Exhibit DD
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of June 26, 2002 (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 Merger Agreement (as defined
below).
RECITALS
A. Covenants. In connection with the execution and delivery of
that certain Agreement and Plan of Merger (the "Merger Agreement"), dated as of
May 16, 2002, by and between GS Inc. and Xxxxxx X. Xxxxx & Co., LLC, a New York
limited liability company (the "Company"), Pledgor and GS Inc. have entered into
a Member Agreement (the "Member Agreement"), in respect of, inter alia,
Pledgor's obligations (the "Obligations") 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 Member 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 Member Agreement, Pledgor has
agreed to pay a certain amount of liquidated damages to GS Inc. in respect of
any breach by Pledgor of certain of the Obligations set forth in the Member
Agreement pursuant to Section 9 of such Agreement (the "Payment Amounts"). As
security for the timely payment of the Payment Amounts, 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) As collateral security for the full and timely payment of the
Payment Amounts, Pledgor hereby delivers, deposits, pledges, transfers and
assigns to 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 the Payment Amounts (and all certificates or other
instruments or documents evidencing the Pledged Shares)
and, 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 (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 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 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.
(c) If Pledgor is not prohibited from doing so by the terms of the
Member Agreement, the Shareholders' Agreement, dated as of May 7, 1999, 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 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 number of shares of Common
Stock to be pledged as of the date of this Agreement shall be $78.1445 per share
of 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, if applicable, 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 the Payment Amounts upon demand by GS Inc.
therefor as provided in the Member 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 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 the Payment Amounts.
(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), 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(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 later of three years from the
Effective Time and two years following the date of termination of the Employment
Period (as such term is defined in the Member Agreement), or (iii) five years
from the date of the Member Agreement, and all remaining Pledged Securities
shall be thereupon released from the pledge hereunder and this Agreement shall
terminate. As provided in Section 1(c), Pledged Securities shall also be
released from the pledge hereunder in connection with permitted sales of Pledged
Securities. 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 Member 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.
(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. 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 the Payment Amounts. 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, following a Payment Event GS Inc.
may, as its remedy hereunder, take ownership of such number of Pledged
Securities as are necessary (based upon the Fair Market Value thereof) to
satisfy the then unpaid portion of the Payment Amounts (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) taken ownership and disposed of 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 Payment Amounts; 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 Payment Amounts. 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
take ownership of Pledged Securities in accordance with this Section 3 in order
to satisfy Pledgor's obligation to pay the Payment Amounts.
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 Member Agreement, the Merger 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 Member Agreement, Merger 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 Member
Agreement, Merger 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. Upon the earliest to occur of the events set forth
in Section 2(e)(i), (ii) and (iii) 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 Member
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 Member Agreement and the Merger 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.
(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 19, 20
AND 21 OF THE MEMBER 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 counterparts, each of which shall be deemed an
original and all such counterparts together shall constitute one and the same
instrument.
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:_____________________________________
Name:
Title:
PLEDGOR
By:_____________________________________
Name:
