Document:

Exhibit 10.9

AMENDED AND RESTATED GLOBAL DISTRIBUTION AGREEMENT

THIS AMENDED AND RESTATED GLOBAL DISTRIBUTION AGREEMENT dated as of October 3, 2005 (this “Agreement”), is made by and between Legg Mason, Inc., a Maryland corporation (“Legg Mason”), and Citigroup, Inc., a Delaware corporation (“Citigroup” and together with Legg Mason, the “Parties” and each, a “Party”).  

RECITALS:

WHEREAS, Legg Mason, through its Affiliates (as defined below), provides asset management, securities brokerage, investment banking and other related financial products and services;

WHEREAS, Citigroup is a diversified global financial services holding company that through its Affiliates, provides a broad range of financial services and products to consumer and corporate customers, including investment products and distribution services in respect thereof;

WHEREAS, Legg Mason and Citigroup have entered into a Transaction Agreement, dated as of June 23, 2005 (the “Transaction Agreement”), under which Citigroup is selling to Legg Mason substantially all of its global asset management business currently operated as Citigroup Asset Management (“CAM”) and Legg Mason is selling the PC/CM business, including the private client business of Legg Mason (“PC/CM Business”) to Citigroup (the “Transaction”);

WHEREAS, Legg Mason and Citigroup entered into a Distribution Agreement, dated as of June 23, 2005 (the “Original Distribution Agreement”), and wish to amend certain terms and conditions of the Original Distribution Agreement as set forth in this Agreement;

WHEREAS, the execution and delivery of the Original Distribution Agreement is a condition to the closing of the Transaction;  

WHEREAS, existing CAM Products currently have access to the distribution channels of the Citigroup Distributors (as each term is defined below);

WHEREAS, certain existing Legg Mason Products currently have access to the PC/CM Business Channels (as each term is defined below); and

WHEREAS, in connection with the Transaction, the Parties desire to enter into a relationship providing for the distribution by Citigroup Distributors of CAM Products and Legg Mason Products within the United States and internationally pursuant to the terms of this Agreement and for Citigroup’s access to certain Legg Mason Products as set forth herein.

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NOW THEREFORE, in consideration of the mutual covenants, agreements and promises contained in this Agreement, the Parties agree as follows:

Section 1.  Amendment and Restatement; Definitions

(a)

As of the date of this Agreement, the terms, agreements, representations and warranties contained in the Original Distribution Agreement shall be deemed amended and restated in their entirety as follows, and the Original Distribution Agreement shall be consolidated with and into and superseded by this Agreement.

(b)

For purposes of this Agreement, unless the context requires otherwise, the following terms will have the following meanings:

“1940 Act” means the Investment Company Act of 1940, as amended from time to time, and the rules and regulations promulgated under the Act by the SEC.

“Advisers Act” means the Investment Advisers Act of 1940, as amended from time to time, and the rules and regulations promulgated under the Act by the SEC.

“Access to Citigroup Distributors” has the meaning set out in Section 6(a) of this Agreement.

“Access to Legg Mason” has the meaning set out in Section 6(b) of this Agreement.

“Affiliate” means, with respect to any specified Person, any other Person that at the time of determination, directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such specified Person.

“Agreement” means this Agreement and the schedules hereto, as amended from time to time.

“Applicable Standards and Practices” means, for Citigroup or Legg Mason or any of their respective Affiliates, the client service and relationship standards, business practices, ethical standards, confidentiality obligations and policies, customer privacy and protection policies and general service quality standards, product-selection standards, reputational considerations, industry standards and requirements of such Person as are generally applied by such Person at the time or on a consistent basis during the period in question. 

“Business Day” means any day other than a Saturday, Sunday or day on which banking institutions in New York, New York are authorized or obligated pursuant to the Requirements of Law or executive order to be closed.

“CAM” has the meaning set forth in the recitals to this Agreement.

“CAM Products” means all of the investment products offered, sponsored, advised or subadvised by CAM or any of its Controlled Affiliates at any time on or after the date of this Agreement, including any such products acquired by Legg Mason pursuant to or after the 

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Transaction, including any of such investment products as are RICs or other pooled investment vehicles, wrap fee programs (as defined in Rule 204-3 (g)(4) under the Advisers Act) or separately managed accounts.

“Citigroup” has the meaning set out in the preamble to this Agreement.

“Citigroup Distributor” means any Affiliate of Citigroup that at any time during the term hereof distributes investment products, including CAM Products, whether domestically or internationally.

“Commencement Date” means the later of (i) the date of the closing of the Transaction or (ii) Conversion.

“Confidential Information” means all confidential, proprietary or non-public information disclosed by either Party, its Affiliates and their respective representatives to the other Party, its Affiliates and their respective representatives; provided, however, that this term shall not include any information independently developed or obtained by the receiving Party or its Affiliates without violating any obligation under this Agreement, so long as such information was not obtained from a third party where the receiving Party knew or should have known that such information was misappropriated or otherwise wrongfully obtained. 

“Control” (including its correlative meanings “Controlled by” and “under common Control with”) means the possession, directly or indirectly, of power to direct or cause the direction of the management or policies of a Person (whether through ownership of securities or partnership or other ownership interest, by contract or otherwise).

“Conversion” for purposes of the definition of Commencement Date means the first date on which Primary, I and FI shares of all Legg Mason Equity Funds are available on all Citigroup mutual fund distribution platforms, including TRAK, SBA and Asset One, and Legg Mason has in place a full sales support team (wholesalers, literature, etc.) for such distribution platforms.

“Covered Products” means the Legg Mason Products and the CAM Products.

“Exclusivity Period” means the period during which Citigroup shall have the exclusive right to distribute the Legg Mason Exclusive Equity Products under Section 4(b) of this Agreement. 

 “Existing Legg Mason Distribution Arrangements” means the arrangements in effect as of the date of this Agreement to which Legg Mason or a Legg Mason Affiliate is a party relating to the distribution of Legg Mason Equity Funds existing as of such date and the amendment or renewal of any such arrangement, provided that any such amendment or renewal during the Exclusivity Period will not (i) add a Retail Share of any Legg Mason Equity Fund unless the distribution of a Retail Share of a Legg Mason Equity Fund is already permitted by the Distribution Agreement, or (ii) add or substitute for an existing party, a third party that is not affiliated with any existing party or (iii) materially alter the economic terms or geographic scope of any such arrangement.

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“FIS” means Legg Mason’s Fund Investors Services unit.

“Governmental Authority” means any federal, national, supranational, state, provincial, local, or similar government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body, including the SEC and any SRO within or outside the United States.  

“Legg Mason” has the meaning set out in the preamble to this Agreement.

“Legg Mason Equity Funds” means the funds in the family of open-end RICs known as the Legg Mason Funds that are LMCM Managed Products.  

“Legg Mason Exclusive Equity Products” means the following LMCM Managed Products, if and to the extent that they are made available during the Exclusivity Period: (i) Retail Shares of the Legg Mason Equity Funds, including Retail Shares of any new RIC launched by Legg Mason or its Affiliates after the date of this Agreement that is a LMCM Managed Product; (ii) any Retail SMA Program; (iii) interests in any hedge fund or similar pooled investment vehicle excepted from regulation as an investment company under the 1940 Act by Section 3(c)(1) of that Act; and (iv) securities of any closed-end RIC (as defined in Section 5(a)(2) of the 1940 Act) unless a Citigroup Distributor fails to offer to distribute such securities on terms that are substantially equivalent to terms offered to LMCM by any third party distributor after LMCM has provided Citigroup a right of first refusal and, if applicable, a right of last refusal before accepting an offer from a third party distributor.

For the avoidance of doubt, during the Exclusivity Period, any product not specifically identified above will not be considered a Legg Mason Exclusive Equity Product, including, but not limited to the following LMCM Managed Products: 

(a)

Interests in products that are offered and sold to investors domiciled outside the U.S.

(b)

Non-Retail Shares of the Legg Mason Equity Funds that are sold on an investment only basis to a retirement plan (such as a 401(k) plan or similar defined contribution retirement plan).  Non-Retail Shares of the Legg Mason Equity Funds may be included in a “bundled retirement plan offering” so long as the Legg Mason Equity Funds offered do not exceed 50% of the total investment options in the bundled offering (including as a Legg Mason Equity Fund any lifestyle funds where one or more Legg Mason Equity Funds exceed 50% of the allocation).  Compliance with the 50% requirement is measured at the time a Legg Mason Equity Fund is added to the bundled offering.

(c)

LMCM Managed Products that serve as an investment option in a variable annuity so long as the LMCM Managed Products do not exceed 50% of the total investment options offered in the annuity (including as a LMCM Managed Product any lifestyle funds where one or more LMCM Managed Products exceed 50% of the allocation).  Compliance with the 50% requirement is measured at the time a LMCM Managed Product is added as an investment option.

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(d)

Legg Mason Equity Funds sold through any Existing Legg Mason Distribution Arrangement, provided, however, that Legg Mason will not (i) add the Legg Mason Value Trust or any Legg Mason Value Trust clone as an available fund to any Existing Legg Mason Distribution Arrangement if Legg Mason Value Trust is not presently available through such arrangement; or (ii) enter into any new relationships with a broker-dealer or mutual fund platform, including those serving registered investment advisers, in the United States.  Nothing herein shall prohibit a broker-dealer or mutual fund platform from assuming (e.g., through acquisition of a broker-dealer or mutual fund platform) the right to distribute Legg Mason Equity Funds under an Existing Legg Mason Distribution Arrangement through means other than amendment or renewal (which are addressed in the definition of Existing Legg Mason Distribution Arrangements), provided, that if a wirehouse assumes the rights of a regional broker-dealer, then the wirehouse may not materially alter the geographic scope of the Existing Legg Mason Distribution Arrangement.

(e)

Legg Mason Equity Funds sold through FIS, as provided in Section 6.18 of the Transaction Agreement.

(f)

Interests in any hedge fund or similar pooled investment vehicle excepted from regulation under the 1940 Act by Section 3(c)(7) of the Act, subject to the following conditions: (i) sales to institutional investors are permitted without limit; (ii) sales to knowledgeable employees of Legg Mason or any Legg Mason Affiliate and individuals with a pre-existing commercial or personal relationship with LMCM or its officers are permitted without limit; (iii) neither Legg Mason nor any Legg Mason Affiliate will solicit other individuals but may accept unsolicited sales from individuals without a pre-existing relationship with LMCM or its officers, provided that Legg Mason or the Legg Mason Affiliate, as applicable, will promptly notify Citigroup of each such individual’s identity and, if such individual has a pre-existing relationship with a broker-dealer or private bank that is a Citigroup Affiliate, will refer the individual to Citigroup; and (iv)  neither Legg Mason nor any Legg Mason Affiliate will distribute Section 3(c)(7) funds through a wirehouse or regional broker-dealer.

“Legg Mason Products” means all proprietary investment products offered, sponsored, advised or subadvised by Legg Mason or any of its Affiliates during the term of this Agreement, including any such investment products that are RICs or other pooled investment vehicles, wrap fee programs (as defined in Rule 204-3(g)(4) under the Advisers Act) and separately managed accounts, including without limitation, after the date of the closing of the Transaction, any CAM Product and Legg Mason Exclusive Equity Product.

“LMCM” means Legg Mason Capital Management, Inc.

“LMCM Managed Product” means any product investing primarily in equity securities managed by Legg Mason or a Legg Mason Affiliate, a portfolio manager of which at any time during the Exclusivity Period was an officer or employee of LMCM as of the date of the Original Distribution Agreement.  

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“NASD” means the National Association of Securities Dealers, Inc.

“Non-Retail Shares” means the Class FI, Class I and/or any comparable Class shares of the Legg Mason Equity Funds.

“Original Distribution Agreement” has the meaning set out in the recitals to this Agreement.

“Party” and “Parties” have the meanings set out in the preamble to this Agreement.

“PC/CM Business” has the meaning set out in the recitals to this Agreement.

“PC/CM Business Channel” means the product distribution business of Legg Mason to be acquired by Citigroup in the Transaction, including its private client business. 

“Person” means any individual, corporation, business trust, partnership, association, limited liability company, unincorporated organization or similar organization, or any Governmental Authority.

“Qualifying Investments” has the meaning set out in Schedule B to this Agreement.

“Representatives” means directors, officers, employees, agents, advisors and other representatives of a Party. 

“Requirement of Law” means, with respect to any Person, any domestic or foreign federal or state statute, law, ordinance, rule, administrative code, administrative interpretation, regulation, order, consent, writ, injunction, directive, judgment, decree, policy, ordinance, decision, guideline or other requirement of (or agreement with) any Governmental Authority (including any memorandum of understanding or similar arrangement with any Governmental Authority), in each case binding on that Person or its property or assets.

“Retail Shares” means the retail share classes (Class A, Class B, Class C, Primary Class, Signature Class, and/or any comparable Class shares, if available and as applicable) of the Legg Mason Equity Funds.

“Retail SMA Program” means any retail-oriented separately managed account program, including wrap fee programs (as defined by Rule 204-3(g)(4) under the Advisers Act) for which one or more Legg Mason Equity Funds, or any new RIC launched by Legg Mason or its Affiliates after the date of this Agreement that is a LMCM Managed Product, are investment options.  For purposes of this definition, a separately managed account or wrap fee program will be “retail-oriented” if it is primarily distributed to U.S. investors through registered representatives, registered investment advisers, or insurance agents who receive transactional or asset-based compensation for selling such product.

“RIC” means a U.S. investment management company registered under the 1940 Act and any class, series or portfolio thereof.

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“Sales Force” means, with respect to any Citigroup Distributor, the point of sale representatives and their direct supervisors utilized by such Citigroup Distributor or any of its Affiliates, whose job responsibility includes the distribution of the Covered Products in question or investment products that would generally be viewed as competitive with the applicable Covered Products in the channel in question.

“SEC” means the Securities and Exchange Commission.

“Selling Agreement” has the meaning set out in Section 7 of this Agreement.

“SRO” means the NASD, the National Futures Association, each national securities exchange in the United States and each other board or body, whether United States or foreign, that is charged with the supervision or regulation of brokers, dealers, commodity pool operators, commodity trading advisors, futures commission merchants, securities underwriting or trading, stock exchanges, commodities exchanges, insurance companies or agents, investment companies or investment advisers.

“Transaction” has the meaning set out in the recitals to this Agreement.

“Transaction Agreement” has the meaning set out in the recitals of this Agreement.

Section 2.

Representations and Warranties of Citigroup

Citigroup represents and warrants to Legg Mason as follows:

(a)

Each of Citigroup and each Citigroup Distributor (i) is duly organized, validly existing and, to the extent applicable, in good standing under the laws of its jurisdiction of organization; (ii) has the power and authority, and the legal right, to own its assets and to transact the business in which it is engaged; (iii) is duly qualified to do business and, to the extent applicable, is in good standing under the laws of each jurisdiction in which its ownership or lease of property or the conduct of its business requires such qualification; and (iv) is in compliance in all material respects with all Requirements of Law.

(b)

Each of Citigroup and each Citigroup Distributor has all necessary power and authority to make, execute, deliver and perform this Agreement and each Selling Agreement to which it is or becomes a party and to perform all of the obligations to be performed by it under this Agreement or under such Selling Agreement.  The making, execution, delivery and performance by Citigroup and each Citigroup Distributor of this Agreement and each Selling Agreement to which it is or will become a party, and the consummation by Citigroup and such Citigroup Distributor of the transactions contemplated by this Agreement and by such Selling Agreement to which it is or will become a party, have been, or will be, duly and validly authorized by all necessary corporate action on the part of Citigroup and such Citigroup Distributor.  Subject to Section 10(i), except as shall have been obtained prior to execution thereof, no consent or authorization of, filing with, or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the execution, delivery, performance, validity or enforceability by or against Citigroup or any Citigroup 

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Distributor of this Agreement and each Selling Agreement, to which it is, or will become, a Party.  

(c)

This Agreement has been duly and validly executed and delivered by Citigroup, and assuming the due authorization, execution and delivery by Legg Mason, this Agreement constitutes the valid, legal and binding obligation of Citigroup, enforceable against it in accordance with its terms, except as may be subject to applicable bankruptcy, insolvency, moratorium or other similar Requirement of Law, now or hereafter in effect, affecting the enforcement of rights of creditors generally and by legal and equitable limitations on the enforceability of specific remedies.  

(d)

Upon execution and delivery, and assuming the due authorization, execution and delivery by Legg Mason or any of its Affiliates, each Selling Agreement will constitute the valid, legal and binding obligation of the respective Citigroup Distributor which is a party thereto, enforceable against it in accordance with its terms, except as may be subject to applicable bankruptcy, insolvency, moratorium or other similar Requirement of Law now or hereafter in effect, affecting the enforcement of rights of creditors generally and by legal and equitable limitations on the enforceability of specific remedies.

(e)

Neither the execution and delivery of this Agreement nor any Selling Agreement by Citigroup or any Citigroup Distributor which is an Affiliate of Citigroup as of the date of this Agreement, respectively, nor the consummation of the transactions contemplated by this Agreement or by any such Selling Agreement, respectively, will (i) violate or conflict with any provision of the articles of incorporation or bylaws or other organizational documents of Citigroup or any such Citigroup Distributor, (ii) violate any of the terms, conditions, or provisions of any Requirement of Law or license to which Citigroup or any such Citigroup Distributor is subject or by which either one or any of their assets are bound, or (iii) violate, breach or constitute a default under any contract to which Citigroup or any such Citigroup Distributor is a party or by which either one or any of their assets is bound.

(f)

All CAM Products which are existing as of the date of this Agreement, and which will be existing as of the date of the closing of the Transaction are, and as of the date of the closing of the Transaction will be, offered in compliance with the Applicable Standards and Practice of Citigroup and its Affiliates.  

Section 3.

Representations and Warranties of Legg Mason

Legg Mason represents and warrants to Citigroup as follows:

(a)

Legg Mason and each of its Affiliates identified on Schedule A to this Agreement (i) is duly organized, validly existing and, to the extent applicable, in good standing under the laws of its jurisdiction of organization; (ii) has the power and authority, and the legal right, to own its assets and to transact the business in which it is engaged; (iii) is duly qualified to do business and, to the extent applicable, is in good standing under the laws of each jurisdiction in which its ownership or lease of property or the conduct of its business requires such qualification; and (iv) is in compliance in all material respects with all Requirements of Law.

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(b)

Legg Mason and each of its Affiliates identified on Schedule A to this Agreement have all necessary power and authority to make, execute, deliver and perform this Agreement and each Selling Agreement, respectively, and to perform all of the obligations to be performed by it under this Agreement or under each such Selling Agreement.  The making, execution, delivery and performance by Legg Mason and each such Affiliate of this Agreement and each Selling Agreement, respectively, and the consummation by Legg Mason and each such Affiliate of the transactions contemplated by this Agreement and by each such Selling Agreement, respectively, have been, or will be, duly and validly authorized by all necessary corporate action on the part of Legg Mason and each such Affiliate.  Subject to Section 10(i), except as shall have been obtained prior to execution thereof, no consent or authorization of, filing with, or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the execution, delivery, performance, validity or enforceability by or against Legg Mason or any of such Affiliates of this Agreement and each Selling Agreement, respectively, to which it is, or will become, a Party.  

(c)

This Agreement has been duly and validly executed and delivered by Legg Mason, and assuming the due authorization, execution and delivery by Citigroup, this Agreement constitutes the valid, legal and binding obligation of Legg Mason, enforceable against it in accordance with its terms, except as may be subject to applicable bankruptcy, insolvency, moratorium or other similar Requirement of Law, now or hereafter in effect, affecting the enforcement of rights of creditors generally and by legal and equitable limitations on the enforceability of specific remedies.

(d)

Upon execution and delivery, and assuming the due authorization, execution and delivery by the respective Citigroup Distributor, each Selling Agreement will constitute the valid, legal and binding obligation of the respective Affiliate of Legg Mason which is a party thereto, enforceable against it in accordance with its terms, except as may be subject to applicable bankruptcy, insolvency, moratorium or other similar Requirement of Law now or hereafter in effect, affecting the enforcement of rights of creditors generally and by legal and equitable limitations on the enforceability of specific remedies.

(e)

Neither the execution and delivery of this Agreement nor any Selling Agreement by Legg Mason or any of its Affiliates identified on Schedule A to this Agreement respectively, nor the consummation of the transactions contemplated by this Agreement or by any such Selling Agreement, respectively, will (i) violate or conflict with any provision of the articles of incorporation or bylaws or other organizational documents of Legg Mason or any such Affiliate, (ii) violate any of the terms, conditions, or provisions of any Requirement of Law or license to which Legg Mason or any such Affiliate is subject or by which either one or any of their assets are bound, or (iii) violate, breach or constitute a default under any contract to which Legg Mason or any such Affiliate is a party or by which either one or any of their assets is bound.

(f)

All Legg Mason Products which are existing as of the date of this Agreement, and which will be existing as of the date of the closing of the Transaction are and, as of the date of the closing of the Transaction will be, offered in compliance with the Applicable Standards and Practices of Legg Mason and its Affiliates.  

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Section 4.

Product Distribution Arrangements

(a)

With respect to any Covered Product, Citigroup shall cause each Citigroup Distributor to provide Legg Mason and its Affiliates (including, after the closing of the Transaction, CAM) substantially the same access to distribution by the applicable Citigroup Distributor or Distributors (i) with respect to an existing CAM Product or a CAM Product introduced after the date hereof and prior to the closing of the Transaction, on at least as favorable a basis as such Citigroup Distributor currently provides with respect to such CAM Product or provides to such new CAM Product on the date of the closing of the Transaction and (ii) with respect to any existing Legg Mason Product or, subject to Section 8(a), any Legg Mason Product or CAM Product introduced after the date of the closing of the Transaction, on at least as favorable a basis as such Citigroup Distributor that distributes CAM Products and Legg Mason Products provides to other investment products that would be generally viewed as competitive with the applicable Legg Mason Product or new CAM Product in the channel in question; provided that access for any of the foregoing products to distribution by such Citigroup Distributor shall be subject to the Applicable Standards and Practices of the applicable Citigroup Distributor with respect to investment products distributed by such Citigroup Distributor, and provided, further, that where multiple compensation programs are utilized for similar or competitive products in a channel, the foregoing standard shall have been complied with if Legg Mason is permitted to determine which program it wishes to utilize.  After the date hereof and prior to the closing of the Transaction, Citigroup agrees that it will not reduce the level of access that any of the existing CAM Products have to distribution by Citigroup Distributors.  With respect to any Citigroup Distributor that does not at the time in question distribute Covered Products, Citigroup will, upon the request of Legg Mason, use all commercially reasonable efforts to obtain distribution of Covered Products by such Citigroup Distributor on the same terms as provided by clauses (i) and (ii) above.

(b)

The Citigroup Distributors shall have the exclusive right to distribute the Legg Mason Exclusive Equity Products for three years from the Commencement Date so long as:

(i)

The Citigroup Distributors use commercially reasonable efforts within the framework of applicable Requirements of Law and Applicable Standards and Practices to distribute the Legg Mason Exclusive Equity Products; and 

(ii)

The Citigroup Distributors’ efforts within the framework of applicable Requirements of Law and Applicable Standards and Practices produce investment flows into the Legg Mason Exclusive Equity Products that are consistent with the reasonable expectations of Legg Mason.  

The obligations under each of (i) and (ii) of Section 4(b) are to be evaluated in light of conditions over the period in question, including but not limited to general economic conditions, general interest rates, equity market performance, mutual fund industry flows, consumer sentiment and the availability and investment performance of the Legg Mason Exclusive Equity Products.

(iii)

Although there is no obligation to reach any set selling goal, the Citigroup Distributors shall have satisfied the obligations under clause (i) above and the reasonable 

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expectations of Legg Mason under clause (ii) above if the relevant amounts set out on Schedule B of this Agreement have been met.

(iv)

If the parties disagree whether the Citigroup Distributors have satisfied the obligations under clause (i) above and the reasonable expectations of Legg Mason under clause (ii) above, and such disagreement has not been resolved to the mutual satisfaction of the Parties within a period of ten Business Days after notice of such disagreement has been sent from one Party to the other, such disagreement shall be presented within four additional Business Days for binding resolution to an independent third party, who shall inform the Parties within ten Business Days after such referral as to whether the Citigroup Distributors have satisfied such obligations and expectations, and, if not, the amount that would satisfy such reasonable expectations if they were using commercially reasonable efforts.  In the event that such independent third party determines that the Citigroup Distributors have not satisfied such obligations and expectations, Citigroup shall have the right to take steps within the following ten Business Days to address the shortfall or, if less, the relevant amount on Schedule B.  Such independent third party shall be identified by the Parties prior to the closing date.

(c)

Citigroup will cause any Citigroup Distributor that enters into a Selling Agreement with respect to a Covered Product pursuant to Section 7 of this Agreement to not provide to its Sales Force for the sale of investment products that are not Covered Products and that would be generally viewed as competitive with the applicable Covered Products in the channel in question any compensation or economic inducement or benefit that is more favorable than that provided to such Sales Force for the sale of such Covered Products in such channel, provided, that this provision is not intended to prohibit a Citigroup Distributor from selling products that provide for different rates of sales load or Rule 12b-1 fees (e.g., Class A shares for different products or funds that have different sales load structures).  For the avoidance of doubt, as an example of the foregoing, the Parties agree that any more favorable compensation or economic inducement or benefit shall not have occurred if a Covered Product and such competitive investment product that have the same pricing structure, and members of such Sales Force are entitled to varying dollar amounts of compensation as a result of the application of such pricing structure’s breakpoints to different purchase amounts or the application of different payout ratios among the members of such Sales Force in accordance with the predetermined formula for payout ratio to the sales resulting from such purchase amounts.

(d)

Notwithstanding the foregoing provisions, in case of a direct or indirect acquisition by Citigroup of the assets or business of another entity engaged in the distribution of investment products that would be generally viewed as competitive with the applicable Covered Products in the channel in question, (i) no such acquisition will limit or restrict any obligation of any Citigroup Distributor other than such acquired business to distribute Covered Products pursuant to the terms of this Agreement or any Selling Agreement, as applicable, and (ii) at the request of Legg Mason, Citigroup shall use all commercially reasonable efforts, subject to each Requirement of Law and any contractual provisions such acquired business is subject to immediately prior to the execution of the related acquisition agreement (provided that such contractual provision was not entered into in connection with, as a part of or in preparation for, such acquisition), to cause such acquired business to provide to Legg Mason and its Affiliates access to distribution by such acquired business on the same basis as set forth in Section 4(a).

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(e)

In the event that Legg Mason determines to recommend the merger or combination of any CAM Product that is a RIC or other pooled investment vehicle with any Legg Mason Product that is a RIC or other pooled investment vehicle, such merger or combination shall be, subject to applicable fiduciary duties and applicable Requirements of Law, effected in a manner designed to preserve (i) the commercial arrangements set forth herein and in any Selling Agreement related to such vehicle (e.g. commission/share class structure, 12b-1 fee, shareholder servicing or subadministration fee and revenue-sharing) and (ii) the preferential distribution rights that the Citigroup Distributors have pursuant to this Agreement.  For the avoidance of doubt, in the event of the merger or combination of any CAM Product with respect to which Legg Mason is required to make revenue sharing payments under this Agreement, into a Legg Mason Product with respect to which Legg Mason is not required to make revenue sharing payments under this Agreement, Legg Mason shall, until the expiration of the Exclusivity Period and subject to applicable fiduciary duties and Requirements of Law, make revenue sharing payments with respect to the net assets of the merged or combined CAM Product immediately prior to such merger or combination at the annualized amount applicable to such CAM Product at the most recent measurement period.  Legg Mason will give reasonable prior notice to Citigroup of such determination to enable the Parties to plan for any such merger or combination. 

(f)

 Subject to applicable Requirements of Law, Legg Mason will use all commercially reasonable efforts to cause the Legg Mason Products that are RICs to continue to provide after the date of the closing of the Transaction, to the extent so provided as of the date of the Transaction Agreement, that shares of such Legg Mason Products sold by Citigroup Distributors (including through the PC/CM Business Channel prior to the date of the closing of the Transaction) may not be held in any manner other than in the name of a Citigroup Distributor or its nominee or in the name of the beneficial holder thereof.  Subject to applicable Requirements of Law, Legg Mason agrees that the applicable Citigroup Distributors may take appropriate steps to ensure that shares of such Legg Mason Products sold by Citigroup Distributors (including through the PC/CM Business Channel prior to the date of the closing of the Transaction) may not be held in any manner other than in the name of a Citigroup Distributor or its nominee or in the name of the beneficial holder thereof.  In addition, subject to applicable Requirements of Law, Legg Mason agrees to maintain disclosure in the prospectus of each Legg Mason Exclusive Equity Product that is a RIC that is substantially similar to the following disclosure that currently appears in each such prospectus: “Fund shares may not be held in, or transferred to, an account with any firm that does not have an agreement with Legg Mason or one of its affiliates.”

Section 5.

Product Access Arrangements

(a)

 During the term of this Agreement, Legg Mason shall permit, and shall cause its Affiliates to permit, each Citigroup Distributor to distribute, and each such Citigroup Distributor shall have the right to distribute, (i) any existing CAM Products, on a basis not less favorable than that on which any Citigroup Distributor currently distributes such CAM Products and (ii) any Legg Mason Exclusive Equity Product, on a basis not less favorable than that on which the Citigroup Distributors generally distribute investment products that would be generally viewed as competitive with such Product in the channel in question, including for this purpose, Primary Shares.  For any other Covered Product or range of Covered Products for 

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which a Citigroup Distributor expresses an interest to Legg Mason, upon request of such Citigroup Distributor, Legg Mason will use all commercially reasonable efforts to obtain the approval of any Affiliate of Legg Mason that is required in order to permit each Citigroup Distributor to have the right to distribute such products on the same terms as provided in clause (ii) above.

(b)

 Notwithstanding the foregoing provisions, in case of a direct or indirect acquisition by Legg Mason of the assets or business of another entity engaged in offering, sponsoring or providing investment advisory or subadvisory services with respect to any investment product, (i) no such acquisition will limit or restrict any obligation of Legg Mason to provide the Citigroup Distributors access to Covered Products other than the Covered Products of such acquired business pursuant to the terms of this Agreement or any Selling Agreement, as applicable, and (ii) at the request of Citigroup, Legg Mason shall use all commercially reasonable efforts, subject to each Requirement of Law and any contractual provisions such acquired business is subject to immediately prior to the execution of the related acquisition agreement, to cause such acquired business to provide the Citigroup Distributors access to distribute the investment products of such acquired business on the same basis as set forth in Section 5(a).

Section 6.

Support Access

(a)

Citigroup will cause each Citigroup Distributor which is a party to a Selling Agreement from time to time to provide Legg Mason and any of its Affiliates with Access to Citigroup Distributors in connection with the distribution of the Covered Products covered thereby.  For purposes of this Agreement, “Access to Citigroup Distributors” means that the personnel of Legg Mason and its Affiliates will be provided access to and contact and interaction with the Sales Force of the applicable Citigroup Distributor on terms no less favorable than provided to CAM by the Sales Force of the applicable Citigroup Distributor prior to the date of this Agreement, subject to compliance with the Applicable Standards and Practices of Citigroup and the Citigroup Distributors, including, but not limited to, contact directly, by telephone, through written materials, electronic mail or otherwise for purposes of providing or obtaining information, resources, communications, training and education, including, with respect to Covered Products, information regarding sales of Covered Products, market trends and analysis, product development and similar matters relating to the sale of the Covered Products; provided, that such contact shall, to the extent appropriate, be coordinated with the applicable Citigroup Distributor.

(b)

Legg Mason will and will cause each of its Affiliates which is a party to a Selling Agreement from time to time to provide to any Citigroup Distributor which is a party to such Selling Agreement with Access to Legg Mason in connection with the distribution of the Covered Products covered thereby.  For purposes of this Agreement, “Access to Legg Mason” means that personnel of each Citigroup Distributor will be provided access to and contact and interaction with the employees of Legg Mason and its Affiliates on terms no less favorable than provided by Legg Mason and its Affiliates to the personnel of the PC/CM Business Channel prior to the date of this Agreement, subject to compliance with the Applicable Standards and Practices of Legg Mason and its Affiliates, including, but not limited to, contact directly, by telephone (including access to call center facilities as currently exist), through written materials, 

13

electronic mail or otherwise for purposes of providing or obtaining information, resources, communications, training and education, including information regarding investment objectives and strategies, portfolio contents and characteristics, performance, outlook, market commentary, product development and similar matters relating to the management and sale of the Covered Products; provided, that such contact shall be coordinated with Legg Mason and its Affiliates, as applicable.  Legg Mason agrees to use commercially reasonable efforts to support the sales of Legg Mason Products and provide reasonable sales support for Covered Products.

Section 7.

Selling Agreements

(a)

To effectuate this Agreement, Legg Mason will, or will cause an Affiliate of Legg Mason, and Citigroup will cause one or more of the Citigroup Distributors to enter into effective as of the date of the closing of the Transaction with respect to Covered Products existing as of such date, and from time to time thereafter with respect to all other Covered Products (subject to Section 8 (a)), selling or other necessary and appropriate agreements, which shall, upon Citigroup’s request in regard to Covered Products that are RICs managed by former Affiliates of Citigroup, include or be in furtherance of one or more principal underwriter agreements with such RICs (subject to the requisite approval by the board of directors or trustees of such RICs and all other Requirements of Law) (collectively, “Selling Agreements”) that implement the terms and conditions of this Agreement and are otherwise consistent with industry practice, applicable Requirements of Law, Applicable Standards and Practices and the provisions of this Agreement.  Subject to applicable Requirements of Law, Legg Mason agrees that after the date hereof and prior to the Commencement Date, it will cooperate with Citigroup’s efforts in seeking such board approval with respect to such Covered Products.

(b)

Subject to applicable Requirements of Law, a Citigroup Distributor that enters into a Selling Agreement with respect to a Covered Product will be entitled to receive compensation (including, as applicable, sales load and, if available, fees in accordance with applicable rules and regulations of the SEC and NASD and other Requirements of Law) with respect to the sale of such Covered Product that is not less than the compensation offered to other distributors of such Covered Product in the channel in question (except as provided in Section 7(c) below).  Subject to applicable Requirements of Law, following the closing of the Transaction, Legg Mason and its Affiliates shall make revenue sharing payments to the applicable Citigroup Distributor with respect to Covered Products determined on a basis consistent with the revenue sharing arrangements that currently exist with respect to CAM Products between the applicable Citigroup Distributor and CAM, provided that Legg Mason and its Affiliates shall not be required to make revenue sharing payments with respect to assets held in Legg Mason Products on the date of the closing of the Transaction or, in the case of the Legg Mason Exclusive Equity Products, with respect to assets held in such products on the date of termination of the Exclusivity Period.  The Parties agree that compensation arrangements under the Selling Agreements will be subject to periodic review in a manner generally consistent with compensation arrangements with respect to investment products that would be generally viewed as competitive with the applicable Covered Products in the channel in question.  

(c)

Notwithstanding anything in this Agreement (other than Section 4(e)) to the contrary, Legg Mason and its Affiliates shall not be obligated to make any revenue sharing payments in respect of Legg Mason Exclusive Equity Products (other than in accordance with 

14

Section 4(e)) for so long as Citigroup has exclusive distribution rights in respect thereof pursuant to Section 4(b).

(d)

Legg Mason and Citigroup agree that this Agreement is intended to set out the principal business terms upon which they will enter into Selling Agreements during the term of this Agreement and that nothing in this Agreement creates a Selling Agreement.

(e)

In the event that the terms of a Selling Agreement conflict with the terms of this Agreement, the terms of this Agreement will control for purposes of the Selling Agreement.

Section 8.

New Products

(a)

At any time during the term of this Agreement, subject to the Applicable Standards and Practices (including product committee approval of the applicable Citigroup Distributors for the channels in question) and to Requirements of Law, Legg Mason will have the right, upon notice to Citigroup, to require one or more Citigroup Distributors to provide, and such Citigroup Distributor will provide, distribution services and Access to Citigroup Distributors with respect to any Covered Product introduced after the date of the closing of the Transaction on the same terms as Covered Products pursuant to the terms of this Agreement.  In connection with the exercise of such right by Legg Mason, such Citigroup Distributors will enter into in accordance with Section 7 or amend in accordance with Section 18 one or more Selling Agreements.  If such new Covered Product is a Legg Mason Exclusive Equity Product and the Citigroup Distributors do not provide distribution of such new Covered Product, Legg Mason and its Affiliates shall not be subject to the limitations of Section 4(b) with respect to distribution of such product in the same channel as it sought distribution by the Citigroup Distributors. 

(b)

Neither Citigroup nor any Citigroup Distributor may require Legg Mason or any of its Affiliates, and Legg Mason and its Affiliates will not be required to, offer any new Covered Product.  In addition, neither Citigroup nor any Citigroup Distributor will have the right to limit Legg Mason or any of its Affiliates from developing or launching any new Covered Products that Legg Mason or any of its Affiliates determine to develop or launch.

Section 9.

Branding

Subject to applicable Requirements of Law and existing arrangements, all Covered Products distributed through a Citigroup Distributor under a Selling Agreement will be offered and branded using the trademarks designated by Legg Mason or any of its Affiliates; provided, that, except as otherwise agreed by the parties, no such trademark shall be associated with a Citigroup Distributor or proprietary products of a distribution competitor of the Citigroup Distributors.

Section 10.

Other Agreements

(a)

Each Party shall be responsible for complying with all applicable Requirements of Law then in effect in carrying out such Party’s obligations under this Agreement. 

15

(b)

Each Party will disclose, and will cause its Affiliates to disclose, any information concerning this Agreement and the arrangements contemplated by this Agreement to its customers to the extent required by any Requirement of Law and any applicable obligations to customers.

(c)

Prior to the closing of the Transaction, Citigroup will, and will cause, the Citigroup Distributors, upon Legg Mason’s request, to use reasonable best efforts to make available to Legg Mason and its Affiliates any information regarding agreements and arrangements for the distribution of then existing CAM Products.  

(d)

Prior to the closing of the Transaction, Legg Mason will, and will cause, its Affiliates, upon Citigroup’s request, to use reasonable best efforts to make available to Citigroup and the Citigroup Distributors any information regarding agreements and arrangements for the distribution of then existing Legg Mason Products.  

(e)

Legg Mason will provide to Citigroup at the time of the closing of the Transaction a list of each distributor of Legg Mason Exclusive Equity Products whose customers hold shares of any Legg Mason Exclusive Equity Products as of a date reasonably close to such closing and of the net asset value of the shares of each such product then held by such distributors’ customers and, thereafter, will, if requested, within thirty (30) days, update such list semi-annually for incremental sales of interests in each LMCM Exclusive Equity Product by each distributor.

(f)

Legg Mason will (i) monitor exchanges from other Covered Products that have exchange privileges with the Legg Mason Exclusive Equity Products, (ii) upon Citigroup’s request, make the results of such monitoring available to Citigroup on a quarterly basis, and (iii) take all reasonably necessary steps, subject to applicable Requirements of Law, to restrict any exchanges that would result in the exchanging investors acquiring Legg Mason Exclusive Equity Products through such exchange privileges in excess of 5% of the aggregate net assets at the time in question of the Legg Mason Exclusive Equity Products.

(g)

Legg Mason and Citigroup will establish a committee consisting of senior representatives of Legg Mason and its Affiliates, on the one hand, and Citigroup Distributors on the other hand to coordinate implementation of the distribution and access provisions of Sections 4 through 10 of this Agreement, including facilitation of Conversion.  Such committee shall seek to refine the application of the principles and agreements set forth herein, to resolve issues and disputes arising hereunder and to seek ways of working together to enhance the business of each Party.  Such committee shall operate by consensus insofar as possible and its determinations shall be implemented by the Parties and their Affiliates only to that extent.  

(h)

Each of the Parties shall use all commercially reasonable efforts to complete Conversion by the date of the closing of the Transaction.

(i)

Notwithstanding anything to the contrary in this Agreement, the parties recognize that implementation of certain portions of this Agreement require the approval of third parties, including the approval of the board of directors or trustees of the Covered Products that are RICs.  The execution of this Agreement by the parties and the terms and conditions of this 

16

Agreement are not intended to indicate that any such third party has approved this Agreement or the terms and conditions hereof.

(j)

Subject to Requirements of Law, Legg Mason agrees to cooperate with any reasonable request by Citigroup to assist Citigroup’s efforts to seek approval from the boards of Covered Products that are RICs: (1) to add any share class comparable to a share class of third party products being distributed by Citigroup to the available share classes of one or more Legg Mason Exclusive Equity Products; and (2) to have transactions in shares of such RICs that are sold through a Citigroup Distributor to be processed through systems widely used by Citigroup for processing share transactions for other third party funds sold through Citigroup Distributors.  In addition, since after close of the Transaction both Legg Mason and CAM money market funds will be offered through Citigroup Distributors, Legg Mason agrees to use commercially reasonable efforts to develop a plan to reconcile this structure, up to and including recommending mergers, asset sales, or similar transactions to the boards of the affected RICs.  If approved by the boards, Citigroup and Legg Mason will share equally the proxy and similar costs of any such transactions.

Section 11.

Confidentiality

(a)

Neither Party shall, and each Party shall cause its respective Affiliates and its Affiliates' personnel (including each of their accountants, legal advisers and other professional advisers) not to, disclose to any other Person or, except to the extent necessary to perform its obligations hereunder or under a Selling Agreement, otherwise use any Confidential Information of the other Party; provided that a Party (or any of its Affiliates) may disclose Confidential Information (i) to the extent required pursuant to the Requirements of Law, in any report, statement, testimony or other submission to any Governmental Authority or (ii) in order to comply with any Requirement of Law, or in response to any summons, subpoena or other legal process or formal or informal investigative demand issued to Citigroup or Legg Mason or any of their respective Affiliates, as the case may be, in the course of any litigation, investigation or administrative proceeding; provided, further, that if either Party or its Affiliates is, in the opinion of counsel to such Party, required by Requirements of Law to disclose any Confidential Information, such Party shall (x) to the extent such action would not violate or conflict with Requirements of Law, promptly notify the other Party of such Requirement of Law so that the non-disclosing Party may, at its sole expense, seek an appropriate protective order and/or waive in writing the disclosing Party's compliance with the provisions of this Agreement and (y) if, in the absence of a protective order or the receipt of a waiver hereunder, such Party or any of its Affiliates is nonetheless, in the opinion of counsel to such Party, compelled to disclose such Confidential Information, such Party, after notice to the non-disclosing Party (unless such notice would violate or conflict with Requirements of Law), may disclose such Confidential Information to the extent so required, in the opinion of counsel, by Requirements of Law.  If requested by the other Party, the Party disclosing such information shall (A) exercise commercially reasonable efforts, at the non-disclosing Party's sole expense, to obtain reliable assurances that the Confidential Information so disclosed will be accorded confidential treatment or (B) cooperate with any attempt by the non-disclosing Party to obtain reliable assurances that the Confidential Information so disclosed will be accorded confidential treatment.  Each Party agrees, and shall cause its Affiliates, to protect the Confidential Information by using the same degree of care, but no less than a reasonable degree of care, to prevent the unauthorized 

17

disclosure of such as each Party uses to protect its own confidential information of a like nature.  Neither Party, any of its Affiliates or their respective personnel (including each of its respective Affiliates' accountants, legal advisers and other professional advisers) shall be liable for the disclosure of Confidential Information   as expressly permitted by this subsection (a).

(b)

The Parties agree that each Selling Agreement entered into hereunder will include provisions substantially the same as those contained in Section 11(a).

Section 12.

Effectiveness; Duration and Termination of this Agreement

(a)

This Agreement will become effective as of the date hereof and will have an initial term and remain in full force and in effect until the third anniversary of the Commencement Date; provided, however, that the term of this Agreement will commence on the date of the closing of the Transaction and the provisions of Sections 4, 5 and 6 shall not be effective until the date of the closing of the Transaction.  After such initial three year term, this Agreement shall automatically renew for additional one year terms unless notice of termination is provided by either Party not less than 45 days prior to the expiration of the then current one year term. 

(b)

Notwithstanding the foregoing, (i) the termination of this Agreement will not (A) reduce or curtail the term of any Selling Agreement that extends beyond the end of the term of this Agreement or (B) prejudice or otherwise affect any rights or obligations of any Person existing at the time of such termination under the terms of any Selling Agreement entered into hereunder and (ii) the provisions of Sections 1, 11, 12(b) and 13 through 21 shall survive termination of this Agreement. 

Section 13.

Relationship Between the Parties

Nothing contained in this Agreement will be deemed to be construed by the Parties or any third party as creating a partnership, an agency relationship or joint venture between the Parties or any of their respective employees, representatives or agents.

Section 14.

Assignment

No Party may assign or transfer all or part of its rights and/or obligations under this Agreement without the prior written consent of the other Party and any purported assignment without such consent will be void; provided, that such prior written consent will not be required in the event that Legg Mason or Citigroup sells, transfers, divests or otherwise disposes of all or substantially all of its business to one or more of its Controlled Affiliates.  This Agreement shall be binding on the successors and permitted assigns of each Party hereto; provided, that dispositions of assets or entities to unaffiliated third parties representing not more than 20% of assets under management in the case of Legg Mason or 20% of sales force in the case of Citigroup may be made free from the foregoing limitations.

18

Section 15.

Costs and Expenses

Each Party agrees to bear its own costs and other expenses incurred by it in connection with the negotiation, preparation or performance of the obligations set out in this Agreement. 

Section 16.

Severability

In the event that any of the provisions in this Agreement is determined invalid, void or unenforceable, the provision will be deemed deleted from this Agreement and the remaining provisions of this Agreement will continue in full force and effect.

Section 17.

Entire Agreement

This Agreement, the Transaction Agreement and the Selling Agreements represent the entire understanding between the Parties in relation to this Agreement and supersedes all prior discussions and agreements among the Parties with respect to the subject matter of this Agreement.  

Section 18.

Amendments and Waivers

No amendment to this Agreement will be effective unless it is in writing and signed by each Party.  Any failure of a Party to comply with any obligation, covenant, agreement or condition contained in this Agreement may be waived by the Party entitled to the benefits of the provision only by a written instrument duly executed and delivered by the Party granting the waiver, but the waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition will not operate as a waiver of, or estoppel with respect to, any subsequent or other failure of compliance.  

Section 19.

Notices

All notices, requests, demands and other communications required or permitted to be given or made under this Agreement or in connection with this Agreement will be deemed to have been duly given when delivered by hand, courier or overnight delivery service or, if mailed, two (2) Business Days after deposit in the mail and sent certified or registered mail, return receipt requested and with first-class postage prepaid, or in the case of facsimile notice, when sent and transmission is confirmed, and, regardless of method, addressed to the Party at its address or facsimile number set out below (or at such other address or facsimile number as the Party furnishes the other Party in accordance with this Section):

(a)

If to Citigroup:

Citigroup, Inc.

399 Park Avenue

New York, New York

Attn: Andrew Felner

Facsimile: (212) 559-7057

19

With a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, New York 10036

Attn: Ralph Arditi

Facsimile: (212) 735-2000

(b)

If to Legg Mason:

Legg Mason, Inc.

100 Light Street

Baltimore, MD  21202

Attn:  Thomas Lemke, General Counsel

Facsimile: (410) 454-4607

With a copy to:

Shearman & Sterling LLP

801 Pennsylvania Avenue, NW

Suite 900

Washington, D.C. 20004

Attn: Barry P. Barbash

Facsimile: (202) 508-8100

Section 20.

Governing Law

The provisions of this Agreement are to be governed by and construed in accordance with the Laws of the State of New York applicable to the agreements made and to be performed entirely within the State, without regard to the conflicts of laws principles of the State.  

Section 21.

JURISDICTION

THE PARTIES IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE PARTIES IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT.  THE PARTIES IRREVOCABLY WAIVE, TO THE FULLEST EXTENT THAT THEY MAY LEGALLY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING.  THE PARTIES AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING WILL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.

[Remainder of Page Intentionally Left Blank.]

20

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.  This Agreement may be executed by the parties hereto in any number of counterparts, all of which will constitute one and the same instrument.

Citigroup, Inc.

By:

/s/ Zion M. Shohet

Zion M. Shohet

Head of Strategy, Mergers & Acquisitions

Legg Mason, Inc.

By:

/s/Mark R. Fetting

Mark R. Fetting

Senior Executive Vice President

21_

Exhibit 10.1

SEITEL, INC.

RESTRICTED STOCK AWARD
AGREEMENT

THIS RESTRICTED STOCK AGREEMENT (this
"Agreement") is made and entered into by and between Seitel, Inc., a Delaware
corporation (the "Company"), and [Name of Canadian Employee]
("Grantee"), effective as of the grant date shown in Appendix A attached
hereto pursuant to the Seitel, Inc. 2004 Stock Option Plan (the "Plan").  The
Plan is incorporated by reference herein in its entirety.  Capitalized terms
not otherwise defined in this Agreement shall have the meaning given such terms
as defined in the Plan.

WHEREAS, Grantee is an employee of the Company
or a subsidiary of the Company and in connection with such employment, the
Committee on behalf of the Company has authorized a grant to Grantee a number
of restricted and unrestricted shares of the Company's Stock, par value $.01
per share (the "Common Stock"), effective [Date], in the amount
indicated on Appendix A and which is pursuant to and shall be subject to the
terms and conditions of this Agreement and the Plan, with a view to increasing
Grantee's interest in the Company's welfare and growth; and

WHEREAS, Grantee desires to receive shares of
the Common Stock as Restricted Stock pursuant to this Agreement in connection
with his employment.

NOW, THEREFORE, in consideration of the
premises, mutual covenants and agreements contained herein, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree
as follows:

1.                 
Grant of Common Stock.  Subject to the
restrictions, forfeiture provisions and other terms and conditions set forth
herein (a) the Company hereby grants to Grantee the number of shares of
Common Stock ("Restricted Shares") as set out in Appendix A hereto, and
(b) subject to the terms hereof, Grantee shall have and may exercise
rights and privileges of ownership of such Restricted Shares, including,
without limitation, the voting rights of such shares and the right to receive
dividends declared in respect thereof.  Subject to the terms and conditions set
forth herein the Company hereby grants to Grantee the number of shares of
Common Stock as set out in Appendix A hereto, which shares are not subject to
any restrictions or forfeiture provisions ("Unrestricted Shares").  This
Agreement and the grant of Restricted Shares, Unrestricted Shares and Common
Stock are subject to administration by and the rules and procedures established
by the Committee under the Plan.

2.                 
Transfer Restrictions; Vesting.

(a)              
Generally.  Grantee shall not sell, assign, transfer,
exchange, pledge, encumber, gift, devise, hypothecate or otherwise dispose of
(collectively, "Transfer") any Restricted Shares prior to their vesting in
accordance with the Vesting Dates set out in Appendix A.  Further, even after
such Restricted Shares become vested, such vested Restricted Shares may not be
sold or otherwise disposed of in any manner which would constitute a violation
of any applicable federal or state securities laws or other applicable law,
rules of any exchange on which the Company's securities are traded or listed,
or Company rules or policies as determined by Company in its sole discretion. 
Restricted Shares shall vest as of each of the Vesting Dates set out in
Appendix A provided that Grantee remains employed with the Company through the
Vesting Date, except as may otherwise be provided herein.

(b)              
Dividends, etc.  If the Company (i) declares a dividend
or makes a distribution on Common Stock in shares of Common Stock or
(ii) subdivides or reclassifies outstanding shares of Common Stock into a
greater number of shares of Common Stock or (iii) combines or reclassifies
outstanding shares of Common Stock into a smaller number of shares of Common
Stock, then the number of shares of Grantee's Common Stock subject to the
transfer restrictions in this Agreement shall be proportionally increased or
reduced as to prevent enlargement or dilution of Grantee's rights and duties
hereunder.  The determination of the Company's Board of Directors regarding
such adjustment should be final and binding.

3.                 
Vesting on Change in Control.  Notwithstanding
the provisions in Section 2, on the date immediately preceding the date of
a Change in Control (as defined below), the Restricted Shares shall be 100%
vested.  For purposes of this Agreement, a "Change in Control" shall
mean the occurrence of any of the following events:

(a)              
any Person (other than the Company, any trustee or other fiduciary
holding securities under any employee benefit plan of the Company, or any
company owned, directly or indirectly, by the stockholders of the Company
immediately prior to the occurrence with respect to which the evaluation is
being made in substantially the same proportions as their ownership of the
common stock of the Company) acquires securities of the Company and immediately
thereafter is the Beneficial Owner (except that a Person shall be deemed to be
the Beneficial Owner of all shares that any such Person has the right to
acquire pursuant to any agreement or arrangement or upon exercise of conversion
rights, warrants or options or otherwise, without regard to the 60-day period
referred to in Rule 13d-3 under the Securities Exchange Act of 1934 (the
"Exchange Act"), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities (except that an acquisition of original issue securities
directly from the Company shall not be deemed an acquisition for purposes of
this clause (a));

(b)              
during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board, and any new director (other than
a director designated by a person who has entered into an agreement with the
Company to effect a transaction described in clause (a), (c), or (d) of this
paragraph) whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two thirds of the
directors then still in office who either were directors at the beginning of
the two-year period or whose election or nomination for election was previously
so approved but excluding for this purpose any such new director whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of an individual, corporation,
partnership, group, associate or other entity or Person other than the Board,
cease for any reason to constitute at least a majority of the Board; 

(c)               
the consummation of a merger or consolidation of the Company with
any other entity, other than (i) a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving or resulting entity) more
than 50% of the combined voting power of the surviving or resulting entity
outstanding immediately after such merger or consolidation or (ii) a merger or consolidation in which no premium is intended to be paid to any
shareholder participating in the merger or consolidation;

(d)              
the stockholders of the Company approve a plan or agreement for the
sale or disposition of all or substantially all of the consolidated assets of
the Company (other than such a sale or disposition immediately after which such
assets will be owned directly or indirectly by the stockholders of the Company,
in substantially the same proportions as their ownership of the common stock of
the Company immediately prior to such sale or disposition) in which case the
Board shall determine the effective date of the Change in Control resulting
therefrom; or

(e)               
any other event occurs which the Board determines, in its
discretion, would materially alter the structure of the Company or its
ownership.

(f)                
"Beneficial Owner" shall have the meaning ascribed to such term in
Rule 13d-3 under the Exchange Act and any successor to such Rule.

(g)              
 "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, and
shall include a "group" as defined in Section 13(d) thereof.

4.                 
Forfeiture.

(a)              
Termination of Service.  If Grantee's employment with the
Company is terminated by the Company or Grantee for any reason, other than on
account of Grantee's death or "Permanent Disability" (as defined in Section
22(e)(3) of the Internal Revenue Code of 1986, as amended) then Grantee shall
immediately forfeit all Restricted Shares which are unvested unless the
Committee, in its sole discretion, determines that any or all of such unvested
Restricted Shares shall not be so forfeited..

(b)              
Death or Permanent Disability. 
In the event of Grantee's
death or Permanent Disability the Restricted Shares shall be 100% vested.

(c)               
Forfeited Shares.  Any Restricted Shares forfeited under this
Section 4 shall automatically revert to the Company and become canceled and
such shares shall be again subject to the Plan as provided in Section 4 of the
Plan.  Any certificate(s) representing Restricted Shares which include
forfeited shares shall only represent that number of Restricted Shares which
have not been forfeited hereunder.  Upon the Company's request, Grantee agrees
for himself and any other holder(s) to tender to the Company any certificate(s)
representing Restricted Shares which include forfeited shares for a new
certificate representing the unforfeited number of Restricted Shares.

5.                 
Issuance of Certificate.

(a)              
The Company shall cause to be issued a stock certificate, registered
in the name of the Grantee, evidencing the Restricted Shares upon receipt of a
stock power duly endorsed in blank with respect to such shares.  Each such
stock certificate shall bear the following legend:

THE TRANSFERABILITY OF THIS
CERTIFICATE AND THE SHARES OF STOCK REPRESENTED HEREBY ARE SUBJECT TO THE
RESTRICTIONS, TERMS AND CONDITIONS (INCLUDING FORFEITURE AND RESTRICTIONS
AGAINST TRANSFER) CONTAINED IN THE RESTRICTED STOCK AGREEMENT ENTERED INTO
BETWEEN THE REGISTERED OWNER OF SUCH SHARES AND SEITEL, INC.  COPIES OF
THE RESTRICTED STOCK AGREEMENT ARE ON FILE IN THE OFFICE OF THE SECRETARY OF
SEITEL, INC., LOCATED AT 10811 S. WESTVIEW CIRCLE DRIVE, SUITE 100, BLDG. C, HOUSTON, TEXAS  77043.

Such legend shall not be removed from the
certificate evidencing Restricted Shares until such time as the restrictions
thereon have lapsed.

(b)              
The certificate issued pursuant to this Section 5, together with the
stock powers relating to the Restricted Shares evidenced by such certificate,
shall be held by the Company.  The Company may issue to the Grantee a receipt
evidencing the certificates held by it which are registered in the name of the
Grantee.

6.                 
Miscellaneous.

(a)              
Certain Transfers Void.  Any purported transfer of Restricted
Shares in breach of any provision of this Agreement shall be void and
ineffectual, and shall not operate to transfer any interest or title in the
purported transferee.

(b)              
No Fractional Shares.  All provisions of this Agreement
concern whole shares of Common Stock.  If the application of any provision
hereunder would yield a fractional share, the value of such fractional share shall
be paid to the Grantee in cash.

(c)               
Not an Agreement for Continued Employment or Services.  This
Agreement shall not, and no provision of this Agreement shall be construed or
interpreted to, create any right of Grantee to continue employment with or
provide services to the Company, Company affiliates, parent, subsidiary or
their affiliates.  

(d)              
Dispute Resolution.

(i)                 
Arbitration. All disputes and controversies of every kind and
nature between any parties hereto arising out of or in connection with this
Agreement or the transactions described herein as to the construction,
validity, interpretation or meaning, performance, non-performance, enforcement,
operation or breach, shall be submitted to arbitration pursuant to the
following procedures:

(1)              
After a dispute or controversy arises, any party may, in a written
notice delivered to the other parties to the dispute, demand such arbitration.
Such notice shall designate the name of the arbitrator (who shall be an
impartial person) appointed by such party demanding arbitration, together with
a statement of the matter in controversy.

(2)              
Within 30 days after receipt of such demand, the other parties shall, in
a written notice delivered to the first party, name such parties' arbitrator
(who shall be an impartial person). If such parties fail to name an arbitrator,
then the second arbitrator shall be named by the American Arbitration
Association (the "AAA"). The two arbitrators so selected shall name a
third arbitrator (who shall be an impartial person) within 30 days, or in lieu of
such agreement on a third arbitrator by the two arbitrators so appointed, the
third arbitrator shall be appointed by the AAA. If any arbitrator appointed
hereunder shall die, resign, refuse or become unable to act before an
arbitration decision is rendered, then the vacancy shall be filled by the
method set forth in this Section for the original appointment of such
arbitrator.

(3)              
Each party shall bear its own arbitration costs and expenses. The
arbitration hearing shall be held in Houston, Texas at a location designated by
a majority of the arbitrators. The Commercial Arbitration Rules of the American
Arbitration Association shall be incorporated by reference at such hearing and
the substantive laws of the State of Texas (excluding conflict of laws
provisions) shall apply.

(4)              
The arbitration hearing shall be concluded within ten (10) days unless
otherwise ordered by the arbitrators and the written award thereon shall be
made within fifteen (15) days after the close of submission of evidence. An
award rendered by a majority of the arbitrators appointed pursuant to this
Agreement shall be final and binding on all parties to the proceeding, shall
resolve the question of costs of the arbitrators and all related matters, and
judgment on such award may be entered and enforced by either party in any court
of competent jurisdiction.

(5)              
Except as set forth in Section 6(e)(ii), the parties stipulate that
the provisions of this Section shall be a complete defense to any suit, action
or proceeding instituted in any federal, state or local court or before any
administrative tribunal with respect to any controversy or dispute arising out
of this Agreement or the transactions described herein. The arbitration
provisions hereof shall, with respect to such controversy or dispute, survive
the termination or expiration of this Agreement.

No party to an arbitration may disclose the existence or
results of any arbitration hereunder without the prior written consent of the
other parties; nor will any party to an arbitration disclose to any third party
any confidential information disclosed by any other party to an arbitration in
the course of an arbitration hereunder without the prior written consent of
such other party.

(ii)               
Emergency Relief. Notwithstanding anything in this Section 6(d)
to the contrary, any party may seek from a court any provisional remedy that
may be necessary to protect any rights or property of such party pending the
establishment of the arbitral tribunal or its determination of the merits of
the controversy or to enforce a party's rights under Section 6(d).

(e)               
Notices.  Any notice, instruction, authorization, request or
demand required hereunder shall be in writing, and shall be delivered either by
personal in-hand delivery, by telecopy or similar facsimile means, by certified
or registered mail, return receipt requested, or by courier or delivery
service, addressed to the Company at the address indicated beneath its signature
on the execution page of this Agreement, and to Grantee at his address
indicated herewith, or at such other address and number as a party shall have
previously designated by written notice given to the other party in the manner
herein set forth.  Notices shall be deemed given when received, if sent by
facsimile means (confirmation of such receipt by confirmed facsimile
transmission being deemed receipt of communications sent by facsimile means),
and when delivered and receipted for (or upon the date of attempted delivery
where delivery is refused), if hand-delivered, sent by express courier or
delivery service, or sent by certified or registered mail, return receipt
requested.

(f)                
Amendment and Waiver.  This Agreement may be amended,
modified or superseded only by written instrument executed by the Company and
Grantee.  Any waiver of the terms or conditions hereof shall be made only by a
written instrument executed and delivered by the party waiving compliance.  Any
amendment or waiver agreed to by the Company shall be effective only if
executed and delivered by a duly authorized executive officer of the Company. 
The failure of any party at any time or times to require performance of any
provisions hereof shall in no manner effect the right to enforce the same.  No
waiver by any party of any term or condition in this Agreement, or breach
thereof, in one or more instances shall be deemed a continuing waiver of any
such condition or breach, a waiver of any other condition, or the breach of any
other term or condition.

(g)              
Independent Legal and Tax Advice.  The Grantee has been
advised and Grantee hereby acknowledges that he has been advised to obtain
independent legal and tax advice regarding this Agreement and the grant of
Restricted Shares and Unrestricted Shares.

(h)              
Governing Law and Severability.  This Agreement shall be
governed by the internal laws, and not the laws of conflict, of the State of Delaware.  The invalidity of any provision of this Agreement shall not affect any other
provision of this Agreement which shall remain in full force and effect.

(i)                 Successors and Assigns.  Subject to the limitations which
this Agreement imposes upon transferability of Restricted Shares, this
Agreement shall bind, be enforceable by and inure to the benefit of the Company
and its successors and assigns, and Grantee, and, upon his death, on his estate
and beneficiaries thereof (whether by will or the laws of descent and
distribution).

(j)                
Community Property.  Each spouse individually is bound by,
and such spouse's interest, if any, in any shares is subject to, the terms of
this Agreement. Nothing in this Agreement shall create a community property
interest where none otherwise exists.

(k)              
Entire Agreement.  This Agreement supersedes any and all
other prior understandings and agreements, either oral or in writing, between
the parties with respect to the subject matter hereof and constitute the sole
and only agreements between the parties with respect to the said subject
matter. All prior negotiations and agreements between the parties with respect
to the subject matter hereof are merged into this Agreement. Each party to this
Agreement acknowledges that no representations, inducements, promises, or
agreements, orally or otherwise, have been made by any party or by anyone
acting on behalf of any party, which are not embodied in this Agreement and
that any agreement, statement or promise that is not contained in this
Agreement shall not be valid or binding or of any force or effect.

(l)                
Compliance with Other Laws and Regulations.  This Agreement,
the grant of Restricted Shares, Unrestricted Shares and issuance of Common
Stock shall be subject to all applicable federal and state laws, rules,
regulations and applicable rules and regulations of any exchanges on which such
securities are traded or listed, and Company rules or policies.  Any
determination in this connection by the Committee shall be final, binding and
conclusive on the parties hereto and on any third parties, including any
individual or entity.

(m)            
Tax Requirements.

(i)                 
Tax Withholding.  This grant under this Agreement is subject to
and the Company shall have the power and the right to deduct or withhold, or
require the Grantee to remit to the Company, an amount sufficient to satisfy
federal, state, and local taxes, domestic or foreign, required by law or
regulation to be withheld with respect to any taxable event arising as a result
of the Plan and this Agreement.

(ii)               
Share Withholding.  With respect to tax withholding required upon
any taxable event arising as a result of this Agreement, Grantee may elect,
subject to the approval of the Committee in its discretion, to satisfy the
withholding requirement, in whole or in part, by having the Company withhold
shares of Stock having a Fair Market Value on the date the tax is to be
determined equal to the statutory total tax which could be imposed on the
transaction.  All such elections shall be made in writing, signed by the
Grantee, and shall be subject to any restrictions or limitations that the
Committee, in its discretion, deems appropriate.  Any fraction of a share of
Stock required to satisfy such obligation shall be disregarded and the amount
due shall instead be paid in cash by the Grantee.

(n)              
Grantee's Address.  

Grantee's
address of record is:             _________________________________

                                                           _________________________________

                                                           _________________________________

Grantee shall be responsible to notify the
Company of any changes to his address.

[Signature page follows]

 

IN WITNESS
WHEREOF, the parties have caused this Agreement to be executed on the date first
above written.

                                                                               COMPANY:

                                                                               SEITEL,
INC.

                                                                               

                                                                               By:                                                                        

                                                                               Name:                                                                   

                                                                               Title:                                                                      

 

                                                                               Address:     Seitel,
Inc.

                                                                                                  10811 S. Westview Circle Drive, 

                                                                                                  Suite 100, Bldg. C

                                                                                                  Houston, TX   77043

                                                                                                  Facsimile: 
(713) 881-2815

                                                                                                  Attention:
Secretary

                                                                               GRANTEE:

                                                                                                                                                            

                                                                               Signature

                                                                                                                                                            

                                                                               Printed
Name

 

 

APPENDIX A TO

RESTRICTED STOCK
AGREEMENT

 

 

Grantee's Name:       [Name]                                                

 

	
  Grant
  Date:

  	
  Number
  of

  Restricted
  Shares Granted

  	
  Number
  of

  Unrestricted
  Shares Granted

  
	
  __________________

  	
  __________________

  	
  __________________

  

 

 

Vesting Dates for Restricted Stock:

 

	
  Date

  	
  Number
  of

  Restricted
  Shares Granted

  
	
  __________________

  	
  33.3%

  
	
  __________________

  	
  33.3%

  
	
  __________________

  	
  33.4%

  

 

Note:  All vesting is subject to the terms and
conditions of the Agreement.

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