Document:

Exhibit 10.1

 Exhibit 10.1 
  
 GLOBAL DISTRIBUTION AGREEMENT 
  
 THIS GLOBAL DISTRIBUTION AGREEMENT dated as of June 23, 2005, 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, the execution and delivery of this 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. 
  
 NOW THEREFORE, in
consideration of the mutual covenants, agreements and promises contained in this Agreement, the Parties agree as follows: 
  
  

 Section 1. Definitions 
  
 (a) 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 Transaction, including any of such investment products as are RICs or other pooled investment vehicles, wrap fee programs (as defined in Rule 204-3 under the Advisers Act) or separately managed accounts.

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

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 “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 the date of the closing of the Transaction or the first day on which Conversion of all of
the Legg Mason Exclusive Equity Products has occurred.  
  
 “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 (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 (a) for Legg Mason RICs whose shares are continuously offered, the ability of the Sales Force of the Citigroup Distributors to sell through all of their
existing sales programs, including TRAK, (i) Primary Shares and (ii) Class A, Class C, Class FI and Class I shares having substantially the same features and terms as the same class currently utilized by certain of such RICs or, if they do not have
such a class, the same class currently utilized by the CAM RICs, in each case through the use of level 3 or level 4 transaction processing functionality of the National Securities Clearing Corporation, (b) for other Legg Mason pooled investment
vehicles and 529 plans, the ability of the Sales Force of the Citigroup Distributors to sell interests in such vehicles on substantially the same basis as such Sales Force currently does for CAM Products; and (c) for retail separately managed
accounts that are Legg Mason Exclusive Equity Products, if any, the ability of the Sales Force of the Citigroup Distributors to have clients utilize the investment management service of the applicable Legg Mason Affiliate for a separately managed
account managed in the same style as each of the Legg Mason Exclusive Equity Products through the various separately managed account programs offered by any of the Citigroup Distributors, including Citigroup Distributor programs such as MDA, FS and
CES, including in each of items (a) through (c) above all necessary ancillary management, administrative, reporting and similar software. 
  
 “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. 
  

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 “Existing Legg Mason Distribution Agreements” means the agreements in effect as
of the Commencement Date to which Legg Mason or a Legg Mason Affiliate is a party relating to the distribution of Legg Mason Products existing as of such date. 
  

“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 RICs in the family of RICs known as the Legg Mason Funds for which Legg Mason Capital Management is the investment adviser.  
  
 “Legg Mason Exclusive Equity Products” means (i) the Legg Mason Equity Funds and (ii) any other
investment products investing primarily in equity securities, a portfolio manager of which at any time during the term hereof is an officer or employee of Legg Mason Capital Management as of the date hereof or who reports directly or indirectly to
any such officer or employee.  
  
 “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 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. 
  
 “NASD” means the National Association of Securities Dealers, Inc. 
  
 “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. 
  

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 “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 Institutional Accounts” means accounts
investing in or constituting a portion of a Covered Product, the beneficial owners of which account are intermediaries acting for the account of or through a product marketed to individuals or vehicles that are not True Institutional
Accounts. 
  
 “RIC” means an
U.S. investment management company registered under the 1940 Act and any class, series or portfolio thereof. 
  
 “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. 
  
 “True
Institutional Accounts” means accounts investing in or constituting a portion of a Covered Product, the beneficial owners of which account are not (i) individuals, (ii) trusts, partnerships or other vehicles for the account of or owned
primarily by individuals or (iii) intermediaries acting for the account of or through a product marketed to individuals or such vehicles; provided, however, that (a) an account (such as a 401(k) plan or similar defined contribution
retirement plan or variable insurance subadvisory product, in either case providing access to numerous investment alternatives in addition to Legg Mason Products, interests in which are sold without participation by registered representatives or
insurance agents for transactional or asset-based compensation, (b) pooled investment vehicles, interests in which are not marketed in or from the U.S. to 

  

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individuals and (c) any unregistered investment company exempt from registration under the 1940 Act by Section 3(c)(7) of that Act that is distributed
primarily to investors other than those in clauses (i)-(iii) above; provided however that any investor included in clauses (i), (ii) or (iii) above must have a minimum investment of at least $25 million. 
  
 Section 2. Representations and Warranties of Citigroup 
  
 Citigroup represents 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. 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 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. 
  

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 (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 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. 
  
 (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. 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, 

  

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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. 
  
 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 

  

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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 this 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 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 has 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 

  

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Schedule B. Such independent third party shall be identified by the Parties prior to the closing date. 

  
 (c) Notwithstanding the foregoing, Legg Mason may permit any
Legg Mason Exclusive Equity Products to be distributed (i) through the Existing Legg Mason Distribution Agreements, (ii) to True Institutional Accounts, (iii) with the consent of Citigroup (which consent shall not be unreasonably withheld, it being
understood that a meaningful adverse effect on the retention of “persons associated with a broker or dealer” (as defined in the Exchange Act) shall be deemed to be a reasonable withholding of such consent) to Retail Institutional Accounts;
and (iv) subject to Section 6.18(b)(ii) of the Transaction Agreement, through Legg Mason’s Fund Investors Services unit; provided that during the Exclusivity Period neither Legg Mason nor its Affiliates will enter into any selling agreements
(other than renewals of Existing Legg Mason Distribution Agreements on substantially the same terms and conditions, including, parties, covered products and limitations) to offer, or allow the distribution of, any Legg Mason Exclusive Equity Product
with any wirehouse or regional brokers during the Exclusivity Period, subject to any Requirement of Law. 
  
 (d) 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. 
  
 (e) 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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 (f) 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. 
  
 (g) 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 at least the same degree of access to and contact and interaction with the Sales Force of the applicable Citigroup Distributor as
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 at least the same degree of access to and contact and
interaction with the employees of Legg Mason and its Affiliates as provided by CAM and its controlled Affiliates to personnel of the applicable Citigroup Distributors and 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 

  

 12 

 
telephone (including access to call center facilities as currently exist), through written materials, 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, to the extent appropriate, 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. 
  

 13 

 (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 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 no such trademark shall be
associated with a Citigroup Distributor or proprietary products of a distribution competitor of the Citigroup Distributors. 
  

 14 

 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. 
  
 (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 (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. 
  
 (f) 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. 
  
 (g) Each of the Parties shall
use all commercially reasonable efforts to complete Conversion by the date of the closing of the Transaction. 
  
 (h) Subject to applicable Requirements of Law, upon Citigroup’s request, Legg Mason will cooperate with any efforts by Citigroup to
seek approval by the board of directors or trustees of those Legg Mason Products that are RICs that one or more Citigroup Distributors identified by Citigroup be appointed to act as an additional principal underwriter of such products. 

 
 (i) Legg Mason covenants and agrees that after the date
hereof and prior to the Commencement Date, it will not, and will cause each of its Affiliates to not, enter into any agreement relating to the distribution of Legg Mason Exclusive Equity Products, except that Legg Mason and any of its Affiliates may
enter into such agreements with respect to True Institutional Accounts and, with the prior consent of Citigroup (which consent shall not be unreasonably withheld, it being understood that a meaningful adverse effect on the retention of “persons
associated with a broker or dealer” (as defined in the Exchange Act) shall be deemed to 

  

 15 

 
be a reasonable withholding of such consent) enter into any such agreement that is under active consideration as of the date hereof. 
  
 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 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 

  

 16 

 
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. 
  
 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. 
  

 17 

 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 
  
 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 
  

 18 

 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.] 
  

 19 

 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/ Robert B. Willumstad
	 	 	 Name: Robert B. Willumstad

	 	 	 Title: President and Chief Operating Officer

			
	
	 Legg Mason, Inc.

		
	By:	 	/s/ Raymond A. Mason
	 	 	 Name: Raymond A. Mason

	 	 	 Title: President and Chief Executive Officer

  

 20Electric Power Purchase and Sale Agreement dated 10/20/2004

 Exhibit 4.18 
  
 Chesf 
  
 Companhia Hidro Elétrica do São Francisco 
  
 ELECTRIC POWER PURCHASE AND SALE AGREEMENT 
  
 CHESF 
  
 X 
  
 BRASKEM S.A. 
  
 BASIC PETROCHEMICALS UNIT –
UNIB 
  
 CCVE-012/2004 
  

 ELECTRIC POWER PURCHASE AND SALE AGREEMENT CELEBRATED BETWEEN COMPANHIA HIDRO ELÉTRICA DO SÃO FRANCISCO
- CHESF AND BRASKEM S.A. 
  
 By this deed, the Parties 
  
 COMPANHIA HIDRO ELÉTRICA DO SÃO FRANCISCO — CHESF, a public
services concessionaire engaged in the supply of electric power, headquartered in the city of Recife, in the state of Pernambuco, at Rua Delmiro Gouveia, n° 333, Bairro do Bongi, enrolled before the CNPJ of the Ministry of Finance under no.
33.541.368/0001-16, and enrolled before the state tax office under no. 18.1.001.0005584-6, hereinafter simply referred to as “CHESF” and represented herein pursuant its Social Bylaws by its Directors, described and undersigned at
the end of the agreement; and 
  
 BRASKEM S.A.-UNIB, with headquarters in
the city of Camaçari, in the state of Bahia, at Rua Eteno, n° 1561, Petrochemical Complex, enrolled before the CNPJ of the Ministry of Finance under no. 42.150.391/0001-70, and enrolled before the state tax office under no. 01.027.389-NO,
hereinafter referred to simply as “CONSUMER”, represented herein pursuant its Social Bylaws by its Directors described and undersigned at the end of the agreement. 
  
 WHEREAS 
  

	 	•	 	on June 02, 1998, the PARTIES celebrated the Electric Power Reserve Agreement for the supply of electric power by CHESF to the CONSUMER’s industrial
installations, located within the Municipality of Maceió, in the state of Alagoas, under a voltage of 230 kV, and governed by the hourly-seasonal tariff structure; 

  

	 	•	 	pursuant art. 25 of Law no. 10.848, dated March 15, 2004, the PARTIES are interested in amending this agreement intending to make it comply with the new sectorial regulations
regarding the sale of electric power, 

  

	 	•	 	§ 2 of art. 54 of Decree no. 5.163, dated July 30, 2004 has determined that all amendments to electric power supply agreements must be first replaced by separate agreements
drawn for the purchase and sale of electric power, and for the use of transmission and connecting systems; 

	 	•	 	the Electric Power Purchase and Sale agreement must be celebrated with the concessionaire of the public power generating service; the Use of the Transmission System Agreement must
be celebrated with ONS, since the consumer service is provided by the Basic Powergrid installations, and the Connection Agreement must be executed with the power transmission concessionaire at the point of access 

  
 the PARTIES have therefore decided to celebrate this Electric Power Purchase and Sale
Agreement (“AGREEMENT”) in replacement to the Electric Power Supply and Reserve Agreement, celebrated on June 02, 1998, pursuant the hourly-seasonal tariff structure, and pursuant the following clauses and conditions: 
  
 CHAPTER I 
  
 TERMINOLOGY AND ANNEXES 
  
 CLAUSE 1 – Purporting to obtain a perfect understanding and precise
definition of the technical terminology employed in this AGREEMENT together with its annexes, the concept referring to the following words and expressions is agreed forthwith between the PARTIES: 
  
 (a) “ANEEL”; Agência Nacional de Energia Elétrica (National
Electric Power Agency), a regulating agency responsible for the control of electric power supply, empowered by Law no. 9.427 dated December 26, 1996, and regulated by Decree no. 2.335, dated December 06, 1997; 
  
 (b) “COMPETENT AUTHORITY”: any government agency empowered to interfere in this
AGREEMENT or in the activities executed by the PARTIES; 
  
 (c)
“BILLING CYCLE”: a time interval taking place between the date the power consumption measuring meters are read for billing purposes, as defined by CHESF, measured as of the previous month until the day of measurement on the month of
reference; 
  
 (d) “CONNECTION TO THE TRANSMISSION SYSTEM AGREEMENT”
agreement celebrated between the users and the power transmission concessionaires, which establishes the terms and conditions to connect the users to the Basic Power grid; 
  
 (e) “TRANSMISSION SYSTEM USE AGREEMENT”: an agreement that establishes the terms and conditions for the use of the Basic Power
grid by a user, including the transmission services provided by the power transmission concessionaires, by means of the control and supervision of ONS, and the providing of the coordination and 

 
operation control services pertaining to the interconnected services by ONS, pursuant a model approved by ANEEL; 
  
 (f) “ELECTRIC POWER”: is the amount of electric power that is being supplied over a
given period of time, expressed in Watts/hour (Wh) or by its multiples; 
  
 (g)
“PEAK HOURS”: a Period made up of three (3) consecutive daily hours, encompassed in the interval between 18:00 and 21:00 hours, excepting Saturdays, Sundays and national holidays. The daily time interval of three consecutive hours may be
redefined within the time interval between 17:00 and 22:00 hours, agreed between CHESF and the CONSUMER, taking into account the characteristics of the latter’s electric system; 
  
 (h) “OFF-PEAK HOURS”: a period made up of two daily consecutive hours, which are a
complement to those that have been defined by the OFF-PEAK HOURS; 
  
 (i)
“IGPM”: Índice Geral de Preços de Mercado (General Market Price Index) computed by Fundação Getúlio Vargas; 
  
 (j) “AUCTION”: means the auction or auctions pertaining to the purchase of electric power deriving from the existing power
generation systems, pursuant Law 10.848, dated March 15, 2004, and by Decree 5.163, dated July 30, 2004. 
  
 (k) “SERVICE OF NOTICE REGARDING CONTROVERSIES”; is a formal document intended to inform the PARTIES regarding any controversies arising from the provisions of this AGREEMENT and/or pertaining to it;

  
 (l) “ONS”: means the National Electric Power System Operator
(Operador Nacional do Sistema Elétrico), created by Law no. 9.648/98 and regulated by Decree no. 5.081/04; 
  
 (m) “DRY PERIOD”: a period made up of seven consecutive months encompassing the power supply derived from the consumption measurements taken between May and
November of each year; 
  
 (n) “WET PERIOD”: a period made up of five
consecutive months, encompassing the power supply derived from the consumption readings made between December of a given year and April of the following year; 
  

(o) “POINT OF DELIVERY”: means the point of connection starting at CHESF’s transmitting installations and ending at the electric installations of
the CONSUMER’s INDUSTRIAL UNIT; 

 (p) “POWER”: electric power referring to a unit of time expressed in kilowatts (kW); 
  
 (q) “POWER RESERVE CHART”: pursuant Annex I; 
  
 (r) “ELECTRIC POWER RESERVE”: demand for power contracted, referred chronologically
to a given period of time; 
  
 (s) “HOURLY-SEASONABLE ELEMENTS”: are
made up of the composition of the dry and wet periods together with the Peak and Off-peak Hours; 
  
 (t) “INTERCONNECTED SYSTEM”: means the generation, transmission and distribution installations, connected to the Basic Transmission Gridwork, including their respective installations; 
  
 (u) “INDUSTRIAL UNIT”: the CONSUMER’s industrial installations located
in Camaçari-BA. 
  
 Sole Paragraph – All the afore defined
terms, when used in the singular within the context of this AGREEMENT and its annexes shall also mean their plural form and vice versa. 
  
 CLAUSE 2 – ANNEX I – ELECTRIC POWER RESERVE CHART is an appurtenant to this AGREEMENT. 
  
 CHAPTER II 
  
 OBJECT AND TERM OF EFFECTIVENESS 
  
 CLAUSE 3 – The purpose of this AGREEMENT is to establish the terms and
conditions pertaining to the RESERVE OF ELECTRIC POWER, corresponding to the commercialization of said Electric Power, to be made available by CHESF to the CONSUMER at the POINT OF DELIVERY, pursuant the amounts and periods that have
been listed on the chart found in ANNEX I, and over which shall apply the tariffs to be determined by ANEEL, pursuant the hourly-seasonal tariff structure. 
  
 CLAUSE 4 – This AGREEMENT shall go into effect on November 30, 2004, and it shall remain in effect for a period of five years, or until the effective
accomplishment of all contractual obligations, including the payment of the Invoice/Electric Power Bill referring to the last month of delivery of electric power. 
  
 Sole Paragraph – The effectiveness and the execution of the obligations and commitments governed by this AGREEMENT shall
be entailed to the signing of the instruments infra, to which the PARTIES pledge forthwith: 
  

	 	a)	CONNECTION TO THE TRANSMISSION SYSTEM AGREEMENT, between the CONSUMER and the involved TRANSMISSION AGENT; 

	 	b)	CONNECTION TO THE TRANSMISSION SYSTEM AGREEMENT, between CHESF and the involved TRANSMISSION AGENT; 

  

	 	c)	TRANSMISSION SYSTEM USE AGREEMENT by the CONSUMER; 

  

	 	d)	TRANSMISSION SYSTEM USE AGREEMENT by CHESF. 

  
 CHAPTER III 
  
 ELECTRIC POWER RESERVE 
  
 CLAUSE 5 – For the purposes envisaged in Clause 3, and pursuant the provisions in Clauses 4, 6 and 7 of this AGREEMENT, CHESF pledges to insure the availability of ELECTRIC POWER to cater to the
CONSUMER’s needs during the periods and in the amounts established in ANNEX I. 
  
 First Paragraph – For all the purposes of this AGREEMENT, the dates for the start of the effectiveness of the electric power reservations shall be counted for each month as of 00:00 hours of the
first day of the supply periods taken into account in ANNEX I. 
  
 Second
Paragraph – Every year as of 2005, and at least sixty (60) days in advance of the AUCTION, the CONSUMER shall inform CHESF in writing as of its power needs to be effective as of January of the following years, considering
that: 
  

	 	(a)	CHESF shall inform the date of the AUCTION at least thirty days in advance of the date the CONSUMER is supposed to inform its own estimate.

  

	 	(b)	in case CHESF fails to effect said communication, the date of September 30 shall prevail for the CONSUMER to present said forecast. 

  

	 	(c)	in case the CONSUMER fails to make its electric power consumption reserve within the timeframe determined in this paragraph, CHESF shall for all purposes use
the Electric Power Consumption Reservation Chart in effect. 

  

	 	(d)	CHESF pledges to validate the forecast dealt with in this paragraph, provided the provisions of the Third Paragraph of this clause are complied with.

  
 Third Paragraph – The Power Consumption Reserve
Chart dealt with in ANNEX I shall be elaborated and defined during each year electric power is supplied, pursuant the following rules: 
  

	 	(a)	Up until October 20, 2004, the CONSUMER shall present its consumption estimate for each hourly-seasonal segment, estimating a supply period for the next subsequent
five (5) years. 

	 	(b)	The power requirements to be informed pursuant sub-item (a) must comply with the following terms: 

  

	 	I.	The power requirements for the year of 2005 shall be at least eighty percent of the last amount informed until 2003 by the CONSUMER, said amount having been validated
by CHESF 

  

	 	II.	The power requirements for 2006 shall be at least 85% of the power requirements defined for 2005, pursuant previous condition I. 

  

	 	III.	The power requirements for 2007 to 2009 shall be defined at will by the CONSUMER. 

  

	 	(c)	The annual estimates established in the Second Paragraph of this Clause shall remain within the limits of variation expressed in the table infra, and they shall refer to the
power requirements established in sub-items (a) and (b) above: 

  

					
	 Year of
 supply

	 	 Lower limit
 %

	 	 Upper limit
 %

	 2006
	 	83	 	120
	 2007
	 	70	 	120
	 2008
	 	70	 	120
	 2009
	 	70	 	120

  
 Fourth Paragraph – Any
power load increases or reductions requested by the CONSUMER outside of the terms and conditions envisaged in the third paragraph of this Clause shall be dealt with as exceptions, and they shall be subject to CHESF’s agreement, to
be expressed in writing up to 60 days before the request is made by the CONSUMER. 
  
 Fifth Paragraph – For information purposes only, up until June 30 of each year the CONSUMER shall inform in writing its power requirements estimate for the following five years, starting in January
of the subsequent year, in order to enable CHESF to convey said information to the electric power consumption agencies. 
  
 CHAPTER IV 
  
 OPERATIONAL, TECHNICAL AND COMMERCIAL CHARACTERISTICS 
  
 CLAUSE 6 – The PARTIES shall submit themselves to the POWERGRID PROCEDURES established by ONS and ratified by ANEEL. 

 CLAUSE 7 – The operational conditions pertaining to the physical delivery of electric power and the
requirements regarding the purchase and sale that are the object of this AGREEMENT shall be ruled by the POWERGRID PROCEDURES, and they shall be governed by ANEEL. 
  
 Sole Paragraph – In the event of disturbances or power shutdowns of the TRANSMISSION SYSTEM, CHESF, intending to maintain
the entitlements of the CONSUMER, and at the latter’s discretion, may represent said CONSUMER before ONS in order to define and to determine the responsibilities arising thereof. 
  
 CLAUSE 8 – The ELECTRIC POWER which is the object of this agreement shall be
delivered at the POINT OF DELIVERY in tri-phasic, alternate current, at 60 Hertz frequencies, and under nominal voltage of 230 kV in between phases. 
  
 CLAUSE 9 – The measurement of active and reactive ELECTRIC POWER shall be accomplished by CHESF by means of appropriate measuring devices, of a class
and accuracy equal to or less than 1% (one percent). Any measurements accomplished using measuring devices that may show differences of over 1% (one percent) shall imply in a mandatory correction of the previous bills that may be not precise, up
until a maximum of the last 6 previous bills, the respective differences found being either dunned from or credited to the CONSUMER. 
  
 First Paragraph – If it so wishes, the CONSUMER may monitor the measurements, as well as check their respective calculations. 
  
 Second Paragraph – The measurement device for the consumption, to be used by
CHESF’s in its billing procedure, shall be installed at the sub-station belonging to the CONSUMER and it shall be kept under the latter’s responsibility. 
  
 Third Paragraph – It is up to the CONSUMER to design and to install under its own responsibility the corrective equipment
which it may need to improve the power consumption factor. 
  
 CLAUSE 10
– The CONSUMER shall pay CHESF monthly the tariff in effect for each megawatt-hour for each BILLING CYCLE, abiding by the hourly-seasonal tariff structure defined and published by ANEEL. 
  
 CLAUSE 11 – The electric power tariffs shall be determined by ANEEL. 

 CHAPTER V 
  

REGARDING BILLING AND PAYMENT OF THE BILL 
  
 CLAUSE 12 – The consumption readings and the bills for the power supply contracted herein shall be accomplished every thirty (30) day intervals. The due dates
for each monthly Invoice/Power Bill shall be expressed therein, abiding by the minimum time frame envisaged in the regulations. 
  
 CLAUSE 13 – The power requirements equivalent to the Power Requirement Reservations envisaged in the ANNEX to this AGREEMENT shall contain the minimum billing
amounts, even if no corresponding consumption took place during the supply periods listed on the POWER CONSUMPTION RESERVATION CHART defined in the aforementioned CLAUSE. 
  
 Sole Paragraph – Any changes that may eventually be agreed to between the parties in the amounts and on the dates defined for
the start of the effectiveness of the power requirements contracted herein shall be considered as being the minimum amounts for billing purposes. 
  
 CLAUSE 14 – The hourly-seasonal power consumption for each segment, billed monthly to the CONSUMER shall be billed for whatever amount is greater: 

 
 1- The greatest consumption, determined through a measurement accomplished within a 15-
(fifteen) minute interval for each hourly-seasonal segment, during the monthly supply period corresponding to the billing; 
  
 2- The power consumption contracted for the supply period. 
  
 First Paragraph – The paid up portion of the consumption, referring to each hourly-seasonal segment which is greater than the amount of the power requirements
reserved by the CONSUMER for the same segment, shall be applied to the tariff in excess of the current tariff. If the excess demand portion is within the tolerance limit established by the Granting Authority, which is currently up to five (5%) of
the reserved power requirements, the excess tariff shall not apply, there being used the respective hourly-seasonal tariff instead. 
  
 Second Paragraph – The billing corresponding to the reactive electric power and the reactive power requirements, established to exist by means of appropriate
measurements, and which is in excess of the amounts allowed by the reference electric power factor established by the Granting Authority shall be computed by using the criteria made available by the laws in effect. 

 CLAUSE 15 – Billing shall be accomplished on a monthly basis according to the periods, amounts and tariffs
referred to in this AGREEMENT, and it shall be the object of a sole Invoice/Electric Power Bill, pursuant the provisions in Clause 16. 
  
 Sole Paragraph – The billable electric power consumption for each CONTRACTUAL MONTH shall correspond to the ELECTRIC POWER measured as having been used.

  
 CLAUSE 16 – The Invoice/Electric Power Bill shall be presented by
CHESF to the CONSUMER at least five (5) business days prior to its maturity, which shall be stated on the bill. 
  
 First Paragraph – In case the limit due date does not fall on a business day in effect in Maceió, in the state of Alagoas, the payment may be made on
the subsequent first business day. 
  
 Second Paragraph - On the first
business day subsequent to the month of supply, CHESF shall send, and the CUSTOMER shall accept a copy of the original collection document either through fax or through another safe electronic means as agreed between the
PARTIES, with the purpose to render the payment process faster, and CHESF pledges to forward the initial collection document until 12:00 hours of the maturity date of the Invoice/Electric Power Bill. 
  
 Third Paragraph – In case the original collection document is presented at any
time after the due date established in the previous paragraph for any reasons that cannot be blamed on the CONSUMER, the due date of the Invoice/Electric Power Bill affected by the delay, and pertaining to said collection document shall be
automatically extended by the same number of days as those of the delays. 
  
 Fourth Paragraph – The payment shall be deposited into a bank account kept at a banking institution defined by CHESF, which may also select to issue bills of acceptance which shall be retired by means of bank payments.

  
 CLAUSE 17 – If there are any discrepancies between the amounts
listed on the Invoice/Electric Power Bill, the CONSUMER may request CHESF to revise the controversial portion of the bill, and to make the appropriate payment until the due date of the full amount. 
  
 First Paragraph – In case the discrepancy derives from a mistake in billing, and
the request is found to hold water, CHESF pledges to issue a new Invoice/Electric Power Bill until one (1) days after receiving a request for revision. 

 Second Paragraph – The provisions in Clause 19 shall apply for any amounts being contested that may be later
agreed on, or which may get defined as being the amounts due, except for the fine. Interest and adjustment for inflation shall be computed as of the due date of the parcel being contested and until the date of its settlement, excluding the day of
settlement itself. 
  
 Third Paragraph – If the discrepancies
regarding the amounts billed remain unresolved for a period in excess of thirty (30) days, the PARTIES shall proceed as determined in the Clauses of Chapter IX. 
  
 CHAPTER VI 
  
 REGARDING PAYMENT ARREARS AND ITS CONSEQUENCES 
  
 CLAUSE 18 – Arrears are said to exist when the CONSUMER fails to settle any amounts due on their respective due dates. 
  
 CLAUSE 19 – In case of arrears by the CONSUMER to effect the payment of
any Invoice/Electric Power Bill issued predicated on this AGREEMENT, the amounts due shall be adjusted for inflation pro rata die according to the variation of the IGPM index determined by Fundação Getúlio Vargas, or by
another index that may come to replace it in case the former is extinguished, or by any index that may be agreed on between the PARTIES, and the following arrears increases shall be levied over the amounts thus adjusted: 
  
 a) a fine of 2 % (two percent) levied over the amount of the liability; 
  
 b) arrears interest of one (1%) percent per month computed pro rata die over the amount of
the liability during the period encompassed between the date of the arrears and the effective date of payment, excluding the latter date. 
  
 First Paragraph – The arrears increases envisaged in the preceeding sub-items shall be levied over the amounts in arrears, and they shall be adjusted for
inflation by the pro rata die variation of the IGPM, or, in case the latter is extinguished, by another index having a similar function that may come to replace, and which has been previously agreed on between the PARTIES. The arrears
interest referred to by this paragraph shall be computed predicated on the variation of the IGPM index belated one month in regards to the due date of the Invoice/Electric Power Bill. 
  
 Second Paragraph – For the effects of the adjustment for inflation referred to in the previous paragraph, in case the payment in
arrears is made up to or before thirty (30) days, any negative variation of the IGPM shall be considered as being null. 

 CHAPTER VI 
  
 ACTS OF GOD, OF FORCE MAJEURE OR RATIONING 
  
 CLAUSE 20 – In case one of the PARTIES fails to accomplish any of its obligations as consequence of an Act of God or of
Force Majeure, as disposed by art. 393 of the Brazilian Civil Code, this AGREEMENT shall remain in effect, albeit the PARTY affected by the event shall not be held accountable for the consequences arising from the non accomplishment of
its obligation during the term of duration of the event, and prorated to its effects, and the counteraction of the affected PARTY shall be held in abeyance for a like period. 
  
 Sole Paragraph – the PARTY affected by any event that may be characterized as being an Act of God or an event of Force
Majeure shall inform the other of the circumstances surrounding the event in no later than in five days, explaining the nature of the event, the time expected to accomplish the obligation being affected, and all other pertinent information, and it
shall regularly refresh said information. 
  
 CLAUSE 21 – In case any
hydrological conditions occur that may be unfavorable to the generation of electric power, this shall not exempt CHESF from having to accomplish the obligations envisaged in this AGREEMENT except as disposed in Clause 22. 

 
 CLAUSE 22 – In case of rationing decreed by the Granting Authority, the
contractual obligations shall be ruled by the laws in effect. 
  
 CHAPTER VII 
  
 REGARDING TERMINATION

  
 CLAUSE 23 – This AGREEMENT shall be terminated pursuant
to law by the PARTY complying with its contractual obligations in case any of the following hypotheses comes about: 
  

	(a)	In case bankruptcy, composition with creditors, dissolution of the judicial or extra judicial liquidation of the other PARTY are decreed; 

  

	(b)	In case the other PARTY has any legal, government-granted or regulatory authorization revoked, said authorization being essential for the accomplishment of the activities or
the obligations envisaged in this AGREEMENT, including but not being limited to the concession of the public power generation services; 

  

	(c)	In case of the default of the other obligations envisaged in this AGREEMENT. 

	(d)	Through the initiative of the CONSUMER, provided CHESF is informed of this action in writing at least eighteen (18) days in advance counted as of the termination of
the respective ongoing supply period extending as of the date of denunciation, irrespectively of being dry or wet, as shown in the annexed Chart I or in its updates; 

  

	(e)	At any time, through the unilateral representation by the party prejudiced, if there is an infraction of any norm ruling the general electric power usage conditions, or in case of
non compliance of this AGREEMENT, unless an Act of God or an Event of Force Majeure has taken place (article 393, sole paragraph of the Brazilian Civil Code). 

  
 First Paragraph – Whenever this AGREEMENT or the official regulations regarding the supply of electric power so allow,
termination shall be replaced by an interim and conditional abeyance of supply, until the event causing the suspensive measure is overcome. 
  
 Second Paragraph – Termination shall be formal, and it shall be informed in writing to the appropriate regulatory entities so that they may take whatever
measures are needed. 
  
 CLAUSE 24 – In case termination takes place
as arising from an Act of God or of Force Majeure, and provided the PARTIES are not in arrears, said parties are released from having to accomplish this AGREEMENT except for the obligations that are supervening to said obligations.

  
 CLAUSE 25 – In case of the termination envisaged in this
AGREEMENT, no compensation or refund shall be due by one PARTY to the other, except for the compensation for the electric power already supplied and its possible ancillary services. 
  
 Sole Paragraph – The liability of each one of the PARTIES within the
context of this AGREEMENT shall in any case be limited to the amount of the power supply already accomplished, and none of the PARTIES shall undertake any obligation to indemnify the other for any resulting damages, including stoppage
of profits, moral damages or any other type of indemnity of the same nature. 

 CHAPTER VIII 
  
 GUARANTEE AND RELEASE FROM THE OBLIGATION OF HAVING TO MAINTAIN AN ELECTRIC POWER RESERVE 
  
 CLAUSE 26 – Complying with provisions of Clauses 14 and 15 of this
AGREEMENT, if the CONSUMER goes into arrears regarding the payment of more than one bill within a period of twelve months, CHESF shall be entitled to entail the continuity of the supply to the providing of a guarantee by the
CONSUMER. 
  
 First Paragraph – In case the provisions in the
header of this Clause come about, and within fifteen (15) days counted as of the service of notice, the CONSUMER shall provide a bank surety letter or any other guaranty acceptable to CHESF, said guarantee extending for twelve months,
and being of an amount corresponding to the last two bills. 
  
 Second
Paragraph – The CONSUMER shall be released from the guarantee at the end of the 12 month period without going into default. 
  
 Third Paragraph – In case the CONSUMER fails to pay its monthly bills on their respective due dates at a place indicated by CHESF, the latter
shall be released by law from having to maintain the Reserves of Electric Power as determined by this AGREEMENT or to go on supplying said electric power as determined herein, and it may go ahead with the interruption of the supply of
electric power pursuant to law. 
  
 Fourth Paragraph – Taking into
account the fact that the CONSUMER is allowed to acquire electric power in a free condition and in addition to the amounts established in this AGREEMENT, and as disposed in this Clause, it is agreed forthwith between the PARTIES that
the interruption of supply established in the previous Paragraph shall correspond to the full power load. 
  
 Fifth Paragraph – In compliance with the aforementioned Third Paragraph, only after the full liability (if any) has been paid off, including taxes, arrears increases, additional payment and all other
lawful comminations, the power supply shall be restored for the periods and as of the date that the parties may have stipulated in writing, and said adjustment shall serve as an addendum to this AGREEMENT in case of abeyance or a new agreement if
the current AGREEMENT has been terminated. 
  
 CHAPTER IX

  
 RESOLVING CONTROVERSIES 
  
 CLAUSE 27 – A controversy begins with a CONTROVERSY SERVICE OF NOTICE served by
one PARTY to the other. 
  
 CLAUSE 28 – In case there are
controversies arising from this AGREEMENT, the PARTIES shall attempt to resolve the controversy in an amicable fashion within fifteen (15) days counted as of the service of the CONTROVERSY NOTICE. 

 CLAUSE 29 – If it is not possible to resolve the controversy pursuant the previous Clause, the PARTIES
if they so agree, may submit the controversy to ANEEL’s mediation, according to specific, applicable norms. 
  
 CLAUSE 30 – If the controversy cannot be resolved as determined in the previous Clauses, the PARTIES may resort to judicial means in order to
definitely redeem said controversy. 
  
 CHAPTER X

  
 GENERAL PROVISIONS 
  
 CLAUSE 31 – In case the CONSUMER acquires said electric power in a free
status, this AGREEMENT shall have priority in the allocation of the electric power consumed. The electric power referentials regarding this AGREEMENT shall be computed predicated on the load factor to be agreed between the
PARTIES. 
  
 CLAUSE 32 – The implementation of the
CONSUMER’s own generators, used together with those of the system must have been previously informed to CHESF.  
  
 CLAUSE 33 – For all legal purposes this AGREEEMENT is assigned the value of R$ 423.800.000,00 (four hundred and twenty-three million, eight hundred
thousand reais). 
  
 CLAUSE 34 – This AGREEMENT may not be
amended, nor shall any waivers be accepted as to its provisions except when accomplished in writing by the PARTIES in compliance with applicable laws. 
  
 CLAUSE 35 – No delays or forebearance by any of the PARTIES regarding the execution of any entitlement, power, privilege or resource contained in this
AGREEMENT shall be construed as capable of prejudicing said entitlement, power, privilege or resource, nor shall it be construed as their waver, or novation of any obligation(s). 
  
 CLAUSE 36 – Any notice or communication made by one PARTY to the other in regards to this AGREEMENT shall be
accomplished in Portuguese, and it may be delivered or sent by certified mail, facsimile or by electronic means, and in any case with a formal proof of receipt, to the addresses mentioned by the PARTIES in the preamble of this instrument, or
to any addresses that the PARTIES may designate in the future. 
  
 CLAUSE 37 – This AGREEMENT is entailed to the legislation and regulation currently in effect and supervening to it, and, in regards to the purchase and sale of electric 

 
power it replaces the Electric Power Supply Reserve Agreement celebrated between the PARTIES on June 02, 1998. 
  
 CLAUSE 38 – The TERM OF COMMITMENT FOR THE TRANSFER OF ADDITIONAL ELECTRIC POWER
RESERVE, as contained in ANNEX II, is made an appurtenant of this AGREEMENT. 
  
 CLAUSE 39 – The Courts of the Judicial District of Recife, in the State of Pernambuco are elected to redeem any quandaries or doubts arising from this AGREEMENT and/or related to it, with the express waiver of any other
even if more privileged. 
  
 AND, IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED
THIS INSTRUMENT IN TWO (02) COUNTERPARTS, EACH CONSIDERED TO BE AN ORIGINAL, IN THE PRESENCE OF THE TWO UNDERSIGNED WITNESSES. 
  

					
	 Recife, October 20, 2004.
	 	 	 	 
			
	  	 	 	 	  
	 Dilton da Conti Oliveira
	 	 	 	 Mozart Bandeira Arnaud

	 Director-President
	 	 	 	 Operations Director

	 CPF: 018.205.404-72
	 	 	 	 CPF: 137.474.444-15

  

					
	CONSUMER: BRASKEM S.A. – UNIB - BA	 	 	 	 
			
	  	 	 	 	  
	 Bernardo Afonso de Almeida
	 	 	 	 Ricardo de Maya Gomes Simões

	 Gradin
	 	 	 	 Electric Power Manager/Attorney

	 Director
	 	 	 	 in Fact CPF: 382.605.654-04

	 CPF: 316.183.245-00
	 	 	 	 

  

					
	Witnesses:	 	 	 	 
			
	  	 	 	 	  
	 Manoel Carnauba Cortez
	 	 	 	 José Carlos de Miranda Farias

	 CPF: 209.049.084-53
	 	 	 	 CPF: 090.244-174-49

 ANNEX I 
  
 ELECTRIC POWER RESERVE CHART 
  

									
	 Supply Period

	 	 Period of the Year

	 	 ELECTRIC POWER
 RESERVES
 (amounts in kW)

	 item

	 	 Month/year

	 	 	 Peak

	 	 Off-peak

	 1
	 	Nov/2004	 	Dry	 	75,000	 	135,000
	 2
	 	Dec/2004	 	Wet	 	84,000	 	135,000
	 3
	 	Jan to Apr/2005	 	Wet	 	63,000	 	138,000
	 4
	 	May to Nov/2005	 	Dry	 	63,000	 	138,000
	 5
	 	Dec/2005	 	Wet	 	63,000	 	138,000
	 6
	 	Jan to Apr/2006	 	Wet	 	83,000	 	150,000
	 7
	 	May to Nov/2006	 	Dry	 	83,000	 	150,000
	 8
	 	Dec/2006	 	Wet	 	83,000	 	150,000

									
	 9
	 	Jan to Apr/2007	 	Wet	 	85,000	 	150,000
	 10
	 	May to Nov/2007	 	Dry	 	85,000	 	150,000
	 11
	 	Dec/2007	 	Wet	 	85,000	 	150,000
	 12
	 	Jan to Apr/2008	 	Wet	 	85,000	 	150,000
	 13
	 	May to Nov/2008	 	Dry	 	85,000	 	150,000
	 14
	 	Dec/2008	 	Wet	 	85,000	 	150,000
	 15
	 	Jan to Apr/2009	 	Wet	 	85,000	 	150,000
	 16
	 	May to Nov/2009	 	Dry	 	85,000	 	150,000
	 17
	 	Dec/2009	 	Wet	 	85,000	 	150,000

 ANNEX II 
  
 TERM OF COMMITMENT FOR THE TRANSFER OF ADDITIONAL ELECTRIC POWER RESERVE CELEBRATED BETWEEN BRASKEM S.A’s CONSUMER UNITS WITH CHESF’s AGREEMENT.

  
 By this instrument, and hereinafter simply referred to jointly as
“CONSUMERS”, the PARTIES:  
  

	•	 	BRASKEM S.A. - UNIB-BA, located at Rua Eteno, n° 1561, in the Municipality of Camaçari, in the State of Bahia, complying with the 230kV voltage supplied by the
basic powergrid, enrolled before the CNPJ/MF under no. 42.150.391/0001-70, represented herein pursuant is Social Bylaws by its Directors who have been described at the end and who have signed this agreement; 

  

	•	 	BRASKEM S.A. - UCS/MVC/PVC-BA, located Rua Oxigênio, n° 765, within the area of the Basic Complex, in the Municipality of Camaçari, in the State of
Bahia, complying with the 230kV voltage supplied by the basic powergrid, enrolled before the CNPJ/MF under no. 42.150.391/0018-19, represented herein pursuant is Social Bylaws by its Directors who have been described at the end and who have signed
this agreement; 

  

	•	 	BRASKEM S.A. - UCS-AL, located at Avenida Assis Chateaubriand, n° 5.260, Ponta! da Barra, in the Municipality of Maceió, in the State of Alagoas, complying
with the 230kV voltage supplied by the basic powergrid, enrolled before the CNPJ/MF under no. 42.150.391/0022-03, represented herein pursuant is Social Bylaws by its Directors who have been described at the end and who have signed this agreement;

  
 And the CONSENTING PARTY, 
  
 COMPANHIA HIDRO ELÉTRICA DO SÃO FRANCISCO — CHESF, a public
services concessionaire engaged in the supply of electric power, headquartered in the city of Recife, in the state of Pernambuco, at Rua Delmiro Gouveia, n° 333, Bairro do Bongi, enrolled before the CNPJ of the Ministry of Finance under no.
33.541.368/0001-16, and enrolled before the state tax office under no. 18.1.001.0005584-6, hereinafter simply referred to as “CHESF” and represented herein pursuant its Social Bylaws by its Directors, described and undersigned at
the end of the agreement; and 

 WHEREAS 
  

	 	•	 	on October 20, 2004, CHESF has signed an Electric Power Purchase and Sale Agreement with each of the CONSUMERS; and 

  

	 	•	 	the CONSUMERS are interested in signing a TERM OF COMMITMENT to set up a specific treatment for an additional portion pertaining to an ELECTRIC POWER RESERVE with
CHESF’s agreement, and in face of the previousness required by the Electric Power Purchase and sale Agreements for the hiring of its power loads until the year 2010, and the difficulty in envisaging that the consumer unit may be allocated
this additional electric power load, the PARTIES  

  
 have
decided to celebrate this TERM OF COMMITMENT FOR THE TRANSFER OF AN ADDITIONAL ELECTRIC POWER RESERVE, pursuant the following terms and conditions: 
  
 FIRST CLAUSE – For all contractual purposes, the intent of this TERM OF COMMITMENT is to establish the amount and the terms for the allocation of an
additional electric power supply share regarding the reservation of electric power established in the Electric Power Purchase and Sale Agreements. 
  
 SECOND CLAUSE – The allocation referred to in the First Clause shall be accomplished without prejudice to the criteria and the conditions established in
Clauses 5 and 13 of the Electric Power Purchase and Sale Agreements all through the years of 2007, 2008, 2009 and 2010, pursuant the forecast to be informed by the CONSUMERS for years 2006, 2007, 2008 and 2009. 
  
 THIRD CLAUSE –An additional share of the total electric power reserve shall be
allowed, as determined in the chart annexed to this TERM OF COMMITMENT, which shall be allocated to the CONSUMERS units at their discretion. 
  
 Sole Paragraph –Any communication by the CONSUMERS regarding the allocation of the additional share to the consumer units must be forwarded to
CHESF each year so as to coincide with the date envisaged in the Second Paragraph of CLAUSE 5 of the Electric Power Purchase and Sale Agreements. 
  

FOURTH CLAUSE – All the conditions envisaged in the Electric Power Purchase and Sale Agreements shall remain unchanged, and they shall remain fully in
force throughout their term of effectiveness. 

 And, in witness whereof, the parties have celebrated this ELECTRIC POWER RESERVE TRANSFER COMMITMENT in two (2)
counterparts, each considered to be an original, in the presence of the two undersigned witnesses. 
  
 Recife, October 20, 2004 
  

					
	CONSUMER: BRASKEM S.A. – INIB - BA	 	 	 	 
			
	  	 	 	 	  
	 Bernardo Afonso de Almeida Gradin
	 	 	 	 Ricardo de Maya Gomes Simões

	 Director
	 	 	 	 Power Manager / Attorney in Fact

	 CPF: 316.183.245-00
	 	 	 	 CPF: 382.605.654-04

  

					
	CONSUMER: BRASKEM S.A. – UCS/MVC/PVC-BA	 	 	 	 
			
	  	 	 	 	  
	 Roberto Lopes Pontes Simões
	 	 	 	 Ricardo de Maya Gomes Simões

	 Director
	 	 	 	 Power Manager / Attorney in Fact

	 CPF: 141.330.245-91
	 	 	 	 CPF: 382.605.654-04

  

					
	CONSUMER: BRASKEM S.A. – UCS-AL	 	 	 	 
			
	  	 	 	 	  
	 Roberto Lopes Pontes Simões
	 	 	 	 Ricardo de Maya Gomes Simões

	 Director
	 	 	 	 Power Manager / Attorney in Fact

	 CPF: 141.330.245-91
	 	 	 	 CPF: 382.605.654-04

  

					
	CONSENTING PARTY: Companhia Hidro Elétrica do São Francisco - CHESF
			
	  	 	 	 	  
	 Dilton da Conti Oliveira
	 	 	 	 Mozart Bandeira Arnaud

	 Director-President
	 	 	 	 Operations Director

	 CPF: 018.205.404-72
	 	 	 	 CPF: 137.474.444-15

  

					
	Witnesses:	 	 	 	 
			
	  	 	 	 	  
	 Manoel Carnaúba Cortez
	 	 	 	 José Carlos de Miranda Farias

	 CPF: 209.049.084-53
	 	 	 	 CPF: 090.244-174-49

 ANNEX I 
  
 ELECTRIC POWER RESERVE CHART 
  

									
	 Period of Supply

	 	 Period of the Year

	 	 POWER RESERVE (amounts in kW)

	 item

	 	 Month/Year

	 	 	 Peak

	 	 Off-peak

	 1
	 	Jan to Apr/2005	 	Wet	 	—  	 	—  
	 2
	 	May to Nov/2005	 	Dry	 	—  	 	—  
	 3
	 	Dec/2005	 	Wet	 	—  	 	—  
	 4
	 	Jan to Apr/2006	 	Wet	 	—  	 	—  
	 5
	 	May to Nov/2006	 	Dry	 	—  	 	—  
	 6
	 	Dec/2006	 	Wet	 	—  	 	—  
	 7
	 	Jan to Apr/2007	 	Wet	 	16,000	 	16,000

									
	 8
	 	May to Nov/2007	 	Dry	 	16,000	 	16,000
	 9
	 	Dec/2007	 	Wet	 	16,000	 	16,000
	 10
	 	Jan to Apr /2008	 	Wet	 	42,000	 	42,000
	 11
	 	May to Nov/2008	 	Dry	 	42,000	 	42,000
	 12
	 	Dec/2008	 	Wet	 	42,000	 	42,000
	 13
	 	Jan to Apr/2009	 	Wet	 	50,000	 	50,000
	 14
	 	May to Nov/2009	 	Dry	 	50,000	 	50,000
	 15
	 	Dec/2009	 	Wet	 	50,000	 	50,000
	 16
	 	Jan to Apr/2010	 	Wet	 	50,000	 	50,000
	 17
	 	May to Nov/2004	 	Dry	 	50,000	 	50,000
	 18
	 	Dec/2010	 	Wet	 	50,000	 	50,000

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