EXHIBIT 10.20 -- FORM OF KEY EMPLOYEE STOCK AGREEMENT

Exhibit 10.20

KEY EMPLOYEE PHANTOM STOCK AGREEMENT

This Key Employee Phantom Stock Agreement (this “Agreement”) is made this      day of               between Legg Mason, Inc. (“Legg”) and                              (“Employee”), but intended to be effective as of the date of the approval of transfer to Legg Mason Wood Walker, Incorporated (“LMWW”) of Employee’s registration with the National Association of Securities Dealers, Inc., the New York Stock Exchange, Inc. and the state(s) in which Employee is licensed (the “Effective Date”).

WHEREAS , LMWW is a wholly owned subsidiary of Legg;

WHEREAS , Employee has accepted employment by LMWW; and

WHEREAS , in consideration of Employee accepting employment by LMWW, Legg has agreed to grant Employee certain deferred compensation, upon the terms and conditions contained herein, under the Legg Mason, Inc. 1996 Equity Incentive Plan, as amended from time to time (the “Plan”),

Now therefore, Legg and Employee agree as follows:

1. Certain Monetary Compensation

In consideration of Employee’s employment with LMWW, Legg shall be obligated to pay Employee certain compensation under the Plan in an amount to be determined pursuant to the terms and conditions of this Agreement. This Agreement is subject to all applicable terms and conditions of the Plan.

2. Phantom Share Units

Legg and Employee agree that the compensation to be paid by Legg to Employee under the Plan shall not be paid currently but shall be deferred, and as deferred, shall be deemed

converted into units that are economically equivalent to, but are not actual, shares of Legg Common Stock, $.10 par value per share (“Common Stock”). These “phantom” shares of Common Stock are referred to as “Share Units.”

3. Key Employee Phantom Stock Account

On the Effective Date, Legg will establish a Key Employee Phantom Stock Account (the “Account”) on its books and records for the benefit of Employee wherein Legg will credit to such Account the amount of $                  as certain deferred compensation (hereafter the “Compensation Credit”) to be converted into Share Units. The number of Share Units into which such Compensation Credit shall be converted (calculated to four decimal places) will be determined as of the fourth trading day after the date the Compensation Credit is made and will be equal to the amount of the Compensation Credit divided by the Fair Market Value of a share of Common Stock, determined as set forth below.

Fair market value of a share of Common Stock will equal the five day average of the closing prices on the principal exchange on which Common Stock is traded for the date on which the price is being determined (i.e., the Effective Date, the Dividend Payment Date or the Distribution Valuation Date) and the four trading days immediately following the applicable valuation date, or, if Common Stock is not then traded on an exchange, such amount as is determined by the Compensation Committee of the Legg Mason, Inc. Board of Directors (the “Committee”) using any reasonable method of valuation (“Fair Market Value”). Any change in the trading price of Common Stock during the five day pricing period will be the sole risk of the Employee.

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4. Adjustment to Account Upon Dividend by Legg

If, prior to the date Employee receives the final distribution of amounts in his or her Account from Legg pursuant to this Agreement (the “Payment Date”), Legg pays any dividend (other than in Common Stock) upon its Common Stock, or makes any distribution (other than in Common Stock) with respect thereto, Employee’s Account will be credited with additional Share Units, equivalent to that number of Share Units determined by dividing the amount of the dividend or other distribution allocable to the Share Units already credited to the Account as of the record date for the dividend or distribution, by 95% of the Fair Market Value of a share of Common Stock on the payment date for the dividend or distribution (the “Dividend Payment Date”). Amounts to be credited under this Section 4 will be credited as soon as administratively practicable after the applicable Dividend Payment Date.

In the event that, prior to the Payment Date, the number of outstanding shares of Common Stock is changed by reason of a stock split, stock dividend, combination of shares, reorganization or recapitalization, the number of Share Units then credited to Employee’s Account will be appropriately adjusted so as to reflect such change (based upon the best estimate of Legg as to relative values).

Nothing contained in this Agreement shall confer or be construed as conferring upon Employee any rights as a stockholder of Legg or any right to have access to the books and records of Legg or any subsidiary.

5. Vesting Schedule of Share Units

Employee shall vest in the Share Units credited to Employee’s Account pursuant to the following vesting schedule as long as Employee is continuously employed in good standing by LMWW for the following elapsed periods:

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Notwithstanding the foregoing, all Share Units will automatically vest on the date of closing of the transactions contemplated by the Transaction Agreement dated as of June 23, 2005, as amended, between Legg and Citigroup Inc.

For purposes of determining Employee’s Vested Portion of Share Units, Employee shall not be entitled to receive any partial or pro-rated credit for having been employed by LMWW for any partial twelve month period specified in the table above. If Employee’s employment with LMWW terminates for any reason other than death or “Disability,” as defined below, whether involuntary or voluntary and for whatever cause or no cause, Employee shall forfeit any rights to, and shall have no right or claim to, any Share Units which have not vested pursuant to the above Vesting Schedule. In the event Employee’s employment with LMWW terminates as a result of Employee’s death or “Disability,” as defined below, all Share Units shall be immediately vested and payment shall be made as described in Paragraph 9.

For purposes of this Agreement, “Disability” shall mean a medically determinable physical or mental impairment which, as determined by the Committee using such criteria as it

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establishes in its sole and absolute discretion, will prevent Employee from performing his usual duties or any other similar duties in connection with his employment by LMWW for a period of at least 12 months.

6. Assignment of Benefits

No amount payable, or other right or benefit, under this Agreement or the Plan, will, except as otherwise specifically provided by this Agreement or by applicable law, be subject to sale, assignment, transfer, pledge, encumbrance, attachment, garnishment or levy prior to distribution to Employee. Since the Plan, and awards under the Plan including this Agreement, is intended to be a non-qualified, unfunded plan not subject to the Employee Retirement Income Security Act of 1974, as amended, payments under this Agreement will not be subject to the provisions of any qualified domestic relations order (as defined under the Internal Revenue Code) applicable to an Employee’s deferred compensation benefit.

Notwithstanding any provision herein to the contrary, Employee acknowledges and agrees that any distribution payable under this Agreement may be used at the discretion of Legg to offset any debt owed by Employee to Legg or LMWW at the date such distribution would otherwise be paid. Employee expressly authorizes Legg to withhold distributions payable under this Agreement to offset any debts or other liabilities owed by Employee to Legg or LMWW. If Legg is aware of any errors, loans outstanding or liabilities of Employee, Legg may withhold distributions under this Agreement until such time as the liabilities are satisfied or Legg has determined that a liability no longer exists.

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In addition to the foregoing, Employee expressly agrees that if at the time any amount is payable to Employee hereunder, Employee has outstanding any debts, or other liabilities or obligations arising from errors or otherwise arising in connection with Employee’s employment with LMWW or Employee acting as a financial advisor on behalf of LMWW, to Legg or LMWW, then Legg may credit all or any portion of the shares of Common Stock then payable to Employee under this Agreement to any brokerage account of Employee at LMWW (regardless of whether Employee is the sole or a joint owner of the account), and LMWW may immediately cause such shares of Common Stock to be sold from such account and the proceeds applied first to pay any required withholding taxes (including payroll taxes) and the remainder paid over to Legg or LMWW to satisfy such debts or other liabilities or obligations. By signing this Agreement, Employee authorizes Legg and LMWW to effect all of the transactions described above through any account owned by Employee at LMWW (regardless of whether Employee is the sole or a joint owner of the account), and, if necessary, to open a brokerage account at LMWW in the name and on behalf of Employee to effect such transactions. The timing of any such crediting and sale will be as determined to be reasonable by Legg and LMWW, in their sole discretion, and the Employee acknowledges that all risks of movements in the price of Common Stock before or after the dates of such crediting and sale shall be borne solely by Employee.

7. Unfunded Nature of the Agreement

Legg will not be required to purchase, hold or dispose of any investments with respect to amounts credited to the Account of Employee, including Compensation Credits or Share Units. Employee has no interest in the Account or in any investments Legg may purchase with such amounts, except as a general, unsecured creditor of Legg.

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This Agreement at all times shall be entirely unfunded. The Employee’s Account is merely a record for measuring and determining the amount of the potential benefits to be paid by Legg to, or with respect to, Employee under this Agreement, and such Account shall be established solely for such bookkeeping purposes. Legg shall not be required to segregate any funds or other assets to be used for payment of benefits under this Agreement. The Employee’s Account shall not be, or be consi