Exhibit 10.28
AGREEMENT RELATING TO RETENTION
AND
NONCOMPETITION AND OTHER COVENANTS
AGREEMENT, dated as of
October 4, 2004 (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 the individual named on Schedule I (the
“ Executive ”).
WHEREAS, as of the date hereof, the
Executive is a “Managing Director” 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, pursuant to the LLC
Agreement and the Goodwill Vesting Agreement and Acknowledgement
between Lazard and the Executive (the “ Goodwill
Agreement ,” and, together with the LLC Agreement, the
“ Current Agreements ”), as a Class A
Member, the Executive is subject to certain restrictions relating
to competition and solicitation; 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 the
draft Registration Statement on Form S-1 (the “ S-1
”) dated September 24th, 2004 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 S.A., a newly formed
société anonyme formed under the laws of Luxembourg
(“ PubliCo ”), the Executive has agreed to enter
into this Agreement with Lazard to set forth the Executive’s
(1) 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), (2) continuing employment commitment in
contemplation of the IPO and following the IPO (as provided in
Section 3(a)) and (3) obligations in respect of keeping
information concerning the Firm confidential, not engaging in
competitive activities, not soliciting the Firm’s clients,
not hiring the Firm’s employees, not disparaging the Firm or
its directors, members or employees, and cooperating with the Firm
in maintaining certain relationships, while employed by the Firm
and following the termination of the Executive’s
employment.
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. Term . Subject to the
final sentence of this Section 1, Section 10(c) and to
Section 16(b), the “ Term ” of this
Agreement shall commence as of the date hereof (the “
Effective Date ”) and shall continue indefinitely
until terminated in accordance with this Section 1.
Either party to this Agreement may terminate the
Term (and the Executive’s employment) upon three
months’ prior written notice to the other party; provided,
however , that such notice (or pay in lieu of notice) shall not
be required in the event of the termination of the
Executive’s employment by reason of the Executive’s
death or “disability” (within the meaning of the
long-term disability plan of the Firm applicable to the Executive)
(“ Disability ”) or by the Firm for Cause (as
defined in Section 2(g)(iv)), may be waived by the Firm in the
event of receipt of notice of a termination by the Executive or
may, if the Firm wishes to terminate the Term with immediate
effect, be satisfied by providing the Executive with his base
salary during such three-month period in lieu of such notice.
Notwithstanding that the Term commences as of the Effective Date,
certain provisions of this Agreement shall not take effect until a
later date, as specified herein. In addition, notwithstanding
anything to the contrary contained herein, this Agreement shall
terminate (i) on September 30, 2005, if the date of the
closing of the IPO (the “ IPO Date ”) does not
occur prior to September 30, 2005, or (ii) on such date
earlier than September 30, 2005, if any, on which (A) the
IPO is finally abandoned or terminated by Lazard or (B) the
Purchase and Transaction Support Agreement among Lazard and certain
holders of “Class B-1 Interests” and “Class C
Interests” (each as defined in the LLC Agreement) 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 Current Agreements and
any agreements or portions thereof that had otherwise been
superseded by Section 16(a).
2. The Transactions
.
(a) Participation in the
Reorganization . The Executive hereby acknowledges that he has
reviewed and understands the terms of the proposed Transactions and
that such terms, including the structure of the Transactions, may
be modified or otherwise altered by the Board of Directors of
Lazard, an authorized committee thereof or the “Head of
Lazard and Chairman of the Executive Committee” (as defined
in the LLC Agreement) as such person(s) may determine in
furtherance of the purposes underlying the Transactions. The
Executive hereby covenants to execute and deliver such documents,
consents and agreements as shall be necessary to effectuate each of
the Transactions (as described in the S-1 or as such Transactions
may be modified or altered in accordance with the foregoing
sentence), including, without limitation, any amendments to the
Current Agreements or this Agreement (solely to the extent such
amendments are necessary to effectuate any such modifications and
alterations to the Transactions and are not inconsistent with the
intent and purpose of this Agreement and other than as set forth in
the last sentence of this Section 2(a)), a customary
accredited investor representation letter, a HoldCo membership
agreement and the stockholders’ agreement referred to in
Section 2(f). Notwithstanding anything contained herein to the
contrary, in no event shall the following provisions be modified in
a manner that materially and adversely affects the following rights
of the Executive as and to the extent set forth in such provisions
of this Agreement: (i) Section 2(c) solely with respect
to the vesting of the Class A-2 Interests and the
corresponding Holdco Interests, (ii) Section 2(e) solely
with respect to the timing of payment of the memo and other capital
in Lazard, (iii) Section 2(g)(i) solely with respect to
the last sentence thereof relating to the restrictive covenants
applicable to the Exchangeable Interests,
(iv) Section 2(g)(ii) solely with respect to the timing
of exchangeability of the Exchangeable Interests,
(v) Section 2(g)(iv) solely with respect to the
definition of Cause and (vi) Schedule I.
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(b) 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 Sections 2(a)
and 2(d), 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 ”). The Holdco LLC Agreement will include those
terms set forth on Schedule II attached hereto, subject to
the limitations set forth therein.
(c) Vesting of Class A-2
Interests (or the Holdco Interests Corresponding to Such
Class A-2 Interests) . Subject to the consummation of the
HoldCo Formation and subject to and effective upon the IPO Date,
and provided that as of the IPO Date the Executive continues to be
employed by the Firm (or has had his employment terminated by the
Firm without “Cause” (as defined below) or on account
of Disability or death), following the date hereof and prior to the
IPO Date, the Class A-2 Interests (as defined in the LLC
Agreement) (the “ Class A-2 Interests ”) held by
the Executive as of the date hereof (or upon consummation of the
Reorganization, the HoldCo Interests received by the Executive in
the Reorganization that correspond to the Executive’s
Class A-2 Interests as of the date hereof) that are not vested
as of the IPO Date, shall become fully vested. Such vesting shall
occur (i) in the case of a termination of employment prior to
the IPO Date on the terms described above in this
Section 2(c), on the date of such termination (provided that
in the event that the IPO Date shall not occur as contemplated by
this Agreement, such vesting shall be deemed not to have occurred,
unless it is otherwise provided by the Current Agreements) or
(ii) in any other case, on the IPO Date.
(d) 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
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 ex-
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changeable membership interests in Lazard that
were then immediately exchanged for “PubliCo Shares”
(as defined below) 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).
(e) 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(e) 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.
(f) Stockholders’
Agreement . The Executive hereby agrees that all Exchangeable
Interests and PubliCo Shares (as defined in Section 2(g)(i))
held by the Executive and the Executive’s Entities (including
PubliCo Shares obtained pursuant to the exchange of Exchangeable
Interests for 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(g)(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. The stockholders’ agreement will
include those terms set forth on Schedule III attached
hereto, subject to the limitations set forth therein.
(g) Exchangeable Interests
.
(i) A portion of the HoldCo
Interests received by the Executive pursuant to Section 2(b)
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(g) 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 Exchange-
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able 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 Covenants (as defined in Section 10),
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” (as defined below) or by reason of
the Executive’s Disability 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-
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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(f), 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 PubliCo Shares during the period
beginning on the ninth anniversary of the IPO Date and ending 30
days after such anniversary.
(iv) For purposes of this Agreement,
“Cause” shall mean: (A) conviction of the
Executive of, or a guilty or nolo contendere plea (or the
equivalent in a non-United States jurisdiction) by the Executive
to, a felony (or the equivalent in a non-United States
jurisdiction), or of any other crime that legally prohibits the
Executive from working for the Firm; (B) breach by the
Executive of a regulatory rule that materially adversely affects
the Executive’s ability to perform his duties to the Firm;
(C) willful and deliberate failure on the part of the
Executive (i) to perform his employment duties in any material
respect or (ii) to follow specific reasonable directions
received from the Firm, in each case following written notice to
the Executive of such failure and, if such failure is curable, the
Executive’s failing to cure such failure within a reasonable
time (but in no event less than 30 days); or (D) a breach of
the Covenants that is (individually or combined with other such
breaches) demonstrably and materially injurious to Lazard or any of
its affiliates. Notwithstanding the foregoing, with respect to the
events described in clauses (B) and (C)(i) hereof, the
Executive’s acts or failure to act shall not constitute Cause
to the extent taken (or not taken) based upon the direct
instructions of the Head of Lazard (or after the IPO Date, the
Chief Executive Officer of PubliCo (the “ CEO ”)
or a senior executive officer of Lazard.
(h) R
