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Exhibit P
SECURITY INTEREST AGREEMENT
SECURITY INTEREST AGREEMENT, dated as of ________, 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 ("the Obligor").
RECITALS
1. Covenants and IPO Pledge. In connection with the Obligor's
participation in the Amended and Restated Plan of Incorporation (the "Plan") of
The Goldman Sachs Group, L.P., the Obligor 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 Obligor'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 Obligor's employment. In addition, the Obligor
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.
Pursuant to the Noncompetition Agreement, the Obligor agreed to pay a certain
amount of liquidated damages (the "Liquidated Damages") to GS Inc. in respect of
any breach by the Obligor of certain of the Obligations set forth in the
Noncompetition Agreement. As security for the timely payment of the Liquidated
Damages, the Obligor and GS Inc. entered into a Pledge Agreement, dated as of
May 7, 1999 (the "IPO PledgeAgreement"), pursuant to which the Obligor pledged
to GS Inc. shares (the "IPO Pledged Shares ") of common stock of GS Inc.
("Common Stock").
2. Transfer and Pledge. The Obligor transferred (the "Transfer") on the
date hereof shares of Common Stock to the corporation whose name is set forth in
definition (b) (the "Corporation"). In order to permit the Transfer, GS Inc.
released the IPO Pledged Shares from the pledge imposed by the IPO
PledgeAgreement. Pursuant to Section 1(c) of this Agreement, the Obligor is
entering into certain covenants and agreements (the "Covenants"). As security
for the timely payment of the Liquidated Damages and the full and timely
performance by the Obligor of the Covenants (the "Secured Obligations"), the
Obligor has agreed to grant a security interest to GS Inc. of all of the shares
or interests in shares issued or to be issued at any time (collectively, the
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"Secured Shares") of the Corporation except for one share of the Corporation
which shall be held by a nominee shareholder for and to the order of GS Inc.
absolutely.
3. This Agreement includes the terms of and constitutes a security
agreement in accordance with the provisions of the Security Interests (Jersey)
Law 1983 (the "1983 Law") and for the purposes of Article 3 thereof the Obligor
is the debtor.
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:
INTERPRETATION
Definitions
In this Agreement:
(a) the "Corporation" means [ ] Limited a company
incorporated under the law of the Island of Jersey whose
registered office is situate at 26 New Street, St. Helier,
Jersey;
(b) "Event of Default" shall have the meaning given to it in
Clause 2(a);
(c) the "Shares" means [ ] shares of
[ ] each in the capital of the Corporation
which shares are issued to and registered in the name of the
Obligor.
INTERPRETATION
In this Agreement, unless the context otherwise requires:
(a) words in the singular shall include the plural and words in
the plural shall include the singular;
(b) words denoting any gender shall include all genders;
(c) headings are used for convenience only and shall not affect
the interpretation of this Agreement;
(d) references to Clauses are to be construed as references to
clauses of this Agreement;
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(e) references to any agreement or document (including, without
limitation, references to this Agreement) shall be deemed to
include references to such agreement or document as from time
to time varied, amended, supplemented or replaced;
(f) references to any enactment shall be deemed to include
references to such enactment as from time to time amended,
extended, re-enacted or consolidated;
(g) references to a person shall include any body or persons
corporate or unincorporate;
(h) words and expressions defined in the 1983 Law, the
Interpretation Law or the Powers of Attorney Law shall have
the same meanings and bear the same interpretations when used
in this Agreement;
1. Security Interest.
1. Security Interest.
(a) In order to provide continuing security for the payment or
performance of the Obligation, the Obligor hereby vests possession of the
certificates of title to the Secured Shares in GS Inc. (or its agent) to the
intent that GS Inc. shall have a priority security interest in the Secured
Shares in accordance with Article 2(3) of the 1983 Law and, except as set forth
in Section 2(a), all proceeds thereof (together with any securities or property
to be delivered to GS Inc. pursuant to Section 2(b), Secured Securities"). The
Obligor herewith delivers to GS Inc. appropriate undated share transfer forms
duly executed in blank (or other documents deemed necessary or appropriate by GS
Inc. to give GS Inc. control (as defined in the 1983 Law) (such transfer forms
and other appropriate documents, the "Control Documents") in respect of Secured
Securities, and will deliver Control Documents for all Secured Securities to be
subject to this security interest hereunder from time to time. Until the
termination of this Agreement, the Obligor shall have no right to substitute,
withdraw, transfer or otherwise dispose of the Secured Securities. (GS Inc.
shall not in any circumstances incur any liability or be under any obligation
whatsoever in connection with the Secured Shares) Possession by GS Inc. (or its
agent) of the certificates of title to the Secured Securities shall be deemed to
be pursuant to this Agreement whether such possession were vested before or
after the execution of this Agreement.
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(b) The Obligor hereby represents and warrants to GS Inc. that
the Secured Shares constitute all of the capital stock of the Corporation; that,
except for the lien and security interest granted hereby, the Obligor is the
record and beneficial owner of all Secured Shares free from any adverse claim,
security interest, encumbrance, lien, charge, or other right or interest of any
person; that, other than the Secured Shares, there are no debt or equity
securities of, or other interests in, the Corporation, and no rights, options,
warrants or other agreements or instruments to acquire any debt or equity
securities of, or other interest in, the Corporation; and that no person other
than the Obligor possesses, directly or indirectly, any voting, economic or
other interest in the Corporation
SAVE THAT one share in the Corporation shall be held by a
nominee shareholder who shall hold such share for and to the order of GS Inc.
absolutely.
(c) the Obligor hereby covenants and agrees with GS Inc. that
until the termination or waiver of all of the Transfer Restrictions (as defined
in 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):
(i) the Obligor will not take any action which would have the
effect of transferring or creating, directly or indirectly, any voting,
economic or other interest in the Corporation;
(ii) the Obligor will not, directly or indirectly, take any
action with respect to the capital stock or other interests in the
Corporation which the Obligor would not be permitted to take if such
capital stock or other interests were the shares of Common Stock
received by the Obligor under the Plan;
(iii) the Obligor will not permit the Corporation to issue, or
to redeem or otherwise acquire, any debt or equity securities of, or
other interest in, the Corporation, or any right, option, warrant or
other agreement or instrument to acquire any debt or equity securities
of, or other interest in, the Corporation;
(iv) the Obligor will not permit the Corporation, directly or
indirectly, to create, incur, assume, guarantee or otherwise become
directly or indirectly liable with respect to any indebtedness, or to
take any action which might create a lien, claim or encumbrance on any
of its assets; provided, however, that the Obligor may permit the
Corporation (i)to grant a negative pledge of shares of Common Stock to
a third-party lender to support a loan or line of credit for the
Obligor or the Corporation and (ii) incur indebtedness and/or pledge
shares of
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Common Stock so long as the terms of such borrowing and/or pledge are
approved in advance by GS Inc.
(v) the Obligor will take all necessary and appropriate
actions to ensure that any transfer of Secured Shares by GS Inc. upon
enforcement of the security interest granted hereunder will be
registered in the corporate records of the Corporation;
(vi) Subject to Section 2(a), the Obligor will not permit the
Corporation to take any action without the prior written consent of GS
Inc., other than (i) the purchase of up to five percent of an
outstanding series or class of publicly-traded investment securities
that are not assessable and impose no future capital commitments, (ii)
the granting of a negative pledge of shares of Common Stock to a
third-party lender to support a loan or line of credit for the Obligor;
or the Corporation and (iii) the acquisitions of interests in merchant
banking funds sponsored by GS Inc. so long as the terms of any such
acquisition are approved in advance by GS Inc.
(vii) the Obligor will remain the sole shareholder of the
Corporation, unless the Obligor has obtained the prior written consent
of GS Inc., which consent will not be unreasonably withheld;
(viii) the Obligor will not permit any person to become a
director of the Corporation other than persons appointed or approved by
GS Inc.;
(ix) the Obligor will cause the Managing Directors of GS Inc.
appointed by GS Inc. as directors of the Corporation (the "GS
Appointees") to be elected as directors of the Corporation and will not
take any action to remove any GS Appointee as director of the
Corporation unless requested by GS Inc. to do so, in which case the
Obligor will take all actions necessary and desirable to remove such GS
Appointee and, if requested by GS Inc., to cause a successor GS
Appointee to become a director of the Corporation; and
(x) the Obligor will not permit the Corporation to dispose of
any shares of Common Stock except as and to the extent that such shares
could have been disposed of by the Corporation to an entity that is
unaffiliated with the Obligor and the Corporation.
2. Administration of Security. The following provisions shall
govern the administration of Secured Securities:
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a) So long as no Event of Default (as defined below) has occurred and is
continuing, the Obligor shall be entitled to vote Secured Securities and to
receive and retain all dividends 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 "Event of Default"
shall mean the failure by the Obligor to make any payment of Liquidated
Damages upon demand by GS Inc. therefor as provided in the Noncompetition
Agreement or a breach by the Obligor of any of the Covenants.
b) If the Obligor becomes entitled to receive, or receives, any certificate
representing Secured Securities (or other security that may succeed Secured
Securities or any security issued as a dividend or distribution in respect
of Secured 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 Secured Securities, the Obligor
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
the Obligor when deemed necessary or appropriate by GS Inc. of undated
share transfer forms duly executed in blank, to be held by GS Inc., subject
to the terms of this Agreement, as additional collateral security
hereunder.
c) the Obligor hereby agrees that GS Inc. is authorized to hold Secured
Securities through one or more custodians. GS Inc. and its agents (and its
and their assigns) shall have no obligation in respect of Secured
Securities, except to hold and dispose of the same in accordance with the
terms of this Agreement.
d) the Obligor agrees with GS Inc. that: (i) the Obligor will not, and will
not purport to, grant or suffer liens or encumbrances against, or sell,
transfer or dispose of, any Secured 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
Secured Securities without the Obligor's signature to the extent permitted
by applicable law, to transfer all or any part of Secured 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) the Obligor has provided GS Inc. with the Obligor's true legal name
and principal residence, and the Obligor will not change the Obligor's name
without 30 days' prior written notice to GS Inc.
e) Subject to the earlier disposition and application of Secured Securities
pursuant to this Agreement following an Event of Default, Secured
Securities shall be released from the security interest hereunder, and the
lien hereby created in such Secured Securities shall simultaneously be
released, upon the earliest to occur of (i) the Obligor's death,
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(ii) the expiration of the twenty-four (24) month period following the
Obligor's Date of Termination (as defined in the Noncompetition Agreement),
(iii) payment in cash or other satisfaction by the Obligor of all
Liquidated Damages, or (iv) May 7, 2004, and all remaining Secured
Securities shall be thereupon released from the Security Interest hereunder
and this Agreement shall terminate. Notwithstanding the foregoing, (x) no
Secured Securities shall be released from the Security Interest hereunder
pursuant to this Section 2(e), if there are one or more pending disputes
between the Obligor and GS Inc. as to the occurrence of an Event of Default
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 Secured Securities in accordance with Section 3 hereof, and this
Agreement shall not terminate until the resolution of all such disputes and
(y) no Secured Securities shall be released prior to the expiration of the
term of the Covenants.
f) GS Inc. shall immediately upon request by the Obligor execute and deliver
to the Obligor such instruments, deeds, transfers, assurances and
agreements, in form and substance as the Obligor 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 Security Interest hereunder in
accordance with the provisions of this Agreement and to ensure that the one
share held by a nominee shareholder shall be held for and to the order of
the Obligor of the Corporation.
3. Remedies in Case of an Event of Default. If a Default Event
has occurred and is continuing, GS Inc. subject to Articles 6(5) and 8(3) of the
1983 Law, and without having to apply to the Royal Court for authority to do so
shall have the power of sale of the Secured Securities and have all the rights
and remedies of a secured party under the 1983 Law. To the extent required and
permitted by applicable law, GS Inc. will give the Obligor notice of the time
and place of any public sale or of the time after which any private sale or
other disposition of Secured Securities is to be made, by sending notice at
least three days before the time of sale or disposition, which the Obligor
hereby agrees is reasonable. The Obligor acknowledges the possibility that the
public sale of some or all Secured Securities by GS Inc. may not be made without
a then existing and effective registration statement under the United States
Securities Act of 1933, as amended. The Obligor 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 Secured
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 Secured Securities
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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 Obligor to
pay Liquidated Damages, purchase such number of Secured Securities as are
necessary (based upon the Fair Market Value (as defined below) 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
Secured Securities purchased and without payment of any cash consideration) by
giving written notice to such effect to the Obligor (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 Secured Securities or (B) such whole number
of Secured 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 Secured Securities and applied such proceeds to the payment
of any then unpaid Liquidated Damages. Any excess net proceeds from the deemed
sale of such Secured Securities will continue to be held as Secured Securities
under this Agreement until released in accordance with Section 2(e). Nothing in
this Agreement, however, shall require the Firm to purchase Secured Securities
in accordance with this Section 3 in order to satisfy the Obligor's obligation
to pay Liquidated Damages. For purposes of this Agreement, the "Fair Market
Value" of any Pledged Security means, as of any date, 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 the
Obligor.
4. the Obligor's Obligations Not Affected. Except as provided
in Section 9(b), the obligations of the Obligor 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 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 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 Plan 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 the Obligor shall have notice or
knowledge of any of the foregoing; or (e) any other act or omission to act or
delay of any kind by the Obligor, GS Inc. or any other person or any other
circumstance whatsoever which might, but for the provisions of this clause (e),
constitute a legal and equitable discharge of the Obligor's obligations
hereunder.
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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 the Obligor 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. As and to the extent set forth in Section 2(e)
hereof, this Agreement shall terminate and GS Inc. shall return to the Obligor
the remaining Secured 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
Noncompetition Agreement.
8. No Third Party Beneficiaries. Except as expressly provided
herein, this Agreement shall not confer on any person other than the Firm and
the Obligor any rights or remedies hereunder.
9. Miscellaneous.
(a) This Agreement, Section 8 of the Noncompetition Agreement,
the Counterpart to the Shareholders' Agreement, dated the date hereof, to which
the Corporation is a party, the Written Consent, dated the date hereof, to which
the Corporation and the Obligor are parties, the Guarantee and Security Interest
Agreement, dated the date hereof, between GS Inc. and the Corporation, and the
Guidelines to Documentation for Non-U.S. Corporations, dated 16 June, 2000,
contain the entire understanding and agreement between the Obligor 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 the Obligor and GS Inc. or its successors,
nor may any provision hereof be waived other than by a writing executed by the
Obligor 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. The Obligor may not,
directly or indirectly (including by operation of law), assign the Obligor'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 the Obligor in violation of this Agreement shall be
void. This Agreement shall be binding upon the Obligor's permitted successors
and assigns.
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Without impairing the Obligor'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 ISLAND OF JERSEY, CHANNEL ISLANDS, 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.
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:________________________________
Position
Signature
[NAME OF INDIVIDUAL OBLIGOR]
By:________________________________
By his Attorney in-Fact
Signature
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