AGREEMENT RELATING TO
REORGANIZATION OF LAZARD
AGREEMENT, dated as of May 10, 2005 (this "Agreement"), by and
between Lazard LLC, a Delaware limited liability company ("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
Xxxxx Xxxxxxxxxxx (the "Executive").
WHEREAS, as of the date hereof, the Executive is the Head of
Lazard and a "Class A Member" of Lazard (each as defined in the Third Amended
and Restated Operating Agreement of Lazard, dated as of January 1, 2002, as
amended (as it may be amended from time to time, the "LLC Agreement")); and
WHEREAS, in connection with the Executive's participation in
the reorganization of Lazard (the "Reorganization") currently expected to
occur substantially on the terms and conditions described in Amendment No. 2
to the draft Registration Statement on Form S-1 (the "S-1") dated March 21,
2005, as filed with the Securities and Exchange Commission, relating to the
initial public offering (the "IPO" and together with the Reorganization and
the HoldCo Formation (as defined below), as each may be modified, adjusted or
implemented after the date hereof, the "Transactions") of shares of Class A
common stock of Lazard Ltd., a company incorporated under the laws of Bermuda
("PubliCo"), the Executive has agreed to enter into this Agreement with Lazard
to set forth the Executive's understanding of the terms of the Transactions
applicable to the Executive as a Class A Member (as defined in the LLC
Agreement) and as a member of a newly formed Delaware limited liability
company ("HoldCo") to be formed in connection with the Reorganization and of
the fact that the terms are in draft form and may be changed or altered after
the date hereof (other than as expressly provided herein), and approval of the
Transactions (including as such terms may be changed or altered).
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 and Lazard hereby agree as
follows:
1. Effectiveness of Agreement. This Agreement shall become effective
upon the HoldCo Formation (as defined below) (such time of effectiveness, the
"Effective Time").
2. The Transactions.
(a) Formation of HoldCo. Effective upon the Reorganization and
consummation of the mandatory sale of all "Interests" (as defined in the LLC
Agreement) pursuant to Section 6.02(b) of the LLC Agreement (as the provisions
of such Section 6.02(b) may be waived or modified) or otherwise (the "HoldCo
Formation"), and provided that as of the effective time of the HoldCo
Formation the Executive continues to be employed by the Firm, the Executive
shall receive, in exchange for the Executive's Class A Interests (as defined
in the LLC Agreement) outstanding immediately prior to the HoldCo Formation,
the percentage of membership interests in HoldCo set forth on Schedule I
attached hereto (such percentage to be increased pro rata to reflect the
redemption of Class B-1 Interests pursuant to the Reorganization) that have
substantially the same rights, obligations and terms (including with respect
to vesting) with respect to HoldCo pursuant to the HoldCo limited liability
company operating agreement (the "HoldCo LLC Agreement") and applicable law as
those of the exchanged Class A Interests, except as provided herein, including
in Section 2(b), or except to the extent that any other changes, taken as a
whole with any benefits provided, are not materially adverse to the Executive
(such membership interests, the "HoldCo Interests").
(b) Profits Interest Allocation. In connection with the
Reorganization, subject to the consummation of the HoldCo Formation and subject
to and effective upon the closing of the IPO, and provided that as of the date
of the closing of the IPO (the "IPO Date"), the Executive continues to be
employed by HoldCo or one of its affiliates (including Lazard), the Executive
shall become a member participating in the profits of HoldCo with a profit
percentage in HoldCo of no less than the amount specified on Schedule I attached
hereto (the "Profits Interest") (such percentage to be increased pro rata to
reflect the redemption of Class B-1 Interests pursuant to the Reorganization)
having the rights, obligations and terms set forth in the HoldCo LLC Agreement
so long as the Executive shall remain employed by the Firm. Subject to the
provisions of the HoldCo LLC Agreement and the determination of the Board of
Directors of HoldCo (the "HoldCo Board"), HoldCo shall make (i) distributions
in respect of income taxes arising from such Profit Interests and (ii) from
and after the third anniversary of the IPO Date distributions that are intended
to be equivalent to the aggregate amount of dividends that the Executive (and,
if applicable, the Executive's "Entities" (as defined below)) would have
received had the Executive (and, if applicable, the Executive's Entities)
exchanged such person's "Exchangeable Interests" (as defined below) for
exchangeable membership interests in Lazard that were then immediately
exchanged for "PubliCo Shares" (as defined in Section 2(e)(i)) effective as of
the third anniversary of the IPO Date (with such amount of distributions,
and such profit percentage, to be adjusted from time to time to reflect the
actual exchange, in whole or in part, of such Exchangeable Interests).
(c) Treatment of Memo Capital and Other Capital. Upon the HoldCo
Formation, HoldCo shall assume the obligations of Lazard for memo capital and
other capital in Lazard, and the Executive hereby acknowledges such assumption
and releases Lazard in full from such obligations. HoldCo shall distribute to
the Executive amounts in respect of the Executive's assumed memo capital in
respect of Class A-1 capital and former Class A-1 capital, if any, in equal
installments on the first, second, third and fourth anniversaries of the IPO
Date, plus any interest accrued through each distribution date. The Executive
further hereby agrees that all of his rights and title to and in any and all
capital of HoldCo allocated with respect to any Exchangeable Interests which
are exchanged for exchangeable membership interests in Lazard that are in turn
exchanged for PubliCo Shares, and the related profits interests (other than,
for the avoidance of doubt, the capital to be repaid in accordance with the
immediately foregoing sentence), shall be forfeited without payment therefor,
effective immediately upon the exchange of such Exchangeable Interests. This
Section 2(c) supercedes and replaces any other agreements or understandings
with respect to all capital of Lazard and HoldCo, other than in respect of
earnings on such capital, which shall be continued in accordance with past
practice.
(d) Stockholders' Agreement. The Executive hereby agrees that all
Exchangeable Interests and PubliCo Shares held by the Executive and the
Executive's Entities (including PubliCo Shares obtained pursuant to the
exchange of Exchangeable Interests for
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exchangeable membership interests in Lazard which are then exchanged for
PubliCo Shares) shall be subject to a stockholders' agreement which shall
provide, among other things, that the Executive (on behalf of himself and any
"Entity" (as defined in Section 2(e)(ii)) to whom he has transferred any Class
A-2 Interests (as defined in the LLC Agreement) or transfers any such
Exchangeable Interests or PubliCo Shares) shall delegate to such person(s) or
entity as is described in such agreement the right to vote PubliCo Shares held
by the Executive or by any such Entity to whom he made such a transfer. The
Executive hereby agrees to execute and deliver such stockholders' agreement
(or, in the case of any Entity, to cause the execution and delivery thereof)
in accordance with the HoldCo LLC Agreement.
(e) Exchangeable Interests.
(i) A portion of the HoldCo Interests received by the
Executive pursuant to Section 2(a) equal in percentage to the
Executive's Lazard Class A-2 Interests as of the IPO Date as
adjusted in the same manner as all other Lazard Class A-2
Interests in connection with the HoldCo Formation (such
portion, the "Exchangeable Interests") shall be exchangeable,
on the terms set forth in this Section 2(e) and the HoldCo LLC
Agreement, for membership interests in Lazard that are in turn
exchangeable for shares of Class A common stock of PubliCo
("PubliCo Shares"), such exchange to be accomplished in each
case by HoldCo distributing to the Executive (in exchange for
the appropriate portion of the Executive's Exchangeable
Interests) the corresponding portion of HoldCo's applicable
ownership interest in Lazard and causing PubliCo to issue the
PubliCo Shares to the Executive in exchange for such
distributed ownership interest in Lazard (or such other
structure as may be reflected in the Holdco LLC Agreement and
documents ancillary thereto which provide for a similar
exchange, directly or indirectly, of Exchangeable Interests for
PubliCo Shares). The documents reflecting the Exchangeable
Interests shall contain the restrictive covenants set forth in
the HoldCo LLC Agreement addressing the subject matter of the
Covenants, which covenants shall be consistent with, and no
more restrictive on the Executive than those contained in this
Agreement. The Executive's Exchangeable Interests shall not be
subject to reduction for any reason.
(ii) Subject to the provisions of the HoldCo LLC
Agreement, the Exchangeable Interests may be exchanged for
exchangeable membership interests in Lazard that are in turn
exchangeable for PubliCo Shares as described above, at the
Executive's election, on and after the eighth anniversary of
the IPO Date; provided, however, that (A) if the Executive
remains employed by the Firm through the third anniversary of
the IPO Date, the Executive's Exchangeable Interests (and any
Exchangeable Interests held by any trust or any entity that is
wholly-owned by the Executive or of which the entire ownership
or beneficial interests are held by any combination of the
Executive and his spouse, parents, and any of their descendants
by lineage or adoption (an "Entity")), may be exchanged for
exchangeable membership interests in Lazard that are in turn
exchangeable for PubliCo Shares, in whole or in part, at the
Executive's (or, if applicable, such Entity's) election, in
three equal installments on and after each of the third, fourth
and fifth anniversaries of the IPO Date, provided that each
such installment may be exchanged only if the Executive has
complied with the provisions of Section 9 of the
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Agreement Relating to Retention and Noncompetition and Other
Covenants (the "Retention Agreement") between the Executive and
Lazard Ltd. dated ______, 2005 (the "Covenants"), and (B) if the
Executive remains employed by the Firm through the second
anniversary of the IPO Date (but not through the third
anniversary of the IPO Date), the Executive's Exchangeable
Interests may be exchanged, in whole or in part, at the
Executive's (or, if applicable, such Entity's) election, in
three equal installments on and after each of the fourth, fifth
and sixth anniversaries of the IPO Date, provided that each
such installment may be exchanged only if the Executive has
complied with the Covenants. Notwithstanding the
above, (w) if the Executive's employment is terminated by the
Firm without "Cause" or by the Executive for "Good Reason"
(each as defined in the Retention Agreement) or by reason of
the Executive's "Disability" (as defined in the Retention
Agreement) prior to the third anniversary of the IPO Date, the
Executive's Exchangeable Interests may be exchanged as if the
Executive had remained employed on the third anniversary of the
IPO Date and complied with the requirements of clause (A) above
(i.e., the Executive may exchange his Exchangeable Interests on
the third, fourth and fifth anniversaries of the IPO Date as
described in clause (A) above, provided that each such
installment may be exchanged only if the Executive has complied
with the Covenants); (x) if the Executive's employment
is terminated by reason of the Executive's death (1) prior to
or on the second anniversary of the IPO Date, the Executive's
Exchangeable Interests shall, at the election of the Firm,
either (A) become exchangeable in full no later than the first
anniversary of such death or (B) be purchased by HoldCo at the
trading price of PubliCo Shares on the date of such repurchase
no later than the first anniversary of such death or (2)
subsequent to the second anniversary of the IPO Date but prior
to the fourth anniversary of the IPO Date, the Executive's
Exchangeable Interests may, to the extent not previously
exchanged, be exchangeable in full on the later of (A) the
third anniversary of the IPO Date and (B) the anniversary of
the IPO Date next following such death; (y) if following the
IPO Date and prior to the third anniversary of the IPO Date,
the Executive's employment terminates due to his Retirement
(defined as the voluntary resignation by the Executive on or
after the date he attains age 65 or attains age 55 and has at
least ten years of continuous service as a managing director of
Lazard or one of its affiliates) and thereafter the Executive
dies, the Executive's Exchangeable Interests shall be treated
as set forth in clause (x) of this Section, provided that
the Covenants have been complied with since his
retirement without regard to the time limits set forth therein;
and (z) in the event of a "Change of Control" (as defined in
the HoldCo LLC Agreement), the Executive's Exchangeable
Interests shall be exchanged prior to the occurrence of such
event at a time and in a fashion designed to allow the
Executive to participate in the Change of Control transaction
on a basis no less favorable (prior to any applicable taxes)
than that applicable to holders of PubliCo Shares.
(iii) Prior to the applicable exchange date and as a
condition to the exchange of the Exchangeable Interests for
PubliCo Shares, the Executive shall have entered into a
stockholders' agreement, as described in Section 2(d), and
otherwise complied in all material respects with the terms of
the HoldCo LLC Agreement applicable to such exchange. Each of
HoldCo and PubliCo shall have the right to require the exchange
of all or part of the Executive's Exchangeable Interests for
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PubliCo Shares during the period beginning on the ninth
anniversary of the IPO Date and ending 30 days after such
anniversary.
(f) Registration; Dilution. The definitive agreements relating to
the Transactions will contain (i) provisions obligating PubliCo to file a
registration statement with the U.S. Securities and Exchange Commission in
order to register the reoffer and resale of the PubliCo Shares on and
following the exchange of the Exchangeable Interests, subject to customary
blackout provisions and other customary restrictions, and obligating PubliCo
to use reasonable efforts to list such PubliCo Shares on the New York Stock
Exchange, and (ii) customary antidilution and corporate event adjustment
protections (consistent with adjustments applicable to PubliCo Shares) with
respect to the Exchangeable Interests and the Exchangeable Interests' exchange
rights into PubliCo Shares.
(g) Cooperation With Respect to Taxes. Lazard shall use its
reasonable efforts to structure the Transactions in a manner that does not
result in any material tax to the Executive (that the Executive would not have
incurred in the absence of the Transactions) upon the exchange of the Class A-2
Interests into Exchangeable Interests or other exchange of Class A-2 Interests
into HoldCo Interests, it being understood that this shall not be a commitment
to maintain the current tax treatment or benefits applicable to the Executive.
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3. Dispute Resolution. Any dispute, controversy or claim between the
Executive and the Firm on or subsequent to the IPO Date arising out of or
relating to or concerning the provisions of this Agreement shall be finally
settled by arbitration in New York City before, and in accordance with the
rules then obtaining of, the New York Stock Exchange, Inc. (the "NYSE") or, if
the NYSE declines to arbitrate the matter, the American Arbitration
Association (the "AAA") in accordance with the commercial arbitration rules of
the AAA; provided, however, that any dispute relating to the basis for any
actual or purported termination of the Executive's employment or any actual or
purported breach of the Covenants shall be governed by the dispute resolution
provisions of the Retention Agreement. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflict of laws which could cause the application of the law
of any jurisdiction other than the State of New York.
4. Other Agreements. As of the Effective Time, this Agreement shall
supersede any other agreement, written or oral, pertaining to the matters
covered herein. For the avoidance of doubt, this Agreement shall not supersede
the Retention Agreement.
5. No IPO. Notwithstanding anything to the contrary contained herein,
this Agreement shall terminate (i) on December 31, 2005, if the IPO Date does
not occur prior to December 31, 2005, or (ii) on such date earlier than
December 31, 2005, if any, on which (A) the IPO is finally abandoned or
terminated by Lazard or (B) the Class B-1 and Class C Members and Transaction
Agreement, dated as of December 12, 2004, terminates. Upon any such
termination, this Agreement shall be of no further force and effect and the
rights and obligations of the parties hereto shall be governed by the terms of
the LLC Agreement and the Amended and Restated Employment Agreement between
the Executive and Lazard LLC, dated as of December 16, 2004.
6. Miscellaneous.
(a) Notices hereunder shall be delivered to Lazard at its
principal executive office directed to the attention of its General Counsel,
and to the Executive at the Executive's last address appearing in the Firm's
employment records. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid.
(b) This Agreement may not be amended or modified, other than by a
written agreement executed by the Executive and the Firm. This Agreement shall
be binding upon and inure to the benefit of the Executive's permitted
successors and assigns. This Agreement shall be binding upon and inure to the
benefit of the Firm and its successors and assigns.
(c) The Firm may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation, and may withhold from,
and offset by, any amounts or benefits provided under this Agreement, any
amounts owed to the Firm by the Executive, including, without limitation, any
advances, expenses, loans, or other monies the Executive owes the Firm
pursuant to a written agreement or any written policy of the Firm which has
been communicated to the Executive.
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(d) Except as expressly provided herein, this Agreement shall not
confer on any person other than the Firm and the Executive any rights or
remedies hereunder. There shall be no third-party beneficiaries to this
Agreement.
(e) The captions in this Agreement are for convenience of
reference only and shall not define or limit the provisions hereof.
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IN WITNESS WHEREOF, the Executive and the Firm hereto have
caused this Agreement to be executed and delivered on the date first above
written.
LAZARD LLC
(on its behalf, and on behalf of its
subsidiaries and affiliates)
By: /s/ Xxxxxx X. Xxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Authorized Person
XXXXX XXXXXXXXXXX
By: /s/ Xxxxx Xxxxxxxxxxx
--------------------------------------
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SCHEDULE I
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HoldCo Interests (as per Section 2(a)): 1.95%
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Profit Interests (as per Section 2(b)): 1.95%
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Initialed by the Executive:_______
Initialed by Lazard:_______
