2.04(c) to bear the
legend set forth in this Section 2.04(c) (together with any Common Stock issued
upon exercise of the Warrants and required to bear the legend set forth in
Section 2.04(d), collectively, the “Restricted
Securities”) shall be subject to the restrictions on transfer set
forth in this Section 2.04(c) (including the legend set forth below), unless
such restrictions on transfer shall be eliminated or otherwise waived by
written consent of the Company, and the Holder of each such Restricted
Security, by such Holder’s acceptance thereof, agrees to be bound by all such
restrictions on transfer. As used in this Section 2.04(c) and Section 2.04(d),
the term “transfer” encompasses
any sale, pledge, transfer or other disposition whatsoever of any Restricted
Security.


          Until
the date (the “Resale Restriction Termination
Date”) that is the later of (1) the date that is one year after the
Issue Date, or such shorter period of time as permitted by Rule 144 under the
Securities Act or any successor provision thereto, and (2) such later date, if
any, as may be required by applicable law, any certificate evidencing such
Warrant (and all securities issued in exchange therefor or substitution
thereof, other than Common Stock, if any, issued upon exercise thereof which
shall bear the legend set forth in Section 2.04(d), if applicable) shall bear a
legend in substantially the following form (unless (i) such Warrants have been
transferred pursuant to a registration statement that has become or been
declared effective under the Securities Act and that continues to be effective
at the time of such transfer, or sold pursuant to 


-9-

A-13






the exemption
from registration provided by Rule 144 or any similar provision then in force
under the Securities Act, or (ii) otherwise agreed by the Company in writing,
with notice thereof to the Warrant Agent):


          THIS
SECURITY AND THE COMMON STOCK, IF ANY, ISSUABLE UPON EXERCISE OF THIS SECURITY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE
ACQUIRER:


	
  

 	
  

 	
  

 
	
  

 	
           (1)
 REPRESENTS THAT IT AND ANY ACCOUNT FOR WHICH IT IS ACTING IS A “QUALIFIED
 INSTITUTIONAL BUYER” (WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES
 ACT) AND THAT IT EXERCISES SOLE INVESTMENT DISCRETION WITH RESPECT TO EACH
 SUCH ACCOUNT; AND

 
	
  

 	
  

 
	
  

 	
           (2)
 AGREES FOR THE BENEFIT OF THE COMPANY THAT IT WILL NOT OFFER, SELL, PLEDGE OR
 OTHERWISE TRANSFER THIS SECURITY OR ANY BENEFICIAL INTEREST HEREIN PRIOR TO
 THE DATE THAT IS THE LATER OF (X) ONE YEAR AFTER THE ISSUE DATE HEREOF OR
 SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144 UNDER THE SECURITIES ACT
 OR ANY SUCCESSOR PROVISION THERETO, AND (Y) SUCH LATER DATE, IF ANY, AS MAY
 BE REQUIRED BY APPLICABLE LAW, EXCEPT:

 
	
  

 	
  

 
	
  

 	
  

 	
           (A)
 TO LEGG MASON, INC. (THE “COMPANY”)
 OR ANY SUBSIDIARY THEREOF; OR 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (B)
 PURSUANT TO A REGISTRATION STATEMENT THAT HAS BECOME EFFECTIVE UNDER THE
 SECURITIES ACT; OR

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (C)
 TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
 SECURITIES ACT; OR

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (D)
 PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
 SECURITIES ACT OR ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
 REQUIREMENTS OF THE SECURITIES ACT.

 



          PRIOR
TO THE REGISTRATION OF ANY TRANSFER IN ACCORDANCE WITH (2)(D) ABOVE, THE
COMPANY AND THE WARRANT AGENT RESERVE THE RIGHT TO REQUIRE THE DELIVERY OF SUCH
LEGAL OPINIONS, CERTIFICATIONS OR OTHER EVIDENCE AS MAY REASONABLY BE REQUIRED
IN ORDER TO DETERMINE THAT THE PROPOSED TRANSFER IS BEING MADE IN COMPLIANCE
WITH THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. NO REPRESENTATION
IS MADE AS TO THE AVAILABILITY OF ANY EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. 


-10-

A-14






          No
transfer of any Warrant prior to the Resale Restriction Termination Date will
be registered by the Warrant Agent unless the applicable box on the Form of
Assignment and Transfer has been checked.


          Any
Warrant (or security issued in exchange or substitution therefor) as to which
such restrictions on transfer shall have expired in accordance with their terms
may, upon surrender of such Warrant for exchange to the Warrant Agent in
accordance with the provisions of this Section 2.04, be exchanged for a new
Warrant or Warrants, of like tenor and aggregate number of Warrants, which
shall not bear the restrictive legend required by this Section 2.04(c). The
Company shall be entitled to instruct the Warrant Agent in writing to so
surrender any Global Warrant as to which such restrictions on transfer shall
have expired in accordance with their terms for exchange, and, upon such
instruction, the Warrant Agent shall so surrender such Global Warrant for
exchange; and any new Global Warrant so exchanged therefor shall not bear the
restrictive legend specified in this Section 2.04(c) and shall not be assigned
a restricted CUSIP number. The Company shall promptly notify the Warrant Agent
upon the occurrence of the Resale Restriction Termination Date and promptly
after a registration statement, if any, with respect to the Warrants or any
Common Stock issued upon exercise of the Warrants has been declared effective
under the Securities Act.


          (d)
Until the Resale Restriction Termination Date, any stock certificate
representing Common Stock issued upon exercise of a Warrant shall bear a legend
in substantially the following form (unless (i) such Common Stock has been
transferred pursuant to a registration statement that has become or been
declared effective under the Securities Act and that continues to be effective
at the time of such transfer, or pursuant to the exemption from registration
provided by Rule 144 or any similar provision then in force under the
Securities Act, (ii) such Common Stock has been issued upon exercise of
Warrants that have been transferred pursuant to a registration statement that
has become or been declared effective under the Securities Act and that
continues to be effective at the time of such transfer, or pursuant to the
exemption from registration provided by Rule 144 or any similar provision then
in force under the Securities Act, or (iii) otherwise agreed by the Company
with written notice thereof to the Warrant Agent and any transfer agent for the
Common Stock):


          THIS
SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), AND MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE
WITH THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL
INTEREST HEREIN, THE ACQUIRER:


	
  

 	
  

 
	
  

 	
           (1)
 REPRESENTS THAT IT AND ANY ACCOUNT FOR WHICH IT IS ACTING IS A “QUALIFIED
 INSTITUTIONAL BUYER” (WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES
 ACT) AND THAT IT EXERCISES SOLE INVESTMENT DISCRETION WITH RESPECT TO EACH
 SUCH ACCOUNT; AND

 
	
  

 	
  

 
	
  

 	
           (2)
 AGREES FOR THE BENEFIT OF THE COMPANY THAT IT WILL NOT OFFER, SELL, PLEDGE OR
 OTHERWISE TRANSFER THIS SECURITY OR ANY BENEFICIAL INTEREST HEREIN PRIOR TO
 THE DATE THAT IS THE LATER OF (X) ONE YEAR AFTER THE ISSUE DATE OF THE
 WARRANTS UPON 

 


-11-

A-15










	
  

 	
  

 	
  

 
	
  

 	
 THE EXERCISE
 OF WHICH THIS SECURITY WAS ISSUED OR SUCH SHORTER PERIOD OF TIME AS PERMITTED
 BY RULE 144 UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THERETO AND
 (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAW, EXCEPT:

 
	
  

 	
  

 
	
  

 	
  

 	
           (A)
 TO LEGG MASON, INC. (THE “COMPANY”)
 OR ANY SUBSIDIARY THEREOF; OR 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (B)
 PURSUANT TO A REGISTRATION STATEMENT THAT HAS BECOME EFFECTIVE UNDER THE
 SECURITIES ACT; OR

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (C)
 TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
 SECURITIES ACT; OR

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (D)
 PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
 SECURITIES ACT OR ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
 REQUIREMENTS OF THE SECURITIES ACT.

 



          PRIOR
TO THE REGISTRATION OF ANY TRANSFER IN ACCORDANCE WITH (2)(D) ABOVE, THE
COMPANY AND THE TRANSFER AGENT FOR THE COMMON STOCK RESERVE THE RIGHT TO
REQUIRE THE DELIVERY OF SUCH LEGAL OPINIONS, CERTIFICATIONS OR OTHER EVIDENCE
AS MAY REASONABLY BE REQUIRED IN ORDER TO DETERMINE THAT THE PROPOSED TRANSFER
IS BEING MADE IN COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS. NO REPRESENTATION IS MADE AS TO THE AVAILABILITY OF ANY
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.


Any such
Common Stock as to which such restrictions on transfer shall have expired in
accordance with their terms may, upon surrender of the certificates
representing such shares of Common Stock for exchange in accordance with the
procedures of the transfer agent for the Common Stock, be exchanged for a new certificate
or certificates for a like aggregate number of shares of Common Stock, which
shall not bear the restrictive legend required by this Section 2.04(d).


                    (e)
Obligations with Respect to Transfers and Exchanges of Warrants. 


	
  

 	
  

 
	
  

 	
           (i)
 To permit registrations of transfers and exchanges, the Company shall execute
 and the Warrant Agent shall countersign, by either manual or facsimile
 signature, any Global Warrants and Definitive Warrants, if applicable, as
 required pursuant to the provisions of Section 2.02 and this Section 2.04.

 
	
  

 	
  

 
	
  

 	
           (ii)
 No service charge shall be made for any registration of transfer or exchange.
 Any transfer tax, assessments, or similar governmental charge payable in
 connection with any registration of transfer or exchange shall be paid by the
 Holder. 

 



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           (iii)
 Prior to the due presentation for registration of transfer of any Warrant,
 the Company and the Warrant Agent may deem and treat the Person in whose name
 Warrants are registered as the absolute owner of such Warrants, and neither
 the Company nor the Warrant Agent shall be affected by notice to the
 contrary.

 
	
  

 	
  

 
	
  

 	
           (iv)
 All Warrants issued upon any transfer or exchange pursuant to the terms of
 this Agreement shall be valid obligations of the Company, entitled to the
 same benefits under this Agreement as the Warrants surrendered upon such
 transfer or exchange.

 



                    (f)
No Obligation of the Warrant Agent. The Warrant Agent shall have no
responsibility or obligation to any beneficial owner of a Global Warrant, an
Agent Member or other Person with respect to the accuracy of the records of the
Depository or its nominee or of any participant or member thereof, with respect
to any ownership interest in the Warrants or with respect to the delivery to
any participant, member, beneficial owner or other Person (other than the
Depository) of any notice, or the payment of any amount, under or with respect
to such Warrants. All notices and communications to be given to the Holders and
all payments or deliveries to be made to Holders under the Warrants shall be
given or made only to or upon the order of the registered Holders (which shall
be the Depository or its nominee in the case of a Global Warrant). The rights
of beneficial owners in any Global Warrant shall be exercised only through the
Depository subject to the applicable rules and procedures of the Depository.
The Warrant Agent may rely and shall be fully protected in relying upon
information furnished by the Depository with respect to its members,
participants and any beneficial owners. 


          Section
2.05. Definitive Warrants.


                    (a)
Subject to Section 2.05(e), beneficial interests in a Global Warrant deposited
with the Depository or with the Warrant Agent as custodian shall be transferred
to the beneficial owners thereof in the form of Definitive Warrants in a number
equal to the number of Warrants represented by such Global Warrant, in exchange
for such Global Warrant, only if such transfer complies with Section 2.04 and
the Depository notifies the Company that it is unwilling or unable to continue
as depositary for such Global Warrant or if at any time the Depository ceases
to be a “clearing agency” registered under the Exchange Act and, in each such
case, a successor depositary is not appointed by the Company within 90 days of
such notice.


                    (b)
Any Global Warrant that is transferable to the beneficial owners thereof
pursuant to this Section 2.05 shall be surrendered by the Depository to the
Warrant Agent, to be so transferred, in whole or from time to time in part,
without charge, and the Warrant Agent shall countersign, by either manual or
facsimile signature, and deliver to each beneficial owner in the name of such
beneficial owner, upon such transfer of each portion of such Global Warrant,
Definitive Warrants evidencing a number of Warrants equivalent to such
beneficial owner’s beneficial interest in the Global Warrant. The Warrant Agent
shall register such transfer in the Warrant Register, and upon such transfer
the surrendered Global Warrant shall be cancelled by the Warrant Agent. 


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                    (c)
Subject to the provisions of Section 2.05(b), the registered Holder of a Global
Warrant may grant proxies and otherwise authorize any Person, including Agent
Members and Persons that may hold interests through Agent Members, to take any
action that a Holder is entitled to take under this Agreement or the Warrants.


                    (d)
In the event of the occurrence of the events specified in Section 2.05(a), the
Company will promptly make available to the Warrant Agent a reasonable supply
of Definitive Warrants in definitive, fully registered form.


                    (e) The Depository shall notify the Warrant
Agent of the names and the amounts in which the Definitive Warrants will be
issued. Neither the Company nor the Warrant Agent will be liable or responsible
for any names or any amounts provided by the Depository.


                    (f)
Notwithstanding the foregoing, in lieu of issuing a Definitive Warrant to any
Person, the Warrant Agent may, upon the Company’s instruction, register
Warrants in the name of such Person through the Company’s direct registration
system or the Warrant Agent’s other book-entry procedures.


          Section
2.06. Replacement Certificates. If a mutilated Warrant Certificate is
surrendered to the Warrant Agent or if the Holder of a Warrant Certificate
provides proof reasonably satisfactory to the Company and the Warrant Agent
that the Warrant Certificate has been lost, destroyed or wrongfully taken, the
Company shall issue and the Warrant Agent shall countersign a replacement
Warrant Certificate of like tenor and representing an equivalent number of
Warrants, if the reasonable requirements of the Warrant Agent are met. Such
Holder shall furnish an indemnity bond sufficient in the judgment of the
Company and the Warrant Agent to protect the Company and the Warrant Agent from
any loss that either of them may suffer if a Warrant Certificate is replaced.
The Company and the Warrant Agent may charge the Holder for their expenses in
replacing a Warrant Certificate. Every replacement Warrant Certificate
evidences an additional obligation of the Company.


          Section
2.07. Outstanding Warrants. Warrants outstanding at any time are all
Warrants evidenced as outstanding in the Warrant Register (which, in the case
of Warrants represented by a Warrant Certificate, shall include all Warrant
Certificates authenticated by the Warrant Agent excluding those canceled by it
and those delivered to it for cancellation). A Warrant does not cease to be
outstanding because the Company or an Affiliate of the Company holds the
Warrant.


          If
a Warrant Certificate is replaced pursuant to Section 2.06, the Warrants
evidenced thereby cease to be outstanding unless the Warrant Agent and the
Company receive proof satisfactory to them that the replaced Warrant
Certificate is held by a bona fide purchaser.


          Any
Warrant or Common Stock issued upon the exercise of a Warrant that is
repurchased or owned by the Company or any Affiliate thereof may not be resold
by the Company or such Affiliate unless registered under the Securities Act or
resold pursuant to an exemption from the registration requirements of the
Securities Act in a transaction that results in such Warrants or Common Stock,
as the case may be, no longer being “restricted securities” (as defined under
Rule 144 under the Securities Act). 


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          Section
2.08. Cancellation. If the Company shall purchase or otherwise acquire
Definitive Warrants, the Company may, at its option, deliver the same to the
Warrant Agent for cancellation.


                    The
Warrant Agent and no one else shall cancel all Warrant Certificates surrendered
for transfer, exchange, replacement, exercise or cancellation. The Company may
not issue new Warrant Certificates to replace Warrant Certificates to the
extent they evidence Warrants that have been exercised or Warrants that the
Company has cancelled.


          Section
2.09. CUSIP Numbers. 

          The Company may assign “CUSIP” numbers (if then
generally in use) in connection with the issuance of the Warrants and the
Warrant Agent may use such “CUSIP” numbers in notices as a convenience to
Holders; provided, however, that
any such notice shall state that no representation is made as to the
correctness of such numbers either as printed on the Warrant Certificates or as
contained in any notice and that reliance may be placed only on the other
identification numbers printed on the Warrant Certificates.


ARTICLE III


Exercise Terms


          Section
3.01. Exercise. Each Warrant shall entitle the Holder thereof to
purchase the Number of Warrant Shares at an exercise price of $[88.00]1
per share (as such exercise price may be adjusted pursuant to Article IV, the “Exercise Price”).


          Section
3.02. Exercise Period. Subject to the terms and conditions set forth
herein, the Warrants shall be exercisable at any time and from time to time on
or after the Issue Date; provided that no Warrant shall be exercisable after
5:00 p.m., New York time, on July 15, 2017 (the “Expiration Date”).


          Section
3.03. Expiration. A Warrant shall terminate and become void as of the
earlier of (i) the Expiration Date or (ii) the date such Warrant is exercised
or deemed exercised pursuant to Section 3.04(b).


          Section
3.04. Manner of Exercise. 


                    (a)
Subject to Section 3.02, Warrants may be exercised by a Holder in full or in
part by taking the actions described in (i) or (ii) below, as appropriate, not
later than 5:00 p.m., New York time, on any Business Day (the “Exercise Date”).


	
  

 	
  

 
	
  

 	
           (i)
 In the case of Definitive Warrants, Warrants may be exercised by delivering
 to the Warrant Agent at its office the related Warrant Certificate duly
 endorsed for transfer, a Notice of Exercise in the form included as
 Attachment 1 

 








1 Subject to adjustment prior to
consummation of the Closing pursuant to Section 5.7 of the Note Exchange
Agreement. 


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 to the Form
 of Warrant attached hereto as Exhibit A (the “Notice of Exercise”), duly filled in and signed by the
 Holder, together with any other required transfer documents.

 
	
  

 	
  

 
	
  

 	
           (ii)
 In the case of Global Warrants, Warrants may be exercised by following the relevant
 procedures of the Depositary. 

 



                    (b)
If either of the Warrant Certificate or the Notice of Exercise is received by
the Warrant Agent after 5:00 P.M., New York time, on any Business Day, or, in
respect of interests in a Global Warrant, the requirements of exercise set
forth in Section 3.04(a)(ii) are not satisfied on or before 5:00 P.M., New York
time, on any Business Day, the Warrants will be deemed to be exercised on the
Business Day next succeeding the date such conditions to exercise set forth in
Section 3.04(a) are met and such next succeeding Business Day shall be deemed
to be the Exercise Date with respect to such Warrants. If the date specified as
the Exercise Date is not a Business Day, the Warrants will be deemed to be received
and exercised on the next succeeding day which is a Business Day. Any Warrants
that have not been exercised prior to 5:00 p.m., New York time, on the
Expiration Date shall be deemed to be exercised by the Holder thereof
immediately prior to such time on the Expiration Date; provided that, for the avoidance of doubt,
in no event shall any cash or shares of Common Stock be due from the Company in
connection with the settlement of such Warrants for any Trading Day during the
Observation Period for such Warrants if the Exercise Value for such Trading Day
is less than or equal to the Exercise Price on such Trading Day.


                    (c)
In the case of a Global Warrant, whenever some but not all of the Warrants
represented by such Global Warrant are exercised in accordance with the terms
thereof and of this Agreement, such Global Warrant shall be surrendered by the
Holder to the Warrant Agent, which shall cause an adjustment to be made to such
Global Warrant so that the number of Warrants represented thereby will be equal
to the number of Warrants theretofore represented by such Global Warrant less
the number of Warrants then exercised. The Warrant Agent shall thereafter
promptly return such Global Warrant to the Holder or its nominee or custodian. 


                    (d)
In the case of a Definitive Warrant, whenever some but not all of the Warrants
represented by such Definitive Warrant are exercised in accordance with the
terms thereof and of this Agreement, the Holder shall be entitled, at the
request of the Holder, to receive from the Company within a reasonable time,
and in any event not exceeding three (3) Business Days, a new Definitive
Warrant in substantially identical form for the number of Warrants equal to the
number of Warrants theretofor represented by such Definitive Warrant less the
number of Warrants then exercised, without payment of any service charge by the
Holder but, if required by the Company or the Warrant Agent, with payment of a
sum sufficient to cover any transfer tax or similar governmental charge
required by law or that may be imposed in connection therewith as a result of
the name of the Holder of the new Definitive Warrant issued upon such exercise
being different from the name of the Holder of the old Definitive Warrant surrendered
for such exercise.


                    (e)
If a Warrant Certificate shall have been exercised in full, the Warrant Agent
shall promptly cancel such certificate following its receipt from the Holder or
the Depository, as applicable. 


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                    (f)
If Net Share Settlement applies to any Warrant exercised or deemed exercised by
a Holder, the Company shall pay any documentary, stamp or similar issue or
transfer tax due on the issue of the shares of Common Stock upon such exercise,
unless the tax is due because the Holder requests such shares to be issued in a
name other than the Holder’s name, in which case the Holder shall pay that tax.
The Warrant Agent may refuse to deliver the certificates representing the
shares of Common Stock being issued in a name other than the Holder’s name
until the Warrant Agent receives a sum sufficient to pay any tax that is due by
such Holder in accordance with the immediately preceding sentence. 


          Section
3.05. Settlement Upon Exercise of Warrants. 


                    (a)
Upon any exercise of Warrants, (i) if the Company has elected (or is deemed to
have elected) to settle such Warrants in shares of Common Stock as set forth in
Section 3.05(d) (“Net Share Settlement”),
the Company will deliver to the Holder of such Warrants in respect of each
Warrant being exercised a number of shares of Common Stock equal to the sum of
the Daily Share Amounts for each of the 20 Trading Days during the Observation
Period and cash for any fractional shares as described in Section 3.06, and
(ii) if the Company has elected to settle such Warrants in cash as set forth in
Section 3.05(d) (“Cash Settlement”),
the Company will pay to the Holder of such Warrants in respect of each Warrant
being exercised an amount in cash equal to the sum of the Daily Cash Amounts
for each of the 20 Trading Days during the Observation Period. Settlement will
occur on the third Business Day following the final Trading Day of the
Observation Period. 


                    (b)
Subject to Section 3.02, upon any exercise of Warrants in compliance with
Section 3.05(a)(i), the Company shall issue and cause the transfer agent for
the Common Stock (the “Stock Transfer Agent”,
which may be the Warrant Agent) to cause to be registered in the Company’s
direct registration system to or upon the written order of the Holder and in
such name or names as the Holder may designate, a number of full shares of
Common Stock so purchased upon the exercise of such Warrants (determined in
accordance with Section 3.01, Section 3.04(a), Section 3.05(a) and Section
3.06) or other securities to which it is entitled, registered or otherwise, to
the Person or Persons entitled to receive the same (including any depositary
institution so designated by a Holder), together with cash as provided in
Section 3.06 in respect of any fractional shares of Common Stock otherwise
issuable upon such exercise. 


                    (c)
Subject to Section 3.02, upon any exercise of Warrants in compliance with
Section 3.05(a)(ii), the Company shall pay an amount determined in accordance
with Section 3.01, Section 3.04(a) and Section 3.05(a) by wire transfer in
immediately available funds to the exercising Holder’s account within the
United States (as such Holder has notified to the Warrant Agent) or, with
respect to any Global Warrant, by wire transfer of immediately available funds
to the account of the Depositary or its nominee. 


                    (d)
The Company may elect the Settlement Method for any Warrants exercised or
deemed exercised on any Exercise Date by delivering a notice (the “Settlement Notice”) of the relevant
Settlement Method, through the Warrant Agent, to the Holders of such Warrants
no later than the close of business on the Trading Day immediately following
the relevant Exercise Date. If the Company does not elect a Settlement Method
prior to the deadline 


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set forth in
the immediately preceding sentence, the Company shall no longer have the right
to elect Cash Settlement and the Company shall be deemed to have elected Net
Share Settlement. 


          Section
3.06. Fractional Shares. The Company shall not be required to issue
fractional shares of Common Stock on the exercise of Warrants. The number of
shares of Common Stock that shall be issuable upon Net Share Settlement of any
Warrants exercised or deemed exercised by a Holder at any time shall be
computed on the basis of the aggregate number of shares of Common Stock
issuable upon exercise of the Warrants being exercised or deemed exercised by
that Holder at that time (determined in accordance with Section 3.01, Section
3.04(a) and this Section 3.06). If any fraction of a share of Common Stock
would, except for the provisions of this Section 3.06, be issuable upon the
exercise of Warrants, the Company shall pay an amount in cash equal to the VWAP
of the Common Stock on the last Trading Day of the Observation Period, multiplied by such fraction, computed to
the nearest whole cent. 


          Section
3.07. Warrant Shares. 


                    (a)
The Company shall provide, free from preemptive rights, out of its authorized
but unissued shares or shares held in treasury, sufficient shares of Common
Stock to provide for the exercise of all outstanding Warrants, including any
Additional Shares. 


                    (b)
Before taking any action which would cause an adjustment decreasing the
Exercise Price to an amount that would cause the Exercise Price to be reduced
below the then par value, if any, of the shares of Common Stock issuable upon
exercise of the Warrants, the Company will take all corporate action that may,
in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue shares of such Common Stock at such adjusted Exercise
Price. 


                    (c)
The Company covenants that all shares of Common Stock that may be issued upon
exercise of the Warrants will, upon issue, be fully paid and non-assessable by
the Company and free from all taxes, liens and charges with respect to the
issue thereof, except as set forth in Section 3.04(f); provided that if any adjustment to the
Exercise Price is made and a Holder is deemed to recognize, as provided by
applicable law, a distribution from the Company even though such Holder has not
received any cash or property as a result of such adjustment, the Company shall
be entitled to withhold (to the extent required by law) United States federal
income tax, if any, on such deemed distribution from any amounts payable upon
exercise of the Warrants. 


                    (d)
The Company covenants that, if any shares of Common Stock to be provided for
the purpose of exercise of Warrants hereunder require registration with or
approval of any governmental authority under any federal or state law before
such shares may be validly issued upon exercise of Warrants, the Company will
in good faith and expeditiously, to the extent then permitted by the rules and
interpretations of the SEC (or any successor thereto), endeavor to secure such
registration or approval, as the case may be. 


                    (e)
The Company further covenants that, if at any time the Common Stock shall be
listed on The New York Stock Exchange or any other national securities exchange
or 


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A-22






national
automated inter-dealer quotation system, the Company will, if permitted by the
rules of such exchange or automated inter-dealer quotation system, list and
keep listed, so long as the Common Stock shall be so listed on such exchange or
automated inter-dealer quotation system, all Common Stock issuable upon
exercise of the Warrants. 


ARTICLE IV


Adjustment and Notice Provisions


          Section
4.01. Adjustments. Subject to the provisions of this Article IV
(including without limitation Section 4.01(i) and Section 4.05), the Exercise
Price shall be subject to adjustment, without duplication, under the following
circumstances: 


                    (a)
in case the Company shall, at any time or from time to time while any of the
Warrants are outstanding, (i) pay a dividend in shares of Common Stock or make
a distribution in shares of Common Stock to all or substantially all holders of
its outstanding shares of Common Stock, or (ii) split the outstanding shares of
Common Stock into a greater number of such shares or combine outstanding shares
of Common Stock into a smaller number of such shares, the Exercise Price will
be adjusted based on the following formula: 


	
  

 	
  

 	
  

 	
  

 
	
  

 	
 EP1
 = EP0 x (OS0 / OS1)

 
	
  

 	
  

 
	
  

 	
 where,

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 EP0

 	
 =

 	
 the Exercise
 Price in effect immediately prior to the Ex-Date of such dividend or
 distribution, or the effective date of such share split or combination, as
 applicable;

 
	
  

 	
 EP1

 	
 =

 	
 the Exercise
 Price in effect immediately after the opening of business on such Ex-Date or
 effective date, as applicable;

 
	
  

 	
 OS0

 	
 =

 	
 the number
 of shares of Common Stock outstanding immediately prior to such Ex-Date or
 effective date, as applicable; and

 
	
  

 	
 OS1

 	
 =

 	
 the number
 of shares of Common Stock outstanding immediately after the opening of
 business on such Ex-Date or effective date after giving effect to such
 dividend, distribution, share split or share combination.

 



               An
adjustment to the Exercise Price made pursuant to this clause (a) will become
effective immediately after the opening of business on the Ex-Date or effective
date of such dividend, distribution, share split or share combination, as
applicable. 


               To
the extent that a dividend, distribution, share split or share combination of
the type described in this Section 4.01(a) is declared but not so paid or made,
the Exercise Price shall again be readjusted to the Exercise Price that would
then be in effect if such dividend, distribution, share split or share
combination had not been declared. 


                    (b)
in case the Company shall, at any time or from time to time while any of the
Warrants are outstanding, issue rights or warrants (other than rights or
warrants referred to in 4.01(c)) to all or substantially all holders of its
outstanding Common Stock entitling them, for a period of not more than 45
calendar days from the date of such distribution, to subscribe for or 


-19-

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purchase
shares of Common Stock, at a price per share less than the average of the
Closing Sale Prices of the Common Stock for the 10 consecutive Trading Day
period ending on the Trading Day immediately preceding the date of announcement
of the issuance of such rights or warrants, the Exercise Price will be adjusted
based on the following formula: 


	
  

 	
  

 	
  

 	
  

 
	
  

 	
 EP1
 = EP0 x (OS0 + Y) / (OS0
 + X)

 
	
  

 	
  

 
	
  

 	
 where,

 
	
  

 	
  

 
	
  

 	
 EP0

 	
 =

 	
 the Exercise
 Price in effect immediately prior the Ex-Date for such issuance;

 
	
  

 	
 EP1

 	
 =

 	
 the Exercise
 Price in effect immediately after the opening of business on such Ex-Date;

 
	
  

 	
 OS0

 	
 =

 	
 the number
 of shares of Common Stock outstanding immediately prior to such Ex-Date;

 
	
  

 	
 X

 	
 =

 	
 the total
 number of shares of Common Stock issuable pursuant to such rights or
 warrants; and

 
	
  

 	
 Y

 	
 =

 	
 the number
 of shares of Common Stock equal to the aggregate price payable to exercise
 such rights or warrants, divided by
 the average of the Closing Sale Prices of the Common Stock for the 10
 consecutive Trading Day period ending on, and including, the Trading Day
 immediately preceding the date of announcement of the issuance of such rights
 or warrants.

 



An adjustment
to the Exercise Price made pursuant to this clause (b) will become effective
immediately after the opening of business on the Ex-Date for such issuance. 


To the extent
that shares of Common Stock are not delivered after the expiration of such
rights or warrants, the Exercise Price will be readjusted to the Exercise Price
that would then be in effect had the adjustments made upon the issuance of such
rights or warrants been made on the basis of delivery of only the number of
shares of Common Stock actually delivered. If such rights or warrants are not
so issued, the Exercise Price will be readjusted to be the Exercise Price that
would then be in effect if the Ex-Date for such issuance had not occurred. 


                    (c)
in case the Company shall, at any time or from time to time while any of the
Warrants are outstanding, by dividend or otherwise, distribute shares of
Capital Stock of the Company (other than the Common Stock), or evidences of its
Indebtedness or other assets or property or rights, or warrants to acquire
shares of Capital Stock of the Company or other securities (any of the
foregoing, the “Distributed Assets”),
to all or substantially all holders of its outstanding shares of Common Stock,
excluding (i) dividends or distributions described in clauses (a) or (b) of
this Section 4.01, (ii) dividends or distributions paid exclusively in cash,
(iii) any dividends and distributions in connection with a Reorganization, and
(iv) Spin-Offs to which the provisions set forth below in this clause (c) shall
apply, then the Exercise Price will be adjusted based on the following formula:



               EP1
= EP0
x (SP0
– FMV) / SP0



-20-

A-24










	
  

 	
  

 	
  

 	
  

 
	
  

 	
 where,

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 EP0

 	
 =

 	
 the Exercise
 Price in effect immediately prior to the Ex-Date for such distribution;

 
	
  

 	
 EP1

 	
 =

 	
 the Exercise
 Price in effect immediately after the opening of business on such Ex-Date;

 
	
  

 	
 SP0

 	
 =

 	
 the average
 of the Closing Sale Prices of the Common Stock over the 10 consecutive
 Trading Day period ending on the Trading Day immediately preceding the
 Ex-Date for such distribution; and

 
	
  

 	
 FMV

 	
 =

 	
 the Fair
 Market Value on the Ex-Date for such distribution (as determined in good
 faith by the Board of Directors) of the Distributed Assets applicable to one
 share of Common Stock.

 



Notwithstanding
the foregoing, no adjustment will be made to the Exercise Price under this
clause (c) in the event that (i) the Fair Market Value of the Distributed
Assets applicable to one share of Common Stock is equal to or greater than the
average Closing Sale Prices of the Common Stock over the 10 consecutive Trading
Day Period ending on the Trading Day immediately preceding the Ex-Date for such
distribution, or (ii) such average Closing Sale Prices exceeds such Fair Market
Value by less than $1.00. In such cases, in lieu of the foregoing adjustment
under this clause (c), each Holder of Warrants shall have the right to receive,
at the same time as holders of the Common Stock and in addition to the shares
of Common Stock (if any) issuable upon exercise of the Warrants, for each
Warrant, the kind and amount of Distributed Assets such Holder would have
received had such Holder owned a number of shares of Common Stock equal to the
Number of Warrant Shares immediately prior to the Ex-Date for such
distribution. 


If the Board
of Directors determines the Fair Market Value of any distribution for purposes
of this clause (c) by reference to the actual or when issued trading market for
any Distributed Assets comprising all or part of such distribution, it must in
doing so consider the prices in such market over the 10 consecutive Trading Day
period ending on the Trading Day immediately preceding the Ex-Date for such
distribution (the “Reference Period”),
to the extent possible, unless the Board of Directors determines in good faith
that determining the Fair Market Value during the Reference Period would not be
appropriate. 


Notwithstanding
the foregoing, in the event that any such dividend or other distribution
consists of shares of Capital Stock of any class or series, or similar equity
interest, of or relating to one or more of the Subsidiaries or other business
units of the Company (a “Spin-Off”),
the Exercise Price will be adjusted based on the following formula: 


	
  

 	
  

 	
  

 	
  

 
	
  

 	
 EP1
 = EP0 x MP0 / (FMV0 + MP0)

 
	
  

 	
  

 
	
  

 	
 where,

 	
  

 
	
  

 	
  

 	
  

 
	
  

 	
 EP0

 	
 =

 	
 the Exercise
 Price in effect immediately prior to the end of the Valuation Period;

 
	
  

 	
 EP1

 	
 =

 	
 the Exercise
 Price in effect immediately after the end of the Valuation Period;

 


-21-

A-25










	
  

 	
  

 	
  

 	
  

 
	
  

 	
 FMV0

 	
 =

 	
 the average
 of the Closing Sale Prices of the Capital Stock or similar equity interest
 distributed to holders of the outstanding shares of Common Stock applicable
 to one share of the Common Stock over the first 10 consecutive Trading Day
 period after, and including, the effective date of the Spin-Off (the “Valuation Period”); and 

 
	
  

 	
 MP0

 	
 =

 	
 the average
 of the Closing Sale Prices per share of the Common Stock over the Valuation
 Period. 

 



The adjustment
to the Exercise Price under this clause (c) in respect of a Spin-Off will occur
on the last day of the Valuation Period; provided
that in respect of any Warrants exercised during the Valuation Period,
references with respect to 10 Trading Days shall be deemed replaced with such
lesser number of Trading Days as have elapsed between the effective date of
such Spin-Off and the Exercise Date for such Warrants in determining the
applicable Exercise Price. 


To the extent
that such dividend or distribution is not so paid or made, the Exercise Price
will be readjusted to the Exercise Price that would then be in effect if such
dividend or distribution had not been declared. 


For purposes
of this clause (c) and clauses (a) and (b) of this Section 4.01, any dividend
or distribution to which this clause (c) is applicable that also includes
shares of Common Stock, or rights or warrants to subscribe for or purchase
shares of Common Stock (or both), shall be deemed instead to be (A) a dividend
or distribution of the evidences of Indebtedness, assets or shares of Capital
Stock other than such shares of Common Stock or rights or warrants (and any
adjustment to the Exercise Price required by this clause (c) with respect to
such dividend or distribution shall then be made) immediately followed by (B) a
dividend or distribution of such shares of Common Stock or such rights or
warrants (and any further adjustment to the Exercise Price required by clauses
(a) or (b) of this Section 4.01 with respect to such dividend or distribution
shall then be made), except the Ex-Date for such dividend or distribution shall
be substituted for “the Ex-Date for such dividend or other distribution” within
the meaning of clause (a) of this Section 4.01 and the “Ex-Date for such
issuance” within the meaning of clause (b) of this Section 4.01, and any shares
of Common Stock included in such dividend or distribution shall not be deemed
“outstanding immediately prior to the opening of business on the Ex-Date for
such dividend or distribution” within the meaning of clause (a) of this Section
4.01. 


                    (d)
in case the Company shall, at any time or from time to time while any of the
Warrants are outstanding, by dividend or otherwise, make a distribution
consisting exclusively of cash to all or substantially all holders of the
outstanding Common Stock, other than (i) regular quarterly cash dividends (as
determined in good faith by the Board of Directors) that do not exceed the
Initial Dividend Threshold, and (ii) dividends or distributions made in
connection with the Company’s liquidation, dissolution or winding-up or upon a
merger or consolidation, the Exercise Price will be adjusted based on the
following formula: 


               EP1
= EP0
x (SP0
– C) / SP0



               where,



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A-26










	
  

 	
  

 	
  

 	
  

 
	
  

 	
 EP0

 	
 =

 	
 the Exercise
 Price in effect immediately prior to the Ex-Date for such distribution;

 
	
  

 	
 EP1

 	
 =

 	
 the Exercise
 Price in effect immediately after the opening of business on the Ex-Date for
 such distribution;

 
	
  

 	
 SP0

 	
 =

 	
 the Closing
 Sale Price of the Common Stock on the Trading Day immediately preceding the
 Ex-Date for such distribution; and

 
	
  

 	
 C

 	
 =

 	
 the amount
 in cash per share the Company distributes to holders of the Common Stock in
 excess of the Initial Dividend Threshold; provided
 that if the distribution is not a regular quarterly cash dividend (as
 determined in good faith by the Board of Directors), the Initial Dividend
 Threshold will be deemed to be zero.

 



Whenever the
Exercise Price is adjusted, the Initial Dividend Threshold shall be adjusted by
multiplying the Initial Dividend Threshold then in effect by a fraction, the
numerator of which is the Exercise Price prior to adjustment and the
denominator of which is the Exercise Price following such adjustment. 


An adjustment
to the Exercise Price made pursuant to this clause (d) will become effective on
the Ex-Date for such dividend or distribution. To the extent that such
distribution is not so paid or made, the Exercise Price will be readjusted to
the Exercise Price that would then be in effect if such distribution had not
been declared. 


Notwithstanding
the foregoing, no adjustment will be made to the Exercise Price under this
clause (d) in the event that (i) the portion of the cash so distributed
applicable to one share of Common Stock is equal to or greater than the Closing
Sale Price of the Common Stock on the Trading Day immediately preceding the
Ex-Date for such distribution, or (ii) such Closing Sale Price exceeds the
amount of such distribution by less than $1.00. In such cases, in lieu of the
adjustment under this clause (d), each Holder of Warrants shall have the right
to receive, at the same time as holders of the Common Stock and in addition to
the shares of Common Stock (if any) issuable upon exercise of the Warrants, for
each Warrant the amount of cash such Holder would have received had such Holder
owned a number of shares of Common Stock equal to the Number of Warrant Shares
immediately prior to the Ex-Date for such distribution 


                    (e)
In case the Company or any Subsidiary of the Company makes, at any time or from
time to time while any of the Warrants are outstanding, a payment in respect of
a tender offer or exchange offer for the Common Stock, to the extent that the
cash and value of any other consideration included in the payment per share of
Common Stock exceeds the Closing Sale Price of the Common Stock on the Trading
Day next succeeding the last date on which tenders or exchanges may be made
pursuant to such tender or exchange offer, the Exercise Price will be decreased
based on the following formula: 


               EP1
= EP0
x (SP1
x OS0)
/ (AC + (SP1 x OS1)) 


               where,



	
  

 	
  

 	
  

 	
  

 
	
  

 	
 EP0

 	
 =

 	
 the Exercise
 Price in effect immediately prior to the effective date of the adjustment set
 forth below; 

 


-23-

A-27










	
  

 	
  

 	
  

 	
  

 
	
  

 	
 EP1

 	
 =

 	
 the Exercise
 Price in effect immediately after the effective date of the adjustment set
 forth below;

 
	
  

 	
 AC

 	
 =

 	
 the
 aggregate value of all cash and any other consideration (as determined in
 good faith by the Board of Directors) paid or payable for shares purchased in
 such tender or exchange offer;

 
	
  

 	
 OS1

 	
 =

 	
 the number
 of shares of Common Stock outstanding immediately after the date such tender
 or exchange offer expires excluding, to the extent applicable, any shares
 purchased pursuant to such tender offer or exchange offer; and

 
	
  

 	
 OS0

 	
 =

 	
 the number
 of shares of the Common Stock outstanding immediately prior to the date such
 tender or exchange offer expires;

 
	
  

 	
 SP1

 	
 =

 	
 the Closing
 Sale Price of the Common Stock on the Trading Day next succeeding the date
 such tender or exchange offer expires.

 



The adjustment
to the Exercise Price pursuant to this clause (e) will become effective at the
close of business on the Trading Day next succeeding the date such tender or
exchange offer expires. 


Notwithstanding
the foregoing, no adjustment will be made to the Exercise Price under this
clause (e) as a result of a tender offer solely to holders of fewer than 100
shares of the Common Stock. 


                    (f)
Except as stated herein, the Company will not adjust the Exercise Price for the
issuance of shares of the Common Stock or any securities convertible into or
exchangeable for shares of the Common Stock or the right to purchase shares of
the Common Stock or such convertible or exchangeable securities. If, however,
the application of the foregoing formulas would result in an increase in the
Exercise Price, no adjustment to the Exercise Price will be made (other than as
a result of a share combination). 


                    (g)
To the extent permitted by law, the Company may in its sole discretion make
such decreases in the Exercise Price, in addition to those required by clauses
(a) to (e) of this Section 4.01, as the Board of Directors considers to be
advisable to avoid or diminish any United States federal income tax to holders of
Common Stock resulting from any dividend or distribution of stock (or rights to
acquire stock) or from any event treated as such for income tax purposes. 


                    (h)
To the extent permitted by applicable law, the Company from time to time may
decrease the Exercise Price by any amount for any period of time, if the Board
of Directors shall have made a determination that such decrease would be in the
best interests of the Company, which determination shall be conclusive.
Whenever the Exercise Price is decreased under this clause (h) or clause (g),
the Company shall mail to Holders of record of the Warrants a notice of the
decrease, which notice will be given at least 15 days prior to the
effectiveness of any such decrease, and such notice shall state the decreased
Exercise Price and the period during which it will be in effect. 


                    (i)
No adjustment in the Exercise Price shall be required unless such adjustment
would require an increase or decrease of at least 1% in such Exercise Price; provided that any adjustments that by
reason of this clause (i) are not required to be made shall be carried 


-24-

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forward and
the Company shall take such carried-forward adjustments into account in an




y
  subsequent adjustment and make such carry forward adjustments, regardless of
  whether the aggregate adjustment is less than 1% on each Trading Day of any
  Observation Period. 

                    (j)
All calculations under this Section 4.01 shall be made by the Company (and the
Company shall inform the Warrant Agent of any such calculations) and shall be
made to the nearest cent or to the nearest one-ten thousandth (1/10,000) of a
share, as the case may be. 


                    (k)
Whenever the Exercise Price is adjusted as herein provided, the Company will
provide notice to Holders of such adjustment either (i) by written notice to
Holders in the manner provided in Section 6.04, (ii) by electronic
communication to Holders, or (iii) by issuing a press release through Business
Wire containing the relevant information and making such information available
on the Company’s website or through another public medium as the Company may
use at that time. In addition, the Company shall promptly file with the Warrant
Agent an Officers’ Certificate setting forth the Exercise Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment. Unless and until an officer of the Warrant Agent shall have
received such Officers’ Certificate, the Warrant Agent shall not be deemed to have
knowledge of any adjustment of the Exercise Price and may assume that the last
Exercise Price of which it has actual knowledge is still in effect. Promptly
after delivery of such certificate, the Company shall prepare a notice of such
adjustment of the Exercise Price setting forth the adjusted Exercise Price and
the date on which each adjustment becomes effective and shall mail such notice
of such adjustment of the Exercise Price to the Holder of each Warrant at its
last address appearing on the Warrant Register, within 20 calendar days after
execution thereof. Failure to deliver such notice shall not affect the legality
or validity of any such adjustment. 


                    (l)
In any case in which this Section 4.01 provides that an adjustment shall become
effective (i) upon the opening of business on an Ex-Date, or (ii) at the close
of business on a day after the date a tender or exchange offer expires (each a
“Determination Date”), the Company
may elect to defer, until the occurrence of the applicable distribution,
issuance of Common Stock or payment (an “Adjustment
Event”) triggering an adjustment to the Exercise Price (A) issuing
to the Holder of any Warrants exercised after such Determination Date and
before the occurrence of such Adjustment Event, the additional shares of Common
Stock, if any, or other securities or property issuable upon such exercise by
reason of the adjustment required by such Adjustment Event over and above the
Common Stock issuable upon such exercise before giving effect to such
adjustment and (B) paying to such Holder any amount in cash in lieu of any
fractional share.


                    (m) For purposes of this Section 4.01, the number of shares
of Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. 


                    (n)
No adjustment to the Exercise Price shall be made pursuant to Section 4.01 on
account of a distribution on Common Stock, if the Holders of the Warrants will
otherwise participate for each Warrant in such distribution without exercise of
such Warrant as a 


-25-

A-29






result of
holding the Warrants at the same time and on the same terms as a holder of a
Number of Warrant Shares. 


                    (o)
Notwithstanding the foregoing, no adjustment to the Exercise Price need be made
for: 


	
  

 	
  

 
	
  

 	
           (i)
 the issuance of any shares of Common Stock or rights to purchase Common Stock
 pursuant to any present or future plan providing for the reinvestment of
 dividends or interest payable on the Company’s securities and the investment
 of additional optional amounts in shares of Common Stock under any plan, or 

 
	
  

 	
  

 
	
  

 	
           (ii)
 the issuance of any shares of Common Stock or options or rights to purchase
 those shares pursuant to any present or future employee, director or
 consultant benefit plan or program of or assumed by the Company or any of its
 Subsidiaries. 

 



                    Interest
will not accrue on any cash into which the Warrants are convertible. 


                    (p)
No adjustment need be made for rights to purchase Common Stock pursuant to a
Company plan for reinvestment of dividends or interest or for any issuance of
Common Stock or convertible or exchangeable securities or rights to purchase
Common Stock or convertible or exchangeable securities. 


                    (q)
Notwithstanding this Section 4.01 and the other provisions of Article IV, if
any adjustment to the Exercise Price becomes effective, or any Ex-Date
(relating to a required adjustment to the Exercise Price) occurs, during the
period beginning on an Exercise Date and ending on the close of business on the
last Trading Day of the corresponding Observation Period, the Board of
Directors may make such adjustments to the Exercise Price, the VWAP of the
Common Stock or the number of shares of Common Stock issuable upon exercise of
the Warrants, as may be necessary or appropriate to effect the intent of this
Section 4.01 and the other provisions of Article IV and to avoid unjust or
inequitable results, as determined in good faith by the Board of Directors. Any
adjustment made pursuant to this clause (q) shall apply in lieu of the
adjustment or other term that would otherwise be applicable. 


          Section
4.02. Adjustment to Number of Warrant Shares. Upon each adjustment of
the Exercise Price pursuant to Section 4.01, the Number of Warrant Shares shall
be adjusted by multiplying the Number of Warrant Shares immediately prior to
such adjustment by a fraction, the numerator of which is the Exercise Price in
effect immediately prior to such adjustment and the denominator of which is the
Exercise Price as so adjusted and rounding the result to the nearest 1/10,000th
of a share. 


          Section
4.03. Reorganizations. 


                    (a)
In the case of: 


-26-

A-30










	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (i)
 any recapitalization, reclassification or change of the Common Stock (other
 than changes in par value or changes resulting from a subdivision or
 combination); 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (ii)
 any consolidation, merger or combination involving the Company; or 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (iii)
 any sale, lease, transfer, conveyance or other disposition of all or
 substantially all of the Company’s assets and those of the Company’s
 Subsidiaries taken as a whole to any other Person, 

 
	
  

 	
  

 	
  

 
	
  

 	
 in each
 case, as a result of which the Common Stock would be converted into, or
 exchanged for, stock, other securities, other property or assets (including
 cash or any combination thereof) (any such event, a “Reorganization”), then, at and after the
 effective time of such Reorganization, each Warrant will become exercisable
 into the kind and amount of shares of stock, other securities or other
 property or assets (including cash or any combination thereof) that a holder
 of a number of shares of Common Stock equal to the Number of Warrant Shares
 that would have been issuable upon exercise of a Warrant immediately prior to
 such Reorganization would have owned or been entitled to receive (the “Reference Property”, with each “unit of Reference Property” meaning the
 kind and amount of Reference Property that a holder of one share of Common
 Stock is entitled to receive) upon such Reorganization and, prior to or at
 the effective time of such Reorganization, the Company or the successor or
 purchasing Person, as the case may be, shall execute with the Warrant Agent
 an agreement with the Warrant Agent confirming the Holders’ rights pursuant
 to this Section 4.03 and providing for such change in the right to exercise
 each Warrant. If holders of Common Stock have the opportunity to elect the
 form of consideration to be received in such Reorganization, the
 consideration into which the Warrants will be exercisable in connection with
 such Reorganization will be the weighted average of the types and amounts of
 consideration received by the holders of Common Stock that affirmatively make
 such an election.

 



          Section
4.04. Adjustment to Number of Warrant Shares upon a Make-Whole Event. 


                    (a)
If and only to the extent a Holder elects to exercise Warrants at any time
following the effective date of a Make Whole Event (the “Effective Date”) but before 5:00 p.m., New
York time, on the Make Whole Termination Date, the Number of Warrant Shares
applicable to such exercised Warrants will be increased by a number of
additional shares of Common Stock (the “Additional
Shares”). The number of Additional Shares of Common Stock shall be
determined as set forth in clause (b) of this Section 4.04, based on the
Effective Date and the price (the “Stock
Price”) paid per share for the Common Stock in such Make Whole
Event. If holders of the Common Stock receive only cash in such Make Whole
Event, the “Stock Price” shall be the cash amount paid per share. Otherwise,
the “Stock Price” shall be the average of the Closing Sale Prices of the Common
Stock on the five Trading Days prior to, but not including, the Effective Date
of such Make Whole Event. 


                    (b)
The number of Additional Shares per Warrant by which the Number of Warrant
Shares shall be increased for exercises of Warrants in connection with a Make
Whole 


-27-

A-31






Event pursuant
to clause (a) of this Section 4.04 will be as set forth in the following table,
based on the Effective Date and the Stock Price for the Make Whole Event:


Incremental Shares to be Delivered per
Warrant


	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Effective Date

 	
  

 
	

 


 	
  

 	

 


 	
  

 
	
 Stock

 Price

 	
  

 	
 July 15, 2011

 	
  

 	
 July 15, 2012

 	
  

 	
 July 15, 2013

 	
  

 	
 July 15, 2014

 	
  

 	
 July 15, 2015

 	
  

 	
 July 15, 2016

 	
  

 	
 July 15, 2017

 	
  

 
	

 


 	
  

 	

 


 	
  

 	

 


 	
  

 	

 


 	
  

 	

 


 	
  

 	

 



 	
  

 	

 


 	
  

 	

 


 	
  

 
	
 $

 	
 71.64

 	
  

 	
 0.0000

 	
  

 	
 0.0000

 	
  

 	
 0.0000

 	
  

 	
 0.0000

 	
  

 	
 0.0000

 	
  

 	
 0.0000

 	
  

 	
 0.0000

 	
  

 
	
  

 	
 75.00

 	
  

 	
 0.0358

 	
  

 	
 0.0380

 	
  

 	
 0.0387

 	
  

 	
 0.0361

 	
  

 	
 0.0271

 	
  

 	
 0.0083

 	
  

 	
 0.0000

 	
  

 
	
  

 	
 80.00

 	
  

 	
 0.0776

 	
  

 	
 0.0775

 	
  

 	
 0.0755

 	
  

 	
 0.0699

 	
  

 	
 0.0571

 	
  

 	
 0.0326

 	
  

 	
 0.0000

 	
  

 
	
  

 	
 85.00

 	
  

 	
 0.1167

 	
  

 	
 0.1149

 	
  

 	
 0.1109

 	
  

 	
 0.1031

 	
  

 	
 0.0880

 	
  

 	
 0.0602

 	
  

 	
 0.0000

 	
  

 
	
  

 	
 90.00

 	
  

 	
 0.1309

 	
  

 	
 0.1279

 	
  

 	
 0.1226

 	
  

 	
 0.1133

 	
  

 	
 0.0969

 	
  

 	
 0.0679

 	
  

 	
 0.0000

 	
  

 
	
  

 	
 95.00

 	
  

 	
 0.1136

 	
  

 	
 0.1097

 	
  

 	
 0.1035

 	
  

 	
 0.0934

 	
  

 	
 0.0765

 	
  

 	
 0.0479

 	
  

 	
 0.0000

 	
  

 
	
  

 	
 100.00

 	
  

 	
 0.0991

 	
  

 	
 0.0947

 	
  

 	
 0.0879

 	
  

 	
 0.0774

 	
  

 	
 0.0607

 	
  

 	
 0.0336

 	
  

 	
 0.0000

 	
  

 
	
  

 	
 120.00

 	
  

 	
 0.0610

 	
  

 	
 0.0559

 	
  

 	
 0.0489

 	
  

 	
 0.0393

 	
  

 	
 0.0260

 	
  

 	
 0.0087

 	
  

 	
 0.0000

 	
  

 
	
  

 	
 140.00

 	
  

 	
 0.0407

 	
  

 	
 0.0361

 	
  

 	
 0.0302

 	
  

 	
 0.0227

 	
  

 	
 0.0134

 	
  

 	
 0.0035

 	
  

 	
 0.0000

 	
  

 
	
  

 	
 160.00

 	
  

 	
 0.0288

 	
  

 	
 0.0251

 	
  

 	
 0.0204

 	
  

 	
 0.0148

 	
  

 	
 0.0085

 	
  

 	
 0.0023

 	
  

 	
 0.0000

 	
  

 
	
  

 	
 180.00

 	
  

 	
 0.0214

 	
  

 	
 0.0184

 	
  

 	
 0.0148

 	
  

 	
 0.0107

 	
  

 	
 0.0062

 	
  

 	
 0.0019

 	
  

 	
 0.0000

 	
  

 



          If
the Stock Price or Effective Date for a Make Whole Event are not set forth in
the table above, then: 


	
  

 	
  

 
	
  

 	
           (i)
 if the Stock Price is between two Stock Price amounts on the table or the
 Effective Date is between two Effective Dates on the table, the number of
 Additional Shares of Common Stock will be determined by straight-line
 interpolation between the number of Additional Shares of Common Stock set
 forth for the higher and lower Stock Price amounts and the two dates, as
 applicable, based on a 365-day year; 

 
	
  

 	
  

 
	
  

 	
           (ii)
 if the Stock Price is in excess of $180.00 per share (subject to adjustment
 as set forth in Section 4.04(c)), the number of Additional Shares of Common
 Stock will be zero; or 

 
	
  

 	
  

 
	
  

 	
           (iii)
 if the Stock Price less than $71.64 per share (subject to adjustment as set
 forth in Section 4.04(c)), the number of Additional Shares of Common Stock
 will be zero. 

 



          Notwithstanding
the foregoing, in no event will the Number of Warrant Shares, as increased by
the number of Additional Shares determined pursuant to this clause (b), exceed
1.1309 shares per Warrant, such number of shares being subject to adjustment in
a manner inversely proportional to adjustments to the Exercise Price.


                    (c)
The numbers of Additional Shares of Common Stock set forth in the table in
clause (b) of this Section 4.04 shall be adjusted, as of any date on which the
Exercise Price is adjusted, in a manner inversely proportional to adjustments
to the Exercise Price. The Stock Prices set forth in the table in clause (b) of
this Section 4.04 and the prices per share set forth in Section 4.04(b)(ii) and
(iii) shall be adjusted, as of any date on which the Exercise Price is 


-28-

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adjusted, to
equal the Stock Price or price per share applicable immediately prior to such
adjustment, multiplied by a
fraction of which: 


	
  

 	
  

 
	
  

 	
           (i)
 the numerator shall be the Exercise Price immediately prior to the
 adjustment; and 

 
	
  

 	
  

 
	
  

 	
           (ii)
 the denominator shall be shall be the Exercise Price as so adjusted. 

 



                    (d)
The Company shall provide written notice to all Holders of the anticipated
Effective Date of any Make Whole Event that the Company knows, or reasonably
should know, will occur at least 15 calendar days prior to such anticipated
Effective Date. 


                    (e)
The Company shall provide written notice to all Holders of record as of the
Effective Date of the Make Whole Event at their addresses shown in the Warrant
Register (and to beneficial owners to the extent required by applicable law) of
the occurrence of such Make Whole Event, the resulting adjustment to the Number
of Warrant Shares and the last date on which Holders may exercise their
Warrants in connection with such Make Whole Event (the “Make Whole Termination Date”), which shall
be a date that is not less than 20 nor more than 35 calendar days after the
date of the notice under this clause (e). 


          Section
4.05. Stockholder Rights Plans. To the extent that the Company has a
rights plan in effect upon exercise of the Warrants, each share of Common Stock
issued upon such exercise shall be entitled to receive the appropriate number
of rights, if any, and the certificates representing the Common Stock issued
upon such exercise shall bear such legends, if any, in each case as may be provided
by the terms of any such stockholder rights plan, as the same may be amended
from time to time. If at the time of exercise, however, the rights have
separated from the shares of Common Stock in accordance with the provisions of
the applicable stockholder rights plan so that the Holders would not be
entitled to receive any rights in respect of Common Stock issuable upon
exercise of the Warrants, the Exercise Price shall be adjusted at the time of
separation as if the Company distributed to all or substantially all holders of
Common Stock shares of Capital Stock of the Company, evidences of its
Indebtedness, other assets or property or rights, options or warrants to
acquire its Capital Stock or other securities as provided in Section 4.01(c),
subject to readjustment in the event of the expiration, termination or
redemption of such rights. 


          Section
4.06. Adjustment to Warrant Certificate. The form of Warrant Certificate
need not be changed because of any adjustment made pursuant to this Article IV,
and Warrant Certificates issued after such adjustment may state the same
Exercise Price and the same number of shares of Common Stock issuable upon
exercise of the Warrants as are stated in any Warrant Certificates issued prior
to such adjustment. The Company, however, may at any time in its sole
discretion make any change in the form of Warrant Certificate that it may deem
appropriate to give effect to such adjustments and that does not affect the
substance of the Warrant Certificate, and any Warrant Certificate thereafter
issued or countersigned, whether in exchange or substitution for an outstanding
Warrant Certificate or otherwise, may be in the form as so changed. 


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ARTICLE V


Warrant Agent


          Section
5.01. Appointment of Warrant Agent. The Company hereby appoints the
Warrant Agent to act as agent for the Company in accordance with the provisions
of this Agreement and the Warrant Agent hereby accepts such appointment. 


          Section
5.02. Rights and Duties of Warrant Agent. 


                    (a)
Agent for the Company. In acting under this Warrant Agreement and in
connection with the Warrant Certificates, the Warrant Agent is acting solely as
agent of the Company and does not assume any obligation or relationship or
agency or trust for or with any of the holders of Warrant Certificates or
beneficial owners of Warrants. All fees and expenses due the Warrant Agent
shall be paid to the Warrant Agent by the Company. The Warrant Agent shall have
no duty to determine which costs, if any, under this Agreement shall be borne
by the Holders or by the Company. 


                    (b)
Counsel. The Warrant Agent may consult with counsel satisfactory to it,
and the advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the advice of such counsel. 


                    (c)
Documents. The Warrant Agent shall be protected and shall incur no
liability for or in respect of any action taken by it in reliance upon any
Warrant Certificate, notice, direction, consent, certificate, affidavit,
statement or other paper or document reasonably believed by it to be genuine
and to have been presented or signed by the proper parties. 


                    (d)
No Implied Obligations. The Warrant Agent shall be obligated to perform
only such duties as are specifically set forth herein and in the Warrant
Certificates, and no implied duties or obligations of the Warrant Agent shall
be read into this Agreement or the Warrant Certificates against the Warrant
Agent. The Warrant Agent shall not be under any obligation to take any action
hereunder that may tend to involve it in any expense or liability for which it
does not receive indemnity if such indemnity is reasonably requested. The
Warrant Agent shall have no duty or responsibility in case of any default by
the Company in the performance of its covenants or agreements contained herein
or in the Warrant Certificates or in the case of the receipt of any written
demand from a Holder with respect to such default, including any duty or
responsibility to initiate or attempt to initiate any proceedings at law or
otherwise. 


                    (e)
Not Responsible for Adjustments or Validity of Stock. The Warrant Agent
shall not at any time be under any duty or responsibility to any Holder to
determine whether any facts exist that may require an adjustment of the number
of shares of Common Stock issuable upon exercise of each Warrant or the
Exercise Price, or with respect to the nature or extent of any adjustment when
made, or with respect to the method employed, or herein or in any supplemental
agreement provided to be employed, in making the same. The Warrant Agent shall
not be accountable with respect to the validity or value of any shares of
Common Stock or 


-30-

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of any
securities or property which may at any time be issued or delivered upon the
exercise of any Warrant or upon any adjustment pursuant to Article IV, and it
makes no representation with respect thereto. The Warrant Agent shall not be
responsible for any failure of the Company to make any cash payment or to
issue, transfer or deliver any shares of Common Stock upon the surrender of any
Warrant Certificate for the purpose of exercise. 


          Section
5.03. Individual Rights of Warrant Agent. The Warrant Agent and any
stockholder, director, officer or employee of the Warrant Agent may buy, sell
or deal in any of the Warrants or other securities of the Company or its
Affiliates or become pecuniarily interested in transactions in which the
Company or its Affiliates may be interested, or contract with or lend money to
the Company or its Affiliates or otherwise act as fully and freely as though it
were not the Warrant Agent under this Agreement. Nothing herein shall preclude
the Warrant Agent from acting in any other capacity for the Company or for any
other legal entity. 


          Section
5.04. Warrant Agent’s
Disclaimer. The Warrant Agent shall not be responsible for and makes no
representation as to the validity or adequacy of this Agreement or the Warrant
Certificates and it shall not be responsible for any statement in this
Agreement or the Warrant Certificates other than its countersignature thereon. 


          Section
5.05. Compensation and Indemnity. The Company agrees that the Warrant
Agent is entitled, from time to time, to reasonable compensation for its
services as agreed and to reimbursement for reasonable out-of-pocket expenses
incurred by it, including the reasonable compensation and expenses of the
Warrant Agent’s agents and counsel as agreed. The Company shall indemnify the
Warrant Agent, its officers, directors, agents and counsel against any loss,
liability or expense (including reasonable attorneys’ fees and expenses)
incurred by it without willful misconduct, gross negligence or bad faith on its
part arising out of or in connection with the acceptance or performance of its
duties under this Agreement. The Warrant Agent shall notify the Company
promptly of any claim for which it may seek indemnity, and the Company, at its
option, may control the defense of such claim with counsel of the Company’s
choice. The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Warrant Agent through willful misconduct,
gross negligence or bad faith. The Company’s
payment and indemnification obligations pursuant to this Section 5.05 shall
survive the termination of this Agreement. 


          Section
5.06. Successor Warrant Agent. 


                    (a)
Company to Provide and Maintain Warrant Agent. The Company agrees for
the benefit of the Holders that there shall at all times be a competent and
reputable Warrant Agent hereunder until all the Warrants have been exercised or
are no longer exercisable. 


                    (b)
Resignation and Removal. The Warrant Agent may at any time resign by
giving written notice to the Company of such intention on its part, specifying
the date on which its desired resignation shall become effective; provided, however, that such date shall
not be less than 60 days after the date on which such notice is given unless
the Company otherwise agrees in writing. The Warrant Agent hereunder may be
removed at any time by the filing with it of an instrument in writing signed by
or on behalf of the Company and specifying such removal and the date when it
shall become effective, which date shall not be less than 60 days after such 


-31-

A-35






notice is
given unless the Warrant Agent otherwise agrees in writing. Notwithstanding the
foregoing, any resignation or removal under this Section 5.06 shall take effect
upon the appointment by the Company as hereinafter provided of a successor
Warrant Agent (which shall be a bank or trust company authorized under the laws
of the jurisdiction of its organization to exercise corporate trust powers) and
the acceptance of such appointment by such successor Warrant Agent. 


                    (c)
The Company to Appoint Successor. In the event that at any time the
Warrant Agent shall resign, or shall be removed, or shall become incapable of
acting, or shall be adjudged bankrupt or insolvent, or shall commence a
voluntary case under the federal bankruptcy laws, as now or hereafter
constituted, or under any other applicable federal or state bankruptcy,
insolvency or similar law or shall consent to the appointment of or taking
possession by a receiver, custodian, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Warrant Agent or its property
or affairs, or shall make an assignment for the benefit of creditors, or shall
admit in writing its inability to pay its debts generally as they become due,
or shall take corporate action in furtherance of any such action, or a decree
or order for relief by a court shall have been entered in respect of the
Warrant Agent in an involuntary case under the federal bankruptcy laws, as now
or hereafter constituted, or any other applicable federal or state bankruptcy,
insolvency or similar law, or a decree or order by a court shall have been
entered for the appointment of a receiver, custodian, liquidator, assignee,
trustee, sequestrator (or similar official) of the Warrant Agent or of its
property or affairs, or any public officer shall take charge or control of the
Warrant Agent or of its property or affairs for the purpose of rehabilitation,
conservation, winding up or liquidation, a successor Warrant Agent, qualified
as aforesaid, shall be appointed by the Company by an instrument in writing,
filed with the successor Warrant Agent. Upon the appointment as aforesaid of a
successor Warrant Agent and acceptance by the successor Warrant Agent of such
appointment, the Warrant Agent shall cease to be Warrant Agent hereunder. 


                    (d)
Successor to Expressly Assume Duties. Any successor Warrant Agent
appointed hereunder shall execute, acknowledge and deliver to its predecessor
and to the Company an instrument accepting such appointment hereunder, and
thereupon such successor Warrant Agent, without any further act, deed or
conveyance, shall become vested with all the rights and obligations of such
predecessor with like effect as if originally named as Warrant Agent hereunder,
and such predecessor, upon payment of its charges and disbursements then
unpaid, shall thereupon become obligated to transfer, deliver and pay over, and
such successor Warrant Agent shall be entitled to receive, all monies,
securities and other property on deposit with or held by such predecessor, as
Warrant Agent hereunder. 


                    (e)
Successor by Merger. Any corporation into which the Warrant Agent
hereunder may be merged or consolidated, or any corporation resulting from any
merger or consolidation to which the Warrant Agent shall be a party, or any
corporation to which the Warrant Agent shall sell or otherwise transfer all or
substantially all of its assets and business, shall be the successor Warrant
Agent under this Agreement without the execution or filing of any paper or any
further act on the part of any of the parties hereto; provided, however, that such corporation
shall be qualified as aforesaid. 


-32-

A-36







ARTICLE VI


Miscellaneous


          Section
6.01. Persons Benefiting. Nothing in this Agreement is intended or shall
be construed to confer upon any Person other than the Company, the Warrant
Agent and the Holders any right, remedy or claim under or by reason of this
Agreement or any part hereof. 


          Section
6.02. Rights of Holders. Holders of unexercised Warrants, as such, have
no rights as stockholders and are not entitled to exercise any rights whatsoever
as stockholders of the Company, including, but not limited to the rights to (i)
receive dividends or other distributions except as expressly provided in this
Agreement, (ii) receive notice of or vote at any meeting of the stockholders,
(iii) consent to any action of the stockholders, (iv) receive notice of any
other proceedings of the Company, or (v) exercise any preemptive right. 


          Section
6.03. Amendment. This Agreement may be amended by the parties hereto
without the consent of any Holder for the purpose of curing any ambiguity, or
of curing, correcting or supplementing any defective or inconsistent provision
contained herein or adding or changing any other provisions with respect to
matters or questions arising under this Agreement as the Company and the
Warrant Agent may deem necessary or desirable; provided,
however, that such action shall not adversely affect the rights of
any of the Holders. Any amendment or supplement to this Agreement that has an
adverse effect on the interests of any of the Holders shall require the written
consent of the Holders of a majority of the then outstanding Warrants; provided further that the consent of each
Holder affected thereby shall be required for any amendment pursuant to which
(i) the Exercise Price would be changed (other than pursuant to adjustments
provided for in Article IV), (ii) the number of shares issuable upon exercise
of the Warrants would be decreased or the kind or amount of other property
issuable upon exercise of the Warrants would be changed or decreased, as
applicable (in each case, other than pursuant to adjustments provided for in
Article IV), (iii) the time period during which the Warrants are exercisable
would be shortened or the Holder’s right to exercise the Warrants would otherwise
be materially impaired or (iv) the percentage of Holders required to amend the
Warrants or this Agreement would be reduced. In determining whether the Holders
of the required number of Warrants have concurred in any direction, waiver or
consent, only Warrants outstanding at the time shall be considered in any such
determination, and Warrants known to the Warrant Agent to be owned by the
Company shall be disregarded and deemed not to be outstanding. The Company or
the Warrant Agent may set a record date for any such direction, waiver or
consent and only the Holders as of such record date shall be entitled to make
or give such direction, waiver or consent. 


          Section
6.04. Notices. Any notice or communication shall be in writing and
delivered in Person or mailed by first-class mail addressed as follows: 


          if
to the Company: 


	
  

 	
  

 
	
  

 	
 Legg Mason,
 Inc.

 
	
  

 	
 100
 International Drive

 
	
  

 	
 Baltimore,
 Maryland 21202

 


-33-

A-37










	
  

 	
  

 
	
  

 	
 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:
 646-848-7707

 






	
  

 	
  

 
	
           if
 to the Warrant Agent:

 
	
  

 	
  

 
	
  

 	
 American
 Stock Transfer & Trust Company, LLC

 
	
  

 	
 6201 15th Avenue

 
	
  

 	
 Brooklyn,
 New York 11219

 
	
  

 	
 Telephone:
 718-921-8317 or 877-248-6417

 
	
  

 	
 Facsimile:
 718-234-5001

 
	
  

 	
 Attention:
 Corporate Reorg Department

 
	
  

 	
  

 
	
  

 	
 with a copy
 (which shall not constitute notice) to:

 
	
  

 	
  

 
	
  

 	
 American
 Stock Transfer & Trust Company, LLC

 
	
  

 	
 6201 15th
 Avenue

 
	
  

 	
 Brooklyn,
 New York 11219

 
	
  

 	
 Attention:
 General Counsel

 



          The
Company or the Warrant Agent each by notice to the other may designate
additional or different addresses for subsequent notices or communications. 


          Any
notice or communication mailed to a Holder shall be mailed to the Holder at the
Holder’s address as it appears on the Warrant Register and shall be
sufficiently given if so mailed within the time prescribed. 


          Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders. If a notice or
communication is mailed in the manner provided above, it is duly given, whether
or not the addressee receives it. 


          Section
6.05. Governing Law. This Agreement, the Warrant Certificates and the
Warrants will be governed by and construed in accordance with the laws of the
State of New York. 


          Section
6.06. Successors. All agreements of the Company in this Agreement and
the Warrant Certificates shall bind its successors. All agreements of the
Warrant Agent in this Agreement shall bind its successors. 


-34-

A-38







          Section
6.07. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together constitute one and the same instrument. 


          Section
6.08. Severability. The provisions of this Agreement are severable, and
if any clause or provision shall be held invalid, illegal or unenforceable in
whole or in part in any jurisdiction, then such invalidity or unenforceability
shall affect in that jurisdiction only such clause or provision, or part
thereof, and shall not in any manner affect such clause or provision in any
other jurisdiction or any other clause or provision of this Agreement in any
jurisdiction. 


          Section
6.09. Withholding. The Company agrees that, as of the date hereof,
applicable law does not require or impose any withholding or reduction for any
tax or other governmental charge upon the distribution of the Warrants, and
that the distribution of the Warrants shall be made free and clear of, and
without reduction or withholding for, any tax or other governmental charge
unless a change to applicable law requiring such a withholding or reduction
occurs between the date hereof and the Closing Date (in which case the Company
shall provide prompt notice of such change of law to the Holders). In the event
of such a change of law, the Company, the Warrant Agent or their agents shall
be entitled, but not obligated, to deduct and withhold the amount so required
by withholding a portion or all of the Warrants otherwise deliverable in such
amounts as they deem necessary to meet their withholding obligations, and shall
also be entitled, but not obligated, to sell all or a portion of such withheld
Warrants by public or private sale in such amounts and in such manner as they
deem necessary and practicable to pay such taxes and charges. To the extent
that Warrants are so withheld, (i) the Company, the Warrant Agent or their
agents, as applicable, shall remit to the applicable tax authority the amount
required to be withheld from such distribution, and (ii) the withheld Warrants
shall be treated for all purposes of this Agreement as having been distributed to
the Holders in respect of which such deduction and withholding was made. 


          Section
6.10. Holder Tax Certification. Each Holder shall render to the Company
no later than the Closing Date an Internal Revenue Service Form W-9, W-8BEN or
W-8IMY, as appropriate, duly executed by an officer of such Holder. 


-35-

A-39






          IN
WITNESS WHEREOF, the parties have caused this Warrant Agreement to be duly
executed as of the date first written above. 


	
  

 	
  

 	
  

 
	
  

 	
 LEGG MASON,
 INC.,

 
	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
  

 
	
  

 	
  

 	

 


 
	
  

 	
 Name:

 
	
  

 	
 Title:

 
	
  

 	
  

 	
  

 
	
  

 	
 AMERICAN
 STOCK TRANSFER & TRUST

 
	
  

 	
 COMPANY,
 LLC,

 
	
  

 	
 as Warrant
 Agent,

 
	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
  

 
	
  

 	
  

 	

 


 
	
  

 	
 Name:

 
	
  

 	
 Title:

 










EXHIBIT A 


[FORM OF WARRANT]


[INCLUDE FOLLOWING GLOBAL SECURITIES LEGEND
IF A GLOBAL WARRANT]


          [UNLESS
THIS GLOBAL WARRANT IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.,
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN. 


          TRANSFERS
OF THIS GLOBAL WARRANT SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART,
TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSORS NOMINEE AND
TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE WARRANT AGREEMENT
REFERRED TO BELOW.] 


[INCLUDE FOLLOWING LEGEND IF A RESTRICTED
SECURITY]


          [THIS
SECURITY AND THE COMMON STOCK, IF ANY, ISSUABLE UPON EXERCISE OF THIS SECURITY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE
ACQUIRER: 


	
  

 	
  

 
	
  

 	
           (1)
 REPRESENTS THAT IT AND ANY ACCOUNT FOR WHICH IT IS ACTING IS A “QUALIFIED
 INSTITUTIONAL BUYER” (WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES
 ACT) AND THAT IT EXERCISES SOLE INVESTMENT DISCRETION WITH RESPECT TO EACH
 SUCH ACCOUNT; AND 

 
	
  

 	
  

 
	
  

 	
           (2)
 AGREES FOR THE BENEFIT OF THE COMPANY THAT IT WILL NOT OFFER, SELL, PLEDGE OR
 OTHERWISE TRANSFER THIS SECURITY OR ANY BENEFICIAL INTEREST HEREIN PRIOR TO
 THE DATE THAT IS THE LATER OF (X) ONE YEAR AFTER THE ISSUE DATE HEREOF OR
 SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144 UNDER THE SECURITIES ACT
 OR ANY SUCCESSOR PROVISION THERETO, AND (Y) SUCH LATER DATE, IF ANY, AS MAY
 BE REQUIRED BY APPLICABLE LAW, EXCEPT: 

 














	
  

 	
  

 
	
  

 	
           (A) TO
 LEGG MASON, INC. (THE “COMPANY”)
 OR ANY SUBSIDIARY THEREOF; OR 

 
	
  

 	
  

 
	
  

 	
           (B)
 PURSUANT TO A REGISTRATION STATEMENT THAT HAS BECOME EFFECTIVE UNDER THE
 SECURITIES ACT; OR 

 
	
  

 	
  

 
	
  

 	
           (C) TO A
 QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
 SECURITIES ACT; OR 

 
	
  

 	
  

 
	
  

 	
           (D)
 PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
 SECURITIES ACT OR ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
 REQUIREMENTS OF THE SECURITIES ACT. 

 



          PRIOR
TO THE REGISTRATION OF ANY TRANSFER IN ACCORDANCE WITH (2)(D) ABOVE, THE
COMPANY AND THE WARRANT AGENT RESERVE THE RIGHT TO REQUIRE THE DELIVERY OF SUCH
LEGAL OPINIONS, CERTIFICATIONS OR OTHER EVIDENCE AS MAY REASONABLY BE REQUIRED
IN ORDER TO DETERMINE THAT THE PROPOSED TRANSFER IS BEING MADE IN COMPLIANCE
WITH THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. NO REPRESENTATION
IS MADE AS TO THE AVAILABILITY OF ANY EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.] 










	
  

 	
  

 
	
 No.
 [     ]

 	
 Certificate [initially]2 for
 [     ] Warrants

 


WARRANTS TO PURCHASE COMMON STOCK OF

LEGG MASON, INC.


          THIS
CERTIFIES THAT [CEDE & CO.]3
[                    ]4,
or its registered assigns, is the registered holder of [the number of warrants
as set forth in the “Schedule of Increases or Decreases in Global Security”
attached hereto, in accordance with the rules of the Depositary]5
[the number of Warrants set forth above]6 (the “Warrants”). Each Warrant entitles the
holder thereof (the “Holder”), at
its option and subject to the provisions contained herein and in the Warrant
Agreement referred to below, to purchase from LEGG MASON, INC., a Maryland
corporation (including any successor thereto, the “Company”), a number of shares of common stock, par value of
$0.10 per share, of the Company (the “Common
Stock”) equal to the Number of Warrant Shares, at the per share
exercise price of $[88.00]7 (as such exercise price may be adjusted
pursuant to Article IV of the Warrant Agreement, the “Exercise Price”). This Warrant Certificate
shall terminate as of 5:00 p.m., New York time, on July 15, 2017 (the “Expiration Date”) or upon the exercise or
deemed exercise hereof as to all the shares of Common Stock subject hereto. The
number of shares issuable upon exercise of the Warrants and the Exercise Price
per share shall be subject to adjustment from time to time as set forth in the
Warrant Agreement. 


          This
Warrant Certificate is issued under and in accordance with a Warrant Agreement,
dated as of
[               ],
20[   ] (the “Warrant
Agreement”), between the Company and American Stock Transfer &
Trust Company, LLC (the “Warrant Agent”,
which term includes any successor Warrant Agent under the Warrant Agreement),
and is subject to the terms and provisions contained in the Warrant Agreement,
to all of which terms and provisions the Holder of this Warrant Certificate
consents by acceptance hereof. The Warrant Agreement is hereby incorporated
herein by reference and made a part hereof. Reference is hereby made to the
Warrant Agreement for a full statement of the respective rights, limitations of
rights, duties and obligations of the Company, the Warrant Agent and the
Holders of the Warrants. Capitalized terms used but not defined herein shall
have the meanings ascribed thereto in the Warrant Agreement. A copy of the
Warrant Agreement may be obtained for inspection by the Holder 




2 Insert for a Global Warrant. 


3 Insert for a Global Warrant. 


4 Insert for a Definitive Warrant. 


5 Inset for a Global Warrant. 


6 Insert for a Definitive Warrant. 


7 Subject to adjustment pursuant to Section
5.7 of the Note Exchange Agreement. 






hereof upon
written request to the Warrant Agent, 6201 15th Avenue, Brooklyn, New York
11219, Telephone: 718-921-8200, Attention: Corporate Trust Department. 


          Subject
to the terms of the Warrant Agreement, the Holder may exercise the Warrants at
its option in whole or in part. As provided in the Warrant Agreement and
subject to the terms and conditions therein set forth, the Warrants shall be
exercisable at any time and from time to time on any Business Day on and after
the Issue Date. Any Warrants that have not been exercised prior to 5:00 p.m.,
New York time, on the Expiration Date shall be deemed to be exercised by the
Holder thereof immediately prior to such time on the Expiration Date in
accordance with Section 3.04(b) of the Warrant Agreement. 


          No
fractional shares of Common Stock will be issued upon the exercise of the
Warrants, but the Company shall pay an amount in cash equal to the VWAP of the
Common Stock on the last Trading Day of the Observation Period, multiplied by the fraction of a share of
Common Stock that would be issuable on the exercise of any Warrant, computed to
the nearest whole cent. 


          All
shares of Common Stock issuable by the Company upon the exercise of the
Warrants shall, upon such issue, be duly and validly issued and fully paid and
non-assessable. 


          The
Warrants do not entitle any Holder hereof to any of the rights of a stockholder
of the Company. 


          The
Warrants, and any claim, controversy or dispute arising under or related to the
Warrants, shall be construed in accordance with and governed by the laws of the
State of New York. 


          In
the case of any conflict between this Warrant Certificate and the Warrant
Agreement, the provisions of the Warrant Agreement shall control and govern. 


 [Remainder of page intentionally left blank]







          IN WITNESS
WHEREOF, the Company has caused this Warrant Certificate to be duly executed. 


	
  

 	
  

 	
  

 
	
  

 	
 LEGG MASON,
 INC., 

 
	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
  

 
	
  

 	
  

 	

 


 
	
  

 	
 Name:

 	
  

 
	
  

 	
 Title:

 	
  

 










          This
Warrant Certificate shall not be valid or obligatory for any purpose until it
shall have been countersigned by the Warrant Agent. 


DATED: 


Countersigned:



AMERICAN STOCK
TRANSFER &

TRUST COMPANY, LLC,

as Warrant Agent, 


	
  

 	
  

 	
  

 
	
 By:

 	
  

 	
  

 
	
  

 	

 


 	
  

 
	
  

 	
 Authorized
 Signatory

 	
  

 











ATTACHMENT 1 


FORM OF NOTICE OF EXERCISE
(to be executed only upon exercise of Warrants)


LEGG MASON, INC. 


          The
undersigned hereby irrevocably elects to exercise_________________Warrants to
acquire shares of Common Stock, par value $0.10 per share, of LEGG MASON, INC.
(the “Common Stock”), or cash in lieu of such shares at the Company’s election,
at an exercise price per share of Common Stock of $[88.00]8 (as such
exercise may be adjusted pursuant to Article IV of the Warrant Agreement) and
otherwise on the terms and conditions specified in the within Warrant
Certificate and the Warrant Agreement therein referred to, surrenders all
right, title and interest in the number of Warrants exercised hereby to LEGG
MASON, INC. and directs that the cash or shares of Common Stock payable or
deliverable upon the exercise of such Warrants, and interests in any Global
Warrant or Definitive Warrant representing unexercised Warrants, be registered
or placed in the name and at the address specified below and delivered thereto.
If other than the registered holder of the Warrants, the undersigned must pay
all transfer taxes, assessments or similar governmental charges in connection
with any such transfer or exchange.  


	
  

 	
  

 	
  

 
	
 Date:

 	
  

 	
  

 
	
  

 	

 


 	
  

 






	
  

 	
  

 	
  

 
	
  

 	
  

 	
 9

 
	
  

 	

 


 	
  

 
	
  

 	
 (Signature
 of Owner)

 	
  

 
	
  

 	
  

 	
  

 
	
  

 	

 


 	
  

 
	
  

 	
 (Street
 Address)

 	
  

 
	
  

 	
  

 	
  

 
	
  

 	

 


 	
  

 
	
  

 	
 (City)
 (State) (Zip Code)

 	
  

 
	
  

 	
  

 	
  

 
	
  

 	
 Medallion
 Guarantee by:

 	
  

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 
	
  

 	

 


 	
  

 
	
  

 	
  

 	
  

 






	
  

 	
  

 	
  

 
	

 


 	
  

 
	
 8

 	
 Subject to
 adjustment pursuant to Section 5.7 of the Note Exchange Agreement. 

 
	
  

 	
  

 
	
 9

 	
 The
 signature must correspond with the name as written upon the face of the
 within Warrant Certificate in every particular, without alteration or
 enlargement or any change whatever, and must be medallion guaranteed by an
 eligible guarantor institution. 

 














	
  

 	
  

 
	
 Securities
 and/or check to be issued to: 

 
	
  

 	
  

 
	
 If held in
 book-entry form through the Depository: 

 
	
  

 	
  

 
	
  

 	
 Depository
 Account Number: 

 
	
  

 	
  

 
	
  

 	
 Name of
 Agent Member: 

 
	
  

 	
  

 
	
 If in
 definitive form: 

 
	
  

 	
  

 
	
  

 	
 Social
 security or identifying number:

 
	
  

 	
  

 
	
  

 	
 Name: 

 
	
  

 	
  

 
	
  

 	
 Street
 Address:

 
	
  

 	
  

 
	
  

 	
 City, State
 and Zip Code: 

 
	
  

 	
  

 
	
 Any
 unexercised Warrants evidenced by the exercising Holder’s interest in the
 Global Warrant or Definitive Warrant, as the case may be, to be issued to: 

 
	
  

 	
  

 
	
 If in
 book-entry form through the Depository:

 
	
  

 	
  

 
	
  

 	
 Depository
 Account Number: 

 
	
  

 	
  

 
	
  

 	
 Name of
 Agent Member:

 
	
  

 	
  

 
	
 If in
 definitive form:

 
	
  

 	
  

 
	
  

 	
 Social
 security or identifying number:

 
	
  

 	
  

 
	
  

 	
 Name: 

 
	
  

 	
  

 
	
  

 	
 Street
 Address:

 
	
  

 	
  

 
	
  

 	
 City, State
 and Zip Code:

 










FORM OF ASSIGNMENT AND TRANSFER


          For
value received, the undersigned hereby sells, assigns and transfers
unto_________________ _________________________ (_______ ) warrants
(“Warrants”) to purchase shares of common stock, par value $0.10 per share, of
LEGG MASON, INC. (the “Company”) evidenced by the attached Warrant Certificate
and does hereby irrevocably constitute and appoint _____________attorney to
transfer the Warrant, or such portion as is transferred hereby, on the books of
the Company with full power of substitution in the premises. The undersigned
requests said attorney to issue to the transferee a Warrant Certificate
evidencing such transfer and to issue to the undersigned a new Warrant
Certificate evidencing Warrants for the balance not so transferred, if any.  


In connection
with any transfer of the within Warrant occurring prior to the Resale Restriction
Termination Date, as defined in the Warrant Agreement governing such Warrant,
the undersigned confirms that such Warrant is being transferred: 


o To Legg Mason, Inc. or a subsidiary thereof; or 


o  Pursuant to a registration statement that has
become or been declared effective under the Securities Act of 1933, as amended;
or 


o Pursuant to and in compliance with Rule 144A
under the Securities Act of 1933, as amended; or 


o Pursuant to and in compliance with Rule 144
under the Securities Act of 1933, as amended, or any other available exemption
from the registration requirements of the Securities Act of 1933, as amended. 


	
  

 	
  

 	
  

 
	
 Date:

 	
  

 	
  

 
	
  

 	

 


 	
  

 






	
  

 	
  

 	
  

 
	
  

 	
  

 	
 10

 
	
  

 	

 


 	
  

 
	
  

 	
 (Signature
 of Owner)

 	
  

 
	
  

 	
  

 	
  

 
	
  

 	

 


 	
  

 
	
  

 	
 (Street
 Address)

 	
  

 
	
  

 	
  

 	
  

 
	
  

 	

 


 	
  

 








	
  

 	
  

 	
  

 
	

 


 	
  

 
	
 10

 	
 The
 signature must correspond with the name as written upon the face of the
 within Warrant Certificate in every particular, without alteration or
 enlargement or any change whatever, and must be medallion guaranteed by an
 eligible guarantor institution. 

 














	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (City)
 (State) (Zip Code)

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Medallion
 Guarantee by:

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	

 


 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
 Name in
 which new Warrant(s) should be registered:

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	

 


 	
  

 	
  

 	
  

 
	
 (Name)

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	

 


 	
  

 	
  

 	
  

 
	
 (Street
 Address)

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	

 


 	
  

 	
  

 	
  

 
	
 (City)
 (State) (Zip Code)

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	

 


 	
  

 	
  

 	
  

 
	
 (social
 security or identifying number)

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 










SCHEDULE OF INCREASES OR DECREASES IN GLOBAL
SECURITY11


The initial
number of Warrants represented by the Global Warrants is
[     ]. 


The following
increases or decreases in this Global Security have been made: 


	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Date of

 Exercise or

 Exchange

 	
  

 	
 Decrease in

 number of

 Warrants in this

 Global Warrant

 Certificate

 	
  

 	
 Increase in

 number of

 Warrants in this

 Global Warrant

 Certificate

 	
  

 	
 Number of

 Warrants in this

 Global Warrant

 Certificate

 following such

 change

 	
  

 	
 Signature of

 authorized

 officer of

 Warrant Agent

 
	

 


 	
  

 	

 


 	
  

 	

 


 	
  

 	

 


 	
  

 	

 


 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 






	
  

 	
  

 	
  

 
	

 


 	
  

 
	
 11

 	
 To be
 included only if Warrants are in global form. 

 










EXHIBIT B


FORM OF REGISTRATION RIGHTS AGREEMENT



B-1







REGISTRATION RIGHTS AGREEMENT


by and between


LEGG MASON, INC.


and


KKR I-L LIMITED


 [                 ],
20[    ]



B-2






TABLE OF CONTENTS


	
  

 	
  

 	
  

 	
  

 	
  

 
	
 1.

 	
 Definitions

 	
  

 	
 1

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 2.

 	
 Registration
 Under the 1933 Act

 	
  

 	
 4

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 2.1

 	
 Shelf
 Registration

 	
  

 	
 4

 
	
  

 	
 2.2

 	
 Expenses

 	
  

 	
 7

 
	
  

 	
 2.3

 	
 Effectiveness

 	
  

 	
 7

 
	
  

 	
 2.4

 	
 Suspension

 	
  

 	
 7

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 3.

 	
 Registration
 Procedures

 	
  

 	
 8

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 4.

 	
 Indemnification;
 Contribution

 	
  

 	
 11

 
	
  

 	
  

 	
  

 	
  

 
	
 5.

 	
 Distributions
 by Holders

 	
  

 	
 15

 
	
  

 	
  

 	
  

 	
  

 
	
 6.

 	
 Miscellaneous

 	
  

 	
 19

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 6.1

 	
 No
 Inconsistent Agreements

 	
  

 	
 19

 
	
  

 	
 6.2

 	
 Amendments
 and Waivers

 	
  

 	
 19

 
	
  

 	
 6.3

 	
 Notices

 	
  

 	
 20

 
	
  

 	
 6.4

 	
 Successors

 	
  

 	
 20

 
	
  

 	
 6.5

 	
 Third Party
 Beneficiaries

 	
  

 	
 21

 
	
  

 	
 6.6

 	
 Specific
 Enforcement

 	
  

 	
 21

 
	
  

 	
 6.7

 	
 Counterparts

 	
  

 	
 21

 
	
  

 	
 6.8

 	
 Headings

 	
  

 	
 21

 
	
  

 	
 6.9

 	
 GOVERNING
 LAW

 	
  

 	
 21

 
	
  

 	
 6.10

 	
 Severability

 	
  

 	
 21

 
	
  

 	
 6.11

 	
 Entire
 Agreement

 	
  

 	
 21

 
	
  

 	
 6.12

 	
 Interpretation

 	
  

 	
 21

 






B-3







INDEX OF DEFINED TERMS


	
  

 	
  

 	
  

 
	
 1933 Act

 	
  

 	
 1

 
	
 1934 Act

 	
  

 	
 1

 
	
 Affiliate

 	
  

 	
 1

 
	
 Agreement

 	
  

 	
 1

 
	
 Automatic
 Shelf Registration Statement

 	
  

 	
 1

 
	
 Beneficially
 Own

 	
  

 	
 1

 
	
 Business Day

 	
  

 	
 1

 
	
 Closing Date

 	
  

 	
 1

 
	
 Common Stock

 	
  

 	
 2

 
	
 Company

 	
  

 	
 1

 
	
 Company
 Supported Distribution

 	
  

 	
 2

 
	
 Delay Period

 	
  

 	
 15

 
	
 Depositary

 	
  

 	
 2

 
	
 Effectiveness
 Period

 	
  

 	
 2

 
	
 Expiration
 Date

 	
  

 	
 2

 
	
 Free Writing
 Prospectus

 	
  

 	
 2

 
	
 Holder

 	
  

 	
 2

 
	
 indemnified
 party

 	
  

 	
 11

 
	
 Initial
 Purchaser

 	
  

 	
 2

 
	
 Issuer Free
 Writing Prospectus

 	
  

 	
 2

 
	
 KKR Holder

 	
  

 	
 1

 
	
 Majority
 Holders

 	
  

 	
 2

 
	
 Note
 Exchange Agreement

 	
  

 	
 1

 
	
 Notes

 	
  

 	
 1

 
	
 Number of
 Warrant Shares

 	
  

 	
 2

 
	
 Person

 	
  

 	
 3

 
	
 Pre-Announcement
 Periods

 	
  

 	
 16

 
	
 Prospectus

 	
  

 	
 3

 
	
 Questionnaire

 	
  

 	
 5

 
	
 Registrable
 Securities

 	
  

 	
 3

 
	
 Registration
 or Offering Expenses

 	
  

 	
 3

 
	
 Rule 144A

 	
  

 	
 3

 
	
 SEC

 	
  

 	
 4

 
	
 Securities

 	
  

 	
 1

 
	
 Sellers

 	
  

 	
 1

 
	
 Shelf
 Registration

 	
  

 	
 4

 
	
 Shelf
 Registration Statement

 	
  

 	
 4

 
	
 Sponsor

 	
  

 	
 4

 
	
 Substantial
 Distribution

 	
  

 	
 4

 
	
 Suspension
 Period

 	
  

 	
 7

 
	
 Threshold
 Amount

 	
  

 	
 4

 
	
 Underwriter

 	
  

 	
 4

 
	
 Warrant
 Agent

 	
  

 	
 4

 
	
 Warrant
 Agreement

 	
  

 	
 4

 
	
 Warrants

 	
  

 	
 1

 
	
 Well-Known
 Seasoned Issuer

 	
  

 	
 4

 


- ii -

B-4






REGISTRATION RIGHTS AGREEMENT


          REGISTRATION
RIGHTS AGREEMENT (this “Agreement”), dated as of
[               ],
20[    ], by and between LEGG MASON, INC., a Maryland
corporation (the “Company”), and KKR I-L LIMITED (the “KKR Holder”).


          This
Agreement is made pursuant to the Note Exchange Agreement, dated
[               ],
20[    ] (the “Note Exchange Agreement”), by
and among the Company, the Holders named on Schedule I thereto (the “Sellers”)
and, for limited purposes, the Sponsor (as defined below), which provides for
the repurchase by the Company from the Sellers of $1,250,000,000 aggregate
principal amount of the Company’s 2.50% Convertible Senior Notes due 2015 (the
“Notes”). In consideration of the repurchase of the Notes, the
Termination (as defined in the Note Exchange Agreement) and the amendment of
certain agreements that were entered into when the Notes were issued, the
Company desires to issue to the KKR Holder, Citibank, N.A., Credit Suisse
International and HSBC Bank USA, National Association warrants (“Warrants”)
to purchase shares of the Company’s Common Stock (as defined below). The
Warrants, together with the shares of Common Stock deliverable upon exercise of
the Warrants, are referred to herein as the “Securities.” In order to
induce the KKR Holder to enter into the Note Exchange Agreement, the Company
has agreed to provide the registration rights set forth in this Agreement. The
execution of this Agreement is a condition to the closing under the Note
Exchange Agreement.


          In
consideration of the foregoing, the parties hereto agree as follows: 


          1.
Definitions. 


          As
used in this Agreement, the following capitalized defined terms shall have the
following meanings:


          “1933
Act” shall mean the Securities Act of 1933, as amended.


          “1934
Act” shall mean the Securities Exchange Act of l934, as amended.


          “Affiliate”
shall have the meaning given to it in the Note Exchange Agreement.


          “Automatic
Shelf Registration Statement” shall have the meaning set forth in Rule 405
of the 1933 Act.


          “Beneficially
Own” or “Beneficial Ownership” shall have the meaning set forth in
Rule 13d-3 of the rules and regulations promulgated under the Exchange Act.


          “Business
Day” shall mean any calendar day on which the New York Stock Exchange, the
NASDAQ Global Select Market, the NASDAQ Global Market and the Securities and
Exchange Commission are open for trading or business, as the case may be.


          “Closing
Date” shall have the meaning given to it in the Note Exchange Agreement. 


-1-

B-5







          “Common
Stock” shall mean any shares of common stock, $0.10 par value, of the
Company and any other shares of common stock as may constitute “Common Stock”
for purposes of the Warrant Agreement.


          “Company
Supported Distribution” means a distribution of Warrants or Common Stock
that are Registrable Securities in connection with which Holders have invoked
their rights for cooperation from the Company under Section 5 of this
Agreement. 


          “Depositary”
shall mean The Depository Trust Company and its successors or assigns, or any
other depositary appointed by the Company; provided,
however, that such appointed depositary must have an address in the
Borough of Manhattan, in The City of New York, unless no such depositary is
available.


          “Effectiveness
Period” shall mean the period beginning on the date the Shelf Registration
Statement is effective pursuant to Section 2.1 hereof and ending on the earlier
of (i) such time as all the Securities cease to be Registrable Securities and
(ii) the date that is 90 days following the Expiration Date.


          “Expiration
Date” shall have the meaning given to it in the Warrant Agreement.


          “Free
Writing Prospectus” shall have the meaning set forth in Rule 405 of the 1933
Act.


          “Holder”
shall mean the KKR Holder, for so long as it owns any Registrable Securities,
and each Affiliate of the Sponsor or the KKR Holder that Beneficially Owns
Registrable Securities.


          “Initial
Purchaser” shall mean an initial purchaser or placement agent in connection
with the offer or sale of Securities pursuant to a Company Supported
Distribution effected under Rule 144A.


          “Issuer
Free Writing Prospectus” shall have the meaning set forth in Rule 433 of
the 1933 Act.


          “Majority
Holders” shall mean Holders holding over 50% of the aggregate number of
Warrants constituting Registrable Securities outstanding; provided that, for the purpose of this
definition, a holder of shares of Common Stock delivered upon exercise of the
Warrants, shall be deemed to hold an aggregate number of Warrants (in addition
to the number of Warrants held by such holder) equal to the quotient of (A) the
number of such shares of Common Stock held by such holder and (B) the Number of
Warrant Shares in effect at the time of the exercise of the Warrants as
determined in accordance with the Warrant Agreement; provided further that whenever the consent or approval of
the Majority Holders or of a specified percentage of the Holders of Registrable
Securities is required hereunder, Warrants or Common Stock delivered upon
exercise of the Warrants that are held by the Company or any Subsidiary of the
Company shall be disregarded, and Warrants held by any Holder shall be included
in determining whether such consent or approval was given by the Majority
Holders or such specified percentage of the Holders of Registrable Securities.


          “Number
of Warrant Shares” shall have the meaning set forth in the Warrant
Agreement. 


-2-

B-6






          “Person”
shall mean an individual, partnership (general or limited), corporation,
limited liability company, trust, unincorporated organization or other entity,
or a government or agency or political subdivision thereof.


          “Prospectus”
shall mean the prospectus relating to the Securities included in a Shelf
Registration Statement, including any preliminary prospectus, and any such
prospectus as amended or supplemented by any prospectus supplement, including
any such prospectus supplement with respect to the terms of the offering of any
portion of the Registrable Securities covered by a Shelf Registration
Statement, and by all other amendments and supplements to a prospectus,
including post-effective amendments, and in each case including all materials
incorporated by reference therein.


          “Registrable
Securities” shall mean all or any of the Securities; provided, however, that such Securities
shall cease to be Registrable Securities when (i) a Shelf Registration
Statement with respect to such Securities shall have become effective under the
1933 Act and such Securities shall have been sold or transferred pursuant to
such Shelf Registration Statement, (ii) such Securities have been transferred
in compliance with Rule 144 under the 1933 Act (or any successor provision
thereto), or (iii) such Securities shall have ceased to be outstanding.


          “Registration
or Offering Expenses” shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including: (i)
all SEC registration and filing fees, (ii) in the case of a Company Supported
Distribution for the benefit of the Holders, all reasonable fees and expenses
incurred in connection with compliance with state securities or blue sky laws
(including reasonable fees and disbursements of one counsel for any
Underwriters, Initial Purchasers or Holders in connection with blue sky
qualification of any of the Registrable Securities), (iii) all expenses of the
Company in preparing or assisting in preparing, word processing, printing and
distributing any Shelf Registration Statement and any Prospectus, and, in the
case of a Company Supported Distribution, any offering or information
memorandum, any amendments or supplements thereto, any securities sales
agreements and any other documents relating to the performance of and
compliance with this Agreement, (iv) all fees and expenses incurred in
connection with the listing, if any, of any of the Registrable Securities on
any securities exchange or exchanges, (v) all rating agency fees, if any, (vi)
the fees and disbursements of counsel for the Company and of the independent
public accountants of the Company, including, in the case of a Company
Supported Distribution, the expenses of any “comfort letters”, (vii) the
reasonable fees and expenses of the Warrant Agent, and any escrow agent or
custodian, and (viii) the reasonable fees and expenses of a single counsel to
the Holders in connection with the Shelf Registration Statement and in
connection with a Company Supported Distribution, which counsel shall be
selected by the Majority Holders, but excluding any underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a Holder and, except as provided under clause (viii)
above, all reasonable expenses and fees for all counsel and other professionals
representing the Holders in connection with the sale or disposition of
Registrable Securities.


          “Rule
144A” means Rule 144A under the 1933 Act. 


-3-

B-7






          “SEC”
shall mean the Securities and Exchange Commission or any successor agency or
government body performing the functions currently performed by the United
States Securities and Exchange Commission.


          “Shelf
Effectiveness Deadline” shall mean the date 180 days after the Closing
Date.


          “Shelf
Registration” shall mean a registration effected pursuant to Section 2.1.


          “Shelf
Registration Statement” shall mean a “shelf” registration statement of the
Company pursuant to the provisions of Section 2.1 of this Agreement which
covers all of the Registrable Securities on an appropriate form under Rule 415
under the 1933 Act, or any similar rule that may be adopted by the SEC, and all
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all materials incorporated by reference
therein; provided, however, that
a registration statement shall not be deemed a Shelf Registration Statement
until such time as it includes a Prospectus relating to the Securities.


          “Sponsor”
shall mean Kohlberg Kravis Roberts & Co. L.P.


          “Substantial
Distribution” shall mean an offer and sale of Securities that are
Registrable Securities of at least the Threshold Amount by one or more Holders
to purchasers that are not Affiliates of the Company (other than the Sponsor or
its Affiliates to the extent they are deemed to be “Affiliates” of the Company
at such time), where such offer and sale is made pursuant to either Rule 144A
or pursuant to a bona fide public offering made pursuant to the Shelf
Registration Statement.


          “Threshold
Amount” shall mean, with respect to an offer and sale of Securities that
are Registrable Securities, an aggregate of at least 4,687,500 Warrants
(calculated, with respect to Common Stock as set forth in the definition of
“Majority Holders”); provided, however, if the proposed offer and sale
of Securities relates to all of the Securities held by a Holder and its
Affiliates, “Threshold Amount” shall mean an aggregate of at least 1,420,454 Warrants.


          “Warrant
Agent” shall have the meaning set forth in the Warrant Agreement.


          “Warrant
Agreement “ means the Warrant Agreement dated as of the date hereof between
the Company and the Warrant Agent.


          “Underwriter”
shall mean an underwriter, as defined in the 1933 Act, of the Securities in
connection with an offering thereof under a Shelf Registration Statement
pursuant to and in accordance with a Company Supported Distribution.


          “Well-Known
Seasoned Issuer” shall have the meaning set forth in Rule 405 of the 1933
Act. 


          2.
Registration Under the 1933 Act. 


                    2.1
Shelf Registration.  


-4-

B-8






                              (a)
No later than 90 days after the Closing Date the Company shall, at its cost,
file with the SEC a Shelf Registration Statement relating to the offer and sale
of the Registrable Securities by the Holders that have provided the Questionnaire
and the other information pursuant to Section 2.1(d). The Company shall, at its
cost, use its commercially reasonable efforts to cause such Shelf Registration
Statement to become or be declared effective under the 1933 Act as promptly as
is reasonably practicable after such Shelf Registration Statement is filed, but
in no event later than the Shelf Effectiveness Deadline. If the Company is a
Well-Known Seasoned Issuer at the time of filing the Shelf Registration
Statement with the SEC, such Shelf Registration Statement shall be designated
by the Company as an Automatic Shelf Registration Statement.


                              (b)
The Company shall, at its cost, use its commercially reasonable efforts,
subject to Section 2.4, to keep the Shelf Registration Statement continuously
effective, supplemented and amended as required by the 1933 Act in order to
permit the Prospectus forming part thereof to be usable by Holders during the
Effectiveness Period. Upon the expiration of an Automatic Shelf Registration
Statement, so long as it remains a Well-Known Seasoned Issuer the Company shall
file a new Shelf Registration Statement which shall be designated by the
Company as an Automatic Shelf Registration Statement.


                              (c)
The Company shall cause the Shelf Registration Statement and the related
Prospectus and any amendment or supplement thereto, as of the effective date of
the Shelf Registration Statement or such amendment or supplement, (i) to comply
in all material respects with the applicable requirements of the 1933 Act, and
(ii) not to contain any untrue statement of a material fact required to be
stated therein or necessary in order to make the statements therein (in the
case of the Prospectus, in the light of the circumstances in which they were
made) not misleading.


                              (d)
Notwithstanding any other provision hereof, no Holder of Registrable Securities
may include any of its Registrable Securities in the Shelf Registration
Statement pursuant to this Agreement unless the Holder furnishes to the Company
a fully completed notice and questionnaire in the form attached hereto as
Exhibit A (the “Questionnaire”) and such other information in writing as the
Company may reasonably request in writing for use in connection with the Shelf
Registration Statement and in any application to be filed with or under state
securities laws. At least 30 business days prior to the filing of the Shelf
Registration Statement, the Company will provide notice to the Holders of its
intention to file the Shelf Registration Statement. In order to be named as a
selling securityholder in the Shelf Registration Statement or Prospectus at the
time of effectiveness of the Shelf Registration Statement, each Holder must no
later than 20 days following notice by the Company as set forth in the previous
sentence, furnish in writing the completed Questionnaire and such other
information that the Company may reasonably request in writing, if any, to the
Company and the Company will include the information from the completed
Questionnaire and such other information, if any, in the Shelf Registration
Statement and the Prospectus, as necessary and in a manner, so that upon
effectiveness of the Shelf Registration Statement the Holder will be permitted
to deliver the Prospectus to purchasers of the Holder’s Registrable Securities.
Each Holder shall update such information upon the written request of the
Company. From and after the date that the Shelf Registration Statement becomes
effective, upon receipt of a completed Questionnaire and such other information
that the Company may reasonably request in writing, if any, the Company shall
(i) within 20 Business Days after receipt of such Questionnaire and such other
information, use commercially reasonable efforts to file any  


-5-

B-9






amendments or
supplements to the Shelf Registration Statement necessary for such Holder to be
named as a selling securityholder in the Prospectus contained therein to permit
such Holder to deliver the Prospectus to purchasers of the Holder’s Securities,
provided that if a post-effective
amendment to the Shelf Registration Statement is required, the Company shall
not be obligated to file more than one such amendment for all such holders
during one fiscal quarter, provided,
further, that if such Questionnaire and such other information is
delivered during a Suspension Period, the Company shall so inform the Holder
delivering such Questionnaire and such other information and shall take the
action described in this Section 2.1(d) (i) within five Business Days after the
expiration of the Suspension Period and (ii) if the Company files a
post-effective amendment to the Shelf Registration Statement, use its
commercially reasonable efforts to cause such post-effective amendment to
become or be declared effective under the 1933 Act as promptly as practicable.
Holders that do not deliver a completed written Questionnaire and such other
information, as provided for in this Section 2.1(d), will not be named as
selling securityholders in the Prospectus. Each Holder named as a selling
securityholder in the Prospectus agrees to promptly furnish to the Company in
writing all information required to be disclosed in order to make information
previously furnished to the Company by the Holder not materially misleading and
any other information regarding such Holder and the distribution of such
Holder’s Registrable Securities as the Company may from time to time reasonably
request in writing for inclusion in the Shelf Registration Statement.


                              (e)
Each Holder agrees that if such Holder wishes to sell Registrable Securities
pursuant to a Shelf Registration Statement and related Prospectus it will do so
only in accordance with Section 2.1(d) and subject to Section 2.4. Each Holder agrees
not to sell any Registrable Securities pursuant to the Shelf Registration
Statement without delivering, or causing to be delivered, a Prospectus
(excluding those materials incorporated by reference therein) to the purchaser
thereof or complying with Rule 153 under the 1933 Act and, following
termination of the Effectiveness Period, to notify the Company, within ten days
of a written request by the Company, of the amount of Registrable Securities
sold pursuant to the Shelf Registration Statement.


                              (f)
The Company agrees that, in the context of a registered Company Supported
Distribution, and only for the period of 30 days from the earlier of the public
announcement or commencement of marketing efforts with respect to such Company
Supported Distribution, unless it obtains the prior consent of the managing
Underwriter (which consent shall not be unreasonably withheld or delayed), and
each Holder agrees that, unless it obtains the prior written consent of the
Company, it will not make any offer relating to the Securities that would
constitute an Issuer Free Writing Prospectus, or that would otherwise
constitute a Free Writing Prospectus required to be filed with the SEC. The
Company represents that any Issuer Free Writing Prospectus prepared by it or
authorized by it in writing for use by such Holder will be delivered to each
such Holder and will not include any information that conflicts with the
information contained in the Shelf Registration Statement or the Prospectus and
that any such Issuer Free Writing Prospectus, when taken together with the
information in the Shelf Registration Statement and the Prospectus, will not
include any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. 


-6-

B-10






          The
Company agrees to supplement or amend the Shelf Registration Statement if
required by the 1933 Act or the rules and regulations thereunder or by the
instructions applicable to the registration form used by the Company or, to the
extent the Company does not reasonably object, as reasonably requested by the
KKR Holder with respect to information relating to the KKR Holder or by the
Warrant Agent on behalf of the Holders covered by such Shelf Registration
Statement with respect to information relating to such Holders, and to furnish
to the Holders of Registrable Securities copies of any such supplement or
amendment promptly after it is used or filed with the SEC; provided, however,
that any such amendment or supplement filed by the Company via the EDGAR system
will be deemed to have been furnished to the Holders of Registrable Securities.


                    2.2
Expenses. The Company shall pay all Registration or Offering Expenses in
connection with the registration pursuant to Section 2.1 and, without
duplication, in connection with a Company Supported Distribution pursuant to
Section 5. Each Holder shall pay all underwriting and placement discounts and
commissions, agency and placement fees, brokers commissions and transfer taxes,
if any, relating to the sale or disposition of such Holder’s Registrable
Securities.


                    2.3
Effectiveness. After a Shelf Registration Statement is effective, if the
offering of Registrable Securities pursuant to a Shelf Registration Statement
is interfered with by any stop order, injunction or other order or requirement
of the SEC or any other governmental agency or court, such Shelf Registration Statement
will be deemed not to have been effective during the period of such
interference, until the offering of Registrable Securities pursuant to such
Shelf Registration Statement may legally resume.


                    2.4
Suspension. Notwithstanding any other provision hereof, the Company may
suspend the use of any Prospectus for a period not to exceed an aggregate of 60
days in any 90-day period or an aggregate of 120 calendar days in any 360-day
period, as such period may be reduced pursuant to Section 5(b) hereof (each, a
“Suspension Period”), if the Company shall have determined in good faith
that because of valid business reasons (not including avoidance of the
Company’s obligations hereunder), including without limitation plans for a
registered public offering, an acquisition or other proposed or pending
corporate developments and similar events or because of filings with the SEC,
it is in the best interests of the Company to suspend such use, and prior to
suspending such use the Company provides the Holders with written notice of
such suspension, which notice need not specify the nature of the event giving
rise to such suspension (and, upon receipt of such notice, each Holder agrees
not to sell any Registrable Securities pursuant to the Shelf Registration
Statement until such Holder is advised in writing that the Prospectus may be
used, which notice the Company agrees to provide promptly following the lapse
of the event or circumstances giving rise to such suspension), provided that 60 days shall be increased
to 75 days if the Company shall have determined in good faith that the
disclosure of previously undisclosed proposed or pending material business
transaction would be reasonably likely to impede its ability to consummate such
transaction. Each Holder shall keep confidential any communications received by
it from the Company regarding the suspension of the use of the Prospectus
(including the fact of the suspension), except as required by applicable law. 


-7-

B-11






          3.
Registration Procedures.


          In
connection with the obligations of the Company with respect to the Shelf
Registration, the Company shall, subject to the rights of the Company to invoke
and maintain a Suspension Period in accordance with Section 2.4 of this
Agreement without being in violation of any of the provisions hereof:


                              (a)
not less than five days prior to filing the Shelf Registration Statement, any
Prospectus forming a part thereof, any amendment to the Shelf Registration
Statement or amendment or supplement to such Prospectus (other than amendments
and supplements that do nothing more than name Holders and provide information
with respect thereto), furnish to the Holders or any Underwriter or designee
thereof and one special counsel to the Holders or any Underwriter or designee
thereof copies of all such documents proposed to be filed and use its
commercially reasonable efforts to reflect in each such document when so filed
with the SEC such comments as the Holders or any Underwriter or designee
thereof and such special counsel to the Holders or any Underwriter or designee
thereof reasonably shall propose within three days of the delivery of such
copies to the Holders or any Underwriter or designee thereof and counsel to the
Holders or any Underwriter or designee thereof. In addition, if any Holder that
has provided the Questionnaire and the other information required by Section
2.1(d) shall so request in writing, a reasonable time prior to filing any such
documents, the Company shall furnish to such Holder copies of all such
documents proposed to be filed and use its commercially reasonable efforts to
reflect in each such document when so filed with the SEC such comments as such
Holder reasonably shall propose within three Business Days of the delivery of
such copies to such Holder;


                              (b)
ensure that (i) the Shelf Registration Statement and any amendment thereto and
any Prospectus forming part thereof and any amendment or supplement thereto
complies in all material respects with the 1933 Act, and (ii) the Shelf
Registration Statement and any amendment thereto does not, when it becomes
effective, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading;


                              (c)
use its commercially reasonable efforts at all times, except as provided in
Section 2.4, to take all steps necessary to effect and maintain the
registration of all of the Registrable Securities covered by the Shelf
Registration Statement;


                              (d)
prepare and file with the SEC such amendments and post-effective amendments to
the Shelf Registration Statement as may be necessary under applicable law to
keep the Shelf Registration Statement effective for the Effectiveness Period,
subject to Section 2.4; and cause each Prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed in
compliance with Rule 424 (or any similar provision then in force) under the
1933 Act and use its commercially reasonable efforts to comply during the
Effectiveness Period with the provisions of the 1933 Act, the 1934 Act and the
rules and regulations thereunder required to enable the disposition of all
Registrable Securities covered by the Shelf Registration Statement in
accordance with the intended method or methods of distribution (as provided to
the Company in the Questionnaires) by the selling Holders thereof; 


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B-12






                              (e)
(i) notify in writing each Holder of Registrable Securities of the filing of a
Shelf Registration Statement or any post-effective amendment to a Shelf
Registration Statement and of when any such Shelf Registration Statement or any
post-effective amendment to a Shelf Registration Statement has become
effective; (ii) during the Effectiveness Period, furnish to each Holder of
Registrable Securities that has provided the Questionnaires and the information
required by Section 2.1(d) and to each Underwriter, if any, without charge, as
many copies of each Prospectus, including each preliminary Prospectus, and any
amendment or supplement thereto and such other documents as such Holder or
Underwriter may reasonably request in writing, including financial statements
and schedules and, if such Holder or Underwriter so requests, all exhibits
thereto in connection with the sale or other disposition of the Registrable
Securities; and (iii) subject to Section 2.4 and to any notice by the Company
in accordance with Section 3(g) of the existence of any fact of the kind
described in Sections 3(g)(i), (ii), (iii), (iv) and (v), hereby consent to the
use of the Prospectus or any amendment or supplement thereto by each of the
selling Holders and Underwriters of Registrable Securities that has provided
the Questionnaire and the other information required by Section 2.1(d) in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus or any amendment or supplement thereto in the manner set forth
therein;


                              (f)
use its commercially reasonable efforts to register or qualify or cooperate
with the Holders and Underwriters in connection with the registration or
qualification (or exemption from such registration or qualification) of the
Registrable Securities under all applicable state securities or “blue sky” laws
of such jurisdictions as any Holder of Registrable Securities covered by a
Shelf Registration Statement and each Underwriter shall reasonably request in writing,
and do any and all other acts and things which may be reasonably necessary or
advisable to maintain such registration or qualification and to enable each
such Holder and Underwriter to consummate the disposition in each such
jurisdiction of such Registrable Securities owned by such Holder; provided, however, that the Company shall
not be required to (i) qualify as a foreign corporation or as a dealer in
securities in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(f), or (ii) take any action which would subject
it to general service of process or taxation in any such jurisdiction where it
is not then so subject;


                              (g)
notify as promptly as reasonably practicable each Holder of Registrable
Securities under a Shelf Registration that has provided the Questionnaire and
the other information required by Section 2.1(d) and, if requested by such
Holder, confirm such advice in writing promptly (i) of any request, following
the effectiveness of the Shelf Registration Statement under the 1933 Act, by
the SEC or any state securities authority for post-effective amendments and
supplements to a Shelf Registration Statement and Prospectus or for additional
information after the Shelf Registration Statement has become effective, (ii)
of the issuance by the SEC or any state securities authority of any stop order
suspending the effectiveness of a Shelf Registration Statement or the
initiation of any proceedings for that purpose, (iii) of the occurrence (but
not the nature of or details concerning) of any event or the discovery of any
facts during the period a Shelf Registration Statement is effective which makes
any statement made in such Shelf Registration Statement or the related
Prospectus untrue in any material respect or which requires the making of any
changes in such Shelf Registration Statement or Prospectus in order to make the
statements therein not misleading, (provided,
however, that no notice by the
Company shall be required pursuant to this clause (iii) in the event that the
Company either promptly files a Prospectus supplement to update the Prospectus
or a Form 8-K or other appropriate 1934 Act report that is incorporated by
reference into 


-9-

B-13






the Shelf
Registration Statement, which, in either case, contains the requisite
information that results in such Shelf Registration Statement no longer
containing any untrue statement of material fact or omitting to state a
material fact necessary to make the statements therein not misleading), (iv) of
the receipt by the Company of any notification with respect to the suspension
of the qualification of the Registrable Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose and (v) of
any determination by the Company that a post-effective amendment to such Shelf
Registration Statement would be required by applicable law;


                              (h)
provided a Holder (collectively with its Affiliates) then holds at least
1,420,454 Registrable
Securities (calculated with respect to Common Stock, as set forth in the
definition of “Majority Holders”), as promptly as reasonably practicable
furnish to such Holder and any Underwriter or designee thereof (i) copies of
any comment letters received from the SEC with respect to a Shelf Registration
Statement and, if requested by such Holder in connection with an offering of
Registrable Securities, copies of any comment letters received from the SEC
with respect to any documents incorporated therein and (ii) any other request
by the SEC or any state securities authority for amendments or supplements to a
Shelf Registration Statement and Prospectus or for additional information with
respect to the Shelf Registration Statement and Prospectus;


                              (i)
use its commercially reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of a Shelf Registration Statement or the
qualification of the securities therein for sale in any jurisdiction at the
earliest practicable moment or, if any such order or suspension is made
effective during any Suspension Period, at the earliest practicable moment
after the Suspension Period;


                              (j)
upon the occurrence of any event or the discovery of any facts, each as
contemplated by Sections 3(g)(i), (ii), (iii), (iv) and (v), as promptly as
practicable after the occurrence of such an event or within the time period
required by Section 2.4, use its commercially reasonable efforts to prepare a
supplement or post-effective amendment to the Shelf Registration Statement or
the related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of the Registrable Securities, such Prospectus will not contain at
the time of such delivery any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and, at such time as
such public disclosure is otherwise made or the Company determines that such
disclosure is not necessary, in each case to correct any misstatement of a
material fact or to include any omitted material fact, the Company agrees
promptly to notify each Holder that has provided the Questionnaire and the
other information required by Section 2.1(d) of such determination and to
furnish each Holder such number of copies of the Prospectus as amended or
supplemented, as such Holder may reasonably request;


                              (k)
use its commercially reasonable efforts to cause all Registrable Securities
which are Common Stock to be listed on any securities exchange or inter-dealer
quotation system on which shares of Common Stock are then listed;


                              (l)
make generally available to its security holders earning statements covering at
least 12 months (which need not be audited) satisfying the provisions of
Section 11(a) of 


-10-

B-14






the 1933 Act
and Rule 158 thereunder as soon as reasonably practicable and, in any event, no
later than 45 days after the end of a 12-month period (or 90 days, if such
period is a fiscal year), or such longer period as may be permitted under the
1934 Act, beginning with the first month of the Company’s first fiscal quarter
commencing after the effective date of the Shelf Registration Statement;


                              (m)
make a reasonable effort to provide such information as is required for any
filings required to be made with the Financial Industry Regulatory Authority;
and


                              (n)
not later than the effective date of the Shelf Registration Statement, provide
a CUSIP number for the Securities registered under the Shelf Registration
Statement and provide the Warrant Agent with certificates for such Securities,
free of any restrictive legends, in a form eligible for deposit with the
Warrant Agent as custodian for Depositary.


          Without
limiting the provisions of Section 2.1(d), the Company may (as a condition to
such Holder’s participation in the Shelf Registration) require each Holder of
Registrable Securities to furnish to the Company such information regarding the
Holder and the proposed distribution by such Holder of such Registrable
Securities as the Company may from time to time reasonably request in writing.
Each Holder agrees promptly to furnish to the Company in writing all
information required to be disclosed in order to make the information
previously furnished to the Company by such Holder not misleading, any other
information regarding such Holder and the distribution of such Registrable
Securities as may be required to be disclosed in the Prospectus or Shelf
Registration Statement under applicable law or pursuant to SEC comments and any
information otherwise reasonably required by the Company to comply with
applicable law or regulations.


          Each
Holder agrees that, upon receipt of any notice from the Company of the
happening of any event or the discovery of any facts, each of the kind described
in Section 3(g)(i), (ii), (iii), (iv) and (v), such Holder will forthwith
discontinue disposition of Registrable Securities pursuant to the Prospectus
included in the Shelf Registration Statement until such Holder’s receipt of the
copies of the supplemented or amended Prospectus contemplated by Section 3(j)
or written notice from the Company that the Shelf Registration Statement is
again effective and no amendment or supplement is needed, and, if so directed
by the Company, such Holder will deliver to the Company (at the Company’s
expense) all copies in such Holder’s possession, other than permanent file
copies then in such Holder’s possession, of the Prospectus covering such
Registrable Securities at the time of receipt of such notice. 


          4.
Indemnification; Contribution. 


                              (a)
Indemnification by the Company.
The Company agrees to indemnify and hold harmless the KKR Holder, each Holder
who provided the Questionnaire and the other information to the Company in
accordance with Section 2.1(d) and each of their respective directors, officers
and employees and agents and each Person, if any, who controls the KKR Holder
or such Holder within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act (each of the foregoing is referred to herein as an “indemnified
party”) (i) against any loss, claim, damage, liability or expense, as incurred,
to which such indemnified party may become subject, insofar as such loss,
claim, damage, liability or expense (or actions in respect thereof as
contemplated below)  


-11-

B-15






arises out of
or is based upon (x) any untrue statement or alleged untrue statement of a
material fact contained in the Shelf Registration Statement (or, in each case,
any amendment or supplement thereto), including all documents incorporated
therein by reference, or the omission or alleged omission therefrom of a
material fact, in each case, necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
(y) any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto), including all documents incorporated therein by reference,
or the omission or alleged omission therefrom of a material fact, in each case,
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading or (z) any untrue
statement or alleged untrue statement of a material fact contained in any
Issuer Free Writing Prospectus prepared by it or authorized by it in writing
for use by such Holder (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact, in each case, necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and (ii) against any and all
reasonable out-of-pocket expense whatsoever, as incurred (including the
reasonable fees and disbursements of counsel), reasonably incurred in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the extent that
any such expense is not paid under subparagraph (i) above; and to reimburse
each indemnified party for any and all expenses (including the fees and
disbursements of counsel chosen by the indemnified parties) as such expenses
are reasonably incurred by such indemnified party in connection with
investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided,
however, that the foregoing indemnity agreement shall not apply to
any loss, claim, damage, liability or expense incurred by an indemnified party
to the extent, but only to the extent, (A) arising out of or based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by such indemnified party expressly for use in the Shelf
Registration Statement (or, in each case, any amendment or supplement thereto),
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) or any Issuer Free Writing Prospectus (or any amendment or supplement
thereto) or (B) use of a Prospectus during a period when use of such Prospectus
has been suspended pursuant to Section 2.4 hereof, provided that such Holder has received notice of such
suspension. The indemnity agreement set forth in this Section 4(a) shall be in
addition to any liabilities that the Company may otherwise have.


                              (b)
Indemnification by the Holders.
Each Holder who has provided the Questionnaire and the other information to the
Company in accordance with Section 2.1(d), severally, but not jointly, agrees
to indemnify and hold harmless the Company, the KKR Holder and the other
selling Holders who have provided the Questionnaire and the other information
to the Company in accordance with Section 2.1(d) and each of their respective
directors, officers, employees and agents and each Person, if any, who controls
the Company, the KKR Holder or any other selling Holder within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act, against any and all
loss, liability, claim, damage and expense described in the indemnity contained
in Section 4(a), as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Shelf
Registration Statement (or, in each case, any amendment thereto), any
preliminary prospectus or the Prospectus included therein (or any amendment or 


-12-

B-16






supplement
thereto) or any Issuer Free Writing Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information with
respect to such Holder furnished to the Company by or on behalf of such Holder
expressly for use in the Shelf Registration Statement (or, in each case, any
amendment thereto), such preliminary prospectus or the Prospectus (or any
amendment or supplement thereto) or any Issuer Free Writing Prospectus (or any
amendment or supplement thereto).


                              (c)
Notifications and Other Indemnification
Procedures. Promptly after receipt by an indemnified party under
this Section 4 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party under this Section 4, notify the indemnifying party in writing of the
commencement thereof, but the failure to so notify the indemnifying party (1)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure
materially prejudices the indemnifying party and (2) will not, in any event,
relieve the indemnifying party from any obligations to any indemnified party
other than the indemnification obligation provided in paragraph (a) or (b)
above. In case any such action is brought against any indemnified party and
such indemnified party seeks or intends to seek indemnity from an indemnifying
party, the indemnifying party will be entitled to participate in, and, to the
extent that it shall elect, jointly with all other indemnifying parties
similarly notified, by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party; provided, however,
if the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict will arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that
there may be material legal defenses available to it and/or other indemnified
parties that are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party
or parties. Upon receipt of notice from the indemnifying party to such
indemnified party of such indemnifying party’s election so to assume the
defense of such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section 4 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (other than one local counsel), reasonably approved by the
indemnifying party, representing the indemnified parties who are parties to
such action) or (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action, in each of which
cases the fees and expenses of counsel shall be at the expense of the
indemnifying party.


                              (d)
Settlements. The indemnifying
party under this Section 4 shall not be liable for any settlement of any
proceeding effected without its written consent, which shall not be withheld
unreasonably, but if settled with such consent or if there is a final judgment
for the plaintiff, the indemnifying party agrees to indemnify the indemnified
party against any loss, claim, damage, liability or expense by reason of such
settlement or judgment. Notwithstanding the 


-13-

B-17






foregoing
sentence, if at any time an indemnified party shall have requested an indemnifying
party to reimburse the indemnified party for fees and expenses of counsel as
contemplated by Section 4(c) hereof, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement
at least 45 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement, compromise or consent to the entry of judgment in
any pending or threatened action, suit or proceeding in respect of which any
indemnified party is or could have been a party and indemnity was or could have
been sought hereunder by such indemnified party, unless such settlement,
compromise or consent (x) includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such action,
suit or proceeding and (y) does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any indemnified
party.


                              (e)
If the indemnification provided for in this Section 4 is for any reason
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, liabilities, claims, damages or expenses referred to therein,
then each indemnifying party shall contribute to the aggregate amount of such
losses, liabilities, claims, damages and expenses incurred by such indemnified
party, as incurred, in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and the Holders on the other hand
in connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.


          The
relative fault of the indemnifying parties on the one hand and the indemnified
parties and the Holders on the other hand shall be determined by reference to,
among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company, or by the Holders and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.


          The
Company and the Holders agree that it would not be just and equitable if
contribution pursuant to this Section 4 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 4. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 4 shall be deemed to
include any reasonable out-of-pocket legal or other expenses reasonably
incurred by such indemnified party in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based upon any
such untrue or alleged untrue statement or omission or alleged omission.


          Notwithstanding
the provisions of this Section 4, no Holder shall be required to indemnify or
contribute any amount in excess of the amount by which the total price at which
the Securities sold by such Holder exceeds the amount of any damages which such
Holder has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. 


-14-

B-18






          No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any Person who
was not guilty of such fraudulent misrepresentation.


          For purposes
of this Section 4, each director, officer, employee and agent of any Holder, or
each Person, if any, who controls any Holder within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as such Holder, and each director, officer, employee or agent of
the Company, and each Person, if any, who controls the Company within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have
the same rights to contribution as the Company. 


                              (f)
The provisions of this Section 4 shall remain in full force and effect,
regardless of any investigation made by or on behalf of any Holder or the
Company or any indemnified person referred to in this Section 4, and shall
survive the sale by a Holder of securities covered by the Shelf Registration
Statement. 


          5.
Distributions by Holders 


                              (a)
If the Company shall at any time receive a written request from Holders then
able to participate in a Substantial Distribution that in the aggregate have
Beneficial Ownership of at least the Threshold Amount of Registrable Securities
(i) that the Company assist in a Substantial Distribution, (ii) stating that such
Holders have a current bona fide intent to effectuate a Substantial
Distribution and (iii) providing verification that such Holders Beneficially
Own at least the Threshold Amount of Registrable Securities, the Company will
(x) provide reasonable notice of the request to each Holder pursuant to which
the Company will offer to include such Holder’s Registrable Securities in such
Substantial Distribution upon a written request from such Holder received by
the Company within 10 days of such notice (such request to specify the number
of such Holder’s Registrable Securities that such Holder requests be included
in such Substantial Distribution) and (y) provide such Holders (including such
Holders that submitted a written request within such ten-day period) with its
reasonable cooperation, as requested by such Holders, to facilitate such
Substantial Distribution; provided,
that the Company shall only be required to assist the Holders with an aggregate
of three such Substantial Distributions; provided,
further, that the Company shall
not be required to assist any Holders with a Substantial Distribution more than
twice in any 365 day period; and provided,
further, that the Company will
only be required to provide Holders with such cooperation until the earlier of
consummation of the Company Supported Distribution or 45 days following the
earlier of the public announcement or commencement of marketing efforts with
respect to such distribution. Under any circumstances and for such periods as
the Company would be permitted to initiate a Suspension Period pursuant to
Section 2.4, the Company shall have the right to delay the commencement (e.g.,
the taking of any external activity, but not including internal, non-public
preparatory work) of a Company Supported Distribution (a “Delay Period”)
for a period of days which, when aggregated with any pending or prior
Suspension Periods and Delay Periods, would not exceed the 60 and 120-day
limits set forth in Section 2.4 without, in the context of a registered Company
Supported Distribution, formally initiating a Suspension Period, provided that
any such Delay Periods may not exceed and shall reduce (on a day-for-day basis)
the 60 and 120-day limits referred to in Section 2.4 unless otherwise agreed by
the Majority Holders participating in such registered Company Supported
Distribution In addition, 


-15-

B-19






under no
circumstances shall the Company be required to commence a Company Supported
Distribution at any time during the three week period immediately preceding the
scheduled public disclosure of results for any quarter (the “Pre-Announcement
Periods”) and any delay during that time shall not be counted against the
Suspension Period. If a request for a Company Supported Distribution has been
made before any Delay Period or Pre-Announcement Period, however, the Company
will provide reasonable cooperation as is reasonably requested during such
Delay Period or Pre-Announcement Period to permit such Company Supported
Distribution to be commenced promptly following the expiration of such Delay
Period or Pre-Announcement Period. For the avoidance of doubt, any Company
Supported Distribution shall not require any pre-clearance under any stock
trading policies of the Company in effect at such time.


          For
purposes of the three Substantial Distributions with which the Company is
required to provide the Holders with assistance, it shall be deemed to be a
Substantial Distribution for which the Company has provided assistance if the
Holders request such assistance and the Substantial Distribution is cancelled,
terminated or otherwise not consummated, unless such cancellation, termination
or failure to consummate such Substantial Distribution is based upon material
adverse information concerning the Company of which the Holders initiating such
Substantial Distribution were not aware at the time of such request.


                              (b)
In furtherance of the Company’s undertakings, and subject to the limitations in
Section 5(a), the Company agrees to use its commercially reasonable efforts to
enter into such customary agreements (on terms reasonably acceptable to the
Company) and take all other customary and appropriate actions in order to
expedite or facilitate the disposition of the Registrable Securities being
offered and sold in a Substantial Distribution by the Holders in which the
Company provides cooperation, including: 


	
  

 	
  

 
	
  

 	
                               (i)
 using commercially reasonable efforts to obtain opinions of counsel to the
 Company and updates thereof addressed to the Underwriters or Initial
 Purchasers, if any, covering matters as are customarily requested in opinions
 covering secondary resale offerings of companies of comparable size,
 maturities and lines of business as the Company;

 
	
  

 	
  

 
	
  

 	
                               (ii)
 using commercially reasonable efforts to obtain “comfort” letters and updates
 thereof from the Company’s independent certified public accountants (and, if
 necessary, any other independent certified public accountants of any
 subsidiary of the Company or of any business acquired by the Company for
 which financial statements are, or are required to be, included in the Shelf
 Registration Statement or offering memorandum, as the case may be) addressed
 to the Underwriters or Initial Purchasers, if any, such letters covering
 matters as are customarily requested in comfort letters covering secondary
 resale offerings of companies of comparable size, maturities and lines of
 business as the Company;

 
	
  

 	
  

 
	
  

 	
                               (iii)
 making reasonably available for inspection by each Holder and the
 Underwriters or Initial Purchasers, if any, participating in any Substantial
 Distribution, and any attorney, accountant or other agent retained by any
 such Holder or Underwriter or Initial Purchaser, all relevant financial and
 other records and pertinent corporate documents 

 


-16-

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-17-




	 
	 

	 
	of the Company as are customarily made available
          in secondary resale offerings of companies of comparable size, maturities
          and lines of business as the Company; 

	 
	 

	 
	                              (iv)
          using commercially reasonable efforts to cause the Company’s officers,
          directors, employees, accountants and auditors to supply all relevant
          information, and causing appropriate persons to be reasonably available
          for discussions concerning such documents, as reasonably requested
          by any such Holder, Underwriter, Initial Purchaser, attorney, accountant
          or agent in connection with any such Substantial Distribution as is
          customary for similar due diligence examinations;

	 
	 

	 
	                              (v)
          delivering such documents and certificates (including an offering or
          information memorandum in the context of a Substantial Distribution
          effected pursuant to Rule 144A) to the Holders and the Underwriters
          or Initial Purchasers, if any, as may be reasonably requested by such
          Holders, Underwriters or Initial Purchasers and as are customarily
          delivered in secondary resale offerings of companies of comparable
          size, maturities and lines of business as the Company;

	 
	 

	 
	                              (vi)
          making appropriate members of senior management, which shall, in the
          Company’s discretion, not include the Chief Executive Officer
          of the Company, reasonably available to participate in one due diligence
          conference call lasting no more than one hour with the Underwriters,
          the Initial Purchasers and the Holders participating in such Substantial
          Distribution; provided, that in the event of a Substantial Distribution
          in excess of 4,687,500 Registrable Securities (calculated with respect
          to Common Stock as set forth in the definition of
      “Majority Holders”) the Company shall, in addition to the foregoing,
      make appropriate members of senior management, which shall include the
      Chief Executive Officer of the Company at the request of such Holders,
      reasonably available to participate in one conference call lasting no more
      than one hour with potential investors, but for the avoidance of doubt,
      such members of senior management (A) shall only be required to review
      the Company and its business in any such conference call, (B) shall not
      be required to address the suitability of any investment in the Warrants
      or the terms of the Warrants in any such conference call, and (C) shall
      not be required to provide any projections in any such conference call;

	 
	 

	 
	                              (vii)
          if an underwriting or purchase, sale or agency agreement is entered
          into, causing the same to set forth indemnification provisions and
          procedures substantially equivalent to the indemnification provisions
          and procedures set forth in Section 4 with respect to the Underwriters
          or Initial Purchasers and all other parties to be indemnified pursuant
          to said Section or, at the request of any Underwriters or Initial Purchasers,
          in the form customarily provided to such Underwriters or Initial Purchasers
          in similar types of transactions;

	 
	 

	 
	                              (viii)
          not selling, offering or agreeing to sell, granting any option for
          the sale of, or otherwise transferring or disposing of securities of
          the same type (including any underlying securities) as the Registrable
          Securities included in such Substantial Distribution, or any securities
          convertible into or exchangeable or exercisable for such securities,
          during the ten days prior to the pricing of such Substantial Distribution
          and until 



B-21









	
  

 	
  

 
	
  

 	
 the earlier
 of (A) the end of any lock-up period which the Underwriters or Initial
 Purchasers deem is necessary to effectuate the Substantial Distribution
 (which in no event will be greater than 45 days), which lock-up period shall
 begin on the date of the pricing of such Substantial Distribution, and (B)
 the abandonment of such Substantial Distribution, provided that the Company may offer, issue and sell shares
 of securities of the same type (including any underlying securities) as the
 Registrable Securities (1) pursuant to any employee, officer or director
 stock or benefit plan, (2) upon the conversion or exercise of securities, or
 rights with respect to any such securities, outstanding on the date of the
 commencement of the Substantial Distribution, or (3) issued or to be issued
 by the Company in connection with an acquisition; and

 
	
  

 	
  

 
	
  

 	
                               (ix)
 (A) causing the Chief Executive Officer, the Chief Financial Officer and each
 other executive officer of the Company as the Underwriters or the Initial
 Purchasers reasonably determine is necessary to effectuate such Substantial
 Distribution, and (B) requesting each director of the Company and each Person
 who then Beneficially Owns more than 5% of the Common Stock, to agree not to
 effect any public or private sale or distribution or otherwise dispose
 (including sales pursuant to Rule 144 under the 1933 Act) of any Common Stock
 during the period of no more than 45 days referred to in clause (viii) above
 (except as part of such Substantial Distribution, if otherwise permitted and
 subject to reasonable and customary exceptions including, but not limited to,
 the exercise of stock options or warrants), unless each Holder and the
 Underwriters or Initial Purchasers, if any, participating in any Substantial
 Distribution otherwise agree. 

 
	
  

 	
  

 
	
  

 	
           Other
 than as provided in this Section 5 (and in the context of a registered
 Substantial Distribution, the other applicable provisions of this Agreement),
 the Company shall not be obligated to cooperate to facilitate any
 underwritten offering to facilitate a Substantial Distribution or otherwise.
 For the avoidance of doubt, (1) the Company shall not be required to provide
 an opinion on an investment in the Registrable Securities to facilitate a
 Substantial Distribution or otherwise and (2) the Company shall not be
 required to participate in more than one conference call lasting no more than
 one hour with potential investors, and for the avoidance of doubt, the
 members of senior management of the Company participating in any such call
 (A) shall only be required to review the Company and its business in such
 conference call, (B) shall not be required to address the suitability of any
 investment in the Warrants or the terms of the Warrants, and (C) shall not be
 required to provide any projections.

 
	
  

 	
  

 
	
  

 	
           In
 connection with any Substantial Distribution in which the Company provides
 assistance to the Holders or the Underwriters or the Initial Purchasers
 thereto, if any, the Company may require each Holder or Underwriter or
 Initial Purchaser, and their attorneys, accountants or agents retained by
 them, to maintain in confidence and not to disclose to any other person any
 information or records provided as part of such assistance and reasonably
 designated by the Company as being confidential, until such time as (A) such
 information becomes a matter of public record (whether by virtue of its
 inclusion in such registration statement or otherwise), or (B) such person
 shall be required so to disclose such information pursuant to a subpoena or
 order of any court or other governmental agency or body having jurisdiction
 over the matter (subject to the requirements of such order, and only after
 such 

 


-18-

B-22










	
  

 	
  

 
	
  

 	
 person shall
 have given the Company prompt prior written notice of such requirement), or
 (C) such information is required to be set forth in the Shelf Registration
 Statement or the prospectus or offering or information memorandum included
 therein or in an amendment to such Shelf Registration Statement or an
 amendment or supplement to such prospectus in order that such Shelf
 Registration Statement, prospectus, amendment or supplement, complies with
 applicable requirements of the federal securities laws and the rules and
 regulations of the Commission and does not contain an untrue statement of a
 material fact or omit to state therein a material fact required to be stated
 therein or necessary to make the statements therein not misleading in light
 of the circumstances then existing or (D) such information becomes available
 to any such person from a source other than the Company and such source is
 not bound by a confidentiality agreement or other confidentiality obligations
 or duties, as the case may be. 

 



                    If
any of the Registrable Securities to be sold in a Substantial Distribution are
to be sold in an underwritten offering, the Underwriter or Underwriters and
Initial Purchaser or Initial Purchasers that will manage such offering will be
selected by the Majority Holders of such Registrable Securities included in
such offering and shall be reasonably acceptable to the Company.


          (h)
This Section 5 shall terminate, and the Holders shall have no rights pursuant
to this Section 5, upon the earlier to occur of (i) the date on which the
Holders collectively Beneficially Own less than 1,420,454 Registrable
Securities (calculated with respect to Common Stock as set forth under the
definition of “Majority Holders”) and (ii) the termination of the Effectiveness
Period. 


          6.
Miscellaneous. 


                    6.1
No Inconsistent Agreements. The Company has not entered into and the
Company will not after the date of this Agreement enter into any agreement with
respect to its securities which conflicts with the rights granted to the
Holders of Registrable Securities in this Agreement. The rights granted to the
Holders hereunder do not for the term of this Agreement conflict with the
rights granted to the holders of the Company’s other issued and outstanding
securities under any such agreements.


                    6.2
Amendments and Waivers. The provisions of this Agreement may not be
amended, qualified, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, unless the Company has
obtained the written consent of the Majority Holders; provided, however, if the proposed
amendment, qualification, modification, supplement or waiver, as the case may
be, has a material and disproportionate adverse effect on certain Holders as
compared to the remaining Holders, the consent of the Holders so affected will
be required in addition to the consent of the Majority Holders; provided, further,
that no amendment, qualification, supplement, waiver or consent with respect to
Section 4 hereof shall be effective as against any Holder of Registrable
Securities unless consented to in writing by such Holder; and provided, further, that the provisions of
this Section 6.2 may not be amended, qualified, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the Company has obtained the written consent of each Holder, except that
any provision of this Section 6.2 which provides that an amendment to this
Agreement may be made upon the written consent of the Majority Holders may
itself be amended, qualified, modified or supplemented, and 


-19-

B-23






waivers or
consents to departures from any such provision may be given if the Company
obtains the written consent of the Majority Holders. Notwithstanding the
foregoing (except the foregoing provisos), (i) a waiver or consent to departure
from the provisions hereof with respect to a matter that relates exclusively to
the rights of Holders whose Registrable Securities are being sold pursuant to a
Shelf Registration Statement and that does not directly or indirectly affect
the rights of other Holders may be given by the Majority Holders, determined on
the basis of the Registrable Securities being sold rather than registered under
such Shelf Registration Statement and (ii) this Agreement may be amended by a
written agreement between the Company and the Majority Holders, without the
consent of the Holders of the Registrable Securities, in order to cure any
ambiguity or to correct or supplement any provision contained herein, provided
that no such amendment shall adversely affect the interest of the Holders of
Registrable Securities. Each Holder of Registrable Securities outstanding at
the time of any amendment, modification, waiver or consent pursuant to this
Section 6.2, shall be bound by such amendment, modification, waiver or consent,
whether or not any notice or writing indicating such amendment, modification,
waiver or consent is delivered to such Holder. Notwithstanding the foregoing,
Section 5 may only be amended, qualified or supplemented if approved by the
Holders.


                    6.3
Notices. All notices, consents and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, facsimile, any courier guaranteeing overnight delivery or by
electronic delivery (a) if to a Holder, in the manner set forth in the Warrant
Agreement; and (b) if to the Company, initially at the Company’s address set
forth in the Note Exchange Agreement, and thereafter at such other address of
which notice is given in accordance with the provisions of this Section 6.3.


          All
such notices and communications shall be deemed to have been duly 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.


          Copies
of all such notices, demands, or other communications to any Holder shall be
deemed to have been duly given, if such notice has been duly given to the
Warrant Agent under the Warrant Agreement, at the address specified in such
Warrant Agreement. 


                    6.4
Successors. This Agreement shall inure to the benefit of and be binding
upon the parties hereto, the Holders, their respective successors and the
indemnified persons referred to in Section 4; provided
that in no event shall any Person who Beneficially Owns or otherwise owns or
holds any Registrable Securities, other than a Holder, have any benefit or any
legal or equitable right, remedy or claim under this Agreement; provided, further,
that nothing herein shall be deemed to permit any assignment, transfer or other
disposition of Registrable Securities in violation of the terms of the Note
Exchange Agreement or the Warrant Agreement. Any Registrable Securities
acquired by a Holder in any manner, whether by operation of law or otherwise,
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities, such Holder shall be conclusively deemed
to have agreed to be bound by and to perform all of the terms and provisions of
this Agreement, including the restrictions on resale set forth in this
Agreement and, if applicable, the Note Exchange Agreement and the Warrant
Agreement, and such Holder shall be entitled to receive the benefits hereof. 


-20-

B-24






                    6.5
Third Party Beneficiaries. Each Holder of Registrable Securities shall
be a third party beneficiary to the agreements made hereunder between the
Company, on the one hand, and the KKR Holder, on the other hand, and shall have
the right to enforce such agreements directly to the extent it deems such
enforcement necessary or advisable to protect its rights hereunder.


                    6.6
Specific Enforcement. Without limiting the remedies available to the KKR
Holder and the other Holders, the Company acknowledges that any failure by the
Company to comply with its obligations under Section 2.1 may result in material
irreparable injury to the KKR Holder or the other Holders for which there is no
adequate remedy at law, that it may not be possible to measure damages for such
injuries precisely and that, in the event of any such failure, the KKR Holder
or any other Holder may seek such relief as may be required to specifically
enforce the Company’s obligations under Section 2.1.


                    6.7
Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.


                    6.8
Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.


                    6.9
GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE PARTIES HERETO EACH
HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.


                    6.10
Severability. In the event that any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid,
illegal or unenforceable, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.


                    6.11
Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect
of the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the Registrable Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.


                    6.12
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 


-21-

B-25






deemed to be
followed by the words “without limitation.” The phrases “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 definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein. All
matters to be agreed to by any party hereto must be agreed to in writing by
such party unless otherwise indicated herein. 


-22-

B-26






          IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
written above. 


	
  

 	
  

 	
  

 
	
  

 	
 LEGG MASON, INC. 

 
	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
  

 
	
  

 	
  

 	

 


 
	
  

 	
  

 	
 Name:

 
	
  

 	
  

 	
 Title: 

 


[SIGNATURE PAGE—REGISTRATION RIGHTS
AGREEMENT]










	
  

 	
  

 	
  

 
	
 Confirmed
 and accepted as of the date

 first above written: 

 	
  

 
	
  

 	
  

 	
  

 
	
 KKR I-L LIMITED 

 	
  

 
	
  

 	
  

 	
  

 
	
 By:

 	
  

 	
  

 
	
  

 	

 


 	
  

 
	
  

 	
 Name:

 	
  

 
	
  

 	
 Title: 

 	
  

 


[SIGNATURE PAGE—REGISTRATION RIGHTS
AGREEMENT]






EXHIBIT A 


SELLING SECURITYHOLDER QUESTIONNAIRE


          The
undersigned beneficial owner (the “Selling Securityholder”) of the
Warrants (the “Warrants”) of Legg Mason, Inc. (the “Company”) or
the shares of the Company’s Common Stock, par value $0.10 per share, issuable
upon exercise of the Warrants (the “Common Stock” and, together with the
Warrants, the “Registrable Securities”) hereby gives notice to the
Company of its intention to sell or otherwise dispose of Registrable Securities
beneficially owned by it and listed below in Item 3 (unless otherwise specified
under Item 3) pursuant to the Shelf Registration Statement. The undersigned, by
signing and returning this Selling Securityholder Questionnaire, understands
that it will be bound by the terms and conditions of this Selling
Securityholder Questionnaire and the Registration Rights Agreement, dated as of
[               ],
20[    ], by and between the Company and KKR I-L
Limited.


          Selling
security holders that do not complete this Questionnaire and deliver it to the
Company as provided below will not be named selling security holders in the
prospectus and therefore will not be permitted to sell any Registrable
Securities pursuant to the Shelf Registration Statement.


          Pursuant
to the Registration Rights Agreement, the undersigned has agreed to indemnify
and hold harmless the Company’s directors, the Company’s officers and each
person, if any, who controls the Company within the meaning of either Section
15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), from and against certain losses arising
in connection with statements concerning the undersigned made in the Shelf
Registration Statement or the related prospectus in reliance upon the
information provided in this Selling Securityholder Questionnaire. The
undersigned hereby acknowledges its obligations under the Registration Rights
Agreement to indemnify and hold harmless certain persons set forth therein.


          Certain
legal consequences arise from being named a selling security holder in the
Shelf Registration Statement and the related prospectus. Accordingly, holders
and beneficial holders are advised to consult their own securities law counsel
regarding the consequences of being named or not named as a selling security
holder in the Shelf Registration Statement and the related prospectus. 


          The
undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate and complete: 


	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (1)

 	
  

 	
 (a)

 	
           Full
 Legal Name of Selling Securityholder: 

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	

 


 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (b)

 	
           Full
 Legal Name of Registered Holder (if not the same as (a) above) through which
 Registrable Securities listed in (3) below are held: 

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	

 


 














	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (c)

 	
  

 	
           Full
 Legal Name of DTC Participant (if applicable and if not the same as (b)
 above) through which Registrable Securities listed in (3) below are held:

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	

 


 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (2)

 	
  

 	
  

 	
 Address for Notices to
 Selling Securityholder:

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	

 


 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	

 


 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
 Telephone (including area
 code): __________________________________________________________________________________

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
 Fax (including area
 code): _______________________________________________________________________________________

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
 Contact
 Person: _______________________________________________________________________________________________

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (3)

 	
  

 	
  

 	
 Beneficial Ownership of
 Registrable Securities:

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	

 


 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (a)

 	
  

 	
 Type and Number of
 Registrable Securities beneficially owned:

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	

 


 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (b)

 	
  

 	
 CUSIP
 No(s). of such Registrable Securities beneficially owned:

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	

 


 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (4)

 	
           Beneficial
 Ownership of Other Securities of the Company Owned by the Selling
 Securityholder:

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
           Except
 as set forth below in this Item (4), the undersigned is not the beneficial or
 registered owner of any securities of the Company other than the Registrable
 Securities listed above in Item (3).

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (a)

 	
           Type
 and Amount of Other Securities beneficially owned by the Selling
 Securityholder: 

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	

 


 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (b)

 	
           CUSIP
 No(s). of such Other Securities beneficially owned: 

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	

 


 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (5)

 	
           Relationship
 with the Company: 

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
           Except
 as set forth below, neither the undersigned nor any of its affiliates,
 officers, directors or principal equity holders (5% or more) has held any
 position or office or has had any other material relationship with the
 Company (or its predecessors or affiliates) during the 

 


A-2










	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 past
 three years.

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 State any exceptions here: _________________________________________________________________________________________

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (6)

 	
  

 	
 Is the Selling
 Securityholder a registered broker-dealer?

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 Yes

 	
  

 	
 o

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 No

 	
  

 	
 o

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 If “Yes”, please answer
 subsection (a) and subsection (b):

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (a)

 	
 Did
 the Selling Securityholder acquire the Registrable Securities as compensation
 for underwriting/broker-dealer activities to the Company?

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  Yes

 	
 o

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  No

 	
 o

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (b)

 	
 If
 you answered “No” to question 6(a), please explain your reason for acquiring
 the Registrable Securities:

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	

 


 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	

 


 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (7)

 	
           Is the Selling Securityholder an affiliate
 of a registered broker-dealer?

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 Yes

 	
  

 	
 o

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 No

 	
  

 	
 o

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
           If
 “Yes”, please identify the registered broker-dealer(s), describe the nature
 of the affiliation(s) and answer subsection (a) and subsection (b):

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	

 


 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (a)

 	
 Did
 the Selling Securityholder purchase the Registrable Securities in the
 ordinary course of business (if no, please explain)?

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  Yes

 	
 o

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  No

 	
 o

 	
 Explain:

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	

 


 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (b)

 	
 Did
 the Selling Securityholder have an agreement or understanding, directly or
 indirectly, with any person to distribute the Registrable Securities at the
 same time the Registrable Securities were originally purchased (if yes,
 please explain)?

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  Yes

 	
 o

 	
 Explain:

 


A-3










	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	

 


 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  No

 	
 o

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (8)

 	
           Is
 the Selling Securityholder a non-public entity?

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 Yes

 	
  

 	
 o

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 No

 	
  

 	
 o

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
           If
 “Yes”, please answer subsection (a):

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (a)

 	
 Identify
 the natural person or persons that have voting or investment control over the
 Registrable Securities that the non-public entity owns:

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	

 


 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	

 


 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (9)

 	
  

 	
 Plan of Distribution:

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
           Except
 as set forth below, the undersigned Selling Securityholder (including its
 donees and pledgees) intends to distribute the Registrable Securities listed
 above in Item (3) pursuant to the Shelf Registration Statement only as
 follows (if at all): Such Registrable Securities may be sold from time to
 time directly by the undersigned Selling Securityholder or, alternatively, in
 accordance with the Registration Rights Agreement, through underwriters,
 broker-dealers or agents. If the Registrable Securities are sold through
 underwriters or broker-dealers, the Selling Securityholders will be
 responsible for underwriting discounts or commissions or agent commissions.
 Such Registrable Securities may be sold in one or more transactions at fixed
 prices, at prevailing market prices at the time of sale, at varying prices
 determined at the time of sale, or at negotiated prices. Such sales may be
 effected in transactions (which may involve cross or block transactions) (i)
 on any national securities exchange or quotation service on which the
 Registrable Securities may be listed or quoted at the time of sale, (ii) in
 the over-the-counter market, (iii) in transactions otherwise than on such
 exchanges or services or in the over-the-counter market, or (iv) through the
 writing of options. In connection with sales of the Registrable Securities or
 otherwise, the undersigned Selling Securityholder may enter into hedging
 transactions with broker-dealers, which may in turn engage in short sales of
 the Registrable Securities in the course of hedging positions they assume.
 The undersigned Selling Securityholder may also sell Registrable Securities
 short and deliver Registrable Securities to close out short positions, or
 loan or pledge Registrable Securities to broker-dealers that in turn may sell
 such securities.

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 State any exceptions
 here: _________________________________________________________________________________________

 



          The
undersigned Selling Securityholder acknowledges that it understands its
obligations to comply with the provisions of the Securities Exchange Act of
1934, as amended, and the rules thereunder relating to stock manipulation,
particularly Regulation M thereunder (or any successor rules or regulations),
in connection with any offering of Registrable Securities pursuant to the Shelf



A-4






Registration
Agreement. The undersigned agrees that neither it nor any person acting on its
behalf will engage in any transaction in violation of such provisions.


          Pursuant
to the Registration Rights Agreement, the Company has agreed under certain
circumstances to indemnify the Selling Securityholder against certain
liabilities.


          In
accordance with the undersigned’s obligation under the Registration Rights
Agreement to provide such information as may be required by law or by the staff
of the Commission for inclusion in the Shelf Registration Statement, the
undersigned agrees to promptly notify the Company of any inaccuracies or
changes in the information provided herein that may occur subsequent to the
date hereof at any time while the Shelf Registration Statement remains
effective. All notices hereunder and pursuant to the Registration Rights
Agreement shall be made in writing, by hand-delivery, first-class mail, or air
courier guaranteeing overnight delivery to the address set forth below.


          By
signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Items (1) through (9) above and the
inclusion of such information in the Shelf Registration Statement and the
related prospectus. The undersigned understands that such information will be
relied upon by the Company in connection with the preparation or amendment of
the Shelf Registration Statement and the related prospectus.


          By
signing below, the undersigned agrees that if the Company notifies the
undersigned that Shelf Registration Statement is not available, the undersigned
will suspend use of the prospectus until notice from the Company that the prospectus
is again available. 


          Once
this Selling Securityholder Questionnaire is executed by the undersigned and
received by the Company, the terms of this Selling Securityholder
Questionnaire, and the representations, warranties and agreements contained
herein, shall be binding on, shall inure to the benefit of and shall be
enforceable by the respective successors, heirs, personal representatives, and
assigns of the Company and the undersigned with respect to the Registrable
Securities beneficially owned by the undersigned and listed in Item (3) above.
This Selling Securityholder Questionnaire shall be governed in all respects by
the laws of the State of New York.


          IN
WITNESS WHEREOF, the undersigned, by authority duly given, has caused this
Selling Securityholder Questionnaire to be executed and delivered either in
person or by its duly authorized agent. 


	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Dated: 

 	
  

 	
  

 
	
  

 	
  

 	
 

 	
  

 
	
  

 	 	
  

 	

 


 
	
  

 	 	
  

 	
  

 
	
  

 	 	
  

 	
 Beneficial
 Owner 

 


A-5










	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
  

 
	
  

 	
  

 	

 


 
	
  

 	
 Name:

 	
  

 
	
  

 	
  

 	

 


 
	
  

 	
 Title:

 	
  

 
	
  

 	
  

 	

 


 


PLEASE RETURN THE COMPLETED AND EXECUTED

SELLING SECURITYHOLDER QUESTIONNAIRE TO THE COMPANY AT: 


LEGG MASON, INC.

100 International Drive

Baltimore, MD 21202


	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Fax:

 	
  

 	
  

 
	
  

 	
  

 	

 


 	
  

 
	
  

 	
 Attn:

 	
 Tom
 Merchant, Deputy

 	
  

 
	
  

 	
  

 	
 General
 Counsel

 	
  

 


A-6






EXHIBIT C-1 


FORM OF OPINION OF SHEARMAN & STERLING
LLP


To the Holders
listed in Schedule I to

the Note Exchange Agreement referred to below 


and 


Kohlberg
Kravis Roberts & Co. L.P. 


Legg Mason, Inc.

Repurchase of 

2.5% Senior Convertible Notes due 2015 


Ladies and
Gentlemen: 


          We
have acted as counsel to Legg Mason, Inc., a Maryland corporation (the “Company”),
in connection with the repurchase by the Company of its 2.50% Convertible
Senior Notes due 2015 (the “Notes”) pursuant to the Note Exchange
Agreement, dated as of [               ],
20[    ] (the “Note Exchange Agreement”),
among the Company and each of you. In consideration for the repurchase of the
Notes and the Termination, the Company shall issue to the Holders warrants (the
“Warrants”) to purchase shares of common stock, par value $0.10 per
share, of the Company (the “Common Stock”). This opinion is furnished to
you pursuant to Section 6.1(j) of the Note Exchange Agreement. Unless otherwise
defined herein, terms defined in the Note Exchange Agreement are used herein as
therein defined. 


          In
that connection, we have reviewed originals or copies of the following
documents:


	
  

 	
  

 	
  

 
	
  

 	
 (a)

 	
 The Note
 Exchange Agreement;

 
	
  

 	
  

 	
  

 
	
  

 	
 (b)

 	
 The Warrant
 Agreement, dated as of
 [               ],
 20[    ] (the “Warrant Agreement”);

 
	
  

 	
  

 	
  

 
	
  

 	
 (c)

 	
 The
 Warrants;

 
	
  

 	
  

 	
  

 
	
  

 	
 (d)

 	
 The
 Registration Rights Agreement, dated as of
 [               ],
 20[    ], between the Company and KKR I-L Limited
 (the “Registration Rights Agreement”); and

 
	
  

 	
  

 	
  

 
	
  

 	
 (e)

 	
 The Amended
 and Restated Standstill Agreement, dated as of
 [               ],
 20[    ], between the Company and Kohlberg Kravis
 Roberts & Co. L.P. (the “Amended and Restated Standstill Agreement”).

 



The documents
described in the foregoing clauses (a) through (e) are collectively referred to
herein as the “Opinion Documents”. 


	
  

 	
  

 
	
  

 	
 We have also
 reviewed the following: 

 


C-1-1










	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (a) The
 Articles of Incorporation and By-Laws of the Company, as certified by an
 officer of the Company. 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (b) A
 specimen copy of the share certificate representing the Common Stock. 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (c)
 Originals or copies of such other corporate records of the Company,
 certificates of public officials and of officers of the Company and
 agreements and other documents as we have deemed necessary as a basis for the
 opinions expressed below. 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 In our
 review of the Opinion Documents and other documents, we have assumed: 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (a) The
 genuineness of all signatures. 

 
	
  

 	
  

 
	
  

 	
 (b) The
 authenticity of the originals of the documents submitted to us.

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (c) The
 conformity to authentic originals of any documents submitted to us as copies.
 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (d) As to
 matters of fact, the truthfulness of the representations made in the Note
 Exchange Agreement and the other Opinion Documents and in certificates of
 public officials and officers of the Company. 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (e) That
 each of the Opinion Documents is the legal, valid and binding obligation of
 each party thereto, other than the Company, enforceable against each such
 party in accordance with its terms. 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (f) That: 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (i) The
 Company is an entity duly organized and validly existing under the laws of
 the jurisdiction of its organization. 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (ii) The
 Company has power and authority (corporate or otherwise) to execute, deliver
 and perform, and has duly authorized, executed and delivered (except to the
 extent Generally Applicable Law is applicable to such execution and
 delivery), the Opinion Documents to which it is a party. 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (iii) The
 execution, delivery and performance by the Company of the Opinion Documents
 to which it is a party have been duly authorized by all necessary action
 (corporate or otherwise) and do not: 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (A)
 contravene its articles of incorporation, bylaws or other organizational
 documents; 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (B) except
 with respect to Generally Applicable Law, violate any law, rule or regulation
 applicable to it; or 

 


C-1-2










	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (C) result
 in any conflict with or breach of any agreement or document binding on it of
 which any addressee hereof has knowledge, has received notice or has reason
 to know. 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (iv) Except
 with respect to Generally Applicable Law, no authorization, approval or other
 action by, and no notice to or filing with, any governmental authority or
 regulatory body or (to the extent the same is required under any agreement or
 document binding on it of which an addressee has knowledge, has received
 notice or has reason to know) any other third party is required for the due
 execution, delivery or performance by the Company of any Opinion Document to
 which it is a party or, if any such authorization, approval, consent, action,
 notice or filing is required, it has been duly obtained, taken, given or made
 and is in full force and effect. 

 



We have not
independently established the validity of the foregoing assumptions. 


                    “Generally
Applicable Law” means the federal law of the United States of America, and
the law of the State of New York (including the rules or regulations
promulgated thereunder or pursuant thereto), that a New York lawyer exercising
customary professional diligence would reasonably be expected to recognize as
being applicable to the Company, the Opinion Documents or the transactions
governed by the Opinion Documents. Without limiting the generality of the
foregoing definition of Generally Applicable Law, the term “Generally
Applicable Law” does not include any law, rule or regulation that is applicable
to the Company, the Opinion Documents or such transactions solely because such
law, rule or regulation is part of a regulatory regime applicable to any party
to any of the Opinion Documents or any of its affiliates due to the specific
assets or business of such party or such affiliate. 


          Based
upon the foregoing and upon such other investigation as we have deemed
necessary and subject to the qualifications set forth below, we are of the
opinion that: 


	
  

 	
  

 
	
  

 	
           1.
 No authorization, approval or other action by, and no notice to or filing
 with, any United States federal or New York governmental authority or
 regulatory body is required for the due execution, delivery or performance by
 the Company of any Opinion Document to which it is a party, except as may be
 required under the Securities Act in connection with the registration
 statements contemplated by the Registration Rights Agreement and as may be
 required under the securities or blue sky laws of any jurisdiction in
 connection with the offer and sale of the Warrants and, except for the
 authorizations, approvals, actions, notices and filings specified in the Note
 Exchange Agreement. 

 
	
  

 	
  

 
	
  

 	
           2.
 The Note Exchange Agreement has been duly executed and delivered by the
 Company and is the legal, valid and binding obligation of the Company,
 enforceable against the Company in accordance with its terms. 

 
	
  

 	
  

 
	
  

 	
           3.
 The Registration Rights Agreement has been duly executed and delivered by the
 Company and is the legal, valid and binding obligation of the Company,
 enforceable against the Company in accordance with its terms. 

 


C-1-3










	
  

 	
  

 
	
  

 	
           4.
 The Amended and Restated Standstill Agreement has been duly executed and
 delivered and is the legal, valid and binding obligation of the Company,
 enforceable against the Company in accordance with its terms. 

 
	
  

 	
  

 
	
  

 	
           5.
 The Warrant Agreement has been duly executed and delivered and is the legal,
 valid and binding obligation of the Company, enforceable against the Company
 in accordance with its terms. 

 
	
  

 	
  

 
	
  

 	
           6.
 The Warrants have been duly executed by the Company and, when delivered in
 exchange for the Notes and the Termination as provided in the Note Exchange
 Agreement, the Warrants will be the legal, valid and binding obligations of
 the Company, enforceable against the Company in accordance with their terms. 

 
	
  

 	
  

 
	
  

 	
           7.
 The Company is not required to register as an investment company under the
 Investment Company Act of 1940, as amended. 

 
	
  

 	
  

 
	
  

 	
           Our opinions
 expressed above are subject to the following qualifications: 

 
	
  

 	
  

 
	
  

 	
           (a)
 Our opinions in paragraphs 2, 3, 4, 5 and 6 above are subject to the effect
 of any applicable bankruptcy, insolvency, reorganization, moratorium or
 similar laws affecting creditors’ rights generally (including without
 limitation all laws relating to fraudulent transfers). 

 
	
  

 	
  

 
	
  

 	
           (b)
 Our opinions in paragraphs 2, 3, 4, 5 and 6 above are also subject to the
 effect of general principles of equity, including without limitation concepts
 of materiality, reasonableness, good faith and fair dealing (regardless of
 whether considered in a proceeding in equity or at law). 

 
	
  

 	
  

 
	
  

 	
           (c)
 Our opinions are limited to (i) Generally Applicable Law and (ii) in the case
 of our opinion in paragraph 7 above, the Investment Company Act of 1940, as
 amended, and we do not express any opinion herein concerning any other law. 

 
	
  

 	
  

 
	
  

 	
           (d)
 The enforcement of any rights to indemnity and contribution in our opinions
 in paragraphs 2 and 3 above may be limited by federal and state securities
 laws and principles of public policy. 

 



          This
opinion letter is rendered to you in connection with the transactions
contemplated by the Opinion Documents. This opinion letter may not be relied
upon by you for any other purpose without our prior written consent.


          This
opinion letter speaks only as of the date hereof. We expressly disclaim any
responsibility to advise you of any development or circumstance of any kind,
including any change of law or fact, that may occur after the date of this
opinion letter that might affect the opinions expressed herein.


	
  

 	
  

 
	
  

 	
 Very truly
 yours, 

 


C-1-4






EXHIBIT C-2 


FORM OF OPINION OF THE GENERAL COUNSEL
CORPORATE OF THE COMPANY


To the Holders
listed in Schedule I

to the Note Exchange Agreement referred to below 


and 


Kohlberg
Kravis Roberts & Co. L.P. 


Ladies and
Gentlemen: 


          You
have requested me, as General Counsel Corporate of Legg Mason, Inc., a Maryland
corporation (the “Company”), to render my opinion in connection with the
repurchase by the Company of its 2.50% Convertible Senior Notes due 2015 (the “Notes”)
pursuant to the Note Exchange Agreement, dated as of
[               ],
20[    ], (the “Note Exchange Agreement”),
among the Company and each of you. In consideration for the repurchase of the
Notes and the Termination, the Company shall issue to the Holders warrants (the
“Warrants”) to purchase shares of common stock, par value $0.10 per
share, of the Company (the “Common Stock”). This opinion is furnished to
you pursuant to Section 6.1(h) of the Note Exchange Agreement. Unless otherwise
defined herein, terms defined in the Note Exchange Agreement are used herein as
therein defined. 


          In
my capacity as General Counsel Corporate of the Company, I have examined the
Note Exchange Agreement, the Registration Rights Agreement, dated as of
[               ],
20[    ], between the Company and KKR I-L Limited
(the “Registration Rights Agreement”), the Amended and Restated
Standstill Agreement, dated as of
[               ],
20[    ], between the Company and Kohlberg Kravis
Roberts & Co. L.P. (the “Amended and Restated Standstill Agreement”),
the Warrant Agreement, dated as of
[               ],
20[    ] (the “Warrant Agreement”) and the
Warrants, originals, or copies identified to my satisfaction, of such corporate
records of the Company, certificates of public officials, officers of the
Company and other persons, and such other documents, agreements and instruments
as I have deemed necessary as a basis for the opinions hereinafter expressed.
In my examinations, I have assumed the genuineness of all signatures, the
authenticity of the originals of the documents submitted to me and the
conformity to authentic originals of all documents submitted to me as copies.
As to factual matters, I have relied upon the truthfulness of the
representations of the Company made in the documents discussed above and in
certificates of public officials and officers of the Company. 


          My
opinions set forth herein are limited to the federal securities laws of the
United States of America and the Maryland General Corporation Law, and I do not
express any opinion herein concerning any other law or any other matter not
expressly addressed below. 


          Based
upon and subject to the foregoing, I am of the opinion that: 


	
  

 	
  

 	
  

 
	
  

 	
 (i)

 	
 The Company
 has been duly incorporated and is validly existing as a corporation in good
 standing under the laws of the State of Maryland. 

 


C-2-1










	
  

 	
  

 	
  

 
	
  

 	
 (ii)

 	
 The Company
 has all requisite corporate power and authority to conduct its business as
 currently conducted.

 
	
  

 	
  

 	
  

 
	
  

 	
 (iii)

 	
 The Company
 has all requisite corporate power to execute, deliver and perform, and has duly
 authorized, executed and delivered the Note Exchange Agreement, the
 Registration Rights Agreement, the Amended and Restated Standstill Agreement,
 the Warrant Agreement and the Warrants and the execution, delivery and
 performance by the Company of the Note Exchange Agreement, the Registration
 Rights Agreement, the Amended and Restated Standstill Agreement, the Warrant
 Agreement and the Warrants have been duly authorized by all necessary
 corporate action and do not (A) contravene the Company’s articles of incorporation
 or bylaws, (B) assuming (i) the accuracy of the representations as to factual
 matters made by the Holders in Section 4 of the Note Exchange Agreement, (ii)
 the consents, approvals, orders and authorizations referred to in clause (ii)
 of Section 3.6 of the Note Exchange Agreement have been obtained and (iii)
 the expiration and termination of applicable waiting periods referred to in
 clause (i) of Section 3.6 of the Note Exchange Agreement, violate any law,
 rule or regulation to my knowledge applicable to it, or (C) result in any
 conflict with or breach of any material agreement binding on the Company of
 which I am aware, (1) other than, in the cases of clauses (B) and (C) above,
 as would not, individually or in the aggregate, have a Material Adverse
 Effect and (2) in the case of clause (B) above, except for potential issues
 under ERISA if, as a result of the issuance of the Common Stock, the
 recipient Beneficially Owns 10% of the total outstanding Common Stock and the
 Company’s investment products are invested in products sponsored by the
 recipient.

 
	
  

 	
  

 	
  

 
	
  

 	
 (iv)

 	
 The
 Company’s authorized capital stock is as set forth in Section 3.2(a) of the
 Note Exchange Agreement.

 
	
  

 	
  

 	
  

 
	
  

 	
 (v)

 	
 The Common
 Stock reserved for issuance upon exercise of the Warrants 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 the issuance
 of the Common Stock will not be subject to any preemptive or similar rights.

 
	
  

 	
  

 	
  

 
	
  

 	
 (vi)

 	
 All governmental
 consents, approvals, orders and authorizations required on the part of the
 Company in connection with the execution, delivery or performance of each of
 the Note Exchange 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 have been
 obtained or made, other than (i) the expiration or termination of any
 applicable waiting periods under the HSR Act 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.

 


C-2-2










	
  

 	
  

 	
  

 
	
  

 	
 (vii)

 	
 To my
 knowledge, there are no (i) investigations or proceedings pending or
 threatened by any Governmental Entity with respect to the Company or any of
 its Subsidiaries or any of their properties or assets, (ii) actions, suits,
 arbitrations, claims or proceedings pending or 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.

 



          I
am furnishing this opinion solely for your benefit. This opinion may not be
relied upon by any other person without my express written consent. Copies of
this opinion may not be furnished to any other person, nor may any portion of
this opinion be quoted, circulated or referred to in any other document, except
as may be required pursuant to applicable law. This opinion letter speaks only
as of the date hereof. I expressly disclaim any responsibility to advise you of
any development or circumstance of any kind, including any change of law or
fact, that may occur after the date of this opinion letter that might affect
the opinions expressed herein. 


	
  

 	
  

 
	
  

 	
 Very truly
 yours, 

 
	
  

 	
  

 
	
  

 	
 Thomas C.
 Merchant 

 
	
  

 	
  

 
	
  

 	
 General
 Counsel Corporate 

 


C-2-3






EXHIBIT D


FORM OF AMENDED AND RESTATED STANDSTILL
AGREEMENT


D-1






[               ],
20[    ] 


Kohlberg
Kravis Roberts & Co. L.P.

9 West 57th Street

New York, NY 10019 


Amended and Restated Standstill Agreement


Ladies and
Gentlemen:


          Reference
is made to that certain letter agreement (the “Standstill Agreement”) dated as of January 14, 2008 between
Kohlberg Kravis Roberts & Co. L.P. (“KKR”)
and Legg Mason, Inc. (“LM”). In
connection with the acquisition by one or more affiliates of KKR (the “Transaction”) of warrants (the “Warrants”) to purchase shares of LM’s
common stock, par value $0.10 per share (“Common
Stock”), having the terms set forth in the warrant agreement dated
as of [          ],
20[    ] (the “Warrant
Agreement”), and as a condition to LM’s execution of the Note
Exchange Agreement of even date herewith (the “Note Exchange Agreement”), LM and KKR hereby enter into this
letter agreement (this “Agreement”)
amending and restating the Standstill Agreement as follows. 


          KKR
agrees, during the period (the “Standstill
Period”) from the date hereof until such time as neither KKR nor any
of its affiliates beneficially owns or Owns any Warrants or a number of shares
of Common Stock issued upon the exercise of any Warrants that exceeds 4.9% of
the outstanding shares of Common Stock, that it and its Representatives will
not, directly or indirectly, unless consented to in advance by the Chief
Executive Officer or the lead independent director of LM: (a) effect or seek,
offer or propose (whether publicly or otherwise) to effect, or announce any
intention to effect or cause or participate in or in any way assist, facilitate
or encourage any other Person to effect or seek, offer or propose (whether
publicly or otherwise) to effect or participate in, (i) any acquisition of any
securities (or beneficial ownership thereof), or rights or options to acquire
any securities (or beneficial ownership thereof), or any assets, indebtedness
or businesses of LM or any of its affiliates, provided,
however, that KKR and its affiliates may acquire beneficial
ownership or Ownership of (A) any or all of the Warrants issuable by LM
pursuant to the Note Exchange Agreement, (B) any shares of Common Stock issued
upon the exercise of Warrants pursuant to the terms of the Warrant Agreement or
upon the conversion of any 2.50% Convertible Senior Notes due 2015 of LM (the “Convertible Notes”) issued pursuant to the
Indenture, dated as of January 31, 2008, between The Bank of New York, as
trustee, and LM (the “Indenture”),
(C) shares of Common Stock that KKR or its affiliates acquire from LM in
connection with any stock split or subdivision of common shares of LM that are
already held by them at the time of such acquisition, (D) shares of capital
stock of LM (other than Common Stock), evidences of LM’s indebtedness or other
assets or property or rights, or warrants to acquire shares of capital stock of
LM or other securities, in each case, that KKR or its affiliates acquire from
LM pursuant to the Warrant Agreement or the Indenture in connection with any
distribution thereof by LM to holders of the Common Stock and (E) any
securities of LM, or rights or options to acquire any securities of LM, to the
extent reasonably estimated to 


D-2






- 2 -




reduce or
close out any short position or “put equivalent position” (within the meaning
of Rule 16a-1 under the Exchange Act of 1934, as amended (the “Exchange Act”)) effected to monetize or
hedge any Warrants or Convertible Notes that are Owned or beneficially owned by
KKR or any of its affiliates, (ii) any tender or exchange offer, consolidation,
business combination, acquisition, merger, joint venture or other business
combination involving LM, any of its affiliates or any of the assets of LM or
its affiliates, (iii) any recapitalization, stock dividend, restructuring,
liquidation, dissolution or other extraordinary transaction with respect to LM
or any of its affiliates or (iv) any “solicitation” of “proxies” (as such terms
are used in the proxy rules of the Securities and Exchange Commission) to vote
any voting securities of LM or any of its affiliates or consents to any action
from any holder of any voting securities of LM or any of its affiliates or seek
to advise or influence any Person with respect to the voting of or the granting
of any consent with respect to any voting securities of LM; (b) form, join or
in any way participate in a “group” (as defined under the Exchange Act) in
connection with the voting securities of LM or otherwise act in concert with
any person in respect of any such securities; (c) otherwise act, alone or in
concert with others, to seek representation on or to control or influence the
management, board of directors or policies of LM or to obtain representation on
the board of directors of LM or any committee thereof; (d) enter into any
discussions or arrangements with any third party with respect to any of the
foregoing; (e) request that LM or any of its Representatives amend or waive any
provision of this Agreement, or make any public announcement with respect to
the restrictions of this Agreement, or take any action which would reasonably
be expected to require LM to make a public announcement regarding any potential
transaction; or (f) advise, assist or encourage, or direct any Person to
advise, assist or encourage any other Person or Persons, in connection with any
of the foregoing. 


          The
restrictions set forth herein will not apply as to KKR and its affiliates if
any of the following occurs:


                    (i)
a third party who is not an affiliate of KKR (a “Third Party”) acquires beneficial ownership of 50% of the
outstanding Voting Stock; or


                    (ii)
LM enters into an agreement pursuant to which a Third Party would acquire all
or substantially all of the stock or assets of LM or LM would be merged or
consolidated with another Person, unless immediately following the consummation
of such transaction the stockholders of LM immediately prior to the
consummation of such transaction would continue to hold (in substantially the
same proportion as their ownership of LM’s voting stock immediately prior to
the transaction) more than 50% of all of the outstanding common stock or other
securities entitled to vote for the election of directors of the surviving or
resulting entity in such transaction or any direct or indirect parent thereof; provided that this clause shall not be
applicable after such agreement is terminated. 


          As
used in this Agreement, the term “Person”
shall be broadly interpreted to include, without limitation, the media and any
individual, corporation, company, partnership, limited liability company, or
other entity or group. As used in this Agreement, the term “affiliate” shall mean any other Person that
directly, or indirectly through one or more intermediates, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person; the term “Representatives”
shall mean, collectively, a party’s directors, officers, affiliates, employees
or consultants, to the extent they are acting on such party’s behalf; the term
“beneficial ownership”

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- 3 -




or variations
thereof, when used with respect to securities, means such term as used in any
of Section 13(d) or Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder; and the terms “Ownership” and “Own”,
when used with respect to securities, shall mean bearing all or substantially
all economic risk of loss or appreciation (less no more than a fixed or
floating interest rate return) in the value of, and any profit (less no more
than a fixed or floating interest rate return) derived from a transaction in,
such securities. 


          Notwithstanding
anything herein to the contrary, except as provided in this paragraph, this
Agreement shall not apply to affiliates of KKR that are Non-Investor
Affiliates. “Non-Investor Affiliates”
are affiliates of KKR (x) whose business is distinct from private equity and
(y) whose investments, investment strategy and related activity (including any
investments, investment strategy or related activity with respect to the Common
Stock) are not executed, developed, directed or undertaken by KKR or its
affiliates or their respective Representatives (other than Non-Investor
Affiliates or their Representatives). If non-public, proprietary information
with respect to LM is made available to a Non-Investor Affiliate or its
Representative (other than to compliance personnel for compliance purposes
only) by KKR or its affiliates (other than Non-Investor Affiliates) (such a
situation, a “Wall Cross”), then
this Agreement shall apply to such Non-Investor Affiliate without regard to the
first sentence of this paragraph. At all times during the Standstill Period,
for so long as a Wall Cross has not occurred with respect to a Non-Investor
Affiliate: 


                    (i)
Such Non-Investor Affiliate shall be permitted to acquire shares of Common
Stock and securities exchangeable or exercisable for, or convertible into,
shares of Common Stock (collectively, “Common
Equity”) only (A) in an amount (together with the Common Equity
Owned or beneficially owned (determined without aggregation with any affiliate
of KKR that is not a Non-Investor Affiliate) by all other Non-Investor
Affiliates) up to 4.9% of the then outstanding shares of Common Stock
(including, with respect to an acquisition of exchangeable, exercisable or
convertible securities, the shares of Common Stock issuable upon exchange,
exercise or conversion thereof), and (B) if such Non-Investor Affiliate is able
to make the passive investor certification specified in clause (i) of the
proviso of Rule 13d-1(b)(1) under the Exchange Act with respect to the
acquisition of such Common Equity. 


                    (ii)
If such Non-Investor Affiliate is unable to make such passive investor
certification, then such Non-Investor Affiliate shall not (A) acquire any
Common Equity or (B) initiate any proposal for a transaction or action that
would be prohibited pursuant to clause (a)(ii), (a)(iii) or (a)(iv) of the
second paragraph of this Agreement if such transaction were effected, or such
action were taken, by KKR.


          The
terms of this Agreement may be modified or waived only by a separate writing
signed by LM and KKR that expressly modifies or waives any such term.


          It
is understood and agreed that no failure or delay by LM in exercising any right,
power or privilege under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any right, power or privilege under this
Agreement. 

D-4





- 4 -




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


          Subject
to applicable law, each party hereby irrevocably and unconditionally (i)
submits to the exclusive jurisdiction of the courts of the State of New York
and of the United States of America, in each case located in the County of New
York in the State of New York, for any action, suit or proceeding arising out
of or relating to this Agreement and the transactions contemplated hereby and
(ii) agrees not to commence any action, suit or proceeding relating thereto
except in such courts. Subject to applicable law, each party hereby irrevocably
and unconditionally (i) waives any objection to the laying of venue of any
action, suit or proceeding arising out of this Agreement or the Transaction, in
the courts of the State of New York and of the United States of America, in
each case located in the County of New York in the State of New York, and (ii)
waives and agrees not to plead or claim that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum.


          KKR
acknowledges that LM would be irreparably injured by a breach of this Agreement
by KKR, that monetary remedies would be inadequate to protect LM against any
actual or threatened breach or continuation of any breach of this Agreement,
and, without prejudice to any other rights and remedies otherwise available to
LM, KKR agrees to the granting of equitable relief, including injunctive relief
and specific performance, in LM’s favor without proof of actual damages in the
event of KKR’s actual or threatened breach of this Agreement.


          In
the event of an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by LM and KKR and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement. Further, if any
term or provision of this Agreement, or any application thereof to any
particular set of facts or circumstances, shall, to any extent and for any
reason, be held to be invalid or unenforceable, the remainder of this
Agreement, or the application of such term or provision to facts or
circumstances other than those to which it is held invalid or unenforceable,
shall not be affected thereby and shall be construed as if such invalid or
unenforceable provision had to such extent never been contained herein and each
term and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.


          This
Agreement may be signed in one or more counterparts which, when taken together,
shall constitute one and the same instrument. 

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 Very truly
 yours, 

 
	
  

 	
  

 	
  

 
	
  

 	
 LEGG MASON,
 INC. 

 
	
  

 	
  

 
	
  

 	
 By:

 	
  

 
	
  

 	
  

 	

 


 
	
  

 	
 Name:

 
	
  

 	
 Title: 

 



Confirmed and
agreed to as of

the date first written above: 


	
  

 	
  

 	
  

 
	
 KOHLBERG
 KRAVIS ROBERTS & CO. L.P. 

 
	
  

 	
  

 	
  

 
	
 By:

 	
  

 	
  

 
	
  

 	

 


 	
  

 
	
 Name:

 	
  

 
	
 Title: 

 	
  

 


[SIGNATURE PAGE—AMENDED AND RESTATED STANDSTILL AGREEMENT]

D-6