LEGG MASON INC
REVENUE SHARE AGREEMENT FOR ROYCE
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<FILENAME>r10qrevagr-1001.txt
<DESCRIPTION>REVENUE SHARE AGREEMENT FOR ROYCE
<TEXT>
							       Exhibit A
			   REVENUE SHARING AGREEMENT

				BY AND AMONG

			      LEGG MASON, INC.,

			   ROYCE & ASSOCIATES, INC.,

				     AND

		       THE PRINCIPAL OFFICERS NAMED BELOW

		THIS REVENUE SHARING AGREEMENT ("Agreement") is made and
entered into as of July 16, 2001, by and among Legg Mason,
Inc., a Maryland corporation ("Legg Mason"); Royce &
Associates, Inc., a New York corporation ("R&A," and together
with all its existing and future subsidiaries (each, a
"Subsidiary" and, collectively, the "Subsidiaries") "Royce");
Charles M. Royce ("CMR"); W. Whitney George; and John D.
Diederich, who are the principal officers of R&A
(collectively, the "Principal Officers.")

		WHEREAS, pursuant to the Stock Purchase Agreement dated as
of July 16, 2001, by and among Legg Mason, R&A, the shareholders of
R&A, and Royce Management Company ("RMC") (the "Stock Purchase
Agreement"), at the Closing (as defined in the Stock Purchase
Agreement) (the "Closing"), Legg Mason will acquire from the
shareholders of R&A all of the outstanding capital stock of
R&A (the "Transaction");

		WHEREAS, prior to the Closing, all of the assets and
liabilities of RMC will be transferred to a limited liability company
("New RMC") that is a wholly owned subsidiary of R&A;

		WHEREAS, prior to the Closing, certain employees of Royce
will enter into agreements with New RMC relating to the entitlement of
such employees to participate in carried interests received by New RMC
from certain limited partnerships for which New RMC acts as the general
partner;

		WHEREAS, the parties desire to afford the management of
R&A discretion with respect to the day-to-day operations of Royce
in light of existing management's demonstrated ability to manage
Royce profitably; and

		WHEREAS, the parties hereto desire to enter into certain
agreements regarding revenues, expenses and management of Royce deemed
necessary by the parties to foster the continued growth and expansion of
Royce's business, such agreements to become effective as of, and subject
to the occurrence of, the Closing; and

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

1.      Revenues.

	(a)     Definition of Gross Revenues.   The term "Gross Revenues"
shall mean, for any period, the consolidated gross revenues of R&A and
its Subsidiaries (less any portion thereof attributable to any minority
equity interest in a Subsidiary held by a third party other than an
employee of R&A or any of its Subsidiaries) from whatever source
derived, calculated on an accrual basis in accordance with generally
accepted accounting principles consistently applied ("GAAP") (but also
shall include (X) the amount by which any judgments, awards, settlement
amounts, indemnification payments or insurance proceeds received exceed
any Company Expenditures incurred or made in respect of the events
giving rise to any such judgment, award, settlement
amount,indemnification payment or insurance proceeds, and (Y) all annual
gross revenues of New RMC constituting "carried interests" and other
performance-related fees); provided, however, that Gross Revenues shall
not include all or any proceeds received by R&A during such period from
any transaction or series of transactions pursuant to which:  (A) R&A
undergoes a change of control constituting an "assignment" of its
investment advisory contracts within the meaning of the Investment
Company Act of 1940 (which change of control does not result from a
change of control of Legg Mason), or (B) R&A ceases to serve
(directly or through a Subsidiary) as the primary investment adviser to
substantially all of the investment management clients of Royce existing
immediately following the Closing, which proceeds shall be distributed
in their entirety to Legg Mason; and, provided, further, that Gross
Revenues shall not include (i) the amount of any judgments, awards,
settlement amounts,indemnification payments (other than those
distributions and other payments described in clause (iii) of this
proviso, which shall be treated in the manner provided for in clause
(iii) below) or insurance proceeds up to the amount that is the equal to
the Company Expenditures incurred or made in respect of the events
giving rise to such judgment, award, settlement amount, indemnification
payment or insurance proceeds (and such amounts shall be added directly
to Retained Operating Revenues in their entirety for the fiscal quarter
in which such judgment, award, settlement amount, indemnification
payment, or insurance proceeds is recorded in accordance with GAAP, and
shall not be included in calculating the amount of any Legg Mason
Distribution); (ii) any fees or reimbursements paid pursuant to a plan
established under Rule 12b-1 under the Investment Company Act of 1940
("Rule 12b-1 Fees"), or any front-end or back-end sales loads or other
similar sales charges ("Sales Charges"), in either such case received
by Royce from any registered investment company or its shareholders, to
the extent that such 12b-1 Fees or Sales Charges are offset by payments
to third parties in respect of distribution and/or shareholder
servicing (and that portion of such fees and reimbursements shall be
added directly to Retained Operating Revenues in its entirety for the
fiscal quarter in which such third-party payments are incurred or made
and utilized to pay or provide for such third-party payments, and shall
not be included in calculating the amount of any Legg Mason
Distribution); or (iii) the amount of any capital contribution made to
R&A by Legg Mason pursuant to Section 1.3(e) of the Stock Purchase
Agreement following Legg Mason having received a distribution or other
payment (whether received from the Applicable Cost Overruns Escrow Account
Deposit (as defined therein) or directly from the R&A Shareholders (as
defined therein)) in respect of Applicable Cost Overruns (as defined

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therein) pursuant to the provisions of Section 1.3 of the Stock
Purchase Agreement (and the amount of each such capital contribution
shall (for purposes of this Agreement and the Stock Purchase Agreement)
be added directly to Retained Operating Revenues in its entirety for
the fiscal year in which the Company Expenditures constituting
Applicable Cost Overruns are incurred or made and utilized to pay or
provide for such Company Expenditures in the manner provided for in the
second sentence of Section 1(c) hereof, and shall not be included in
calculating the amount of any Legg Mason Distribution).

	(b)     Allocation of Gross Revenues.   For each of R&A's fiscal
quarters (or portion thereof) commencing on or after the Effective Date
during the term of this Agreement:

			(i)     R&A shall distribute or cause to be
distributed to Legg Mason 35% of the Gross Revenues for such fiscal quarter
(the "Legg Mason Distribution") subject to any adjustments required pursuant
to paragraph (e) below; and

			(ii)    R&A shall retain as Retained Operating
Revenues 65% of the Gross Revenues for such fiscal quarter.  Gross Revenues
less the Legg Mason Distribution are referred to herein as "Retained
Operating Revenues" (provided that Retained Operating Revenues for any
fiscal quarter also shall have added directly to it any amounts
contemplated to be added directly thereto for such
fiscal quarter by the final proviso to Section 1(a) hereof).

R&A shall make distributions of the Legg Mason Distribution within five (5)
business days after the determination of the amount of the Legg Mason
Distribution pursuant to Section 1(e) below.  Each Subsidiary shall
timely make any distributions to R&A which are required for R&A to make
distributions of the Legg Mason Distribution. R&A shall have the same
fiscal year-end as Legg Mason during the period that it is a direct or
indirect subsidiary of Legg Mason.

	(c)     Retained Operating Revenues.

			(i)     Retained Operating Revenues for any period
shall be applied by R&A to pay and provide for all of Royce's expenses
and expenditures during such period, which shall be determined in
accordance with GAAP ("Company Expenditures"), including, without
limitation:  (A) all salaries (and other compensation) and employee
benefits of employees of R&A or a Subsidiary, including, without
limitation, the Principal Officers, and including, without limitation,
any payments required to be made to any employee or former employee
pursuant to the terms of an employment agreement between R&A or a
Subsidiary and the employee (each, an "Employment Agreement" and,
collectively, the "Employment Agreements")); (B) all liabilities of R&A
or its Subsidiaries to third parties (other than Legg Mason); (C) all
intercompany liabilities (excluding interest and any other payments
owed to Legg Mason on debt incurred in connection with the Transaction)
from Royce to Legg Mason or its subsidiaries, other than Royce (Legg
Mason and its subsidiaries other than Royce are individually referred
to as a "Legg Entity," and collectively, as the "Legg Entities"),
including, without limitation, reasonable expenses incurred by Legg
Entities upon authorization by R&A; (D) all liabilities of R&A or its
Subsidiaries for federal, state or local taxes, licenses or registration

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fees pertaining to the operations of Royce after the Closing (except for
any federal, state or local taxes on income of R&A or its Subsidiaries
and the Legg Entities, which shall be the responsibility of Legg Mason
and shall not be treated as an expense of Royce); (E) depreciation and
amortization (other than the amortization of intangible assets resulting
from the Transaction); (F) minor capital expenditures (which shall be
expensed and not capitalized); (G) interest payments to Legg Mason
pursuant to (I) any working capital loan from Legg Mason (as
contemplated by Section 1(f) hereof) and (II) the funding of any capital
expenditures as contemplated by Section 1(c)(ii) hereof; and (H) any
payments or allocations to employee non-managing members of New RMC of
carried interests and other performance-related fees in which any such
person may participate directly as a member of New RMC.

Without limiting the general nature of the foregoing, "Company
Expenditures" for a particular period shall include (without limitation)
the amount of any expenses or expenditures incurred or made during such
period constituting Applicable Cost Overruns (as defined in the Stock
Purchase Agreement) (and the amount of the related capital contribution
made to R&A by Legg Mason that was excluded from Gross Revenues pursuant
to clause (iii) of the final proviso of Section 1(a) and added directly
to Retained Operating Revenues for such period shall be used in such
period to pay or provide for such Company Expenditures giving rise to
Applicable Cost Overruns).

For purposes of this Agreement, a "minor capital expenditure" shall mean
any single expenditure for real or personal property in the amount of
$500 or less. The Principal Officers will use their commercially
reasonable efforts not to cause R&A or a Subsidiary to enter into any
contractual obligation that would reasonably be expected to cause R&A to
exceed its ability to pay or provide for them when due out of Retained
Operating Revenues.

			(ii)    If the President of R&A (the "President")
determines to request the funding of non-minor capital expenditures by
Legg Mason, such funding shall be discussed in advance by Legg Mason and
the President.  If Legg Mason agrees to fund a non-minor capital
expenditure, such expenditure shall be amortized on the books and
records of R&A over a period of time determined in accordance with Legg
Mason's practice current at the time of the expenditure consistent with
GAAP, and Legg Mason's funding of such expenditure shall be repaid to
Legg Mason in accordance with the amortization schedule, together with
interest at the rate specified in Section 1(f)(iii) herein or such other
rate agreed to by the parties.  Legg Mason shall be under no obligation
to agree to fund any capital expenditure, and any failure of Legg Mason
to so agree shall not constitute a breach of this Agreement.  In the
event that Legg Mason determines not to fund a non-minor capital
expenditure, R&A may fund such non-minor capital expenditure from
Retained Operating Revenues.

	(d)     Incentive Pool. To provide an incentive to the Principal
Officers and other key employees of R&A, R&A shall establish an
incentive compensation pool ("Incentive Pool"),which shall be equal to
the balance (if any) of the Retained Operating Revenues remaining after
subtraction of all Company Expenditures (other than the Incentive Pool)

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with respect to a fiscal year.  The Incentive Pool shall be used by R&A
to make cash bonus payments to such Principal Officers and key employees
("Incentive Pool Bonus Distributions"), and the entire Incentive Pool in
the aggregate shall be paid as Incentive Pool Bonus Distributions with
respect to each fiscal year.  The Management Committee shall recommend
to the Board of Directors of R&A (the "Board") the recipients and
amounts of any Incentive Pool Bonus Distributions, and Incentive Pool
Bonus Distributions shall be paid promptly following the completion of
each fiscal year (and determination of amounts under Section 2(e) of
this Agreement) upon (and subject to) approval by the Board of the
recipients and individual bonus amounts to be received from the
Incentive Pool for such fiscal year, which approval shall not be
unreasonably delayed; provided, however, that, during the initial term
of this Agreement, the aggregate portion of the Incentive Pool for any
fiscal year to be paid to those Principal Officers and key employees of
R&A ("Initial Senior Management Members") who were parties to Employment
Agreements with R&A as of the Effective Date (but, for the avoidance of
doubt, not the specific recipients of such aggregate portion of the
Incentive Pool from among the Initial Senior Management Members, which
shall remain subject to approval by the Board in its discretion) shall
be jointly determined in good faith by (w) the Board and (x) CMR (for so
long as CMR is employed by Royce) or the CMR Representative (as defined
in the Stock Purchase Agreement) (following such time as CMR is no
longer employed by Royce), each acting reasonably, provided that, in
the event the Board and CMR or the CMR Representative (as applicable)
are unable to jointly determine in good faith the aggregate portion of
the Incentive Pool for any fiscal year to be paid to the Initial Senior
Management Members (each acting reasonably), such aggregate portion
shall be determined by the Board in good faith for such fiscal year,
and provided, further, that, following such time as CMR is no longer
employed by Royce, the consent of the CMR Representative shall not be
required under this proviso in the event that the percentage of the
total Incentive Pool to be paid to the Initial Senior Management
Members in the aggregate for a particular fiscal year of R&A (other
than the first fiscal year of R&A following the Effective Date) is at
least equal to the percentage of the total Incentive Pool paid to the
Initial Senior Management Members in the aggregate for the immediately
preceding fiscal year of R&A; and provided, further, that any (I)
Incentive Pool Bonus Distribution paid to an Initial Senior Management
Member (other than CMR), or (II) Performance Bonus (as defined in the
Employment Agreements) paid to an Initial Senior Management Member
(other than CMR) that exceeds any minimum Performance Bonus
contractually required (whether by a contractually specified minimum
Performance Bonus dollar amount or a Performance Bonus formula
expressly specified in such Employment Contract) to be paid to such
Initial Senior Management Member under his or her Employment Agreement
for the applicable fiscal year in respect of which it is paid (the
aggregate amounts described in clauses (I) and (II) of this proviso
with respect to such fiscal year, the "Applicable Compensation"), in
either such case shall constitute (and be designated in writing to such
Initial Senior Management Member as) an Early Special Bonus Payment (as
such term is defined in the Employment Agreements) unless otherwise
elected in writing by (y) CMR (for so long as CMR is employed by Royce)
or (z) the Board (following such time as CMR is no longer employed by
Royce) with the written consent of the CMR Representative, provided
that, the consent of the CMR Representative under this proviso shall
not be required if (I) the CMR Representative and the Board fail to
agree on the designation of an amount as an Early Special Bonus Payment
(each acting reasonably) after reasonable consultation, or the CMR
Representative's consent is unreasonably withheld (in which case such
percentage shall be determined for such fiscal year in good faith by

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the Board), or (II) following such time as CMR is no longer employed by
Royce, with respect to a particular Initial Senior Management Member,
the percentage of the Applicable Compensation paid to such Initial
Senior Management Member for a particular fiscal year of R&A (other
than the first fiscal year of R&A following the Effective Date) that is
designated as an Early Special Bonus Payment is not less than the
percentage of the Applicable Compensation paid to such Initial Senior
Management Member for the immediately preceding fiscal year of
R&A that was designated as an Early Special Bonus Payment.
Notwithstanding anything to the contrary in this Agreement, no Incentive
Pool Bonus Distributions shall be paid or committed unless and until R&A
is current with respect to its required distributions of the Legg Mason
Distribution, including the payment in full of principal of and
interest on any working capital loans made pursuant to Section 1(f) of
this Agreement (to the extent such principal and interest is
then required to be paid to Legg Mason under the terms of such working
capital loan).  Nothing contained in this Agreement shall establish or
be deemed to constitute an obligation of R&A to any particular employee
of R&A to pay bonuses or other compensation to such employee, or
restrict the right of R&A to terminate the employment of any employee at
any time, with or without cause.

	(e)     Determination of Amounts. The amount of Gross Revenues, the
Legg Mason Distribution, Retained Operating Revenues, Company
Expenditures and the Incentive Pool shall be reasonably determined in
accordance with this Agreement by the Board:  (i) within 30 days after
the end of each of the first three fiscal quarters in a fiscal year
based on the most recent unaudited consolidated quarterly financial
statements of R&A; and (ii) within 30 days after the end of the last
fiscal quarter based on the audited annual financial statements of R&A,
or at such later time as the audited annual financial statements become
available.  Any adjustments to the Legg Mason Distribution (including
Legg Mason Distributions made for the first three fiscal quarters of any
fiscal year) which are required as a result of the year-end audit of the
annual financial statements shall be made by appropriate adjustment to
the quarterly distribution for such last fiscal quarter.

	(f)     Conversion to Working Capital Loan.     If R&A fails to
distribute to Legg Mason all or a portion of the Legg Mason Distribution
for any fiscal quarter as required under Section 1(b) of this Agreement,
Legg Mason may, in its sole and absolute discretion and in lieu of
treating such failure as a default under this Agreement, elect to
convert R&A's obligation to make such distribution into a working
capital loan from Legg Mason which:  (i) has an original principal
amount equal to the undistributed portion of the Legg Mason
Distribution; (ii) is payable on demand; (iii) bears interest at the
rate of one half of one percent in excess of the broker-call rate as
published in The Wall Street Journal on the day Legg Mason makes the
election, compounded annually; (iv) may be prepaid by R&A (without
premium or penalty) at any time and from time to time at the President's
election; and (v) at Legg Mason's request, shall be evidenced by a
promissory note containing such other terms and conditions as are
reasonably acceptable to Legg Mason.

	(g)     Nondeductibility of Expenses.   In the event that (i) all or
any portion of the base or incentive compensation, including Bonus

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Distributions, of any R&A employee, or (ii) all or any portion of any
other Company Expenditures (excluding, however, amortizable capital
expenditures and repayment of the principal balance of any R&A
indebtedness) become not fully and currently deductible as a result of
a material change or changes in the tax laws (unless the current
nondeductibility is due solely to a timing difference between GAAP and
tax accounting that causes a particular Company Expenditure to be
deductible for tax purposes in a fiscal year different from the fiscal
year in which the expense was accrued under GAAP) under federal or
state tax laws, rules or regulations (including, without limitation, any
judicial or administrative rulings or interpretation thereof), Legg
Mason shall have the right to restructure the revenue allocation
arrangements reflected in this Agreement in such a manner (including,
without limitation, increasing the Legg Mason Distribution) as will put
Legg Mason in as favorable an economic position as if such compensation
and other Company Expenditure were fully and currently deductible;
provided that, to the extent more than one alternative restructuring is
available which will put Legg Mason into such economic position, Legg
Mason shall choose that alternative which has the least adverse effect
on the amount of the Incentive Pool.

	(h)     Key-Man Life Insurance. Notwithstanding anything to the
contrary herein, (i) any premiums paid by R&A on life insurance policies
on which Legg Mason is the beneficiary ("Key-Man Policies") shall not be
considered Company Expenditures and shall be paid either by funds
provided by Legg Mason or out of the Legg Mason Distribution (except to
the extent as may otherwise be agreed to in writing by CMR and Legg
Mason, for so long as CMR is an employee of Royce); (ii) any death
benefit or other proceeds paid or payable to R&A or a Subsidiary under a
Key-Man Policy shall not be considered Gross Revenues; and (iii) all or
any portion of said death benefit or other proceeds received by R&A or a
Subsidiary as described in the preceding clause (ii) shall be payable to
Legg Mason (at such times and in such amounts as Legg Mason elects in
its sole discretion), in addition to any Legg Mason Distribution to
which Legg Mason is otherwise entitled pursuant to this Agreement.

2.      Management of R&A.

(a)     Board of Directors.

	(i)     Legg Mason shall have the right at all times to designate
a majority of the Board and of the board of each Subsidiary
("Subsidiary Board") and R&A shall vote all of its shares of voting
stock of its Subsidiaries in favor of Legg Mason's designees.  Subject
to the requirements of the next sentence, the Board shall have such
number of members as shall be determined from time to time in writing
by Legg Mason.  Legg Mason agrees that CMR and John D. Diederich shall
be members of the Board and of each committee thereof, and of each
Subsidiary Board and each committee thereof, during the term of this
Agreement; provided, however, that should the employment of CMR or
John D. Diederich with Royce be terminated for any reason while CMR or
John D. Diederich is a member of the Board or a Subsidiary Board (or
any respective committee thereof), CMR or John D. Diederich (as
applicable) shall be promptly removed from the Board and each
Subsidiary Board (and each respective committee thereof), and the
resulting vacancies thereon shall be filled by an appointee designated
by the remaining members of the Board.

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	 (ii)    The Articles of Incorporation of R&A and each
Subsidiary shall provide that:  (A) a quorum of the Board, or a
Subsidiary Board, shall consist of a majority of the directors in
office, attending in person or by teleconference, of which at least
one (1) shall be a director designated by Legg Mason and at least one
(1) shall be CMR; provided, however, that in the event that CMR fails
to attend a board meeting following reasonable advance notice of the
meeting having been provided to him, his attendance shall not be
necessary to constitute a quorum of the Board or a Subsidiary Board;
and (B) decisions of the Board, or a Subsidiary Board, may be made
only upon a vote of the Board, or the Subsidiary Board, in which at
least one (1) director designated by Legg Mason votes in favor of the
decision of the majority.  For so long as CMR is employed by Royce,
to the extent that any decision of the Board, or a Subsidiary Board,
is to be taken over the objection or against the recommendation of
either CMR or the Management Committee (including, without
limitation, with respect to the recipients and/or amounts of
Incentive Pool Bonus Distributions) Legg Mason shall not prevent CMR
or the Management Committee (as applicable) from being afforded an
opportunity to be fully heard by the Board, or the Subsidiary Board,
as applicable, with respect to the subject matter of such decision.

	(b)     Management Committee.   A Management Committee of R&A (the
"Management Committee") shall be established as of the Effective Date
and remain in existence for the term of this Agreement.  For so long
as CMR is employed by Royce, the Management Committee shall consist
exclusively of (i) CMR and (ii) such other of the Principal Officers
and/or other key employees of R&A as shall mutually be agreed from
time to time by CMR and the Board (provided that any such person
described in this clause (ii) promptly shall be removed from the
Management Committee in the event that CMR and the Board thereafter at
any time do not mutually agree that such person should remain on the
Management Committee).  At any time during the term of this Agreement
that CMR is no longer employed by Royce, the Management Committee
shall consist of the Principal Officers employed by Royce at any given
time (including the President), as well as any other key employees of
Royce who are appointed to the Management Committee by the President
with the approval of the Board.  Except as provided in subsection (d)
below, and subject to any limitations imposed by law, the Management
Committee shall consult with the President concerning the day-to-day
operations of R&A.  Notwithstanding the foregoing provisions of this
Section 2(b) (but subject to Section 1(d) of this Agreement) any
decision made by the Management Committee may be superseded by a
subsequent decision of the Board.

(c)     President.
      (i)       The President shall be responsible for the overall
management and operation of Royce consistent with the terms of this
Agreement and subject to general supervision by the Board and with
advice from the Management Committee.  The President shall have the
general powers and duties of management usually vested in such office,
which shall include the power, subject to the Board's authority, to (A)
hire, establish the compensation levels (subject to the Employment
Agreements) and other conditions of employment for, and supervise
and discharge, employees of R&A or a Subsidiary, and (B) enter into
contracts that do not require the approval of the Board.

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No Principal Officer (other than the President) shall voluntary incur
(or commit to incur) on behalf of Royce, and each Principal Officer
(other than the President) shall use his or her commercially
reasonable efforts to prevent any other employee of Royce from
voluntarily incurring (or committing to incur) on behalf of Royce, any
Company Expenditures (other than de minimis expenditures incurred by
Royce in the ordinary course of business) without express
authorization from the President (or such person as has been expressly
identified by the President for purposes of making such decisions with
respect to particular subject matter).

		(ii)    In the event that, for any reason, CMR shall no
longer be President, the Board shall select his successor (and any
subsequent successor) to the position of President.

	(d)     Board Approval. The approval of the Board with respect
to actions proposed to be taken by R&A, and a Subsidiary Board with
respect to actions proposed to be taken by a Subsidiary, shall be
required for R&A or a Subsidiary to take action on the matters set
forth below (subject to any shareholder approval of such matters
which may be required under applicable law), and decisions by the
Board or a Subsidiary Board on such actions may be made only upon a
vote of the majority of the full Board or a Subsidiary Board.  The
approval of the Board is required for:

		(i)     any amendment to any Employment Agreement, any change
in the compensation or benefits of any employee who is a party to an
Employment Agreement, other than as permitted or required under such
employee's Employment Agreement, or any other material change in the
terms of employment of any of such employees, provided that
contributions to nondiscretionary, nonterminable benefit plans as
approved by the Board (so long as such contributions are made pursuant
to the terms of such plans and in accordance with applicable law) will
not require separate Board approval;

		(ii)    any agreement or arrangement, whether written or
verbal, which imposes payment obligations in excess of $100,000 per
annum on R&A or any Subsidiary;

		(iii)   the issuance, repurchase or redemption (or any
agreement regarding the issuance, repurchase or redemption) of any
securities of R&A or any Subsidiary;

		(iv)    the acquisition by R&A for its own account, or for
the account of a Subsidiary, of any other business or of the equity
securities or debt securities of, or the making of any loan or advance
to, any other entity, or the entering into any joint venture, profit
sharing or similar agreement, provided that Board approval shall not
be required for R&A or a Subsidiary to engage in cash management
activities for its own account in the ordinary course of business or
to make advances of business expenses to any person or entity in the
ordinary course of business;

		(v)     (A) a material alteration in the fundamental business
of Royce, which business for purposes of this provision means the
management of investment accounts for individual and institutional
clients and activities related thereto, including, without limitation,
the sponsorship and management of private and registered investment

<Page> 10

companies, or (B) the initiation of any business that is materially
different from such fundamental business, or (C) the addition of new
products, including investment company or annuity products, that are in
conflict with any product sponsored, managed, offered or distributed by
Legg Mason or any of its affiliates or that would result in Legg Mason
or any of its affiliates being deemed to be in violation of any
obligation under an existing contract or arrangement to which Legg Mason
or any of its affiliates is a party or is subject;

		(vi)    the sale, exchange, lease or hypothecation of a
substantial part of the assets of R&A or a Subsidiary in any manner;

		(vii)   the merger, consolidation, combination, voluntary
liquidation or voluntary dissolution of R&A or a Subsidiary, subject,
however, to the terms of Section 6(d) below;

		(viii)  any amendment to the Articles of Incorporation
or the By-laws of R&A or a Subsidiary;

		(ix)    the voluntary creation of a lien, other than purchase
money security interests, against all or any portion of the assets of
R&A or a Subsidiary;

		(x)     any borrowing of funds in excess of $150,000 in the
aggregate by R&A or a Subsidiary;

		(xi)    the employment of any professional personnel under an
employment contract for a term exceeding one year;

		(xii)   the appointment of, or delegation of responsibilities
to, any committee of the Board other than as provided in this
Agreement;

		(xiii) the election of officers of R&A (other than the
Principal Officers' status as such), which shall be consistent with the
Articles of Incorporation and By-laws of R&A and in accordance with the
terms of the Employment Agreements (where applicable);

		(xiv)   transactions between R&A or a Subsidiary and any
officer, director or employee of R&A or a Subsidiary, other than the
payment of compensation, salary and benefits and the advancement or
reimbursement of business expenses;

		(xv)    the termination of employment of any Principal
Officer or key employee who is a party to an Employment Agreement or
the granting of any waiver or consent which would relieve any such
Principal Officer or key employee from any material obligation or
restriction under such Employment Agreement;

		(xvi)   the payment of any dividend other than those provided
for in this Agreement;


<Page> 11

		(xvii)  the waiver by R&A of any of the covenants under
the Stock Purchase
Agreement affecting the compensation or obligations of, or restrictions
upon, the Principal
Officers or other key employees of R&A;

		(xviii) the initiation and settlement of any material
litigation, arbitration or regulatory proceeding or investigation
involving R&A or a Subsidiary; and

		(xix)   the entry into any subadvisory or other
subcontractual relationship under which R&A or a Subsidiary will pay a
portion of the advisory or other fees it earns with respect to an
account to any subadvisor or subcontractor, other than arrangements
among Royce.

3.      New RMC.        Each employee of Royce who participates in New RMC-
related Retained Operating Revenues comprised of "carried interests"
(or similar profit participations) received from collective investment
vehicles sponsored or managed by New RMC that are not registered
as investment companies under the Investment Company Act shall, if such
employee so elects, be admitted as a non-managing member of New RMC
(solely for purposes of receiving his or her carried interest
participation therein) and enter into a "carried interest percentage"
agreement with New RMC (provided, however, that any such employee shall
remain a non-managing member of New RMC only for so long as such
continued participation has been approved by the Board).  The
documentation relating to the carried interest participation described
in the preceding sentence shall be in form and substance reasonably
acceptable to Legg Mason and the President.  Legg Mason, R&A and the
Principal Officers agree to make their respective tax elections and
filings in a manner that is consistent with the treatment of such
carried interest participations as capital gains by such participating
employees.

4.      Administration. The parties hereto agree to meet and consult, at
such times as may be reasonably requested by (i) Legg Mason; (ii) CMR
(for so long as he is an employee of Royce); or (iii) if CMR is no
longer an employee of Royce, any other Principal Officer, to endeavor in
good faith to agree on appropriate procedures for administering the
provisions of this Agreement.

5.      Effectiveness, Term and Status as Parties. This Agreement shall
constitute a binding agreement among the parties as of the date hereof;
provided, however, that this Agreement shall become effective only as
of, and subject to the occurrence of, the Closing (the "Effective
Date") and, in the event that the Stock Purchase Agreement is
terminated for any reason without the Closing having occurred, this
Agreement shall automatically terminate without further obligation or
liability on the part of any party hereto.  This Agreement shall
continue in effect for an initial term of five (5) years from the
Effective Date; provided, however, that in the event that a
Contingent Payment Escrow Account Deposit, as defined in the Stock
Purchase Agreement, is made with respect to a Year 5 Contingent Payment,
as defined in the Stock Purchase Agreement, this Agreement shall
continue in effect for an initial term of six (6) years from the
Effective Date,and at either such time, it shall automatically be
renewed for successive one-year periods unless
(i) terminated in writing by (A) Legg Mason, or (B) CMR, for so long as
he is employed by Royce, or if CMR is no longer employed by Royce, fifty
percent (50%) or more of the Principal Officers or (ii) terminated in
the manner described below by Legg Mason at such time as there are no

<Page> 12

Principal Officers party to this Agreement.  If the employment of any
Principal Officer by R&A ceases for any reason, such Principal Officer
shall automatically cease to be a party to this Agreement and to have
any rights hereunder and shall cease to be a Principal Officer for
purposes of this Agreement.  At the election of Legg Mason, any
replacement President (who is not already a Principal Officer) shall
become a Principal Officer for purposes of this Agreement and become a
party to this Agreement.  In the event that there are no Principal
Officers party to this Agreement employed by Royce, Legg Mason may, at
its election, terminate this Agreement.

In the event of a failure by R&A to make any four consecutive quarterly
distributions of the Legg Mason Distribution, in whole or in part,
within the time period specified in Section 1(b) of this Agreement,
which amount, in the aggregate, to a shortfall in the Legg Mason
Distribution of at least $50,000, (whether or not a working capital loan
is established pursuant to Section 1(f) of this Agreement), Legg Mason
shall have the right, until such time as the total shortfall in the Legg
Mason Distribution is paid to Legg Mason in full, to terminate this
Agreement, effective upon written notice to the other parties to this
Agreement; provided, however, that such failure was not caused, directly
or indirectly, by the imposition of expenses or expenditures (for the
avoidance of doubt, other than any involuntary expenses or expenditures
(i.e., fines, settlements, judgments and substantially similar
expenditures), with respect to which CMR shall have no right to object
for purposes of this proviso) upon Royce by the Board over the written
objection of CMR, for so long as he is employed by Royce.

6.      Financial Statements.

	(a)     Monthly Statements.     R&A shall use its reasonable best
efforts to provide to Legg Mason, within five (5) business days, in the
case of clause (i) below, and three (3) business days, in the case of
clause (ii) below, following the end of each calendar month during each
fiscal quarter during the term of this Agreement, an unaudited:  (i)
balance sheet as of the end of the most recent month; and (ii)
statement of income and expenses for the most recent month.  Such
monthly financial statements shall be prepared on an accrual basis.

	(b)     Quarterly Statements.  R&A shall use its reasonable best
efforts to provide to Legg Mason, within five (5) business days, in the
case of clause (i) below, and three (3) business days, in the case of
clauses (ii) and (iii) below, following the end of each fiscal quarter
during the term of this Agreement, an unaudited:  (i) balance sheet as
of the end of the most recent fiscal quarter; (ii) statement of income
and expenses for the most recent fiscal quarter and the fiscal year to
date; and (iii) statement of cash flows for the fiscal year to date.
Such quarterly financial statements shall be prepared on an accrual
basis.

	(c)     Annual Statements.      R&A shall use its reasonable best
efforts to provide to Legg Mason, within twenty (20) business days
after the close of each fiscal year during the term hereof:  (i) a
balance sheet as of the close of the fiscal year; (ii) a statement of
income and expenses for the fiscal year; (iii) a statement of cash
flows for the fiscal year; (iv) a statement of changes in stockholders'
equity for the fiscal year; and (v) a draft of the notes accompanying
the foregoing financial statements.  Such annual financial statements

<Page> 13

shall be prepared on an accrual basis in accordance with GAAP and shall
be subject to audit by independent certified public
accountants designated by Legg Mason.

	(d)     Financial Reporting.    The financial statements described
in subsections (a) - (c) above shall be reported on a separate legal
entity basis for R&A and each Subsidiary.

	(e)     Other Financial Reports.        Legg Mason shall have the
right at any time to receive from R&A such additional financial
statements and reports as Legg Mason may from time to time reasonably
request, whether or not such financial statements and reports have been
prepared previously by R&A.

	(f)     Expenses of Preparation.        The expense of preparing the
financial statements and reports described in this Section 5, except for
those prepared under subsection (e) above, shall be Company Expenditures
and, as such, shall be paid from Retained Operating Revenues. Legg Mason
shall pay the expense of preparing any financial statements and reports
prepared
under subsection (e) above.

	(g)     Access to Books and Records.    Legg Mason shall have full
access to the books and records of R&A and each of its Subsidiaries.
Without limiting the generality of the foregoing, it is expressly
acknowledged and agreed that R&A's obligations hereunder shall not in any
way imply a limitation on Legg Mason's right, as the owner (directly or
indirectly) of Royce, to full access to all such books and records at any
time.

7.      General.

	(a)     Captions.       The captions herein have been inserted solely for
convenience of reference and in no way define, limit or describe the scope
or substance of any provision of this Agreement.

	(b)     Amendments.   This Agreement may be amended only (i) for so
long as CMR is an employee of Royce, by a written amendment executed
and delivered by each of Legg Mason and CMR and any such amendment
shall not require the consent, written or otherwise, of R&A or any
other Principal Officer, and (ii) following such time as CMR is no
longer an employee of Royce, by a written amendment executed and
delivered by Legg Mason and each person who is a Principal Officer at
the time of such amendment and any such amendment shall not require
the consent, written or otherwise, of R&A.

	(c)     Waivers.    Neither this Agreement nor any term or condition
hereof or right hereunder may be waived (or shall be deemed to have been
waived), in whole or in part, by any party (or by the forbearance of any
party to exercise any of its rights hereunder), except by written
instrument executed (i) by Legg Mason, in the case of any waiver by Legg
Mason or R&A of any term or condition hereof, or (ii)(A) for so long as
CMR is an employee of Royce, by CMR, in the case of any waiver by the
Principal Officers of any term or condition hereof (and any such waiver
shall not require the consent, written or otherwise, or any other party
hereto) and (B) following such time as CMR is no longer an employee of
Royce, by such Principal Officer, in the case of any waiver by a

<Page> 14

particular Principal Officer (solely on his or her own behalf) of any
term or condition hereof.  In the case of a breach by any party of any
agreement or undertaking hereunder, a nondefaulting party may
nevertheless accept from the defaulting party any payment or performance
hereunder and may continue to operate under this Agreement without in
any way waiving its rights or remedies.

	(d)     Assignment.     None of the parties shall have the right to
assign this Agreement or any rights or obligations hereunder without
the prior written consent of the other parties.  Any merger or
consolidation of R&A (or any direct or indirect parent thereof, other
than Legg Mason), or any sale or transfer of all or substantially all
of the stock or assets of R&A (or any direct or indirect parent
thereof, other than Legg Mason) shall be deemed an assignment by Legg
Mason in violation of the terms of this subsection (d), unless (i)
Legg Mason shall be the direct or indirect parent of the successor
entity, and (ii) all of the assets of R&A as of immediately prior to
such transaction (including, without limitation, its relationships
with clients, contracts and agreements related thereto) constitute
assets of the successor entity to such transaction (and/or
subsidiaries of such entity, as applicable) following the
effectiveness of such transaction and such successor entity has
replaced R&A as a party hereto and assumed all of R&A's liabilities
and obligations hereunder (with such successor entity thereafter
constituting the entity with respect to which Gross Revenues are
measured hereunder) in which case the other parties' consent shall
not be required.  This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their heirs, personal
representatives, successors and permitted assigns.

	(e)     Counterparts.   This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original and
all of which together shall be deemed to constitute one and the same
instrument.

	(f)     Entire Agreement.       This Agreement (together with the
Stock Purchase Agreement and the Employment Agreements, to the
extent any such person is a party thereto) constitutes the entire
agreement of the parties hereto relating to the subject matter
hereof, and the parties hereto have made no agreements,
representations or warranties relating to the subject
matter of this Agreement that are not set forth in this Agreement.

	(g)     No Other Rights.    Subject to the last sentence of Section
6(d) of this Agreement, nothing herein, either express or implied, is
intended or shall be construed to give any person, other than Legg
Mason, R&A and the Principal Officers, any rights or remedies under or
by reason of this Agreement.

	(h)     Neither Party to Bind Other; Publicity. R&A and Legg Mason
shall not incur obligations or make binding commitments on behalf of the
other, or make representations to third parties that they have the
authority to do so.  However, Legg Mason and R&A may represent and
advertise that they are affiliated with the other.

	(i)     Governing Law.  The execution, interpretation and
performance of this Agreement shall be governed by the internal laws
of the State of New York.

<Page> 15


	(j)     Notices.        All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed
effective (i) when delivered personally, (ii) when sent by confirmed
facsimile, (iii) one (1) day after deposit with a commercial
overnight carrier with written verification of receipt, or (iv) 3
days after deposit in the United States mail by certified mail
postage prepaid.  All communications will be sent to the party to
whom it is directed at the address set forth below:



				(i)     If to R&A

				Royce & Associates, Inc.
				1414 Avenue of the Americas
				New York, New York 10019
				Attention:      Charles M. Royce
			Facsimile No.: (212) 752-8875


		     (ii)    If to any Principal Officer:

		     Charles M. Royce
		     President and Chief Executive and Investment Officer
		     Royce & Associates, Inc.
		     8 Sound Shore Drive
		     Greenwich, Connecticut  06830
		     Facsimile No.: (203) 869-4145

		     W. Whitney George
		     Senior Portfolio Manager
		     Royce & Associates, Inc.
		     1414 Avenue of the Americas
		     New York, New York 10019
		     Facsimile No.: (212) 832-8921

		     John D. Diederich
		     President, Royce Fund Services, Inc.
		     Royce & Associates, Inc.
		     1414 Avenue of the Americas
		     New York, New York 10019
		     Facsimile No.: (212) 832-8921

	     (iii)   If to Legg Mason:

		     Legg Mason, Inc.

<Page> 16

		     100 Light Street
		     Baltimore, Maryland  21202
		     Attention:      Raymond A. Mason
		     Chairman, President and
		     Chief Executive Officer
		     Facsimile No.:  (410) 685-2365

		     with copies to:

		     Legg Mason, Inc.
		     100 Light Street
		     Baltimore, Maryland  21202
		     Attention:      Robert F. Price, Esq.
				     General Counsel
		     Facsimile No.:  (410) 539-4607

Any party may change the address to which such notices are to be sent by
giving the other parties notice thereof in the manner herein set forth.

	(k)     Arbitration.    If (i) for so long as CMR is an employee
of Royce, CMR notifies Legg Mason and the Board that he objects, or
(ii) following such time as CMR is no longer an employee of Royce,
fifty percent (50%) or more of the Principal Officers notify Legg Mason
and the Board that they object, in either such case, to the
determination by the Board of the Gross Revenues, the Legg Mason
Distribution, the Retained Operating Revenues, the Company Expenditures
and/or the Incentive Pool, for any applicable period, then CMR (if he
is the objecting party) or such Principal Officers (if they are the
objecting parties), on the one hand, and Legg Mason, on the other hand,
shall negotiate in good faith to resolve in writing any differences,
and any such agreed resolutions shall be final and binding upon the
parties hereto.  With respect to any resolutions so agreed upon or
otherwise rendered by the Arbitrator (as provided below), Legg Mason
shall cause the Board to promptly comply with and put into effect such
resolutions. Each of the parties hereto shall co-operate with the other
parties hereto in all reasonable respects in connection with the
resolution of any disputed matters, and shall promptly provide access
to the other parties hereto and to the Arbitrator (if applicable) to
information in such party's or R&A's (as applicable) possession that is
relevant to the resolution of any such disputed matters (including,
without limitation access to such party's work papers, memoranda and
internal and external professional advisors).  If after ten (10) days
following such notice (the "Negotiation Period") any of such objections
have not been resolved (the "Disputed Matters"), then such Disputed
Matters shall be submitted to arbitration in New York City, New York
and shall be conducted in accordance with the American Arbitration
Association Commercial Arbitration Rules before three arbitrators, one
of which shall be selected by Legg Mason, one of which shall be
selected by CMR (or following such time as CMR is not longer an
employee of Royce, fifty percent (50%) or more of the Principal
Officers), and one of which shall be selected in accordance with
Section 12 of the American Arbitration Association Commercial
Arbitration Rules, each of whom shall have substantial business
experience in the investment management industry (collectively, the
"Arbitrator").  The Arbitrator shall act promptly to resolve all
Disputed Matters and its decision with respect to all Disputed Matters
shall be final and binding upon the parties hereto and shall not be
appealable to any court.  The Arbitrator shall render an opinion in
writing setting forth the basis of its decision on the Disputed
Matters.  The costs and expenses of the Arbitrator shall be shared
equally by Legg Mason and R&A; provided, however, that R&A's share of
such cost and expense shall be treated as a Company Expenditure.  A
Principal Officer who does not object may monitor the arbitration at
his expense and shall be entitled to notice of, and to attend, all
arbitration proceedings.  Any portion of the Legg Mason Distribution or
the Incentive Pool that is affected by the Disputed Matters shall not
be distributed until the resolution of the Disputed Matters, and upon
such resolution any increase in the Incentive Pool shall be distributed
to all participants in the Incentive Pool as determined by CMR, for so
long as CMR is employed by Royce, or by fifty percent (50%) or more of
the Principal Officers, if CMR is no longer an employee of Royce.

<Page> 17

Nothing in this Agreement shall be deemed to limit any party's right to
seek injunctive relief from any court of competent jurisdiction, or to
limit any party's right to seek the enforcement by any such court of a
decision of the Arbitrator (to the extent any such decision is not
otherwise promptly complied with by the parties hereto).


<Page> 18

  IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.

			    LEGG MASON, INC.


		   By:
		       Raymond A. Mason,
		       President and Chief Executive Officer


		   ROYCE & ASSOCIATES, INC.


		    By:
			Charles M. Royce
			President and Chief Executive and Investment Officer


		    PRINCIPAL OFFICERS (each in his individual
				       capacity):

		    By:
			Charles M. Royce
			President and Chief Executive and Investment Officer


		    By:
			W. Whitney George
			Senior Portfolio Manager


		    By:
			John D. Diederich
			President, Royce Fund Services, Inc.



</TEXT>
</DOCUMENT>
