FORM OF PLEDGE AGREEMENT
Exhibit 10.3
FORM OF PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of ___, 200___(this “Agreement”), by and between Xxxxxx Xxxxxx
Partners Group, Inc., a Delaware corporation (“TWPG Inc.”), on its behalf and on behalf of its
subsidiaries and affiliates (collectively with TWPG 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 Reorganization and
Merger Agreement (the “Plan”), dated as of October 14, 2005, by and among TWPG Inc., Xxxxxx Xxxxxx
Partners Group LLC and TWPG Merger Sub LLC, Pledgor, along with other individuals party thereto,
and TWPG Inc. have entered into a Partners’ Equity Agreement (the “Partners’ Equity 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 Partners’ Equity 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 Partners’ Equity Agreement, Pledgor has agreed to pay a
certain amount of liquidated damages (the “Liquidated Damages”), in the form of forfeiture of
certain shares of the Common Stock (as defined below) received by Pledgor pursuant to the Plan, to
TWPG Inc. in respect of any breach by Pledgor of certain of the Obligations set forth in the
Partners’ Equity 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, par value $0.01 per
share, of TWPG 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 TWPG Inc., in form transferable by delivery, and
creates for the benefit of TWPG Inc. a perfected first priority security interest in, the Pledged
Shares with a Fair Market Value (as defined in Section 1(d)) on the date hereof equal to the amount
of the 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 TWPG 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)), the “Pledged Securities”). Pledgor herewith delivers to TWPG Inc. appropriate
undated security transfer powers duly executed in blank (or other documents deemed necessary or
appropriate by TWPG Inc. to give TWPG 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 the Pledged Securities, and will deliver the 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 the 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 TWPG Inc. in its sole and absolute discretion (collateral other than the 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 the 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 Partners’ Equity
Agreement, any other written agreement with TWPG Inc. or the Firm, or any law or regulation or Firm
policy (collectively, the “Restrictions”), this Agreement shall not prohibit Pledgor from disposing
of the Pledged Shares; provided, that such disposition shall be made expressly subject to all of
TWPG 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 TWPG Inc. shall have determined that such disposition will not result in the loss for any period
by TWPG Inc. of the perfection of its first priority security interest in such proceeds; provided,
further, that the proceeds of such disposition are cash, the 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 of. Pledgor shall give TWPG 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 the Pledged Shares pursuant to any tender or
exchange offer in which 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
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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
TWPG Inc. of its Common Stock; and provided, further, that in connection with any taking of
ownership by TWPG Inc. of the 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 TWPG Inc. Any good faith
determination by TWPG 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 Partners’ Equity Agreement) be entitled to
vote Pledged Securities and to exercise all of Pledgor’s rights under the Partners’ Equity
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 the Liquidated Damages
upon demand by TWPG Inc. therefor as provided in the Partners’ Equity Agreement.
(b) If Pledgor becomes entitled to receive, or receives, any certificate representing the
Pledged Securities (or other security that may succeed the Pledged Securities or any security
issued as a dividend or distribution in respect of the 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 the Pledged Securities, Pledgor agrees to accept the same as TWPG Inc.’s
agent and to hold the same in trust on behalf of and for the benefit of TWPG Inc. and to deliver
the same forthwith to TWPG Inc. in the exact form received, with the endorsement of Pledgor when
deemed necessary or appropriate by TWPG Inc. of undated security transfer powers duly executed in
blank, to be held by TWPG Inc., subject to the terms of this Agreement, as additional collateral
security for the Liquidated Damages.
(c) Pledgor hereby agrees that TWPG Inc. is authorized to hold the Pledged Securities through
one or more custodians. TWPG Inc. and its agents (and its and their assigns) shall have no
obligation in respect of the 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 the
Pledged Securities as provided in Section 1(b) or 1(c), TWPG Inc. shall determine in its sole
discretion the manner in which such cash shall be invested during the term of this Agreement.
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(d) Pledgor agrees with TWPG Inc. that: (i) Pledgor will not, and will not purport to, grant
or suffer liens or encumbrances against (excluding for such purpose the Partners’ Equity
Agreement), or except as provided in Section 1(c), sell, transfer or dispose of, any Pledged
Securities other than to or in favor of TWPG Inc.; (ii) TWPG Inc. is authorized, at any time and
from time to time, to file financing statements and give notice to third parties regarding the
Pledged Securities without Pledgor’s signature to the extent permitted by applicable law, to
transfer all or any part of the Pledged Securities to TWPG 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 TWPG 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 TWPG Inc.
(e) Subject to the earlier disposition and application of the Pledged Securities pursuant to
this Agreement following a Payment Event, the 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 twelve (12) month
period following Pledgor’s Date of Termination (as defined in the Partners’ Equity 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 TWPG Inc. as to the occurrence of a
Payment Event or as to the right of TWPG Inc. or the Firm to exercise its remedies under this
Agreement or the Partners’ Equity Agreement, including realization against the Pledged Securities
in accordance with Section 3 hereof, and this Agreement shall not terminate until the resolution of
all such disputes.
(f) TWPG 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,
TWPG 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, TWPG 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 the
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. TWPG Inc. need not give such notice if not
required
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by the UCC. Pledgor acknowledges the possibility that the public sale of some or all Pledged
Securities by TWPG 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 TWPG
Inc. that TWPG Inc. has no affirmative obligation to prepare or keep effective any such
registration statement and agrees that at any private sale the 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 Liquidated Damages. For so long as the 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, TWPG Inc. may, as its remedy hereunder,
take ownership of such number of the Pledged Securities as are necessary (based upon the Fair
Market Value thereof) to satisfy the then unpaid portion of the Liquidated Damages (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, TWPG 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 the 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 the 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 the Pledged Securities in accordance with this Section 3 in order to
satisfy Pledgor’s obligation to pay the Liquidated Damages.
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 Partners’ Equity Agreement, the Plan or any assignment or
transfer thereof; (b) any exercise or non-exercise by TWPG Inc. of any right, remedy, power or
privilege under or in respect of this Agreement, the Partners’ Equity 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 Partners’ Equity
Agreement, the Plan or any assignment or transfer of any thereof; (d) any bankruptcy, insolvency,
reorganization, arrangement, readjustment, composition, liquidation or the like, of TWPG 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, TWPG 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.
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5. Attorneys-in-Fact. Each of TWPG Inc., the Chief Administrative Officer of TWPG Inc. and
the General Counsel of TWPG 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 TWPG
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 TWPG 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 Partners’ Equity 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 Article III of the Partners’ Equity Agreement contain the entire
understanding and agreement between Pledgor and TWPG 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 TWPG Inc. or its successors, nor may any provision hereof be waived other than by a
writing executed by Pledgor or TWPG 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 TWPG 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 TWPG 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, TWPG 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
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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 SECTION 3.09 OF THE PARTNERS’ EQUITY AGREEMENT.
(e) The captions in this Agreement are for convenience of reference only and shall not define
or limit the provisions hereof.
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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.
| XXXXXX XXXXXX PARTNERS GROUP, INC. | ||||||
| By: | ||||||
| Title: | ||||||
| [PLEDGOR] | ||||||
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