EXHIBIT HH
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of July 1, 2003 (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"). Capitalized terms used but not defined herein shall have the
respective meanings ascribed to such terms in the Purchase Agreement and the
Partner Agreement (each such agreement, as defined below).
RECITALS
A. Covenants and Indemnification Obligations. In connection
with the execution and delivery of that certain Purchase Agreement (the
"Purchase Agreement"), dated as of April 14, 2003, by and among GS Inc., The
Ayco Company, L.P., a Delaware limited partnership (the "Company"), and the
other Seller Parties thereto, Pledgor and GS Inc. have entered into a Partner
Agreement (the "Partner Agreement"), in respect of, inter alia, Pledgor's
obligations (the "Obligations") set forth in Sections 7, 8, 9, 14 and 16
thereof, not to engage in competitive activities, not to solicit the Firm's
clients or employees, not to disparage the Firm, to cooperate with the Firm in
maintaining certain relationships following the termination of Pledgor's
employment and to indemnify each Acquiror Party as set forth in Articles 7 and 9
of the Purchase Agreement. In addition, Pledgor has agreed under the Partner
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. As security for the performance of the
Obligations, Pledgor has agreed to pledge to the Firm (i) all shares of common
stock of GS Inc. (the "Common Stock") to be received by Pledgor as part of the
Closing Consideration (the "Pledged Shares") and (ii) all Substituted Cash, if
any, in each case, as more specifically set forth opposite Pledgor's name on
Annex A attached hereto, and certain other collateral described below.
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) As collateral security for the performance of the
Obligations, Pledgor hereby delivers, deposits, pledges, transfers and assigns
to GS Inc., in form transferable by delivery, and hereby creates for the benefit
of GS Inc. a perfected first priority security interest in, the Pledged Shares
(and all certificates or other instruments or documents evidencing the Pledged
Shares) and the Substituted Cash, if any, and, in each case, except as set forth
in Sections 1(c) and 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, the "Collateral"). Pledgor herewith delivers with respect to Pledged
Shares 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 the Uniform Commercial Code of the State of New York
(the "UCC"))) (such transfer powers and other appropriate documents, the
"Control Documents") of the Pledged Shares, and will immediately deliver Control
Documents requested by GS Inc. for all other securities included within the
Collateral to be pledged hereunder from time to time.
(b) During the term of this Agreement, Pledgor may
substitute for any Pledged Shares (other than, subject to Section 2(f), Pledged
Shares included in the 25% Collateral that Pledgor is required pursuant to
Section 4(b)(iv) of such Pledgor's Partner Agreement to own for so long as
Pledgor is employed by Acquiror or any of its Affiliates) readily marketable
direct obligations of the United States, any agency thereof, or any triple-A
rated sovereign, shares of Common Stock, or other collateral; provided that any
such other collateral may only be substituted if such collateral is acceptable
to 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 Shares to be released in exchange therefor. Upon such substitution, the
Pledged Shares replaced by such Substitute Collateral shall be released from the
pledge hereunder.
(c) If Pledgor is not prohibited from doing so by the
terms of the Purchase Agreement, such Pledgor's Partner Agreement, the
Shareholders' Agreement dated as of May 7, 1999, among GS Inc. and the
individuals listed on Annex A thereto, as in effect from time to time (the
"Shareholders' Agreement"), any other written agreement with GS Inc. or the
Firm, the Securities Laws, 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 the pledge and all of GS Inc.'s rights hereunder, that the
provisions of this Agreement shall (including 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; and provided that any such
Substitute Collateral or Tender or Exchange Offer Consideration must be
acceptable to GS Inc. in its sole and absolute discretion. Pledgor shall give GS
Inc. prior written notice of any proposed transaction under this Section 1(c).
For purposes of this Agreement, "Tender or Exchange Offer Consideration" means
the consideration issuable for Pledged Shares pursuant to any tender or exchange
offer that has been approved and recommended by the Board of Directors of GS
Inc. in which Pledgor is not prohibited from participating by the Restrictions.
Upon the pledge of all
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such proceeds of such disposition in accordance with the terms of this Section
1(c), the Pledged Shares so disposed shall be released from the pledge
hereunder.
(d) For purposes of this Agreement, the "Fair Market
Value" of any Collateral means, as of any date (1) in the case of Collateral
that is a share of Common Stock, the average of the daily closing prices for a
share of Common Stock on the New York Stock Exchange composite tape for the 10
consecutive business days before the date in question (the "Average Closing
Price"); provided, however, that in connection with any acquisition of ownership
by GS Inc. of Collateral under Section 3(a) hereof, the Average Closing Price
shall be determined as the average of the daily closing prices for a share of
Common Stock on the New York Stock Exchange composite tape for the 10
consecutive business days before the date of any Resolution (as defined in
Section 3(b) hereof), and (2) for any Collateral other than Common Stock, 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 Collateral will be
final and binding on Pledgor.
2. Administration of Collateral. The following provisions
shall govern the administration of Collateral:
(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 Common Stock included
within the Collateral and to exercise all of Pledgor's rights under the
Shareholders' Agreement, if applicable, in respect of any Collateral, and to
receive and retain all regular quarterly cash dividends and distributions with
respect to such Common Stock and, except as set forth in Section 2(b) below,
other distributions thereon and to give consents, waivers and ratifications in
respect thereof. From the time a Payment Event has occurred and until a
Resolution thereof, (x) GS Inc. may exercise, or refrain from exercising, any
and all voting and other consensual rights pertaining to such Common Stock
included within the Collateral, and (y) all regular quarterly cash dividends and
distributions with respect to such Common Stock shall be included within the
Collateral and be subject to the pledge hereunder; provided, however, following
the Resolution of such Payment Event, all of Pledgor's rights specified in the
preceding sentence shall resume. For purposes of this Agreement, a "Payment
Event" shall mean a claim by GS Inc. that Pledgor has failed to perform his
Obligations under Section 16 of the Partner Agreement or has breached his
Obligations under Sections 7, 8, 9 or 14 of the Partner Agreement.
(b) If Pledgor becomes entitled to receive, or receives,
any certificate representing Pledged Shares (or other security that may succeed
any of the Collateral or any security issued as a dividend or distribution in
respect of any of the Collateral) 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 such Collateral, 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
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form received, with the endorsement of Pledgor (when deemed necessary or
appropriate by GS Inc.) of undated security transfer powers duly executed in
blank and such other Control Documents as GS Inc. may reasonably deem necessary
or appropriate, to be held by GS Inc., subject to the terms of this Agreement,
as additional collateral security for the performance of the Obligations.
(c) Pledgor hereby agrees that GS Inc. is authorized to
hold the Collateral through JPMorgan Chase Bank, as custodian, or one or more
successor custodians as GS Inc. may designate in its sole discretion. GS Inc.
and its agents (and its and their assigns) shall have no obligation in respect
of the Collateral, except to hold and either to acquire ownership of or
otherwise to dispose of the same in accordance with the terms of this Agreement.
With respect to any Collateral consisting of Substituted Cash, or in the event
that Pledgor substitutes cash for Collateral, or disposes of Pledged Shares for
cash, as provided in Sections 1(b) or 1(c), as applicable, including in each
case any dividends or distributions thereon, such cash shall be invested, in GS
Inc.'s sole discretion, in any of the following:
(i) obligations issued or guaranteed by the
United States of America or any agency or instrumentality thereof;
(ii) certificates of deposit of or accounts with
national banks or corporations endowed with trust powers having capital
and surplus in excess of $100,000,000;
(iii) commercial paper at the time of investment
rated A-1 by Standard & Poor's Corporation or Prime-1 by Moody's
Investor's Service, Inc.; and
(iv) obligations issued by any state or
municipality of the United States.
(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(b) and Section 1(c), sell, transfer or dispose of, any Collateral
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 the Collateral without Pledgor's signature to the extent
permitted by applicable law, and, upon the occurrence of a Payment Event, to
transfer all or any part of the Collateral 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
Collateral pursuant to this Agreement following a Payment Event, (i) all of the
Collateral (including
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cash, Substitute Collateral and Tender or Exchange Offer Consideration
previously received in respect of any Pledged Shares), excluding Retained
Collateral, shall be released from the pledge hereunder, and the lien hereby
created in such Collateral shall simultaneously be released on the date which is
18 months after the Closing Date (the "Initial Release Date"), (ii) the 25%
Collateral, excluding Collateral with an aggregate Fair Market Value on the
Final Release Date equal to the aggregate Payment Amounts (the "Final Reserved
Collateral") in respect of any pending claims by GS Inc. against Pledgor as of
the Final Release Date under Section 16 of the Partner Agreement or relating to
a breach by Pledgor of his Obligations under Sections 7, 8, 9 or 14 of the
Partner Agreement (a "Pending Final Claim"), shall be released from the pledge
hereunder, and the lien hereby created in such Collateral shall simultaneously
be released upon the earliest to occur of (A) Pledgor's death (which, if such
death occurs prior to the Initial Release Date, shall be deemed, for purposes of
this clause (A), to have occurred on the Initial Release Date) and (B) the later
of (x) ten years from the Closing Date, (y) two years following the date of
termination of the Employment Period and (z) the termination of the Consulting
Period (the date of such occurrence, the "Final Release Date"), (iii) the
Initial Reserved Collateral in respect of any particular Pending Initial Claim
shall, to the extent such Initial Reserved Collateral is not used to satisfy
such Pending Initial Claim pursuant to a Resolution, be released promptly
following such Resolution and the satisfaction in full of such Pending Initial
Claim from the Initial Reserved Collateral and (iv) the Final Reserved
Collateral in respect of any particular Pending Final Claim shall, to the extent
such Final Reserved Collateral is not used to satisfy such Pending Final Claim
pursuant to a Resolution, be released promptly following such Resolution and the
satisfaction in full of such Pending Final Claim from the Final Reserved
Collateral. Except as expressly provided for in this Section 2(e) above, no
Collateral shall be released from the pledge hereunder pursuant to this Section
2(e) and this Agreement shall not terminate, 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 Partner Agreement, including realization against Collateral in
accordance with Section 3 hereof, and this Agreement shall not terminate until
the resolution of all such disputes.
For purposes of this Agreement, the following terms shall have
the meanings set forth below:
"25% Collateral" shall mean such number of Pledged Shares
equal to 25% of the aggregate number of shares of Common Stock received by
Pledgor as part of the Closing Consideration or, to the extent that the Pledged
Shares remaining represent fewer than 25% of the aggregate number of shares of
Common Stock received by Pledgor as part of the Closing Consideration (the "25%
Reserve"), all of the Pledged Shares, if any, remaining together with such
additional Collateral that together with such remaining Pledged Shares, if any,
have a Fair Market Value as of the Initial Release Date equal to the Fair Market
Value as of the Initial Release Date of Common Stock that would represent the
25% Reserve.
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"Retained Collateral" shall mean the sum of (x) the 25%
Collateral and (y) Collateral with an aggregate Fair Market Value on the Initial
Release Date equal to the aggregate Payment Amounts (the "Initial Reserved
Collateral") in respect of any pending claims, if any, by GS Inc. against
Pledgor as of the Initial Release Date relating to any of Pledgor's Obligations
under Sections 7, 8, 9, 14 or 16 of the Partner Agreement (a "Pending Initial
Claim").
"Payment Amounts" shall mean Acquiror's reasonable estimate of
any amounts in respect of any claim by GS Inc. against Pledgor under Section 16
of the Partner Agreement or Pledgor's breach of his Obligations under Sections
7, 8, 9 or 14 of the Partner Agreement.
(f) GS Inc. shall promptly 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. At any time on or after the date of termination of Pledgor's
employment with the Firm, Pledgor may substitute, or dispose of, any Pledged
Shares included in the 25% Collateral in accordance with the provisions of
Section 1(b) or 1(c), as applicable.
3. Remedies in Case of a Payment Event.
(a) 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 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 Collateral is to be made, by sending notice
at least three days before the time of sale or disposition, which Pledgor hereby
agrees is reasonable. Pledgor acknowledges the possibility that the public sale
of some or all securities included within such Collateral by GS Inc. may not be
made without a then existing and effective registration statement under the
Securities Act. 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 such Collateral 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 in respect of the
Payment Amounts. For so long as the Collateral consists of (x) cash or (y)
securities of a type customarily sold in a recognized market or which are the
subject of widely distributed standard price quotations, following a Payment
Event GS Inc. may (and if the Collateral in question is Common Stock, GS Inc.
shall), as its remedy hereunder, purchase full ownership and possession of such
Collateral as are necessary (based upon the Fair Market Value thereof in
accordance with Section 9-610(c)(2) of the UCC) to satisfy the then unpaid
portion of the Payment Amounts
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(without payment of any cash consideration) by giving written notice 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) acquired ownership and disposed of the lesser of (A)
all Collateral or (B) such Collateral as has a Fair Market Value at least equal
to the then unpaid Payment Amounts (or, in the case of a claim under Section 16
of the Partner Agreement, Pledgor's pro rata share, determined on the basis of
Pledgor's percentage interest in the partnership interests of New Ayco, of such
Payment Amounts); and (2) received proceeds in the amount of the Fair Market
Value of such Collateral and applied such proceeds to the payment of any then
Payment Amounts (or, in the case of a claim under Section 16 of the Partner
Agreement, Pledgor's pro rata share, determined on the basis of Pledgor's
percentage interest in the partnership interests of New Ayco, of such Payment
Amounts). Any excess net proceeds from the deemed sale of such Collateral will
continue to be held as Collateral under this Agreement until such net proceeds
are released in accordance with Section 2(e). Except with respect to Collateral
consisting of Common Stock, nothing in this Agreement, however, shall require
the Firm to acquire ownership of Collateral in accordance with this Section 3(a)
in order to satisfy Pledgor's obligation to pay the Payment Amounts.
Notwithstanding the foregoing, GS Inc. may not with respect to any Enforcement
Notice dispose of any Collateral until, whether by public or private sale, there
has been a Resolution of the claim that resulted in such Enforcement Notice, (i)
in the case of a Resolution pursuant to clause (i)(A) or (ii)(A) under Section
3(b) below, the time of such Resolution and, (ii) in the case of a Resolution
pursuant to clause (i)(B) or (ii)(B) under Section 3(b) below, after 5 days from
such Resolution if such claim has not been settled in full in cash as permitted
under Section 9.01(b) of the Purchase Agreement within such 5 days.
(b) For purposes of this Agreement, a "Resolution" of a
particular claim shall consist of one or more of the following:
(i) with respect to a claim that Pledgor has failed
to perform his Obligations under Section 16 of the Partner Agreement,
the receipt by GS Inc. of (A) the written agreement or confirmation of
the Company Representatives (as defined in the Purchase Agreement) to
pay all or some portion of the Payment Amounts or (B) a final,
non-appealable judgment, order or decree issued by a court of competent
jurisdiction compelling Pledgor to pay all or some portion of the
Payment Amounts; or
(ii) with respect to a claim that Pledgor has
breached his Obligations under Sections 7, 8, 9 or 14 of the Partner
Agreement, the receipt by GS Inc. of (A) the written agreement or
confirmation of Pledgor to pay all or some portion of the Payment
Amounts or (B) a final, non-appealable award of an arbitration tribunal
appointed pursuant to Section 20 of the Partner Agreement or a final,
non-appealable judgment, order or decree issued by a court of competent
jurisdiction compelling Pledgor to pay all or some portion of the
Payment Amounts.
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(c) Any portion of the Payment Amounts in excess of the
amounts specified for payment in any Resolution will continue to be held as
Collateral under this Agreement until released in accordance with Section 2(e).
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 Partner Agreement, the Purchase Agreement 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
Partner Agreement, Purchase Agreement 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 Partner Agreement, Purchase
Agreement 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 each General
Counsel (or co-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. This Agreement shall terminate upon the
release of all Collateral from the pledge hereunder as provided for in Section
2(e) hereof, and following any such termination, GS Inc. shall return to Pledgor
the remaining Collateral, except as otherwise provided in this Agreement.
7. Notices. All notices or other communications required or
permitted to be given hereunder shall be delivered as provided in the Partner
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, the Partner Agreement and the
Purchase Agreement contain the entire understanding and agreement between
Pledgor and GS Inc.
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with respect to the matters expressly covered therein and supersede any other
agreement, written or oral, pertaining to such matters.
(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 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 GS Inc. or its successors and any purported
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 20, 21
AND 22 OF THE PARTNER AGREEMENT.
(e) The captions in this Agreement are for convenience of
reference only and shall not define or limit the provisions hereof.
(f) This Agreement may be executed (including by
facsimile transmission) in one or more separate counterparts, each of which
shall be deemed an original and all such counterparts together shall constitute
one and the same instrument.
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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: /s/ Xxxxxxxxx X. Xxxxxx
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Name: Xxxxxxxxx X. Xxxxxx
Title: Authorized Person
PLEDGOR
By: /s/ Xxxx Xxxxx
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Name: Xxxx Xxxxx
Address:
