SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
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OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
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OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-6862
DONALDSON, LUFKIN & JENRETTE, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-1898818
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
277 Park Avenue, New York, New York 10172
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (212) 892-3000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period than the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes ( X ) No ( ).
As of August 14, 1996, the latest practicable date, there were 53,300,000
shares of Common Stock, $0.10 par value, outstanding.
1
<PAGE>
DONALDSON, LUFKIN & JENRETTE, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
TABLE OF CONTENTS
Part I FINANCIAL INFORMATION
Page Number
Item 1. Financial Statements
Condensed Consolidated Statements of Financial
Condition at June 30, 1996 and December 31, 1995
(Unaudited)...................................................... 3
Condensed Consolidated Statements of Income for the
three and six months ended June 30, 1996 and 1995
(Unaudited) ..................................................... 5
Condensed Consolidated Statements of Changes in
Stockholders' Equity for the year ended December 31,
1995 and the six months ended June 30, 1996
(Unaudited)...................................................... 6
Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 1996 and 1995
(Unaudited)...................................................... 7
Notes to Condensed Consolidated Financial
Statements
(Unaudited)...................................................... 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 13
Part II OTHER INFORMATION
Item 1. Legal Proceedings.................................................. 20
Item 4. Submission of Matters to a Vote of Security Holders................ 20
Item 6. Exhibits and Reports on Form 8-K................................... 21
Signature.......................................................... 22
2
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Financial Condition (Unaudited)
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------- ------------
ASSETS
<S> <C> <C>
Cash and cash equivalents.................................................... $ 140,435 $ 107,766
Cash and securities segregated for regulatory purposes or deposited with
clearing organizations.................................................... 533,129 454,470
Securities purchased under agreements to resell.............................. 19,686,311 18,748,224
Securities borrowed.......................................................... 10,186,389 9,044,909
Receivables:
Customers................................................................. 3,052,357 2,355,973
Brokers, dealers and other................................................ 1,692,655 1,622,858
Securities owned, at value:
U.S. government and agencies.............................................. 4,807,572 5,601,090
Corporate debt............................................................ 3,660,970 3,469,899
Foreign sovereign debt.................................................... 1,259,835 734,238
Mortgage whole loans...................................................... 279,676 359,756
Equities and other........................................................ 813,941 656,290
Long-term corporate development investments............................... 226,069 284,498
Mortgages, other receivables collateralized by
real estate assets and real estate owned.................................. 540,111 466,066
Property, equipment and leasehold improvements, at cost, (net of accumulated
depreciation and amortization of $133,101 and $137,640, respectively).... 252,433 192,446
Other assets and deferred amounts............................................ 614,725 478,011
------------ ------------
Total Assets................................................................. $ 47,746,608 $ 44,576,494
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Financial Condition
(Unaudited) (In thousands, except share and per share data)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Short-term borrowings...................................................... $ 1,410,585 $ 752,442
Securities sold under agreements to repurchase............................. 26,692,449 26,744,797
Securities loaned.......................................................... 3,010,771 2,624,213
Payables:
Customers.............................................................. 3,160,354 2,561,258
Brokers, dealers and other............................................. 2,033,469 1,025,574
Securities sold not yet purchased, at value:
U.S. government and agencies........................................... 5,009,084 5,407,572
Corporate debt......................................................... 738,505 529,273
Foreign sovereign debt................................................. 604,294 186,861
Equities and other..................................................... 569,802 580,721
Accounts payable and accrued expenses...................................... 1,370,454 1,421,935
Other liabilities and deferred amounts..................................... 480,431 359,212
------------- -------------
45,080,198 42,193,858
Long-term borrowings....................................................... 1,103,874 958,916
------------- -------------
Total liabilities................................................. 46,184,072 43,152,774
------------- -------------
Cumulative Exchangeable $8.83 Preferred Stock, at
redemption value....................................................... 225,000 225,000
------------- -------------
Stockholders' Equity:
Common stock ($0.10 par value; 150,000,000 shares authorized; 53,300,000
shares issued and outstanding)...................................... 5,330 5,330
Restricted stock units (5,179,147 units authorized;
5,140,205 units and 5,179,147 units issued and outstanding in 1996 and
1995, respectively) ................................................... 105,365 106,163
Paid-in capital........................................................ 364,791 363,993
Retained earnings...................................................... 862,700 723,859
Cumulative translation adjustment...................................... (650) (625)
------------- -------------
Total stockholders' equity........................................ 1,337,536 1,198,720
------------- -------------
Total Liabilities and Stockholders' Equity................................. $ 47,746,608 $ 44,576,494
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
----------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Commissions......................................... $ 152,513 $117,790 $ 299,047 $ 224,992
Underwritings....................................... 255,536 118,771 390,967 171,184
Fees................................................ 101,510 85,677 184,743 173,501
Interest, net of interest to finance U.S.
government, agency and mortgage-
backed securities of $503,903, $523,741,
$991,277 and $977,927, respectively............... 251,101 228,284 481,900 423,553
Principal transactions-net:
Trading........................................... 131,579 87,316 275,040 154,933
Investment........................................ 85,495 39,434 111,126 99,070
Other............................................... 13,475 14,026 24,296 26,505
--------- -------- ---------- ----------
Total revenues................................... 991,209 691,298 1,767,119 1,273,738
--------- ------- ---------- ----------
Costs and Expenses:
Compensation and benefits........................... 464,683 331,367 808,952 598,072
Interest............................................ 177,504 169,908 352,516 308,913
Brokerage, clearing, exchange fees
and other......................................... 52,964 44,650 97,693 78,838
Occupancy and equipment............................. 37,300 28,720 67,912 57,223
Communications...................................... 13,110 10,206 23,813 20,203
Other operating expenses............................ 88,348 36,447 150,433 77,989
--------- -------- ---------- ----------
Total costs and expenses......................... 833,909 621,298 1,501,319 1,141,238
--------- -------- ---------- ----------
Income before provision for income taxes................ 157,300 70,000 265,800 132,500
--------- -------- --------- ----------
Provision for income taxes.............................. 60,300 28,000 103,700 53,000
--------- -------- ---------- ----------
Net income.............................................. $ 97,000 $ 42,000 $ 162,100 $ 79,500
========= ======== ========== ==========
Dividends on preferred stock............................ $ 4,967 $ 4,967 $ 9,934 $ 9,934
========= ======== ========== ==========
Earnings applicable to common shares.................... $ 92,033 $ 37,033 $ 152,166 $ 69,566
========= ======== ========== ==========
Weighted average common shares
outstanding......................................... 60,082 59,839
========= ===========
Earnings per common share............................... $ 1.53 $ 2.54
========= ===========
Pro forma weighted average common
shares outstanding................................... 51,475 51,475
======== ==========
Pro forma earnings per common share..................... $ 0.72 $ 1.35
======== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
For the Year Ended December 31, 1995 and the Six Months Ended June 30,
1996 (In thousands, except per share data)
<TABLE>
<CAPTION>
Restricted Cumulative
Common Stock Paid-in Retained Translation
Stock Units Capital Earnings Adjustment Total
------ ----- ------- -------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1994 $ 1,000 $ 0 $232,080 $587,555 $(344) $820,291
Net income -- -- -- 179,100 -- 179,100
Dividends:
Common stock ($0.45 per share) -- -- -- (22,928) -- (22,928)
Preferred stock ($8.83 per share) -- -- -- (19,868) -- (19,868)
Stock split 4,000 -- (4,000) -- -- --
Additional capital contribution from
Equitable -- -- 55,000 -- -- 55,000
Net proceeds from issuance of common stock
in Initial Public Offering 330 -- 80,913 -- -- 81,243
Issuance of restricted stock units -- 106,163 -- -- -- 106,163
Translation adjustment -- -- -- -- (281) (281)
-------- --------- --------- --------- --------- ----------
Balances at December 31, 1995 5,330 106,163 363,993 723,859 (625) 1,198,720
Net income -- -- -- 162,100 -- 162,100
Dividends:
Common stock ($0.25 per share) -- -- -- (13,325) -- (13,325)
Preferred stock ($4.42 per share) -- -- -- (9,934) -- (9,934)
Forfeiture of restricted stock units -- (798) 798 -- -- --
Translation adjustment -- -- -- -- (25) (25)
-------- --------- --------- --------- --------- -----------
Balances at June 30, 1996 $5,330 $105,365 $364,791 $862,700 $(650) $1,337,536
======== ========= ========= ========= ========= ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
For the Six Months Ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
----------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $162,100 $79,500
--------- ---------
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 16,050 14,524
Deferred taxes (62,472) (46,479)
Decrease in unrealized appreciation of long-term corporate
development investments 89,167 36,224
Other-net 172 490
--------- ---------
205,017 84,259
(Increase) decrease in operating assets:
Cash and securities segregated for regulatory
purposes or deposited with clearing organizations (78,659) (210,929)
Securities purchased under agreements to resell (1,904,932) (6,217,441)
Securities borrowed (1,141,480) (1,407,966)
Receivables from customers (696,384) 53,024
Receivables from brokers, dealers and other (69,797) (392,247)
Securities owned, at value (721) (1,184,541)
Other assets (128,856) 41,069
Increase (decrease) in operating liabilities:
Securities sold under agreements to repurchase 1,904,932 6,217,441
Securities loaned 386,558 791,553
Payables to customers 599,096 137,941
Payables to brokers, dealers and other 1,007,895 (71,398)
Securities sold not yet purchased, at market value 217,258 1,195,035
Accounts payable and accrued expenses (51,481) 28,825
Other liabilities and deferred amounts 183,691 74,775
Translation adjustment (25) 23
--------- ---------
Net cash provided by (used in) operating activities $432,112 $(860,577)
--------- ---------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE>
DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
For the Six Months Ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Cash flows from investing activities:
Net proceeds from (payments for):
Purchases of long-term corporate development investments.................... $ (52,131) $ (30,541)
Sales of long-term corporate development investments........................ 21,393 33,312
Purchases of property, equipment and leasehold improvements................. (75,569) (31,180)
Purchases of mortgages, other receivables collateralized by real estate
assets and real estate owned.............................................. (112,945) (21,650)
Sales of mortgages, other receivables collateralized by real estate assets
and real estate owned..................................................... 38,900 15,559
Other assets................................................................ (8,326) (4,785)
------------ -----------
Net cash used in investing activities........................................... (188,678) (39,285)
------------ -----------
Cash flows from financing activities:
Net (payments for) proceeds from:
Short-term financings....................................................... (332,292) 778,226
Medium-Term Notes........................................................... 249,515 (15,000)
Swiss Franc Bonds........................................................... (105,513) -
Subordinated debt financings................................................ 784 175
Other long-term debt........................................................ - (1,070)
Secured notes payable....................................................... - (51,367)
Dividends................................................................... (23,259) (26,200)
Proceeds from secured term loan agreement................................... - 250,000
------------ -----------
Net cash (used in) provided by financing activities............................. (210,765) 934,764
-------------- -----------
Increase in cash and cash equivalents........................................... 32,669 34,902
Cash and cash equivalents at beginning of period............................... 107,766 94,854
-------------- -----------
Cash and cash equivalents at end of period..................................... $ 140,435 $ 129,756
============== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
8
<PAGE>
DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 1996
1. Basis of Presentation
The condensed consolidated financial statements include Donaldson, Lufkin &
Jenrette, Inc. and its subsidiaries ("DLJ" or the "Company"). Prior to October
30, 1995, the Company was wholly owned by The Equitable Companies Incorporated
and its subsidiaries (together, "Equitable"). After the completion of an
initial public offering in October 1995, Equitable's ownership in the Company
was reduced from 100 percent to 80.2 percent. The Company's separate financial
statements reflect Equitable's cost basis established at the time of
Equitable's acquisition of the Company in 1985.
Certain financial information that is normally included in annual consolidated
financial statements prepared in accordance with generally accepted accounting
principles but is not required for interim reporting purposes has been
condensed or omitted. These condensed consolidated financial statements
reflect, in the opinion of management, all adjustments (consisting of normal,
recurring accruals) necessary for a fair presentation of the consolidated
financial position and results of operations for the interim periods
presented. The results of operations for interim periods are not necessarily
indicative of results for the entire year. These financial statements should
be read in conjunction with the consolidated financial statements and notes
thereto as of and for the year ended December 31, 1995 included on Form 10-K
filed by the Company under the Securities Act of 1934.
The preparation of condensed consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Certain reclassifications have been made to prior year financial statements to
conform to the 1996 presentation.
2. Income Taxes
Income taxes for interim period condensed consolidated financial statements
have been accrued using the Company's estimated effective tax rate. Net
Federal income tax equivalents paid to Equitable were $72.5 million and $93.1
million for the six months ended June 30, 1996 and 1995, respectively.
3. Borrowings
Long-term borrowings, including current maturities of $8.0 million and $110.3
million at June 30, 1996 and December 31, 1995, respectively, consist of the
following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---- ----
(In thousands)
<S> <C> <C>
Senior notes, 6 7/8% due in 2005................................ $ 496,998 $ 496,836
Senior subordinated revolving credit agreement due in 1998...... 250,000 250,000
Medium-term notes, 5 5/8% due in 2016........................... 249,525 -
Medium-term notes, 7.88% due in 1997............................ 88,000 88,000
Swiss Franc bonds, 10.55% due in 1996........................... - 105,513
Other........................................................... 19,351 18,567
----------- ---------
Total long-term borrowings................................. $ 1,103,874 $ 958,916
=========== =========
</TABLE>
9
<PAGE>
DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
In January 1996, the Swiss franc bonds of $105.5 million plus accrued interest
were repaid in full.
On February 12, 1996, a shelf registration statement, which enables the
Company to issue from time to time up to $500 million in aggregate public
offering price of Senior Debt Securities and/or Preferred Stock, was declared
effective by the Securities and Exchange Commission. On February 15, 1996, the
Company completed an offering under such shelf registration statement of $250
million aggregate principal amount of its 5 5/8% Medium-Term Notes due
February 15, 2016. The notes are repayable by the Company, in whole or in
part, at the option of the holders on February 15, 2001.
On July 3, 1996, the Company filed a registration statement which, when
effective, will enable the Company to issue up to $500 million in aggregate
principal amount of Senior, Subordinated, and Junior Subordinated Debt
Securities and/or Preferred Stock of the Company and/or preferred securities
of certain of its subsidiaries and/or guarantees by the Company of such
preferred securities.
Interest paid on all borrowings and financing arrangements amounted to $1.3
billion and $1.2 billion for the six months ended June 30, 1996 and 1995,
respectively.
At June 30, 1996, the Company has committed credit facilities which enables it
to borrow up to $1.28 billion on a secured basis and $650 million on an
unsecured basis. Interest rates to be charged are based upon Federal funds,
Eurodollar or negotiated rates, as applicable. There were no borrowings
outstanding at June 30, 1996 and December 31, 1995 under these agreements.
4. Long-term Corporate Development Investments
Long-term corporate development investments represent the Company's
involvement in private debt and equity investments which generally have no
readily available market or may otherwise be restricted as to resale under the
Securities Act of 1933. Accordingly, these investments are carried at
estimated fair value as determined by the Finance Committee of the Board of
Directors. The cost of these investments was $306.9 million and $276.2 million
at June 30, 1996 and December 31, 1995, respectively. The decrease in net
unrealized appreciation of long-term corporate development investments
amounted to $89.2 million and $36.2 million for the six months ended June 30,
1996 and 1995, respectively. Changes in unrealized appreciation arising from
changes in fair value or upon realization are reflected in revenues, principal
transactions-net, investment in the condensed consolidated statements of
income.
5. Net Capital
The Company's wholly owned principal subsidiary, Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJSC"), is a registered broker-dealer, a registered
futures commission merchant and member firm of The New York Stock Exchange,
Inc. (the "NYSE") and, accordingly, is subject to the minimum net capital
requirements of the Securities and Exchange Commission, the NYSE and the
Commodities Futures Trading Commission. As such, it is subject to the NYSE's
net capital rule which conforms to the Uniform Net Capital Rule pursuant to
rule 15c3-1 of the Securities Exchange Act of 1934. Under the alternative
method permitted by this rule, the required net capital, as defined, shall not
be less than two percent of aggregate debit balances arising from customer
transactions, as defined, or four percent of segregated funds, as defined,
whichever is greater. The NYSE may also require a member firm to reduce its
business if its net capital is less than four percent of aggregate debit
balances and may prohibit a member firm from expanding its business and
declaring cash dividends if its net capital is less than five percent of
aggregate debit balances. At June 30, 1996, DLJSC's net capital of
approximately $670.5 million was 22 percent of aggregate debit balances and in
excess of the minimum requirement by approximately $602.9 million.
Certain U.S. and foreign subsidiaries of the Company are subject to net
capital requirements of their respective regulatory agencies. At June 30,
1996, the Company and its subsidiaries were in compliance with all applicable
regulatory capital adequacy requirements.
10
<PAGE>
DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
6. Earnings Per Share
Earnings per common share and pro forma earnings per share are computed by
dividing net income applicable to common shares by the weighted average or the
pro forma number of shares of common stock and common stock equivalents
outstanding during each period presented and after deducting the dividends on
preferred stock requirements. Weighted average common shares outstanding are
the same for both primary and fully diluted earnings per common share. The
Restricted Stock Units issued in October 1995 are considered common stock
equivalents upon issuance and also have a dilutive effect on the Company's
historical earnings per share amounts. Weighted average common shares
outstanding have been adjusted for the dilutive effect of the units on the
Company's historical pro forma earnings per share using the treasury stock
method.
7. Commitments and Contingencies
At June 30, 1996, the Company was contingently liable for unsecured letters of
credit of approximately $128.6 million.
As a securities broker and dealer, risk is an inherent part of the Company's
business activities. The principal types of risks involved in the Company's
activities are market risk, credit or counterparty risk and transaction risk.
The Company has developed an infrastructure to control, monitor and manage
each type of risk. For a further discussion of these matters, refer to Notes 9
and 10 of the Consolidated Financial Statements in the Company's Annual Report
on the Form 10-K for the year ended December 31, 1995.
8. Employee Benefit Plans
In addition to the employee benefit plans disclosed in the Company's Form 10-K
for December 31, 1995, the Company maintains the following plans.
1996 Stock Option Plan
During the second quarter of 1996, the stockholders approved the 1996 Stock
Option Plan. Options to purchase a maximum of approximately 8.8 million shares
of Common Stock, exclusive of forfeitures from the 1995 Stock Option Plan, are
available under the 1996 Stock Option Plan. As of June 30, 1996, options to
purchase an aggregate 577,500 shares of Common Stock with exercise prices
ranging from $29.875-32.50 were outstanding.
1996 Incentive Compensation
During the second quarter of 1996, the stockholders approved the 1996
Incentive Compensation Plan (the "Plan"). The Plan is effective January 1,
1996. Awards under the Plan are determined by the Compensation and Management
Committee of the Board of Directors. The Plan provides for the creation of
short term and long term award pools to be awarded to key employees of the
Company. Short term award pools are for a performance period up to two years
and are based on 10% of pre-tax earnings, as defined. Long term award pools
are for performance periods of three to 10 years and are based on a percentage
of pre-tax earnings and varies with the Company's average return on common
equity during the performance period. Participants may receive awards in the
form of cash, options, shares or restricted stock units, however stock-based
payments are limited to a total of 8.8 million shares. Under certain
circumstances, participants may defer the receipt of part or all of any award.
9. Derivative Financial Instruments
The Company enters into certain contractual agreements referred to as
derivatives or off-balance sheet financial instruments involving futures,
forwards and options. The Company's derivative activities consist of writing
over-the-counter options to accommodate its customers' needs, trading in
forward contracts in U.S. government and agency issued or guaranteed
securities and in futures contracts on equity-based indices, interest rate
instruments and currencies and issuing structured notes. The Company's
involvement in swap contracts is not significant. Substantially all of the
Company's activities related to derivatives are, by their nature, trading
activities which are primarily for the purpose of customer accommodations.
11
<PAGE>
DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Option contracts are typically written for a duration of less than 13 months.
The notional value of written option contracts outstanding was approximately
$3.5 billion at June 30, 1996. These written option contracts are
substantially covered by various financial instruments that the Company has
purchased or sold as principal.
The notional contract and market values of the forward and futures contracts
at June 30, 1996 and December 31, 1995, were as follows:
June 30, 1996 December 31, 1995
--------------------- ------------------
Purchases Sales Purchases Sales
--------- ----- --------- -----
(In millions) (In millions)
Forward Contracts
(Notional Contract Value).... $ 17,102 $ 18,446 $ 18,186 $ 17,066
========= ======== ======== ========
Futures Contracts
(Market Value)............... $ 803 $ 590 $ 1,129 $ 1,932
========= ======== ======== =========
10. Legal Proceedings
Certain significant legal proceedings and matters have been
previously disclosed in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 and there have been no material developments in such
proceedings and matters. With respect to the National Gypsum Corporation
litigation, the Bankruptcy Court has remanded the Texas State Court action to
state court.
In addition to the significant proceedings and matters referred to above, the
Company has been named as a defendant in a number of actions relating to its
various businesses including various civil actions and arbitrations arising
out of its activities as a broker-dealer in securities, as an underwriter and
as an employer and arising out of alleged employee misconduct. Some of the
actions have been brought on behalf of various classes of claimants and seek
damages of material or indeterminate amounts. The Company is also involved,
from time to time, in proceedings with, and investigations by, governmental
agencies and self-regulatory organizations. Although there can be no assurance
that such other actions, proceedings, investigations and litigation will not
have a material adverse effect on the results of operations of the Company in
any future period, depending in part on the results for such period, in the
opinion of management of the Company the ultimate resolution of any such other
actions, proceedings, investigations and litigation against the Company will
not have a material adverse effect on the consolidated financial condition
and/or results of operations of the Company.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following analysis of the consolidated results of operations and financial
condition of Donaldson, Lufkin & Jenrette, Inc. and Subsidiaries should be
read in conjunction with the Condensed Consolidated Financial Statements and
the related Notes to Condensed Consolidated Financial Statements included
elsewhere herein, and with the Management's Discussion and Analysis section
included in the Company's 1995 Annual Report on Form 10-K.
BUSINESS ENVIRONMENT
The Company's principal business activities, which consist of
investment and merchant banking, securities sales and trading and
correspondent brokerage services are, by their nature, highly competitive and
subject to general market conditions, volatile trading markets and
fluctuations in the volume of market activity. Consequently, the Company's net
income and revenues have been and are likely to continue to be, subject to
wide fluctuations, reflecting the impact of many factors beyond the Company's
control, including securities market conditions, the level and volatility of
interest rates, competitive conditions and the size and timing of
transactions.
The strong conditions that existed in the second half of 1995
continued to improve in the first half of 1996. Rising stock prices and record
levels of underwriting improved operating results throughout the securities
industry.
RECENT DEVELOPMENTS
On July 3, 1996, the Company filed a registration statement which,
when effective, will enable the Company to issue up to $500 million in
aggregate principal amount of Senior, Subordinated, and Junior Subordinated
Debt Securities and/or Preferred Stock of the Company and/or preferred
securities of certain of its subsidiaries and/or guarantees by the Company of
such preferred securities.
During the second quarter of 1996, the Financial Accounting Standards
Board issued SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." The new standard
provides more consistent standards for distinguishing transfers of financial
assets that are sales from those that are secured borrowings, and provides
guidance on the recognition and measurement of servicing assets and
liabilities. The new standard is to be applied prospectively to transactions
which occur after December 31, 1996. The Company is currently evaluating the
impact of this standard.
RESULTS OF OPERATIONS
Quarter Ended June 30, 1996 Compared to Quarter Ended June 30, 1995
Total revenues for the quarter ended June 30, 1996 were $991.2
million, an increase of $299.9 million or 43.4 % over the quarter ended June
30, 1995. Revenues increased in most of the Company's major areas of activity
during the second quarter of 1996.
Commission revenues increased by $34.7 million or 29.5% to $152.5
million due to increased business in all areas and is generally consistent
with the overall growth in listed share volume on major equity exchanges.
Underwriting revenues increased by $136.8 million or 115.2% to $255.5
million. The Company experienced increases in all areas of underwriting during
the second quarter of 1996.
Fee revenues increased by $15.8 million or 18.5% to $101.5 million.
Overall, merger and acquisition ("M&A") and other advisory services activities
increased during the second quarter of 1996.
Interest, net of interest expense to finance U.S. government, agency
and mortgage-backed securities, increased by $22.8 million or 10.0% to $251.1
million. Higher levels of customer margin balances and securities
loaned/borrowed activity at Pershing accounted for approximately one half of
the increase. The remaining increase was due to higher levels of inventory in
the Fixed Income Division and the full quarter impact of the Latin America
business which commenced operations in March of 1995.
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Principal transactions-net, trading revenues increased by $44.3
million or 50.7% to $131.6 million. All of the Company's major trading areas
experienced improved results over the quarter ended June 30, 1995.
Principal transactions-net, investment revenues increased by $46.1
million or 116.8% to $85.5 million. Realized gains on investments were $185.1
million. Net unrealized carrying values decreased by $99.6 million, which
includes the elimination of net unrealized appreciation of $80.2 million on
investments sold and a decrease in net unrealized appreciation of $19.4
million on retained investments. During the second quarter of 1996, the
Company recorded a gain of $79.4 million, net on one investment. There were no
comparably sized gains in the second quarter of 1995.
Other revenues, consisting primarily of dividends and miscellaneous
transaction revenues, decreased by $0.5 million or 3.9% to $13.5 million.
Total costs and expenses for the second quarter of 1996 were $833.9
million, an increase of $212.6 million or 34.2% over the second quarter of
1995.
Compensation and benefits increased $133.3 million or 40.2% to $464.7
million. Most of the increase was due to increased variable incentive and
production-related compensation, which resulted from higher revenues and
operating results. Incentive and production-related compensation increased by
50.6% in 1996, while base compensation, including benefits and all payroll
taxes, increased by 10.7% due to expansion in various business groups. At June
30, 1996, full-time personnel totaled 5,405 compared to 4,676 at June 30,
1995, an increase of 729 or 15.6%.
Interest expense increased $7.6 million or 4.5% to $177.5 million.
Most of this increase was related to higher balances in payables to brokers,
dealers and customers in the correspondent clearing business at Pershing and
expanded levels of fixed income related products.
All other expenses, as noted below, increased by $71.7 million or
59.7% to $191.7 million for the second quarter of 1996.
Brokerage, clearing, exchange fees and other expenses increased by
$8.3 million due to increased share volume, underwriting related expenses and
transaction fee payments. Occupancy and equipment costs increased by $8.6
million as a result of the relocation of the Company's principal office in the
U.S. and the expansion of the Company's overseas offices. Communications costs
increased by $2.9 million. All other operating expenses increased by $51.9
million. Included therein are data processing, professional fees, travel and
entertainment, and printing and stationery which increased by $20.7 million
reflecting an overall increase in the level of business activity. In addition,
for the quarter ended June 30, 1996, $23.0 million of expenses were incurred
for mortgage-related securities previously underwritten by the Company.
The Company's income tax provision for the second quarter of 1996 and
1995 was $60.3 million and $28.0 million, respectively, which represented a
38.3% and 40% effective tax rate for each period, respectively.
Net income for the quarter ended June 30, 1996 was $97.0 million, up
$55.0 million or 131.0% from the comparable 1995 period. Earnings per common
share for the second quarter of 1996 and pro forma earnings per common share
using the treasury stock method were $1.53 and $0.72 for the second quarter of
1996 and 1995, respectively.
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<PAGE>
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Total revenues for the six months ended June 30, 1996 were $1,767.1
million, an increase of $493.4 million or 38.7% over the six months ended June
30, 1995. Revenues increased in most of the Company's major areas of activity
during the second quarter of 1996.
Commission revenues increased by $74.1 million or 32.9% to $299.0
million due to increased business in all areas and is generally consistent
with the overall growth in listed share volume on major equity exchanges.
Underwriting revenues increased by $219.8 million or 128.4% to $391.0
million. The Company experienced increases in all areas of underwriting during
the second quarter of 1996.
Fee revenues increased by $11.2 million or 6.5% to $184.7 million.
Overall, merger and acquisition ("M&A") and other advisory services activities
have increased during the first six months of 1996.
Interest, net of interest expense to finance U.S. government, agency
and mortgage-backed securities, increased by $58.3 million or 13.8% to $481.9
million. Higher levels of customer margin balances and securities
loaned/borrowed activity at Pershing accounted for approximately one half of
the increase. The remaining increase was due to higher levels of inventory in
the Fixed Income Division and the full quarter impact of the Latin America
business which commenced operations in March of 1995.
Principal transactions-net, trading revenues increased by $120.1
million or 77.5% to $275.0 million. All of the Company's major trading areas
experienced improved results over the six months ended June 30, 1995.
Principal transactions-net, investment revenues increased by $12.1
million or 12.2% to $111.1 million. Realized gains on investments were $200.3
million. Net unrealized carrying values decreased by $89.2 million, which
includes the elimination of net unrealized appreciation of $77.7 million on
investments sold and a decrease in net unrealized appreciation of $11.5
million on retained investments.
Other revenues, consisting primarily of dividends and miscellaneous
transaction revenues, decreased by $2.2 million or 8.3% to $24.3 million.
Total costs and expenses for the six months ended June 30, 1996 were
$1,501.3 million, an increase of $360.1 million or 31.6% over the six months
ended June 30, 1995.
Compensation and benefits increased $210.9 million or 35.3% to $809.0
million. Most of the increase was due to increased variable incentive and
production-related compensation, which resulted from higher revenues and
operating results. Incentive and production-related compensation increased by
45.9% in 1996, while base compensation, including benefits and all payroll
taxes, increased by 8.1% due to expansion in various business groups. At June
30, 1996, full-time personnel totaled 5,405 compared to 4,676 at June 30,
1995, an increase of 729 or 15.6%.
Interest expense increased $43.6 million or 14.1% to $352.5 million.
Most of this increase was related to higher balances in payables to brokers,
dealers and customers in the correspondent clearing business at Pershing and
expanded levels of fixed income related products.
All other expenses, as noted below, increased by $105.6 million
or 45.1% to $339.9 million for the first six months of 1996.
Brokerage, clearing, exchange fees and other expenses increased by
$18.9 million due to increased share volume, underwriting related expenses and
transaction fee payments. Occupancy and equipment costs increased by $10.7
million as a result of the relocation of the Company's principal office in the
U.S. and the expansion of the Company's overseas offices. Communications costs
increased by $3.6 million. All other operating expenses increased by $72.4
million. Included therein are data processing, professional fees, travel and
entertainment, and printing and stationery which increased by $33.0 million
reflecting an overall increase in the level of business activity. In addition,
for the six months ended June 30, 1996, $29.0 million of expenses were
incurred for mortgage-related securities previously underwritten by the
Company.
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<PAGE>
The Company's income tax provision for the six months ended June 30,
1996 and 1995 was $103.7 million and $53.0 million, respectively, which
represented a 39.0% and 40% effective tax rate for each period.
Net income for the six months ended June 30, 1996 was $162.1 million,
up $82.6 million or 103.9% from the comparable 1995 period. Earnings per
common share for the six months ended June 30, 1996 and pro forma earnings per
common share using the treasury stock method were $2.54 and $1.35 for the
first six months of 1996 and 1995, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's assets are highly liquid with the majority consisting
of securities inventories and collateralized receivables, both of which
fluctuate depending on the levels of customer business and proprietary
trading. Such collateralized receivables consist primarily of resale
agreements and securities borrowed, both of which are secured by U.S.
government and agency securities and highly marketable corporate debt and
equity securities. In addition, the Company has significant receivables from
customers, brokers and dealers which turn over frequently. As a securities
dealer, the Company may carry significant levels of trading inventories to
meet client needs. As such, the Company's total assets or the individual
components of total assets vary significantly from period to period because of
changes relating to customer needs, economic and market conditions and
proprietary trading strategies. A relatively small percentage of total assets
is fixed or held for a period of longer than one year. The Company's total
assets at June 30, 1996 and December 31, 1995 were $47.7 billion and $44.6
billion, respectively.
The majority of the Company's assets are financed through daily
operations by repurchase agreements, securities sold not yet purchased,
securities loaned, bank loans, and through payables to customers and brokers
and dealers. Short-term funding is generally obtained at rates related to
Federal funds, LIBOR and money market rates. Other borrowing costs are
negotiated depending upon prevailing market conditions. The Company monitors
overall liquidity by tracking the extent to which unencumbered marketable
assets exceed short-term unsecured borrowings.
The Company maintains borrowing relationships with a broad range of
banks, financial institutions, counterparties and others including $6.0
billion at June 30, 1996 in uncommitted and committed bank credit lines with
50 domestic and international banks. These include $4.06 billion of
uncommitted bank credit lines, $1.28 billion of secured committed bank lines
and $650 million of unsecured committed bank lines.
Certain of the Company's businesses are capital intensive. In
addition to normal operating requirements, capital is required to cover
financing and regulatory charges on securities inventories, merchant banking
investments and investments in fixed assets. The Company's overall capital
needs are continually reviewed to ensure that its capital base can
appropriately support the anticipated needs of its business units as well as
the regulatory capital requirements of subsidiaries. Based upon these
analyses, management believes that the Company's debt and equity base is
adequate for current operating levels. The Company has been active in raising
additional long-term financing, including extending the maturity of its $250
million senior subordinated revolving credit agreement and increasing the
amount of the credit available thereunder to $325.0 million in 1995. As of
June 30, 1996, $250.0 million was outstanding under this facility.
Additionally, the Company increased the amount of credit available under its
unsecured credit facility to $650 million. There were no borrowings
outstanding under this facility at June 30, 1996.
Mortgages and other receivables collateralized by real estate assets
and real estate owned amounting to $540.1 million at June 30, 1996 and $466.1
million at December 31, 1995, generally represent the Company's interest in
mortgages receivable including certain mortgage-related securities previously
underwritten by the Company which were primarily repurchased in 1994, and are
carried at amounts approximating fair value, determined by, among other
things, the discounted cash flow and/or estimated sales prices of the
underlying properties.
In March 1996, the Company moved its principal offices from 140
Broadway to 277 Park Avenue in New York City. The Company is presently
financing expenditures related to the move from currently available operating
capital.
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DLJSC is subject to the capital requirements of the Securities and
Exchange Commission, the New York Stock Exchange, Inc., the Commodities
Futures Trading Commission and the Chicago Board of Trade, all of which ensure
the general capital adequacy and liquidity of broker-dealers and futures
commission merchants. DLJSC has consistently maintained capital substantially
in excess of the minimum requirements of such capital rules. At June 30, 1996,
DLJSC had aggregate regulatory "net capital," after adjustments required by
Rule 15c3-1 under the Exchange Act of 1934, of approximately $670.5 million,
which exceeded minimum net capital requirements by $602.9 million and which
exceeded the net capital required by DLJSC's most restrictive debt covenants
by $445.0 million.
On October 30, 1995, the Company completed an Initial Public Offering
(IPO) of its shares. The Company's net proceeds from the IPO totaled $81.2
million. Concurrent with the IPO, the Company completed the offering of $500
million aggregate principal amount of 6 7/8% Senior Notes due November 1, 2005
(the "Senior Debt Offering"). The proceeds from this offering totaled $493.5
million (net of underwriting discounts and commissions).
On February 12, 1996, a shelf registration statement, which enables
the Company to issue up to $500 million in aggregate public offering price of
Senior Debt Securities and/or Preferred Stock, was declared effective by the
Securities and Exchange Commission. On February 15, 1996, the Company
completed an offering under such shelf registration statement of $250 million
aggregate principal amount of its 5 5/8% Medium-Term Notes due February 15,
2016. The notes are repayable by the Company, in whole or in part, at the
option of the holders on February 15, 2001. Net proceeds to the Company from
this offering were $248.3 million (net of underwriting discounts and
commissions).
On July 3, 1996, the Company filed a registration statement which,
when effective, will enable the Company to issue up to $500 million in
aggregate principal amount of Senior, Subordinated, and Junior Subordinated
Debt Securities and/or Preferred Stock of the Company and/or preferred
securities of certain of its subsidiaries and/or guarantees by the Company of
such preferred securities.
The Company's overall capital and funding needs are continually
reviewed to ensure that its capital base can support the estimated needs of
its business units.
Cash Flows
The Company's condensed consolidated statements of cash flows
classify cash flow into three broad categories: cash flows from operating
activities, investing activities and financing activities. The Company's net
cash flows are principally associated with operating and financing activities,
which support the Company's trading, customer and banking activities.
Six Months Ended June 30, 1996 and 1995
Cash and cash equivalents at June 30, 1996 and 1995, totaled $140.4
million and $129.8 million, respectively, an increase of $32.7 million and
$34.9 million, respectively, for the comparable periods.
Cash provided by (used in) operating activities totaled $432.1
million and $(860.6) million for the first six months of 1996 and 1995,
respectively, and reflects primarily an increase in operating liabilities in
1996 and an increase in operating assets in 1995. In the first six months of
1996, there were increases in payables to customers of $599.1 million,
payables to brokers, dealers and other of $1.0 billion, securities loaned of
$386.6 million and securities sold not yet purchased of $217.3 million. These
increases were partially offset by increases in assets including receivables
from customers of $696.4 million, securities borrowed of $1.1 billion, and all
other assets and liabilities- net, which rose by $145.8 million. In the first
six months of 1995, there were increases in securities sold not yet purchased
of $1.2 billion and securities loaned of $791.6 million. These increases were
offset by increases in assets including securities borrowed of $1.4 billion,
trading inventories of $1.2 billion and all other receivables and payables-
net, which rose by $243.9 million.
During the first six months of 1996 and 1995, net cash used in
investing activities of $188.7 million and $39.3 million, respectively was
comprised primarily of fixed asset purchases in connection with the Company's
move of its principal offices and purchases of mortgages receivables
collateralized by real estate assets.
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<PAGE>
For the first six months of 1996 and 1995, net cash (used in)
provided by financing activities totaled $(210.8) million and $934.8 million,
respectively. In the first quarter of 1996, $105.5 million was used to repay
Swiss Franc Bonds which matured in January 1996 and $249.5 million was
provided by the issuance of Medium-Term Notes. In addition, $332.3 million was
used to repay short term financings. During the first six months of 1995,
proceeds from short term financings and a secured term loan agreement amounted
to $778.2 million and $250.0 million, respectively.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company's derivative activities are not as extensive as many of
its competitors. Instead, the Company has focused its derivative activities on
writing over-the-counter ("OTC") options to accommodate its customers needs,
trading in forward contracts in U.S. government and agency issued or
guaranteed securities and engaging in futures contracts on equity-based
indices, interest rate instruments, and currencies, and issuing structured
notes. The Company's involvement in swap contracts is not significant. As a
result, the Company's involvement in derivative products is related primarily
to revenue generation through the provision of products to its clients as
opposed to hedges against the Company's own positions.
Options Contracts:
Option contracts are typically written for a duration of less than 13
months. Revenues from these activities (net of related interest expenses) were
approximately $31.9 million and $44 million for the six months ended June 30,
1996 and 1995, respectively. Option writing revenues are primarily from the
amortization of option premiums. The decrease in revenues primarily resulted
from lower levels of activity, both in size and number of transactions, by the
Company's institutional customers. These reductions were caused by a number of
factors, including market conditions and competition from other financial
institutions.
The notional value of written options contracts outstanding was
approximately $3.5 billion and $3.9 billion at June 30, 1996 and 1995,
respectively. The decrease in the notional value of options was due primarily
to decreases in customer activity related to U.S. government obligations. Such
written option contracts are substantially covered by various financial
instruments that the Company has purchased or sold as principal.
Futures and Forward Contracts:
As part of the Company's trading activities, including trading
activities in the related cash market instruments, the Company enters into
forward and futures contracts primarily involving securities, foreign
currencies, indices and forward rate agreements. Such forward and futures
contracts are entered into as part of the Company's covering transactions and
generally are not used for speculative purposes.
Net trading gains (losses) on forward contracts were $(39.1) million
and $120 million and net trading gains (losses) on futures contracts were $8.5
million and $(52) million for the six months ended June 30, 1996 and 1995,
respectively.
The notional contract and market values of the forward and futures
Contracts at June 30, 1996 and 1995, were as follows:
June 30, 1996 June 30, 1995
------------- -------------
Purchases Sales Purchases Sales
--------- ----- --------- -----
(In millions)
Forward Contracts
(Notional Contract Value).... $ 17,102 $ 18,446 $ 16,516 $ 20,201
======== ======== ======== ========
Futures Contracts
(Market Value)............... $ 803 $ 590 $ 309 $ 847
======== ======== ======== ========
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Structured Notes:
Structured notes are customized derivative instruments in which the
amount of interest or principal paid on a debt obligation is linked to
movements in the value of cash market financial instruments. At June 30, 1996
and 1995, the Company had issued structured notes with principal amounts of
$143.1 million and $113.0 million outstanding, respectively. The Company
expects the volume of this activity to increase in the future. The Company
covers its obligations on structured notes primarily by purchasing and selling
the securities to which the value of its structured notes are linked.
MERCHANT BANKING TRANSACTIONS
The Company's merchant banking investments are carried at estimated
fair value as determined by the Finance Committee of the Board of Directors.
Changes in unrealized appreciation arising from changes in fair value or gains
or losses upon realization are reflected in principal transactions-net,
investments. At June 30, 1996 and December 31, 1995, the Company's share in
its merchant banking investments amounted to $144.1 million and $210.1
million, respectively.
HIGH YIELD TRANSACTIONS
The Company accounts for its high-yield inventory positions on a
market basis with unrealized gains and losses being recognized currently in
earnings. At June 30, 1996 and December 31, 1995, the Company had long
inventory of $689.1 million and $500.7 million, respectively, and short
inventory of $384.8 million and $219.6 million, respectively, of high-yield
securities, which accounted for less than 6.0% of the Company's overall
inventory positions.
19
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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Certain significant legal proceedings and matters have been
previously disclosed in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 and there have been no material developments in such
proceedings and matters. With respect to the National Gypsum Corporation
litigation, the Bankruptcy Court has remanded the Texas State Court action to
state court.
In addition to the significant proceedings and matters referred to
above, the Company has been named as a defendant in a number of actions
relating to its various businesses including various civil actions and
arbitrations arising out of its activities as a broker-dealer in securities,
as an underwriter and as an employer and arising out of alleged employee
misconduct. Some of the actions have been brought on behalf of various classes
of claimants and seek damages of material or indeterminate amounts. The
Company is also involved, from time to time, in proceedings with, and
investigations by, governmental agencies and self regulatory organizations.
Although there can be no assurance that such other actions, proceedings,
investigations and litigation will not have a material adverse effect on the
results of operations of the Company in any future period, depending in part
on the results for such period, in the opinion of management of the Company
the ultimate resolution of any such other actions, proceedings, investigations
and litigation against the Company will not have a material adverse effect on
the consolidated financial condition and/or results of operations of the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Certain matters submitted to a vote of stockholders have been previously
disclosed in the Company's Form 10-Q for the quarterly period ended March 31,
1996.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
3.1 Certificate of Incorporation. (Incorporated herein by reference to
Exhibit 3.1 to the Company's Registration Statement on Form S-1, File No.
33-96276).
3.2 By-Laws. (Incorporated herein by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-1, File No. 33-96276).
4.1 Form of Senior Debt Securities (Incorporated herein by reference to
Exhibit 4.5 of the Company's Form 10-K for the year ended December 31,
1995, File No. 1-6862).
4.2 Specimen 5 5/8% Medium-Term Note due 2016. (Incorporated herein by
reference to Exhibit 4.6 of the Company's Form 10-K for the year ended
December 31, 1995, File No. 1-6862).
10.8 Donaldson, Lufkin & Jenrette, Inc. 1996 Stock Option Plan. (Incorporated
herein by reference to Annex A of the Company's Proxy Statement on
Schedule 14 A).
10.81 Insurance Agreement dated February 1, 1996 by and between the Registrant
and Jeanette Eliasberg as Trustee and Owner of the Trust created under
Agreement dated December 22, 1993 between Theodore P. Shen, as Grantor
and Jeanette Eliasberg as Trustee.
10.82 Insurance Agreement dated February 1, 1996 by and between the Registrant
and Jeanette Eliasberg as Trustee and Owner of the Trust created under
Agreement dated December 22, 1993 between Theodore P. Shen, as Grantor
and Jeanette Eliasberg as Trustee.
10.83 Insurance Agreement dated February 1, 1996 by and between the Registrant
and Jeanette Eliasberg as Trustee and Owner of the Trust created under
Agreement dated December 22, 1993 between Theodore P. Shen, as Grantor
and Jeanette Eliasberg as Trustee.
10.84 Insurance Agreement dated January 4, 1996 by and between the Registrant
and Dan Curtis Roby as Trustee and Owner of the Roby 1995 Insurance Trust
dated November 27, 1995.
10.85 Second Amendment of Lease by and between Stanley Stahl D/B/A Stahl Park
Avenue Co. and the Registrant, dated August 24, 1995.
10.86 Third Amendment of Lease by and between Stanley Stahl D/B/A Stahl Park
Avenue Co. and the Registrant, dated October 6, 1995.
10.87 Fourth Amendment of Lease by and between Stanley Stahl D/B/A Stahl Park
Avenue Co. and the Registrant, dated April 29, 1996.
10.9 Donaldson, Lufkin & Jenrette, Inc. 1996 Incentive Compensation Plan.
(Incorporated herein by reference to Annex B of the Company's Proxy
Statement on Schedule 14 A).
11 Statement re: Computation of Earnings Per Share.
27 Financial Data Schedule.
21
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Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DONALDSON, LUFKIN & JENRETTE, INC.
Date: August 14, 1996 /s/ Anthony F. Daddino
------------------------------
Anthony F. Daddino
Executive Vice President and Chief Financial Officer
(On behalf of the Registrant and as
Principal Financial Officer)
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EXHIBIT INDEX
3.1 Certificate of Incorporation. (Incorporated herein by reference to
Exhibit 3.1 to the Company's Registration Statement on Form S-1, File
No. 33-96276).
3.2 By-Laws. (Incorporated herein by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-1, File No. 33-96276).
4.1 Form of Senior Debt Securities (Incorporated herein by reference to
Exhibit 4.5 of the Company's Form 10-K for the year ended December 31,
1995, File No. 1-6862).
4.2 Specimen 5 5/8% Medium-Term Note due 2016. (Incorporated herein by
reference to Exhibit 4.6 of the Company's Form 10-K for the year ended
December 31, 1995, File No. 1-6862).
10.8 Donaldson, Lufkin & Jenrette, Inc. 1996 Stock Option Plan. (Incorporated
herein by reference to Annex A of the Company's Proxy Statement on
Schedule 14 A).
10.81 Insurance Agreement dated February 1, 1996 by and between the Registrant
and Jeanette Eliasberg as Trustee and Owner of the Trust created under
Agreement dated December 22, 1993 between Theodore P. Shen, as Grantor
and Jeanette Eliasberg as Trustee.
10.82 Insurance Agreement dated February 1, 1996 by and between the Registrant
and Jeanette Eliasberg as Trustee and Owner of the Trust created under
Agreement dated December 22, 1993 between Theodore P. Shen, as Grantor
and Jeaette Eliasberg as Trustee.
10.83 Insurance Agreement dated February 1, 1996 by and between the Registrant
and Jeanette Eliasberg as Trustee and Owner of the Trust created under
Agreement dated December 22, 1993 between Theodore P. Shen, as Grantor
and Jeanette Eliasberg as Trustee.
10.84 Insurance Agreement dated January 4, 1996 by and between the Registrant
and Dan Curtis Roby as Trustee and Owner of the Roby 1995 Insurance
Trust dated November 27, 1995.
10.85 Second Amendment of Lease by and between Stanley Stahl D/B/A Stahl Park
Avenue Co. and the Registrant, dated August 24, 1995.
10.86 Third Amendment of Lease by and between Stanley Stahl D/B/A Stahl Park
Avenue Co. and the Registrant, dated October 6, 1995.
10.87 Fourth Amendment of Lease by and between Stanley Stahl D/B/A Stahl Park
Avenue Co. and the Registrant, dated April 29, 1996.
10.9 Donaldson, Lufkin & Jenrette, Inc. 1996 Incentive Compensation Plan.
(Incorporated herein by reference to Annex B of the Company's Proxy
Statement on Schedule 14 A).
11 Statement re: Computation of Earnings Per Share.
27 Financial Data Schedule.
23
Exhibit 10.81
INSURANCE AGREEMENT
THIS INSURANCE AGREEMENT made and entered into as of
the 1st day of February, 1996, by and between DONALDSON,
LUFKIN & JENRETTE, INC., a Delaware corporation, with
principal offices and place of business in the State of New
York (hereinafter referred to as the "Company") and JEANNETTE
ELIASBERG, as Trustee of the Trust created under Agreement
dated December 22, 1993 between Theodore P. Shen, as Grantor,
and Jeannette Eliasberg, as Trustee (hereinafter referred to
as the "Owner"),
WITNESSETH THAT:
WHEREAS, the Owner has obtained a policy of life
insurance insuring the joint and survivor lives of Theodore P.
Shen (hereinafter referred to as the "Insured") and his wife,
Carol Shen, (hereinafter referred to as the "Insured's Wife")
in the original face amount of Seven Million Two Hundred Fifty
Thousand Dollars ($7,250,000) (such policy being hereinafter
referred to as the "Insurance Contract") which is described in
Exhibit A attached hereto and by this reference made a part
hereof, and which was issued by the insurance company shown in
Exhibit A (hereinafter referred to as the "Insurer"); and
WHEREAS, in consideration of past services rendered
and services to be rendered by the Insured, the Company wishes
<PAGE>
to pay a portion of the premiums due with respect to the
Insurance Contract, subject to certain repayment rights
described herein, all on the terms and conditions hereinafter
set forth; and
WHEREAS, the Company wishes to have the Insurance
Contract collaterally assigned to it by the Owner in order to
secure the repayment to it of the aggregate premiums on the
Insurance Contract which the Company may pay pursuant to this
Insurance Agreement.
NOW, THEREFORE, in consideration of the premises and
of the mutual promises contained herein, the parties hereto
agree as follows:
1. (a) Premium Payments. Except as otherwise
provided herein, on or before March 15, 1996, and on or before
each of the following fourteen (14) consecutive annual premium
due dates with respect to the Insurance Contract (each such
premium due date hereinafter referred to as an "Anniversary
Date"), the Owner shall pay to the Insurer as and for a
portion of the premium due with respect to such Insurance
Contract an amount equal to the greater of (i) the total
premium less Sixty Thousand Dollars ($60,000) and (ii) the
economic benefit of the insurance protection then provided to
the Owner under the Insurance Contract and this Insurance
Agreement on the life or lives of such as are then living of
the Insured and the Insured's Wife, and the Company shall pay
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<PAGE>
to the Insurer as and for a portion of such premium an amount
equal to Sixty Thousand Dollars ($60,000). The economic
benefit referred to in the preceding sentence shall be the
lesser of (i) the PS 58 cost for the insurance protection
referred to therein (as determined under tables published by
the Internal Revenue Service) and modified as appropriate (or,
if applicable, as specifically prescribed by the Internal
Revenue Service) to reflect that such insurance protection is
on the joint lives of the Insured and the Insured's Wife and
that the death benefit under such Insurance Contract is
payable only on the death of the second to die of the Insured
and the Insured's Wife) and (ii) if such insurance protection
is available from the Insurer as term insurance, the premium
for such insurance protection determined by reference to the
Insurer's current published premium rate for one-year term
life insurance protection available to all standard risks.
Thirty (30) days prior to each Anniversary Date on which
premium is payable hereunder, the Company shall notify the
Owner of the exact amount of the economic benefit the Owner is
obligated to pay hereunder. Each of the Owner and the Company
shall promptly furnish the other evidence of timely payment of
the portion of each such premium it is obligated to pay
hereunder.
(b) Dividends. After such time that premiums on
the Insurance Contract are no longer payable pursuant to
paragraph 1(a) hereof, dividends and other Policy Values shall
-3-
<PAGE>
be applied to the payment of premiums on the Insurance
Contract. Dividends on the Insurance Contract not applied to
the payment of premiums pursuant to this subparagraph (b)
shall be used to purchase additional paid-up insurance or may
be accumulated with interest, as the Owner shall elect. For
purposes of this Insurance Agreement, with respect to the
Insurance Contract, the term "Policy Values" shall include
dividends, dividend additions, dividend accumulations, the
cash surrender value of the Insurance Contract including the
cash surrender value of paid-up additions and supplemental
insurance rider additions and any other element of value which
would ordinarily be applied to the payment of premiums under a
premium "vanish" option.
2. Collateral Assignment. (a) To secure the
repayment to the Company to the extent possible of the
Repayment Amount (as defined in paragraph 5 hereunder) as
provided herein, the Owner shall assign the Insurance Contract
to the Company as collateral ("the Collateral Assignment")
under a Collateral Assignment Agreement substantially in the
form attached hereto as Exhibit B. The Collateral Assignment
shall not be terminated (except as otherwise provided in this
Insurance Agreement), altered or amended by the Owner without
the express written consent of the Company.
(b) Except as provided in subparagraph (a) of this
paragraph 2, the Owner shall not transfer any interest in the
Insurance Contract during the term of this Insurance Agreement
-4 -
<PAGE>
without the consent of the Company. In the event of an
assignment by the Owner to which the Company has consented,
the references to "Owner" herein shall be deemed to refer to
the assignee or any subsequent assignee thereof for all
purposes of this Insurance Agreement, including for purposes
of this paragraph 2. The Owner shall comply with the
notification requirements of the Insurer with respect to any
such assignment and shall deliver a copy of any such
notification to the Company.
3. Loans. (a) In no event shall the Company have
any right to borrow from, or against the security of, the
Insurance Contract during the term of this Insurance
Agreement.
(b) The Owner shall have no right to borrow from,
or against the security of, the Insurance Contract during the
term of this Insurance Agreement to the extent that the amount
of aggregate indebtedness under, or secured by, the Insurance
Contract would thereafter exceed the loan value of the
Insurance Contract as determined immediately prior to the
first premium payment made by the Company pursuant to
paragraph 1 hereof except (i) as provided in subparagraph 8(f)
hereof, (ii) as provided in paragraph 11 hereof and (iii)
after the death of the Insured, to pay any increase in the
Owner's Federal, State or local income tax which is
attributable to the inclusion, if any, as an item of gross
income for purposes of computing such taxes of (A) the
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<PAGE>
economic benefit (as defined in paragraph 1 hereof) of the
insurance protection then provided to the Owner on the life of
the Insured's Wife under the Insurance Contract and this
Insurance Agreement and (B) any portion of, or increase in,
the cash surrender value of the Insurance Contract
(hereinafter "the Cash Surrender Value").
4. Term of Insurance Agreement. This Insurance
Agreement and, except to the extent otherwise provided in
paragraph 9 hereof, the obligations of the Company hereunder
shall remain in force (regardless of whether the Owner has
assigned any portion or all of the Owner's rights, interests
and incidents of ownership in and to the Insurance Contract)
until the first to occur of:
(a) the death of the second to die of the
Insured and the Insured's Wife;
(b) the surrender or cancellation of the
Insurance Contract by the Owner prior to the death
of the second to die of the Insured and the
Insured's Wife; and
(c) the release of the Collateral Assignment by
the Company pursuant to the provisions of paragraph
8 hereof.
5. Repayment Amount. The Repayment Amount as of
any time is the total amount of premiums on the Insurance
Contract paid by the Company (other than any premium or
portion thereof which consists of Restoration Amount as
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<PAGE>
defined in paragraph 11 hereunder), reduced by any premium
returns and reimbursement paid to the Company from any source
on account of such premiums paid and further reduced by any
unpaid portion of the Restoration Amount as set forth in
paragraph 11 hereunder. In no event shall the amount payable
to the Company hereunder on account of the Repayment Amount
exceed (i) if payable by reason of the death of the Insured or
the Insured's Wife, the proceeds of the Insurance Contract
payable at such death or (ii) if payable by reason of the
surrender of the Insurance Contract or the withdrawal of any
Policy Values, the amount of Cash Surrender Value payable with
respect to such surrender or the amount of such Policy Values
so withdrawn. If, on the complete surrender or cancellation
of the Insurance Contract or on the death of the second to die
of the Insured and the Insured's Wife, the Cash Surrender
Value or proceeds of the Insurance Contract, as the case may
be, are less than the Repayment Amount due to the Company
hereunder, none of the Owner, the Insured, the Insured's Wife,
or the personal representative of any of them shall have any
obligation to pay any part of such shortfall to the Company.
6. Death Benefit. Upon the termination of this
Insurance Agreement on the death of the second to die of the
Insured and the Insured's Wife, the Company and the Owner
shall promptly take all action necessary to obtain the death
benefit provided under the Insurance Contract. The Company
shall have the right to receive a portion of the death benefit
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<PAGE>
under the Insurance Contract equal to the Repayment Amount
determined as of the date of such death, subject to the
limitations of paragraph 5 hereunder. The balance of the
death benefit provided under the Insurance Contract, if any,
shall be paid to the beneficiary or beneficiaries, and in the
manner and amounts, designated by the Owner in the beneficiary
designation for the Insurance Contract. No amount shall be
paid from the death benefit under the Insurance Contract to
the Owner or the beneficiary or beneficiaries designated by
the Owner until the entire Repayment Amount payable to the
Company has been paid.
7. Withdrawals from Insurance Contract; Surrender
or Cancellation. (a) Except to the extent Policy Values are
applied to pay premiums on the Insurance Contract pursuant to
paragraph 1(b) hereof or as otherwise provided in this
paragraph 7, (i) the Owner shall not surrender the Insurance
Contract or otherwise withdraw any Policy Values during the
term of this Insurance Agreement (including by cancellation of
the Insurance Contract) without the consent of the Company and
(ii) in the event that the Insurance Contract is surrendered
or Policy Values are withdrawn prior to the death of the
survivor of the Insured and the Insured's Wife, the Company
shall be entitled to receive the Repayment Amount as then
determined to the extent of the Cash Surrender Value payable
with respect to any such surrender or the Policy Values then
withdrawn, such Repayment Amount to be paid to the extent
-8-
<PAGE>
possible first from the cash surrender value of paid up
additions and then from the remaining Cash Surrender Value so
payable.
(b) Notwithstanding the foregoing, the Owner shall
be permitted to withdraw Policy Values to the extent permitted
under the Insurance Contract (other than by surrender of the
Insurance Contract) without the consent of the Company and, in
the case of subparagraph (i) of this subparagraph (b), without
paying any portion of the Repayment Amount to the Company, as
shall be necessary to pay:
(i) Any increase in the Owner's Federal, State or
local income tax after, or by reason of, the death of the
Insured which is attributable to the inclusion of any portion
of, or an increase in, the Cash Surrender Value as an item of
gross income for purposes of computing the Owner's income
taxes; and
(ii) The Repayment Amount at such time as the Owner
obtains the release of the Collateral Assignment pursuant to
the provisions of paragraph 8 hereunder.
(c) The Owner shall surrender the Insurance
Contract at such time as the Company, based on information
provided by the Insurer, notifies the Owner that the total
Augmented Cash Surrender Value is less than the Repayment
Amount if, prior to such time (i) the Augmented Cash Surrender
Value exceeded such Repayment Amount and (ii) either of the
following events has occurred: (A) the death of the Insured or
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<PAGE>
(B) an event to which subparagraph 9(b) hereof applies. For
purposes of this Insurance Agreement, the Augmented Cash
Surrender Value as of any time shall be the amount by which
the total cash surrender value of the Insurance Contract as of
such time exceeds the cash surrender value of the Insurance
Contract determined immediately prior to the first premium
payment made by the Company pursuant to paragraph 1 hereof.
(d) The Owner shall surrender the Insurance
Contract at such time, if any, as the Insured is dismissed
from employment by the Company for cause. For purposes of
this Insurance Agreement, "cause" means (i) the Insured's
willful failure to perform his duties as an officer and/or
employee of the Company (other than as a result of his total
or partial incapacity due to physical or mental illness and
excluding any action taken and any decision not to act if such
action is taken or such decision is made in the good faith
belief that it is in the furtherance of the business of the
Company), (ii) gross negligence or gross malfeasance in the
performance of such duties, (iii) a final finding by a court
or other governmental body with proper jurisdiction that
Insured engaged in an act or acts that (A) constitute a felony
under the laws of the United States or any state thereof, or
(B) constitute a violation of Federal or State securities law,
if the Board of Directors determines that, by reason of such
finding, the continued employment of the Insured by the
Company would be seriously detrimental to the Company and its
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<PAGE>
business; or (iv) in the absence of any final finding by a
court or other governmental body with proper jurisdiction, a
determination by the Board of Directors in good faith that
Insured engaged in an act or acts that (A) constitute a felony
under the laws of the United States or any state thereof, or
(B) constitute a violation of Federal or State securities law,
if the Board of Directors determines that, by reason of such
act or acts, the continued employment of the Insured by the
Company would be seriously detrimental to the Company and its
business.
8. Release of Collateral Assignment. (a) The
Owner shall obtain the release of the Collateral Assignment in
the manner set forth in subparagraph (f) of this paragraph 8
on the earliest to occur of (i) the Nontaxable Rollout Time
(as defined in subparagraph (b) of this paragraph 8), (ii) the
Post-Death Rollout Time (as defined in subparagraph (c) of
this paragraph 8) and (iii) the Applicable Anniversary Date
(as defined in subparagraph (d) of this paragraph 8).
(b) The Nontaxable Rollout Time shall mean the
earliest time after the last premium payment the Company is
obligated to make hereunder that (i) after payment of the
Repayment Amount from the Cash Surrender Value, based on
projections supplied by the Insurer (using a projected
dividend or interest rate approved by the Owner, provided that
such approval may not be unreasonably withheld), a death
benefit under the Insurance Contract of an amount not less
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<PAGE>
than the lesser of (A) the face amount of the Insurance
Contract immediately prior to the first premium payment made
by the Company hereunder or (B) the then amount of insurance
provided under the Insurance Contract may thereafter be
maintained for the joint and survivor lives of the Insured and
the Insured's Wife solely by the application of Policy Values
under the Insurance Contract without the payment of further
cash premiums and (ii) the Company provides the Owner with an
opinion of outside counsel recognized as expert in Federal tax
matters, and which opinion may be relied on by the Owner, that
the payment to the Company of the Repayment Amount and the
release of the Collateral Assignment will not be a Federal
taxable event with respect to the Owner or the Insured.
Notwithstanding the foregoing, if, within 30 days after
receipt of the opinion referred to in the preceding sentence,
the Owner obtains an opinion of independent counsel recognized
as expert in Federal tax matters that the payment to the
Company of the Repayment Amount and the release of the
Collateral Assignment will more likely than not be a Federal
taxable event with respect to the Owner or the Insured, the
Company and Owner shall refer the matter to a third
independent counsel acceptable to both and the Nontaxable
Rollout Time shall not be deemed to have occurred unless such
third counsel affirms the opinion originally supplied by the
Company. For purposes of this paragraph, a Federal taxable
event shall mean the recognition of gross income or the making
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<PAGE>
of a taxable gift under the then applicable provisions of the
Internal Revenue Code.
(c) The Post-Death Rollout Time shall mean the
earliest time after the death of the Insured and after the
last premium payment the Company is obligated to make
hereunder that, based on projections supplied by the Insurer
(using a projected dividend or interest rate approved by the
Owner, provided that such approval may not be unreasonably
withheld), after payment from the Cash Surrender Value of the
Repayment Amount and all income tax liability of the Owner
arising by reason of such payment, a death benefit under the
Insurance Contract of an amount not less than the lesser of
(i) the face amount of the Insurance Contract immediately
prior to the first premium payment made by the Company
hereunder or (ii) the then amount of insurance provided under
the Insurance Contract may thereafter be maintained for the
life of the Insured's Wife solely by the application of Policy
Values under the Insurance Contract without the payment of
further cash premiums.
(d) The Applicable Anniversary Date shall be such
Anniversary Date, if any, on which the Owner in its sole and
absolute discretion consents to a request by the Company that
the Owner obtain the release of the Collateral Assignment,
which request by the Company and consent by the Owner shall be
made and given, if at all, in accordance with the provisions
of subparagraph (e) of this paragraph 8.
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<PAGE>
(e) On any Anniversary Date on which the Augmented
Cash Surrender Value exceeds the Repayment Amount as then
determined (but only on any such Anniversary Date), the
Company may request the Owner to obtain the release of the
Collateral Assignment in accordance with the provisions of
subparagraph (f) of this paragraph 8. In determining whether
to consent to any such request, the Owner shall consider
primarily the interests of the Insured and shall not consent
to such request unless the Owner determines in its sole and
absolute discretion that it would be in the interests of the
Insured to do so. Although the Owner, in determining whether
or not to consent to such request, shall consider primarily
the interests of the Insured (and may consult with the Insured
for purposes of making any such determination), such
determination shall be within the sole and absolute discretion
of the Owner. The consent of the Owner with respect to any
request by the Company as herein described may be given only
on the Anniversary Date on which the Company makes such
request.
(f) To obtain the release of the Collateral
Assignment pursuant to the provisions of this subparagraph 8,
the Owner shall pay to the Company the Repayment Amount
determined as of the date of such payment and, solely as a
source of funding such payment, the Owner may borrow such
amount from the Insurance Contract and direct that the same be
paid to the Company. Upon receipt of such payment, the
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<PAGE>
Company shall release the Collateral Assignment by the
execution and delivery of an appropriate instrument of
release, and neither the Company nor the Company's assigns
shall thereafter have any further interest in and to the
Insurance Contract, either under the terms thereof or under
this Insurance Agreement.
9. Termination of Company's Obligation to Pay
Premiums. Notwithstanding that this Insurance Agreement
remains in effect until the termination thereof pursuant to
paragraph 4 hereunder, the Company's obligation to make
further premium payments hereunder shall cease on the first to
occur, if any, of:
(a) the giving of notice by the Insured to the
Company that the Company is thereafter relieved of
any further obligation to make premium payments
under this Insurance Agreement; and
(b) the failure of the Owner to pay the
portion of any premium the Owner is obligated to pay
hereunder within 30 days of written demand by the
Company for such payment, which written demand may
be made only after the Owner fails to pay its
portion of premium within the grace period provided
under the Insurance Contract with respect to such
premium, provided that this subparagraph (b) shall
not apply if the Company elects to pay the Owner's
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<PAGE>
portion of such premium pursuant to paragraph 10
hereunder.
10. Default by Owner. If the Owner fails to pay
the portion of any premium due and payable which the Owner is
obligated to pay hereunder within the period described in
paragraph 9(b) hereof, the Company, in its sole discretion,
may elect to pay such portion of the premium, which amount
shall thereafter be recovered by the Company as part of the
Repayment Amount and, if the Company elects to pay such
portion, this Insurance Agreement shall thereafter continue to
apply as if the Owner had timely paid its portion of such
premium. If the Owner fails to pay its portion of any premium
payable hereunder, the Company's sole remedy with respect to
such failure shall be (i) if the Company does not elect to pay
the Owner's portion of the premium pursuant to this paragraph
10, the cessation of the Company's obligation to make further
premium payments pursuant to paragraph 9(b) hereof or (ii) if
the Company elects to pay the Owner's portion of the premium
pursuant to this paragraph 10, the recovery of such amount as
part of the Repayment Amount.
11. Default by Company. In the event that the
Company shall be in default as to any premium payment due
under paragraph 1 hereunder with respect to the Insurance
Contract, the Owner may borrow from the Insurance Contract, to
the extent permitted thereunder, all or part of the amount as
to which the Company is in default to be applied to the
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<PAGE>
payment of such premium. Such borrowing and payment shall not
discharge the Company's obligation under paragraph 1 hereunder
with respect to such premium or any subsequent premiums. With
respect to a default by the Company hereunder with respect to
premium payments, the Company shall be obligated (a) to repay
directly to the Insurer the full amount of any indebtedness
including accrued and unpaid interest incurred with respect to
the Insurance Contract pursuant to this paragraph and (b) to
repay to the Owner any amount which the Owner paid (i) as
premium which the Company was obligated to pay hereunder and
(ii) as interest on a loan from the Insurance Contract
pursuant to this paragraph 11, together with interest on the
amounts described in this clause (b) at a rate equal to the
interest rate applicable to policy loans with respect to the
Insurance Contract (the aggregate amounts referred to in this
sentence being herein referred to as the "Restoration
Amount"). If any portion of the Restoration Amount has not
been repaid by the Company prior to the termination of this
Insurance Agreement, the Repayment Amount payable to the
Company on such termination shall be reduced by such portion
of the Restoration Amount. Nothing herein shall preclude the
Owner from recovering such additional damages, if any, as the
Owner shall sustain by reason of the Company's default
hereunder.
12. Notification of Insurer. Except as otherwise
provided herein, at any time that the Company shall be
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<PAGE>
entitled under the provisions hereof to recover the Repayment
Amount with respect to the Insurance Contract, the Company
shall notify the Owner and the Insurer of the amount that the
Company claims it is entitled so to recover and, unless the
Owner objects in writing to the Company and the Insurer within
thirty (30) days of such notice, the Insurer is hereby
authorized to recognize such statement of the Company without
investigation or the giving of any notice and shall be fully
protected in paying such amount to the Company. If the
Insurer receives written notice from the Owner controverting
the amount payable to the Company, the Insurer shall make no
payments with respect to such Insurance Contract except upon
written instructions signed by both the Owner and the Company
or in accordance with a final, non-appealable order of a court
of competent jurisdiction. The written acknowledgment of
receipt by the Company of any funds paid to the Company
pursuant to its statement of the amount payable to it shall be
a full discharge and release of the Insurer by the Company
with respect to such payment. The Insurer shall be relieved
of any and all responsibility to any party claiming an
interest in the Insurance Contract for any decrease in cash
value or death benefit resulting from the exercise of any
right as to which both the Owner and the Company have
consented or which is specifically permitted hereunder.
13. Owner. The undersigned Owner shall be the sole
and absolute owner of the Insurance Contract and shall have
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<PAGE>
all rights of ownership in the Insurance Contract except to
the extent otherwise specifically provided in this Insurance
Agreement and the Collateral Assignment. Without limiting any
other rights not specifically enumerated, the Owner
specifically reserves, subject to the Company's rights under
this Insurance Agreement, the right to designate the
beneficiary or beneficiaries of the death benefit payable
under the Insurance Contract and to elect any optional mode of
settlement permitted by the Insurance Contract or allowed by
the Insurer.
14. Premium Waiver. For purposes of computing the
Repayment Amount, no premium waived under a premium waiver
provision of the Insurance Contract shall be treated as having
been paid by the Company.
15. Further Assurances. Each of the Company and
the Owner shall execute and deliver such other instruments and
agreements as shall be necessary or appropriate to carry out
the intent of this Insurance Agreement.
16. Amendment. Except as otherwise provided
herein, this Insurance Agreement may not be amended, altered
or modified, except by a written instrument signed by the
Company and the Owner, or their respective successors or
assigns, and may not be otherwise terminated except as
provided herein.
17. Binding Nature of Insurance Agreement. This
Insurance Agreement shall be binding upon and shall inure to
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the benefit of the Company and its successors and assigns, the
Owner, and the Owner's successors, assigns, and beneficiaries.
As used in this Insurance Agreement, the term "successor",
with respect to the Company, shall include, but shall not be
limited to, any person, firm, corporation or other entity
which acquires all or substantially all of the assets or
business of the Company whether by merger, consolidation,
purchase or otherwise.
18. Notices. Any notice, consent or demand
required or permitted to be given under the provisions of this
Insurance Agreement shall be in writing, and shall be deemed
to be dated and to have been duly given when delivered
personally or by courier or upon delivery to the post office
and sent registered or certified mail, postage prepaid, return
receipt requested addressed as set forth below:
(a) If to the Company:
Donaldson, Lufkin & Jenrette, Inc.
140 Broadway
New York, New York 10005
Attention: Corporate Secretary
(b) If to the Owner:
Jeannette Eliasberg, Trustee
24481 Harbour View Drive
Ponte Vedra, Florida 32082
Any party may alter the address to which communications or
copies are to be sent pursuant to this Insurance Agreement by
giving notice of such change of address in conformity with the
provisions of this paragraph 18.
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<PAGE>
19. Governing Law. This Insurance Agreement, and
the rights of the parties hereunder, shall be governed by and
construed in accordance with the laws of the State of New York
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<PAGE>
applicable to contracts made and to be performed entirely
within the State of New York.
IN WITNESS WHEREOF, the parties hereto have
executed this Insurance Agreement as of the day and year first
above written.
DONALDSON, LUFKIN & JENRETTE, INC.
By /s/ Thomas E. Siegler
---------------------------
Senior Vice President
ATTEST:
/s/ Claire M. Power
- -----------------------
Assistant Secretary
/s/ Jeannette Eliasberg
------------------------------
JEANNETTE ELIASBERG,as Trustee
of the Trust created under
Agreement dated December
22, 1993 between Theodore
P. Shen, Grantor, and
Jeannette Eliasberg,
Trustee, Owner
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<PAGE>
EXHIBIT A
Insurer: John Hancock Mutual Life Insurance Company
Policy No.: 080071228
Face Amount: $7,250,000
Policy Description: Policy on the joint and survivor lives of
Theodore P. Shen and Carol Shen, payable on second death.
Issue Date: February 11, 1994
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<PAGE>
EXHIBIT B
COLLATERAL ASSIGNMENT AGREEMENT dated as of
February 1, 1996 by and between JEANNETTE ELIASBERG, as
Trustee of the Trust created under Agreement dated December
22, 1993 between Theodore P. Shen, as Grantor, and Jeannette
Eliasberg, as Trustee (such Trustee or any successor as such
Trustee being hereinafter referred to as the "Owner") and
DONALDSON, LUFKIN & JENRETTE, INC., a Delaware corporation
(hereinafter referred to as "the Company").
John Hancock Mutual Life Insurance Company (the
"Insurer") issued on February 11, 1994 Insurance Contract
No. 080071228 on the joint and survivor lives of Theodore P.
Shen, an employee of the Company (hereinafter referred to as
the "Insured") and the Insured's wife, Carol Shen,
(hereinafter referred to as the "Insured's Wife"). Such
policy shall be referred to hereinafter as the "Insurance
Contract."
The undersigned parties have entered into an
Insurance Agreement (the "Insurance Agreement") which is
attached hereto as Exhibit A and which by this reference is
made a part hereof.
Pursuant to the Insurance Agreement, Owner has
agreed to assign the Insurance Contract to the Company as
collateral security for the payment to the Company of the
Repayment Amount as set forth in the Insurance Agreement.
<PAGE>
The parties hereto, in consideration of the
foregoing and the agreements and covenants hereinafter set
forth and intending to be legally bound hereby, agree as
follows:
1. Owner hereby assigns to the Company, effective
as of the date hereof, the Insurance Contract as collateral
security for payment to the Company of the Repayment Amount
pursuant to the provisions of the Insurance Agreement (such
assignment hereinafter referred to as "the Collateral
Assignment"). The Company shall be entitled to receive the
Repayment Amount, as then determined and subject to the
limitations in paragraph 5 of the Insurance Contract, as
follows:
(a) From the death proceeds payable under the
Insurance Contract on the death of the second to die of
the Insured and the Insured's Wife;
(b) Except as otherwise provided in paragraph 7 of
the Insurance Agreement, from the cash surrender value of
the Insurance Contract (hereinafter "the Cash Surrender
Value") or other Policy Values (as defined in paragraph
1(b) of the Insurance Agreement) to the extent the Owner
withdraws any such Cash Surrender Value or other Policy
Values from the Insurance Contract prior to the death of
the second to die of the Insured and the Insured's Wife
(including by reason of a surrender or cancellation of
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<PAGE>
the Insurance Contract pursuant to paragraph 7 of the
Insurance Agreement); or
(c) At such time as the Owner obtains the
release of the Collateral Assignment hereunder in
accordance with paragraph 8 of the Insurance
Agreement.
The Collateral Assignment made herein shall not be terminated
(except as otherwise provided in the Insurance Agreement),
altered or amended by the Owner without the express written
consent of the Company.
2. Release of Collateral Assignment. The Owner
shall obtain the release of the Collateral Assignment in the
manner and at such time as set forth in paragraph 8 of the
Insurance Agreement.
3. Payment by Insurer. Owner hereby authorizes
the Insurer to rely solely on the written statement of the
Company as to the amount payable to the Company with respect
to the Insurance Contract as of any date unless the Insurer
receives notice in writing from the Owner given within thirty
(30) days of receipt of such written statement of the Company
controverting the Company's statement of such amount payable.
If the Insurer receives no such written notice from the Owner,
the Insurer is hereby authorized to recognize such statement
of the Company without investigation or the giving of any
notice. If the Insurer receives such written notice from the
Owner controverting the amount payable to the Company, the
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<PAGE>
Insurer shall make no payments with respect to such Insurance
Contract except upon written instructions signed by both the
Owner and the Company or in accordance with a final,
non-appealable order of a court of competent jurisdiction.
The written acknowledgment of receipt by the Company of any
funds paid to the Company pursuant to its statement of the
amount payable to it shall be a full discharge and release of
the Insurer by the Company with respect to such payment. The
Insurer shall be relieved of any and all responsibility to any
party claiming an interest in the Insurance Contract for any
decrease in cash value or death benefit resulting from the
exercise of any right as to which both the Owner and the
Company have consented or which is specifically permitted
under the Insurance Agreement.
4. Owner's Rights. (a) Except as otherwise
provided in the Insurance Agreement and herein and subject to
the rights of the Company under the Insurance Agreement, each
and every right, interest and incident of ownership associated
with the Insurance Contract which is not expressly assigned to
the Company by this Collateral Assignment Agreement is
retained by the Owner, including, without limitation, the
right to designate the beneficiary or beneficiaries of the
death benefit payable under the Insurance Contract and to
elect any optional mode of settlement permitted by the
Insurance Contract or allowed by the Insurer.
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<PAGE>
(b) The Owner shall not assign any portion or all
of the Owner's right, interest and incidents of ownership in
and to the Insurance Contract during the term of the Insurance
Agreement without the consent of the Company. In the event of
an assignment by the Owner to which the Company has consented,
the references to "Owner" herein shall be deemed to refer to
the assignee or any subsequent assignee thereof for all
purposes of this Collateral Assignment Agreement, including
for purposes of this paragraph 4.
(c) (i) Except to the extent Policy Values are
applied to pay premiums on the Insurance Contract pursuant to
paragraph 1(b) of the Insurance Agreement or as otherwise
provided in paragraph 7 of the Insurance Agreement or this
subparagraph (c), (A) the Owner shall not surrender the
Insurance Contract or otherwise withdraw any Policy Values
during the term of this Insurance Agreement (including by
cancellation of the Insurance Contract) without the consent of
the Company and (B) in the event that the Insurance Contract
is surrendered or Policy Values are withdrawn prior to the
death of the survivor of the Insured and the Insured's Wife,
the Company shall be entitled to receive the Repayment Amount
as then determined to the extent of the Cash Surrender Value
payable with respect to any such surrender or the Policy
Values then withdrawn, such Repayment Amount to be paid to the
extent possible first from the cash surrender value of paid up
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<PAGE>
additions and then from the remaining Cash Surrender Value so
payable.
(ii) Notwithstanding the foregoing, the Owner shall
be permitted to withdraw Policy Values to the extent permitted
under the Insurance Contract (other than by surrender of the
Insurance Contract) without the consent of the Company and, in
the case of subparagraph (A) of this subparagraph (ii),
without paying any portion of the Repayment Amount to the
Company, as shall be necessary to pay:
(A) Any increase in the Owner's Federal, State or
local income tax after, or by reason of, the death of the
Insured which is attributable to the inclusion of any portion
of, or an increase in, the Cash Surrender Value as an item of
gross income for purposes of computing the Owner's income
taxes; and
(B) The Repayment Amount at such time as the Owner
obtains the release of the Collateral Assignment pursuant to
the provisions of paragraph 8 of the Insurance Agreement.
(iii) The Owner shall surrender the Insurance
Contract at such time as the Company, based on information
provided by the Insurer, notifies the Owner that the total
Augmented Cash Surrender Value is less than the Repayment
Amount if, prior to such time (A) the Augmented Cash Surrender
Value exceeded such Repayment Amount and (B) either of the
following events has occurred: (x) the death of the Insured or
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<PAGE>
(y) an event to which subparagraph 9(b) of the Insurance
Agreement applies.
(iv) The Owner shall surrender the Insurance
Contract at such time, if any, as the Insured is dismissed
from employment by the Company for "cause" (as defined in
paragraph 7(d) of the Insurance Agreement).
5. Borrowing Rights. (a) In no event shall the
Company have any right to borrow from, or against the security
of, the Insurance Contract during the term of the Insurance
Agreement.
(b) The Owner shall have no right to borrow from,
or against the security of, the Insurance Contract during the
term of the Insurance Agreement to the extent that the amount
of aggregate indebtedness under, or secured by, the Insurance
Contract would thereafter exceed the loan value of the
Insurance Contract as determined immediately prior to the
first premium payment made by the Company pursuant to
paragraph 1 of the Insurance Agreement except (i) as provided
in subparagraph 8(f) thereof (in connection with obtaining the
release of the Collateral Assignment), (ii) as provided in
subparagraph 11 thereof (in connection with a Default by the
Company) and (iii) after the death of the Insured, to pay any
increase in the Owner's Federal, State or local income tax
which is attributable to the inclusion, if any, as an item or
items of gross income for purposes of computing such taxes of
(A) the economic benefit (as defined in paragraph 1 of the
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<PAGE>
Insurance Agreement) of the insurance protection then provided
to the Owner on the life of the Insured's Wife under the
Insurance Contract and the Insurance Agreement and (B) any
portion of, or increase in, the Cash Surrender Value.
6. Representation of Solvency. Each of the parties
hereto declares that no proceedings in bankruptcy are pending
against such party, and the Owner hereby declares that its
property is not the subject of any assignment for the benefit
of creditors.
7. Governing Law. All matters respecting the
validity, effect, and interpretation of this Collateral
Assignment Agreement shall be determined in accordance with
the laws of the State of New York, applicable to contracts
made and to be performed entirely within the State of New
York.
8. Binding Nature of Assignment. This Collateral
Assignment Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective
successors, assigns, distributees, executors, administrators
and beneficiaries. As used in this Collateral Assignment
Agreement, the term "successor", with respect to the Company,
shall include, but shall not be limited to, any person, firm,
corporation or other entity which acquires all
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<PAGE>
or substantially all of the assets or business of the
Company whether by merger, consolidation, purchase or
otherwise.
IN WITNESS WHEREOF, the parties have hereunto set
their respective hands and seals as of the date first above
written.
DONALDSON, LUFKIN & JENRETTE, INC.
By_______________________________
Senior Vice President
ATTEST:
____________________
Assistant Secretary
_________________________________
JEANNETTE ELIASBERG, as Trustee
of the Trust created under
Agreement dated December
22, 1993 between Theodore
P. Shen, Grantor, and
Jeannette Eliasberg,
Trustee, Owner
ACCEPTED:
___________________________________________________
John Hancock Mutual Life Insurance Company, Insurer
9
Exhibit 10.82
INSURANCE AGREEMENT
THIS INSURANCE AGREEMENT made and entered into as of
the 1st day of February, 1996, by and between DONALDSON,
LUFKIN & JENRETTE, INC., a Delaware corporation, with
principal offices and place of business in the State of New
York (hereinafter referred to as the "Company") and JEANNETTE
ELIASBERG, as Trustee of the Trust created under Agreement
dated December 22, 1993 between Theodore P. Shen, as Grantor,
and Jeannette Eliasberg, as Trustee (hereinafter referred to
as the "Owner"),
WITNESSETH THAT:
WHEREAS, the Owner has obtained a policy of life
insurance insuring the joint and survivor lives of Theodore P.
Shen (hereinafter referred to as the "Insured") and his wife,
Carol Shen, (hereinafter referred to as the "Insured's Wife")
in the original face amount of Five Million Three Hundred
Eighty-Three Thousand Five Hundred and Fifty-Two Dollars
($5,383,552) (such policy being hereinafter referred to as the
"Insurance Contract") which is described in Exhibit A attached hereto and by
this reference made a part hereof, and which was
issued by the insurance company shown in Exhibit A
(hereinafter referred to as the "Insurer"); and
<PAGE>
WHEREAS, in consideration of past services rendered
and services to be rendered by the Insured, the Company wishes
to pay a portion of the premiums due with respect to the
Insurance Contract, subject to certain repayment rights
described herein, all on the terms and conditions hereinafter
set forth; and
WHEREAS, the Company wishes to have the Insurance
Contract collaterally assigned to it by the Owner in order to
secure the repayment to it of the aggregate premiums on the
Insurance Contract which the Company may pay pursuant to this
Insurance Agreement.
NOW, THEREFORE, in consideration of the premises and
of the mutual promises contained herein, the parties hereto
agree as follows:
1. (a) Premium Payments. Except as otherwise
provided herein, on or before March 15, 1996, and on or before
each of the following fourteen (14) consecutive annual premium
due dates with respect to the Insurance Contract (each such
premium due date hereinafter referred to as an "Anniversary
Date"), the Owner shall pay to the Insurer as and for a
portion of the premium due with respect to such Insurance
Contract an amount equal to the greater of (i) the total
premium less Sixty Five Thousand Dollars ($65,000) and (ii)
the economic benefit of the insurance protection then provided
to the Owner under the Insurance Contract and this Insurance
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<PAGE>
Agreement on the life or lives of such as are then living of
the Insured and the Insured's Wife, and the Company shall pay
to the Insurer as and for a portion of such premium an amount
equal to Sixty Five Thousand Dollars ($65,000). The economic
benefit referred to in the preceding sentence shall be the
lesser of (i) the PS 58 cost for the insurance protection
referred to therein (as determined under tables published by
the Internal Revenue Service) and modified as appropriate (or,
if applicable, as specifically prescribed by the Internal
Revenue Service) to reflect that such insurance protection is
on the joint lives of the Insured and the Insured's Wife and
that the death benefit under such Insurance Contract is
payable only on the death of the second to die of the Insured
and the Insured's Wife) and (ii) if such insurance protection
is available from the Insurer as term insurance, the premium
for such insurance protection determined by reference to the
Insurer's current published premium rate for one-year term
life insurance protection available to all standard risks.
Thirty (30) days prior to each Anniversary Date on which
premium is payable hereunder, the Company shall notify the
Owner of the exact amount of the economic benefit the Owner is
obligated to pay hereunder. Each of the Owner and the Company
shall promptly furnish the other evidence of timely payment of
the portion of each such premium it is obligated to pay
hereunder.
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<PAGE>
(b) Dividends. After such time that premiums on
the Insurance Contract are no longer payable pursuant to
paragraph 1(a) hereof, dividends and other Policy Values shall
be applied to the payment of premiums on the Insurance
Contract. Dividends on the Insurance Contract not applied to
the payment of premiums pursuant to this subparagraph (b)
shall be used to purchase additional paid-up insurance or may
be accumulated with interest, as the Owner shall elect. For
purposes of this Insurance Agreement, with respect to the
Insurance Contract, the term "Policy Values" shall include
dividends, dividend additions, dividend accumulations, the
cash surrender value of the Insurance Contract including the
cash surrender value of paid-up additions and supplemental
insurance rider additions and any other element of value which
would ordinarily be applied to the payment of premiums under a
premium "vanish" option.
2. Collateral Assignment. (a) To secure the
repayment to the Company to the extent possible of the
Repayment Amount (as defined in paragraph 5 hereunder) as
provided herein, the Owner shall assign the Insurance Contract
to the Company as collateral ("the Collateral Assignment")
under a Collateral Assignment Agreement substantially in the
form attached hereto as Exhibit B. The Collateral Assignment
shall not be terminated (except as otherwise provided in this
Insurance Agreement), altered or amended by the Owner without
the express written consent of the Company.
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<PAGE>
(b) Except as provided in subparagraph (a) of this
paragraph 2, the Owner shall not transfer any interest in the
Insurance Contract during the term of this Insurance Agreement
without the consent of the Company. In the event of an
assignment by the Owner to which the Company has consented,
the references to "Owner" herein shall be deemed to refer to
the assignee or any subsequent assignee thereof for all
purposes of this Insurance Agreement, including for purposes
of this paragraph 2. The Owner shall comply with the
notification requirements of the Insurer with respect to any
such assignment and shall deliver a copy of any such
notification to the Company.
3. Loans. (a) In no event shall the Company have
any right to borrow from, or against the security of, the
Insurance Contract during the term of this Insurance
Agreement.
(b) The Owner shall have no right to borrow from,
or against the security of, the Insurance Contract during the
term of this Insurance Agreement to the extent that the amount
of aggregate indebtedness under, or secured by, the Insurance
Contract would thereafter exceed the loan value of the
Insurance Contract as determined immediately prior to the
first premium payment made by the Company pursuant to
paragraph 1 hereof except (i) as provided in subparagraph 8(f)
hereof, (ii) as provided in paragraph 11 hereof and (iii)
after the death of the Insured, to pay any increase in the
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<PAGE>
Owner's Federal, State or local income tax which is
attributable to the inclusion, if any, as an item of gross
income for purposes of computing such taxes of (A) the
economic benefit (as defined in paragraph 1 hereof) of the
insurance protection then provided to the Owner on the life of
the Insured's Wife under the Insurance Contract and this
Insurance Agreement and (B) any portion of, or increase in,
the cash surrender value of the Insurance Contract
(hereinafter "the Cash Surrender Value").
4. Term of Insurance Agreement. This Insurance
Agreement and, except to the extent otherwise provided in
paragraph 9 hereof, the obligations of the Company hereunder
shall remain in force (regardless of whether the Owner has
assigned any portion or all of the Owner's rights, interests
and incidents of ownership in and to the Insurance Contract)
until the first to occur of:
(a) the death of the second to die of the
Insured and the Insured's Wife;
(b) the surrender or cancellation of the
Insurance Contract by the Owner prior to the death
of the second to die of the Insured and the
Insured's Wife; and
(c) the release of the Collateral Assignment by
the Company pursuant to the provisions of paragraph
8 hereof.
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<PAGE>
5. Repayment Amount. The Repayment Amount as of
any time is the total amount of premiums on the Insurance
Contract paid by the Company (other than any premium or
portion thereof which consists of Restoration Amount as
defined in paragraph 11 hereunder), reduced by any premium
returns and reimbursement paid to the Company from any source
on account of such premiums paid and further reduced by any
unpaid portion of the Restoration Amount as set forth in
paragraph 11 hereunder. In no event shall the amount payable
to the Company hereunder on account of the Repayment Amount
exceed (i) if payable by reason of the death of the Insured or
the Insured's Wife, the proceeds of the Insurance Contract
payable at such death or (ii) if payable by reason of the
surrender of the Insurance Contract or the withdrawal of any
Policy Values, the amount of Cash Surrender Value payable with
respect to such surrender or the amount of such Policy Values
so withdrawn. If, on the complete surrender or cancellation
of the Insurance Contract or on the death of the second to die
of the Insured and the Insured's Wife, the Cash Surrender
Value or proceeds of the Insurance Contract, as the case may
be, are less than the Repayment Amount due to the Company
hereunder, none of the Owner, the Insured, the Insured's Wife,
or the personal representative of any of them shall have any
obligation to pay any part of such shortfall to the Company.
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<PAGE>
6. Death Benefit. Upon the termination of this
Insurance Agreement on the death of the second to die of the
Insured and the Insured's Wife, the Company and the Owner
shall promptly take all action necessary to obtain the death
benefit provided under the Insurance Contract. The Company
shall have the right to receive a portion of the death benefit
under the Insurance Contract equal to the Repayment Amount
determined as of the date of such death, subject to the
limitations of paragraph 5 hereunder. The balance of the
death benefit provided under the Insurance Contract, if any,
shall be paid to the beneficiary or beneficiaries, and in the
manner and amounts, designated by the Owner in the beneficiary
designation for the Insurance Contract. No amount shall be
paid from the death benefit under the Insurance Contract to
the Owner or the beneficiary or beneficiaries designated by
the Owner until the entire Repayment Amount payable to the
Company has been paid.
7. Withdrawals from Insurance Contract; Surrender
or Cancellation. (a) Except to the extent Policy Values are
applied to pay premiums on the Insurance Contract pursuant to
paragraph 1(b) hereof or as otherwise provided in this
paragraph 7, (i) the Owner shall not surrender the Insurance
Contract or otherwise withdraw any Policy Values during the
term of this Insurance Agreement (including by cancellation of
the Insurance Contract) without the consent of the Company and
(ii) in the event that the Insurance Contract is surrendered
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<PAGE>
or Policy Values are withdrawn prior to the death of the
survivor of the Insured and the Insured's Wife, the Company
shall be entitled to receive the Repayment Amount as then
determined to the extent of the Cash Surrender Value payable
with respect to any such surrender or the Policy Values then
withdrawn, such Repayment Amount to be paid to the extent
possible first from the cash surrender value of paid up
additions and then from the remaining Cash Surrender Value so
payable.
(b) Notwithstanding the foregoing, the Owner shall
be permitted to withdraw Policy Values to the extent permitted
under the Insurance Contract (other than by surrender of the
Insurance Contract) without the consent of the Company and, in
the case of subparagraph (i) of this subparagraph (b), without
paying any portion of the Repayment Amount to the Company, as
shall be necessary to pay:
(i) Any increase in the Owner's Federal, State or
local income tax after, or by reason of, the death of the
Insured which is attributable to the inclusion of any portion
of, or an increase in, the Cash Surrender Value as an item of
gross income for purposes of computing the Owner's income
taxes; and
(ii) The Repayment Amount at such time as the Owner
obtains the release of the Collateral Assignment pursuant to
the provisions of paragraph 8 hereunder.
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<PAGE>
(c) The Owner shall surrender the Insurance
Contract at such time as the Company, based on information
provided by the Insurer, notifies the Owner that the total
Augmented Cash Surrender Value is less than the Repayment
Amount if, prior to such time (i) the Augmented Cash Surrender
Value exceeded such Repayment Amount and (ii) either of the
following events has occurred: (A) the death of the Insured or
(B) an event to which subparagraph 9(b) hereof applies. For
purposes of this Insurance Agreement, the Augmented Cash
Surrender Value as of any time shall be the amount by which
the total cash surrender value of the Insurance Contract as of
such time exceeds the cash surrender value of the Insurance
Contract determined immediately prior to the first premium
payment made by the Company pursuant to paragraph 1 hereof.
(d) The Owner shall surrender the Insurance
Contract at such time, if any, as the Insured is dismissed
from employment by the Company for cause. For purposes of
this Insurance Agreement, "cause" means (i) the Insured's
willful failure to perform his duties as an officer and/or
employee of the Company (other than as a result of his total
or partial incapacity due to physical or mental illness and
excluding any action taken and any decision not to act if such
action is taken or such decision is made in the good faith
belief that it is in the furtherance of the business of the
Company), (ii) gross negligence or gross malfeasance in the
performance of such duties, (iii) a final finding by a court
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<PAGE>
or other governmental body with proper jurisdiction that
Insured engaged in an act or acts that (A) constitute a felony
under the laws of the United States or any state thereof, or
(B) constitute a violation of Federal or State securities law,
if the Board of Directors determines that, by reason of such
finding, the continued employment of the Insured by the
Company would be seriously detrimental to the Company and its
business; or (iv) in the absence of any final finding by a
court or other governmental body with proper jurisdiction, a
determination by the Board of Directors in good faith that
Insured engaged in an act or acts that (A) constitute a felony
under the laws of the United States or any state thereof, or
(B) constitute a violation of Federal or State securities law,
if the Board of Directors determines that, by reason of such
act or acts, the continued employment of the Insured by the
Company would be seriously detrimental to the Company and its
business.
8. Release of Collateral Assignment. (a) The
Owner shall obtain the release of the Collateral Assignment in
the manner set forth in subparagraph (f) of this paragraph 8
on the earliest to occur of (i) the Nontaxable Rollout Time
(as defined in subparagraph (b) of this paragraph 8), (ii) the
Post-Death Rollout Time (as defined in subparagraph (c) of
this paragraph 8) and (iii) the Applicable Anniversary Date
(as defined in subparagraph (d) of this paragraph 8).
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<PAGE>
(b) The Nontaxable Rollout Time shall mean the
earliest time after the last premium payment the Company is
obligated to make hereunder that (i) after payment of the
Repayment Amount from the Cash Surrender Value, based on
projections supplied by the Insurer (using a projected
dividend or interest rate approved by the Owner, provided that
such approval may not be unreasonably withheld), a death
benefit under the Insurance Contract of an amount not less
than the lesser of (A) the face amount of the Insurance
Contract immediately prior to the first premium payment made
by the Company hereunder or (B) the then amount of insurance
provided under the Insurance Contract may thereafter be
maintained for the joint and survivor lives of the Insured and
the Insured's Wife solely by the application of Policy Values
under the Insurance Contract without the payment of further
cash premiums and (ii) the Company provides the Owner with an
opinion of outside counsel recognized as expert in Federal tax
matters, and which opinion may be relied on by the Owner, that
the payment to the Company of the Repayment Amount and the
release of the Collateral Assignment will not be a Federal
taxable event with respect to the Owner or the Insured.
Notwithstanding the foregoing, if, within 30 days after
receipt of the opinion referred to in the preceding sentence,
the Owner obtains an opinion of independent counsel recognized
as expert in Federal tax matters that the payment to the
Company of the Repayment Amount and the release of the
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Collateral Assignment will more likely than not be a Federal
taxable event with respect to the Owner or the Insured, the
Company and Owner shall refer the matter to a third
independent counsel acceptable to both and the Nontaxable
Rollout Time shall not be deemed to have occurred unless such
third counsel affirms the opinion originally supplied by the
Company. For purposes of this paragraph, a Federal taxable
event shall mean the recognition of gross income or the making
of a taxable gift under the then applicable provisions of the
Internal Revenue Code.
(c) The Post-Death Rollout Time shall mean the
earliest time after the death of the Insured and after the
last premium payment the Company is obligated to make
hereunder that, based on projections supplied by the Insurer
(using a projected dividend or interest rate approved by the
Owner, provided that such approval may not be unreasonably
withheld), after payment from the Cash Surrender Value of the
Repayment Amount and all income tax liability of the Owner
arising by reason of such payment, a death benefit under the
Insurance Contract of an amount not less than the lesser of
(i) the face amount of the Insurance Contract immediately
prior to the first premium payment made by the Company
hereunder or (ii) the then amount of insurance provided under
the Insurance Contract may thereafter be maintained for the
life of the Insured's Wife solely by the application of Policy
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<PAGE>
Values under the Insurance Contract without the payment of
further cash premiums.
(d) The Applicable Anniversary Date shall be such
Anniversary Date, if any, on which the Owner in its sole and
absolute discretion consents to a request by the Company that
the Owner obtain the release of the Collateral Assignment,
which request by the Company and consent by the Owner shall be
made and given, if at all, in accordance with the provisions
of subparagraph (e) of this paragraph 8.
(e) On any Anniversary Date on which the Augmented
Cash Surrender Value exceeds the Repayment Amount as then
determined (but only on any such Anniversary Date), the
Company may request the Owner to obtain the release of the
Collateral Assignment in accordance with the provisions of
subparagraph (f) of this paragraph 8. In determining whether
to consent to any such request, the Owner shall consider
primarily the interests of the Insured and shall not consent
to such request unless the Owner determines in its sole and
absolute discretion that it would be in the interests of the
Insured to do so. Although the Owner, in determining whether
or not to consent to such request, shall consider primarily
the interests of the Insured (and may consult with the Insured
for purposes of making any such determination), such
determination shall be within the sole and absolute discretion
of the Owner. The consent of the Owner with respect to any
request by the Company as herein described may be given only
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<PAGE>
on the Anniversary Date on which the Company makes such
request.
(f) To obtain the release of the Collateral
Assignment pursuant to the provisions of this subparagraph 8,
the Owner shall pay to the Company the Repayment Amount
determined as of the date of such payment and, solely as a
source of funding such payment, the Owner may borrow such
amount from the Insurance Contract and direct that the same be
paid to the Company. Upon receipt of such payment, the
Company shall release the Collateral Assignment by the
execution and delivery of an appropriate instrument of
release, and neither the Company nor the Company's assigns
shall thereafter have any further interest in and to the
Insurance Contract, either under the terms thereof or under
this Insurance Agreement.
9. Termination of Company's Obligation to Pay
Premiums. Notwithstanding that this Insurance Agreement
remains in effect until the termination thereof pursuant to
paragraph 4 hereunder, the Company's obligation to make
further premium payments hereunder shall cease on the first to
occur, if any, of:
(a) the giving of notice by the Insured to the
Company that the Company is thereafter relieved of
any further obligation to make premium payments
under this Insurance Agreement; and
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<PAGE>
(b) the failure of the Owner to pay the
portion of any premium the Owner is obligated to pay
hereunder within 30 days of written demand by the
Company for such payment, which written demand may
be made only after the Owner fails to pay its
portion of premium within the grace period provided
under the Insurance Contract with respect to such
premium, provided that this subparagraph (b) shall
not apply if the Company elects to pay the Owner's
portion of such premium pursuant to paragraph 10
hereunder.
10. Default by Owner. If the Owner fails to pay
the portion of any premium due and payable which the Owner is
obligated to pay hereunder within the period described in
paragraph 9(b) hereof, the Company, in its sole discretion,
may elect to pay such portion of the premium, which amount
shall thereafter be recovered by the Company as part of the
Repayment Amount and, if the Company elects to pay such
portion, this Insurance Agreement shall thereafter continue to
apply as if the Owner had timely paid its portion of such
premium. If the Owner fails to pay its portion of any premium
payable hereunder, the Company's sole remedy with respect to
such failure shall be (i) if the Company does not elect to pay
the Owner's portion of the premium pursuant to this paragraph
10, the cessation of the Company's obligation to make further
premium payments pursuant to paragraph 9(b) hereof or (ii) if
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<PAGE>
the Company elects to pay the Owner's portion of the premium
pursuant to this paragraph 10, the recovery of such amount as
part of the Repayment Amount.
11. Default by Company. In the event that the
Company shall be in default as to any premium payment due
under paragraph 1 hereunder with respect to the Insurance
Contract, the Owner may borrow from the Insurance Contract, to
the extent permitted thereunder, all or part of the amount as
to which the Company is in default to be applied to the
payment of such premium. Such borrowing and payment shall not
discharge the Company's obligation under paragraph 1 hereunder
with respect to such premium or any subsequent premiums. With
respect to a default by the Company hereunder with respect to
premium payments, the Company shall be obligated (a) to repay
directly to the Insurer the full amount of any indebtedness
including accrued and unpaid interest incurred with respect to
the Insurance Contract pursuant to this paragraph and (b) to
repay to the Owner any amount which the Owner paid (i) as
premium which the Company was obligated to pay hereunder and
(ii) as interest on a loan from the Insurance Contract
pursuant to this paragraph 11, together with interest on the
amounts described in this clause (b) at a rate equal to the
interest rate applicable to policy loans with respect to the
Insurance Contract (the aggregate amounts referred to in this
sentence being herein referred to as the "Restoration
Amount"). If any portion of the Restoration Amount has not
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been repaid by the Company prior to the termination of this
Insurance Agreement, the Repayment Amount payable to the
Company on such termination shall be reduced by such portion
of the Restoration Amount. Nothing herein shall preclude the
Owner from recovering such additional damages, if any, as the
Owner shall sustain by reason of the Company's default
hereunder.
12. Notification of Insurer. Except as otherwise
provided herein, at any time that the Company shall be
entitled under the provisions hereof to recover the Repayment
Amount with respect to the Insurance Contract, the Company
shall notify the Owner and the Insurer of the amount that the
Company claims it is entitled so to recover and, unless the
Owner objects in writing to the Company and the Insurer within
thirty (30) days of such notice, the Insurer is hereby
authorized to recognize such statement of the Company without
investigation or the giving of any notice and shall be fully
protected in paying such amount to the Company. If the
Insurer receives written notice from the Owner controverting
the amount payable to the Company, the Insurer shall make no
payments with respect to such Insurance Contract except upon
written instructions signed by both the Owner and the Company
or in accordance with a final, non-appealable order of a court
of competent jurisdiction. The written acknowledgment of
receipt by the Company of any funds paid to the Company
pursuant to its statement of the amount payable to it shall be
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<PAGE>
a full discharge and release of the Insurer by the Company
with respect to such payment. The Insurer shall be relieved
of any and all responsibility to any party claiming an
interest in the Insurance Contract for any decrease in cash
value or death benefit resulting from the exercise of any
right as to which both the Owner and the Company have
consented or which is specifically permitted hereunder.
13. Owner. The undersigned Owner shall be the sole
and absolute owner of the Insurance Contract and shall have
all rights of ownership in the Insurance Contract except to
the extent otherwise specifically provided in this Insurance
Agreement and the Collateral Assignment. Without limiting any
other rights not specifically enumerated, the Owner
specifically reserves, subject to the Company's rights under
this Insurance Agreement, the right to designate the
beneficiary or beneficiaries of the death benefit payable
under the Insurance Contract and to elect any optional mode of
settlement permitted by the Insurance Contract or allowed by
the Insurer.
14. Premium Waiver. For purposes of computing the
Repayment Amount, no premium waived under a premium waiver
provision of the Insurance Contract shall be treated as having
been paid by the Company.
15. Further Assurances. Each of the Company and
the Owner shall execute and deliver such other instruments and
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<PAGE>
agreements as shall be necessary or appropriate to carry out
the intent of this Insurance Agreement.
16. Amendment. Except as otherwise provided
herein, this Insurance Agreement may not be amended, altered
or modified, except by a written instrument signed by the
Company and the Owner, or their respective successors or
assigns, and may not be otherwise terminated except as
provided herein.
17. Binding Nature of Insurance Agreement. This
Insurance Agreement shall be binding upon and shall inure to
the benefit of the Company and its successors and assigns, the
Owner, and the Owner's successors, assigns, and beneficiaries.
As used in this Insurance Agreement, the term "successor",
with respect to the Company, shall include, but shall not be
limited to, any person, firm, corporation or other entity
which acquires all or substantially all of the assets or
business of the Company whether by merger, consolidation,
purchase or otherwise.
18. Notices. Any notice, consent or demand
required or permitted to be given under the provisions of this
Insurance Agreement shall be in writing, and shall be deemed
to be dated and to have been duly given when delivered
personally or by courier or upon delivery to the post office
and sent registered or certified mail, postage prepaid, return
receipt requested addressed as set forth below:
(a) If to the Company:
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<PAGE>
Donaldson, Lufkin & Jenrette, Inc.
140 Broadway
New York, New York 10005
Attention: Corporate Secretary
(b) If to the Owner:
Jeannette Eliasberg, Trustee
24481 Harbour View Drive
Ponte Vedra, Florida 32082
Any party may alter the address to which communications or
copies are to be sent pursuant to this Insurance Agreement by
giving notice of such change of address in conformity with the
provisions of this paragraph 18.
19. Governing Law. This Insurance Agreement, and
the rights of the parties hereunder, shall be governed by and
construed in accordance with the laws of the State of New York
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<PAGE>
applicable to contracts made and to be performed entirely
within the State of New York.
IN WITNESS WHEREOF, the parties hereto have
executed this Insurance Agreement as of the day and year first
above written.
DONALDSON, LUFKIN & JENRETTE, INC.
By /s/ Thomas E. Siegler
-----------------------
Senior Vice President
ATTEST:
/s/ Claire M. Power
- -----------------------
Assistant Secretary
/s/ Jeannette Eliasberg
------------------------------
JEANNETTE ELIASBERG, as Trustee
of the Trust created under
Agreement dated December
22, 1993 between Theodore
P. Shen, Grantor, and
Jeannette Eliasberg,
Trustee, Owner
-22-
<PAGE>
EXHIBIT A
Insurer: Guardian Life Insurance Company of America
Policy No.: 3755730
Face Amount: $5,383,552
Policy Description: Policy on the joint and survivor lives of
Theodore P. Shen and Carol Shen, payable on second death.
Issue Date: February 14, 1994
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<PAGE>
EXHIBIT B
COLLATERAL ASSIGNMENT AGREEMENT dated as of
February 1, 1996 by and between JEANNETTE ELIASBERG, as
Trustee of the Trust created under Agreement dated December
22, 1993 between Theodore P. Shen, as Grantor, and Jeannette
Eliasberg, as Trustee (such Trustee or any successor as such
Trustee being hereinafter referred to as the "Owner") and
DONALDSON, LUFKIN & JENRETTE, INC., a Delaware corporation
(hereinafter referred to as "the Company").
Guardian Life Insurance Company of America (the
"Insurer") issued on February 14, 1994 Insurance Contract
No. 3755730 on the joint and survivor lives of Theodore P.
Shen, an employee of the Company (hereinafter referred to as
the "Insured") and the Insured's wife, Carol Shen,
(hereinafter referred to as the "Insured's Wife"). Such
policy shall be referred to hereinafter as the "Insurance
Contract."
The undersigned parties have entered into an
Insurance Agreement (the "Insurance Agreement") which is
attached hereto as Exhibit A and which by this reference is
made a part hereof.
Pursuant to the Insurance Agreement, Owner has
agreed to assign the Insurance Contract to the Company as
collateral security for the payment to the Company of the
Repayment Amount as set forth in the Insurance Agreement.
<PAGE>
The parties hereto, in consideration of the
foregoing and the agreements and covenants hereinafter set
forth and intending to be legally bound hereby, agree as
follows:
1. Owner hereby assigns to the Company, effective
as of the date hereof, the Insurance Contract as collateral
security for payment to the Company of the Repayment Amount
pursuant to the provisions of the Insurance Agreement (such
assignment hereinafter referred to as "the Collateral
Assignment"). The Company shall be entitled to receive the
Repayment Amount, as then determined and subject to the
limitations in paragraph 5 of the Insurance Contract, as
follows:
(a) From the death proceeds payable under the
Insurance Contract on the death of the second to die of
the Insured and the Insured's Wife;
(b) Except as otherwise provided in paragraph 7 of
the Insurance Agreement, from the cash surrender value of
the Insurance Contract (hereinafter "the Cash Surrender
Value") or other Policy Values (as defined in paragraph
1(b) of the Insurance Agreement) to the extent the Owner
withdraws any such Cash Surrender Value or other Policy
Values from the Insurance Contract prior to the death of
the second to die of the Insured and the Insured's Wife
(including by reason of a surrender or cancellation of
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<PAGE>
the Insurance Contract pursuant to paragraph 7 of the
Insurance Agreement); or
(c) At such time as the Owner obtains the
release of the Collateral Assignment hereunder in
accordance with paragraph 8 of the Insurance
Agreement.
The Collateral Assignment made herein shall not be terminated
(except as otherwise provided in the Insurance Agreement),
altered or amended by the Owner without the express written
consent of the Company.
2. Release of Collateral Assignment. The Owner
shall obtain the release of the Collateral Assignment in the
manner and at such time as set forth in paragraph 8 of the
Insurance Agreement.
3. Payment by Insurer. Owner hereby authorizes
the Insurer to rely solely on the written statement of the
Company as to the amount payable to the Company with respect
to the Insurance Contract as of any date unless the Insurer
receives notice in writing from the Owner given within thirty
(30) days of receipt of such written statement of the Company
controverting the Company's statement of such amount payable.
If the Insurer receives no such written notice from the Owner,
the Insurer is hereby authorized to recognize such statement
of the Company without investigation or the giving of any
notice. If the Insurer receives such written notice from the
Owner controverting the amount payable to the Company, the
-3 -
<PAGE>
Insurer shall make no payments with respect to such Insurance
Contract except upon written instructions signed by both the
Owner and the Company or in accordance with a final,
non-appealable order of a court of competent jurisdiction.
The written acknowledgment of receipt by the Company of any
funds paid to the Company pursuant to its statement of the
amount payable to it shall be a full discharge and release of
the Insurer by the Company with respect to such payment. The
Insurer shall be relieved of any and all responsibility to any
party claiming an interest in the Insurance Contract for any
decrease in cash value or death benefit resulting from the
exercise of any right as to which both the Owner and the
Company have consented or which is specifically permitted
under the Insurance Agreement.
4. Owner's Rights. (a) Except as otherwise
provided in the Insurance Agreement and herein and subject to
the rights of the Company under the Insurance Agreement, each
and every right, interest and incident of ownership associated
with the Insurance Contract which is not expressly assigned to
the Company by this Collateral Assignment Agreement is
retained by the Owner, including, without limitation, the
right to designate the beneficiary or beneficiaries of the
death benefit payable under the Insurance Contract and to
elect any optional mode of settlement permitted by the
Insurance Contract or allowed by the Insurer.
-4-
<PAGE>
(b) The Owner shall not assign any portion or all
of the Owner's right, interest and incidents of ownership in
and to the Insurance Contract during the term of the Insurance
Agreement without the consent of the Company. In the event of
an assignment by the Owner to which the Company has consented,
the references to "Owner" herein shall be deemed to refer to
the assignee or any subsequent assignee thereof for all
purposes of this Collateral Assignment Agreement, including
for purposes of this paragraph 4.
(c) (i) Except to the extent Policy Values are
applied to pay premiums on the Insurance Contract pursuant to
paragraph 1(b) of the Insurance Agreement or as otherwise
provided in paragraph 7 of the Insurance Agreement or this
subparagraph (c), (A) the Owner shall not surrender the
Insurance Contract or otherwise withdraw any Policy Values
during the term of this Insurance Agreement (including by
cancellation of the Insurance Contract) without the consent of
the Company and (B) in the event that the Insurance Contract
is surrendered or Policy Values are withdrawn prior to the
death of the survivor of the Insured and the Insured's Wife,
the Company shall be entitled to receive the Repayment Amount
as then determined to the extent of the Cash Surrender Value
payable with respect to any such surrender or the Policy
Values then withdrawn, such Repayment Amount to be paid to the
extent possible first from the cash surrender value of paid up
-5-
<PAGE>
additions and then from the remaining Cash Surrender Value, so
payable.
(ii) Notwithstanding the foregoing, the Owner shall
be permitted to withdraw Policy Values to the extent permitted
under the Insurance Contract (other than by surrender of the
Insurance Contract) without the consent of the Company and, in
the case of subparagraph (A) of this subparagraph (ii),
without paying any portion of the Repayment Amount to the
Company, as shall be necessary to pay:
(A) Any increase in the Owner's Federal, State or
local income tax after, or by reason of, the death of the
Insured which is attributable to the inclusion of any portion
of, or an increase in, the Cash Surrender Value as an item of
gross income for purposes of computing the Owner's income
taxes; and
(B) The Repayment Amount at such time as the Owner
obtains the release of the Collateral Assignment pursuant to
the provisions of paragraph 8 of the Insurance Agreement.
(iii) The Owner shall surrender the Insurance
Contract at such time as the Company, based on information
provided by the Insurer, notifies the Owner that the total
Augmented Cash Surrender Value is less than the Repayment
Amount if, prior to such time (A) the Augmented Cash Surrender
Value exceeded such Repayment Amount and (B) either of the
following events has occurred: (x) the death of the Insured or
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<PAGE>
(y) an event to which subparagraph 9(b) of the Insurance
Agreement applies.
(iv) The Owner shall surrender the Insurance
Contract at such time, if any, as the Insured is dismissed
from employment by the Company for "cause" (as defined in
paragraph 7(d) of the Insurance Agreement).
5. Borrowing Rights. (a) In no event shall the
Company have any right to borrow from, or against the security
of, the Insurance Contract during the term of the Insurance
Agreement.
(b) The Owner shall have no right to borrow from,
or against the security of, the Insurance Contract during the
term of the Insurance Agreement to the extent that the amount
of aggregate indebtedness under, or secured by, the Insurance
Contract would thereafter exceed the loan value of the
Insurance Contract as determined immediately prior to the
first premium payment made by the Company pursuant to
paragraph 1 of the Insurance Agreement except (i) as provided
in subparagraph 8(f) thereof (in connection with obtaining the
release of the Collateral Assignment), (ii) as provided in
subparagraph 11 thereof (in connection with a Default by the
Company) and (iii) after the death of the Insured, to pay any
increase in the Owner's Federal, State or local income tax
which is attributable to the inclusion, if any, as an item or
items of gross income for purposes of computing such taxes of
(A) the economic benefit (as defined in paragraph 1 of the
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<PAGE>
Insurance Agreement) of the insurance protection then provided
to the Owner on the life of the Insured's Wife under the
Insurance Contract and the Insurance Agreement and (B) any
portion of, or increase in, the Cash Surrender Value.
6. Representation of Solvency. Each of the parties
hereto declares that no proceedings in bankruptcy are pending
against such party, and the Owner hereby declares that its
property is not the subject of any assignment for the benefit
of creditors.
7. Governing Law. All matters respecting the
validity, effect, and interpretation of this Collateral
Assignment Agreement shall be determined in accordance with
the laws of the State of New York, applicable to contracts
made and to be performed entirely within the State of New
York.
8. Binding Nature of Assignment. This Collateral
Assignment Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective
successors, assigns, distributees, executors, administrators
and beneficiaries. As used in this Collateral Assignment
Agreement, the term "successor", with respect to the Company,
shall include, but shall not be limited to, any person, firm,
corporation or other entity which acquires all
-8-
<PAGE>
or substantially all of the assets or business of the
Company whether by merger, consolidation, purchase or
otherwise.
IN WITNESS WHEREOF, the parties have hereunto set
their respective hands and seals as of the date first above
written.
DONALDSON, LUFKIN & JENRETTE, INC.
By_______________________________
Senior Vice President
ATTEST:
- -----------------------
Assistant Secretary
-------------------------------
JEANNETTE ELIASBERG, as Trustee
of the Trust created under
Agreement dated December
22, 1993 between Theodore
P. Shen, Grantor, and
Jeannette Eliasberg,
Trustee, Owner
ACCEPTED:
- ---------------------------------------------------
Guardian Life Insurance Company of America, Insurer
9
Exhibit 10.83
INSURANCE AGREEMENT
THIS INSURANCE AGREEMENT made and entered into as of
the 1st day of February, 1996, by and between DONALDSON,
LUFKIN & JENRETTE, INC., a Delaware corporation, with
principal offices and place of business in the State of New
York (hereinafter referred to as the "Company") and JEANNETTE
ELIASBERG, as Trustee of the Trust created under Agreement
dated December 22, 1993 between Theodore P. Shen, as Grantor,
and Jeannette Eliasberg, as Trustee (hereinafter referred to
as the "Owner"),
WITNESSETH THAT:
WHEREAS, the Owner has obtained a policy of life
insurance insuring the joint and survivor lives of Theodore P.
Shen (hereinafter referred to as the "Insured") and his wife,
Carol Shen, (hereinafter referred to as the "Insured's Wife")
in the original face amount of Seven Million Four Hundred
Seventy-Four Thousand Dollars ($7,474,000) (such policy being
hereinafter referred to as the "Insurance Contract") which is
described in Exhibit A attached hereto and by this reference
made a part hereof, and which was issued by the insurance
company shown in Exhibit A (hereinafter referred to as the
"Insurer"); and
<PAGE>
WHEREAS, in consideration of past services rendered
and services to be rendered by the Insured, the Company wishes
to pay a portion of the premiums due with respect to the
Insurance Contract, subject to certain repayment rights
described herein, all on the terms and conditions hereinafter
set forth; and
WHEREAS, the Company wishes to have the Insurance
Contract collaterally assigned to it by the Owner in order to
secure the repayment to it of the aggregate premiums on the
Insurance Contract which the Company may pay pursuant to this
Insurance Agreement.
NOW, THEREFORE, in consideration of the premises and
of the mutual promises contained herein, the parties hereto
agree as follows:
1. (a) Premium Payments. Except as otherwise
provided herein, on or before March 15, 1996, and on or before
each of the following fourteen (14) consecutive annual premium
due dates with respect to the Insurance Contract (each such
premium due date hereinafter referred to as an "Anniversary
Date"), the Owner shall pay to the Insurer as and for a
portion of the premium due with respect to such Insurance
Contract an amount equal to the greater of (i) the total
premium less Sixty Thousand Dollars ($60,000) and (ii) the
economic benefit of the insurance protection then provided to
the Owner under the Insurance Contract and this Insurance
-2-
<PAGE>
Agreement on the life or lives of such as are then living of
the Insured and the Insured's Wife, and the Company shall pay
to the Insurer as and for a portion of such premium an amount
equal to Sixty Thousand Dollars ($60,000). The economic
benefit referred to in the preceding sentence shall be the
lesser of (i) the PS 58 cost for the insurance protection
referred to therein (as determined under tables published by
the Internal Revenue Service) and modified as appropriate (or,
if applicable, as specifically prescribed by the Internal
Revenue Service) to reflect that such insurance protection is
on the joint lives of the Insured and the Insured's Wife and
that the death benefit under such Insurance Contract is
payable only on the death of the second to die of the Insured
and the Insured's Wife) and (ii) if such insurance protection
is available from the Insurer as term insurance, the premium
for such insurance protection determined by reference to the
Insurer's current published premium rate for one-year term
life insurance protection available to all standard risks.
Thirty (30) days prior to each Anniversary Date on which
premium is payable hereunder, the Company shall notify the
Owner of the exact amount of the economic benefit the Owner is
obligated to pay hereunder. Each of the Owner and the Company
shall promptly furnish the other evidence of timely payment of
the portion of each such premium it is obligated to pay
hereunder.
-3-
<PAGE>
(b) Dividends. After such time that premiums on
the Insurance Contract are no longer payable pursuant to
paragraph 1(a) hereof, dividends and other Policy Values shall
be applied to the payment of premiums on the Insurance
Contract. Dividends on the Insurance Contract not applied to
the payment of premiums pursuant to this subparagraph (b)
shall be used to purchase additional, paid-up insurance or may
be accumulated with interest, as the Owner shall elect. For
purposes of this Insurance Agreement, with respect to the
Insurance Contract, the term "Policy Values" shall include
dividends, dividend additions, dividend accumulations, the
cash surrender value of the Insurance Contract including the
cash surrender value of paid-up additions and supplemental
insurance rider additions and any other element of value which
would ordinarily be applied to the payment of premiums under a
premium "vanish" option.
2. Collateral Assignment. (a) To secure the
repayment to the Company to the extent possible of the
Repayment Amount (as defined in paragraph 5 hereunder) as
provided herein, the Owner shall assign the Insurance Contract
to the Company as collateral ("the Collateral Assignment")
under a Collateral Assignment Agreement substantially in the
form attached hereto as Exhibit B. The Collateral Assignment
shall not be terminated (except as otherwise provided in this
Insurance Agreement), altered or amended by the Owner without
the express written consent of the Company.
-4 -
<PAGE>
(b) Except as provided in subparagraph (a) of this
paragraph 2, the Owner shall not transfer any interest in the
Insurance Contract during the term of this Insurance Agreement
without the consent of the Company. In the event of an
assignment by the Owner to which the Company has consented,
the references to "Owner" herein shall be deemed to refer to
the assignee or any subsequent assignee thereof for all
purposes of this Insurance Agreement, including for purposes
of this paragraph 2. The Owner shall comply with the
notification requirements of the Insurer with respect to any
such assignment and shall deliver a copy of any such
notification to the Company.
3. Loans. (a) In no event shall the Company have
any right to borrow from, or against the security of, the
Insurance Contract during the term of this Insurance
Agreement.
(b) The Owner shall have no right to borrow from,
or against the security of, the Insurance Contract during the
term of this Insurance Agreement to the extent that the amount
of aggregate indebtedness under, or secured by, the Insurance
Contract would thereafter exceed the loan value of the
Insurance Contract as determined immediately prior to the
first premium payment made by the Company pursuant to
paragraph 1 hereof except (i) as provided in subparagraph 8(f)
hereof, (ii) as provided in paragraph 11 hereof and (iii)
after the death of the Insured, to pay any increase in the
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<PAGE>
Owner's Federal, State or local income tax which is
attributable to the inclusion, if any, as an item of gross
income for purposes of computing such taxes of (A) the
economic benefit (as defined in paragraph 1 hereof) of the
insurance protection then provided to the Owner on the life of
the Insured's Wife under the Insurance Contract and this
Insurance Agreement and (B) any portion of, or increase in,
the cash surrender value of the Insurance Contract
(hereinafter "the Cash Surrender Value").
4. Term of Insurance Agreement. This Insurance
Agreement and, except to the extent otherwise provided in
paragraph 9 hereof, the obligations of the Company hereunder
shall remain in force (regardless of whether the Owner has
assigned any portion or all of the Owner's rights, interests
and incidents of ownership in and to the Insurance Contract)
until the first to occur of:
(a) the death of the second to die of the
Insured and the Insured's Wife;
(b) the surrender or cancellation of the
Insurance Contract by the Owner prior to the death
of the second to die of the Insured and the
Insured's Wife; and
(c) the release of the Collateral Assignment by
the Company pursuant to the provisions of paragraph
8 hereof.
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<PAGE>
5. Repayment Amount. The Repayment Amount as of
any time is the total amount of premiums on the Insurance
Contract paid by the Company (other than any premium or
portion thereof which consists of Restoration Amount as
defined in paragraph 11 hereunder), reduced by any premium
returns and reimbursement paid to the Company from any source
on account of such premiums paid and further reduced by any
unpaid portion of the Restoration Amount as set forth in
paragraph 11 hereunder. In no event shall the amount payable
to the Company hereunder on account of the Repayment Amount
exceed (i) if payable by reason of the death of the Insured or
the Insured's Wife, the proceeds of the Insurance Contract
payable at such death or (ii) if payable by reason of the
surrender of the Insurance Contract or the withdrawal of any
Policy Values, the amount of Cash Surrender Value payable with
respect to such surrender or the amount of such Policy Values
so withdrawn. If, on the complete surrender or cancellation
of the Insurance Contract or on the death of the second to die
of the Insured and the Insured's Wife, the Cash Surrender
Value or proceeds of the Insurance Contract, as the case may
be, are less than the Repayment Amount due to the Company
hereunder, none of the Owner, the Insured, the Insured's Wife,
or the personal representative of any of them shall have any
obligation to pay any part of such shortfall to the Company.
-7-
<PAGE>
6. Death Benefit. Upon the termination of this
Insurance Agreement on the death of the second to die of the
Insured and the Insured's Wife, the Company and the Owner
shall promptly take all action necessary to obtain the death
benefit provided under the Insurance Contract. The Company
shall have the right to receive a portion of the death benefit
under the Insurance Contract equal to the Repayment Amount
determined as of the date of such death, subject to the
limitations of paragraph 5 hereunder. The balance of the
death benefit provided under the Insurance Contract, if any,
shall be paid to the beneficiary or beneficiaries, and in the
manner and amounts, designated by the Owner in the beneficiary
designation for the Insurance Contract. No amount shall be
paid from the death benefit under the Insurance Contract to
the Owner or the beneficiary or beneficiaries designated by
the Owner until the entire Repayment Amount payable to the
Company has been paid.
7. Withdrawals from Insurance Contract; Surrender
or Cancellation. (a) Except to the extent Policy Values are
applied to pay premiums on the Insurance Contract pursuant to
paragraph 1(b) hereof or as otherwise provided in this
paragraph 7, (i) the Owner shall not surrender the Insurance
Contract or otherwise withdraw any Policy Values during the
term of this Insurance Agreement (including by cancellation of
the Insurance Contract) without the consent of the Company and
(ii) in the event that the Insurance Contract is surrendered
-8-
<PAGE>
or Policy Values are withdrawn prior to the death of the
survivor of the Insured and the Insured's Wife, the Company
shall be entitled to receive the Repayment Amount as then
determined to the extent of the Cash Surrender Value payable
with respect to any such surrender or the Policy Values then
withdrawn, such Repayment Amount to be paid to the extent
possible first from the cash surrender value of paid up
additions and then from the remaining Cash Surrender Value so
payable.
(b) Notwithstanding the foregoing, the Owner shall
be permitted to withdraw Policy Values to the extent permitted
under the Insurance Contract (other than by surrender of the
Insurance Contract) without the consent of the Company and, in
the case of subparagraph (i) of this subparagraph (b), without
paying any portion of the Repayment Amount to the Company, as
shall be necessary to pay:
(i) Any increase in the Owner's Federal, State or
local income tax after, or by reason of, the death of the
Insured which is attributable to the inclusion of any portion
of, or an increase in, the Cash Surrender Value as an item of
gross income for purposes of computing the Owner's income
taxes; and
(ii) The Repayment Amount at such time as the Owner
obtains the release of the Collateral Assignment pursuant to
the provisions of paragraph 8 hereunder.
-9-
<PAGE>
(c) The Owner shall surrender the Insurance
Contract at such time as the Company, based on information
provided by the Insurer, notifies the Owner that the total
Augmented Cash Surrender Value is less than the Repayment
Amount if, prior to such time (i) the Augmented Cash Surrender
Value exceeded such Repayment Amount and (ii) either of the
following events has occurred: (A) the death of the Insured or
(B) an event to which subparagraph 9(b) hereof applies. For
purposes of this Insurance Agreement, the Augmented Cash
Surrender Value as of any time shall be the amount by which
the total cash surrender value of the Insurance Contract as of
such time exceeds the cash surrender value of the Insurance
Contract determined immediately prior to the first premium
payment made by the Company pursuant to paragraph 1 hereof.
(d) The Owner shall surrender the Insurance
Contract at such time, if any, as the Insured is dismissed
from employment by the Company for cause. For purposes of
this Insurance Agreement, "cause" means (i) the Insured's
willful failure to perform his duties as an officer and/or
employee of the Company (other than as a result of his total
or partial incapacity due to physical or mental illness and
excluding any action taken and any decision not to act if such
action is taken or such decision is made in the good faith
belief that it is in the furtherance of the business of the
Company), (ii) gross negligence or gross malfeasance in the
performance of such duties, (iii) a final finding by a court
-10-
<PAGE>
or other governmental body with proper jurisdiction that
Insured engaged in an act or acts that (A) constitute a felony
under the laws of the United States or any state thereof, or
(B) constitute a violation of Federal or State securities law,
if the Board of Directors determines that, by reason of such
finding, the continued employment of the Insured by the
Company would be seriously detrimental to the Company and its
business; or (iv) in the absence of any final finding by a
court or other governmental body with proper jurisdiction, a
determination by the Board of Directors in good faith that
Insured engaged in an act or acts that (A) constitute a felony
under the laws of the United States or any state thereof, or
(B) constitute a violation of Federal or State securities law,
if the Board of Directors determines that, by reason of such
act or acts, the continued employment of the Insured by the
Company would be seriously detrimental to the Company and its
business.
8. Release of Collateral Assignment. (a) The
Owner shall obtain the release of the Collateral Assignment in
the manner set forth in subparagraph (f) of this paragraph 8
on the earliest to occur of (i) the Nontaxable Rollout Time
(as defined in subparagraph (b) of this paragraph 8), (ii) the
Post-Death Rollout Time (as defined in subparagraph (c) of
this paragraph 8) and (iii) the Applicable Anniversary Date
(as defined in subparagraph (d) of this paragraph 8).
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<PAGE>
(b) The Nontaxable Rollout Time shall mean the
earliest time after the last premium payment the Company is
obligated to make hereunder that (i) after payment of the
Repayment Amount from the Cash Surrender Value, based on
projections supplied by the Insurer (using a projected
dividend or interest rate approved by the Owner, provided that
such approval may not be unreasonably withheld), a death
benefit under the Insurance Contract of an amount not less
than the lesser of (A) the face amount of the Insurance
Contract immediately prior to the first premium payment made
by the Company hereunder or (B) the then amount of insurance
provided under the Insurance Contract may thereafter be
maintained for the joint and survivor lives of the Insured and
the Insured's Wife solely by the application of Policy Values
under the Insurance Contract without the payment of further
cash premiums and (ii) the Company provides the Owner with an
opinion of outside counsel recognized as expert in Federal tax
matters, and which opinion may be relied on by the Owner, that
the payment to the Company of the Repayment Amount and the
release of the Collateral Assignment will not be a Federal
taxable event with respect to the Owner or the Insured.
Notwithstanding the foregoing, if, within 30 days after
receipt of the opinion referred to in the preceding sentence,
the Owner obtains an opinion of independent counsel recognized
as expert in Federal tax matters that the payment to the
Company of the Repayment Amount and the release of the
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<PAGE>
Collateral Assignment will more likely than not be a Federal
taxable event with respect to the Owner or the Insured, the
Company and Owner shall refer the matter to a third
independent counsel acceptable to both and the Nontaxable
Rollout Time shall not be deemed to have occurred unless such
third counsel affirms the opinion originally supplied by the
Company. For purposes of this paragraph, a Federal taxable
event shall mean the recognition of gross income or the making
of a taxable gift under the then applicable provisions of the
Internal Revenue Code.
(c) The Post-Death Rollout Time shall mean the
earliest time after the death of the Insured and after the
last premium payment the Company is obligated to make
hereunder that, based on projections supplied by the Insurer
(using a projected dividend or interest rate approved by the
Owner, provided that such approval may not be unreasonably
withheld), after payment from the Cash Surrender Value of the
Repayment Amount and all income tax liability of the Owner
arising by reason of such payment, a death benefit under the
Insurance Contract of an amount not less than the lesser of
(i) the face amount of the Insurance Contract immediately
prior to the first premium payment made by the Company
hereunder or (ii) the then amount of insurance provided under
the Insurance Contract may thereafter be maintained for the
life of the Insured's Wife solely by the application of Policy
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<PAGE>
Values under the Insurance Contract without the payment of
further cash premiums.
(d) The Applicable Anniversary Date shall be such
Anniversary Date, if any, on which the Owner in its sole and
absolute discretion consents to a request by the Company that
the Owner obtain the release of the Collateral Assignment,
which request by the Company and consent by the Owner shall be
made and given, if at all, in accordance with the provisions
of subparagraph (e) of this paragraph 8.
(e) On any Anniversary Date on which the Augmented
Cash Surrender Value exceeds the Repayment Amount as then
determined (but only on any such Anniversary Date), the
Company may request the Owner to obtain the release of the
Collateral Assignment in accordance with the provisions of
subparagraph (f) of this paragraph 8. In determining whether
to consent to any such request, the Owner shall consider
primarily the interests of the Insured and shall not consent
to such request unless the Owner determines in its sole and
absolute discretion that it would be in the interests of the
Insured to do so. Although the Owner, in determining whether
or not to consent to such request, shall consider primarily
the interests of the Insured (and may consult with the Insured
for purposes of making any such determination), such
determination shall be within the sole and absolute discretion
of the Owner. The consent of the Owner with respect to any
request by the Company as herein described may be given only
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<PAGE>
on the Anniversary Date on which the Company makes such
request.
(f) To obtain the release of the Collateral
Assignment pursuant to the provisions of this subparagraph 8,
the Owner shall pay to the Company the Repayment Amount
determined as of the date of such payment and, solely as a
source of funding such payment, the Owner may borrow such
amount from the Insurance Contract and direct that the same be
paid to the Company. Upon receipt of such payment, the
Company shall release the Collateral Assignment by the
execution and delivery of an appropriate instrument of
release, and neither the Company nor the Company's assigns
shall thereafter have any further interest in and to the
Insurance Contract, either under the terms thereof or under
this Insurance Agreement.
9. Termination of Company's Obligation to Pay
Premiums. Notwithstanding that this Insurance Agreement
remains in effect until the termination thereof pursuant to
paragraph 4 hereunder, the Company's obligation to make
further premium payments hereunder shall cease on the first to
occur, if any, of:
(a) the giving of notice by the Insured to the
Company that the Company is thereafter relieved of
any further obligation to make premium payments
under this Insurance Agreement; and
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<PAGE>
(b) the failure of the Owner to pay the
portion of any premium the Owner is obligated to pay
hereunder within 30 days of written demand by the
Company for such payment, which written demand may
be made only after the Owner fails to pay its
portion of premium within the grace period provided
under the Insurance Contract with respect to such
premium, provided that this subparagraph (b) shall
not apply if the Company elects to pay the Owner's
portion of such premium pursuant to paragraph 10
hereunder.
10. Default by Owner. If the Owner fails to pay
the portion of any premium due and payable which the Owner is
obligated to pay hereunder within the period described in
paragraph 9(b) hereof, the Company, in its sole discretion,
may elect to pay such portion of the premium, which amount
shall thereafter be recovered by the Company as part of the
Repayment Amount and, if the Company elects to pay such
portion, this Insurance Agreement shall thereafter continue to
apply as if the Owner had timely paid its portion of such
premium. If the Owner fails to pay its portion of any premium
payable hereunder, the Company's sole remedy with respect to
such failure shall be (i) if the Company does not elect to pay
the Owner's portion of the premium pursuant to this paragraph
10, the cessation of the Company's obligation to make further
premium payments pursuant to paragraph 9(b) hereof or (ii) if
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<PAGE>
the Company elects to pay the Owner's portion of the premium
pursuant to this paragraph 10, the recovery of such amount as
part of the Repayment Amount.
11. Default by Company. In the event that the
Company shall be in default as to any premium payment due
under paragraph 1 hereunder with respect to the Insurance
Contract, the Owner may borrow from the Insurance Contract, to
the extent permitted thereunder, all or part of the amount as
to which the Company is in default to be applied to the
payment of such premium. Such borrowing and payment shall not
discharge the Company's obligation under paragraph 1 hereunder
with respect to such premium or any subsequent premiums. With
respect to a default by the Company hereunder with respect to
premium payments, the Company shall be obligated (a) to repay
directly to the Insurer the full amount of any indebtedness
including accrued and unpaid interest incurred with respect to
the Insurance Contract pursuant to this paragraph and (b) to
repay to the Owner any amount which the Owner paid (i) as
premium which the Company was obligated to pay hereunder and
(ii) as interest on a loan from the Insurance Contract
pursuant to this paragraph 11, together with interest on the
amounts described in this clause (b) at a rate equal to the
interest rate applicable to policy loans with respect to the
Insurance Contract (the aggregate amounts referred to in this
sentence being herein referred to as the "Restoration
Amount"). If any portion of the Restoration Amount has not
-17-
<PAGE>
been repaid by the Company prior to the termination of this
Insurance Agreement, the Repayment Amount payable to the
Company on such termination shall be reduced by such portion
of the Restoration Amount. Nothing herein shall preclude the
Owner from recovering such additional damages, if any, as the
Owner shall sustain by reason of the Company's default
hereunder.
12. Notification of Insurer. Except as otherwise
provided herein, at any time that the Company shall be
entitled under the provisions hereof to recover the Repayment
Amount with respect to the Insurance Contract, the Company
shall notify the Owner and the Insurer of the amount that the
Company claims it is entitled so to recover and, unless the
Owner objects in writing to the Company and the Insurer within
thirty (30) days of such notice, the Insurer is hereby
authorized to recognize such statement of the Company without
investigation or the giving of any notice and shall be fully
protected in paying such amount to the Company. If the
Insurer receives written notice from the Owner controverting
the amount payable to the Company, the Insurer shall make no
payments with respect to such Insurance Contract except upon
written instructions signed by both the Owner and the Company
or in accordance with a final, non-appealable order of a court
of competent jurisdiction. The written acknowledgment of
receipt by the Company of any funds paid to the Company
pursuant to its statement of the amount payable to it shall be
-18-
<PAGE>
a full discharge and release of the Insurer by the Company
with respect to such payment. The Insurer shall be relieved
of any and all responsibility to any party claiming an
interest in the Insurance Contract for any decrease in cash
value or death benefit resulting from the exercise of any
right as to which both the Owner and the Company have
consented or which is specifically permitted hereunder.
13. Owner. The undersigned Owner shall be the sole
and absolute owner of the Insurance Contract and shall have
all rights of ownership in the Insurance Contract except to
the extent otherwise specifically provided in this Insurance
Agreement and the Collateral Assignment. Without limiting any
other rights not specifically enumerated, the Owner
specifically reserves, subject to the Company's rights under
this Insurance Agreement, the right to designate the
beneficiary or beneficiaries of the death benefit payable
under the Insurance Contract and to elect any optional mode of
settlement permitted by the Insurance Contract or allowed by
the Insurer.
14. Premium Waiver. For purposes of computing the
Repayment Amount, no premium waived under a premium waiver
provision of the Insurance Contract shall be treated as having
been paid by the Company.
15. Further Assurances. Each of the Company and
the Owner shall execute and deliver such other instruments and
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<PAGE>
agreements as shall be necessary or appropriate to carry out
the intent of this Insurance Agreement.
16. Amendment. Except as otherwise provided
herein, this Insurance Agreement may not be amended, altered
or modified, except by a written instrument signed by the
Company and the Owner, or their respective successors or
assigns, and may not be otherwise terminated except as
provided herein.
17. Binding Nature of Insurance Agreement. This
Insurance Agreement shall be binding upon and shall inure to
the benefit of the Company and its successors and assigns, the
Owner, and the Owner's successors, assigns, and beneficiaries.
As used in this Insurance Agreement, the term "successor",
with respect to the Company, shall include, but shall not be
limited to, any person, firm, corporation or other entity
which acquires all or substantially all of the assets or
business of the Company whether by merger, consolidation,
purchase or otherwise.
18. Notices. Any notice, consent or demand
required or permitted to be given under the provisions of this
Insurance Agreement shall be in writing, and shall be deemed
to be dated and to have been duly given when delivered
personally or by courier or upon delivery to the post office
and sent registered or certified mail, postage prepaid, return
receipt requested addressed as set forth below:
(a) If to the Company:
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<PAGE>
Donaldson, Lufkin & Jenrette, Inc.
140 Broadway
New York, New York 10005
Attention: Corporate Secretary
(b) If to the Owner:
Jeannette Eliasberg, Trustee
24481 Harbour View Drive
Ponte Vedra, Florida 32082
Any party may alter the address to which communications or
copies are to be sent pursuant to this Insurance Agreement by
giving notice of such change of address in conformity with the
provisions of this paragraph 18.
19. Governing Law. This Insurance Agreement, and
the rights of the parties hereunder, shall be governed by and
construed in accordance with the laws of the State of New York
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<PAGE>
applicable to contracts made and to be performed entirely
within the State of New York.
IN WITNESS WHEREOF, the parties hereto have
executed this Insurance Agreement as of the day and year first
above written.
DONALDSON, LUFKIN & JENRETTE, INC.
By /s/ Thomas E. Siegler
----------------------------
Senior Vice President
ATTEST:
/s/ Claire M. Power
- -------------------
Assistant Secretary
/s/ Jeannette Eliasberg
-------------------------------
JEANNETTE ELIASBERG, as Trustee
of the Trust create under
Agreement dated December
22, 1993 between Theodore
P. Shen, Grantor, and
Jeannette Eliasberg,
Trustee, Owner
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<PAGE>
EXHIBIT A
Insurer: New York Life Insurance Company
Policy No. : 45126820
Face Amount: $7,474,000
Policy Description: Policy on the joint and survivor lives of
Theodore P. Shen and Carol Shen, payable on second death.
Issue Date: February 1, 1994
-23-
<PAGE>
EXHIBIT B
COLLATERAL ASSIGNMENT AGREEMENT dated as of
February 1, 1996 by and between JEANNETTE ELIASBERG, as
Trustee of the Trust created under Agreement dated December
22, 1993 between Theodore P. Shen, as Grantor, and Jeannette
Eliasberg, as Trustee (such Trustee or any successor as such
Trustee being hereinafter referred to as the "Owner") and
DONALDSON, LUFKIN & JENRETTE, INC., a Delaware corporation
(hereinafter referred to as "the Company").
New York Life Insurance Company (the "Insurer")
issued on February 1, 1994 Insurance Contract No. 45126820 on
the joint and survivor lives of Theodore P. Shen, an employee
of the Company (hereinafter referred to as the "Insured") and
the Insured's wife, Carol Shen, (hereinafter referred to as
the "Insured's Wife"). Such policy shall be referred to
hereinafter as the "Insurance Contract."
The undersigned parties have entered into an
Insurance Agreement (the "Insurance Agreement") which is
attached hereto as Exhibit A and which by this reference is
made a part hereof.
Pursuant to the Insurance Agreement, Owner has
agreed to assign the Insurance Contract to the Company as
collateral security for the payment to the Company of the
Repayment Amount as set forth in the Insurance Agreement.
The parties hereto, in consideration of the
<PAGE>
foregoing and the agreements and covenants hereinafter set
forth and intending to be legally bound hereby, agree as
follows:
1. Owner hereby assigns to the Company, effective
as of the date hereof, the Insurance Contract as collateral
security for payment to the Company of the Repayment Amount
pursuant to the provisions of the Insurance Agreement (such
assignment hereinafter referred to as "the Collateral
Assignment"). The Company shall be entitled to receive the
Repayment Amount, as then determined and subject to the
limitations in paragraph 5 of the Insurance Contract, as
follows:
(a) From the death proceeds payable under the
Insurance Contract on the death of the second to die of
the Insured and the Insured's Wife;
(b) Except as otherwise provided in paragraph 7 of
the Insurance Agreement, from the cash surrender value of
the Insurance Contract (hereinafter "the Cash Surrender
Value") or other Policy Values (as defined in paragraph
1(b) of the Insurance Agreement) to the extent the Owner
withdraws any such Cash Surrender Value or other Policy
Values from the Insurance Contract prior to the death of
the second to die of the Insured and the Insured's Wife
(including by reason of a surrender or cancellation of
the Insurance Contract pursuant to paragraph 7 of the
Insurance Agreement); or
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<PAGE>
(c) At such time as the Owner obtains the
release of the Collateral Assignment hereunder in
accordance with paragraph 8 of the Insurance
Agreement.
The Collateral Assignment made herein shall not be terminated
(except as otherwise provided in the Insurance Agreement),
altered or amended by the Owner without the express written
consent of the Company.
2. Release of Collateral Assignment. The Owner
shall obtain the release of the Collateral Assignment in the
manner and at such time as set forth in paragraph 8 of the
Insurance Agreement.
3. Payment by Insurer. Owner hereby authorizes
the Insurer to rely solely on the written statement of the
Company as to the amount payable to the Company with respect
to the Insurance Contract as of any date unless the Insurer
receives notice in writing from the Owner given within thirty
(30) days of receipt of such written statement of the Company
controverting the Company's statement of such amount payable.
If the Insurer receives no such written notice from the Owner,
the Insurer is hereby authorized to recognize such statement
of the Company without investigation or the giving of any
notice. If the Insurer receives such written notice from the
Owner controverting the amount payable to the Company, the
Insurer shall make no payments with respect to such Insurance
Contract except upon written instructions signed by both the
-3-
<PAGE>
Owner and the Company or in accordance with a final,
non-appealable order of a court of competent jurisdiction.
The written acknowledgment of receipt by the Company of any
funds paid to the Company pursuant to its statement of the
amount payable to it shall be a full discharge and release of
the Insurer by the Company with respect to such payment. The
Insurer shall be relieved of any and all responsibility to any
party claiming an interest in the Insurance Contract for any
decrease in cash value or death benefit resulting from the
exercise of any right as to which both the Owner and the
Company have consented or which is specifically permitted
under the Insurance Agreement.
4. Owner's Rights. (a) Except as otherwise
provided in the Insurance Agreement and herein and subject to
the rights of the Company under the Insurance Agreement, each
and every right, interest and incident of ownership associated
with the Insurance Contract which is not expressly assigned to
the Company by this Collateral Assignment Agreement is
retained by the Owner, including, without limitation, the
right to designate the beneficiary or beneficiaries of the
death benefit payable under the Insurance Contract and to
elect any optional mode of settlement permitted by the
Insurance Contract or allowed by the Insurer.
(b) The Owner shall not assign any portion or all
of the Owner's right, interest and incidents of ownership in
and to the Insurance Contract during the term of the Insurance
-4-
<PAGE>
Agreement without the consent of the Company. In the event of
an assignment by the Owner to which the Company has consented,
the references to "Owner" herein shall be deemed to refer to
the assignee or any subsequent assignee thereof for all
purposes of this Collateral Assignment Agreement, including
for purposes of this paragraph 4.
(c) (i) Except to the extent Policy Values are
applied to pay premiums on the Insurance Contract pursuant to
paragraph 1(b) of the Insurance Agreement or as otherwise
provided in paragraph 7 of the Insurance Agreement or this
subparagraph (c), (A) the Owner shall not surrender the
Insurance Contract or otherwise withdraw any Policy Values
during the term of this Insurance Agreement (including by
cancellation of the Insurance Contract) without the consent of
the Company and (B) in the event that the Insurance Contract
is surrendered or Policy Values are withdrawn prior to the
death of the survivor of the Insured and the Insured's Wife,
the Company shall be entitled to receive the Repayment Amount
as then determined to the extent of the Cash Surrender Value
payable with respect to any such surrender or the Policy
Values then withdrawn, such Repayment Amount to be paid to the
extent possible first from the cash surrender value of paid up
additions and then from the remaining Cash Surrender Value so
payable.
(ii) Notwithstanding the foregoing, the Owner shall
be permitted to withdraw Policy Values to the extent permitted
-5-
<PAGE>
under the Insurance Contract (other than by surrender of the
Insurance Contract) without the consent of the Company and, in
the case of subparagraph (A) of this subparagraph (ii),
without paying any portion of the Repayment Amount to the
Company, as shall be necessary to pay:
(A) Any increase in the Owner's Federal, State or
local income tax after, or by reason of, the death of the
Insured which is attributable to the inclusion of any portion
of, or an increase in, the Cash Surrender Value as an item of
gross income for purposes of computing the Owner's income
taxes; and
(B) The Repayment Amount at such time as the Owner
obtains the release of the Collateral Assignment pursuant to
the provisions of paragraph 8 of the Insurance Agreement.
(iii) The Owner shall surrender the Insurance
Contract at such time as the Company, based on information
provided by the Insurer, notifies the Owner that the total
Augmented Cash Surrender Value is less than the Repayment
Amount if, prior to such time (A) the Augmented Cash Surrender
Value exceeded such Repayment Amount and (B) either of the
following events has occurred: (x) the death of the Insured or
(y) an event to which subparagraph 9(b) of the Insurance
Agreement applies.
(iv) The Owner shall surrender the Insurance
Contract at such time, if any, as the Insured is dismissed
-6-
<PAGE>
from employment by the Company for "cause" (as defined in
paragraph 7(d) of the Insurance Agreement).
5. Borrowing Rights. (a) In no event shall the
Company have any right to borrow from, or against the security
of, the Insurance Contract during the term of the Insurance
Agreement.
(b) The Owner shall have no right to borrow from,
or against the security of, the Insurance Contract during the
term of the Insurance Agreement to the extent that the amount
of aggregate indebtedness under, or secured by, the Insurance
Contract would thereafter exceed the loan value of the
Insurance Contract as determined immediately prior to the
first premium payment made by the Company pursuant to
paragraph 1 of the Insurance Agreement except (i) as provided
in subparagraph 8(f) thereof (in connection with obtaining the
release of the Collateral Assignment), (ii) as provided in
subparagraph 11 thereof (in connection with a Default by the
Company) and (iii) after the death of the Insured, to pay any
increase in the Owner's Federal, State or local income tax
which is attributable to the inclusion, if any, as an item or
items of gross income for purposes of computing such taxes of
(A) the economic benefit (as defined in paragraph 1 of the
Insurance Agreement) of the insurance protection then provided
to the Owner on the life of the Insured's Wife under the
Insurance Contract and the Insurance Agreement and (B) any
portion of, or increase in, the Cash Surrender Value.
-7-
<PAGE>
6. Representation of Solvency. Each of the parties
hereto declares that no proceedings in bankruptcy are pending
against such party, and the Owner hereby declares that its
property is not the subject of any assignment for the benefit
of creditors.
7. Governing Law. All matters respecting the
validity, effect, and interpretation of this Collateral
Assignment Agreement shall be determined in accordance with
the laws of the State of New York, applicable to contracts
made and to be performed entirely within the State of New
York.
8. Binding Nature of Assignment. This Collateral
Assignment Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective
successors, assigns, distributees, executors, administrators
and beneficiaries. As used in this Collateral Assignment
Agreement, the term "successor", with respect to the Company,
shall include, but shall not be limited to, any person, firm,
corporation or other entity which acquires all
-8-
<PAGE>
or substantially all of the assets or business of the
Company whether by merger, consolidation, purchase or
otherwise.
IN WITNESS WHEREOF, the parties have hereunto set
their respective hands and seals as of the date first above
written.
DONALDSON, LUFKIN & JENRETTE, INC.
By
---------------------
Senior Vice President
ATTEST:
- -------------------
Assistant Secretary
-------------------------------
JEANNETTE ELIASBERG, as Trustee
of the Trust created under
Agreement dated December
22, 1993 between Theodore
P. Shen, Grantor, and
Jeannette Eliasberg,
Trustee, Owner
ACCEPTED:
- ----------------------------------------
New York Life Insurance Company, Insurer
9
Exhibit 10.84
INSURANCE AGREEMENT
THIS INSURANCE AGREEMENT made and entered into as of
the 4th day of January, 1996, by and between DONALDSON, LUFKIN
& JENRETTE, INC., a Delaware corporation, with principal
offices and place of business in the State of New York (here-
inafter referred to as the "Company") and DAN CURTIS ROSY, as
Trustee of The Roby 1995 Insurance Trust dated November 27,
1995 (hereinafter referred to as the "Owner"),
WITNESSETH THAT:
WHEREAS, the Owner has obtained two policies of life
insurance insuring the joint and survivor lives of Joe L. Roby
(hereinafter referred to as the "Insured") and his wife,
Hilppa A. Roby, (hereinafter referred to as the "Insured's
Wife") each in the face amount of Five Million Six Hundred
Ninety-Two Thousand Five Hundred Dollars ($5,692,500) (such
policies for all purposes hereof being treated as though they
constituted a single policy and being hereinafter referred to
in the aggregate as the "Insurance Contract") which are
described in Exhibit A attached hereto and by this reference
made a part hereof, and which were issued by the insurance
company shown in Exhibit A (hereinafter referred to as the
"Insurer"); and
WHEREAS, in consideration of past services rendered
and services to be rendered by the Insured, the Company wishes
<PAGE>
to pay a portion of the premiums due with respect to the
Insurance Contract, subject to certain repayment rights
described herein, all on the terms and conditions hereinafter
set forth; and
WHEREAS, the Company wishes to have the Insurance
Contract collaterally assigned to it by the Owner in order to
secure the repayment to it of the aggregate premiums on the
Insurance Contract which the Company may pay pursuant to this
Insurance Agreement.
NOW, THEREFORE, in consideration of the premises and
of the mutual promises contained herein, the parties hereto
agree as follows:
1. Premium Payments. (a) Except as otherwise
provided in paragraph 9 hereof, on or before February 15, 1996
and on or before each of the first fourteen (14) anniversaries
of the register date of the Insurance Contract (each such
anniversary hereinafter referred to as an "Anniversary Date")
prior to the termination of this Insurance Agreement, premium
on the Insurance Contract shall be paid as follows: the Owner
shall pay to the Insurer as and for a portion of such premium
an amount equal to the economic benefit of the insurance
protection then provided to the Owner under the Insurance
Contract and this Insurance Agreement on the life or lives of
such as are then living of the Insured and the Insured's Wife,
and the Company shall pay to the Insurer as and for a portion
-2-
<PAGE>
of such premium an amount equal to One Hundred Eighty-Five
Thousand Dollars ($185,000). The economic benefit referred to
in the preceding sentence shall be the lesser of (i) the PS 58
cost for the insurance protection referred to therein (as
determined under tables published by the Internal Revenue
Service) and modified as appropriate (or, if applicable, as
specifically prescribed by the Internal Revenue Service) to
reflect that such insurance protection is on the joint lives
of the Insured and the Insured's Wife and that the death
benefit under such Insurance Contract is payable only on the
death of the second to die of the Insured and the Insured's
Wife and (ii) if such insurance protection is available from
the Insurer as term insurance, the premium for such insurance
protection determined by reference to the Insurer's current
published premium rate for one-year term life insurance
protection available to all standard risks. Thirty (30) days
prior to each Anniversary Date on which premium is payable
hereunder, the Company shall notify the Owner of the exact
amount of the economic benefit the Owner is obligated to pay
hereunder. Each of the Owner and the Company shall promptly
furnish the other evidence of timely payment of the portion of
each such premium it is obligated to pay hereunder.
(b) During the term of this Insurance Agreement,
the Owner shall elect to have Option A apply under the
Insurance Contract.
-3-
<PAGE>
2. Collateral Assignment. (a) To secure the
repayment to the Company to the extent possible of the
Repayment Amount (as defined in paragraph 5 hereunder) as
herein provided, the Owner shall assign the Insurance Contract
to the Company as collateral ("the Collateral Assignment")
under a Collateral Assignment Agreement substantially in the
form attached hereto as Exhibit B. The Collateral Assignment
of the Insurance Contract to the Company shall not be
terminated (except as otherwise provided in this Insurance
Agreement), altered or amended by the Owner without the
express written consent of the Company.
(b) Except as provided in subparagraph (a) of this
paragraph 2, the Owner shall not transfer any interest in the
Insurance Contract during the term of this Insurance Agreement
without the consent of the Company. In the event of an
assignment by the Owner to which the Company has consented,
the references to "Owner" herein shall be deemed to refer to
the assignee or any subsequent assignee thereof for all
purposes of this Insurance Agreement, including for purposes
of this paragraph 2. The Owner shall comply with the
notification requirements of the Insurer with respect to any
such assignment and shall deliver a copy of any such
notification to the Company.
3. Loans. (a) In no event shall the Company have
any right to borrow from, or against the security of, the
-4-
<PAGE>
Insurance Contract during the term of this Insurance
Agreement.
(b) The Owner shall have no right to borrow from,
or against the security of, the Insurance Contract during the
term of this Insurance Agreement except (i) as provided in
subparagraph 8(f) hereof and (ii) after the death of the
Insured, to pay any increase in the Owner's Federal, State or
local income tax which is attributable to the inclusion, if
any, as an item of gross income for purposes of computing such
taxes of (A) the economic benefit (as defined in paragraph 1
hereof) of the insurance protection then provided to the Owner
on the life of the Insured's Wife under the Insurance Contract
and this Insurance Agreement and (B) any portion of, or
increase in, the cash surrender value of the Insurance
Contract (hereinafter "the Cash Surrender Value").
4. Term of Insurance Agreement. This Insurance
Agreement and, except to the extent otherwise provided in
paragraph 9 hereof, the obligations of the Company hereunder
shall remain in force (regardless of whether the Owner has
assigned any portion or all of the Owner's rights, interests
and incidents of ownership in and to the Insurance Contract)
until the first to occur of:
(a) the death of the second to die of the
Insured and the Insured's Wife;
(b) the surrender or cancellation of the
Insurance Contract by the Owner prior to the death
-5-
<PAGE>
of the second to die of the Insured and the
Insured's Wife; and
(c) the release of the Collateral Assignment by
the Company pursuant to the provisions of paragraph
8 hereof.
5. Repayment Amount. The Repayment Amount as of
any time is the total amount of premiums on the Insurance
Contract paid by the Company (other than any premium or
portion thereof which consists of Restoration Amount as
defined in paragraph 11 hereunder), reduced by any premium
returns and reimbursement paid to the Company from any source
on account of such premiums paid and further reduced by any
unpaid portion of the Restoration Amount as set forth in
paragraph 11 hereunder. In no event shall the amount payable
to the Company hereunder on account of the Repayment Amount
exceed (i) if payable by reason of the death of the Insured or
the Insured's Wife, the proceeds of the Insurance Contract
payable at such death or (ii) if payable by reason of a
withdrawal of all or any portion of the Cash Surrender Value
(including by cancellation or surrender of the Insurance
Contract), the amount of Cash Surrender Value so withdrawn.
If, on the surrender or cancellation of the Insurance Contract
or on the death of the second to die of the Insured and the
Insured's Wife, the Cash Surrender Value or proceeds of the
Insurance Contract, as the case may be, are less than the
Repayment Amount due to the Company hereunder, none of the
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<PAGE>
Owner, the Insured, the Insured's Wife, or the personal
representative of any of them shall have any obligation to pay
any part of such shortfall to the Company.
6. Death Benefit. Upon the termination of this
Insurance Agreement on the death of the second to die of the
Insured and the Insured's Wife, the Company and the Owner
shall promptly take all action necessary to obtain the death
benefit provided under the Insurance Contract. The Company
shall have the right to receive a portion of the death benefit
under the Insurance Contract equal to the Repayment Amount
determined as of the date of such death, subject to the
limitations of paragraph 5 hereunder. The balance of the
death benefit provided under the Insurance Contract, if any,
shall be paid to the beneficiary or beneficiaries, and in the
manner and amounts, designated by the Owner in the beneficiary
designation for the Insurance Contract. No amount shall be
paid from the death benefit under the Insurance Contract to
the Owner or the beneficiary or beneficiaries designated by
the Owner until the entire Repayment Amount payable to the
Company has been paid.
7. Withdrawals from Insurance Contract; Surrender
or Cancellation. (a) Except as otherwise provided in this
paragraph 7, the Owner shall not withdraw any portion of the
Cash Surrender Value during the term of this Insurance
Agreement (including by cancellation or surrender of the
Insurance Contract) without the consent of the Company and
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<PAGE>
upon withdrawal of all or any portion of the Cash Surrender
Value (including upon termination of this Insurance Agreement
by reason of a surrender or cancellation of the Insurance
Contract), the Company shall be entitled to receive the
Repayment Amount as then determined to the extent of the Cash
Surrender Value so withdrawn.
(b) Notwithstanding the foregoing, the Owner shall
be permitted to withdraw from the Cash Surrender Value without
the consent of the Company and, in the case of subparagraph
(i) of this subparagraph (b), without paying any portion of
the Repayment Amount to the Company, the following amounts:
(i) Any increase in the Owner's Federal, State or
local income tax after, or by reason of, the death of the
Insured which is attributable to the inclusion of any portion
of, or an increase in, the Cash Surrender Value as an item of
gross income for purposes of computing the Owner's income
taxes; and
(ii) The Repayment Amount at such time as the Owner
obtains the release of the Collateral Assignment pursuant to
the provisions of paragraph 8 hereunder.
(c) The Owner shall surrender the Insurance
Contract at such time as the Company, based on information
provided by the Insurer, notifies the Owner that the total
Cash Surrender Value is less than the Repayment Amount if,
prior to such time (i) the Cash Surrender Value exceeded such
Repayment Amount and (ii) either of the following events has
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<PAGE>
occurred: (A) the death of the Insured or (B) an event to
which subparagraph 9(b) hereof applies.
(d) The Owner shall surrender the Insurance
Contract at such time, if any, as the Insured is dismissed
from employment by the Company for cause. For purposes of
this Insurance Agreement, "cause" means (i) the Insured's
willful failure to perform his duties as an officer and/or
employee of the Company (other than as a result of his total
or partial incapacity due to physical or mental illness and
excluding any action taken and any decision not to act if such
action is taken or such decision is made in the good faith
belief that it is in the furtherance of the business of the
Company), (ii) gross negligence or gross malfeasance in the
performance of such duties, (iii) a final finding by a court
or other governmental body with proper jurisdiction that
Insured engaged in an act or acts that (A) constitute a felony
under the laws of the United States or any state thereof, or
(B) constitute a violation of Federal or State securities law,
if the Board of Directors determines that, by reason of such
finding, the continued employment of the Insured by the
Company would be seriously detrimental to the Company and its
business; or (iv) in the absence of any final finding by a
court or other governmental body with proper jurisdiction, a
determination by the Board of Directors in good faith that
Insured engaged in an act or acts that (A) constitute a felony
under the laws of the United States or any state thereof, or
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<PAGE>
(B) constitute a violation of Federal or State securities law,
if the Board of Directors determines that, by reason of such
act or acts, the continued employment of the Insured by the
Company would be seriously detrimental to the Company and its
business.
8. Release of Collateral Assignment. (a) The
Owner shall obtain the release of the Collateral Assignment to
the Company of the Insurance Contract in the manner set forth
in subparagraph (f) of this paragraph 8 on the earliest to
occur of (i) the Nontaxable Rollout Time (as defined in
subparagraph (b) of this paragraph 8), (ii) the Post-Death
Rollout Time (as defined in subparagraph (c) of this paragraph
8) and (iii) the Applicable Anniversary Date (as defined in
subparagraph (d) of this paragraph 8).
(b) The Nontaxable Rollout Time shall mean the
earliest time after the last premium payment the Company is
obligated to make hereunder that (i) after payment of the
Repayment Amount from the Cash Surrender Value, based on
projections supplied by the Insurer (using a projected rate of
interest or investment return approved by the Owner, provided
that such approval may not be unreasonably withheld), a death
benefit under the Insurance Contract of an amount not less
than the lesser of (A) the initial face amount of the
Insurance Contract or (B) the then amount of insurance
provided under the Insurance Contract may thereafter be
maintained for the joint and survivor lives of the Insured and
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<PAGE>
the Insured's Wife solely by the application of investment
returns and other Policy Values under the Insurance Contract
without the payment of further cash premiums and (ii) the
Company provides the Owner with an opinion of outside counsel
recognized as expert in Federal tax matters, and which opinion
may be relied on by the Owner, that the payment to the Company
of the Repayment Amount and the release of the Collateral
Assignment will not be a Federal taxable event with respect to
the Owner or the Insured. Notwithstanding the foregoing, if,
within 30 days after receipt of the opinion referred to in the
preceding sentence, the Owner obtains an opinion of
independent counsel recognized as expert in Federal tax
matters that the payment to the Company of the Repayment
Amount and the release of the Collateral Assignment will more
likely than not be a Federal taxable event with respect to the
Owner or the Insured, the Company and Owner shall refer the
matter to a third independent counsel acceptable to both and
the Nontaxable Rollout Time shall not be deemed to have
occurred unless such third counsel affirms the opinion
originally supplied by the Company. For purposes of this
paragraph, a Federal taxable event shall mean the recognition
of gross income or the making of a taxable gift under the then
applicable provisions of the Internal Revenue Code. For
purposes of this Insurance Agreement, with respect to the
Insurance Contract, the term "Policy Values" shall include
investment returns and the Cash Surrender Value and any other
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<PAGE>
element of value which would ordinarily be applied to the
payment of the internal charges (including mortality charges)
with respect to the Insurance Contract if no premium were
paid.
(c) The Post-Death Rollout Time shall mean the
earliest time after the death of the Insured and after the
last premium payment the Company is obligated to make
hereunder that, based on projections supplied by the Insurer
(using a projected rate of interest or investment return
approved by the Owner, provided that such approval may not be
unreasonably withheld), after payment from the Cash Surrender
Value of the Repayment Amount and all income tax liability of
the Owner arising by reason of such payment, a death benefit
under the Insurance Contract of an amount not less than the
lesser of (i) the initial face amount of the Insurance
Contract or (ii) the then amount of insurance provided under
the Insurance Contract may thereafter be maintained for the
life of the Insured's Wife solely by the application of
investment returns and other Policy Values under the Insurance
Contract without the payment of further cash premiums.
(d) The Applicable Anniversary Date shall be such
Anniversary Date, if any, on which the Owner in its sole and
absolute discretion consents to a request by the Company that
the Owner obtain the release of the Collateral Assignment,
which request by the Company and consent by the Owner shall be
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<PAGE>
made and given, if at all, in accordance with the provisions
of subparagraph (e) of this paragraph 8.
(e) On any Anniversary Date on which the Cash
Surrender Value exceeds the Repayment Amount as then
determined (but only on any such Anniversary Date), the
Company may request the Owner to obtain the release of the
Collateral Assignment in accordance with the provisions of
subparagraph (f) of this paragraph 8. In determining whether
to consent to any such request, the Owner shall consider
primarily the interests of the Insured and shall not consent
to such request unless the Owner determines in its sole and
absolute discretion that it would be in the interests of the
Insured to do so. Although the Owner, in determining whether
or not to consent to such request, shall consider primarily
the interests of the Insured (and may consult with the Insured
for purposes of making any such determination), such
determination shall be within the sole and absolute discretion
of the Owner. The consent of the Owner with respect to any
request by the Company as herein described may be given only
on the Anniversary Date on which the Company makes such
request.
(f) To obtain the release of the Collateral
Assignment pursuant to the provisions of this subparagraph 8,
the Owner shall pay to the Company the Repayment Amount
determined as of the date of such payment and, solely as a
source of funding such payment, the Owner may borrow such
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<PAGE>
amount from the Cash Surrender Value and direct that the same
be paid to the Company. Upon receipt of such payment, the
Company shall release the Collateral Assignment of the
Insurance Contract by the execution and delivery of an
appropriate instrument of release, and neither the Company nor
the Company's assigns shall thereafter have any further
interest in and to the Insurance Contract, either under the
terms thereof or under this Insurance Agreement.
9. Termination of Company's Obligation to Pay
Premiums. Notwithstanding that this Insurance Agreement
remains in effect until the termination thereof pursuant to
paragraph 4 hereunder, the Company's obligation to make
further premium payments hereunder shall cease on the first to
occur, if any, of:
(a) the giving of notice by the Insured to the
Company that the Company is thereafter relieved of
any further obligation to make premium payments
under this Insurance Agreement; and
(b) the failure of the Owner to pay the
portion of any premium the Owner is obligated to pay
hereunder within 30 days of written demand by the
Company for such payment, which written demand may
be made only after the Owner fails to pay its
portion of premium on the date set forth for the
payment of such premium under paragraph 1 hereof,
provided that this subparagraph (b) shall not apply
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<PAGE>
if the Company elects to pay the Owner's portion of
such premium pursuant to paragraph 10 hereunder.
10. Default by Owner. If the Owner fails to pay
the portion of any premium due and payable which the Owner is
obligated to pay hereunder within the period described in
paragraph 9(b) hereof, the Company, in its sole discretion,
may elect to pay such portion of the premium, which amount
shall thereafter be recovered by the Company as part of the
Repayment Amount and, if the Company elects to pay such
portion, this Insurance Agreement shall thereafter continue to
apply as if the Owner had timely paid its portion of such
premium. If the Owner fails to pay its portion of any premium
payable hereunder, the Company's sole remedy with respect to
such failure shall be (i) if the Company does not elect to pay
the Owner's portion of the premium pursuant to this paragraph
10, the cessation of the Company's obligation to make further
premium payments pursuant to paragraph 9(b) hereof or (ii) if
the Company elects to pay the Owner's portion of the premium
pursuant to this paragraph 10, the recovery of such amount as
part of the Repayment Amount.
11. Default by Company. In the event that the
Company shall be in default as to any premium payment due
under paragraph 1 hereunder with respect to the Insurance
Contract, the application of Policy Values to maintain the
amount of insurance provided under the Insurance Contract
immediately prior to the Company's default shall not discharge
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<PAGE>
the Company's obligation hereunder with respect to such
premium or any subsequent premiums and the Company shall be
required to pay as premium on the Insurance Contract (a) the
amount as to which the Company is in default under paragraph 1
hereof (the "Default Amount") and (b) the Restoration Amount.
For purposes of this Insurance Agreement, the Restoration
Amount shall be, as of any date, that amount which, when added
to the Default Amount, would increase the Cash Surrender Value
to the amount such Cash Surrender Value would have been as of
such date if the Default Amount had been timely paid, such
amount to be determined on the basis of the investment return
credited to the Cash Surrender Value during the period from
the original due date of the Default Amount until the date on
which the Restoration Amount is paid. If any portion of the
Restoration Amount has not been repaid by the Company prior to
the termination of this Insurance Agreement, the Repayment
Amount payable to the Company on such termination shall be
reduced by such portion of the Restoration Amount.
12. Notification of Insurer. Except as otherwise
provided herein, at any time that the Company shall be
entitled under the provisions hereof to recover the Repayment
Amount with respect to the Insurance Contract, the Company
shall notify the Owner and the Insurer of the amount that the
Company claims it is entitled so to recover and, unless the
Owner objects in writing to the Company and the Insurer within
thirty (30) days of such notice, the Insurer is hereby
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<PAGE>
authorized to recognize such statement of the Company without
investigation or the giving of any notice and shall be fully
protected in paying such amount to the Company. If the
Insurer receives written notice from the Owner controverting
the amount payable to the Company, the Insurer shall make no
payments with respect to such Insurance Contract except upon
written instructions signed by both the Owner and the Company
or in accordance with a final, non-appealable order of a court
of competent jurisdiction. The written acknowledgment of
receipt by the Company of any funds paid to the Company
pursuant to its statement of the amount payable to it shall be
a full discharge and release of the Insurer by the Company
with respect to such payment. The Insurer shall be relieved
of any and all responsibility to any party claiming an
interest in the Insurance Contract for any decrease in cash
value or death benefit resulting from the exercise of any
right as to which both the Owner and the Company have
consented or which is specifically permitted hereunder.
13. Owner. (a) The undersigned Owner shall be the
sole and absolute owner of the Insurance Contract and shall
have all rights of ownership in the Insurance Contract except
to the extent otherwise specifically provided in this
Insurance Agreement and the Collateral Assignment. Without
limiting any other rights not specifically enumerated, the
Owner specifically reserves, subject to the Company's rights
under this Insurance Agreement, the right to designate the
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<PAGE>
beneficiary or beneficiaries of the death benefit payable
under the Insurance Contract and to elect any optional mode of
settlement permitted by the Insurance Contract or allowed by
the Insurer.
(b) The Owner shall have the right to exercise any
investment option available under the Insurance Contract
provided that the exercise of any such option shall require
the consent of the Company which shall not be unreasonably
withheld.
14. Premium Waiver. For purposes of computing the
Repayment Amount, no premium waived under a premium waiver
provision of the Insurance Contract shall be treated as having
been paid by the Company.
15. Further Assurances. Each of the Company and
the Owner shall execute and deliver such other instruments and
agreements as shall be necessary or appropriate to carry out
the intent of this Insurance Agreement.
16. Amendment. Except as otherwise provided
herein, this Insurance Agreement may not be amended, altered
or modified, except by a written instrument signed by the
Company and the Owner, or their respective successors or
assigns, and may not be otherwise terminated except as
provided herein.
17. Binding Nature of Insurance Agreement. This
Insurance Agreement shall be binding upon and shall inure to
the benefit of the Company and its successors and assigns, the
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<PAGE>
Owner, and the Owner's successors, assigns, and beneficiaries.
As used in this Insurance Agreement, the term "successor",
with respect to the Company, shall include, but shall not be
limited to, any person, firm, corporation or other entity
which acquires all or substantially all of the assets or
business of the Company whether by merger, consolidation,
purchase or otherwise.
18. Notices. Any notice, consent or demand
required or permitted to be given under the provisions of this
Insurance Agreement shall be in writing, and shall be deemed
to be dated and to have been duly given when delivered
personally or by courier or upon delivery to the post office
and sent registered or certified mail, postage prepaid, return
receipt requested addressed as set forth below:
(a) If to the Company:
Donaldson, Lufkin & Jenrette, Inc.
140 Broadway
New York, New York 10005
Attention: Corporate Secretary
(b) If to the Owner:
Dan Curtis Roby, Trustee
14202 Lake Forest Drive
Louisville, KY 40223
Any party may alter the address to which communications or
copies are to be sent pursuant to this Insurance Agreement by
giving notice of such change of address in conformity with the
provisions of this paragraph 18.
19. Governing Law. This Insurance Agreement, and
the rights of the parties hereunder, shall be governed by and
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<PAGE>
construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed entirely
within the State of New York.
IN WITNESS WHEREOF, the parties hereto have
executed this Insurance Agreement as of the day and year first
above written.
DONALDSON, LUFKIN & JENRETTE, INC.
By /s/
-------------------------
Senior Vice President
ATTEST:
/s/
- -------------------
Assistant Secretary
/s/ Dan Curtis Roby, Trustee
----------------------------
DAN CURTIS ROBY, as
Trustee of the Roby
1995 Insurance
Trust, Owner
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<PAGE>
EXHIBIT A
Insurer: The Equitable Life Assurance Society of the United
States
Policy Nos. : 46 201 235 and 46 203 737
Face Amount: $11,385,000 aggregate ($5,692,500 each policy)
Policy Description: Each policy is a policy on the joint and
survivor lives of Joe L. Roby and Hilppa A. Roby, payable on
second death.
Register Date: January 4, 1996
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<PAGE>
EXHIBIT B
COLLATERAL ASSIGNMENT AGREEMENT dated as of January
4, 1996 by and between DAN CURTIS ROBY, as Trustee of The Roby
1995 Insurance Trust dated November 27, 1995, (such Trustee or
any successor as such Trustee being hereinafter referred to as
the "Owner") and DONALDSON, LUFKIN & JENRETTE, INC., a
Delaware corporation (hereinafter referred to as "the
Company").
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED
STATES (the "Insurer") issued to the Owner Insurance Contract
Nos. 46 201 235 and 46 203 737, each in the face amount of
Five Million Six Hundred Ninety-Two Thousand Five Hundred
Dollars ($5,692,500) on the joint and survivor lives of Joe L.
Roby, an employee of the Company (hereinafter referred to as
the "Insured") and the Insured's wife, Hilppa A. Roby,
(hereinafter referred to as the "Insured's Wife"). The
register date of each policy is January 4, 1996. For all
purposes hereof, the policies are treated as though they
constituted a single policy and are hereinafter referred to in
the aggregate as the "Insurance Contract."
The undersigned parties have entered into an
Insurance Agreement (the "Insurance Agreement") which is
attached hereto as Exhibit A and which by this reference is
made a part hereof.
<PAGE>
Pursuant to the Insurance Agreement, Owner has
agreed to assign the Insurance Contract to the Company as
collateral security for the payment to the Company of the
Repayment Amount as set forth in the Insurance Agreement.
The parties hereto, in consideration of the
foregoing and the agreements and covenants hereinafter set
forth and intending to be legally bound hereby, agree as
follows:
1. Owner hereby assigns to the Company, effective
as of the date hereof, the Insurance Contract as collateral
security for payment to the Company of the Repayment Amount
pursuant to the provisions of the Insurance Agreement (such
assignment hereinafter referred to as "the Collateral
Assignment"). The Company shall be entitled to receive the
Repayment Amount, as then determined and subject to the
limitations in paragraph 5 of the Insurance Contract, as
follows:
(a) From the death proceeds payable under the
Insurance Contract on the death of the second to die of
the Insured and the Insured's Wife;
(b) From the cash surrender value of the Insurance
Contract (hereinafter "the Cash Surrender Value") to the
extent any such Cash Surrender Value is withdrawn from
the Insurance Contract by the Owner prior to the death of
the second to die of the Insured and the Insured's Wife
other than by a withdrawal permitted under paragraph
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<PAGE>
7(b)(i) of the Insurance Agreement (but including by
reason of a surrender or cancellation of the Insurance
Contract pursuant to paragraph 7 of the Insurance
Agreement); or
(c) At such time as the Owner obtains the
release of the Collateral Assignment hereunder in
accordance with paragraph 8 of the Insurance
Agreement.
The Collateral Assignment of the Insurance Contract to the
Company made herein shall not be terminated (except as
otherwise provided in the Insurance Agreement), altered or
amended by the Owner without the express written consent of
the Company.
2. Release of Collateral Assignment. The Owner
shall obtain the release of the Collateral Assignment to the
Company of the Insurance Contract in the manner and at such
time as set forth in paragraph 8 of the Insurance Agreement.
3. Payment by Insurer. Owner hereby authorizes
the Insurer to rely solely on the written statement of the
Company as to the amount payable to the Company with respect
to the Insurance Contract as of any date unless the Insurer
receives notice in writing from the Owner given within thirty
(30) days of receipt of such written statement of the Company
controverting the Company's statement of such amount payable.
If the Insurer receives no such written notice from the Owner,
the Insurer is hereby authorized to recognize such statement
-3-
<PAGE>
of the Company without investigation or the giving of any
notice. If the Insurer receives such written notice from the
Owner controverting the amount payable to the Company, the
Insurer shall make no payments with respect to such Insurance
Contract except upon written instructions signed by both the
Owner and the Company or in accordance with a final,
non-appealable order of a court of competent jurisdiction.
The written acknowledgment of receipt by the Company of any
funds paid to the Company pursuant to its statement of the
amount payable to it shall be a full discharge and release of
the Insurer by the Company with respect to such payment. The
Insurer shall be relieved of any and all responsibility to any
party claiming an interest in the Insurance Contract for any
decrease in cash value or death benefit resulting from the
exercise of any right as to which both the Owner and the
Company have consented or which is specifically permitted
under the Insurance Agreement.
4. Owner's Rights. (a) Except as otherwise
provided in the Insurance Agreement and herein and subject to
the rights of the Company under the Insurance Agreement, each
and every right, interest and incident of ownership associated
with the Insurance Contract which is not expressly assigned to
the Company by this Collateral Assignment Agreement is
retained by the Owner, including, without limitation, the
right to designate the beneficiary or beneficiaries of the
death benefit payable under the Insurance Contract and to
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<PAGE>
elect any optional mode of settlement permitted by the
Insurance Contract or allowed by the Insurer.
(b) The Owner shall not assign any portion or all
of the Owner's right, interest and incidents of ownership in
and to the Insurance Contract during the term of the Insurance
Agreement without the consent of the Company. In the event of
an assignment by the Owner to which the Company has consented,
the references to "Owner" herein shall be deemed to refer to
the assignee or any subsequent assignee thereof for all
purposes of this Collateral Assignment Agreement, including
for purposes of this paragraph 4.
(c) The Owner shall have the right at any time to
exercise any investment option available under the Insurance
Contract provided that any such exercise shall require the
consent of the Company which shall not be unreasonably
withheld.
(d) (i) Except as otherwise provided in this
paragraph (d) and paragraph 7 of the Insurance Agreement, the
Owner shall not withdraw any portion of the Cash Surrender
Value during the term of the Insurance Agreement (including by
cancellation or surrender of the Insurance Contract) without
the consent of the Company and upon withdrawal of all or any
portion of the Cash Surrender Value (including upon
termination of the Insurance Agreement by reason of a
surrender or cancellation of the Insurance Contract), the
Company shall be entitled to receive the Repayment Amount as
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<PAGE>
then determined to the extent of the Cash Surrender Value so
withdrawn.
(ii) Notwithstanding the foregoing, the Owner shall
be permitted to withdraw from the Cash Surrender Value without
the consent of the Company and, in the case of subparagraph
(A) of this subparagraph (ii), without paying any portion of
the Repayment Amount to the Company, the following amounts:
(A) Any increase in the Owner's Federal, State or
local income tax after, or by reason of, the death of the
Insured which is attributable to the inclusion of any portion
of, or an increase in, the Cash Surrender Value as an item of
gross income for purposes of computing the Owner's income
taxes; and
(B) The Repayment Amount at such time as the Owner
obtains the release of the Collateral Assignment pursuant to
the provisions of paragraph 8 of the Insurance Agreement.
(iii) The Owner shall surrender the Insurance
Contract at such time as the Company, based on information
provided by the Insurer, notifies the Owner that the total
Cash Surrender Value is less than the Repayment Amount if,
prior to such time (A) the Cash Surrender Value exceeded such
Repayment Amount and (B) either of the following events has
occurred: (x) the death of the Insured or (y) an event to
which subparagraph 9(b) of the Insurance Agreement applies.
(iv) The Owner shall surrender the Insurance
Contract at such time, if any, as the Insured is dismissed
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<PAGE>
from employment by the Company for "cause" (as defined in
paragraph 7(d) of the Insurance Agreement).
(e) During the term of the Insurance Agreement, the
Owner shall elect to have Option A apply under the Insurance
Contract.
5. Borrowing Rights. (a) In no event shall the
Company have any right to borrow from, or against the security
of, the Insurance Contract during the term of the Insurance
Agreement.
(b) The Owner shall have no right to borrow from,
or against the security of, the Insurance Contract during the
term of the Insurance Agreement except (i) as provided in
subparagraph 8(f) thereof and (ii) after the death of the
Insured, to pay any increase in the Owner's Federal, State or
local income tax which is attributable to the inclusion, if
any, as an item of gross income for purposes of computing such
taxes of (A) the economic benefit (as defined in paragraph 1
of the Insurance Agreement) of the insurance protection then
provided to the Owner on the life of the Insured's Wife under
the Insurance Contract and the Insurance Agreement and (B) any
portion of, or increase in, the Cash Surrender Value.
6. Representation of Solvency. Each of the parties
hereto declares that no proceedings in bankruptcy are pending
against such party, and the Owner hereby declares that its
property is not the subject of any assignment for the benefit
of creditors.
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<PAGE>
7. Governing Law. All matters respecting the
validity, effect, and interpretation of this Collateral
Assignment Agreement shall be determined in accordance with
the laws of the State of New York, applicable to contracts
made and to be performed entirely within the State of New
York.
8. Binding Nature of Assignment. This Collateral
Assignment Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective
successors, assigns, distributees, executors, administrators
and beneficiaries. As used in this Collateral Assignment
Agreement, the term "successor", with respect to the Company,
shall include, but shall not be limited to, any person, firm,
corporation or other entity which acquires all
-8-
<PAGE>
or substantially all of the assets or business of the
Company whether by merger, consolidation, purchase or
otherwise.
IN WITNESS WHEREOF, the parties have hereunto set
their respective hands and seals as of the date first above
written.
DONALDSON, LUFKIN & JENRETTE, INC.
By /s/
-----------------------
Senior Vice President
ATTEST:
/s/
- -------------------
Assistant Secretary
/s/ Dan Curtis Roby
----------------------
DAN CURTIS ROBY, as
Trustee of the Roby
1995 Insurance Trust,
Owner
ACCEPTED:
- ------------------------------------
The Equitable Life Assurance Society
of the United States, Insurer
9
Exhibit 10.85
SECOND AMENDMENT OF AGREEMENT OF LEASE
THIS SECOND AMENDMENT OF AGREEMENT OF LEASE (this "Amendment" or
"Amendment No. 2") is made and entered into as of August 24, 1995 (the
"EFFECTIVE DATE"), by and between STANLEY STAHL D/B/A STAHL PARK AVENUE CO., a
sole proprietorship, whose address is 277 Park Avenue, New York, New York
10172 ("Landlord"), and DONALDSON, LUFKIN & JENRETTE, INC., a Delaware
corporation, whose address is 140 Broadway, New York, New York 10005
("TENANT"). This Amendment is entered into with reference to the following
facts:
A. Landlord is the lessor and Tenant is the lessee pursuant to that
certain Agreement of Lease dated as of October 26, 1994, as amended by a First
Amendment of Agreement of Lease dated as of March 30, 1995 (collectively, the
"LEASE"), affecting certain premises located at 277 Park Avenue, New York, New
York (the "PREMISES"), all as more particularly described in the Lease.
B. A memorandum of the Lease was recorded on November 22, 1994 in Reel
2157, Page 452, in the New York County Register's Office, State of New York.
C. Landlord and Tenant desire to amend certain terms and provisions of
the Lease to facilitate conversion of the Building to condominium ownership so
that Tenant may receive certain Public Inducements from IDA, as well as to
amend certain other terms and provisions of the Lease, upon the terms and
conditions set forth in this Amendment.
NOW, THEREFORE, Landlord and Tenant agree as follows (all capitalized
terms defined in the Lease shall have the same meanings in this Amendment
except to the extent that this Amendment modifies the definition for a
particular term):
1 Definitions. The following definitions are amended, added and/or
restated as follows:
1. 1 Condominium Unit. The following definition is added to the Lease
following the definition of "Commencement Date":
"CONDOMINIUM UNIT" shall mean any portion of the Building (including the
corresponding interest in common elements) constituting a separate unit
of ownership during any period in which the Building or any portion
thereof is held through condominium ownership.
1.2 Escalation Rent. The definition of "ESCALATION RENT" is amended and
restated to read as follows:
"ESCALATION RENT" shall mean, individually or collectively, the Tax
Payment, the Operating Payment and, to the extent any PILOT payments to
IDA are made by Landlord, Tenant's reimbursement of such PILOT payments.
1.3 Lease. Wherever the Lease refers to "this Lease," such reference
shall mean the Lease as modified by this Amendment.
<PAGE>
1.4 PILOT Agreement. In the definition of "Pilot Agreement, the word
"Pilot" is deleted and replaced by the word "PILOT."
1.5 Superior Lease(s). The definition of "SUPERIOR LEASE(S)" is amended
and restated to read as follows:
"SUPERIOR LEASE(S)" shall mean all ground or underlying leases and/or
subleases of the Real Property or the Building (including any such
lease(s) or sublease(s) pertaining to Condominium Units during any period
in which the Building or any portion thereof is held by condominium
ownership), including the Overlease constituting part of the IDA
Documents, and all renewals, extensions, supplements, amendments and
modifications thereof.
1.6 Tenant's Tax Share. The second sentence of the definition of
"TENANT'S TAX SHARE" is amended and restated to read as follows:
Tenant's Tax Share for the Premises initially demised under this Lease
(i.e., all Premises listed in the Fixed Rent Table) (assuming the entire
Seventh Floor Storage Premises is used entirely for office), including
Amendment No. 1 to the Lease, equals forty one and seventy three
one-hundredths percent (41.73%); provided, however, that for any period
during the Term during which any portion of the Office Premises (or
Seventh Floor Storage Premises that is from time to time not used for
storage) `shall constitute IDA Premises, Tenant's Tax Share shall be
adjusted so as to reduce each of the Space Factors set forth in clause
(a) (subclause "i" or "ii," as applicable) and clause (b) above by the
Space Factor attributable to such IDA Premises.
2 Modification of IDA Documents.
In the first sentence of Section 10.3(C) of the Lease, the words "ceases
to qualify as IDA Premises" are deleted and replaced by the following words:
"shall cease to be IDA Premises for any reason.
3 Reversion to Original Ownership Structure.
In the first sentence of Section 10.3(D) of the Lease, the following
words are added after the words "or if Tenant no longer qualifies for such
benefits as provided in Section 10.4 below": "or can no longer receive such
benefits or if IDA is no longer able to grant such benefits."
4 Reduction of IDA Premises.
The following language is hereby added as Section 10.3(E) of the Lease:
(E) The parties intend that all of the Premises initially demised
under this Lease (excluding the Cellar Storage Premises) shall become IDA
Premises under the IDA Documents. Notwithstanding the foregoing, after the
initial transfer of Premises to IDA, Landlord may require that the size of the
IDA Premises be decreased to an aggregate of approximately 200,000 units of
2
<PAGE>
Space Factor (the "MINIMUM IDA PREMISES"), which the parties stipulate would
be the smallest area that, as transferred to the IDA, would permit Tenant to
take full advantage of any Public Inducements relating to Taxes available as
of the date hereof. Tenant agrees that at Landlord's request, Tenant promptly
shall take any and all actions necessary to reduce the IDA Premises to the
Minimum IDA Premises. In such event, Landlord shall: (i) pay the Actual Cost
to Tenant of effecting such a reduction and (ii) pay or, if applicable, credit
against amounts to be recovered by Landlord pursuant to Section 10.2(C), any
incremental increases in commercial rent tax incurred by Tenant as a result
of such reduction, provided, however, that the obligation referred to in
clause "ii" shall terminate on the date on which the Minimum IDA Premises
cease to be IDA Premises.
5 Effect of IDA Public Inducements.
5.1 Commencement of Parties' Obligations. The first sentence of Section
10.5 of the Lease (excluding Section 10.5(A)) is amended and restated to read
as follows:
To the extent that, during any Tax Year: (i) the PILOT Agreement shall be
in effect, (ii) the PILOT Commencement Date (as defined in the PILOT
Agreement) shall have occurred and (iii) the Premises (or any portion
thereof) continue(s) to constitute IDA Premises, the following shall
apply notwithstanding anything to the contrary in this Lease:
5.2 PILOT Commencement Date. The parties hereby confirm that for purposes
of Section 5.1 of this Amendment, the "PILOT Commencement Date" shall not
occur prior to July 1, 1996.
6 Rent Credit for IDA Premises.
In clause (i) of Section 10.5(E) of the Lease, after the words
"(determined as if no portion of the Premises were IDA Premises)" the
following words are added: "divided by 1,744,590."
7 Reduction of Tenant's Tax Share.
In Section 10.5(F) of the Lease, the words "reduced by the Space Factor
allocable to the IDA Premises" are deleted and replaced by the following
words: "adjusted as provided in the definition of "Tenant's Tax Share" above."
3
<PAGE>
8 Default under Unit Owners Agreement.
The following language is added as Section 10.6(C) of the Lease:
(C) Reference is made to that certain Unit Owners Agreement dated as of
August 24, 1995 between Landlord and Tenant (the "UNIT OWNERS
AGREEMENT"). If any Unit Owner (as defined in the Unit Owners Agreement)
shall default in performing any obligation under the Unit Owners
Agreement that corresponds to and incorporates any obligation of
Landlord under this Lease, such default shall constitute a default by
Landlord under this Lease.
9 Conformity with Tax Agreement.
The following language is added as Section 10.6(C) of the Lease:
(D) Reference is made to that certain Tax Agreement dated as of August
24, 1995 between Landlord and the City of New York (the "TAX AGREEMENT").
Landlord agrees that if any additional Condominium Units are created in the
Building after the date hereof, the share of the Aggregate Value (as defined
in the Tax Agreement) attributable to each such new Condominium Unit shall be
equal to the percentage derived from dividing the Space Factor of such
Condominium Unit (determined in accordance with Exhibit G, page 3 of 3,
hereto) by 1,744,590.
10 Tenant's Tax Payment.
In the first sentence of Section 11.2(A) of the Lease, the following
words are added after the words "shall represent an increase above the Base
Taxes": "(on a per unit of Space Factor basis)".
11 Lease Subject and Subordinate.
The following language is added to the end of Section 15.1 of the Lease:
Notwithstanding the foregoing, this Lease shall be subject and
subordinate to the Overlease whether or not a Tenant Nondisturbance
Agreement is executed or delivered.
12 Termination of the Lease.
In the first sentence of Section 22.1(A) of the Lease, the words "If an
Event of Default shall occur and Landlord" are deleted and replaced by the
following words: "If (i) an Event of Default shall occur and (ii) Landlord".
13 No Other Changes.
Except for the foregoing changes in the Lease, the parties ratify and
confirm the Lease, as amended by this Amendment. Landlord and Tenant
acknowledge and agree that the Lease, as amended by this Amendment, is in full
force and effect in accordance with its terms. Any
4
<PAGE>
inconsistency between this Amendment and the Lease (as it existed before this
Amendment) shall be resolved in favor of this Amendment, whether or not this
Amendment specifically modifies the particular provision(s) in the Lease
inconsistent with this Amendment. Wherever the Lease refers to the Lease, such
reference shall be deemed to refer to the Lease as modified by this Amendment.
Section 40.3 of the Lease shall apply to this Amendment as if set forth in
full verbatim.
14 Miscellaneous.
14.1 Representations, Warranties and Confirmations. Each party
represents, warrants and confirms that this Amendment is a valid, legal, and
binding obligation of such party enforceable in accordance with its terms and
that the Lease is in full force and effect and has not been supplemented,
modified or otherwise amended, except pursuant to this Amendment, or cancelled
or terminated.
14.2 Recording. This Amendment shall not be recorded; however, either
party shall upon request of the other execute, acknowledge and deliver a
memorandum with respect to this Amendment sufficient for recording.
14.3 Amendments. The Lease may not be further amended, discharged or
terminated except by a written instrument executed by the parties.
14.4 Counterparts. This Amendment may be executed in counterparts, each
of which shall be an original, but all of which shall constitute a single
agreement.
14.5 Sakura. This Amendment shall not become effective unless and until,
within thirty days after the Effective Date: (a) Sakura has signed the Sakura
Acknowledgment below and (b) two executed counterparts of this Amendment, with
Landlord's and Sakura's signature, have been delivered to Tenant. Tenant
agrees to the Sakura Acknowledgment. If, as of thirty days after the Effective
Date, Sakura has not signed the Sakura Acknowledgment, then this Amendment
shall be of no force or effect, and the parties shall so confirm in writing.
5
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as
of the Effective Date.
STANLEY STAHL D/B/A STAHL PARK DONALDSON, LUFKIN & JENRETTE,
AVENUE CO., Landlord INC., Tenant
By:/s/ Stanley Stahl By: /s/ George P. Twill
------------------------ --------------------------
Stanley Stahl Name:
Title:
SAKURA ACKNOWLEDGMENT
Reference is made to the Subordination, Nondisturbance, Recognition and
Attornment Agreement made of the 28th day of October, 1994, between Tenant and
Sakura (the "SNDA"). In the third "Whereas" clause of the SNDA, the following
language is added at the end of the reference to "October 26, 1994, as
modified by the First Amendment of Agreement of Lease dated March 30, 1995":
"and the Second Amendment of Agreement of Lease dated as of August 24, 1995."
THE SAKURA BANK, LIMITED, NEW YORK BRANCH
By: _______________________________________
Name:
Title:
6
Exhibit 10.86
THIRD AMENDMENT OP AGREEMENT OF LEASE
THIS THIRD AMENDMENT OF AGREEMENT OF LEASE (this "AMENDMENT" or
"AMENDMENT NO. 3") is made and entered into as of October 6, 1995 (the
"EFFECTIVE DATE") by and between STANLEY STAHL D/B/A STAHL PARK AVENUE CO.,
a sole proprietorship, whose address is 277 Park Avenue, New York, New York
10172 ("LANDLORD"), and DONALDSON, LUFKIN & JENRETTE, INC., a Delaware
corporation, whose address is 140 Broadway, New York, New York 10005
("TENANT"). This Amendment is entered into with reference to the following
facts:
A. Landlord is the lessor and Tenant is the lessee pursuant to that
certain Agreement of Lease dated as of October 26, 1994 (as amended by the
First Amendment of Agreement of Lease dated as of March 30, 1995 ("AMENDMENT
NO. 1") and the Second Amendment of Agreement of Lease dated as of August 24,
1995 ("AMENDMENT NO. 2"), the "LEASE"), affecting certain premises
located at 277 Park Avenue, New York, New York (the "PREMISES"), all as more
particularly described in the Lease.
B. A memorandum of the Lease was recorded on November 22, 1994 in Reel
2157, Page 452, in the New York County Register's Office, State of New
York,
C. Landlord and Tenant desire to expand the Upper Office Premises to
include the twenty fifth (25th) floor of the Building (the "TWENTY FIFTH
FLOOR") and amend certain other terms and provisions of the Lease, upon the
terms and conditions set forth in this Amendment,
NOW, THEREF0RE, Landlord and Tenant agree as follows (all capitalized
terms defined in the Lease shall have the same meanings in this Amendment
except to the extent that this Amendment modifies the definition for a
particular term):
1 Definitions. The following definitions are amended and/or restated as
follows;
1.1 Landlord's Work. The definition of "LANDLORD'S WORK" is amended and
restated to read as follows:
"LANDLORD'S WORK" shall mean Landlord's Pre-Possession Work, Landlord's
Post-Possession Work, Landlord's Additional Work, the Additional Premises
Pre-Possession Work, the Additional Premises Post-Possession Work, the
Additional Premises Additional Work, the Twenty Fifth Floor
Pre-Possession Work, the Twenty Fifth Floor Post-Possession Work and
the Twenty Fifth Floor Additional Work.
1.2 Lease. Wherever the Lease refers to "this Lease" such
reference shall mean the Lease as modified by this Amendment.
1.3 Submetered Premises. In the definition of "SUBMETERED PREMISES,"
clause "a" is modified to read as follows "(a) the nineteeth through twenty
fifth floors of the Building, as depicted on EXHIBIT 'A.'"
1.4 Tenant's Operating Share. The second sentence of the definition of
"TENANT'S OPERATING SHARE" is amended and restated to read as follows:
<PAGE>
Tenant's Operating Share for the Premises Initially demised under this
Lease (i.e., all Premises listed In the Fixed Rent Table) (assuming the
entire Seventh Floor Storage Premises is used entirely for office),
including Amendment No. 1 and Amendment No. 3 to the Lease, equals forty
four and forty nine one-hundredths percent (44.49%).
1.5 Tenant's Tax Share. The Second sentence of the definition of
"TENANT'S TAX SHARE" is amended and restated to read as follows:
Tenant's Tax Share for the Premises initially demised under this Lease
(i.e., all Premises listed in the Fixed Rent Table) (assuming the entire
Seventh Floor Storage Premises is used entirely for office), including
Amendment No. 1 and Amendment No. 3 to the Lease, equals forty two and
ninety six one-hundredths percent (42,96%); provided, however, that for
any period during the Term during which any portion of the Premises shall
Constitute IDA Premises, Tenant's Tax Share shall be adjusted so as to
reduce the Space Factors set forth in both clause (a) and clause (b)
above by the Space Factor Constituting Such IDA Premises.
1.6 Upper Office Premises. "UPPER OFFICE PREMISES" shall mean, subject to
Article 21, the 22nd, 23rd, 24th and 25th floors of the Building and the
portion of the 21st floor of the Building not Constituting "Middle Office
Premises."
1.7 Upper Office Premises Space Factor. "UPPER OFFICE PREMISES SPACE
FACTOR" shall mean 9O,700, as the same may be increased or decreased
pursuant to this Lease.
2 Fixed Rent Table.
The "Fixed Rent Table" at the end of Section 1.1 of the Lease is modified
by adding the following additional column of information as part of the
"Upper Office Premises" portion of the Fixed Rent Table.
Premises Addition to Upper Office Premises
Floor(s) All of 25
Space Factor 21,500
Rent Commencement Date March 1, 1996
Unit Fixed Rent Total Fixed Rent Per Year (Per Month)
First Rental Period $43.00 $924,500 ($77,041.67)
Second Rental Period $47.00 $1,010,500 ($84,208.33)
Third Rental Period $51.00 $1,096,500 ($91,375.00)
Fourth Rental Period $55.00 $1,182,500 ($98,541.67)
Footnote "2," following the Fixed Rent Table, is modified to read as
follows:
2 Total "Space Factor" of the entire "Premises" as originally defined in
this Lease, including Amendment No. 1, Amendment No. 2 and Amendment No. 3
thereto, is 754,500.
3 Landlord's Work.
2
<PAGE>
3.1 Pre-Possession Work.
3.1.1 Description. The Commencement Date for the Twenty Fifth
Floor shall be November 1, 1995, subject to adjustment (without further
amendment of this Lease) by written agreement of Landlord and Tenant
(the "TWENTY FIFTH FLOOR COMMENCEMENT DATE"), On or prior to the Twenty
Fifth Floor Commencement Date, Landlord shall Substantially Complete the
same Pre-Possession Work for the Twenty Fifth Floor that Landlord was
required to perform for the Office Premises initially demised under the
Lease (the "TWENTY FIFTH FLOOR PRE-POSSESION WORK"), including Landlord's
delivery to Tenant of an Asbestos Abatement Certificate regarding the
Twenty Fifth Floor together with clearance data to establish that air in
the Twenty Fifth Floor does not contain asbestos fibers in Violation of
the Requirements. For the Twenty Fifth Floor, Landlord and Tenant shall
have the same rights and obligations as set forth in Section 3.2 of the
Lease with respect to Landlord's Pre-Possession Work beginning from and
after the Commencement Date for the Twenty Fifth Floor, except that
landlord shall not be required to give notice of such Commencement
Date unless Landlord fails to deliver the Twenty Fifth Floor on or prior
to November 1, 1995, Tenant shall not be obligated to contribute to, and
Landlord shall pay for, air monitoring and asbestos consulting fees with
respect to the Twenty Fifth Floor.
3.1.2 Delayed Rent Credits. If the Twenty Fifth Floor or any
portion(s) (other than de minimis portions) thereof are delivered after
the Twenty Fifth Floor Commencement Date, Tenant shall be entitled to the
same remedies set forth in Section 3-3(C) of the Lease, except that the
Delayed Rent Credits to which Tenant shall be entitled shall be equal
to: (a) one and one-half (1 1/2) days' Fixed Rent plus Escalation Rent
(prorated daily) for the entire Twenty Fifth Floor for each of the first
fourteen (14) days of delay after the Twenty Fifth Floor Commencement
Date, and (b) two (2) days' Fixed Rent plus Escalation Rent (prorated
daily) for the entire Twenty Fifth Floor for each additional day of delay
beyond the fourteenth (14th) day, in each case regardless of whether or
not such delays are due to Unavoidable Delays.
3.2 Post-Possession Work.
3.2.1 Description As Landlord's Post-Possession Work for the
Twenty Fifth Floor (the "TWENTY FIFTH FLOOR POST-POSSESSION WORK"),
Landlord shall be obligated to perform only the items of work listed
below, and shall have no obligation to perforrn any work that would
otherwise be required as "Post-Possession Work" under the Lease, Landlord
shall perform the Twenty Fifth Floor Post-Possession Work in coordination
with Tenant's Initial Alterations and in Substantial compliance with a
Schedule to be reasonably agreed upon by the parties. The Twenty Fifth
Floor Post-Possession Work shall consist only of the following work
described in EXHIBIT "N" of the Lease:
II(B)(1) -- At Landlord's cost, Landlord shall submeter the
Twenty Fifth Floor, providing 6 watts per unit of Space Factor
demand, exclusive of air conditioning; and
3.2.2 Twenty fifth Floor HVAC Credit. Landlord shall allow
Tenant a credit in the amount of Seventy Five Thousand Dollars ($75.000)
against Tenant's monetary obligations under the Lease. Such credit
reflects a reasonable estimate of the cost avoided to Landlord because
Tenant has advised Landlord that it will not be necessary for Landlord
to provide certain HVAC capacity and equipment that Landlord had
intended to install for the Twenty Fifth floor.
3.2.3 Landlord's HVAC Performance Obligations. When and as
required by Section 8.3 of the Lease. Landlord shall provide Tenant with
HVAC to the Twenty Fifth Floor, except that notwithstanding anything to
the contrary in the lease:
3
<PAGE>
3.2.3.1 Landlord's Specifications. Landlord's only obligation
with respect to Twenty Fifth Floor HVAC shall be to make available such
HVAC Capacity as is presently available to the 24th floor (the "24th
Floor Existing HVAC"), consisting of the following, assuming in each case
one person per 100 usable square feet at a room design temperature of 75
degrees fahrenheit: (i) existing induction units (perimeter) with a
15-foot perimeter band sufficient to support an average of 3.25 watts per
square foot of light and equipment loads: (ii) 7165 cubic feet per minute
for the interior system at a minimum static pressure of 1.25" w.g. and
temperature not to exceed 54 degrees fahrenheit, which is sufficient to
support light and equipment loads of 4.00 watts per usable square foot of
interior space and to provide an additional .75 watts per usable square
foot for the perimeter area, producing (iii) an overall HVAC capacity for
the Twenty Fourth Floor of 4.00 watts per usable square foot.
3.2.3.2 Reallocation of Twenty Fifth Floor HVAC. For the
interior HVAC system serving the Twenty Fifth Floor (clause "ii" in the
preceding paragraph), Tenant shall have the right to reallocate to the
Twenty Fifth Floor any portion of the Tenant interior air quantities for
floors 20 through 24 (as indicated in the "Supply Air Distribution" chart
referred to as part of EXHIBIT "O" of the Lease).
3.2.3.3 Lease Specifications. Landlord shall not be
responsible for assuring that HVAC on the Twenty Fifth Floor complies
with Exhibit "O" of the Lease.
3.2.4 Inadequate UVAC. If at any time Tenant determines that
HVAC on the Twenty Fifth Floor is inadequate even though Landlord is
performing Landlord's ob1igations to continue to provide HVAC equal to
the 24th Floor Existing HVAC, then the parties shall reasonably
cooperate to design suitable enhancements and expansions to the HVAC
service for such floor, all subject to Landlord's reasonable approval.
Tenant shall pay all costs (including Landlord's Actual Costs incurred)
of designing, installing, constructing and connecting such enhancements
and expansions, which shall when completed and accepted by Landlord then
become part of the Building HVAC System.
3.2.5 Completion. Landlord and Tenant shall have the same
rights and obligations with respect to the Twenty Fifth Floor
Post-Possession Work as are set forth in Section 3.4(A), (D) and (E)
of the Lease with respect to Landlord's Post-Possession Work.
3.3 Additional Work. As Landlord's Additional Work for the Twenty
Fifth Floor, Landlord shall perform only the items listed in EXHIBIT
"KK" of the Lease identified as items 1(A), 1(C) and 1(D) (the "TWENTY FIFTH
FLOOR ADDITIONAL WORK") Landlord shall perform such Twenty Fifth Floor
Additional Work in compliance with Section 3.7 of the Lease.
4 Tenant Fund.
In the first sentence of Section 5.5(A) of the Lease, the words "Thirty
Eight Million Eight Hundred Thirty Nine Thousand Dollars ($38,839,000)" are
deleted and replaced by the following words; "Thirty Nine Million Four Hundred
Twenty Six Thousand Dollars (S39,426,000)."
5 Installation of Soundproofing Materials.
The Second Sentence of Section 5.8 of the Lease is hereby amended and
restated as follows:
4
<PAGE>
Tenant shall also have the right to install soundproofing materials on
the seventeenth (17th) through twenty fifth (25th) floors, as well as the
right at Tenant's expense to install replacement windows (to attenuate
sound) on the eastern exposure of the seventeenth (17th) through twenty
fifth (25th) floors.
6 HVAC.
In Section 8.4 of the Lease, all provisions of such Section 8.4 that
apply to Floor 23 shall also apply to the Twenty Fifth Floor.
7 Electrical Work for Twenty Fifth Floor.
Landlord and Tenant shall have the same rights and obligations with
respect to the electrical work for the Twenty Fifth Floor as are set forth in
Section 12.3(E) of the Lease, contained in Amendment No. 1.
8 Expansion Options.
8.1 Space to be Designated by March 1, 1999. The first sentence of
Section 44.1(A)(2) of the Lease is hereby amended and restated to read as
follows:
(2) On or before March 1, 1999, Landlord shall designate by
written notice to Tenant as Expansion Option Space one floor of the
Building from between floors 26 and 27, subject to Section 44.1(E).
8.2 Other Changes in Expansion Option Space. Section 44.1(A)(4) of the
Lease is hereby amended and restated to read as follows:
(a) Any one floor of the Building (as designated by Landlord,
subject to Section 44.1 (E)) from between floors 26 and 27, but if
more than one of such floors is available. then the lowest available
floor, not previously added to the Premises as Expansion Option Space
shall constitute Expansion Option Space having a single Scheduled
Expansion Option Space Commencement Date (subject to Section 44.1(E)) on
or after March 1, 2006 and on or before August 31, 2006, as designated
by Landlord as part of Landlord's notice designating the Expansion
Option Space, which notice must be delivered on or before September 1,
2004. From the time of Tenant's election under Section 44.1 (A)(2),
Landlord shall, if reasonably possible in view of Landlord's
then-current stacking plan and projected requirements endeavor to hold
and make available to Tenant Pursuant to this paragraph the lowest
possible floor (as between floors 26 and 27) under the circumstances.
The Space Factor for each Expansion Option Space described in this
section shall be as set forth on EXHIBIT "G."
(b) The 29th floor of the Building shall constitute Expansion
Option Space having a Scheduled Expansion Option Space Commencement
Date of July 1, 2009 (subject to Section 44-1(E)). Notwithstanding the
foregoing, if S.S.I (U.S.) Inc. or its assignee or successor is entitled
to and does exercise its option (which option Landlord confirms
presently exists under such tenant's present lease) to extend its
lease of the 29th floor beyond June 30, 2009, then; (a) Landlord shall
by January 1, 2008, so notify Tenant, and (b) in place of the 29th
floor,
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<PAGE>
the 30th floor of the Building shall Constitute Expansion Option Space
having a Scheduled Expansion Option Space Commencement Date of August
15, 2010 (subject to Section 44.1(E)). The Space Factor for such
Expansion Option Space (either the 29th or the 30th floor) shall be as
set forth on EXHIBIT "G."
9 No Other Changes.
Except for the foregoing changes in the Lease, the parties ratify and
confirm the Lease, as amended by this Amendment. Landlord and Tenant
acknowledge and agree that the Lease, as amended by this Amendment, is in full
force and effect in accordance with its terms. Any inconsistency between this
Amendment and the Lease (as it existed before this Amendment) shall be
resolved in favor of this Amendment, whether or not this Amendment
specifically modifies the particular provision(s) in the Lease inconsistent
with this Amendment. Wherever the Lease refers to the Lease, such reference
shall be deemed to refer to the Lease as modified by this Amendment. Section
40.3 of the Lease shall apply to this Amendment as if Set forth in full
verbatim.
10 Miscellaneous.
10.1 Representations, Warranties and Confirmations. Each party
represents, warrants and confirms that this Amendment is a valid, legal, and
binding obligation of such party enforceable in accordance with its terms and
that the Lease is in full force and effect and has not been supplemented,
modified or otherwise amended, except pursuant to this Amendment, or cancelled
or terminated.
10.2 Recording. This Amendment shall not be recorded; however, either
party shall upon request of the other execute, acknowledge and deliver a
memorandum with respect to this Amendment sufficient for recording.
10.3 Amendments. The Lease may not be further amended, discharged or
terminated except by a written instrument executed by the parties.
10.4 Counterparts. This Amendment may be executed in counterparts, each
of which shall be an original, but all of which shall constitute a
single agreement.
10.5 Sakura. This Amendment shall not become effective unless and until,
within thirty days after the Effective Date: (a) Sakura has signed the
Sakura Acknowledgment below and (b) two executed counterparts of this
Amendment, with Landlord's and Sakura's signature, have been delivered to
Tenant. Tenant agrees to the Sakura Acknowledgment. If, as of thirty days
after the Effective Date, Sakura has not signed the Sakura Acknowledgment,
then this Amendment shall be of no force or effect, and the parties shall so
confirm in writing.
6
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as of
the Effective Date.
STANLEY STAHL D/B/A STAHL PARK DONALDSON, LUFKIN & JENRETTE,
AVENUE CO., Landlord, INC., Tenant
By:/s/ Stanley Stahl By: /s/ George P. Twill
------------------------ --------------------------
Stanley Stahl Name:
Title:
SAKURA ACKNOWLEDGMENT
Reference is made to the Subordination, Nondisturbance, Recognition and
Attornment Agreement made of the 28th day of October, 1994, between Tenant
and Sakura (the "SNDA"). In the third "Whereas" clause of the SNDA, the
reference to "October 26, 1994" is deleted and is replaced by a reference to
"October 26, 1994, as modified by the First Amendment of Agreement of Lease
dated March 30, 1995, the Second Amendment of Agreement of Lease dated
August 24, 1995, and the Third Amendment of Agreement of Lease dated October
6, 1995.
THE SAKURA BANK, LIMITED, NEW YORK BRANCH
By: /s/ Tamihiro Kawauchi
---------------------------------------
Name:
Title:
7
Exhibit 10.87
FOURTH AMENDMENT OF AGREEMENT OF LEASE
THIS FOURTH AMENDMENT OF AGREEMENT OF LEASE (this "AMENDMENT" or
"AMENDMENT NO. 4") is made and entered into as of April 29, 1996 (the
"EFFECTIVE DATE"), by and between STANLEY STAHL D/B/A STAHL PARK AVENUE CO., a
sole proprietorship, whose address is 277 Park Avenue, New York, New York
10172 ("LANDLORD"), and DONALDSON, LUFKIN & JENRETTE, INC., a Delaware
corporation, whose address is 140 Broadway, New York, New York 10005
("TENANT"). This Amendment is entered into with reference to the following
facts:
A. Landlord is the lessor and Tenant is the lessee pursuant to that
certain Agreement of Lease dated as of October 26, 1994 (as amended as set
forth below, the "LEASE"), affecting certain premises located at 277 Park
Avenue, New York, New York (the "PREMISES"), all as more particularly
described in the Lease.
B. The Lease has been previously amended by the First Amendment of
Agreement of Lease dated as of March 30, 1995 ("AMENDMENT NO. 1"), the Second
Amendment of Agreement of Lease dated as of August 24, 1995 ("AMENDMENT NO.
2") and the Third Amendment of Agreement of Lease dated as of October 6, 1995
("AMENDMENT NO. 3").
C. A memorandum of the Lease was recorded on November 22, 1994 in Reel
2157, Page 452, in the New York County Register's Office, State of New York.
D. Landlord and Tenant desire (i) to expand the Premises to include
certain premises to be used for storage purposes in the twenty eighth (28th)
floor of the Building (the "TWENTY EIGHTH FLOOR STORAGE PREMISES") as shown in
EXHIBIT A to this Amendment, (ii) to expand the Upper Office Premises to
include the thirty fourth (34th) floor and a portion of the thirty third
(33rd) floor of the Building (together, the "NEW TOWER PREMISES") as shown in
EXHIBIT A to this Amendment and (iii) to amend certain other terms and
provisions of the Lease, upon the terms and conditions set forth in this
Amendment.
NOW, THEREFORE, Landlord and Tenant agree as follows (all capitalized
terms defined in the Lease shall have the same meanings in this Amendment
except to the extent that this Amendment modifies the definition for a
particular term):
1 Definitions. The following definitions are amended and/or restated as
follows:
1.1 Landlord's Work. The definition of "LANDLORD'S WORK" is amended and
restated to read as follows:
"LANDLORD'S WORK" shall mean Landlord's Pre-Possession Work, Landlord's
Post-Possession Work, Landlord's Additional Work, the Additional Premises
Pre-Possession Work, the Additional Premises Post-Possession Work, the
Additional Premises Additional Work, the Twenty Fifth Floor
Pre-Possession Work, the Twenty Fifth Floor Post-Possession Work, the
Twenty Fifth Floor Additional Work, the New Tower Premises Pre-Possession
Work, the New Tower Premises Post-Possession Work and the New Tower
Premises Additional Work.
1.2 Lease. Wherever the Lease refers to "this Lease," such reference
shall mean the Lease as modified by this Amendment.
<PAGE>
1.3 Rent Inclusion Premises. The definition of "Rent Inclusion Premises"
is amended and restated to read as follows:
"RENT INCLUSION PREMISES" shall mean: (a) the Cellar Storage Premises;
(b) the Twenty Eighth Floor Storage Premises; and (c) any portion of the
Premises treated as Rent Inclusion Premises pursuant to Section 12.2(B).
1.4 Storage Premises. The definition of "STORAGE PREMISES" is amended and
restated to read as follows:
"STORAGE PREMISES" shall mean, collectively, the Cellar Storage
Premises, the Seventh Floor Storage Premises and the Twenty Eighth
Floor Storage Premises.
1.5 Storage Premises Space Factor. The definition of "STORAGE PREMISES
SPACE FACTOR" is amended and restated to read as follows:
"STORAGE PREMISES SPACE FACTOR" shall mean 9,771, consisting of 3,000
for the Seventh Floor Storage Premises, 5,000 for the Cellar Storage
Premises and 1,771 for the Twenty Eighth Floor Storage Premises, as the
same may be increased or decreased pursuant to this Lease.
1.6 Submetered Premises. In the definition of "SUBMETERED PREMISES,"
clause "a" is modified to read as follows: "(a) the nineteenth through twenty
fifth floors and the thirty fourth floor of the Building and the portion of
the thirty third floor of the Building that constitutes Premises hereunder,
all as depicted on EXHIBIT A to the Fourth Amendment of this Lease."
1.7 Tenant's Operating Share. The second sentence of the definition of
"Tenant's Operating Share" is amended and restated to read as follows:
Tenant's Operating Share for the Premises initially demised under this
Lease (i.e., all Premises listed in the Fixed Rent Table) (assuming the
entire Seventh Floor Storage Premises is used entirely for office),
including Amendment No. 1 through Amendment No. 4 to the Lease, equals
forty six and sixty four one-hundredths percent (46.64%).
1.8 Tenant's Tax Share. The definition of "TENANT'S TAX SHARE" is amended
and restated to read as follows:
"TENANT'S TAX SHARE" shall mean the quotient, from time to time,
of (a) (i) the Office Premises Space Factor plus (ii) the Space Factor
for any Seventh Floor Storage Premises that is, from time to time, not
used for storage, divided by (b) 1,744,590. Tenant's Tax Share for the
Premises demised under this Lease through and including Amendment No.
4 (i. e., all Premises listed in the Fixed Rent Table) (assuming the
entire Seventh Floor Storage Premises are used entirely for office),
including Amendment No. 1 through Amendment No. 4 to the Lease, equals
forty five and five one-hundredths percent (45.05%); provided, however,
that for any period during the Term during which any portion of the
Premises shall constitute IDA Premises, Tenant's Tax Share shall be
adjusted so as to reduce the Space Factors set forth in both clause (a)
(subclause "i" or "ii", as applicable) and clause (b) above by the Space
Factor constituting such IDA Premises.
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1.9 Upper Office Premises. "Upper Office Premises" shall mean, subject
to Article 21, the twenty second (22nd) through twenty fifth (25th) floors and
the thirty fourth (34th) floor of the Building, the portion of the thirty
third (33rd) floor of the Building constituting Premises and the portion of
the twenty first (21st) floor of the Building not constituting "Middle Office
Premises."
1.10 Upper Office Premises Space Factor. "UPPER OFFICE PRERNISES SPACE
FACTOR" shall mean 127,092, as the same may be increased or decreased pursuant
to this Lease.
2 Fixed Rent Table.
2.1 Twenty Eighth Floor Storage Premises. The "Fixed Rent Table" at the
end of Section 1.1 of the Lease is modified by adding the following additional
columns of information as part of the "Storage Premises" portion of the Fixed
Rent Table.
Premises Twenty Eighth Floor Storage Premises
Floor(s) Part of 28
Space Factor 1771
Rent Commencement Date January 1, 1996
Unit Fixed Rent Total Fixed Rent Per Year (Per Month)
First Rental Period $17.34 $30,709 ($2,559.08)
Second Rental Period $17.34 $30,709 ($2,559.08)
Third Rental Period $17.34 $30,709 ($2,559.08)
Fourth Rental Period $17.34 $30.709 ($2,559.08)
2.2 New Tower Premises. The "Fixed Rent Table" at the end of Section 1.1
of the Lease is further modified by adding the following additional columns of
information as part of the "Upper Office Premises" portion of the Fixed Rent
Table.
<TABLE>
<CAPTION>
Addition to Upper Office Premises
Premises (New Tower Premises)
<S> <C> <C>
Floor(s) Part of 33 All of 34
Space Factor 14,892 21,500
Rent Commencement Date April 15, 1996 January 1, 1997
<CAPTION>
Unit Fixed Total Fixed Rent Per Unit Fixed Total Fixed Rent Per
Rent Year (Per Month) Rent Year (Per Month)
<S> <C> <C> <C> <C>
First Rental Period $45.00 $670,140 ($55,845) $45.00 $967,500 ($80,625)
Second Rental Period $49.00 $729,708 ($60,809) $49.00 $1,053,500 ($87,791.67)
Third Rental Period $53.00 $789,276 ($65,773) $53.00 $1,139,500 ($94,958.33)
Fourth Rental Period $57.00 $848,844 ($70,737) S57.00 $1,225,500 ($102,125)
</TABLE>
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Footnote "2," following the Fixed Rent Table, is modified to read as follows:
2. Total "Space Factor" of the entire "Premises" as originally defined
in this Lease, including Amendment No. 1, Amendment No. 2, Amendment No.
3 and Amendment No. 4 thereto, is 792,663.
3 Permitted Uses.
The second sentence of Section 2.1 of the Lease is amended and restated
to read as follows:
Tenant shall use and occupy the Cellar Storage Premises and the Seventh
Floor Storage Premises for office or storage purposes incidental to
Tenant's use of the Office Premises for the uses set forth herein, and
for no other purpose other than as set forth in Section 2.4. Tenant
shall use and occupy the Twenty Eighth Floor Storage Premises for:
storage purposes incidental to Tenant's use of the Office Premises for
the uses set forth herein (including by placing lockers for Tenant's
cleaning or maintenance personnel in a portion of such premises) and for
no other purpose other than as set forth in Section 2.4. All of the
foregoing permitted uses shall be subject to Article 6 of this Lease.
4 Twenty Eighth Floor Storage Premises: Delivery of Premises and Landlord's
Work.
4.1 Delivery and Pre-Possession Work. The Commencement Date for the
Twenty Eighth Floor Storage Premises shall be January 1, 1996 (the "TWENTY
EIGHTH FLOOR STORAGE PREMISES COMMENCEMENT DATE") Tenant shall take the
Twenty Eighth Floor Storage Premises on the date hereof in its "as-is"
condition, and Landlord shall not be obligated to perform any Pre-Possession
Work or other preparation of any kind with respect to the Twenty Eighth Floor
Storage Premises, except that Landlord shall promptly deliver to Tenant an
Asbestos Abatement Certificate regarding the Twenty Eighth Floor Storage
Premises together with clearance data to establish that air in the Twenty
Eighth Floor Storage Premises does not contain asbestos fibers in violation of
the Requirements. Landlord shall not be required to give further notice of
such Commencement Date. Notwithstanding anything to the contrary in any other
provision of this Lease, except for the deliveries required by this paragraph
Landlord shall have no obligations to Tenant under Article 9 of the Lease with
respect to the Twenty-Eighth Floor Storage Premises.
4.2 Post-Possession Work. Landlord shall not be obligated to perform any
Post-Possession Work with respect to the Twenty Eighth Floor Storage Premises.
5 New Tower Premises: Delivery of Premises and Landlord's Work.
5.1 Delivery and Pre-Possession Work. Notwithstanding the exceptions to
Substantial Completion set forth in clauses "i" and "ii" below, the Commencement
Date for the New Tower Premises shall be the date of this Amendment (the "New
Tower Premises Commencement Date"). Landlord represents and warrants that
Landlord has Substantially Completed the same Pre-Possession Work for the New
Tower Premises that Landlord was required to perform for the Office Premises
initially demised under the Lease (the "NEW TOWER PREMISES PRE-POSSESSION
WORK"), including delivery to Tenant of an Asbestos Abatement Certificate
regarding the New Tower Premises together
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with clearance data to establish that air in the New Tower Premises does not
contain asbestos fibers in violation of the Requirements, except that (i)
Landlord has not yet but shall promptly repair any air induction units in the
New Tower Premises that Tenant shall promptly notify Landlord that Tenant
believes are leaking air as of the New Tower Premises Commencement Date
(except for those units that Tenant chooses to replace with fan coils pursuant
to Section 5.4 of this Amendment No. 4), and (ii) Landlord has not yet but
shall promptly complete horizontal insulation of any existing HVAC ducts in
the New Tower Premises. Notwithstanding any provision to the contrary in this
Lease, Tenant shall have thirty (30) days from the date on which the items of
work described in clauses "i" and "ii" above have been Substantially Completed
(and Landlord notifies Tenant of such Substantial Completion) to deliver a
Punchlist to Landlord with respect to such items. For the New Tower Premises,
Landlord and Tenant shall have the same rights and obligations as set forth in
Section 3.2 of the Lease with respect to Landlord's Pre-Possession Work
beginning from and after the Commencement Date for the New Tower Premises.
Tenant shall not be obligated to contribute to, and Landlord shall pay for,
air monitoring and asbestos consulting fees with respect to the New Tower
Premises.
5.2 Post-Possession Work.
5.2.1 Description. As Landlord's Post-Possession Work for the New
Tower Premises (the "NEW TOWER PREMISES POST-POSSESSION WORK"), Landlord shall
be obligated to perform only the items of work listed below, and shall have no
obligation to perform any work that would otherwise be required as
"Post-Possession Work" under the Lease. Landlord shall perform the New Tower
Premises Post-Possession Work in coordination with Tenant's Initial
Alterations and in substantial compliance with a schedule to be reasonably
agreed upon by the parties. The New Tower Premises Post-Possession Work shall
consist only of the following work described in Exhibit "N" of the Lease:
II(B)(1) -- At Landlord's cost, Landlord shall submeter the New
Tower Premises, providing 6 watts per unit of Space Factor demand,
exclusive of air conditioning; and
5.2.2 New Tower Premises HVAC Credit. Landlord shall allow Tenant
a credit in the amount of One Hundred Twenty Six Thousand Nine Hundred Fifty
Dollars ($126,950) against Tenant's monetary obligations under the Lease. Such
credit reflects a reasonable estimate of the cost that Tenant will incur in
order to modify the HVAC system in the New Tower Premises to comply with
EXHIBIT "O" of the Lease.
5.2.3 Connection to Chilled Water Risers. Tenant, at Tenant's sole
cost, may at its option extend the existing chilled water risers connected to
the seventh (7th) floor chiller plant from Tenant's Premises on or below the
twenty fifth (25th) floor through the New Tower Premises through the shaftway
located immediately east of the freight elevator slop sink and immediately
north of the north stairwell across the freight-elevator lobby from the
freight elevator. The final route of such risers within the shaftway shall be
subject to Landlord's reasonable approval, the parties acknowledging that such
route should be as close to straight as reasonably possible taking into
account site conditions. Notwithstanding any other provision of this Lease,
Landlord shall not be responsible for any asbestos abatement that might be
necessitated by the extension or installation of such risers. Tenant, at
Tenant's cost, shall make all necessary connections from such extended risers
to each floor of the New Tower Premises, sized for no less than twenty (20)
tons capacity per floor, provided, however, that Landlord shall be responsible
for the operating costs (consisting of electricity, water, labor and
maintenance costs) of providing the New Tower Premises with twenty (20) tons
of such extended chilled water capacity (prorated to 13.85 tons capacity for
the portion of the 33rd floor
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initially demised under this Amendment No. 4) during HVAC Standard Hours. Upon
completion and delivery of such risers by Tenant in accordance with
Section 5.2.3.2 below, such risers shall become part of the Shared HVAC system
and shall be owned by Landlord.
5.2.3.1 Riser Capacity and Size. The parties acknowledge that
the new risers to be installed by Tenant may potentially have a capacity of up
to 100 tons per floor and may occupy a vertical volume whose horizontal
dimensions are up to approximately 24 by 36 inches.
5.2.3.2 Standard of Quality. The extended chilled water risers
to be installed by Tenant pursuant to this Section 5.2.3 shall consist of no
less than two (2) six-inch pipes (or pipes of equivalent capacity) and shall
be constructed to a standard of quality comparable to the standard of quality
used for the risers in the Shared HVAC system. Such risers shall be
constructed by contractors selected in accordance with Section 5.1(E) of the
Lease or otherwise approved in writing by Landlord (which approval shall not
be unreasonably withheld) and shall be delivered by Tenant to Landlord in
accordance with Section 4.9 of the Lease. All construction shall be in
compliance with the terms of the Lease and any applicable Requirements.
5.2.4 Landlord's HVAC Performance Obligations. When and as required
by Section 8.3 of the Lease, Landlord shall provide Tenant with HVAC to the
New Tower Premises, except that notwithstanding anything to the contrary in
the Lease:
5.2.4.1 Landlord's Specifications. Landlord's only obligation
with respect to New Tower Premises HVAC shall be to make available during HVAC
Standard Hours such HVAC capacity as is presently available to the 33rd and
34th floors (the "NEW TOWER PREMISES EXISTING HVAC"), consisting of the
following, assuming in each case one person per 100 usable square feet at a
room design temperature of 75 degrees fahrenheit: (i) existing induction units
(perimeter) with a 15-foot perimeter band sufficient to support an average
of 3.25 watts per square foot of light and equipment loads (existing induction
units' quantities and capacities are the same as indicated for the 20th
through 23rd floors as stated in EXHIBIT "O" to the Lease); (ii) 8920 cubic
feet per minute for the interior system at a minimum static pressure of 1.25"
w.g. and temperature not to exceed 61 degrees fahrenheit and outside air of at
least 20 CFM per person, which is sufficient to support light and equipment
loads of 4.00 watts per usable square foot of interior space, producing (iii)
an overall HVAC capacity for the New Tower Premises of 3.70 watts per usable
square foot.
5.2.4.2 Lease Specifications. Landlord shall not be responsible
for assuring that HVAC in the New Tower Premises complies with EXHIBIT "O" of
the Lease.
5.2.5 Inadequate HVAC. If at any time Tenant determines that HVAC
on any floor(s) of the New Tower Premises is inadequate even though Landlord
is performing Landlord's obligations to continue to provide HVAC equal to the
New Tower Premises Existing HVAC, then the parties shall reasonably cooperate
to design suitable enhancements and expansions to the HVAC system for the
affected floor(s), all subject to Landlord's reasonable approval. Tenant shall
pay all costs (including Landlord's Actual Costs incurred) of designing,
installing, constructing and connecting such enhancements and expansions,
which shall when completed and accepted by Landlord then become part of the
Building HVAC system.
5.2.6 Completion. Landlord and Tenant shall have the same rights
and obligations with respect to the New Tower Premises Post-Possession Work as
are set forth in Sections 3.4(A), (D) and (E) of the Lease with respect to
Landlord's Post-Possession Work.
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5.2.7 Drain Line. Tenant has indicated that Tenant desires to
install a drain line in the ceiling of the space (the "ARAB BANK SPACE") on
the 32nd and 33rd floors of the Building occupied by Arab Banking Corporation
B.S.C. ("ARAB BANK") pursuant to a lease between Arab Bank and Landlord (the
"ARAB BANK LEASE"). With respect to installation of such drain line in the
ceiling of the Arab Bank Space, Landlord and Tenant shall have all of the same
rights and obligations set forth in Section 5.6(B) of the Lease for the
Sumitomo Space, except that: (a) every occurrence of the word "Sumitomo" shall
be deemed to be replaced by the words "Arab Bank" and (b) each reference to
the sixth-floor ceiling shall be deemed replaced by a reference to the ceiling
of the Arab Bank Space. Landlord hereby advises Tenant that Arab Bank is about
to commence, or has commenced, its tenant fixturization work, and Tenant
should install any necessary drain lines in the ceiling of the Arab Bank
space as promptly as possible after the date hereof in order to minimize any
potential for disruption, expense, or conflict.
5.3 Additional Work. (a) As Landlord's Additional Work for the New Tower
Premises, Landlord shall perform only the following items listed in EXHIBIT
"KK" of the Lease (the "NEW TOWER PREMISES ADDITIONAL WORK"), which New Tower
Premises Additional Work shall be performed in compliance with Section 3.7 of
the Lease (disregarding the reference to January 31, 1996):
I(A) The enclosure of the Building for each floor shall be weather
tight, with all windows caulked and repaired. Dow silicon sealant shall
be applied to all windows.
I(C) Sufficient generator capacity shall be provided for all Tenant EXIT
and emergency lighting to maintain minimum Standard Local Law #16.
I(D) Elevator call buttons shall meet Local Law 58 and ADA requirements.
(b)Landlord shall (by June 26, 1996) close up the one internal stairway
opening between floors 32 and 33, and (at Tenant's option, within 45 days
[subject to Unavoidable Delays] after Tenant's request, which request must be
made, if at all, by November 1, 1996) the one internal stairway opening within
the New Tower Premises between floors 33 and 34. In closing such opening(s),
Landlord shall coordinate Landlord's work with Tenant's Alterations.
5.4 Fan Coils. Tenant shall have the option to replace at Tenant's
expense the existing induction units located around the perimeter of either or
both floors (or, in the case of the thirty third (33rd) floor, the portion of
the floor occupied by Tenant) of the New Tower Premises with new fan coils
prior to occupying the New Tower Premises. Such coils shall be of quality
comparable to those installed by Tenant in connection with the Shared HVAC
system. If any work or shutdown shall or would interfere with any other tenant
or affect Building Systems serving common areas of the Building not used
exclusively by Tenant, then Landlord and Tenant shall jointly agree upon a
schedule pursuant to which Tenant may perform such work or temporarily shut
down certain Building systems to facilitate such replacement. Tenant shall
comply with such schedule. To the extent that Tenant's work or shutdown would
not interfere with any other tenant or affect Building Systems serving common
areas of the Building not used exclusively by Tenant, Tenant may proceed based
on such schedule as Tenant shall establish.
6 Tenant Fund.
In the first sentence of Section 5.5(A) of the Lease, the words "Thirty
Nine Million Four Hundred Twenty Six Thousand Dollars ($39,426,000)" are
deleted and replaced by the following words: "Forty Million Eight Hundred
Eighty One Thousand Six Hundred Eighty Dollars ($40,881,680)." The preceding
amount reflects the new total amount of the Tenant Fund, including both (i)
portions that have been disbursed on or prior to the date hereof and (ii)
portions that have not yet been disbursed.
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7 Installation of Soundproofing Materials.
The second sentence of Section 5.8 of the Lease is hereby amended and
restated as follows:
Tenant shall also have the right to install soundproofing materials on
the seventeenth (17th) through twenty fifth (25th) floors, the thirty
fourth (34th) floor and the portion of the thirty third (33rd) floor
constituting Premises, as well as the right at Tenant's expense to
install replacement windows (to attenuate sound) on the eastern exposure
of the seventeenth (17th) through twenty fifth (25th) floors, and the
thirty third (33rd) and thirty fourth (34th) floors.
8 HVAC.
In Section 8.4 of the Lease, all provisions of such Section 8.4 that
apply to Floor 23 shall also apply to the New Tower Premises.
9 Services.
With respect to the Twenty Eighth Floor Storage Premises, Landlord shall
not be responsible for providing HVAC services pursuant to Sections 8.1, 8.3
or 8.4 or any other provision of the Lease or cleaning services pursuant to
Section 8.5 or any other provision of the Lease.
10 Landlord's Asbestos Obligations.
Clause "c" of Section 9.2(D) of the Lease is amended and restated to read
as follows:
(c) the Base Building mechanical rooms on the Seventh Floor and areas of
the twenty eighth (28th) floor other than the Twenty Eighth Floor
Storage Premises contain ACM, none of which will interfere with Tenant's
Alterations or operations;
11 Escalation.
11.1 Base Operating Year. Section 11.1(C) of the Lease is amended and
restated to read as follows:
(C) "BASE OPERATING YEAR" shall mean the calendar year ending December
31, 1995, except that for the New Tower Premises, the Base Operating
Year shall mean the calendar year ending December 31, 1996.
11.2 Base Taxes. Section 11.1(D) of the Lease is amended and restated
to read as follows:
(D) "BASE TAXES" shall mean the Taxes payable for the Base Tax Year.
Because the Base Tax Year for the New Tower Premises is calendar year
1996, for the New Tower Premises, Base Taxes shall mean the average of
(i) the Taxes payable for the Tax Year commencing July 1, 1995 and
ending June 30, 1996 and (ii) the Taxes payable for Tax Year commencing
July 1, 1996 and ending June 30, 1997.
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11.3 Base Tax Year. Section 11.1(E) of the Lease is amended and restated
to read as follows:
(C) "BASE TAX YEAR" shall mean the Tax Year commencing July 1, 1995 and
ending June 30, 1996, except that (i) for the Upper Office Premises, the
Base Tax Year shall mean the Tax Year commencing July 1, 1994 and ending
June 30, 1995 and (ii) for the New Tower Premises, the Base Tax Year
shall mean calendar year 1996.
12 Electrical Work for New Tower Premises.
Landlord and Tenant shall have the same rights and obligations with
respect to the electrical work for the New Tower Premises as are set forth in
Section 12.3(E) of the Lease, contained in Amendment No. 1.
13 Air Conditioning Units in Twenty Eighth Floor Storage Premises.
13.1 Existing Units. As of the date hereof, two (2) air cooled floor
mounted air conditioning units, identified as units AC-5-1 and AC-5-2, are
located in the Twenty Eighth Floor Storage Premises. Landlord shall be
permitted to obtain access to and use for Landlord's purposes the unit
identified as unit AC-5-1 (located to the west of the other such unit).
Landlord shall cooperate with Tenant to prevent such access and use by
Landlord from causing unreasonable interference with Tenant's use of the
Twenty Eighth Floor Storage Premises.
13.2 Removal of Unit AC-5-2; Installation of New Unit. Tenant shall, at
Tenant's sole expense, remove unit AC-5-2 and install a new ceiling-hung air
conditioning unit (provided that such unit shall not materially impair
Landlord's ability to access and use unit AC-5-1). Landlord shall operate and
maintain both of such units unless otherwise agreed by Landlord and Tenant,
provided that Tenant may elect at any time to assume the maintenance of the
unit Tenant installs. Until such time as Tenant may assume such maintenance,
Tenant shall pay to Landlord as Additional Rent an amount equal to Landlord's
Actual Cost of maintenance and operation with respect to the unit Tenant
installs. For purposes of the air conditioning unit to be installed by Tenant
pursuant to this paragraph or Tenant's future air conditioning requirements,
Tenant may at Tenant's sole cost and expense use the louver formerly connected
to Unit AC-5-2.
13.3 Reconnection of Unit AC-5-1. Promptly after the date of this
Amendment No. 4, Tenant shall, at Tenant's sole cost, reconnect unit AC-5-1,
including connections to the existing louver for condenser air, and
connections for electricity. Tenant shall not, however, be required to repair
such unit or restore it to operability. Tenant shall install a full size
supply air duct (but no return air duct), which shall be reasonably
satisfactory to Landlord, from Unit AC-5-1 to a point that is approximately
six inches from the inside of the demising wall of the Twenty Eighth Floor
Storage Premises (excluding any code-required damper), and Landlord shall
credit against Rental an amount equal to fifty percent (50%) of Tenant's
Actual Cost of installing such duct work.
14 33rd Floor Common Areas.
Tenant has confirmed to Landlord that Tenant desires the common area
corridor, the elevator lobby and the common bathrooms on the thirty third
(33rd) floor (collectively, the "THIRTY THIRD
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FLOOR COMMON AREAS") to be built out and decorated to a higher standard of
quality than Landlord's usual standard for such common areas. Tenant shall
assume responsibility for the buildout of the Thirty Third Floor Common Areas
and shall have exclusive control (not subject to Landlord's approval) with
respect to the design and decoration of the Thirty Third Floor Common Areas,
provided that such areas substantially conform to Tenant's standards for other
such areas within the Premises. Landlord shall have no further obligations
with respect to such buildout and the decoration of the Thirty Third Floor
Common Areas, except that Landlord shall allow Tenant a credit against
Tenant's next Rental payments in the amount of twenty thousand dollars
($20,000) toward Tenant's cost of completing such work. Tenant shall complete
all such work in the Thirty Third Floor Common Areas on or prior to the later
of (i) June 15, 1996 and (ii) the date on which Arab Banking Corporation
B.S.C. shall occupy the space leased by it on the thirty third (33rd) floor
of the Building. Tenant shall coordinate such work with Landlord so as not to
unreasonably interfere with other tenants occupying the thirty third (33rd)
floor of the Building and shall comply with all otherwise applicable Building
rules, the Requirements and any other requirements of this Lease. This section
shall not limit the general applicability of Section 13.5 of the Lease to
common area corridors on other multi-tenant floors.
15 Shared HVAC System.
The parties acknowledge that Tenant has expanded the Shared HVAC system
to include the twentieth (20th) floor of the Building. The parties confirm
that HVAC for the 20th floor during the period 7 p.m. to 10 p.m. on Business
Days shall be paid for by Tenant and not Landlord. HVAC during other periods
shall be governed by the applicable provisions of the Lease as they would
apply to the fourteenth through nineteenth floors of the Building. To the
extent, if any, that Landlord has incurred or shall incur during the Term any
incremental Actual Cost (for water, electrical, labor or maintenance costs)
for Tenant's HVAC usage on the twentieth (20th) floor during the periods
7 p.m. to 10 p.m. on Business Days, Tenant shall reimburse such Actual Cost. To
the extent that existing equipment is capable of measuring such Actual Cost,
the reimbursement shall be based on such measurement. To the extent that
existing equipment is not capable of measuring such incremental Actual Cost
incurred by Landlord, the parties shall reasonably agree upon modifications of
such equipment, or installations of new metering equipment, as reasonably
necessary, all to be performed at Tenant's expense, to permit separate
measurement of such incremental Actual Cost incurred by Landlord. For purposes
of the foregoing calculations, water usage for perimeter fan coils on the 20th
floor shall be allocated based on a fraction whose numerator is the number of
perimeter fan coils on the 20th floor and whose denominator is the number of
perimeter fan coils for the 14th through 20th floors.
16 Incorporation of Certain Additional Agreements.
Landlord and Tenant hereby agree to all terms set forth in EXHIBIT B to
this Amendment (certain of which have already been performed as of the date
hereof), which are hereby incorporated by reference into this Lease and made a
part hereof. Nothing in EXHIBIT B shall be deemed to require Landlord to
perform any Pre-Possession Work or Post-Possession Work, or incur any expense,
with respect to the New Tower Premises or the Storage Premises demised
pursuant to this Amendment, not expressly required by the text of this
Amendment.
10
<PAGE>
17 No Other Changes.
Except for the foregoing changes in the Lease, the parties ratify and
confirm the Lease, as amended by this Amendment. Landlord and Tenant
acknowledge and agree that the Lease, as amended by this Amendment, is in full
force and effect in accordance with its terms. Any inconsistency between this
Amendment and the Lease (as it existed before this Amendment) shall be
resolved in favor of this Amendment, whether or not this Amendment
specifically modifies the particular provision(s) in the Lease inconsistent
with this Amendment. Wherever the Lease refers to the Lease, such reference
shall be deemed to refer to the Lease as modified by this Amendment. Section
40.3 of the Lease shall apply to this Amendment as if set forth in full
verbatim.
18 Miscellaneous.
18.1 Representations, Warranties and Confirmations. Each party
represents, warrants and confirms that this Amendment is a valid, legal, and
binding obligation of such party enforceable in accordance with its terms and
that the Lease is in full force and effect and has not been supplemented,
modified or otherwise amended, except pursuant to this Amendment, or cancelled
or terminated.
18.2 Recording. This Amendment shall not be recorded; however, either
party shall upon request of the other execute, acknowledge and deliver a
memorandum with respect to this Amendment sufficient for recording.
18.3 Amendments. The Lease may not be further amended, discharged or
terminated except by a written instrument executed by the parties.
18.4 Counterparts. This Amendment may be executed in counterparts, each
of which shall be an original, but all of which shall constitute a single
agreement.
18.5 Sakura. This Amendment shall not become effective unless and until,
within thirty days after the Effective Date: (a) Sakura has signed the Sakura
Acknowledgment below and (b) two executed counterparts of this Amendment, with
Landlord's and Sakura's signature, have been delivered to Tenant. Tenant
agrees to the Sakura Acknowledgment. If, as of thirty days after the Effective
Date, Sakura has not signed the Sakura Acknowledgment, then this Amendment
shall be of no force or effect, and the parties shall so confirm in writing.
11
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as
of the Effective Date.
STANLEY STAHL D/B/A STAHL PARK DONALDSON, LUFKIN & JENRETTE,
AVENUE CO., Landlord INC., Tenant
By:/s/ Stanley Stahl By: /s/ George P. Twill
------------------------ --------------------------
Stanley Stahl Name: George P. Twill
Title: Senior Vice President
Attached: Exhibit A: Diagram of Twenty Eighth Floor Storage Premises and
New Tower Premises
Exhibit B: Certain Additional Agreements
SAKURA ACKNOWLEDGMENT
Reference is made to the Subordination, Nondisturbance, Recognition and
Attornment Agreement made of the 28th day of October, 1994, between Tenant and
Sakura (the "SNDA"). In the third "Whereas" clause of the SNDA, the reference
to "October 26, 1994" is deleted and is replaced by a reference to "October
26, 1994, as modified by the First Amendment of Agreement of Lease dated March
30, 1995; the Second Amendment of Agreement of Lease dated August 24, 1995;
the Third Amendment of Agreement of Lease dated October 6, 1995; and the
Fourth Amendment of Agreement of Lease dated April 29, 1996."
THE SAKURA BANK, LIMITED, NEW YORK BRANCH
By: /s/ Tamihiro Kawauchi
--------------------------------------
Name: TAMIHIRO KAWAUCHI
Title: Senior Vice President
& Head of Real Estate/Project Finance Dept.
12
<PAGE>
EXHIBIT A
DIAGRAM OF TWENTY EIGHTH FLOOR STORAGE
PREMISES AND NEW TOWER PREMISES
[CHARTS TO COME]
<PAGE>
EXHIBIT B
CERTAIN ADDITIONAL AGREEMENTS
BETWEEN LANDLORD AND TENANT
A. Two 40-Ton Chillers. Reference is made to the 2-40 ton chillers
located on the 7th floor of the Building, as referred to in paragraph "5" of
Exhibit GG of the Lease (the "Chillers"). Tenant shall relocate the Chillers
to a location on the seventh floor, reasonably designated by Landlord, outside
but approximately six column bays to the west of the chiller room in which the
Chillers are presently located. To relocate the Chillers, Tenant shall break
through the existing wall of the chiller room, move the Chillers to their new
location without damaging them, and then reconstruct the existing wall to its
pre-existing condition, all in compliance with the Lease and Landlord's
reasonable requirements. Tenant shall have no obligation to reconnect the
Chillers.
B. Shared HVAC.
1. New Make-Up Water Pump. Landlord shall install a new make-up
water pump. Tenant shall pay to Landlord as Additional Rent an amount equal to
Landlord's Actual Cost for such work, all as part of Tenant's completion of
the Shared HVAC Work. Such Actual Cost will consist of: (a) actual
construction costs ("Hard Costs") in the amount of $17,669 plus tax; plus (b)
third-party consulting, design, filing and expediting charges (collectively,
"Soft Costs") expected not to exceed $5,000.
2. Dry Cooler. Tenant acknowledges that Landlord has removed a dry
cooler that was located on the 18th floor at the time Landlord delivered the
18th floor to Tenant. Tenant shall pay to Landlord as Additional Rent an
amount equal to Landlord's Actual Cost for such removal, all as part of
Tenant's completion of the Shared HVAC Work. Such Actual Cost will consist of:
(a) Hard Costs already incurred in the amount of $12,381 plus tax; plus (b)
Soft Costs expected not to exceed $6,000.
3. Backup Documentation. Landlord shall promptly provide Tenant
with backup documentation to substantiate the foregoing Actual Costs relating
to the new make-up water pump and the dry cooler. To the extent that Landlord
is unable to substantiate such Actual Costs they shall be adjusted
accordingly.
C. Landlord's HVAC Isolation Dampers and Taps.
1. Adjustment of Date. For purposes of the Post-Possession Work
Substantial Completion Deadlines, Section 3.4(a) of the Lease, and any other
provision(s) of the Lease that require Landlord to Substantially Complete the
isolation dampers and taps by June 1, 1995, Tenant agrees that Landlord shall
be deemed to have completed the isolation dampers and taps in compliance with
the applicable timing requirements of the Lease, and Tenant shall not be
entitled to any Delayed Rent Credits or other rights or remedies on account of
the timing of Landlord's Substantial Completion of the isolation dampers and
taps. Landlord acknowledges that upon Tenant's request, Landlord shall
promptly raise two of such taps (as previously specified by Tenant); such
adjustments shall be deemed a punchlist item and shall not be considered part
of Substantial Completion of such isolation dampers and taps.
1
<PAGE>
2. Withdrawal of Dispute Letters. Landlord and Tenant hereby
withdraw the following notices and letters (the "Dispute Letters") as they
relate to isolation dampers and taps: (a) Landlord's letter to Tenant dated
April 19, 1995, regarding delays by Tenant; (b) Tenant's letter to Landlord
dated June 5, 1995 disclaiming responsibility for delay; (c) Tenant's letter
to Landlord dated June 8, 1995, asserting that Landlord failed to meet the
Post-Possession Work Substantial Completion Deadline for isolation dampers and
taps; and (d) Landlord's letter to Tenant dated June 13, 1995, regarding the
meeting held on June 14.
3. Incremental Costs. Tenant acknowledges that Landlord has
incurred incremental costs that Landlord would not otherwise have been
required to incur in order to accommodate certain requests of Tenant with
respect to Landlord's Post-Possession Work relating to HVAC. Provided that,
and only to the extent that, such incremental costs would not otherwise have
been incurred by Landlord and Landlord provides reasonable documentation of
the Actual Costs incurred by Landlord, Tenant shall reimburse Landlord for
such Actual Costs as Additional Rent.
D. Existing Wiring in Electrical Closets.
1. Modification of Responsibility. In Exhibit W-1 of the Lease,
paragraph number "B(2)" (immediately before paragraph "a") is modified to read
as follows (without any revision to the letter "T" in the left-hand column
adjacent to such paragraph):
Local Electric Closets. Existing closet electric wiring no longer in use
(as previously identified by Landlord to Tenant's contractor, Structure
Tone) shall be completely removed by the Tenant prior to the closet
fit-outs, except that existing risers serving floors above the 18th floor
may be retained if required by the Landlord.
2. Mecanics and Cost of Samuels Electrical Work. Reference is made
to the letter dated June 20, 1995 from Robert B. Samuels Inc. to Structure
Tone Inc. (the "Samuels Proposal"). In order to effectuate the removal of the
existing closet electric wiring referred to in Section D.1 above, Tenant
shall enter into a separate contract with Robert B. Samuels Inc. for the
performance of the eight (8) items of work (collectively, the "Samuels
Proposal Work") described in the Samuels Proposal. Landlord shall contribute
50% of the cost of completing items 1, 6 and 7 of the Samuels Proposal Work,
which cost is presently budgeted at $71,500. Landlord shall contribute 25% of
the cost of completing items 2, 3, 4, 5 and 8 of the Samuels Proposal Work,
which cost is presently budgeted at $39,500. Tenant will provide power
circuitry to support base building ATC panels and certain other existing uses
requiring feeds in such closets located within and serving the Premises, which
existing uses consist of: electric closet lighting circuits, elevator machine
rooms lighting and appliance circuits, receptacle outlet circuits in electric
and telephone closets and convenience outlets on setbacks. Landlord will not
be responsible for ongoing costs relating thereto but will be responsible for
maintaining and repairing all base building systems located in electrical
closets within the Premises.
E. 24th Floor HVAC.
1. Removal of Requirement. Section 3.2.1 of the First Amendment of
Agreement of Lease between Landlord and Tenant made and entered into as of
March 30, 1995 (the "First Amendment"), is hereby modified by deleting the
following language therefrom:
II(C) - At Landlord's cost, Landlord to perform all work required to meet
the HVAC specifications outlined in Exhibit "O", using condenser water
with floor-by-floor units.
2
<PAGE>
2. 24th Floor HVAC Credit. Landlord shall allow Tenant a credit in
the amount of Seventy Five Thousand Dollars ($75,000) against Tenant's
monetary obligations under the Lease and/or as a cash payment to be applied
toward Tenant's net cost (after allowing for Landlord's contribution) of the
Samuels Proposal Work as provided for above, or as a cash payment within
thirty days after Tenant's written request at any time (the "24th Floor HVAC
Credit"). The 24th Floor HVAC Credit reflects a reasonable estimate of the
cost avoided to Landlord because Tenant has advised Landlord that it will not
be necessary for Landlord to provide certain HVAC capacity and equipment that
Landlord had intended to install for the 24th floor.
3. Landlord's HVAC Performance Obligations. When and as required by
Section 8.3 of the Lease, Landlord shall provide Tenant with HVAC to the 24th
floor, except that notwithstanding anything to the contrary in the Lease:
a. Landlord's Specifications. Landlord's only obligation with
respect to 24th floor HVAC shall be to make available such HVAC capacity as is
presently available to the 24th floor (the "24th floor Existing HVAC"),
consisting of the following, assuming in each case one person per 100 usable
square feet at a room design temperature of 75 degrees fahrenheit: (i)
existing induction units (perimeter) with a 15-foot perimeter band sufficient
to support an average of 3.25 watts per square foot of light and equipment
loads; (ii) 7165 cubic feet per minute for the interior system at a minimum
static pressure of 1.25" w.g. and temperature not to exceed 54 degrees
fahrenheit, which is sufficient to support light and equipment loads of 4.00
watts per usable square foot of interior space and to provide an additional
.75 watts per usable square foot for the perimeter area, producing (iii) an
overall HVAC capacity for the 24th floor of 4.00 watts per usable square foot.
b. Reallocation of 24th Floor HVAC. For the interior system
(clause "ii" in the preceding paragraph), Tenant shall have the right to
reallocate to the 24th floor any portion of the Tenant interior air quantities
for floors 20 through 23 (as indicated in the "Supply Air Distribution" chart
referred to as part of Exhibit "O" of the Lease).
c. Lease Specifications. Landlord shall not be responsible for
assuring that HVAC on the 24th floor complies with EXHIBIT "O" of the Lease.
4. Inadequate HVAC. If at any time Tenant determines that HVAC on
the 24th floor is inadequate even though Landlord is performing Landlord's
obligations to continue to provide 24th Floor Existing HVAC, then the parties
shall reasonably cooperate to design suitable enhancements and expansions to
the HVAC service for such floor, all subject to Landlord's reasonable
approval. Tenant shall pay all costs (including Landlord's Actual Costs
incurred) of designing, installing, constructing and connecting such
enhancements and expansions, which shall when completed and accepted by
Landlord then become part of the Building HVAC system.
F. Missing Cable. The parties acknowledge that certain copper wire
cabling on the seventh floor was vandalized and appears to have been removed
by persons unknown (the "Missing Cable"). Landlord shall repair the Missing
Cable as necessary and provide Tenant with a pullbox to make Tenant's
electrical connections on the seventh floor, all by July 15, 1995. Provided
that Landlord complies with the preceding sentence, the foregoing delay shall
not be deemed failure of Landlord to Substantially Complete Landlord's
Post-Possession Electrical Work by the applicable Post-Possession Work
Substantial Completion Deadline.
G. Seventh-Floor Reconfiguration. Landlord agrees that Tenant may make the
following changes on the seventh floor:
3
<PAGE>
1. Tenant's Proposal. Reference is made to the letter dated March
20, 1995, from Robert Luce, RA to Mr. Jim Farley of Stahl Real Estate Company,
a copy of which is annexed hereto, together with the drawings annexed to such
letter (the "Proposal Letter").
2. Dumbwaiter Space. Tenant may enclose and use and occupy as part
of the Premises, for the entire Term of the Lease, in accordance with all the
terms and conditions of the Lease, but without payment of any Fixed Rent or
Escalation Rent at any time during the Term, the space north of the men's room
on the seventh floor, as shown in Mancini Duffy Dwg. #D7.005 (a copy of which
is attached to the Proposal Letter), identified as Ramp Up 12", Platform, and
DW Shaft (total area approximately 5 feet by 23 feet 7 inches including new
enclosing wall to be built).
3. New Offset Corridor. Tenant may demolish two existing closets
and the men's room vestibule to provide space for a relocated service
corridor, which Tenant shall build. The demolition is shown in Mancini Duffy
Dwg #D7.006 attached to the Proposal Letter. The new offset service corridor
is shown in Mancini Duffy Dwg #D7.007 attached to the Proposal Letter.
4. Other. Tenant shall perform the foregoing work substantially as
depicted in the plans annexed to the Proposal Letter, or in such other manner
as Landlord shall reasonably approve, and in all cases in compliance with the
Lease, including the Lease requirements that relate to Alterations.
H. Convector Covers. Tenant waives any claims against Landlord on account
of nondelivery or nonexistence of convector covers anywhere in the Premises.
Tenant shall replace any missing convector covers to the extent Tenant desires
such missing convector covers to be replaced.
4
DONALDSON, LUFKIN & JENRETTE, INC. & SUBSIDIARIES
Computation of Earnings Per Share
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted Average Common Shares:
Average Common Shares Outstanding 53,300 50,000 53,300 50,000
Average Restricted Stock Units Outstanding 5,161 5,170
Average Common Shares Issuable Under
Employee Benefit Plans 1,621 1,369
Pro forma average common shares upon
issuance of Restricted Stock Units Under
the Treasury Stock Method - 1,475 - 1,475
-------- ------- --------- ----------
Weighted Average Common Shares Outstanding 60,082 59,839
======== =========
Pro forma Weighted Average Common Shares
Outstanding 51,475 51,475
======= =========
Earnings:
Net Income $ 97,000 $42,000 $ 162,100 $ 79,500
Less: Preferred Stock Dividend Requirement 4,967 4,967 9,934 9,934
-------- ------- --------- ---------
Earnings Applicable to Common Shares $ 92,033 $37,033 $ 152,166 $ 69,566
======== ======= ========= =========
Earnings Per Common Share $ 1.53 $ 2.54
======== =========
Pro forma Earnings Per Common Share $ 0.72 $ 1.35
======= =========
Weighted average common shares outstanding are the same for both primary and
fully diluted earnings per common share.
24
</TABLE>
<TABLE> <S> <C>
<ARTICLE> BD
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 673,564
<RECEIVABLES> 4,745,012
<SECURITIES-RESALE> 19,686,311
<SECURITIES-BORROWED> 10,186,389
<INSTRUMENTS-OWNED> 11,048,063
<PP&E> 252,433
<TOTAL-ASSETS> 47,746,608
<SHORT-TERM> 1,410,585
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<REPOS-SOLD> 26,692,449
<SECURITIES-LOANED> 3,010,771
<INSTRUMENTS-SOLD> 6,921,685
<LONG-TERM> 1,103,874
225,000
0
<COMMON> 5,330
<OTHER-SE> 1,332,206
<TOTAL-LIABILITY-AND-EQUITY> 47,746,608
<TRADING-REVENUE> 275,040
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<INCOME-PRETAX> 265,800
<INCOME-PRE-EXTRAORDINARY> 265,800
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 162,100
<EPS-PRIMARY> $2.54
<EPS-DILUTED> $2.54
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