Exhibit 10.2
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 di
