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EXHIBIT Z
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of October 31, 2000 (the "Agreement"), by
and between The Goldman Sachs 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
September 10, 2000, by and between GS Inc. and SLK 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) Unless otherwise requested by Pledgor pursuant to the last sentence
of Section 1(b), 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
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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 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 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.
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(d) For purposes of this Agreement, the "Fair Market Value" of any
Pledged Security means, as of any date (1) in the case of a Pledged Security
that is a share of Common Stock, the average of the daily closing prices for a
share of Common Stock on the principal securities exchange or market on which
the Common Stock is traded for the 20 consecutive business days before the date
in question (the "Average Closing Price"); provided, however, that the Fair
Market Value of a share of Common Stock for purposes of determining the initial
amount to be pledged as of the date of this Agreement shall be $128.025 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 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.
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(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:
(a) obligations issued or guaranteed by the United States of
America or any agency or instrumentality thereof;
(b) 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;
(c) 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
(d) 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) upon a sale in accordance with
Section 1(c) or (iii) 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), 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
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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 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 of
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
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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 the General Counsel of GS
Inc. from time to time, acting separately, are hereby appointed the
attorneys-in-fact of Pledgor for the purpose of carrying out the provisions of
this Agreement and taking any action and executing any instrument that GS Inc.
reasonably may deem necessary or advisable to accomplish the purposes hereof,
which appointments as attorneys-in-fact are irrevocable as ones coupled with an
interest.
6. Termination. Upon the earliest to occur of the events set forth in
Section 2(e) hereof, this Agreement shall terminate and GS Inc. shall return to
Pledgor the remaining Pledged Securities, except as otherwise provided in such
Section.
7. Notices. All notices or other communications required or permitted
to be given hereunder shall be delivered as provided in the 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.
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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 18, 19 AND
20 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.
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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 GOLDMAN SACHS GROUP, INC.
By:
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PLEDGOR
By:
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Name:
