FORM OF FIRST AMENDMENT TO AGREEMENT RELATING TO RETENTION AND NONCOMPETITION AND OTHER COVENANTS
Exhibit
10.2
FORM OF
FIRST AMENDMENT TO AGREEMENT RELATING TO RETENTION AND
NONCOMPETITION
AND OTHER COVENANTS
First
Amendment (the “First
Amendment”), dated as of May 7, 2008 (the “Effective Date”), to
Agreement Relating to Retention and Noncompetition and Other Covenants by and
between Lazard Group LLC, a Delaware limited liability company, and successor to
Lazard LLC (“Lazard”), on its
behalf and on behalf of its subsidiaries and affiliates (collectively with
Lazard, and its and their predecessors and successors, the “Firm”),
and [
] (the “Executive”), dated as
of May 4, 2005 (the “Agreement”);
and
WHEREAS,
the Firm and the Executive wish to amend the Agreement to (i) make Lazard Ltd, a
company incorporated under the laws of Bermuda (“PubliCo”), a party to
the Agreement, as amended by the First Amendment, through PubliCo’s execution of
the First Amendment, and (ii) modify Schedule I to such Agreement to, among
other things, extend certain of the obligations thereunder and to make such
other changes to the Agreement and Schedule I as are necessary in order for the
terms thereof to comply with Section 409A of the Internal Revenue Code of 1986,
as amended.
NOW,
THEREFORE, in consideration of the premises contained herein and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Executive, Lazard and PubliCo hereby agree as
follows:
Effective
as of the Effective Date, PubliCo shall become a party to the Agreement and
Schedule I of the Agreement shall hereby be amended and restated in the form
attached hereto.
IN
WITNESS WHEREOF, the Executive and the Board of Directors of each of Lazard and
PubliCo have caused this First Amendment to be executed and delivered on the
date first above written.
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[
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(on
its behalf, and on behalf of its
subsidiaries
and affiliates)
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By:
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Name:
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Title:
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LAZARD
LTD
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By:
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Name:
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Title:
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SCHEDULE
I
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Name
(as per Preamble):
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[ ]
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HoldCo
Interests (as per Section 2(b)):
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[ ]
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Profit
Interests (as per Section 2(d)):
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Effective upon the
Effective Date of the First Amendment to this Agreement, this Schedule I shall
take effect and its provisions shall constitute binding and enforceable
agreements of the Firm.
1. Title. Notwithstanding
anything to the contrary contained in Section 3(b) of this Agreement, from the
Effective Date through March 31, 2011, the Executive shall serve as Managing
Director and Chief Financial Officer of PubliCo and of Lazard Group
LLC.
2. Compensation. Notwithstanding
anything to the contrary contained in Sections 3(c)(i) and (ii) of this
Agreement, subject to the Executive’s continued employment with the Firm during
the period from the Effective Date through March 31, 2011, the Executive shall
be entitled to receive (i) an annual base salary of not less
than [ ]
(“Base Salary”)
and (ii) so long as the Executive remains employed by the Firm through the end
of the applicable fiscal year of Lazard, an annual bonus to be determined under
the terms of the applicable annual bonus plan of Lazard on the same basis as
annual bonus is determined for other executive officers of PubliCo, with such
bonus to be paid in the same ratio of cash to equity awards as is applicable to
executives of the Firm receiving bonuses at a level comparable to the bonus of
the Executive. For purposes hereof, the term Base Salary shall refer
to Base Salary as in effect from time to time, including any
increases. Notwithstanding anything to the contrary contained in
Section 3(c)(iv) of this Agreement, during the portion of the Term commencing on
the Effective Date, subject to the Executive’s continued employment, the
Executive shall be eligible to participate in the employee retirement and
welfare benefit plans and programs of the type made available to the senior most
executives of the Firm generally, in accordance with their terms and as such
plans and programs may be in effect from time to time, including, without
limitation, savings, profit-sharing and other retirement plans or programs,
401(k), medical, dental, flexible spending account, hospitalization, short-term
and long-term disability and life insurance plans.
3. Severance Pay and Benefits
under Certain Circumstances. Notwithstanding anything to the
contrary contained in Section 3(d) of this Agreement, in the event that during
the period commencing on the Effective Date and concluding on March 31, 2011,
the Executive’s employment with the Firm is terminated by the Firm without Cause
or by the Executive for Good Reason (as defined below) (a “Qualifying
Termination”), Lazard shall pay the Executive, in a lump sum in cash
within thirty (30) days after the Date of Termination, the aggregate of the
following amounts: (i) any unpaid Base Salary through the Date of Termination;
(ii) any earned and unpaid cash bonus amounts for fiscal years of Lazard
completed prior to the Date of Termination (determined in accordance with
paragraph 2 above and with any such bonus to be paid in full in cash); and (iii)
the product of (1) the “Severance Multiple”
(as defined below) and (2) the sum of (x) the Base Salary and (y) the average annual bonus
(or, to the extent applicable, cash distributions, and including any bonuses
paid in the form of equity awards based on the grant date value of such equity
awards in accordance with the normal valuation methodology used by Lazard) paid
or payable to the Executive for the two completed fiscal years of Lazard
immediately preceding the fiscal year during which occurs the Date of
Termination (the “Average
Bonus”). In addition, (i) for a period of months equal to the
product of (1) 12 and (2) the Severance Multiple, the Executive and his
eligible dependents shall continue to be eligible to participate in the medical
and dental benefit plans of Lazard on the same basis as the Executive
participated in such plans immediately prior to the Date of Termination, to the
extent that the applicable plan permits such continued participation for all or
any portion of such period (it being agreed that Lazard will use its reasonable
efforts to cause such continued coverage to be permitted under the applicable
plan for the entire period), which benefits continuation period shall not run
concurrently with or reduce the Executive’s right to continued coverage under
COBRA and (ii) to the extent permitted under the applicable plan, the Executive
will receive additional years of age and service credit equal to the Severance
Multiple for purposes of determining his eligibility for and right to commence
receiving benefits under the retiree health care benefit plans of Lazard
Group. For purposes of the provision of the health care benefits as
provided above, the amount of such health care benefits provided in any given
calendar year shall not affect the amount of such benefits provided in any other
calendar year, and the Executive’s right to the health care benefits may not be
liquidated or exchanged for any other benefit.
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In addition, in
the case of a Qualifying Termination, with respect to the fiscal year of Lazard
during which the Date of Termination occurs, the Executive shall receive a
pro-rata annual bonus payable in cash determined as follows:
(i) if the Date of
Termination occurs prior to or on December 31, 2008, the pro-rata annual bonus
shall be determined by the administrator of the Lazard Ltd 2005 Bonus Plan
consistent with Section 5(c) thereof on the same basis as annual bonus is
determined for other executive officers of PubliCo;
(ii) if (A) the
Date of Termination occurs after December 31, 2008 and prior to or on December
31, 2010 and (B) with respect to the fiscal year during which the Date of
Termination occurs, (1) the Executive was reasonably expected by Lazard to be a
“covered employee” (within the meaning of Section 162(m) of the Internal Revenue
Code of 1986, as amended (the “Code”)) prior to his
Date of Termination, and (2) the annual bonus that the Executive was eligible to
receive for such year was originally intended by Lazard to satisfy the
performance-based exception under Section 162(m) of the Code (without regard to
any entitlement to payment upon termination of employment), the Executive’s
pro-rata annual bonus shall equal the product of (1) the amount determined by
the Compensation Committee based on the Firm’s actual performance for the fiscal
year of the Firm in which the Date of Termination occurs on the same basis as
annual bonus is determined for other executive officers of the Firm (which,
subject to the limits on any such bonus due to the level of satisfaction of the
performance goals previously established for purposes of Section 162(m) of the
Code, shall not represent (on an annualized basis) a percentage of the
Executive’s bonus for the fiscal year preceding the fiscal year in which the
Date of Termination occurs that is lower than the average corresponding
percentage applicable to active executives of Lazard who received bonuses for
such prior fiscal year in amounts within 5% of the Executive’s bonus for such
prior fiscal year), and (2) a fraction, the numerator of which is the number of
days elapsed in the fiscal year of Lazard in which occurs the Date of
Termination through the Date of Termination, and the denominator of which is 365
(the “Pro-Ration
Fraction”); or
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(iii) if (A) the Date
of Termination occurs after December 31, 2008 and prior to or on March 31, 2011
and (B) with respect to the fiscal year during which the Date of Termination
occurs, the Executive is not reasonably expected by Lazard to be a “covered
employee” (within the meaning of Section 162(m) of the Code) prior to his Date
of Termination, the pro-rata annual bonus shall equal the product of (1) the
Average Bonus and (2) the Pro-Ration Fraction.
The pro-rata annual
bonus determined pursuant to clause (i), (ii) or (iii) above, as applicable,
shall be paid at such time or times as Lazard otherwise makes incentive payments
for such fiscal year (and in all events prior to March 15 of the year following
the year in which the Date of Termination occurs).
For all
purposes of this Agreement, including without limitation, Sections 2(g)(ii) and
Section 5(a), a resignation on or prior to March 31, 2011 by the Executive for
Good Reason shall be treated as a termination of the Executive by the Firm
without Cause.
In no event shall the Executive be obligated to seek other employment or take
any other action by way of mitigation of the amounts payable to the Executive
under any of the provisions of this paragraph 3 of this Schedule and such
amounts shall not be reduced whether or not the Executive obtains other
employment. Except as provided in Section 16(f) of this Agreement,
the Firm’s obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action which
the Firm may have against the Executive.
4. Certain
Definitions. For purposes of the Agreement and this Schedule
I, as applicable, the following terms shall have the following
meanings:
Notwithstanding the definition of “Date of Termination” set forth in Section 5
of the Agreement, for purposes of the Agreement, including Section 5, and this
Schedule I, “Date of Termination” shall mean (i) if the Executive’s
employment is terminated by the Firm for Cause, the date of receipt of the
notice of termination from the Firm or any later date specified therein within
30 days of such notice, as the case may be, (ii) if the Executive’s
employment is terminated by the Firm other than for Cause or Disability, the
date on which the Firm notifies the Executive of such termination, (iii) if
the Executive’s employment is voluntarily terminated by the Executive without
Good Reason, the date as specified by the Executive in the Notice of
Termination, which date shall not be less than three months after the Executive
notifies the Firm of such termination, unless waived in writing by the Firm,
(iv) if the Executive’s employment is terminated by the Executive for Good
Reason, the earlier of (A) the last day of the cure period (assuming no cure has
occurred) and (B) the date Lazard formally notifies the Executive that it does
not intend to cure, unless Lazard and the Executive agree to a later date, which
shall in no event be later than 30 days following the first to occur of the
dates set forth in clauses (A) and (B) of this clause (iv), and (v) if the
Executive’s employment is terminated by reason of death or Disability, the Date
of Termination shall be the date of death of the Executive or the date on which
the Executive’s employment due to Disability is effective for purposes of the
applicable long-term disability plan of the Firm. The Firm and the
Executive shall take all steps necessary (including with regard to any
post-termination services by the Executive) to ensure that any termination of
the Executive’s employment described in the Agreement, including Schedule I,
constitutes a “separation from service” within the meaning of Section 409A of
the Code, and notwithstanding anything contained herein to the contrary, the
date on which such separation from service takes place shall be the “Date of
Termination.”
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“Good Reason”
shall mean (i) the assignment to the Executive of any duties inconsistent in any
material respect with the Executive’s position (including status, offices,
titles and reporting requirements), authority, duties or responsibilities as in
effect as of the Effective Date, or any other action by the Firm which results
in a material diminution in such position, authority, duties or responsibilities
from the level in effect as of the Effective Date, (ii) a material breach by the
Firm of the terms of this Agreement, including, without limitation, any material
failure by the Firm to comply with paragraph 2 of this Schedule, or (iii) any
requirement that the Executive’s principal place of employment be relocated to a
location that increases the Executive’s commute from his primary residence by
more than 30 miles. In the event of a termination for Good Reason,
the notice requirements of Section 1 shall not apply. Notwithstanding
the foregoing, a termination for Good Reason shall not have occurred unless (i)
the Executive gives written notice to Lazard of termination of employment within
ninety (90) days after the Executive first becomes aware of the occurrence of
the circumstances constituting Good Reason, specifying in reasonable detail the
circumstances constituting Good Reason, and Lazard has failed within thirty (30)
days after receipt of such notice to cure the circumstances constituting Good
Reason, and (ii) the Executive’s “separation from service” (within the meaning
of Section 409A of the Code) occurs no later than two years following the
initial existence of one or more of the circumstances giving rise to Good
Reason.
“Severance
Multiple” shall equal (i) two (2), if the Date of Termination occurs
prior to a Change of Control or (ii) three (3), if the Date of Termination
occurs on or following the date of a Change of Control.
5. Excise
Tax. In the event it shall be determined that any payment,
benefit, or distribution by the Firm to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional
payments required under this paragraph) (a “Payment”) would be
subject to the excise tax imposed by Section 4999 of the Code or any interest or
penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the “Excise Tax”), then
the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in
an amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, but excluding
any income taxes and penalties imposed pursuant to Section 409A of the Code, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
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The Firm’s obligation
to make Gross-Up Payments under this paragraph 5 shall not be conditioned upon
the Executive’s termination of employment. All determinations
required to be made under this paragraph, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Deloitte
& Touche LLP or such other certified public accounting firm reasonably
acceptable to the Firm as may be designated by the Executive (the “Accounting Firm”),
which shall provide detailed supporting calculations both to Lazard and the
Executive within fifteen (15) business days of the receipt of notice from the
Executive that there has been a Payment, or such earlier time as is requested by
Lazard. All fees and expenses of the Accounting Firm shall be borne
solely by the Firm. Any Gross-Up Payment shall be paid by the Firm to
the Executive within five days of the later of (i) the due date for the payment
of any Excise Tax, and (ii) the receipt of the Accounting Firm’s
determination. Any determination by the Accounting Firm shall be
binding upon the Firm and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Firm should have been
made (“Underpayment”) or
that Gross-Up Payments which were made by the Firm should not have been made
(“Overpayment”). In
the event that there occurs an Underpayment and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Firm to or for the benefit of the
Executive. In the event that there occurs an Overpayment and the
Executive becomes entitled to receive any refund with respect to the Excise Tax,
the Executive shall promptly pay to the Firm the amount of such refund (together
with any interest paid or credited thereon after taxes applicable
thereto).
Any Gross-Up Payment, as determined pursuant to this paragraph 5, shall be paid
by the Firm to the Executive within five (5) days of the receipt of the
Accounting Firm’s determination; provided that, the
Gross-Up Payment shall in all events be paid no later than the end of the
Executive’s taxable year next following the Executive’s taxable year in which
the Excise Tax (and any income or other related taxes or interest or penalties
thereon) on a Payment is remitted to the Internal Revenue Service or any other
applicable taxing authority or, in the case of amounts relating to a claim from
the Internal Revenue Service or another tax authority that does not result in
the remittance of any federal, state, local and foreign income, excise, social
security and other taxes, the calendar year in which the claim is finally
settled or otherwise resolved. Notwithstanding any other provision of
this paragraph 5, the Firm may, in its sole discretion, withhold and pay over to
the Internal Revenue Service or any other applicable taxing authority, for the
benefit of the Executive, all or any portion of any Gross-Up Payment, and the
Executive hereby consents to such withholding.
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6. Section
409A. It is the intention of the parties that the payments and
benefits to which the Executive could become entitled in connection with
termination of employment under this Agreement comply with or are exempt from
the definition of “nonqualified deferred compensation” under Section 409A of the
Code. In this regard, notwithstanding anything in this Agreement to
the contrary, all cash amounts that become payable under Section 3 of this
Schedule I on account of the Executive’s termination of employment shall be paid
no later than March 15 of the year following the year in which the Date of
Termination occurs. In the event the parties determine that the terms
of this Agreement, including this Schedule I, do not comply with Section 409A,
they will negotiate reasonably and in good faith to amend the terms of this
Agreement and/or Schedule I such that they comply (in a manner that attempts to
minimize the economic impact of such amendment on the Executive and the Firm)
within the time period permitted by the applicable Treasury
Regulations.
7. Miscellaneous.
Section
12. Section 12 of this Agreement is
hereby amended to replace all references to the New York Stock Exchange, Inc.”
and the “NYSE”
with references to the “Financial Industry Regulatory Authority” and “FINRA”, as
applicable.
Section
16(b). Paragraphs 2, 3, 4, 5 and 6
of this Schedule I are hereby added to the list of Sections in Section 16(b) of
this Agreement.
Section 16(f). Section 16(f) of this
Agreement is hereby amended to add the following words at the end
thereof: “, except to the extent such withholding or offset is not
permitted under Section 409A of the Code without the imposition of additional
taxes or penalties on the Executive.”
| Initialed by the Executive: |
| Initialed by Lazard: |
| Initialed by PubliCo: |
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