1
EXHIBIT 10.21
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of May 7, 1999 (the "Agreement"), by and
between The Xxxxxxx Xxxxx Group, Inc., a Delaware corporation ("GS Inc."), on
its behalf and on behalf of its subsidiaries and affiliates (collectively with
GS Inc., and its and their predecessors and successors, the "Firm"), and the
individual whose name appears at the end of this Agreement ("Pledgor").
RECITALS
A. Covenants. In connection with Pledgor's participation in the Plan of
Incorporation (the "Plan") of The Xxxxxxx Sachs Group, L.P., Pledgor and GS Inc.
have entered into an Agreement Relating to Noncompetition and Other Covenants
(the "Noncompetition Agreement"), dated as of the date hereof, in respect of,
inter alia, Pledgor's obligations (the "Obligations") to keep information
concerning the Firm confidential, not to engage in competitive activities, not
to solicit the Firm's clients or employees, and to cooperate with the Firm in
maintaining certain relationships following the termination of Pledgor's
employment. In addition, Pledgor has agreed under the Plan and the
Noncompetition Agreement to certain provisions regarding arbitration, choice of
law and choice of forum, injunctive relief and submission to jurisdiction with
respect to the enforcement of the Obligations.
B. The Pledge. Pursuant to the Noncompetition Agreement, Pledgor has
agreed to pay a certain amount of liquidated damages (the "Liquidated Damages")
to GS Inc. in respect of any breach by Pledgor of certain of the Obligations set
forth in the Noncompetition Agreement. As security for the timely payment of the
Liquidated Damages, Pledgor has agreed to pledge to the Firm shares (the
"Pledged Shares") of common stock of GS Inc. (the "Common Stock"), or other
collateral described below, all as set forth herein.
NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
1. Pledge.
(a) Unless otherwise requested by Pledgor pursuant to the last sentence
of Section 1(b), as collateral security for the full and timely payment of
Liquidated Damages, Pledgor hereby delivers, deposits, pledges, transfers and
assigns to
2
GS Inc., in form transferable by delivery, and creates for the benefit of GS
Inc. a perfected first priority security interest in, Pledged Shares with a Fair
Market Value (as defined in Section 1(d)) on the date hereof equal to the amount
of Liquidated Damages (and all certificates or other instruments or documents
evidencing the Pledged Shares) and, except as set forth in Section 2(a), all
proceeds thereof (together with any securities or property to be delivered to GS
Inc. pursuant to Section 2(b) and, upon substitution or delivery in accordance
with Section 1(b), any Substitute Collateral (as defined in Section 1(b)),
"Pledged Securities"). Pledgor herewith delivers to GS Inc. appropriate undated
security transfer powers duly executed in blank (or other documents deemed
necessary or appropriate by GS Inc. to give GS Inc. control (as defined in
Article 8 of the Uniform Commercial Code of the State of New York (the "UCC")))
(such transfer powers and other appropriate documents, the "Control Documents")
in respect of Pledged Securities, and will deliver Control Documents for all
Pledged Securities to be pledged hereunder from time to time.
(b) During the term of this Agreement, Pledgor may substitute for
Pledged Securities readily marketable direct obligations of the United States,
any agency thereof, or any triple-A rated sovereign, shares of Common Stock, or
other collateral acceptable to the Board of Directors of GS Inc. in its sole and
absolute discretion (collateral other than Pledged Shares, the "Substitute
Collateral") with a Fair Market Value on the date of substitution equal to or
greater than the Fair Market Value on such date of the Pledged Securities to be
released in exchange therefor. Upon such substitution, the Pledged Securities
replaced by such Substitute Collateral shall be released from the pledge
hereunder. If requested by Pledgor, Pledgor shall be permitted to deliver on the
date hereof Substitute Collateral in lieu of shares of Common Stock.
(c) If Pledgor is not prohibited from doing so by the terms of the
Plan, the Shareholders' Agreement, dated as of the date hereof, among GS Inc.
and the individuals listed on Appendix A thereto, as in effect from time to time
(the "Shareholders' Agreement"), any other written agreement with GS Inc. or the
Firm, or any law or regulation or Firm policy (collectively, the
"Restrictions"), this Agreement shall not prohibit Pledgor from disposing of
Pledged Shares; provided, that such disposition shall be made expressly subject
to all of GS Inc.'s rights hereunder, that the provisions of this Agreement
shall (as described in Section 1(a)) apply to all proceeds of such disposition,
and that such disposition shall be permitted only if GS Inc. shall have
determined that such disposition will not result in the loss for any period by
GS Inc. of the perfection of its first priority security interest in such
proceeds; provided, further, that the proceeds of such disposition are cash,
Substitute Collateral, Tender or Exchange Offer Consideration or a combination
thereof, with an aggregate Fair Market Value on the date of such disposition
equal to or greater than the Fair Market Value on such date of the Pledged
Shares so disposed. Pledgor shall give GS Inc. prior written notice of any
proposed transaction under this Section 1(c). For purposes of this Agreement,
"Tender or
-2-
3
Exchange Offer Consideration" means the consideration issuable for Pledged
Shares pursuant to any tender or exchange offer in which the Pledgor is not
prohibited from participating by the Restrictions.
(d) For purposes of this Agreement, the "Fair Market Value" of any
Pledged Security means, as of any date (1) in the case of a Pledged Security
that is a share of Common Stock, the average of the daily closing prices for a
share of Common Stock on the principal securities exchange or market on which
the Common Stock is traded for the 20 consecutive business days before the date
in question (the "Average Closing Price"); provided, however, that the Fair
Market Value of a share of Common Stock for purposes of determining the initial
amount to be pledged as of the date of this Agreement shall be deemed to be the
initial public offering price in the initial public offering by GS Inc. of its
Common Stock; and provided, further, that in connection with any taking of
ownership by GS Inc. of Pledged Securities under Section 3 hereof, the Average
Closing Price shall be determined as the average of the daily closing prices for
a share of Common Stock on the principal securities exchange or market on which
the Common Stock is traded for the 20 consecutive business days before the date
the Enforcement Notice (as hereafter defined) was given, and (2) otherwise, the
fair market value thereof as determined in good faith by GS Inc. Any good faith
determination by GS Inc. of the Fair Market Value of any Pledged Security will
be binding on Pledgor.
2. Administration of Security. The following provisions shall govern
the administration of Pledged Securities:
(a) So long as no Payment Event (as defined below) has occurred and is
continuing, Pledgor shall (subject to any restrictions imposed under the
Shareholders' Agreement) be entitled to vote Pledged Securities and to exercise
all of Pledgor's rights under the Shareholders' Agreement in respect of the
Pledged Shares, and to receive and retain all regular quarterly cash dividends
and distributions and, except as set forth in Section 2(b) below, other
distributions thereon and to give consents, waivers and ratifications in respect
thereof. As used herein, a "Payment Event" shall mean the failure by Pledgor to
make any payment of Liquidated Damages upon demand by GS Inc. therefor as
provided in the Noncompetition Agreement.
(b) If Pledgor becomes entitled to receive, or receives, any
certificate representing Pledged Securities (or other security that may succeed
Pledged Securities or any security issued as a dividend or distribution in
respect of Pledged Securities) in respect of any stock split, reverse stock
split, stock dividend, spinoff, splitup, merger or other combination, exchange
or distribution in connection with any reclassification, increase or reduction
of capital, in each case, with respect to Pledged Securities, Pledgor agrees to
accept the same as GS Inc.'s agent and to hold the same in trust on behalf of
and for the benefit of GS Inc. and to deliver the same forthwith to GS Inc. in
the exact form
-3-
4
received, with the endorsement of Pledgor when deemed necessary or appropriate
by GS Inc. of undated security transfer powers duly executed in blank, to be
held by GS Inc., subject to the terms of this Agreement, as additional
collateral security for Liquidated Damages.
(c) Pledgor hereby agrees that GS Inc. is authorized to hold Pledged
Securities through one or more custodians. GS Inc. and its agents (and its and
their assigns) shall have no obligation in respect of Pledged Securities, except
to hold and dispose of the same in accordance with the terms of this Agreement.
In the event that Pledgor substitutes cash for Pledged Securities as provided in
Section 1(b) or 1(c), GS Inc. shall determine in its sole discretion the manner
in which such cash shall be invested during the term of this Agreement.
(d) Pledgor agrees with GS Inc. that: (i) Pledgor will not, and will
not purport to, grant or suffer liens or encumbrances against (excluding for
such purpose the Shareholders' Agreement), or except as provided in Section
1(c), sell, transfer or dispose of, any Pledged Securities other than to or in
favor of GS Inc.; (ii) GS Inc. is authorized, at any time and from time to time,
to file financing statements and give notice to third parties regarding Pledged
Securities without Pledgor's signature to the extent permitted by applicable
law, to transfer all or any part of Pledged Securities to GS Inc.'s name or that
of its nominee, and, subject to the provisions of Section 2(a), to exercise all
rights as if the absolute owner thereof; and (iii) Pledgor has provided GS Inc.
with Pledgor's true legal name and principal residence, and Pledgor will not
change Pledgor's name without 30 days' prior written notice to GS Inc.
(e) Subject to the earlier disposition and application of Pledged
Securities pursuant to this Agreement following a Payment Event, Pledged
Securities shall be released from the pledge hereunder, and the lien hereby
created in such Pledged Securities shall simultaneously be released, upon the
earliest to occur of (i) Pledgor's death, (ii) the expiration of the twenty-four
(24) month period following Pledgor's Date of Termination (as defined in the
Noncompetition Agreement), (iii) payment in cash or other satisfaction by
Pledgor of all Liquidated Damages, or (iv) the fifth anniversary of the date
hereof, and all remaining Pledged Securities shall be thereupon released from
the pledge hereunder and this Agreement shall terminate. Notwithstanding the
foregoing, no Pledged Securities shall be released from the pledge hereunder
pursuant to this Section 2(e), if there are one or more pending disputes between
Pledgor and GS Inc. as to the occurrence of a Payment Event or as to the right
of GS Inc. or the Firm to exercise its remedies under this Agreement or the
Noncompetition Agreement, including realization against Pledged Securities in
accordance with Section 3 hereof, and this Agreement shall not terminate until
the resolution of all such disputes.
-4-
5
(f) GS Inc. shall immediately upon request by Pledgor execute and
deliver to Pledgor such instruments, deeds, transfers, assurances and
agreements, in form and substance as Pledgor shall reasonably request, including
the withdrawal or termination of any financing statements and amendments
thereto, or the filing, withdrawal, termination or amendment of any other
document required under applicable law to evidence the termination of the
security interest created hereunder with respect to any securities that are
released from the pledge hereunder in accordance with the provisions of this
Agreement.
3. Remedies in Case of a Payment Event. If a Payment Event has occurred
and is continuing, GS Inc. shall have the rights and remedies of a secured party
under Article 9 of the UCC. To the extent required and permitted by applicable
law, GS Inc. will give Pledgor notice of the time and place of any public sale
or of the time after which any private sale or other disposition of Pledged
Securities is to be made, by sending notice at least three days before the time
of sale or disposition, which Pledgor hereby agrees is reasonable. GS Inc. need
not give such notice if not required by the UCC. Pledgor acknowledges the
possibility that the public sale of some or all Pledged Securities by GS Inc.
may not be made without a then existing and effective registration statement
under the Securities Act of 1933, as amended. Pledgor acknowledges and agrees
with GS Inc. that GS Inc. has no affirmative obligation to prepare or keep
effective any such registration statement and agrees that at any private sale
Pledged Securities may be sold at a price that is less than the price which
might have been obtained at a public sale or that is less than the aggregate
outstanding amount of Liquidated Damages. For so long as Pledged Securities
consist of securities of a type customarily sold in a recognized market or which
are the subject of widely distributed standard price quotations, GS Inc. may, as
its remedy hereunder, purchase such number of Pledged Securities as are
necessary (based upon the Fair Market Value thereof) to satisfy the then unpaid
portion of Liquidated Damages (by reducing the then unpaid Liquidated Damages by
an amount equal to the Fair Market Value of the Pledged Securities purchased and
without payment of any cash consideration) by giving written notice to such
effect to Pledgor (the "Enforcement Notice"). Effective upon the giving of the
Enforcement Notice, and without further action on the part of the parties to
this Agreement, GS Inc. shall be deemed to have (1) purchased the lesser of (A)
all Pledged Securities or (B) such whole number of Pledged Securities as has a
Fair Market Value at least equal to the then unpaid Liquidated Damages; and (2)
received proceeds in the amount of the Fair Market Value of such Pledged
Securities and applied such proceeds to the payment of any then unpaid
Liquidated Damages. Any excess net proceeds from the deemed sale of such Pledged
Securities will continue to be held as Pledged Securities under this Agreement
until returned in accordance with Section 2(e). Nothing in this Agreement,
however, shall require the Firm to purchase Pledged Securities in accordance
with this Section 3 in order to satisfy Pledgor's obligation to pay Liquidated
Damages.
-5-
6
4. Pledgor's Obligations Not Affected. Except as provided in Section
9(b), the obligations of Pledgor under this Agreement shall remain in full force
and effect without regard to, and shall not be impaired or affected by (a) any
subordination, amendment or modification of or addition or supplement to this
Agreement, the Noncompetition Agreement, the Plan or any assignment or transfer
thereof; (b) any exercise or non-exercise by GS Inc. of any right, remedy, power
or privilege under or in respect of this Agreement, the Noncompetition
Agreement, the Plan or any waiver of any such right, remedy, power or privilege;
(c) any waiver, consent, extension, indulgence or other action or inaction in
respect of this Agreement, the Noncompetition Agreement, the Plan or any
assignment or transfer of any thereof; (d) any bankruptcy, insolvency,
reorganization, arrangement, readjustment, composition, liquidation or the like,
of GS Inc., whether or not Pledgor shall have notice or knowledge of any of the
foregoing; (e) any substitution of collateral pursuant to Sections 1(b) or 1(c);
or (f) any other act or omission to act or delay of any kind by Pledgor, GS Inc.
or any other person or any other circumstance whatsoever which might, but for
the provisions of this clause (f), constitute a legal and equitable discharge of
Pledgor's obligations hereunder.
5. Attorneys-in-Fact. Each of GS Inc. and the General Counsel of GS
Inc. from time to time, acting separately, are hereby appointed the
attorneys-in-fact of Pledgor for the purpose of carrying out the provisions of
this Agreement and taking any action and executing any instrument that GS Inc.
reasonably may deem necessary or advisable to accomplish the purposes hereof,
which appointments as attorneys-in-fact are irrevocable as ones coupled with an
interest.
6. Termination. Upon the earliest to occur of the events set forth in
Section 2(e) hereof, this Agreement shall terminate and GS Inc. shall return to
Pledgor the remaining Pledged Securities, except as otherwise provided in such
Section.
7. Notices. All notices or other communications required or permitted
to be given hereunder shall be delivered as provided in the Noncompetition
Agreement.
8. No Third Party Beneficiaries. Except as expressly provided herein,
this Agreement shall not confer on any person other than the Firm and Pledgor
any rights or remedies hereunder.
9. Miscellaneous.
(a) This Agreement and Section 8 of the Noncompetition Agreement
contain the entire understanding and agreement between Pledgor and GS Inc. with
respect to the matters expressly covered therein and supersede any other
agreement, written or oral, pertaining to such matters.
-6-
7
(b) This Agreement may not be amended or modified other than by a
written agreement executed by Pledgor and GS Inc. or its successors, nor may any
provision hereof be waived other than by a writing executed by Pledgor or GS
Inc. or its successors; provided, that any waiver, amendment or modification of
any of the provisions of this Agreement will not be effective against the Firm
without the written consent of the Chief Executive Officer of GS Inc. or its
successors, or such individual's designee. Pledgor may not, directly or
indirectly (including by operation of law), assign Pledgor's rights or
obligations hereunder without the prior written consent of the Chief Executive
Officer of GS Inc. or its successors, or such individual's designee, and any
such assignment by Pledgor in violation of this Agreement shall be void. This
Agreement shall be binding upon Pledgor's permitted successors and assigns.
Without impairing Pledgor's obligations hereunder, GS Inc. may at any time and
from time to time assign its rights and obligations hereunder to any of its
subsidiaries or affiliates (and have such rights and obligations reassigned to
it or to any other subsidiary or affiliate). This Agreement shall be binding
upon and inure to the benefit of the Firm and its assigns.
(c) If any provision of this Agreement is finally held to be invalid,
illegal or unenforceable (whether in whole or in part), such provision shall be
deemed modified to the extent, but only to the extent, of such invalidity,
illegality or unenforceability and the remaining provisions shall not be
affected thereby.
(d) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS, AND SHALL BE SUBJECT TO THE PROVISIONS OF SECTIONS 9, 10 AND
11 OF THE NONCOMPETITION AGREEMENT.
(e) The captions in this Agreement are for convenience of reference
only and shall not define or limit the provisions hereof.
-7-
8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
THE XXXXXXX XXXXX GROUP, INC.
By:________________________________
[PLEDGOR]
By:________________________________
-8-
