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Term Loan Agreement

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Sectors: Financial Services, Banking
Governing Law: New York, View New York State Laws
Effective Date: October 14, 2005
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Exhibit 10.1


EXECUTION COPY


$700,000,000

TERM LOAN AGREEMENT

Dated as of October 14, 2005

Among


LEGG MASON, INC.,

as Borrower


THE LENDERS PARTY HERETO


CITIBANK, N.A., as Administrative Agent

CITIGROUP GLOBAL MARKETS INC.,

as Lead Arranger and Book Manager


BANK OF AMERICA, N.A.,

JPMORGAN CHASE BANK, N.A.,

THE BANK OF NEW YORK and

DEUTSCHE BANK AG NEW YORK BRANCH,

as Co-Syndication Agents


TABLE OF CONTENTS


Section Page


ARTICLE I DEFINITIONS 1

SECTION 1.01. Certain Defined Terms 1

SECTION 1.02. Terms Generally 15

SECTION 1.03. Accounting Terms; GAAP 15

ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES 16

SECTION 2.01. The Loans; Application of Proceeds 16

SECTION 2.02. Making the Loans, Evidence of Debt 17

SECTION 2.03. Administrative Agent' s Fee 18

SECTION 2.04. Reductions of the Commitments 18

SECTION 2.05. Repayment 19

SECTION 2.06. Interest 19

SECTION 2.07. Additional Interest on Eurodollar Rate Loans 19

SECTION 2.08. Interest Rate Determinations; Changes in Rating Systems 20

SECTION 2.09. Voluntary Conversion and Continuation of Loans 21

SECTION 2.10. Prepayments of Loans 22

SECTION 2.11. Payments; Computations; Etc. 22

SECTION 2.12. Sharing of Payments, Etc. 24

SECTION 2.13. Increased Costs 24

SECTION 2.14. Illegality 25

SECTION 2.15. Taxes 26

SECTION 2.16. Mitigation Obligations; Replacement of Lenders 28

SECTION 2.17. Break Funding Payments 29

ARTICLE III CONDITIONS OF LENDING 29

SECTION 3.01. Conditions Precedent to Initial Borrowing 29

SECTION 3.02. Conditions Precedent to Each Borrowing 31

ARTICLE IV REPRESENTATIONS AND WARRANTIES 31

SECTION 4.01. Representations and Warranties 31

ARTICLE V COVENANTS 33

SECTION 5.01. Affirmative Covenants 33

SECTION 5.02. Negative Covenants 36

SECTION 5.03. Financial Covenants 37

ARTICLE VI EVENTS OF DEFAULT 38

SECTION 6.01. Events of Default 38


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ARTICLE VII THE ADMINISTRATIVE AGENT 40

SECTION 7.01. Appointment and Authority 40

SECTION 7.02. Rights as a Lender 40

SECTION 7.03. Exculpatory Provisions 40

SECTION 7.04. Reliance by Administrative Agent 41

SECTION 7.05. Delegation of Duties 41

SECTION 7.06. Resignation of Administrative Agent 42

SECTION 7.07. Non-Reliance on Administrative Agent and Other Lenders 42

SECTION 7.08. No Other Duties; Etc. 43

ARTICLE VIII MISCELLANEOUS 43

SECTION 8.01. Amendments, Etc. 44

SECTION 8.02. Notices, Etc. 44

SECTION 8.03. No Waiver; Remedies; Setoff 46

SECTION 8.04. Expenses; Indemnity; Damage Waiver 46

SECTION 8.05. Binding Effect, Successors and Assigns 48

SECTION 8.06. Assignments and Participations 48

SECTION 8.07. Governing Law; Jurisdiction; Etc. 51

SECTION 8.08. Severability 51

SECTION 8.09. Counterparts; Integration; Effectiveness; Execution 52

SECTION 8.10. Survival 52

SECTION 8.12. Confidentiality 53

SECTION 8.13. No Fiduciary Relationship 53

SECTION 8.14. Headings 54

SECTION 8.15. USA PATRIOT Act 54


ii

SCHEDULES


Schedule I Lenders and Commitments

Schedule II Existing Liens


EXHIBITS


Exhibit A Form of Note

Exhibit B Form of Notice of Borrowing

Exhibit C Form of Assignment and Assumption

Exhibit D-1 Form of Opinion of Borrower' s Internal Counsel

Exhibit D-2 Form of Opinion of Special New York Counsel to the Borrower

Exhibit E Form of Opinion of Special New York Counsel to the Administrative Agent


iii


TERM LOAN AGREEMENT dated as of October 14, 2005 (this " Agreement" ) among LEGG MASON, INC., a Maryland corporation (the " Borrower" ), each of the Lenders (as defined below) party hereto, and CITIBANK, N.A., as administrative agent for such Lenders (in such capacity, the " Administrative Agent" ).


Pursuant to the Transaction Agreement dated as of June 23, 2005 (the " Transaction Agreement" ) by and between Citigroup Inc. and the Borrower, the Borrower has agreed to acquire (directly or through one of its wholly-owned subsidiaries) the shares of capital stock of certain subsidiaries of Citigroup Inc. known collectively as the business unit Citigroup Asset Management (the " Acquisition" ).

In order to finance, in part, the Acquisition, the Borrower has requested that the Lenders make term loans to it in aggregate amount up to but not exceeding $700,000,000, and the Lenders are willing to make such loans on and subject to the terms and conditions set forth herein.

Accordingly, the parties hereto hereby agree as follows:

ARTICLE I


DEFINITIONS

SECTION 1.01. Certain Defined Terms . As used in this Agreement, the following terms shall have the meanings specified below:

" Acquisition" has the meaning specified in the recitals hereto.


" Administrative Agent" has the meaning specified in the introduction hereto.


" Administrative Agent' s Account" means the account of the Administrative Agent maintained by the Administrative Agent at Citibank, N.A., 2 Penns Way, Suite 200, New Castle, Delaware 19720, ABA No.: 021-00-0089, Account No.: 36852248, Account Name: Medium Term Finance, Reference: Legg Mason, Attention: John Davidson, or such other account as may be designated by the Administrative Agent from time to time.

" Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Administrative Agent.


" Affiliate" means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.


" Applicable Lending Office" means, with respect to any Lender, such Lender' s Domestic Lending Office in the case of a Base Rate Loan and such Lender' s Eurodollar Lending Office in the case of a Eurodollar Rate Loan.

TERM LOAN AGREEMENT

" Applicable Margin" means:

(a) for any Base Rate Loan, 0.000% per annum; and


(b) for any Eurodollar Rate Loan and while any particular Rating Level applies, the rate per annum set forth below opposite the reference to the relevant Rating Level:


Rating Level Applicable
Margin


Rating Level 1 0.250 %

Rating Level 2 0.300 %

Rating Level 3 0.350 %

Rating Level 4 0.500 %

Rating Level 5 0.625 %


provided that if at any time the Debt Ratings of Moody' s and S&P would lead to different Rating Levels, the " Applicable Margin" will be determined based on the Rating Level one above the lower Rating Level (Rating Level 1 being the highest and Rating Level 5 being the lowest). Each change in the Applicable Margin resulting from a Rating Level Change shall be effective on the date on which such Rating Level Change is first announced by Moody' s or S&P, as the case may be.

" Approved Fund" means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.


" Assignment and Assumption" means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 8.06), and accepted by the Administrative Agent, in substantially the form of Exhibit C or any other form approved by the Administrative Agent.


" Assignment Date" has the meaning specified in Section 8.06(b).


" Base Rate" means a fluctuating interest rate per annum which shall at any time be equal to the higher of:

(a) the rate of interest announced publicly by Citibank in New York, New York from time to time as Citibank' s base rate; and


(b) 1/2 of 1% per annum above the Federal Funds Rate.


" Base Rate Loan" means a Loan which bears interest at rates based upon the Base Rate.

" Borrower" has the meaning specified in the introduction hereto.

TERM LOAN AGREEMENT

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" Borrowing" means a borrowing consisting of simultaneous Loans of the same Type made by each of the Lenders to the Borrower pursuant to Section 2.01.

" Business Day" means any day of the year that is not a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Rate Loan, the term " Business Day" shall also exclude any day on which banks are not open for dealings in U.S. Dollar deposits in the London interbank market.


" Capital Lease Obligations" of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.


" Change in Control" means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934, as amended from time to time, and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof) of Equity Interests representing more than 51% of the issued and outstanding Voting Shares of the Borrower or (b) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were neither (i) nominated by the board of directors of the Borrower or a committee thereof nor (ii) appointed by directors so nominated.


" Change in Law" means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority.

" Citibank" means Citibank, N.A., a national banking association.


" Closing Date" means the date on which the Administrative Agent confirms to the Borrower that the conditions precedent to the initial Borrowing set forth in Section 3.01 have been satisfied (or waived in accordance with Section 8.01).


" Code" means the Internal Revenue Code of 1986, as amended from time to time.


" Commitment" means, with respect to each Lender, the commitment of such Lender to make Loans to the Borrower in the aggregate amount set forth opposite such Lender' s name on Schedule I or, if such Lender has entered into an Assignment and Assumption, set forth for such Lender in the Register, as such amount may be reduced pursuant to Section 2.04(b). The initial aggregate amount of the Lenders' Commitments is $700,000,000.

TERM LOAN AGREEMENT

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" Commitment Percentage" means, with respect to any Lender, the percentage of the total Commitments represented by such Lender' s Commitment. If the Commitments have terminated or expired, the Commitment Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments.


" Commitment Termination Date" means the earlier of (a) the date five Business Days after the date on which the final determination of all purchase price adjustments for the Acquisition under the Transaction Agreement are made and (b) the date 90 days after the Closing Date.


" Consolidated" refers to the consolidation of accounts of any Person and its Subsidiaries without duplication in accordance with GAAP.


" Consolidated EBITDA" means, for any period, for the Borrower and its Consolidated Subsidiaries on a Consolidated basis, Consolidated net income for such period plus , without duplication and to the extent reflected as a charge in the statement of such Consolidated net income for such period, the sum of (a) income tax expense, (b) interest expense, amortization or writeoff of debt discount with respect to Indebtedness (including the Loans), (c) depreciation and amortization expense, (d) amortization of intangibles (including, but not limited to, goodwill) and organization costs, (e) any extraordinary expenses or losses (including, whether or not otherwise includable as a separate item in the statement of such Consolidated net income for such period, losses on sales of assets outside of the ordinary course of business), and (f) any other non-cash charges, and minus , to the extent included in the statement of such Consolidated net income for such period, the sum of (a) any extraordinary income or gains (including, whether or not otherwise includable as a separate item in the statement of such Consolidated net income for such period, gains on the sales of assets outside of the ordinary course of business) and (b) any other non-cash income, all as determined without duplication on a Consolidated basis in accordance with GAAP, in each case exclusive of the cumulative effect of foreign currency gains or losses. For the purposes of calculating Consolidated EBITDA for any period in connection with any determination of the Leverage Ratio, if during such period the Borrower or any Subsidiary shall have made an acquisition or incurred or assumed any Indebtedness (without duplication of any Indebtedness incurred to refinance such assumed Indebtedness), Consolidated EBITDA for such period shall be calculated after giving pro forma effect thereto as if such acquisition occurred and such Indebtedness had been incurred or assumed or refinanced on the first day of such period.


" Continuation" , " Continue" and " Continued" each refers to a continuation of Eurodollar Rate Loans from one Interest Period to the next Interest Period pursuant to Section 2.09(b).

" Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. " Controlling" and " Controlled" have meanings correlative thereto.


TERM LOAN AGREEMENT

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" Convert" , " Conversion" and " Converted" each refers to a conversion of Loans of one Type into Loans of the other Type pursuant to Section 2.08 or Section 2.09(a).


" Debt Rating" means the long-term, senior unsecured non-credit-enhanced debt ratings of the Borrower by Moody' s and/or S&P.


" Default" means an event that, with notice or lapse of time or both, would become an Event of Default.

" Delayed Term Loan" has the meaning specified in Section 2.01(b).

" Domestic Lending Office" means, with respect to any Lender, the office of such Lender specified as its " Domestic Lending Office" in the Administrative Questionnaire of such Lender or in the Assignment and Assumption pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent.

" Eligible Assignee" means (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved Fund, and (d) any other Person (other than a natural person) approved by the Administrative Agent and, unless an Event of Default has occurred and is continuing, by the Borrower (each such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, " Eligible Assignee" shall not include the Borrower or any of the Borrower' s Affiliates or Subsidiaries.


" Environmental Laws" means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material or to health and safety matters.


" Environmental Liability" means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.


" Equity Interests" means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest.


TERM LOAN AGREEMENT

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" ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time.


" ERISA Affiliate" means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

" ERISA Event" means (a) any " reportable event" , as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an " accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Borrower or any of its ERISA Affiliates from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any of its ERISA Affiliates of any notice, or the receipt by any Multiemployer Plan from the Borrower or any of its ERISA Affiliates of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

" Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.

" Eurodollar Lending Office" means, with respect to any Lender, the office of such Lender specified as its " Eurodollar Lending Office" in the Administrative Questionnaire of such Lender or in the Assignment and Assumption pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent.

" Eurodollar Rate" means, for any Interest Period for each Eurodollar Rate Loan, the rate appearing on Telerate Page 3750 at approximately 11:00 A.M., London time, two Business Days prior to the commencement of such Interest Period, as the rate for U.S. Dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the " Eurodollar Rate" with respect to such Eurodollar Rate Loan for such Interest Period shall be the rate equal to the average (rounded upwards, if necessary, to the nearest 1/16 of 1%) of the respective rates notified to the Administrative Agent by the Reference Banks as the rate at which U.S. Dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by such Reference Banks in immediately available funds in the London interbank


TERM LOAN AGREEMENT

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market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, subject , however , to the provisions of Section 2.08.


" Eurodollar Rate Loan" means a Loan which bears interest at rates based upon the Eurodollar Rate.

" Eurodollar Rate Reserve Percentage" of any Lender, for any Interest Period for any Eurodollar Rate Loan, means the reserve percentage applicable during such Interest Period (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage shall be so applicable) under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) for such Lender with respect to liabilities or assets consisting of or including Eurocurrency Liabilities having a term equal to such Interest Period.


" Events of Default" has the meaning specified in Section 6.01.

" Excluded Representations" means the representations and warranties set forth in the last sentence of Section 4.01(e) and in Section 4.01(f)(i).

" Excluded Taxes" means, with respect to the Administrative Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) Taxes imposed on or measured by its overall net income, overall gross income or overall gross receipts (however denominated), and franchise taxes imposed on it (in lieu of net income taxes) or capital taxes, by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States or any similar Tax imposed by any other jurisdiction in which the Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 2.16(b)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new lending office) or is attributable to such Foreign Lender' s failure or inability (other than as a result of a Change in Law) to comply with Section 2.15(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 2.15(a).


" Federal Funds Rate" means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for


TERM LOAN AGREEMENT

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such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

" Fee Letter" means the Fee Letter dated June 22, 2005, between the Borrower and Citigroup Global Markets Inc., providing for, among other things, the payment of certain fees in connection with this Agreement.


" Financial Officer" means the chief financial officer, principal financial officer, treasurer or controller of the Borrower.


" Foreign Lender" means a Lender that is organized under the laws of a jurisdiction other than the United States. For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.


" Fund" means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.


" GAAP" means generally accepted accounting principles in the United States as in effect from time to time.

" Governmental Authority" means the government of the United States, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.


" Guarantee" of or by any Person (the " guarantor" ) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other Person (the " primary obligor" ) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or to advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guarantee issued to support such Indebtedness or obligation; provided that the term " Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business.


" Hazardous Materials" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated


TERM LOAN AGREEMENT

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biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.


" Hedging Agreement" means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement.


" Indebtedness" of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in res
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