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                                                                   Exhibit 10.16

                      LEGG MASON WOOD WALKER, INCORPORATED

                        FINANCIAL ADVISOR RETENTION PLAN

         This document constitutes the Legg Mason Wood Walker, Incorporated
Financial Advisor Retention Plan (the "Plan"), as amended and restated effective
as of January 1, 2003. The Plan, as amended and restated, constitutes the
continuation of the plan as in effect immediately prior to January 1, 2003 (the
"Prior Plan"). The Prior Plan was known as the Legg Mason Wood Walker,
Incorporated Private Client Group Deferred Compensation Plan.

         1.  Purpose - The purpose of the Plan is to enhance the ability of Legg
Mason Wood Walker, Incorporated (the "Company") to retain key full-time
financial advisors by providing special payments to key financial advisors who
remain employed by the Company for specific periods of time. The Plan also
provides for payments to retired financial advisors who do not compete with the
Company following their retirement. The additional compensation payable to a
full-time financial advisor for remaining with the Company for a specified
period (and the measure of the value of that financial advisor's continued
employment with the Company) is determined based upon the commissions and fee
revenue generated by the financial advisor. Amounts payable under this Plan are
in addition to the compensation provided for services rendered and are intended
solely to encourage financial advisors to remain employed by the Company as
full-time financial advisors.

         2.  Definitions - As used herein, the following definitions shall
apply:

             (a) "Account" means a Financial Advisor's combined Interest Account
and Phantom Stock Account.

             (b) "Committee" means the Legg Mason Wood Walker, Incorporated
Financial Advisor Retention Plan Committee consisting of such members as the
Company's President shall select from time to time.

             (c) "Company" means Legg Mason Wood Walker, Incorporated.

             (d) "Credit Interest Asset Base" means for each month, the product
of (A) the product of (X) 0.0833 and (Y) the sum of the average credit interest
and Legg Mason money market fund balances of the FA for the month (calculated by
dividing the sum of the closing balances in the account for each day by the
number of days in the month), less the applicable threshold for that Plan Year
as set forth in the FA Compensation Schedule, and (B) 0.001 (or the different
number for the applicable Plan Year as is set forth in the FA Compensation
Schedule).

             (e) "Credit Interest Retention Bonus" means the retention bonus
credited under Section 4(b) with respect to the combined balance in credit
interest accounts and Legg Mason money market fund accounts in excess of the
applicable threshold contained in the FA Compensation Schedule. In the case of a
Team Leader, such retention bonus shall be based on the combined balance in
credit interest accounts and Legg Mason money market fund

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accounts of the Participating Team in excess of the applicable threshold
contained in the FA Compensation Schedule.

         (f) "Credit Interest Rate" means the average of the twelve month end
rates of the Company's credit interest rate paid during a Plan Year to the
Company's cash reinvestment accounts.

         (g) "Disability" means a medically determinable physical or mental
impairment which, as determined by the Committee using such criteria as it
establishes in its sole and absolute discretion, will prevent the FA from
performing his or her usual duties or any other similar duties available in the
Company's employ for a period of at least twelve (12) months.

         (h) "Distribution Valuation Date" means (i) in the case of a
distribution following the death of a FA or the termination of a FA's employment
as a result of Disability, the date that is ten (10) business days before the
applicable Payment Date; and (ii) in all other cases, January 25th (or, if Legg
Mason Common Stock is not traded on its principal exchange on that day, the next
following day on which Legg Mason Common Stock is traded on its principal
exchange) preceding the applicable Payment Date.

         (i) "Dividend Payment Date" has the meaning specified in Section
6(d)(i).

         (j) "Eligible FA" means a FA (i) who is employed in the Company's
Private Client Group, (ii) who is classified by the Company as a full-time FA
and (iii) who is employed by the Company on the last day of the Plan Year, or
who terminated employment during the Plan Year by reason of death, Disability or
Retirement. A FA who is not classified by the Company as a "full-time" FA is not
eligible to participate in the Plan, regardless of the number of hours devoted
to services as a FA. Also, FAs who are members of a Participating Team are not
considered Eligible FAs, however, a FA who is a Team Leader is considered an
Eligible FA.

         (k) "Eligible Gross Production" means Gross Production that is used to
calculate the amount of a Production Retention Bonus, as determined annually in
accordance with the FA Compensation Schedule. The Gross Production of a
Participating Team shall count toward Eligible Gross Production regardless of
whether the Participating Team is compensated under the FA Compensation
Schedule.

         (l) "FA Compensation Schedule" means the Legg Mason Financial Advisor
Compensation Schedule that is in effect for a particular Plan Year.

         (m) "Fair Market Value" means an amount equal to the average of the
closing prices on the principal exchange on which Legg Mason Common Stock is
traded for the date on which the price is being determined (i.e., the Valuation
Date, Dividend Payment Date, Distribution Valuation Date or other specified
date) and the four (4) trading days immediately following the applicable date on
which the value is being determined or, if Legg Mason Common Stock is not then
traded on an exchange, such amount as is determined by the Committee, in its
discretion, using any reasonable method of valuation. Any decline in the actual
trading price of Legg Mason Common Stock during the five (5) day pricing period
shall be the sole risk of the FA.

         (n) "Financial Advisor" or "FA" means an employee who devotes all of
his or her working time to the generation of commission and fee revenues through
the sale of

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investment products and services to the public and is compensated on a
commission basis. This definition excludes any executive office/departmental
personnel unless specifically included by separate agreement. Notwithstanding
the foregoing, a Branch Manager who receives non-commission compensation shall
be considered a "Financial Advisor" or "FA" and shall be considered a
Participating FA who is eligible to receive a Retention Bonus hereunder (but
determined solely on his or her personal Gross Production).

         (o) "Gross Production" means the gross commission and fee revenue
(other than investment banking fees and order fees, both of which are excluded
from the calculation of Gross Production) that is received by the Company from
sales of products and services by a Financial Advisor. If production is split
between one or more Financial Advisors, each Financial Advisor's "Gross
Production" will be based on his or her own cumulative production level.

         (p) "Inactive Participant" means a Participating FA was credited with a
Retention Bonus under the Plan and who continues to be employed by the Company
but who ceases to be an Eligible FA.

         (q) "Interest Account" means the investment account established for
Retention Bonuses pursuant to Section 5(a) and Section 6(c) of the Plan.

         (r) "Legg Mason Common Stock" means shares of common stock of Legg
Mason, Inc.

         (s) "Legg Mason Share Units" or "Share Units" means units that are
economically equivalent to, but are not actual, shares of Legg Mason Common
Stock.

         (t) "Monthly Credit Interest Amount" means for each month, the amount
determined by multiplying 0.40 (or the different number for the applicable Plan
Year as is set forth in the FA Compensation Schedule) by the Credit Interest
Asset Base for the FA for that month; however, a Monthly Credit Interest Amount
that is a negative number shall be deemed to be zero.

         (u) "Participating FA" means an Eligible FA who participates in the
Plan based on his or her Eligible Gross Production in any Plan Year.

         (v) "Participating Team" means a group of FAs who operate (and are
compensated) as a team and who are designated as a Participating Team by the
Company.

         (w) "Payment Date" means the date a FA receives a payment from the
Company pursuant to the Plan.

         (x) "Phantom Stock Account" means the investment account established
for Retention Bonuses pursuant to Section 5(a) and Section 6(d) of the Plan.

         (y) "Plan Year" means the calendar year.

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             (z)  "Production Retention Bonus" means the retention bonus
calculated under Section 4(a) with respect to Gross Production in excess of the
applicable Gross Production threshold contained in the FA Compensation Schedule.
In the case of a Team Leader, such retention bonus shall be based on Gross
Production of the Participating Team in excess of the applicable Gross
Production threshold contained in the FA Compensation Schedule.

             (aa) "Retention Bonus" means the Production Retention Bonus and the
Credit Interest Retention Bonus.

             (bb) "Retirement" means a FA's termination of employment with the
Company (i) on or after age sixty-five (65); or (ii) at any time when the sum of
the FA's age at termination of employment and his or her years of service with
the Company equals at least seventy (70).

             (cc) "Team Leader" means the person designated as leader of a
Participating Team on the records of the Company.

             (dd) "Valuation Date" means February 15th of each year or, if that
day is not a day on which Legg Mason Common Stock is traded on the principal
exchange on which it is regularly traded, the next following trading day.

         3.  Plan Participation - Eligible FAs shall become participants in the
Plan on the last day of the first Plan Year during which they become
Participating FAs. In order to receive a Retention Bonus for any Plan Year
during which a Participating FA is employed, the FA must be an Eligible FA for
such Plan Year (provided, however, if the employment of a Participating FA
terminates during a Plan Year by reason of the FA's death, Disability or
Retirement, the FA may be entitled to a prorated Retention Bonus for such Plan
Year (determined in accordance with Section 4)).

         Retention Bonuses are designed to encourage continued employment with
the Company and to entice Eligible FAs to continue in their position as a
full-time FA. If a Participating FA ceases to be an Eligible FA (e.g., because
he or she ceases to be classified as a full-time FA), but still remains in the
employ of the Company, he/she will become an Inactive Participant. An Inactive
Participant shall remain eligible to receive Retention Bonuses that were
previously credited to his or her Account (and which are payable at a future
date if he/she remains employed by the Company), and the value of the Account of
an Inactive Participant shall continue to be credited with earnings pursuant to
Section 5 (subject to the forfeiture provisions of Section 7(a) if he/she does
not remain employed by the Company). However, an Inactive Participant shall not
be entitled to receive further Retention Bonuses with respect to his or her
subsequent period of employment with the Company in a capacity other than as an
Eligible FA.

         4.  Retention Bonuses - Retention Bonuses are designed to provide a
financial incentive for Participating FAs to remain employed by the Company and
to continue in the position of a full-time FA. The Plan also provides for
payment of Retention Bonuses in exchange for compliance with the provisions of
Section 10 following Retirement. In order to entice a Participating FA to remain
employed as an Eligible FA and/or to comply with the provisions of Section 10
following Retirement, the Company will credit the following amounts

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to the Account of each Participating FA who is employed on the last day of the
Plan Year. Such credit shall be made following the end of each Plan Year
commencing with the 2003 Plan Year:

             (a) Production Retention Bonus - The amount determined by applying
the applicable rate schedule in the FA Compensation Schedule for the Plan Year
to the Participating FA's Eligible Gross Production for that Plan Year.

             (b) Credit Interest Retention Bonus - The sum of the Monthly Credit
Interest Amounts of the Participating FA for that Plan Year.

         Notwithstanding the foregoing, if the total amount to be credited to
the Account of a Participating FA under (a) and (b) above for a Plan Year is
less than One Hundred Dollars ($100.00), no amount will be credited to the
Account of such Participating FA for such Plan Year.

         Retention Bonuses which the Participating FA elects to invest in the
Phantom Stock Account will be allocated as of the Valuation Date following the
close of the Plan Year to which the Retention Bonus relates.

         If the employment of a Participating FA terminates during a Plan Year
by reason of the FA's death, Disability or Retirement, the FA shall be entitled
to a prorated Retention Bonus for such Plan Year. Such proration shall be made
by:

                 (i)  multiplying the applicable thresholds in Section 4(a) and
the related provisions of the FA Compensation Schedule by a fraction, the
numerator of which is the number of calendar days during which the FA was
employed by the Company and the denominator of which is 365; and

                 (ii) applying such adjusted thresholds and making the required
determinations with respect to the FA's Eligible Gross Production under Section
4(a) as of the last day of the month during which the FA terminated employment
and adding to that amount any Credit Interest Retention Bonus related to the
months in which the Participating FA was employed.

         5.  Establishment of FA Accounts

             (a) Account Established for Each Participating FA - An individual
Account shall be established on the books of the Company in the name of each
Participating FA, for the purpose of accounting for Retention Bonuses payable to
the FA, and to account for investment adjustments made pursuant to Section 6. A
separate sub-account shall be established with respect to Retention Bonuses
credited for each Plan Year (to which Retention Bonuses for the Plan Year and
any investment adjustments made pursuant to Section 6 shall be credited). Other
sub-accounts may be established as the Committee or the Company deems
appropriate to properly implement the provisions of the Plan.

             (b) Account Statements - As soon as practicable after the Valuation
Date, the Company shall provide each FA who has a balance in his or her Account
with a

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statement showing the Retention Bonuses credited to his or her Account with
respect to each Plan Year, the manner in which Retention Bonuses for a
particular Plan Year are deemed to be invested, the date on which the FA is
scheduled to receive his or her Retention Bonus (and investment adjustments
thereon) for each Plan Year, and such other information as the Committee shall
deem relevant.

         6. Investment of Retention Bonuses - In order to give a Participating
FA the opportunity to share in the growth and profitability of the Company, and
to provide further incentive for Participating FAs to remain in the employ of
the Company (and to comply with the provisions of Section 10 following
Retirement), Retention Bonuses credited to an Account shall be deemed to be
invested in accordance with the provisions of this Section 6 pending payment.

             (a) Phantom Stock or Interest Credit - For investment purposes,
Retention Bonuses credited to a Participating FA's Account shall be allocated
to, and accrue in, either the Phantom Stock Account or Interest Account.

             (b) Investment Designation - Subject to such limitations, rules and
procedures as may from time to time be imposed by the Committee, each
Participating FA shall elect annually, prior to the end of each Plan Year, on a
form prescribed by the Committee, whether any Retention Bonuses for such Plan
Year shall be allocated to, and accrue in, the Interest Account or the Phantom
Stock Account. Once an election has been made for a particular Plan Year, it may
not be changed. A separate election may be made with respect to each Plan Year.
Except as the Committee shall otherwise determine, any investment election with
respect to the Retention Bonuses for a Plan Year shall apply to the Retention
Bonus for each following Plan Year unless and until a new investment election is
filed with the Committee. In the event the Committee does not receive an initial
investment election, or it receives an investment election which it deems to be
incomplete, unclear, not in accordance with procedures established by the
Committee, or otherwise improper, the Participating FA's existing investment
election then in effect shall remain in effect, unless the Committee provides
for, and permits, corrective action. If there is no existing investment
election, or, if after the expiration of any opportunity provided for corrective
action, the Committee still possesses incomplete investment instructions, the
Participating FA shall be deemed to have designated that any non-directed
Retention Bonus be allocated to the Interest Account.

             (c) Interest Account - The Company will establish an Interest
Account on its books and records for the benefit of each Participating FA and
shall credit such Interest Account with the Retention Bonuses allocated to the
Interest Account. As of the last day of each Plan Year, the balance of a FA's
Interest Account (as determined prior to the allocation of any Retention Bonus
for such Plan Year) shall be credited with an amount equal to one year's
interest based on the Credit Interest Rate. Retention Bonuses which the FA
elects to invest in the Interest Account will be allocated as of December 31 of
the Plan Year to which the Retention Bonus relates (but will not be included for
purposes of determining the amount of interest allocated for such Plan Year).

             (d) Phantom Stock Account - All Retention Bonuses for a Plan Year
that are allocated to the Phantom Stock Account for that Plan Year shall be
deemed converted into Legg Mason Share Units. The Company will establish a
Phantom Stock Account on its

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books and records for the benefit of each Participating FA and shall credit such
Phantom Stock Account with the amount of Share Units resulting from the
conversion of the Retention Bonuses. The number of Share Units into which such
Retention Bonus shall be converted (calculated to four decimal places) will be
determined as of the Valuation Date and will be equal to the amount of the
Retention Bonus for the Plan Year divided by the Fair Market Value of a share of
Legg Mason Common Stock on the Valuation Date. The conversion of a Retention
Bonus into Legg Mason Share Units will be made by the Committee as soon as
administratively practicable after the Valuation Date following the Plan Year to
which the Retention Bonus relates.

                 (i)   Adjustment to Phantom Stock Account upon Dividend by the
Company - If, prior to a Payment Date, the Company pays any dividend (other than
in Legg Mason Common Stock) on its Common Stock, or makes any distribution
(other than in Legg Mason Common Stock) with respect thereto, the FA's Phantom
Stock Account will be credited with a number of additional Share Units
determined by dividing the amount of the dividend or other distribution
allocable to the Share Units already credited to the Phantom Stock Account as of
the record date for the dividend or distribution, by 95% of the Fair Market
Value of a share of Legg Mason Common Stock on the payment date for the dividend
or distribution (the "Dividend Payment Date"). Amounts to be credited under this
subsection 6(d)(i) will be credited as soon as administratively practicable
after the applicable Dividend Payment Date.

                 (ii)  Adjustment to Phantom Stock Account upon Certain Events -
In the event that, prior to a Payment Date, the number of outstanding shares of
Legg Mason Common Stock is changed by reason of a stock split, stock dividend,
combination of shares or recapitalization, or Legg Mason Common Stock is
converted into or exchanged for other shares as a result of a merger,
consolidation, sale of assets or other reorganization or recapitalization, the
number of Share Units then credited to a FA's Phantom Stock Account will be
appropriately adjusted so as to reflect such change (based upon the best
estimate of the Company as to relative values).

                 (iii) Rights as LMI Stockholder - Neither the allocation of
Retention Bonuses to the Phantom Stock Account, nor any other provision of the
Plan, shall confer or be construed as conferring upon a FA any rights as a
stockholder of the Company or any right to have access to the books and records
of the Company or any affiliate or subsidiary.

         7.  Eligibility for Payment of Account -

             (a) Continued Employment - The Retention Bonuses credited to a
Participating FA's Account for a Plan Year (together with any related investment
adjustments thereto) are not intended to constitute compensation for specific
services or for commissions or fee revenue generated during a particular year,
but are additional discretionary payments that are designed to encourage a FA to
remain employed by the Company for a period of six years following the close of
such Plan Year in which a Retention Bonus is credited to an Account.
Accordingly, the Retention Bonuses for a particular Plan Year (together with any
related investment adjustments thereto) shall only be paid if the FA remains
continuously employed by the Company through the last day of the sixth (6th)
Plan Year following the Plan Year to which the Retention Bonuses relates. If a
Participating FA's employment with the Company terminates for any reason
(whether involuntary or voluntary and whether with or without cause) other than

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death, Disability or Retirement on or before the last day of the sixth Plan Year
following the year to which the Retention Bonuses relates, the portion of the
Participating FA's Interest Account and Phantom Stock Account that relates to
such Retention Bonuses (and the related investment adjustments thereto) shall be
forfeited in their entirety.

             (b) Death or Disability - Upon termination of employment with the
Company due to death or Disability, the amount credited to the Account of a FA
shall be paid in accordance with the provisions of Section 8.

             (c) Retirement - Upon termination of employment with the Company
due to Retirement, a FA shall be entitled to receive the amount credited to his
or her Account in accordance with the provisions of Section 8, conditioned upon,
and in exchange for, his or her continued compliance with the provisions of
Section 10.

             (d) Forfeitures - Forfeited amounts (including amounts forfeited
pursuant to Section 10) shall revert to the Company and will not be allocated to
other Participating FAs.

         8.  Timing of Payments -

             (a) During Employment - Except for cases of Retirement, death or
Disability, and subject to Section 11, payments of the Retention Bonuses
credited to a FA's Account (together with any investment adjustments made
pursuant to Section 6 with respect to such Retention Bonus) shall be made within
seventy-five (75) days after the last day of the sixth (6th) Plan Year following
the Plan Year to which the Retention Bonus relates.

             (b) Retirement - In the event a FA's employment with the Company
terminates as a result of Retirement, payment of the FA's remaining Account
(including any prorated Retention Bonus to which the FA may be entitled for the
Plan Year pursuant to Section 4) shall be made, subject to Section 11, within
seventy-five (75) days after the close of the Plan Year following the Plan Year
in which the FA retired, unless the FA has forfeited his or her right to payment
pursuant to Section 10.

             (c) Disability of FA - In the event a FA's employment with the
Company terminates as a result of the FA's Disability, all amounts in the FA's
Account (including any prorated Retention Bonus to which the FA may be entitled
for the Plan Year pursuant to Section 4) shall be paid, subject to Section 11,
within seventy-five (75) days following the later of (i) the date on which the
FA's employment terminated and (ii) the date the Committee determines that the
FA's employment terminated as a result of the FA's Disability. The Committee, in
its sole discretion, may determine that a FA has a Disability and that the FA's
employment with the Company terminated as a result of such Disability at any
time before, at the time of, or after the FA's termination of employment.

             (d) Death -

                 (i) Death During Employment - If a FA's employment with the
Company terminates as a result of the FA's death, all amounts in the FA's
Account (including any prorated Retention Bonus to which the FA may be entitled
for the Plan Year

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pursuant to Section 4) shall be paid to the FA's beneficiary (as determined
pursuant to Section 8(d)(iii)) within seventy-five (75) days following the date
of the FA's death.

                 (ii)  Death Following Retirement - In the event of a FA's death
subsequent to the date of the FA's Retirement and at a time during which the
FA's remaining Account under the Plan has not been distributed, all amounts then
remaining in the FA's Account shall be paid to the FA's beneficiary (as
determined pursuant to Section 8(d)(iii)) within seventy-five (75) days
following Committee's receipt of written notification of the FA's death.

                 (iii) Designation of Beneficiary - Each FA from time to time
may designate, on such form as the Committee may prescribe from time to time,
any person or persons (who may be named contingently or successively) to receive
any amount payable under the Plan upon or after his or her death, and such
designation may be changed from time to time by the FA by filing a new
designation with the Committee. Each designation will revoke all prior
designations by the FA, shall be on a form prescribed by the Committee, and will
be effective only when filed in writing with the Committee during the FA's
lifetime. In the absence of a valid beneficiary designation, or if, at the time
any amount is payable to a FA or beneficiary, there is no living beneficiary
eligible to receive the payment that has been validly named by the FA, then
Company shall pay any such amount to the FA's surviving spouse (if the FA was
legally married at the time of his or her death) or if there is no surviving
spouse, to the FA's estate. In determining the existence or identity of anyone
entitled to payment, the Committee may rely conclusively upon information
supplied by the personal representative of the FA's estate. In the event of a
lack of adequate information having been supplied to the Committee, or in the
event that any question arises as to the existence or identity of anyone
entitled to receive a payment as aforesaid, or in the event that a dispute
arises with respect to any such payment, or in the event that a beneficiary
designation conflicts with applicable law, or in the event the Committee is in
doubt for any other reason as to the right of any person to receive a payment as
beneficiary then, notwithstanding the foregoing, the Company, in its sole
discretion, may, in complete discharge, and without liability for any tax or
other consequences which might flow therefrom: (i) distribute the payment to the
FA's estate, (ii) retain such payment, without liability for interest, until the
rights thereto are determined, or (iii) deposit the payment into any court of
competent jurisdiction.

         9.  Form of Payment -

             (a) Interest Account - The portion allocable to a FA's Interest
Account shall be paid in cash.

             (b) Phantom Stock Account - The portion allocable to a FA's Phantom
Stock Account shall be paid in whole shares of Legg Mason Common Stock as
described below, based on the Fair Market Value of Legg Mason Common Stock on
the Distribution Valuation Date. Whole Share Units to be distributed within an
FA's Phantom Stock Account will be converted into shares of Legg Mason Common
Stock on a one-for-one basis. The portion of a FA's Phantom Stock Account that
represents fractional Share Units and thus cannot be converted into whole shares
of Legg Mason Common Stock shall be distributed in cash. There is no limit on
the total number of shares of Legg Mason Common Stock that may be

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distributed under this Section. Any decline in the actual trading price of Legg
Mason Common Stock during the period between the Distribution Valuation Date and
the applicable Payment Date, as well as any brokerage commissions, fees or other
charges incurred by a FA in connection with the disposition of any shares of
Legg Mason Common Stock that are distributed to the FA, shall be the sole risk
and responsibility of the FA.

         10. Non-Compete - If a retired FA engages in competition with the
Company prior to the date of payment, the FA's Account shall be forfeited in its
entirety. Forfeited amounts shall revert to the Company and will not be
allocated to other FAs.

             (a) For purpose of this Section, a FA shall be deemed to have
"engaged in competition" with the Company if he or she:

                 (i)   discloses the names of or otherwise identifies any of the
Company's customers to any person, firm, corporation, association, or other
entity which provides products or services that are similar to those provided by
the Company;

                 (ii)  discloses to any person, firm, corporation, association,
or other entity any information regarding the Company's general business
practices or procedures, methods of sale, list of products, personnel
information or any other information concerning the Company's business;

                 (iii) owns, manages, operates, controls, is employed by, acts
as an agent for, participates in or is connected in any manner with the
ownership, management, operation or control of any firm, corporation,
association or other entity which is engaged in businesses which are or may be
competitive to the business of the Company; provided further that this
restrictive covenant shall encompass the State of Maryland and any other states
where the Company is engaged in business, and every city, county, and other
political subdivision of such states; or

                 (iv)  solicits or calls, either by himself or at his or her
direction has any other person or firm solicit or call, any of the customers of
the Company on whom the FA called, with whom the FA became acquainted, or of
whom the FA learned during his or her employment by the Company.

             (b) The determination of whether a FA has violated the terms of
Section 10(a) shall be made by the Committee, in its sole and absolute
discretion, and the determination of the Committee shall be final, conclusive
and binding upon both the FA (or any person or entity claiming through the FA)
and the Company.

             (c) As a condition precedent to any distribution, the Committee may
require a certificate from the FA certifying that he or she has not violated any
of the provisions of Section 10(a).

             (d) It is the intention of the Company and the FA that this Section
be given the broadest protection allowed by law with regard to the restrictions
herein contained. Each restriction set forth in this Section shall be construed
as a condition separate and apart from any other restriction or condition. To
the extent that any restriction contained in this Section is

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determined by any court of competent jurisdiction to be unenforceable by reason
of it being extended for too great a period of time, or as encompassing too
large a geographic area, or over too great a range of activity, or any
combination of these elements, then such restriction shall be interpreted to
extend only over the maximum period of time, geographic area, and range of
activities which the court deems reasonable and enforceable. The FA agrees that
the restrictions described in this Section are reasonable and necessary to
protect legitimate interests of the Company.

             (e) In the event a FA desires a ruling as to the potential
application of this Section, he may request a ruling from the Committee in
accordance with Section 16.

             (f) If the Committee in its discretion determines that an activity
otherwise described herein would not be injurious to the Company, it may waive
the application of this Section to such activity, which waiver shall be binding
upon the FA and the Company. The Committee shall exercise such discretion in a
uniform, nondiscriminatory manner.

         11. Withholding Taxes - Amounts payable under the Plan shall be subject
to such deductions or withholding as may be required by law. Notwithstanding
anything herein to the contrary, the Company may delay any distribution under
the Plan until the recipient of the distribution has separately provided for the
payment of any required withholding taxes with respect to the distribution by
check or other method approved by the Committee in its sole discretion. The
Company, to the extent permitted or required by law, shall have the right (i) to
deduct any federal, state or local taxes of any kind required by law to be
withheld with respect to any taxable event under the Plan from any amount
payable hereunder or from any wage, salary, commission, bonus or other payment
otherwise due to a FA, and (ii) to retain or sell without notice a sufficient
number of shares of Legg Mason Common Stock to be issued to such FA (or any
other person entitled to receive the payment due a FA) to cover any such taxes.

         12. Assignment of Benefits - No amount payable, or other right or
benefit, under the Plan will, except as otherwise specifically provided by the
Plan or by applicable law, be subject to sale, assignment, transfer, pledge,
encumbrance, attachment, garnishment or levy prior to distribution to a FA.
Since the Plan is intended to be a non-qualified, unfunded plan not subject to
the Employment Retirement Income Security Act of 1974, as amended, payments
under the Plan will not be subject to the provisions of any qualified domestic
relations order (as defined under the Internal Revenue Code of 1986, as amended)
applicable to a FA's Account.

         13. Right to Offset - Notwithstanding any provision herein to the
contrary, any distribution payable under the Plan may be used, at the discretion
of the Committee and subject to compliance with applicable law, to offset any
debt owed by a FA to the Company at the date such distribution would otherwise
be paid. The Company may withhold distributions payable under the Plan to offset
any debts or other liabilities owed by a FA to the Company. If the Company is
aware of any errors, loans outstanding, or outstanding or pending liabilities of
a FA, the Company may withhold distributions under the Plan until such time as
the liabilities are satisfied or the Company has determined that an outstanding
or pending liability no longer exists.

         14. Unfunded Nature of the Plan - The Company will not be required to
purchase, hold or dispose of any investments with respect to amounts credited to
the Account of

                                      -11-

<PAGE>

any FA participating in the Plan. A FA has no interest in the Account or in any
investments the Company may purchase with such amounts, except as a general,
unsecured creditor of the Company.

              The Plan at all times shall be entirely unfunded. The FA's Account
(including the Interest Account and Phantom Stock Account) is merely a record
for measuring and determining the amount of Retention Bonuses to be paid by the
Company to, or with respect to, the FA under the Plan, and such Account shall be
established solely for such bookkeeping purposes. The Company shall not be
required to segregate any funds or other assets to be used for payment of
benefits under the Plan. The FA's Account shall not be, or be considered as
evidence of the creation of, a trust fund, an escrow or any other segregation of
assets for the benefit of the FA or any beneficiary of the FA. There is no
guaranty of benefit payments to the FA.

              The obligation of the Company to make the payments described in
the Plan is an unsecured contractual obligation only, and neither the FA nor any
beneficiary of the FA shall have any beneficial or preferred interest by way of
trust, escrow, lien or otherwise in and to any specific assets or funds. The FA
and each beneficiary of the FA shall look solely to the general credit of the
Company for satisfaction of any obligations due or to become due under the Plan.

              Should the Company elect to make contributions to a trust
(hereinafter referred to as the "Trust") to assist the Company in paying the
benefits which may accrue hereunder, the amounts contributed shall be used to
purchase the deemed investments under Section 6, subject to application of the
provisions of this Section 14 to the actual investments. However, contributions
to the Trust shall not reduce or otherwise affect the Company's liability to pay
benefits under the Plan (which benefits may be paid from the Trust or from the
Company's general assets, in the discretion of the Company), except that the
Company's liability shall be reduced by actual benefit payments from the Trust
(and the Account shall be appropriately adjusted to reflect such payments). If
any such investments, or any contributions to the Trust, are made by the
Company, such investments shall have been made solely for the purpose of aiding
the Company in meeting its obligations under the Plan, and, except for actual
contributions to the Trust, no trust or trust fund is intended. To the extent
that the Company does, in its discretion, purchase or hold any such investments
(other than through contributions to the Trust), the Company will be named sole
owner of all such investments and of all rights and privileges conferred by the
terms of the instruments or certificates evidencing such investments. Nothing
stated herein will cause such investments, or the Trust, to form part of the
Account, or to be treated as anything but the general assets of the Company,
subject to the claims of its general creditors, nor will anything stated herein
cause such investments, or the Trust, to represent the vested, secured or
preferred interest of the FA. The Company shall have the right at any time to
use such investments not held in the Trust in the ordinary course of its
business. Neither the FA nor any of his or her beneficiaries shall at any time
have any interest in the Account or the Trust or in any such investments, except
as a general, unsecured creditor of the Company to the extent of the Retention
Bonuses which are the subject of the Plan.

         15.  Effect on Employment Rights and Other Benefit Programs - Neither
participation in nor any of the provisions of the Plan shall give the FA any
right to be retained in

                                      -12-

<PAGE>

the employment of the Company. The Plan shall not be construed as a contract of
employment. The Company maintains an employment-at-will policy. As a FA is free
to end his or her employment with the Company at any time for any reason or no
reason, the Company is free to end the employment with a FA at any time for any
reason or no reason. Furthermore, the Company may end at any time a FA's
employment as a Financial Advisor. In the event a FA is no longer employed as a
Financial Advisor or otherwise ceases to be an Eligible FA, the FA will no
longer be entitled to Retention Bonuses pursuant to the Plan. However, as long
as a FA continues to be employed in good standing by the Company for the
requisite period, the FA shall continue to be entitled to the Retention Bonuses
previously credited to the FA's Account under the Plan. The Plan is in addition
to, and not in lieu of, any other employee benefit plan or program in which the
FA may be or become eligible to participate by reason of employment with the
Company, and the timing of receipt of benefits hereunder shall have no effect on
contributions to or benefits under such other plans or programs except as the
provisions hereof and of each such plan or program may specify.

         16.  Administration - The Committee, as constituted from time to time,
shall have full power to interpret, construe and administer the Plan, including
authority to determine any dispute or claim with respect thereto. The
determination of the Committee in any matter within the powers and discretion
granted to it under the Plan, made in good faith, shall be binding and
conclusive upon the Company, the FA and all other persons having any right or
benefit hereunder. If the FA is a member of the Committee at any time, the FA
shall have no authority as such member with respect to any matter specifically
affecting the FA's interest hereunder (such as determination of the amount, form
or time of benefit payments to the FA), all such authority being reserved to the
other Committee members, to the exclusion of the FA, and the FA shall act only
in his or her individual capacity in connection with any such matter.

         17.  Paperless Communications - Notwithstanding anything contained
herein to the contrary, the Committee from time to time may establish uniform
procedures whereby with respect to any or all instances herein where a writing
is required, including but not limited to any required written notice, election,
consent, authorization, instruction, direction, designation, request or claim,
communication may be made by any other means designated by the Committee,
including by paperless communication, and such alternative communication shall
be deemed to constitute a writing to the extent permitted by applicable law,
provided that such alternative communication is carried out in accordance with
such procedures in effect at such time.

         18.  Arbitration - As a condition precedent to the crediting and
receipt of Retention Bonuses under the Plan, each FA agrees that any controversy
or dispute arising under the Plan which cannot be resolved by the Committee
shall be submitted for arbitration upon demand of either party in accordance
with the rules of the National Association of Securities Dealers, Inc. or the
New York Stock Exchange, Inc.

         19.  Controlling Law - The Plan shall be construed, and the legal
relations between the parties in connection with any dispute relating to the
Plan shall be determined, in accordance with the laws of the State of Maryland;
provided, however, that employment laws (including wage and hour laws) shall be
based on the law of the jurisdiction in which the FA is employed.

                                      -13-

<PAGE>

         20.  Amendment or Termination - The Company reserves the right to amend
or terminate the Plan at any time. Any such amendment or termination shall be by
action of the Board of Directors of the Company or any Executive Committee
thereof.

         21.  Effect of Amendment or Termination - No amendment or termination
of the Plan shall directly or indirectly affect the rights of any FA (or the
FA's designated beneficiary) to payment of the amount in his or her Account, to
the extent that such amount was payable under the terms of the Plan prior to the
effective date of such amendment or termination.


                                      -14-