1
Exhibit N
GUARANTEE AND PLEDGE AGREEMENT
GUARANTEE AND PLEDGE AGREEMENT, dated as of June 26, 2000 (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 corporation whose name appears at the end of
this Agreement ("Pledgor").
RECITALS
A. Covenants. Pledgor is wholly-owned by a former partner of
GS Inc. (the "Shareholder"). In connection with the Shareholder's participation
in the Amended and Restated Plan of Incorporation (the "Plan") of The Xxxxxxx
Sachs Group, L.P., the Shareholder and GS Inc. entered into an Agreement
Relating to Noncompetition and Other Covenants (the "Noncompetition Agreement"),
dated as of May 7, 1999, in respect of, inter alia, the Shareholder'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 the Shareholder's employment. In
addition, the Shareholder 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 Shareholder's Pledge. Pursuant to the Noncompetition
Agreement, the Shareholder agreed to pay a certain amount of liquidated damages
(the "Liquidated Damages") to GS Inc. in respect of any breach by the
Shareholder of certain of the Obligations set forth in the Noncompetition
Agreement. As security for the timely payment of the Liquidated Damages and the
performance of certain covenants and agreements of the Shareholder in a security
interest agreement of even date herewith between the Shareholder and GS Inc.
(the "Shareholder Security Agreement"), the Shareholder has agreed to grant a
security interest to the Firm of all of the outstanding capital stock of Pledgor
(except for one share of Pledgor's capital stock which shall be held by a
nominee shareholder for and to the order of GS Inc. exclusively).
C. Pledgor's Guarantee and Pledge. Pledgor has agreed to
guarantee the satisfaction of the Shareholder's obligation to pay the Liquidated
Damages under the Noncompetition Agreement and the Shareholder's performance of
the Covenants (as defined in the Shareholder Security Agreement). As security
for the satisfaction by Pledgor of such guarantee, Pledgor has agreed to pledge
to the Firm the Pledged Shares
2
(as defined below) and to make certain other covenants and undertakings all as
set forth herein.
D. Release of Original Shareholder Pledge Agreement. The
Shareholder has pledged to GS Inc. shares (the "Pledged Shares") of common stock
of GS Inc. ("Common Stock") pursuant to the Pledge Agreement, dated as of May 7,
1999, between GS Inc. and the Shareholder (the "Original Shareholder Pledge
Agreement"). It is a condition to the release of the Pledged Shares from the
lien under the Original Shareholder Pledge Agreement that the Pledgor enter into
this Agreement.
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. Guarantee. Pledgor unconditionally and irrevocably
guarantees (the "Guarantee") to GS Inc. the satisfaction by the Shareholder of
the Shareholders' obligation to pay the Liquidated Damages under the
Noncompetition Agreement and the Shareholders' performance of the Covenants (the
Guarantee by Pledgor of the obligations of the Shareholder to pay such
Liquidated Damages and to perform the Covenants are referred to herein as the
"Secured Obligations"). The Guarantee is one of payment and not of collection
and shall not be affected by the validity of the Secured Obligations. Pledgor
hereby waives all legal and equitable defenses to the enforcement of the
Guarantee.
2. Pledge.
(a) As collateral security for the full and timely performance
of the Secured Obligations, 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, the
Pledged Shares (and all certificates or other instruments or documents
evidencing the Pledged Shares) and, except as set forth in Section 3(a), all
proceeds thereof (together with any securities or property to be delivered to GS
Inc. pursuant to Section 3(b) and, upon substitution or delivery in accordance
with Section 2(b), any Substitute Collateral (as defined in Section 2(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.
-2-
3
(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.
(c) If Pledgor and the Shareholder are not prohibited from
doing so by the terms of the Plan, 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"), the Shareholder
Security Agreement, the Counterpart to the Shareholders' Agreement, dated the
date hereof, to which the Pledgor is a party (the "Counterpart"), any other
written agreement with GS Inc. or the Firm, or any law or regulation, Firm
policy or provision of the Pledgor's organizational documents (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 2(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 2(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 in connection
with any taking of ownership by GS Inc. of Pledged Securities under Section 4
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
-3-
4
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.
3. Administration of Security. The following provisions shall
govern the administration of Pledged Securities:
(a) So long as no Default 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, except as set forth in Section 3(b) below, other distributions
thereon and to give consents, waivers and ratifications in respect thereof. As
used herein, a "Default Event" shall mean (x) the failure by the Shareholder to
make any payment of Liquidated Damages upon demand by GS Inc. therefor as
provided in the Noncompetition Agreement, (y) the breach by the Shareholder of
any of the Covenants or (z) the failure by Pledgor as guarantor to satisfy the
Secured Obligations upon written demand by GS Inc.
(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 Secured Obligations.
(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 2(b) or 2(c), GS Inc. shall determine in its
sole discretion the manner in which such cash shall be invested during the term
of this Agreement.
-4-
5
(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 2(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 3(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 Default 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) the Shareholder's death, (ii) the expiration of the
twenty-four (24) month period following the Shareholder's Date of Termination
(as defined in the Noncompetition Agreement), (iii) payment in cash or other
satisfaction by the Shareholder or Pledgor of all Liquidated Damages, or (iv)
May 7, 2004, and all remaining Pledged Securities shall be thereupon released
from the pledge hereunder and this Agreement shall terminate. Notwithstanding
the foregoing, (x) no Pledged Securities shall be released from the pledge
hereunder pursuant to this Section 3(e), if there are one or more pending
disputes between the Shareholder or Pledgor and GS Inc. as to the occurrence of
a Default 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 4 hereof, and
this Agreement shall not terminate until the resolution of all such disputes and
(y) no Pledged Securities shall be released prior to the expiration of the term
of the Covenants.
(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.
4. Remedies in Case of a Default Event. If a Default 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.
-5-
6
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 (but shall not be
obligated to), as its remedy for a failure by the Shareholder to pay Liquidated
Damages, 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 released in accordance
with Section 3(e). Nothing in this Agreement, however, shall require the Firm to
purchase Pledged Securities in accordance with this Section 4 in order to
satisfy Pledgor's obligation to pay Liquidated Damages.
5. Pledgor's Obligations Not Affected. Except as provided in
Section 10(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 Shareholder Security
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 Shareholder
Security 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
Shareholder Security Agreement, the Plan or any assignment or transfer of any
thereof;
-6-
7
(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 2(b) or 2(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.
6. 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.
7. Termination. As and to the extent set forth in Section 3(e)
hereof, this Agreement shall terminate and GS Inc. shall return to Pledgor the
remaining Pledged Securities, except as otherwise provided in such Section.
8. Notices. All notices or other communications required or
permitted to be given hereunder shall be delivered to GS Inc. at its principal
executive office directed to the attention of its General Counsel, and to
Pledgor at the address set forth in Annex A hereto.
9. 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.
10. Miscellaneous.
(a) This Agreement, Section 8 of the Noncompetition Agreement,
the Counterpart, the Written Consent, dated the date hereof, to which Pledgor
and the Shareholder are parties, the Shareholder Security Agreement and the
Guidelines to Documentation for Non-U.S. Corporations, dated June 16, 2000,
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
-7-
8
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.
-8-
9
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:________________________________
___________________________________
(Print Name of Corporation)
By:________________________________
Name:
Title:
-9-
10
Annex A
Address of Corporation:
-10-
