EXHIBIT 10.3

 

TAX RECEIVABLE AGREEMENT

 

This TAX RECEIVABLE AGREEMENT (this “Agreement”), dated as of May 10, 2005, by
and among Ltd Sub A and Ltd Sub B, (each as defined herein) both wholly owned
indirect subsidiaries of Lazard Ltd, a Bermuda company (“Lazard”) and LFCM
Holdings LLC, a Delaware limited liability company (“LFCM”).

 

WHEREAS, on December 16, 2004, Lazard, Lazard LLC, a Delaware limited liability
company taxable as a partnership for U.S. Federal income tax purposes that will
be renamed “Lazard Group LLC” (“Lazard Group”) and LAZ-MD Holdings LLC, a
Delaware limited liability company (“LAZ-MD”), entered into that certain Class
B-1 and Class C Members Transaction Agreement relating to Lazard Group (the
“Buyout Agreement”); and

 

WHEREAS, pursuant to the Buyout Agreement, certain interests of historic
partners of Lazard Group (the “Historic Partners”) shall be redeemed for cash
(the “Redemption”); and

 

WHEREAS, pursuant to the Buyout Agreement, Lazard Group and the Historic
Partners have agreed to treat a portion of the consideration paid to the
Historic Partners in the Redemption as received in a sale or exchange pursuant
to Section 707(a)(2)(B) of the Internal Revenue Code of 1986, as amended (the
“Code”) and the remainder of such consideration as received by the Historic
Partners as a distribution; and

 

WHEREAS, in connection with transactions contemplated by the Buyout Agreement,
certain members of Lazard Group (each, an “Exchangeable Holder”) will be issued
a class of exchangeable membership interests in LAZ-MD, which exchangeable
interests are effectively exchangeable on a one-for-one basis for shares of
Lazard (an “Exchange”); and

 

WHEREAS the Exchanges are expected to be effected via an Exchangeable Holder’s
transfer of Lazard Group interests directly to Ltd Sub A and Ltd Sub B (each, an
“Ltd Exchanging Subsidiary”) in transactions that are intended to result in an
Exchangeable Holder’s recognition of gain or loss for U.S. Federal income tax
purposes (each, a “Taxable Exchange”), as described herein; and

 

WHEREAS, Lazard Group shall have in effect an election under Section 754 of the
Code for the Taxable Year (as defined herein) in which the Redemption occurs,
which election will result in an adjustment to the Ltd Exchanging Subsidiaries’
share of the tax basis of the assets owned by Lazard Group as of the Redemption
Date (such assets and any asset whose tax basis is determined, in whole or in
part, by reference to the adjusted basis of any such asset, the “Original
Assets”) by reason of the Redemption; and

 

WHEREAS, Lazard Group intends to have in effect an election under Section 754 of
the Code for each Taxable Year in which any Taxable Exchange occurs, which
election will result in an adjustment to the Ltd Exchanging Subsidiaries’ share
of the tax basis of the assets owned by Lazard Group as of the date of any such
Taxable Exchange; and

 

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WHEREAS, Lazard, through the Ltd Exchanging Subsidiaries, will own, immediately
following the Redemption, a controlling interest in Lazard Group and a portion
of the common membership interests in Lazard Group; and

 

WHEREAS, the income, gain, loss, expense and other Tax items of Lazard Group and
the Relevant Lazard Ltd Taxpayers (as defined herein) may be affected by the
Basis Adjustment (as defined herein) and the Imputed Interest (as defined
herein); and

 

WHEREAS, the parties to this Agreement desire to make certain arrangements with
respect to the effect of the Basis Adjustment and Imputed Interest on the actual
liability for Covered Taxes of the Relevant Lazard Ltd Taxpayers (as defined
herein).

 

NOW, THEREFORE, in consideration of the foregoing and the respective covenants
and agreements set forth herein, and intending to be legally bound hereby, the
parties hereto agree as follows:

 

ARTICLE I

 

Definitions

 

Definitions. As used in this Agreement, the terms set forth in this Article I
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined).

 

“Advisory Firm” means an accounting or law firm that is nationally recognized as
being expert in Covered Tax matters, as determined by the Audit Committee. The
Audit Committee shall select the Advisory Firm.

 

“Advisory Firm Letter” shall mean a letter from the Advisory Firm stating that
the relevant schedule, notice or other information to be provided by the Ltd
Exchanging Subsidiaries to LFCM and all supporting schedules and work papers
were prepared in a manner consistent with the terms of this Agreement and, to
the extent not expressly provided in this Agreement, on a reasonable basis in
light of the facts and law in existence on the date such schedule, notice or
other information is delivered to LFCM.

 

“Agreed Rate” means LIBOR plus 200 basis points.

 

“Agreement” is defined in the preamble.

 

“Amended Tax Benefit Schedule” is defined in Section 2.05(b) of this Agreement.

 

“Applicable Treasury Rate” means a rate equal to the yield to maturity as of the
date an Early Termination Notice is delivered (the “delivery date”) of U.S.
Treasury securities with a constant maturity (the “Applicable Maturity”) (as
compiled and published in the most recent Federal Reserve Statistical Release H
15 (519)) equal to (a) if the delivery date is on or after the third anniversary
of the Redemption Date but prior to the fifth anniversary of the Redemption
Date, 10 years after the delivery date, (b) if the delivery date is on or after
the fifth anniversary of

 

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the Redemption Date but prior to the fifteenth anniversary of the Redemption
Date, the number of years from the delivery date through the fifteenth
anniversary of the Redemption Date, or (c) if the delivery date is on or after
the fifteenth anniversary of the Redemption Date, two years after the delivery
date. If there are no U.S. Treasury securities with a constant maturity equal to
the Applicable Maturity, the yield to maturity shall be interpolated from the
U.S. Treasury securities with constant maturities that are most nearly longer
than and shorter than the Applicable Maturity.

 

“Audit Committee” means the audit committee of the board of directors of Lazard.

 

“Basis Adjustment” means the increase or decrease to the tax basis of, or any
Relevant Lazard Ltd Taxpayer’s share of the tax basis of, Lazard Group’s assets
(i) under Sections 734(b), 743(b) and 754 of the Code and the comparable
sections of U.S. state and local income and franchise Tax law as a result of the
Redemption, (ii) under Section 743(b) and 754 of the Code and the comparable
sections of U.S. state and local income and franchise Tax law as a result of any
Taxable Exchange and (iii) under Sections 743(b) and 754 as a result of any
payments under this Agreement. For the avoidance of doubt, payments under this
Agreement shall not be treated as resulting in a Basis Adjustment to the extent
such payments relate to the Redemption or are treated as Imputed Interest.

 

“Business Day” means any calendar day that is not a Saturday, Sunday or other
calendar day on which banks are required or authorized to be closed in the City
of New York.

 

“Buyout Agreement” is defined in the recitals.

 

“Change of Control Event” means the occurrence of any of the following events:

 

(i) the consummation, through one or more related transactions, of (A) a merger,
amalgamation, consolidation, statutory share exchange or similar form of
corporate transaction involving Lazard or Lazard Group (a “Reorganization”) or
(B) the sale or other disposition of all or substantially all the assets of
Lazard or Lazard Group to an entity that is not a controlled subsidiary of
Lazard (a “Sale”) if such Reorganization or Sale requires the approval of
Lazard’s stockholders under the law of Bermuda (whether such approval is
required for such Reorganization or Sale or for the issuance of securities of
Lazard in such Reorganization or Sale or the rules and regulations of the
principal trading exchange for Lazard’s Class A common shares), unless,
immediately following such Reorganization or Sale, (1) all or substantially all
the individuals and entities who were the “beneficial owners” (as such term is
defined in Rule 13d-3 under the Exchange Act (or a successor rule thereto)) of
the shares of Lazard, or such other securities of Lazard into which such shares
shall be changed by reason of a Reorganization (the “Shares”) or other
securities eligible to vote for the election of the Board (together, “Lazard
Voting Securities”) outstanding immediately prior to the consummation of such
Reorganization or Sale beneficially own, directly or indirectly, more than 50%
of the combined voting power of the then outstanding voting securities of the
corporation resulting from such Reorganization or Sale (including,

 

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without limitation, a corporation that as a result of such transaction owns
Lazard or all or substantially all Lazard’s assets either directly or through
one or more subsidiaries) (the “Continuing Corporation”) in substantially the
same proportions as their ownership, immediately prior to the consummation of
such Reorganization or Sale, of the outstanding Lazard Voting Securities
(excluding any outstanding voting securities of the Continuing Corporation that
such beneficial owners hold immediately following the consummation of the
Reorganization or Sale as a result of their ownership prior to such consummation
of voting securities of any company or other entity involved in or forming part
of such Reorganization or Sale other than Lazard);

 

(ii) the stockholders of Lazard approve a plan of complete liquidation or
dissolution of Lazard; or

 

(iii) any “person” (as such term is used in Section 13(d) of the Exchange Act),
corporation or other entity or “group” (as used in Section 14(d)(2) of the
Exchange Act) (other than (A) Lazard, (B) any trustee or other fiduciary holding
securities under an employee benefit plan of Lazard or an affiliate of Lazard,
(C) a person controlled by all or substantially all of the then-current managing
directors of Lazard (provided no individual person controls more than 5% of any
such person) or (D) any company owned, directly or indirectly, by the
stockholders of Lazard in substantially the same proportions as their ownership
of the voting power of the Lazard Voting Securities) becomes the beneficial
owner, directly or indirectly, of securities of Lazard representing 20% or more
of the combined voting power of the Lazard Voting Securities; provided, however,
that for purposes of this subparagraph (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by Lazard or an
affiliate of Lazard shall not constitute a Change of Control Event.

 

“Change of Control Termination Payment” is defined in Section 4.03(c) of this
Agreement.

 

“Change Notice” is defined in Section 3.03 of this Agreement.

 

“Code” is defined in the recitals.

 

“Covered Taxable Year” means any Taxable Year of the Relevant Lazard Ltd
Taxpayers ending after the Redemption Date and on or before the end of the
Taxable Year including the date which is the twentieth-fourth (24th) anniversary
of the Redemption Date.

 

“Covered Taxes” means U.S. Federal Income Taxes and U.S. state and local income
and franchise Taxes.

 

“Determination” shall have the meaning ascribed to such term in Section 1313(a)
of the Code or similar provision of state or local income or franchise Tax law,
as applicable.

 

“Early Termination Notice” is defined in Section 4.02 of this Agreement.

 

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“Early Termination Payment” is defined in Section 4.03(b) of this Agreement.

 

“Early Termination Rate” means the Applicable Treasury Rate plus 300 basis
points.

 

“Escrow Agent” is defined in Section 3.01(a) of the Agreement.

 

“Escrow Agreement” is defined in Section 3.01 of the Agreement.

 

“Exchange” is defined in the recitals.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any
successor statute thereto.

 

“Exchange Assets” means the assets owned by Lazard Group as of an applicable
Exchange Date (and any asset whose tax basis is determined, in whole or in part,
by reference to the adjusted basis of any such asset).

 

“Exchange Basis Schedule” is defined in Section 2.04(a) of this Agreement.

 

“Exchange Date” means the date on which a Taxable Exchange is effected.

 

“Exchangeable Holder” is defined in the recitals.

 

“Federal Income Tax” means any tax imposed under Subtitle A of the Code or any
other provision of U.S. Federal income tax law (including, without limitation,
the taxes imposed by Sections 11, 55, 59A, 881, 882, 884 and 1201(a) of the
Code), and any interest, additions to tax or penalties applicable or related to
such tax.

 

“Governmental Entity” means any federal, state, local, provincial or foreign
government or any court of competent jurisdiction, administrative agency or
commission or other governmental authority or instrumentality, whether domestic
or foreign.

 

“Hypothetical Tax Basis” means, with respect to any asset at any time, the tax
basis that such asset would have at such time if no Basis Adjustment had been
made as a result of the Redemption or an applicable Taxable Exchange, as the
case may be.

 

“Hypothetical Tax Liability” means, with respect to any Covered Taxable Year,
the liability for Covered Taxes of the Relevant Lazard Ltd Taxpayers using the
same methods, elections, conventions and similar practices used on the actual
Tax Returns of such Relevant Lazard Ltd Taxpayers, but using the Hypothetical
Tax Basis instead of the actual tax basis of each relevant asset and excluding
any deduction attributable to the Imputed Interest.

 

“Imputed Interest” shall mean any interest imputed under Section 1272, 1274 or
483 or other provision of the Code (or any successor U.S. Federal income tax
statute) and the similar section of the applicable U.S. state or local income or
franchise Tax law with respect to the Ltd Exchanging Subsidiaries’ payment
obligations under this Agreement.

 

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“IPO Proceeds” means the aggregate proceeds from the sale of Lazard shares in an
initial public offering, net of underwriters’ discounts and commissions and
directly allocated expenses.

 

“IRS” means the U.S. Internal Revenue Service.

 

“LAZ-MD” is defined in the recitals.

 

“Lazard” is defined in the preamble.

 

“LFCM” is defined in the preamble.

 

“LFCM Operating Agreement” means the Operating Agreement of LFCM dated as of May
10, 2005.

 

“Ltd Exchanging Subsidiary” is defined in the recitals.

 

“Ltd Exchanging Subsidiary Payment” is defined in Section 5.01 of this
Agreement.

 

“Ltd Sub A” and “Ltd Sub B” are defined in Schedule A to this Agreement.

 

“LIBOR” means, for each month (or portion thereof) during any period, an
interest rate per annum equal to the rate per annum reported, on the date two
days prior to the first day of such month, on the Telerate Page 3750 (or if such
screen shall cease to be publicly available, as reported on Reuters Screen page
“LIBO” or by any other publicly available source of such market rate) for London
interbank offered rates for U.S. dollar deposits for such month (or portion
thereof).

 

“Person” means and includes any individual, firm, corporation, partnership
(including, without limitation, any limited, general or limited liability
partnership), company, limited liability company, trust, joint venture,
association, joint stock company, unincorporated organization or similar entity
or Governmental Entity.

 

“Potential Reduction” is defined in Section 3.03(a) of this Agreement.

 

“Proceeding” is defined in Section 7.08 of this Agreement.

 

“Realized Tax Benefit” means, for a Covered Taxable Year, the excess, if any, of
the Hypothetical Tax Liability over the actual liability for Covered Taxes of
the Relevant Lazard Ltd Taxpayers for such Covered Taxable Year, less the fees,
charges and expenses of the Advisory Firm and the expert described in Section
7.09 related to this Agreement paid by the Relevant Lazard Ltd Taxpayers in the
relevant Covered Taxable Year. For the avoidance of doubt, the “Realized Tax
Benefit” shall take into account the difference, if any, in the ability of Ltd
Sub B to use foreign tax credits to offset its U.S. Federal income tax liability
in calculating its Hypothetical Tax Liability and its actual liability for
Covered Taxes in the Covered Taxable Year. If all or a portion of the actual tax
liability for Covered Taxes for the Covered Taxable Year arises as a result of
an audit by a Taxing Authority of any Covered Taxable Year, such liability shall

 

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not be included in determining the Realized Tax Benefit or the Realized Tax
Detriment unless and until there has been a Determination.

 

“Realized Tax Detriment” means, for a Covered Taxable Year, the excess, if any,
of the actual liability for Covered Taxes of the Relevant Lazard Ltd Taxpayers
over the Hypothetical Tax Liability for such Covered Taxable Year, plus the
fees, charges and expenses of the Advisory Firm and the expert described in
Section 7.09 related to this Agreement paid by the Relevant Lazard Ltd Taxpayers
in the relevant Covered Taxable Year. For the avoidance of doubt, the “Realized
Tax Detriment” shall take into account the difference, if any, in the ability of
Ltd Sub B to use foreign tax credits to offset its U.S. Federal income tax
liability in calculating its Hypothetical Tax Liability and its actual liability
for Covered Taxes in the Covered Taxable Year. If all or a portion of the actual
tax liability for Covered Taxes for the Covered Taxable Year arises as a result
of an audit by a Taxing Authority of any Covered Taxable Year, such liability
shall not be included in determining the Realized Tax Benefit or Realized Tax
Detriment unless and until there has been a Determination.

 

“Reconciliation Procedures” shall mean those procedures set forth in Section
7.09 of this Agreement.

 

“Redemption” is defined in the recitals.

 

“Redemption Basis Schedule” is defined in Section 2.02 of this Agreement.

 

“Redemption Date” means the date on which the Redemption is effected.

 

“Relevant Lazard Ltd Taxpayer” means (i) Ltd Sub A (or its successors and
assigns) or (ii) Ltd Sub B (or its successors and assigns) and (iii) any
consolidated, combined or unitary group containing either Ltd Sub A or Ltd Sub
B, as the case may be, or any of their respective successors and/or assigns.

 

“Scheduled Termination Date” shall mean the date on which this Agreement would
terminate in the absence of an Early Termination Notice.

 

“Senior Obligations” is defined in Section 5.01 of this Agreement.

 

“Subsidiary” means any entity in which Lazard, directly or indirectly, possesses
fifty percent (50%) or more of the total combined voting power of all classes of
its stock, other than Lazard Group, Lazard Group Finance, LLC and their
respective subsidiaries.

 

“Tax Benefit Payment” is defined in Section 3.01(b) of this Agreement.

 

“Tax Benefit Schedule” is defined in Section 2.05(a) of this Agreement.

 

“Taxable Exchange” is defined in the recitals.

 

“Taxable Year” means a taxable year as defined in Section 441(b) of the Code or
comparable section of U.S. state or local income or franchise Tax law, as
applicable, (and, therefore,

 

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for the avoidance of doubt, may include a period of less than 12 months for
which a Tax Return is made).

 

“Taxes” means (i) all forms of taxation or duties imposed, or required to be
collected or withheld, including, without limitation, charges, together with any
related interest, penalties or other additional amounts, (ii) liability for the
payment of any amount of the type described in the preceding clause (i) as a
result of being a member of an affiliated, consolidated, combined or unitary
group, and (iii) liability for the payment of any amounts as a result of being
party to any tax sharing agreement (other than this Agreement) or as a result of
any express or implied obligation to indemnify any other person with respect to
the payment of any amount described in the immediately preceding clauses (i) or
(ii) (other than an obligation to indemnify under this Agreement).

 

“Tax Return” means any return, filing, report, questionnaire, information
statement or other document required to be filed, including amended returns that
may be filed, for any taxable period with any Taxing Authority (whether or not a
payment is required to be made with respect to such filing).

 

“Taxing Authority” means the IRS and any other state, local, foreign or other
Governmental Entity responsible for the administration of Taxes.

 

“Treasury Regulations” means the final, temporary and proposed regulations under
the Code promulgated from time to time (including corresponding provisions of
succeeding provisions) as in effect for the relevant taxable period.

 

“Valuation Assumptions” shall mean, as of any Valuation Date, the assumptions
described in Schedule B to this Agreement.

 

“Valuation Date” means the date of an Early Termination Notice for purposes of
determining an Early Termination Payment or Change of Control Termination
Payment.

 

ARTICLE II

 

Determination of Realized Tax Benefit or Realized Tax Detriment

 

SECTION 2.01. Redemption Date Basis Adjustment. Pursuant to the Buyout
Agreement, Lazard Group and the Historic Partners have agreed to treat the
consideration paid to the Historic Partners in the Redemption (i) as a sale or
exchange pursuant to Section 707(a)(2)(B) of the Code (the “Sale”) to the extent
such consideration originates from IPO Proceeds and (ii) as a distribution
pursuant to Section 736(b)(1) and Section 731(b) of the Code (the
“Distribution”) to the extent the total Redemption consideration exceeds the IPO
Proceeds. The Ltd Exchanging Subsidiaries and LFCM hereby agree that (i) the
Historic Partners of Lazard Group redeemed for cash in the Redemption shall
recognize gain on the Redemption Date under Sections 741 and 731 of the Code,
(ii) each Ltd Exchanging Subsidiary’s share of the basis in the Original Assets
shall be increased by the excess of the Sale proceeds over the Ltd Exchanging
Subsidiary’s proportionate share of the basis of the Original Assets on the
Redemption Date and (iii) the basis in the Original Assets shall be increased by
the amount of gain recognized by the

 

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Historic Partners of Lazard Group with respect to the Distribution. The Ltd
Exchanging Subsidiaries and LFCM shall treat such gain and Basis Adjustment as
occurring entirely on the Redemption Date unless there is a Determination to the
contrary. For purposes of this Agreement, the Ltd Exchanging Subsidiaries and
LFCM (i) shall not take into account the fair market value of the right to
receive payments under this Agreement in determining the amount of Sale proceeds
or the amount of gain recognized by the Historic Partners on the Redemption Date
and (ii) shall not treat any payments made under this Agreement with respect to
the Redemption as resulting in a Basis Adjustment.

 

SECTION 2.02. (a) Redemption Basis Schedule. Within 120 calendar days after the
Redemption Date, the Ltd Exchanging Subsidiaries shall deliver to LFCM a
schedule (the “Redemption Basis Schedule”) approved by the Audit Committee that
shows, in reasonable detail, for purposes of Covered Taxes, (i) the actual tax
basis as of the Redemption Date of the Original Assets, (ii) the Basis
Adjustment with respect to the Original Assets as a result of the Sale and the
Distribution and (iii) the period or periods, if any, over which the Original
Assets are amortizable or depreciable for purposes of Covered Taxes. At the time
the Ltd Exchanging Subsidiaries deliver the Redemption Basis Schedule to LFCM,
they shall (x) deliver to LFCM schedules and work papers providing reasonable
detail regarding the preparation of the Redemption Basis Schedule and an
Advisory Firm Letter supporting such Redemption Basis Schedule and (y) allow
LFCM reasonable access to the appropriate representatives at Lazard and its
Subsidiaries, Lazard Group and the Advisory Firm in connection with its review
of such schedule. The Redemption Basis Schedule shall become final and binding
on the parties unless LFCM, within 30 calendar days after receiving such
Redemption Basis Schedule, provides the Ltd Exchanging Subsidiaries with notice
of a material objection to such Redemption Basis Schedule made in good faith. If
the parties, negotiating in good faith, are unable to successfully resolve the
issues raised in such notice within 60 calendar days after such Redemption Basis
Schedule was delivered to LFCM, the Ltd Exchanging Subsidiaries and LFCM shall
employ the Reconciliation Procedures.

 

(b) Amended Redemption Basis Schedule. The Redemption Basis Schedule may be
amended from time to time by the Ltd Exchanging Subsidiaries with the consent of
the Audit Committee (i) in connection with a Determination, (ii) to correct
inaccuracies to the original Redemption Basis Schedule identified after the
Redemption Date as a result of the receipt of additional information relating to
facts or circumstances on or prior to the Redemption Date or (iii) to comply
with the expert’s determination under the Reconciliation Procedures. At the time
the Ltd Exchanging Subsidiaries deliver such amended Redemption Basis Schedule
to LFCM they shall (x) deliver to LFCM schedules and work papers providing
reasonable detail regarding the preparation of the amended Redemption Basis
Schedule and an Advisory Firm Letter supporting such amended Redemption Basis
Schedule and (y) allow LFCM reasonable access to the appropriate representatives
at Lazard and its Subsidiaries, Lazard Group and the Advisory Firm in connection
with its review of such schedule. The amended Redemption Basis Schedule shall
become final and binding on the parties unless LFCM, within 30 calendar days
after receiving such amended Redemption Basis Schedule, provides the Ltd
Exchanging Subsidiaries with notice of a material objection to such amended
Redemption Basis Schedule made in good faith. If the parties, negotiating in
good faith, are unable to successfully resolve the is-

 

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sues raised in such notice within 60 calendar days after such amended Redemption
Basis Schedule was delivered to LFCM, the Ltd Exchanging Subsidiaries and LFCM
shall employ the Reconciliation Procedures.

 

SECTION 2.03. Basis Adjustment Attributable to a Taxable Exchange. Pursuant to a
Taxable Exchange, (i) to the extent an Exchangeable Holder effecting a Taxable
Exchange holds its Lazard Group interests through LAZ-MD, LAZ-MD will distribute
to such Exchangeable Holder all or a portion of LAZ-MD’s Lazard Group interests
attributable to such Exchangeable Holder in redemption of all or a portion of
the exchangeable interests of such Exchangeable Holder in LAZ-MD and (ii) the
Exchangeable Holder will transfer its interests in Lazard Group to the Ltd
Exchanging Subsidiaries in exchange for shares of Lazard. The number of Lazard
shares transferred by each Ltd Exchanging Subsidiary to an Exchangeable Holder
pursuant to a Taxable Exchange will be determined in proportion to each such
subsidiary’s respective interests in Lazard Group on the applicable Exchange
Date. The Ltd Exchanging Subsidiaries and LFCM hereby agree that an Exchangeable
Holder effecting a Taxable Exchange shall recognize gain, if any, for U.S.
Federal income tax purposes on the Exchange Date under Section 741 of the Code
in an amount equal to the excess of (i) the fair market value of the Lazard
shares received in the Taxable Exchange over (ii) the Exchangeable Holder’s
basis in its Lazard Group interests transferred to the Ltd Exchanging
Subsidiaries pursuant to the Taxable Exchange. For purposes of this Agreement,
the Ltd Exchanging Subsidiaries and LFCM hereby agree that the fair market value
of the Lazard shares received in the Taxable Exchange shall mean the trading
value of such shares at the close of business on the Exchange Date. The Ltd
Exchanging Subsidiaries and LFCM further agree that, with respect to each
Taxable Exchange, each Ltd Exchanging Subsidiary’s share of the basis in the
Exchange Assets shall be increased by the excess, if any, of (i) the fair market
value of the Lazard shares transferred to the Exchangeable Holder pursuant to
the Taxable Exchange over (ii) the Ltd Exchanging Subsidiary’s proportionate
share of the basis of the Exchange Assets immediately after the Taxable Exchange
attributable to the Lazard Group interests exchanged. The Ltd Exchanging
Subsidiaries and the Exchangeable Holders, pursuant to the LFCM Operating
Agreement, will treat such gain and Basis Adjustment as occurring entirely on
the Exchange Date unless there is a Determination to the contrary. The Ltd
Exchanging Subsidiaries and the Exchangeable Holders, pursuant to the LFCM
Operating Agreement, agree that, for U.S. Federal income tax purposes, this
Agreement is treated as additional consideration paid to the Exchangeable
Holders in the Exchange (and immediately assigned by the Exchangeable Holders to
LFCM). By assigning this Agreement to LFCM, the Exchangeable Holders relinquish
all rights, title and interest under this Agreement. Notwithstanding any other
provision of this Agreement, the Ltd Exchanging Subsidiaries and LFCM (i) shall
not take into account the fair market value of the right to receive payments
under this Agreement in determining the Basis Adjustment resulting on any
Exchange Date and (ii) shall not treat the payments of principal under this
Agreement related to any Taxable Exchange as resulting in a Basis Adjustment
until such payments are made.

 

SECTION 2.04. (a) Exchange Basis Schedule. Within 120 calendar days after the
end of a Covered Taxable Year in which any Taxable Exchange has been effected,
the Ltd Exchanging Subsidiaries shall deliver to LFCM a schedule (the “Exchange
Basis Schedule”) approved by the Audit Committee that shows, in reasonable
detail, for purposes of Covered Taxes, (i) the actual tax basis as of the first
applicable Exchange Date in such Covered Taxable Year of

 

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the Exchange Assets, (ii) the Basis Adjustment with respect to the Exchange
Assets as a result of the Taxable Exchanges effected in such Covered Taxable
Year, calculated in the aggregate, and (iii) the period or periods, if any, over
which the Exchange Assets are amortizable or depreciable. At the time the Ltd
Exchanging Subsidiaries deliver the Exchange Basis Schedule to LFCM, they shall
(x) deliver to LFCM schedules and work papers providing reasonable detail
regarding the preparation of the Exchange Basis Schedule and an Advisory Firm
Letter supporting such Exchange Basis Schedule and (y) allow LFCM reasonable
access to the appropriate representatives at Lazard and its Subsidiaries, Lazard
Group and the Advisory Firm in connection with its review of such schedule. The
Exchange Basis Schedule shall become final and binding on the parties unless
LFCM, within 30 calendar days after receiving such Exchange Basis Schedule,
provides the Ltd Exchanging Subsidiaries with notice of a material objection to
such Exchange Basis Schedule made in good faith. If the parties, negotiating in
good faith, are unable to successfully resolve the issues raised in such notice
within 60 calendar days after such Exchange Basis Schedule was delivered to
LFCM, the Ltd Exchanging Subsidiaries and LFCM shall employ the Reconciliation
Procedures.

 

(b) Amended Exchange Basis Schedule. The Exchange Basis Schedule may be amended
from time to time by the Ltd Exchanging Subsidiaries with the consent of the
Audit Committee (i) in connection with a Determination, (ii) to correct
inaccuracies to the original Exchange Basis Schedule identified after the date
of the Taxable Exchange as a result of the receipt of additional information or
(iii) to comply with the expert’s determination under the Reconciliation
Procedures. At the time the Ltd Exchanging Subsidiaries deliver such amended
Exchange Basis Schedule to LFCM they shall (x) deliver to LFCM schedules and
work papers providing reasonable detail regarding the preparation of the amended
Exchange Basis Schedule and an Advisory Firm Letter supporting such amended
Exchange Basis Schedule and (y) allow LFCM reasonable access to the appropriate
representatives at Lazard and its Subsidiaries, Lazard Group and the Advisory
Firm in connection with its review of such schedule. The amended Exchange Basis
Schedule shall become final and binding on the parties unless LFCM, within 30
calendar days after receiving such amended Exchange Basis Schedule, provides the
Ltd Exchanging Subsidiaries with notice of a material objection to such amended
Exchange Basis Schedule made in good faith. If the parties, negotiating in good
faith, are unable to successfully resolve the issues raised in such notice
within 60 calendar days after such amended Exchange Basis Schedule was delivered
to LFCM, the Ltd Exchanging Subsidiaries and LFCM shall employ the
Reconciliation Procedures.

 

SECTION 2.05. (a) Tax Benefit Schedule. Within 10 calendar days after filing the
U.S. Federal Income Tax Return of the Relevant Lazard Ltd Taxpayers for the
relevant Covered Taxable Year, each Ltd Exchanging Subsidiary shall provide to
LFCM a schedule approved by the Audit Committee showing, in reasonable detail,
the calculation of each Relevant Lazard Ltd Taxpayer’s Realized Tax Benefit or
Realized Tax Detriment for such Covered Taxable Year (the “Tax Benefit
Schedule”). At the time the Ltd Exchanging Subsidiaries deliver the Tax Benefit
Schedules to LFCM they shall (i) deliver to LFCM schedules and work papers
providing reasonable detail regarding the preparation of the Tax Benefit
Schedules (including information related to the amount of Ltd Sub A’s
“effectively connected income” with respect to the applicable Covered Taxable
Year as determined for U.S. Federal income tax purposes) and an Advisory

 

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Firm Letter supporting such Tax Benefit Schedules and (ii) allow LFCM reasonable
access to the appropriate representatives at Lazard and its Subsidiaries, Lazard
Group and the Advisory Firm in connection with its review of such schedules. The
Tax Benefit Schedules shall become final and binding on the parties unless LFCM,
within 30 calendar days after receiving such Tax Benefit Schedules, provides the
Ltd Exchanging Subsidiaries with notice of a material objection to such Tax
Benefit Schedules made in good faith. If the parties, negotiating in good faith,
are unable to successfully resolve the issues raised in such notice within 60
calendar days after such Tax Benefit Schedules were delivered to LFCM, the Ltd
Exchanging Subsidiaries and LFCM shall employ the Reconciliation Procedures.

 

(b) Amended Tax Benefit Schedule. A Tax Benefit Schedule for any Covered Taxable
Year may be amended from time to time by the applicable Ltd Exchanging
Subsidiary with the consent of the Audit Committee (i) in connection with a
Determination affecting such Tax Benefit Schedule, (ii) to correct inaccuracies
in the original Tax Benefit Schedule identified as a result of the receipt of
additional factual information relating to a Covered Taxable Year after the date
the Tax Benefit Schedule was provided to LFCM, (iii) to reflect a change in the
Realized Tax Benefit or Realized Tax Detriment for such Covered Taxable Year
attributable to a carryback or carryforward of a loss or other tax item to such
Covered Taxable Year, (iv) to reflect a change in the Realized Tax Benefit or
Realized Tax Detriment for such Covered Taxable Year attributable to an amended
tax return filed for such Covered Taxable Year (provided, however, that such a
change attributable to an audit of a Tax Return by an applicable Taxing
Authority shall not be taken into account on an Amended Tax Benefit Schedule
unless and until there has been a Determination with respect to such change) or
(v) to comply with the expert’s determination under the Reconciliation
Procedures. At the time a Ltd Exchanging Subsidiary delivers such an amended Tax
Benefit Schedule pursuant to this Section 2.05(b) (an “Amended Tax Benefit
Schedule”) to LFCM it shall (x) deliver to LFCM schedules and work papers
providing reasonable detail regarding the preparation of the Amended Tax Benefit
Schedule and an Advisory Firm Letter supporting such Amended Tax Benefit
Schedule and (y) allow LFCM reasonable access to the appropriate representatives
at Lazard and its Subsidiaries, Lazard Group and the Advisory Firm in connection
with its review of such schedule. Such Amended Tax Benefit Schedule shall become
final and binding on the parties unless LFCM, within 30 calendar days after
receiving such Amended Tax Benefit Schedule, provides the applicable Ltd
Exchanging Subsidiary with notice of a material objection to such Amended Tax
Benefit Schedule made in good faith. If the parties, negotiating in good faith,
are unable to successfully resolve the issues raised in such notice within 60
calendar days after such Amended Tax Benefit Schedule was delivered to LFCM, the
Ltd Exchanging Subsidiary and LFCM shall employ the Reconciliation Procedures.

 

(c) Applicable Principles. The Realized Tax Benefit or Realized Tax Detriment
for each Covered Taxable Year is intended to measure the decrease or increase in
the actual Covered Tax liability of the Relevant Lazard Ltd Taxpayers for such
Covered Taxable Year attributable to the Basis Adjustment and Imputed Interest,
determined using a “with and without” methodology. Carryovers or carrybacks of
any tax item attributable to the Basis Adjustment and Imputed Interest
(determined using such “with and without”

 

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methodology) shall be considered to be subject to the rules of the Code (or any
successor U.S. Federal income tax statute) and the Treasury Regulations or the
appropriate provisions of U.S. state and local income and franchise Tax law, as
applicable, governing the use, limitation and expiration of carryovers or
carrybacks of the relevant type. If a carryover or carryback of any tax item
includes a portion that is attributable to the Basis Adjustment or Imputed
Interest and another portion that is not, such portions shall be considered to
be used in the order determined using such “with and without” methodology.
Schedule C to this Agreement provides illustrative examples of the applicable
principles described in this Section 2.05(c) of this Agreement.

 

ARTICLE III

 

Tax Benefit Payments

 

SECTION 3.01. Payments. (a) Except as provided in Section 3.03, within 3
calendar days of the delivery of the Tax Benefit Schedule to LFCM for any
Covered Taxable Year the Ltd Exchanging Subsidiaries shall pay (i) to LFCM an
amount equal to 80% of the Tax Benefit Payment (as defined below) for such
Covered Taxable Year and (ii) to a national bank mutually agreeable to the Ltd
Exchanging Subsidiaries, the Audit Committee and LFCM as escrow agent (the
“Escrow Agent”), an amount equal to 20% of the Tax Benefit Payment (as defined
below) for such Covered Taxable Year. The Escrow Agent shall hold each Tax
Benefit Payment it receives in escrow pursuant to a mutually agreeable escrow
agreement (the “Escrow Agreement”) between the Ltd Exchanging Subsidiaries and
LFCM until the expiration of the applicable statute of limitations attributable
to the Covered Taxable Year to which such Tax Benefit Payment relates. Each Tax
Benefit Payment shall be made by wire transfer of immediately available funds to
the bank accounts of LFCM and the Escrow Agent previously designated by such
parties to the Ltd Exchanging Subsidiaries. For the avoidance of doubt, no Tax
Benefit Payment shall be made in respect of estimated tax payments, including,
without limitation, estimated Federal Income Tax payments.

 

(b) A “Tax Benefit Payment” shall equal, with respect to each Ltd Exchanging
Subsidiary, 85% of the applicable Ltd Exchanging Subsidiary’s Realized Tax
Benefit, if any, for a Covered Taxable Year,

 

increased by:

 

(1) interest calculated at the Agreed Rate from the due date (without
extensions) for filing the Tax Return with respect to Covered Taxes for such
Covered Taxable Year); and

 

(2) the amount of the excess Realized Tax Benefit reflected on an Amended Tax
Benefit Schedule for a previous Covered Taxable Year over the Realized Tax
Benefit (or Realized Tax Detriment) reflected on the Tax Benefit Schedule for
such previous Covered Taxable Year;

 

and decreased by:

 

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(3) an amount equal to the Ltd Exchanging Subsidiary’s Realized Tax Detriment
(if any) for any previous Covered Taxable Year;

 

(4) the amount of the excess Realized Tax Benefit reflected on the Tax Benefit
Schedule for a previous Covered Taxable Year over the Realized Tax Benefit (or
Realized Tax Detriment) reflected on the Amended Tax Benefit Schedule for such
previous Covered Taxable Year;

 

provided, however, that the amounts described in Sections 3.01(b)(2), (3) and
(4) shall not be taken into account in determining a Tax Benefit Payment
attributable to any Covered Taxable Year to the extent of such amounts taken
into account in determining any Tax Benefit Payment in a preceding Covered
Taxable Year.

 

(c) Within 3 days of receiving any Tax Benefit Payment, LFCM shall distribute
such Tax Benefit Payment to each member of LFCM set forth on the schedule
attached hereto as Schedule D, in accordance with the percentage indicated on
such Schedule D.

 

SECTION 3.02. No Duplicative Payments. No duplicative payment of any amount
(including interest) will be required under this Agreement.

 

SECTION 3.03. Suspension of Tax Benefit Payments Following Change Notice.

 

(a) If Lazard, its Subsidiaries or Lazard Group receives a 30-day letter, a
final audit report, a statutory notice of deficiency or similar written notice
from any Taxing Authority with respect to the Tax treatment of the Redemption or
any Taxable Exchange (a “Change Notice”), which, if sustained, would result in
(i) a reduction in the amount of Realized Tax Benefit (or the increase in the
amount of Realized Tax Detriment) with respect to a Covered Taxable Year
preceding the taxable year in which the Change Notice is received or (ii) a
reduction in the amount of Tax Benefit Payments the Ltd Exchanging Subsidiaries
will be required to pay to LFCM with respect to Covered Taxable Years after and
including the taxable year in which the Change Notice is received (collectively,
the “Potential Reduction”), prompt written notice shall be given to LFCM.

 

(b) From and after the date such Change Notice is received until there is a
Final Determination with respect to the adjustments proposed therein, 100% of
any Tax Benefit Payments required to be made by the Ltd Exchanging Subsidiaries
shall be paid by the Ltd Exchanging Subsidiaries to the Escrow Agent until such
time as the amounts paid to the Escrow Agent under Section 3.01(a)(ii) with
respect to the Covered Year at issue in the Change Notice and this Section
3.03(b), in the aggregate, equal the amount of the Potential Reduction (or, if
earlier, until a Final Determination is received with respect to the Change
Notice).

 

(c) If a Final Determination with respect to the Change Notice results in no
adjustment to any Tax Benefit Payment, then 80% of the amounts paid to the
Escrow Agent pursuant to this Section 3.03 (along with interest earned on such
funds) shall be distributed to LFCM in accordance with the Escrow Agreement. If
the Final Determination result in an adjustment to any Tax Benefit Payment, then
the lesser of (i) the amounts paid

 

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to the Escrow Agent pursuant to this Section 3.03 and (ii) the amount of the
adjustment to the Tax Benefit Payment, in each case, along with interest earned
on such funds, shall be distributed to the Ltd Exchanging Subsidiaries in
accordance with the Escrow Agreement.

 

ARTICLE IV

 

Termination

 

SECTION 4.01. Early Termination of Agreement. At any time after the second (2nd)
anniversary of the date of this Agreement, the Ltd Exchanging Subsidiaries may
terminate this Agreement with the consent of the Audit Committee by paying to
LFCM the Early Termination Payment as of the date of the Early Termination
Notice (as defined below). The Ltd Exchanging Subsidiaries may terminate this
Agreement upon the occurrence of a Change of Control Event by paying to LFCM the
Change of Control Termination Payment as of the date of the Early Termination
Notice. Upon payment of the Early Termination Payment or the Change of Control
Termination Payment by the Ltd Exchanging Subsidiaries, the Ltd Exchanging
Subsidiaries shall have no further payment obligations under this Agreement,
other than for any (a) Tax Benefit Payment agreed to by the Ltd Exchanging
Subsidiaries and LFCM as due and payable but unpaid as of the Early Termination
Notice and (b) any Tax Benefit Payment due for the Covered Taxable Year ending
with or including the date of the Early Termination Notice (except to the extent
that the amount described in clause (a) or (b) is included in the Early
Termination Payment or the Change of Control Termination Payment, as the case
may be).

 

SECTION 4.02. Early Termination Notice. If the Ltd Exchanging Subsidiaries
choose to exercise their right of early termination under Section 4.01 above,
the Ltd Exchanging Subsidiaries shall deliver to LFCM a notice (the “Early
Termination Notice”) specifying the Ltd Exchanging Subsidiaries’ intention to
exercise such right and showing in reasonable detail the calculation of the
Early Termination Payment or the Change of Control Termination Payment, as the
case may be. At the time the Ltd Exchanging Subsidiaries deliver the Early
Termination Notice to LFCM, the Ltd Exchanging Subsidiaries shall (i) deliver to
LFCM schedules and work papers providing reasonable detail regarding the
calculation of the Early Termination Payment or the Change of Control
Termination Payment, as the case may be, in a manner consistent with the
guidelines set forth in Section 4.03 of this Agreement and an Advisory Firm
Letter supporting such calculation and (b) allow LFCM reasonable access to the
appropriate representatives at Lazard and its Subsidiaries, Lazard Group and the
Advisory Firm in connection with its review of such calculation. The calculation
contained in such Early Termination Notice shall become final and binding on the
parties unless LFCM, within 30 calendar days after receiving such calculation,
provides the Ltd Exchanging Subsidiaries with notice of a material objection to
such calculation made in good faith. If the parties, negotiating in good faith,
are unable to successfully resolve the issues raised in such calculation within
60 calendar days after such calculation was delivered to LFCM, the Ltd
Exchanging Subsidiaries and LFCM shall employ the Reconciliation Procedures.

 

SECTION 4.03. Payment upon Early Termination. (a) Within 3 calendar days of the
delivery to LFCM of the Early Termination Notice or any amendment to the Early
Termination Notice, the Ltd Exchanging Subsidiaries shall pay to LFCM an amount
equal to the Early

 

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Termination Payment or the Change of Control Termination Payment, as the case
may be. Such payment shall be made by wire transfer of immediately available
funds to a bank account designated by LFCM.

 

(b) The Early Termination Payment as of the Valuation Date shall equal the
present value, discounted at the Early Termination Rate, of all Tax Benefit
Payments that would be required to be paid by the Ltd Exchanging Subsidiaries to
LFCM during the period from the date of the Early Termination Notice through the
Scheduled Termination Date assuming the Valuation Assumptions are applied.

 

(c) The Change of Control Termination Payment as of the Valuation Date shall
equal the Early Termination Payment as of such date multiplied by 80%.

 

SECTION 4.04. No Other Right of Early Termination. For the avoidance of doubt,
LFCM shall not be entitled to cause an early termination of this Agreement.

 

ARTICLE V

 

Subordination and Late Payments

 

SECTION 5.01. Subordination. Notwithstanding any other provision of this
Agreement to the contrary, any Tax Benefit Payment, Early Termination Payment or
Change of Control Termination Payment required to be made by the Ltd Exchanging
Subsidiaries to LFCM under this Agreement (a “Ltd Exchanging Subsidiary
Payment”) shall rank subordinate and junior in right of payment to any
principal, interest or other amounts due and payable in respect of any debt of
the Ltd Exchanging Subsidiaries (“Senior Obligations”) and shall rank pari passu
with all current or future unsecured obligations of the Ltd Exchanging
Subsidiaries that are not Senior Obligations.

 

SECTION 5.02. Late Payments by the Ltd Exchanging Subsidiaries. The amount of
all or any portion of a Ltd Exchanging Subsidiary Payment not made to LFCM when
due under the terms of this Agreement shall be payable together with any
interest thereon, computed at the Agreed Rate and commencing from the date on
which such Ltd Exchanging Subsidiary Payment was due and payable.

 

ARTICLE VI

 

No Disputes; Consistency; Cooperation

 

SECTION 6.01. LFCM Participation In Ltd Exchanging Subsidiary Tax Matters.
Except as otherwise provided herein, the Ltd Exchanging Subsidiaries shall have
full responsibility for, and sole discretion over, all Tax matters concerning
any Relevant Lazard Ltd Taxpayer, including, without limitation, the
preparation, filing or amending of any Tax Return and defending, contesting or
settling any issue pertaining to Taxes. Notwithstanding the foregoing, the Ltd
Exchanging Subsidiaries shall notify LFCM of, and keep LFCM reasonably informed
with respect to, and LFCM shall have the right to participate in and monitor
(but, for the avoidance of doubt, not to control) the portion of any audit of
the Relevant Lazard Ltd Taxpayers by a Taxing

 

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Authority the outcome of which is reasonably expected to affect LFCM’s rights
under this Agreement. The Ltd Exchanging Subsidiaries shall provide to LFCM
reasonable opportunity to provide information and other input to the Ltd
Exchanging Subsidiaries and its advisors concerning the conduct of any such
portion of such audits. No Relevant Lazard Ltd Taxpayer shall settle or
otherwise resolve any audit or other challenge by a Taxing Authority relating to
the Basis Adjustment or the deduction of Imputed Interest without the consent of
the Audit Committee and LFCM, which consent LFCM shall not unreasonably
withhold, condition or delay.

 

SECTION 6.02. Consistency. Unless there is a Determination to the contrary, the
Relevant Lazard Ltd Taxpayers, LFCM and the Exchangeable Holders (in accordance
with the LFCM Operating Agreement), on their own behalf and on behalf of each of
their affiliates, agree to report and cause to be reported for all U.S.
purposes, including U.S. Federal, state and local income and franchise Tax
purposes and U.S. financial reporting purposes, all Tax-related items relating
to this Agreement (including, without limitation, the Basis Adjustment and each
Tax Benefit Payment) in a manner consistent with that specified by the Ltd
Exchanging Subsidiaries in any schedule, letter or certificate required to be
provided by or on behalf of the Ltd Exchanging Subsidiaries under this
Agreement. In the event that an Advisory Firm is replaced with another firm
acceptable to the Audit Committee, such replacement Advisory Firm shall be
required to perform its services under this Agreement using procedures and
methodologies consistent with the previous Advisory Firm, unless otherwise
required by law or the Ltd Exchanging Subsidiaries, the Audit Committee and LFCM
agree to the use of other procedures and methodologies.

 

SECTION 6.03. Cooperation. LFCM shall (and shall cause its affiliates to) (a)
furnish to the Ltd Exchanging Subsidiaries in a timely manner such information,
documents and other materials as the Ltd Exchanging Subsidiaries may reasonably
request for purposes of making any determination or computation necessary or
appropriate under this Agreement, preparing any Tax Return or contesting or
defending any audit, examination or controversy with any Taxing Authority, (b)
make its employees available to the Ltd Exchanging Subsidiaries and its
representatives to provide explanations of documents and materials and such
other information as the Ltd Exchanging Subsidiaries or its representative may
reasonably request in connection with any of the matters described in clause (a)
above, and (c) reasonably cooperate in connection with any such matter.

 

ARTICLE VII

 

General Provisions

 

SECTION 7.01. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed duly given and
received (a) on the date of delivery if delivered personally, or by facsimile
upon confirmation of transmission by the sender’s fax machine if sent on a
Business Day (or otherwise on the next Business Day) or (b) on the first
Business Day following the date of dispatch if delivered by a recognized
next-day courier service. All notices hereunder shall be delivered as set forth
in Schedule E, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice. Any party may change its address or
fax number by giving the other party written notice of its new address or fax
number in the manner set forth above.

 

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SECTION 7.02. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.

 

SECTION 7.03. Entire Agreement; No Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof. This Agreement shall be binding upon and inure solely to
the benefit of each party hereto and their respective successors and permitted
assigns, and nothing in this Agreement, express or implied, is intended to or
shall confer upon any other Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.

 

SECTION 7.04. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York without giving effect to
applicable principles of conflict of laws.

 

SECTION 7.05. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.

 

SECTION 7.06. Successors; Assignment; Amendments. LFCM may not assign this
Agreement to any person without the prior written consent of the Ltd Exchanging
Subsidiaries and the Audit Committee, which consent shall not be unreasonably
withheld, conditioned or delayed; provided, however, LFCM may pledge some or all
of its rights, interests or entitlements under this Agreement to any U.S. money
center bank in connection with a bona fide loan or other indebtedness; provided
further, however LFCM may assign this Agreement to one or more wholly owned
subsidiaries of LFCM, which subsidiaries are subsequently distributed to the
members of LFCM set forth on Schedule D. The Ltd Exchanging Subsidiaries may not
assign any of their rights, interests or entitlements under this Agreement
without the consent of LFCM, not to be unreasonably withheld or delayed. Subject
to each of the two immediately preceding sentences, this Agreement will be
binding upon, inure to the benefit of and be enforceable by, the parties and
their respective successors and assigns including any acquirer of all or
substantially all of the assets of Lazard. Lazard shall cause the Ltd Exchanging
Subsidiaries to be the legal and beneficial owners of all of the direct or
indirect interests held by Lazard or any of its Subsidiaries in Lazard Group. In
the event that Lazard ceases to be the owner of the Ltd Exchanging Subsidiaries,
the successor to Lazard shall assume all of Lazard’s rights and obligations
under this Agreement.

 

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No amendment to this Agreement shall be effective unless it is (i) in writing,
(ii) signed by the Ltd Exchanging Subsidiaries and LFCM and (iii) approved by
the Audit Committee.

 

SECTION 7.07. Titles and Subtitles. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.

 

SECTION 7.08. Submission to Jurisdiction; Waivers. With respect to any suit,
action or proceeding relating to this Agreement (collectively, a “Proceeding”),
each party to this Agreement irrevocably (a) consents and submits to the
exclusive jurisdiction of the courts of the States of New York and Delaware and
any court of the U.S. located in the Borough of Manhattan in New York City or
the State of Delaware; (b) waives any objection which such party may have at any
time to the laying of venue of any Proceeding brought in any such court, waives
any claim that such Proceeding has been brought in an inconvenient forum and
further waives the right to object, with respect to such Proceeding, that such
court does not have jurisdiction over such party; (c) consents to the service of
process at the address set forth for notices in Section 7.01 herein; provided,
however, that such manner of service of process shall not preclude the service
of process in any other manner permitted under applicable law; and (d) waives,
to the fullest extent permitted by applicable law, any and all rights to trial
by jury in connection with any Proceeding.

 

SECTION 7.09. Reconciliation. In the event that the Ltd Exchanging Subsidiaries
and LFCM are unable to resolve a disagreement within the relevant period
designated in this Agreement, the matter shall be submitted for determination to
a nationally recognized expert in the particular area of disagreement employed
by a nationally recognized accounting firm or a law firm (other than the
Advisory Firm), which expert is mutually acceptable to all parties and the Audit
Committee. If the matter is not resolved before any payment that is the subject
of a disagreement is due or any Tax Return reflecting the subject of a
disagreement is due, such payment shall be made on the date prescribed by this
Agreement and such Tax Return may be filed as prepared by the Ltd Exchanging
Subsidiaries, subject to adjustment or amendment upon resolution. The
determinations of the expert pursuant to this Section 7.09 shall be binding on
Lazard and its Subsidiaries, Lazard Group and LFCM absent manifest error.

 

SECTION 7.10. Withholding. The Ltd Exchanging Subsidiaries and the Escrow Agent
shall be entitled to deduct and withhold from any payment payable pursuant to
this Agreement such amounts as the Ltd Exchanging Subsidiaries and the Escrow
Agent are required to deduct and withhold with respect to the making of such
payment under the Code, or any provision of state, local or foreign tax law. To
the extent that amounts are so withheld and paid over to the appropriate taxing
authority by the Ltd Exchanging Subsidiaries or the Escrow Agent, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to LFCM.

 

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IN WITNESS WHEREOF, the Ltd Exchanging Subsidiaries and LFCM have duly executed
this Agreement as of the date first written above.

 

Ltd Sub A By   /s/ Scott D. Hoffman    

Name: Scott D. Hoffman

   

Title:   General Counsel

Ltd Sub B By   /s/ Scott D. Hoffman    

Name: Scott D. Hoffman

   

Title:   Director

LFCM HOLDINGS LLC By   /s/ Scott D. Hoffman    

Name: Scott D. Hoffman

   

Title:   Authorized Person

 

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